T. Rowe Price says 1Q profits tripled

Assets under management hit $419 billion

April 23, 2010|By Jamie Smith Hopkins, The Baltimore Sun

T. Rowe Price Group Inc. said Friday that its first-quarter profits tripled as investors sent more money to the Baltimore firm to manage and as financial markets rebounded from year-ago lows.

The money manager said profits in the first three months of the year were $153 million, up from $48.2 million in the first quarter of 2009.

The early part of last year was a bad stretch for many financial companies as the country struggled with a deep economic crisis. Price's earnings during the first quarter of last year were pulled down by a noncash impairment charge of nearly $36 million because of falling investment values in its mutual funds.

Since then, Price's assets under management have ballooned. Assets hit $419 billion at the end of March, up nearly $28 billion over the previous three months. The company said a record $10.3 billion of that increase came from investors placing more money in Price accounts, and the rest was a result of higher market values and income.

The net cash inflow is "pretty phenomenal for us," said James A.C. Kennedy, Price's chief executive. "It's a sign that the clients trust us."

Revenue in the quarter was $556 million, up 45 percent from the same period a year ago.

Despite the record inflows, Price's earnings of 57 cents per share missed analysts' expectations by 2 cents. Wells Fargo Securities analysts Jim Shanahan and Nathan Burk said in a research note that investors opted for cheaper funds, which affected earnings.

"Bottom line: Organic growth was very strong, but in institutional fixed-income and target retirement date products, which carry a lower average fee rate," they wrote in a report Friday, recommending that investors hold Price stock rather than buy or sell.

The company's price per share closed at $58.88 Friday, down 10 cents.

Kennedy said he's "reasonably optimistic" about economic recovery efforts and growth opportunities in the near term. "I think the odds of double-dip recession continue to decline," he said.

Price has about 450 fewer employees than it did a year ago, with two-thirds of that due to layoffs last spring as fewer clients opened new accounts and processing volumes sunk. But the company is hiring now. Kennedy expects to add roughly 250 jobs this year, most of them in the Baltimore area.

The company closed a deal in January to buy 26 percent of UTI Asset Management Co., India's oldest mutual-fund firm. Asked about future acquisition plans, Kennedy said he could not confirm published reports that Price is in talks to buy a stake in China Asset Management Co., that country's largest mutual-fund house.

"We sub-advise a portfolio for them," he said. "We know them; they know us. To talk about whether we're involved [beyond that] is speculative at this point.

"Our strong bias is to do things organically as opposed to investing in other operations," he said, adding: "From time to time, there are opportunities out there."

jamie.smith.hopkins@baltsun.com

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