T. Rowe Price 4th-quarter profit up more than 6 times, fueled by new investments, market rally

T. Rowe Price 4Q profit leaps more than sixfold

BALTIMORE — Investment manager T. Rowe Price Group Inc. on Thursday said its fourth-quarter profit jumped more than six times as investors bought into its mutual funds and the market rally boosted other investments.

For the final three months of 2009, net income rose to $152.5 million, or 57 cents per share, compared with $24.3 million, or 9 cents per share, in the 2008 fourth quarter. Adjusted profit in the 2008 quarter was 31 cents per share.

Revenue rose 30 percent to $542.6 million, from $415.9 million in the prior year.

Analysts polled by Thomson Reuters, on average, expected profit of 55 cents per share, on revenue of $546.6 million.

Investment advisory revenue increased 40 percent, to $461.7 million. That included $318.4 million in revenue earned from U.S. mutual funds, a 39 percent gain.

Assets under management increased 42 percent to $391.3 billion on Dec. 31, from $276.3 billion a year earlier. The most recent figure included $232.7 billion in the company’s U.S. mutual funds and $158.6 billion in other managed investment portfolios.

Net cash inflows in the quarter totaled $7.3 billion, while the market rally added $17.8 billion to assets under management.

“Unlike many other financial services companies, we are fortunate that our strong balance sheet and our diversified investment and distribution capabilities meant we did not have to fundamentally change our business model in the wake of the recent market turmoil,” said President and CEO James A.C. Kennedy.

Kennedy said the company’s revenue, profit and earnings per share have rebounded, but they remain lower than 2008 and well below the highs of 2007. Average assets under management remains well below the level of the prior two years. The company reined in some costs, particularly advertising and promotion, which dropped 23 percent from the prior year to $23.8 million.

Compensation and related costs rose 13 percent, due to a higher fourth quarter accrual for the firm’s year-end compensation program. Quarterly accruals had dropped off significantly due to market conditions in the 2008 fourth quarter.

For the year, T. Rowe Price’s profit slid 12 percent to $433.6 million, or $1.65 per share, from 2008 profit of $490.8 million, or $1.81 per share. Net cash inflows from investors totaled $22.7 billion for 2009, and market appreciation and net income added $92.3 billion during the year.

T. Rowe Price shares closed Wednesday’s trading at $52.63, down about 1 percent since the start of the year. The stock has changed hands between $20.09 and $55.48 in the past 52 weeks.