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BlackRock Reports Full Year 2016 Diluted EPS of $19.04, or $19.29 as adjusted

Company Release - 1/13/2017 6:30 AM ET

Fourth Quarter 2016 Diluted EPS of $5.13, or $5.14 as adjusted

  • Record $202 billion of full year total net inflows reflects strength of diversified business model
  • $98 billion of fourth quarter total net inflows, including $18 billion in cash management, led by momentum in iShares® and Institutional businesses
  • Demand for BlackRock technology solutions drove 13% full year revenue growth in Aladdin®
  • Expansion in operating margin from prior year reflects continued expense discipline
  • Returned $2.7 billion to shareholders in 2016
  • Board of Directors approves 9% increase in quarterly cash dividend to $2.50 per share and authorizes repurchase of an additional 6 million shares under existing share repurchase program

NEW YORK--(BUSINESS WIRE)-- BlackRock, Inc. (NYSE:BLK)

FINANCIAL RESULTS

(in millions, except per share data)   Q4

2016

  Q4

2015

  Change   Q3

2016

  Change   Full Year  
            2016   2015   Change
AUM $ 5,147,852 $ 4,645,412 11 % $ 5,117,421 1 % $ 5,147,852   $ 4,645,412 11 %
Total net flows $ 98,050 $ 67,885 $ 69,809 $ 202,191 $ 149,895

GAAP basis:

Revenue $ 2,890 $ 2,863 1 % $ 2,837 2 % $ 11,155 $ 11,401 (2 )%
Operating income $ 1,225 $ 1,137 8 % $ 1,209 1 % $ 4,570 $ 4,664 (2 )%
Operating margin 42.4 % 39.7 % 270 bps 42.6 % (20) bps 41.0 % 40.9 % 10 bps
Net income(1) $ 851 $ 861 (1 )% $ 875 (3 )% $ 3,172 $ 3,345 (5 )%
Diluted EPS $ 5.13 $ 5.11 - % $ 5.26 (2 )% $ 19.04 $ 19.79 (4 )%
Weighted average diluted shares 165.9 168.6 (2 )% 166.3 - % 166.6 169.0 (1 )%

As adjusted:

Operating income(2) $ 1,232 $ 1,143 8 % $ 1,216 1 % $ 4,674 $ 4,695 - %
Operating margin(2) 44.4 % 41.6 % 280 bps 44.8 % (40) bps 43.7 % 42.9 % 80 bps
Net income(1) (2) $ 852 $ 801 6 % $ 854 - % $ 3,214 $ 3,313 (3 )%
Diluted EPS(2)   $ 5.14     $ 4.75     8 %   $ 5.14    

-

%   $ 19.29     $ 19.60     (2 )%
(1)   Net income represents net income attributable to BlackRock, Inc.
(2)

See notes (1) through (4) to the Condensed Consolidated Statements of Income and Supplemental Information for more information on as adjusted items and the reconciliation to GAAP.

 

BlackRock, Inc. (NYSE:BLK) today reported financial results for the three months and year ended December 31, 2016.

“In a year of dramatic change and uncertainty around the world, clients continued to put their trust in BlackRock, allowing us to deliver the strongest annual net inflows in our firm’s history,” commented Laurence D. Fink, Chairman and CEO of BlackRock. “2016 total net inflows of $202 billion were positive across product types and included $181 billion of long-term net inflows. Our full year results reflect our continued commitment to optimize the growth of our diverse investment, technology and risk management capabilities in the most efficient way possible.

“While domestic equities rallied following the US election, the combination of a strengthening dollar, underperforming international equities and negative fixed income markets produced challenging outcomes for global investors. Investors are rethinking their approach to active management, asset allocation and portfolio construction, and we’re seeing more clients use active and index strategies together to deliver returns. We have purposefully invested in our platform to provide clients with a full spectrum of offerings including cash, market cap-weighted indexes, smart beta and factor-based investment strategies, and high-conviction active products, whether fundamental, quantitative or illiquid.

“Increasingly diversified groups of institutional and retail clients are using ETFs in their portfolios. This broadening of the ETF ecosystem is creating a deeper secondary market for ETF trading – enhancing liquidity for all investors. iShares generated a record $140 billion of net inflows for the year, including $60 billion into iShares fixed income ETFs, capturing the #1 share of flows globally, in the US and in Europe, and in equity and fixed income.

“Institutions looked to BlackRock to help them close funding gaps and meet future liability objectives, and we saw record institutional net inflows of $51 billion, driven by fixed income and multi-asset solutions.

“Technology is increasingly important in the evolving regulatory and investment landscape, and clients increasingly value BlackRock’s technology solutions to help them understand and manage risk, and build portfolios. Aladdin revenue increased 13% in 2016, and is well positioned for continued momentum with a broader set of clients than ever before. Additionally, we launched Aladdin Risk for Wealth Management and continued to deepen our relationships with our distribution partners through FutureAdvisor’s digital advice capabilities.

“BlackRock has always focused on repositioning its investment platform and technology capabilities in anticipation of change, and BlackRock employees embrace their responsibility to help clients navigate this evolving, complex landscape. As we head into 2017, we remain committed to investing for the future and developing our talent in order to fulfill our responsibility to both clients and shareholders.”

CAPITAL MANAGEMENT

The BlackRock Board of Directors approved a 9% increase in the quarterly cash dividend to $2.50 per share, payable March 23, 2017, to shareholders of record at the close of business on March 6, 2017. In addition, the Board authorized the repurchase of an additional 6 million shares under the Company’s existing share repurchase program for a total up to 9 million shares of BlackRock common stock.

