This morning BlackRock, the largest money manager in the world, reported their Second Quarter Results. Overall basic earnings per share increased $2.01 to eps of $9.13, of which Blackrock paid a $5.00 dividend. From a top-line perspective, a very positive result for BlackRock.
But as we dig deeper into these results, there are a couple of surprises.
First, Blackrock achieved a dramatic $938 billion inflow. And as we discussed in our earlier article.
Assets Under Management (AUM) are the lifeblood of any money manager, especially BlackRock. That kind of asset gathering would increase the Rock’s income. But it did not.
Operating Income for BlackRock declined by $53 million. It is likely due to a change in the mix of BlackRock’s business. Not all clients return the same income. For instance, BlackRock Retail Clients represent a mere 10% of their AUM, yet they produce 29% of Rock’s revenue, with excellent margins! On the other hand, Exchange Traded Funds (ETFs) represent 30% of AUM and return only 7% of income—the polar opposite.
For Blackrock to gain $.9Trillion, and yet have lower income means that their business mix likely changed from high margin to low.
The next surprise, in addition to Blackrock’s decline in operating income, was how the company beat last quarter’s results. They did it by trading the market for their investment account. Something you don’t see every day, but it paid off this quarter for Blackrock. In the first quarter of the year, Blackrock’s capital desk Lost $314 million. In this second quarter, Blackrock’s investment account GAINED $231 million. An astonishing half-billion-dollar swing. And a large enough contribution by the Capital Desk to bring Blackrock’s total income for the quarter to $1.3 billion. Not bad.
Unfortunately, Blackrock has not yet filed their Form 10Q with the Securities and Exchange Commission (it is not due for another couple of months), which would help us get a complete picture of this Quarter’s Blackrock Results.
You can find the complete BlackRock Earnings Report here: