BOSTON (Reuters) - T. Rowe Price Group Inc (TROW.O) said third-quarter profit rose 27 percent as it drew significant inflows from institutional investors, beating expectations and driving up its shares.
The Baltimore asset manager reported net inflows of $8 billion for the three months ended September 30, a contrast to other fund firms such as BlackRock Inc (BLK.N) and Janus Capital Group JNS.N which have reported outflows for the quarter.
T Rowe Price’s earnings topped expectations, coming in at $169.1 million, or 64 cents per share, up from $132.9 million or 50 cents per share a year earlier.
Analysts surveyed by Thomson Reuters I/B/E/S had expected on average the company to earn 60 cents a share.
Fees from T Rowe’s growing assets under management drove the increase.
“It was better than expected across the board,” said Sandler O’Neill analyst Michael Kim. “The theme has been, ‘it’s all about flows.’”
Shares were up about 4 percent at $54.82 on the Nasdaq on Friday morning, reaching their highest level since early May.
Most of the inflows, nearly $7 billion, came from institutional customers, T Rowe Price Chief Executive James Kennedy said in an interview.
Kennedy said the firm recently had attracted new business from large customers, but that it still faces plenty of competition and takes nothing for granted.
“I would not draw a lot of conclusions. It could have been $2 billion,” he said, referring to the $7 billion in inflows from institutional customers.
Individual investors, once the mutual fund industry’s bedrock, lately have been more guarded, especially in stock market products.
Individuals started to move back into the stock market earlier this year, but the trend was interrupted by the May 6 “flash crash,” when markets were struck by technical mayhem and plunged sharply before recovering.
“Once the flash crash happened, retail investors started to sit on their hands again and have been relatively quiet since,” Kennedy said. In October retail flows were split between stock and bond funds again, he said, but added, “there is so much uncertainty out there, people don’t know what to do.”
T Rowe’s assets under management rose to $439.7 billion at the end of September from $391.1 billion at the end of June. Along with the inflows the increase included market appreciation of $40.6 billion. Revenue was $586.1 million, beating expectations of $575 million.
T Rowe Price said it will take a pretax charge of $17 million to account for a capital contribution it will make in the fourth quarter to some money market mutual funds. Kennedy said this will work out to several pennies per share for company stockholders.
The move comes in advance of new rules by the U.S. Securities and Exchange Commission, Kennedy said. Starting early in 2011, the SEC will require companies to fully disclose to investors the exact value of shares they own in money market funds down to hundredths of a penny.
Without the contribution it is possible investors might see shares valued at slightly less than $1 each, even by hundredths of a penny, Kennedy said, which might be worrisome to some even though it would be immaterial on a financial basis.
“We don’t want any misperceptions,” he said.
Reporting by Ross Kerber; editing by John Wallace, Derek Caney and Matthew Lewis