BlackRock is hunting for “transformational” opportunities created by the recent banking turmoil and market dislocation, chief executive Larry Fink said on Friday as the world’s largest money manager reported assets under management had recovered to $9.1tn.
“If there is an opportunity to do something transformational, we are going to be prepared to do it,” he told analysts. “How can we double down on what we’re doing with . . . technology. How can we build out our footprint globally at this time?”
US regional banks, brokers and wealth managers are under pressure after the collapse of Silicon Valley Bank last month sparked concerns about unrealised losses in their securities and loan portfolios and sent depositors scurrying to larger banks and money market funds.
BlackRock sent to a team to Switzerland to look at buying part of Credit Suisse before it was forcibly merged into UBS last month, and Fink obliquely referenced that decision, repeating what he said to his executives that week: “I said to be in the game, we must play the game. And so we’re in the game.”
Fink bought what became its huge iShare’s exchange traded funds business when Barclays needed cash during the 2008 financial crisis, and it has done a series of smaller deals to expand the reach of its Aladdin technology business.
The remarks on Friday came as BlackRock revealed that Fink took a 30 per cent pay cut, to $25.2mn in 2022, in recognition of “the firm’s decline in profitability” amid falling markets. Fink’s top leadership team, including the outgoing chief financial officer Gary Shedlin, saw similar reductions, in what the firm described as an effort to reduce the impact of lower earnings on the rest of its employees.
BlackRock also reported that first quarter net income fell 19 per cent year on year to $1.1bn due to squeezed margins, subdued markets and lower performance fees. That translated to $7.64 a share. On an adjusted basis, EPS were $7.93, ahead of the $7.67 expected by analysts polled by Bloomberg.
Revenue was down 10 per cent year on year to $4.2bn, with performance fees on its hedge funds and other alternative investment offerings down more than 40 per cent to $55mn, the money manager said.
However, assets under management rose by $500bn in the quarter to $9.1tn, more than analysts had expected, although they are still well short of the peak of $10tn at the end of 2021. BlackRock also saw inflows of $110bn, with bond exchange traded funds performing particularly strongly.
BlackRock is among the first money managers to report for the quarter, with others in the sector under pressure to slash costs to compensate for lower earnings after a tough 2022. Its first-quarter operating margin of 33.9 per cent was down sharply from the same quarter last year, and slightly missed expectations.
The inflows include $103bn to long-term funds and reflect a strong performance in the US where BlackRock has faced persistent attacks from state officials and legislatures in Republican states over its use of environment, social and governance factors in investing.
Republican state treasurers have pulled out more than $4bn of government pension and treasury funds from the company on the grounds that it “boycotts” fossil fuel. BlackRock has hit back, denying those claims and arguing that it invests money the way its clients want.
The company saw outflows from its cash management products in January and February but then $40bn in inflows in March as investors fled regional banks.
BlackRock supplements its money management business with a chunky technology services business centred on its Aladdin risk management platform. Revenues in that division were basically flat year on year at $340mn, a bright spot when most other areas were down.
Kyle Sanders of Edward Jones said the results “exceed low expectations” and highlighted BlackRock’s “ability to sustain solid asset inflows in volatile markets” but warned that profit margins would reman under pressure until markets recovered.
BlackRock shares gained 3.1 per cent in New York on Friday.