T. Rowe Price 3Q profit dips as fees shrink

T. Rowe Price 3rd-qtr profit down as management revenue declines; results beat Street views

• On 10:27 am EDT, Friday October 23, 2009

BALTIMORE (AP) -- Mutual fund manager T. Rowe Price Group Inc. said Friday its third-quarter profit shrank 13 percent as the recent market rally failed to restore money management fees back to pre-meltdown levels.

T. Rowe Price's profit and revenue for the three months ended Sept. 30 nevertheless narrowly beat Wall Street expectations, sending shares to a new 52-week high.

The nation's sixth-largest mutual fund manager reported net income of $132.9 million, or 50 cents per share, down from $152.8 million, or 56 cents per share, in the same quarter a year ago.

Revenue fell 10 percent to $498.1 million from $554.8 million.

On average, analysts surveyed by Thomson Reuters had forecast a profit of 46 cents per share on revenue of $495.5 million.

T. Rowe Price continued to feel the lingering effects of last year's plunging markets, which sharply reduced the value of assets under management and eroded money management fees. The blow has been softened by a seven-month rally that started in March but hasn't restored most stocks to pre-meltdown levels.

The Baltimore-based company's assets under management were $366.2 billion as of Sept. 30, up 16 percent from $315.6 billion at the end of June.

Investment advisory fees from T. Rowe Price's mutual funds distributed in the U.S. fell nearly 12 percent to $289.4 million in the latest quarter. Average mutual fund assets under management were $204.3 billion, down nearly 10 percent from the year-ago quarter.

Revenue from other investment portfolios that the company manages fell nearly 8 percent to $127.9 million.

Net flows into mutual funds were $2.6 billion in the latest quarter, as the $3.5 billion flow into bond funds was offset by about $900 million pulled out of money-market funds, an investment category where returns have lately been at historical lows. Flows into stock funds were neutral.

Operating expenses fell nearly 8 percent to $290.8 million.

CEO and President James Kennedy said the company was "encouraged that investors have shown a willingness to accept more risk."

But he said the strength of the recent market rebound "still leaves us cautious as headwinds persist and equity valuations may have gotten ahead of the recovery. Investors should not be surprised at a pullback as the markets begin to look for broader improvements in economic conditions.

"Nevertheless, we are generally optimistic that the worst of the global economic and market downturn is behind us."

In morning trading, shares of T. Rowe Price advanced $4.66, or 9.5 percent, to a new peak of $53.77. Their previous 52-week high of $49.22 was set Thursday.

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