Legg Mason profit falls as asset total slips

Legg Mason quarterly earnings shrink as investment manager's asset total slips

Associated Press

BALTIMORE (AP) -- Legg Mason's third-quarter earnings fell by about half as its clients withdrew more cash than they deposited into mutual funds and other investments.

However, the net outflow was smaller than the prior quarter, the company said Friday, and total assets managed was up compared with the second-quarter total, boosted in part by end-of-the-year market gains.

Net income for the three months ended Dec. 31 was $28.1 million, or 20 cents per share, down from $61.6 million, or 41 cents per share, in the same period a year earlier.

Results in the latest quarter included $42.3 million, or 21 cents per share, in transition-related costs from steps that the Baltimore company has taken since mid-2010 to streamline its business. In the year-ago quarter, those costs were $24 million, or 10 cents per share.

On an adjusted basis, Legg Mason's fiscal third-quarter earnings were $76.8 million, or 55 cents per share.

Revenue fell 13 percent to $627 million from $721.9 million a year ago, in part because assets under management fell 7 percent to $627 million. The biggest category of fee income, fees paid to funds, fell nearly 9 percent.

"Mixed flow dynamics keep us cautious and we see 2012 as another transition year," said William Katz of Citi Investment Research & Analysis. "Lack of new buyback is disappointing at the margin and may suggest incremental repurchase is more difficult" without a recovery of inflow from clients.

Katz maintained a "neutral" rating on the investment management company.

Net client outflows were $1.3 billion in the latest quarter. Although more money flowed out than in, the latest quarter's figure was an improvement from the $17.6 billion net outflow in the fiscal second quarter, and $16.7 billion in the same quarter a year ago.

During the latest quarter, assets under management rose 2 percent compared with the figure in the previous quarter in part because of $17.6 billion in market appreciation, as most stocks and bonds appreciated in value over the final three months of the year.

Legg Mason on Friday also said its board declared a quarterly cash dividend of 8 cents per share, payable April 16 to shareholders of record as of March 15.

Legg Mason Inc. reported quarterly results before markets opened. The stock closed on Thursday at $27.32, and is up from a 52-week low of $22.84 reached in October. The stock traded as high as $37.82 last April.

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