Franklin Resources 2Q Net Tumbles 70% On Asset Decline

   DOW JONES NEWSWIRES 
 

Franklin Resources Inc.'s (BEN) fiscal second-quarter net income tumbled a more-than-expected 70% amid lower fee revenue and tumbling assets under management as the bottom line was also hurt by investment losses.

Shares of the mutual-fund company fell 3.35% premarket to $58.53 in early trading Tuesday; through Monday the stock was down roughly 45% since September.

Money managers have struggled as investors shift from stock funds into lower-fee bond and money-market funds and reduced asset balances weigh on margins. Rivals Invesco Ltd. (IVZ) and T. Rowe Price Group (TROW) reported steep quarterly profit declines, with Rowe slashing its work force by 5%.

For the quarter ended March 31, Franklin reported net income of $110 million, or 48 cents a share, down from $366.1 million, or $1.54 a share, a year earlier. The latest period included $26 million in investment write-downs and a net $33.9 million in investment and other losses, while the prior year included $32.4 million in investment and other income.

Revenue slid 40% to $912.3 million, as investment-management fees tumbled amid a 39% year-to-year drop in assets under management to $391.1 billion.

Analysts polled by Thomson Reuters most recently were looking for earnings of 62 cents on revenue of $898 million.

Operating margin fell to 24.5% from 34.5%.

Assets under management fell 6% from the previous quarter as fund outflows slowed to $5.5 billion from $18.2 billion in the fourth quarter and $6.1 billion a year earlier. Equity holdings declined to 44% of total assets from 47% at the end of last year, while fixed income rose to 35% from 32%.

-By Tess Stynes, Dow Jones Newswires; 201-938-2473; [e-mail]