January 27, 2011

2010 Q4 Earnings: Invesco Profits Rise 44% in Mixed Performance

Morgan Stanley acquisition, client withdrawals contribute to outflows

Invesco Ltd. (IVZ) reported fourth-quarter 2010 earnings that were higher than last quarter and a year ago but disappointed analysts’ expectations just the same as stronger stock market results were tempered by fallout from the firm’s June acquisition of Morgan Stanley’s mutual-funds business.

The Atlanta-based investment manager said in its Q4 news release that earnings per share for the year were 32.9% higher, at $1.01 compared with $0.76 in 2009, while quarterly EPS came in at $0.37 compared with $0.32 in the third quarter. Analyst consensus was for EPS of $0.40.

Profits were up 44.4% for the year, at $465.7 million versus $322.5 million in 2009, and up 13.3% for the quarter, at $175.2 million versus $154.7 million in Q3.

“Invesco’s efforts to provide strong, long-term investment performance to our clients contributed to enhanced operating results for the firm during 2010,” said President and Chief Executive Martin Flanagan in a statement. “Driven by strong investment performance, an improved market environment and the successful integration of Morgan Stanley’s retail asset management business, Invesco reported a 55% increase in adjusted earnings per share year over year.”

However, Sandler O’Neill & Partners equity analyst Michael Kim told Bloomberg in an interview before earnings were announced that “it was a mixed quarter for Invesco as it relates to flows” because proposed fund mergers stemming from the acquisition led to client withdrawals.

Invesco’s long-term outflows totaled $57.4 billion in the fourth quarter while inflows totaled $40.4 billion, resulting in a $17.0 billion loss in long-term net flows compared to a $4.9 billion gain in the third quarter.  Among the asset classes, equity was hardest hit, with an $8.6 billion loss. Year to date, long-term net flows totaled $5.5 billion in 2010 compared with $16.6 billion in 2009, down 66.9%.

Total assets under management (AUM) at Dec. 31 were $616.5 billion versus $604.5 billion at Sept. 30. Average AUM during the fourth quarter was $616.0 billion, compared to $583.3 billion for the third quarter and $459.5 billion for 2009.

The firm aims to cut expenses by $78 million over two years by combining some of its funds with others acquired in the Morgan Stanley deal, Bloomberg noted. The firm has proposed folding 69 funds into 43 others, and the company has said that it expects to receive shareholder approval for the mergers within seven months.

Read about InvescoPowerShares’ plans to eliminate 10 equity ETFs at AdvisorOne.com.

Read AdvisorOne's 2010 Q4 earnings calendar for the financial sector for release dates and links to earnings stories.

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