T. Rowe Price set to post a 30% drop in 1st-quarter profit

Company is expecting its results to perk up as U.S. markets do

T. Rowe Price is in position for rebound, chairman says

April 11, 2003|By William Patalon III | William Patalon III,SUN STAFF

While T. Rowe Price Group Inc. will see a drop in its first-quarter profit, the company's broad mutual fund lineup and diversified business base position it well for an economic rebound that's expected later this year, Chairman and President George A. Roche said at the firm's annual stockholders meeting downtown yesterday.

"The company has done a very good job with the things we can control," Roche said in a post-meeting interview at the Hyatt Regency hotel. "The financial markets will probably stabilize here and begin to improve -- which would be very good for us."

Baltimore-based Price also expects to announce plans to buy back 5 million shares of its common stock, adding to a program in which only 846,000 shares remain to be repurchased.

FOR THE RECORD - Because of incorrect information provided to the newspaper, an article in yesterday's Business section listed an incorrect figure for T. Rowe Price Group Inc.'s assets under management at the close of 2002. The correct figure is $140.6 billion.
The Sun regrets the error.

Roche told shareholders that the mutual fund company's first-quarter profit will decline by 30 percent from the 41 cents per share Price earned in first-quarter 2002 -- which was the firm's strongest quarter of the year.

Income from investment advisory fees will fall by about 10 percent, as assets under management declined from about $156 billion in last year's first quarter to about $140 billion this year. Price closed 2002 with about $180 billion in assets under management, Roche said in the post-meeting interview.

According to Roche, Price has suffered less than many of its rivals because it did not over-expand during the late 1990s stock-market boom. Industry experts have said that Price's controlled overseas expansion, coupled with a more-consistent and conservative investment strategy that drew criticism during the market bubble, is now paying dividends: More than 80 percent of Price's mutual funds are currently beating their peer-group averages for the one-, three- and five-year periods that ended Dec. 31, according to the company.

However, Roche noted that Price's fortunes are tied to the economy. The stock market has declined for three straight years, something it hasn't done since 1939-1941. It's unlikely there will be a fourth-straight down year, Roche said, since that's happened only once in this century -- 1929-1932, a debacle ignited by the Great Crash. Roche said the stage is set for a measured rebound by the economy, as well as the stock and bond markets: Interest rates remain low, credit quality is improving and inflation remains under control. The key will be how quickly the Iraqi situation is resolved.

"Despite the uncertainty and poor returns in the financial markets during the first quarter, we believe the most likely outcome is one of improvement during the remainder of the year," Roche told shareholders. "The economy should continue on its slow growth path. Inflation should remain within acceptable parameters, which is positive news for the bond market.

"In equities, we anticipate gains that are more in line with historical trends over the rest of the year, particularly when the crisis in the Middle East is more clearly resolved. Investors should be served well by T. Rowe Price's broad mix of well-diversified fund offerings, supported by our experienced and dedicated research staff."

Price plans to report its interim first-quarter results April 25. It expects declines in revenue, earnings and earnings per share.

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