BlackRock Posts $256m Profit after Barclays Acquisition
BlackRock (BLK) posted total fourth-quarter net income of $256m, up $204m from the same time in 2008. The quarterly results reflect BlackRock's acquisition of Barclays Global Investors (BGI) on Dec. 1, 2009, which contributed $94m of Q4 net income. After-tax expenses of $108m related to the integration offset that income. Net new business in the quarter totaled $82bn. US and Canada-based investors contributed $48bn in net new business funds as well. "Investors worldwide redeployed assets out of money market accounts yielding near zero to a variety of long-only and alternative investment strategies," said BlackRock chairman and CEO Laurence Fink. "Their renewed risk appetite drove a substantial tightening of credit spreads and a sharp rebound in global equity markets." Fink said the firm is well-positioned for 2010, although merger integrations like the one of BGI will require time. He said BlackRock still faces some risks, especially as regulators look to restructure financial institutions. Most recently, President Barack Obama proposed limits on banks' size and trading activities. Fink indicated the firm remains committed to its real estate business in spite of "a bad investment in New York City, which we identified many quarters ago and wrote off." BlackRock Realty and Tishman Speyer Properties recently said they would pursue a deed-in-lieu of foreclosure on Manhattan's Stuyvesant Town/Peter Cooper Village and surrender ownership back to the creditors. News of the intended ownership transfer comes just weeks after Tishman and BlackRock said they would miss a scheduled repayment to senior lenders on a bond used to finance debt from the joint purchase. It marks the second-largest commercial mortgage default after the Extended Stay Hotel default pushed commercial mortgage-backed securities (CMBS) delinquencies up 85 bps in November. "We are not alone in the problems of real estate," Fink said in the BlackRock investor call. "We need to be vigorous in rebuilding, rebalancing and restructuring [what] needs to be fixed." The firm's acquisition of Helix Financial Group will offer "huge opportunities" to analyze commercial mortgage-backed securities (CMBS), down to loan-level data, Fink said. He added that "too many investors relied too heavily on the rating agencies" pre-crisis. BlackRock's use of Helix will allow investors now to analyze their holdings and understand the base assets. This type of loan-level analysis will likely be the "new fiduciary standard" in order to invest in structured finance products, he said. Write to Diana Golobay. Disclaimer: The author holds no relevant investment positions.