Invesco profit down 22 percent in fourth quarter

Thu Jan 31, 2013 11:42am EST

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(Reuters) - Money manager Invesco Ltd, which runs the Powershares brand of exchange-traded funds, said on Thursday its fourth-quarter profit slipped 22 percent as the firm gathered less new money from customers than in prior quarters.

Shares of Atlanta-based Invesco lost $1.30, or 4.6 percent, to $26.98 in midday trading on the New York Stock Exchange.

Customers added a net $1 billion to Invesco's funds and accounts during the quarter, down 91 percent from the prior period and 83 percent from the fourth quarter of 2011, Invesco said in a statement on Thursday.

Assets under management at Atlanta-based Invesco totaled $687.7 billion, up 0.7 percent during the quarter.

Invesco was not alone in seeing slowing flows amid investor confusion in the fourth quarter. Competitors T. Rowe Price Group and Janus Capital Group have also reported fourth quarter net outflows from their customers.

Customers withdrew $5.7 billion from Invesco's equity accounts and about $600 million from alternative assets while adding $3.4 billion to fixed income products and $3.9 billion to balanced accounts, Invesco said. Money market customers added about $100 million.

Overall flows also were reduced by $1.6 billion because a collateralized debt obligation managed by Invesco matured during the quarter.

Like much of the rest of the industry, improving investor enthusiasm about stocks bolstered Invesco's flows in January, after the quarter ended. Gross sales of U.S. equity funds rose 56 percent from the firm's monthly average in the fourth quarter, Chief Executive Martin Flanagan said on a call with analysts.

"January is not a year. It's not multiple years," Flanagan said. "But it is a very encouraging sign and probably something very different than what we have seen in many years."

COMPENSATION INCREASES

Invesco's adjusted net revenue increased 8.2 percent from a year earlier to $775.9 million. Employee compensation increased 9.5 percent to $342 million.

Invesco Chief Financial Officer Loren Starr said compensation would remain about the same in the first quarter, leading several analysts to question Invesco about the size of the fourth-quarter increase.

"It's something that is not lost in us," CEO Flanagan responded. "We think the way we are doing compensation is right."

Compensation should decline as a proportion of revenue as the year continues, Flanagan said.

Analysts had expected higher customer inflow and lower compensation expenses. "If the company could strike a better balance between performance and expenses, the stock could see better momentum," Glenn Schorr, an analyst at Nomura Securities, wrote after the earnings were released.

Net income totaled $158.7 million, or 35 cents per share, in the fourth quarter compared with $202.3 million, or 44 cents per share, in the same period a year earlier, Invesco said.

That included an expense of $24 million for the early redemption of debt that was refinanced during the fourth quarter, costs to outsource some of Invesco's operations in Europe and other items.

Excluding those items, Invesco said its adjusted net income increased 6 percent from a year earlier to $202.6 million and adjusted net income per share was 45 cents.

Analysts on average had expected net income per share excluding items of 47 cents per share, according to Thomson Reuters I/B/E/S.

(Reporting by Aaron Pressman; Editing by Theodore d'Afflisio and Leslie Gevirtz)

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