Invesco Profit Rises 35% as Stock Market Rally Boosts Assets

Jul 31, 2014 9:45 am ET

(Updates with CFO’s comments in eighth paragraph.)

July 31 (Bloomberg) -- Invesco Ltd., owner of the Invesco, Perpetual and PowerShares funds, said second-quarter profit rose 35 percent as stock market gains lifted assets.

Net income increased to $274.5 million, or 63 cents a share, from $202.6 million, or 45 cents, a year earlier, Atlanta-based Invesco said today in a statement. Excluding certain items, earnings of 65 cents a share beat the average estimate of 59 cents in a Bloomberg survey of 19 analysts.

Invesco Chief Executive Officer Martin Flanagan has relied on market gains and growth in the U.S. and continental Europe for much of the past year to overcome client withdrawals in the U.K. linked to the April departure of star fund manager Neil Woodford. The company recorded $8.8 billion in net withdrawals in the quarter.

“The outlook remains quite favorable as momentum continues to build across most of their business outside the U.K,” Michael Kim, an analyst at Sandler O’Neill & Partners LP in New York, said in an interview before earnings were announced.

Invesco rose 0.5 percent to $38.58 at 9:39 a.m. in New York trading. The shares rose 5.4 percent this year through yesterday, compared with the 1.7 percent gain by Standard & Poor’s 18-company index for asset managers and custody banks.

One client, U.K. distributor St. James’s Place Plc., pulled $13.1 billion in April. The firm’s largest exchange-traded fund, the PowerShares QQQ Trust, which tracks the Nasdaq 100 Index of technology stocks, recorded $3 billion in withdrawals in the quarter, according to data compiled by Bloomberg.

Markets Rally

Market gains helped assets rise by 1.9 percent in the three months ended June 30, and by 14 percent in 12 months, to $802.4 billion. The MSCI ACWI Index of global stocks advanced 4.3 percent during the quarter and more than 20 percent in the year ended June 30.

Revenue increased 14 percent to $1.29 billion, driven by a 17 percent jump in investment management fees. The fees rose 6.6 percent from the previous quarter with about half the increase due to a one-time change in the way the firm charges fees to U.K. clients, according to Chief Financial Officer Loren M. Starr. Expenses rose 8.5 percent to $935 million.

Excluding the U.K., the company took in about $6.2 billion in long-term deposits, including about $5.1 billion from clients in continental Europe and close to $2 billion from Asia, Starr said today in an interview. The firm didn’t expect additional large withdrawals from the U.K. this quarter.

“Inflows in continental Europe and the U.K. business should more than offset the dribs and drabs that may continue” to be withdrawn, Starr said.

BlackRock Inc., the world’s largest asset manager, said July 16 its second-quarter net income climbed 11 percent to $808 million. Investors deposited a net $38 billion into its funds.