Bloomberg News

Franklin Third-Quarter Profit Rises 21% Amid Stock Market Rally

July 29, 2013

Franklin Resources Inc. (BEN:US), manager of the Franklin and Templeton mutual funds, said fiscal third-quarter profit climbed 21 percent as rising global stock markets boosted assets under management.

Net income for the three months ended June 30 increased to $552.3 million, or 86 cents per share, from $455.3 million, or 71 cents, a year earlier, the San Mateo, California-based company said today in a statement. Analysts had expected earnings of 85 cents a share, according to the average of 14 estimates (BEN:US) in a Bloomberg survey.

Franklin benefited as gains in equity prices and deposits into fixed-income funds lifted assets from the previous year. Federal Reserve Chairman Ben S. Bernanke rattled global markets and pushed interest rates higher last month by outlining plans to phase out the U.S. central bank’s asset purchases, triggering a flight from bonds, which represent 45 percent of Franklin’s assets under management.

“I don’t think the company is immune from the trends we are seeing, but their scale and diversification should continue to separate them from their peers,” Michael Kim, an analyst with Sandler O’Neill & Partners LP in New York, said in a telephone interview before earnings were released. Kim has a buy rating on the stock.

Investors around the world pulled a record $5.63 billion from global bond funds in the week ended June 26, according to data from Cambridge, Massachusetts-based EPFR Global.

They withdrew $611 million from the $70 billion Templeton Global Bond Fund (TPINX:US) in June, data from Chicago-based Morningstar Inc. (MORN:US) show. The flagship fund, managed by Michael Hasenstab, attracted more than $5.6 billion in the first five months of 2013.

Short-Term ‘Panic’

Hasenstab, who oversees more than $195 billion, beat 68 percent of peers this year and 91 percent (TPINX:US) over the past five years, according to data compiled by Bloomberg.

Hasenstab, in a June 25 interview posted on Franklin’s website, described the bond selloff as a bout of risk-aversion. “It pretty much happens every year at some point,” he said. “So we’re not terribly concerned about these short-term periods of panic.”

Franklin had $365.7 billion of its $815 billion in assets in bonds as of June 30, the firm reported earlier this month. Stocks accounted for 38 percent. Franklin’s assets grew 15 percent in the 12 months through midyear, helped by a 17 percent gain in the MSCI All Country World Index, including dividends.

Franklin shares fell (BEN:US) 12 percent in June, making it the second-worst performer in the 20-member Standard & Poor’s index of asset managers and custody banks. After closing last week at $48.66, the shares gained 16 percent in 2013, compared with 30 percent for the index.

New Chairman

The company last month named Greg Johnson chairman of the firm after his father, Charles Johnson, retired. Greg Johnson, 52, is the chief executive officer and president of the company. His father was CEO from 1957 to 2003.

Franklin declared a 3-for-1 stock split (BEN:US) on June 13 that altered the earnings per share originally reported in 2012. Companies typically split their stock when they determine the share price has become too high for individual investors.

To contact the reporter on this story: Charles Stein in Boston at cstein4@bloomberg.net

To contact the editor responsible for this story: Christian Baumgaertel at cbaumgaertel@bloomberg.net


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Companies Mentioned

  • BEN
    (Franklin Resources Inc)
    • $57.23 USD
    • -0.49
    • -0.86%
  • TPINX
    (Templeton Global Bond Fund/United States)
    • $13.39 USD
    • 0.00
    • 0.0%
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