RESULTS BY CLIENT TYPE

       

December 31, 2016

 

Q4 2016

Q4 2016

December 31, 2016

Q4 2016

AUM

Base fees(1)

(in millions), (unaudited)  

Net flows

 

AUM

 

Base fees(1)

 

% of Total

 

% of Total

Retail $ (2,444 )

$

541,952

$ 789 10 % 31 %
iShares 49,300 1,287,879 885 25 % 36 %
Institutional:
Active 6,306 1,009,974 453 20 % 18 %
Index   34,601       1,901,681     241   37 %   10 %
Total institutional   40,907       2,911,655     694   57 %  

28

%
Long-term 87,763 4,741,486 2,368 92 % 95 %
Cash management 17,671 403,584 118 8 % 5 %
Advisory   (7,384 )     2,782     -   -     -  
Total   $ 98,050     $ 5,147,852   $ 2,486   100 %   100 %
 
 

RESULTS BY PRODUCT TYPE

December 31, 2016

Q4 2016

Q4 2016

December 31, 2016

Q4 2016

AUM

Base fees(1)

(in millions), (unaudited)  

Net flows

 

AUM

 

Base fees(1)

 

% of Total

 

% of Total

Equity $ 57,965 $ 2,657,176 $ 1,237 52 % 50 %
Fixed income 25,306 1,572,365 685 30 % 27 %
Multi-asset 4,856 395,007 278 8 % 11 %
Alternatives   (364 )     116,938     168   2 %   7 %
Long-term 87,763 4,741,486 2,368 92 % 95 %
Cash management 17,671 403,584 118 8 % 5 %
Advisory   (7,384 )     2,782     -   -     -  
Total   $ 98,050     $ 5,147,852   $ 2,486   100 %   100 %
 
 

RESULTS BY INVESTMENT STYLE

December 31, 2016

Q4 2016

Q4 2016

December 31, 2016

Q4 2016

AUM

Base fees(1)

(in millions), (unaudited)  

Net flows

 

AUM

 

Base fees(1)

 

% of Total

 

% of Total

Active $ (546 ) $ 1,501,052 $ 1,232 29 % 49 %
Index and iShares   88,309       3,240,434     1,136   63 %   46 %
Long-term 87,763 4,741,486 2,368 92 % 95 %
Cash management 17,671 403,584 118 8 % 5 %
Advisory   (7,384 )     2,782     -   -     -  
Total   $ 98,050     $ 5,147,852   $ 2,486   100 %   100 %

(1) Base fees include investment advisory, administration fees and securities lending revenue.

 

BUSINESS HIGHLIGHTS

Long-term net inflows were positive across all major regions, with net inflows of $46.0 billion, $38.2 billion and $3.6 billion from clients in the Americas, EMEA and Asia-Pacific, respectively. At December 31, 2016, BlackRock managed 63% of its long-term AUM for investors in the Americas and 37% for clients in EMEA and Asia-Pacific.

A discussion of the Company’s net flows by client type for the fourth quarter of 2016 is presented below.

  • Retail long-term net outflows of $2.4 billion reflected net outflows of $1.6 billion from the United States and $0.8 billion internationally. Equity net inflows of $1.7 billion were paced by flows into US equities and index mutual funds, and included the seasonal impact of capital gains. Fixed income net outflows of $1.8 billion reflected outflows from unconstrained and high yield categories. Multi-asset net outflows of $1.7 billion were largely due to outflows from world allocation strategies.
  • iShares long-term net inflows of $49.3 billion were led by equity net inflows of $50.7 billion, with strength in precision exposures and iShares Core ETFs. Fixed income net outflows of $0.3 billion reflected outflows from investment grade corporate and treasury bond funds. Commodities iShares saw $1.7 billion of net outflows.
  • Institutional active long-term net inflows of $6.3 billion were led by multi-asset net inflows of $5.7 billion, driven by ongoing demand for solutions offerings and the LifePath® target-date series. Alternatives net inflows of $2.2 billion reflected inflows into multi-strategy hedge fund and alternatives solutions offerings. Equity net outflows of $2.8 billion were primarily due to outflows from Scientific Active equities and international equities.
  • Institutional index long-term net inflows of $34.6 billion were driven by fixed income net inflows of $26.2 billion, reflecting demand for liability-driven investment solutions. Equity saw net inflows of $8.4 billion.

Cash management AUM increased 4% to $403.6 billion, driven by $17.7 billion of net inflows, primarily into government funds.

INVESTMENT PERFORMANCE AT DECEMBER 31, 2016(1)

 

  One-year period   Three-year period   Five-year period
Fixed Income:      

Actively managed AUM above benchmark or peer median

Taxable

60%

78%

88%

Tax-exempt

64%

63%

73%

Index AUM within or above applicable tolerance  

90%

 

99%

 

99%

Equity:

Actively managed AUM above benchmark or peer median

Fundamental

48%

62%

65%

Scientific

43%

80%

91%

Index AUM within or above applicable tolerance  

95%

 

97%

 

97%

(1)  

Past performance is not indicative of future results. The performance information shown is based on preliminary available data. Please refer to performance disclosure detail.

 

TELECONFERENCE, WEBCAST AND PRESENTATION INFORMATION

Chairman and Chief Executive Officer, Laurence D. Fink, and Chief Financial Officer, Gary S. Shedlin, will host a teleconference call for investors and analysts on Friday, January 13, 2017 at 8:30 a.m. (Eastern Time). Members of the public who are interested in participating in the teleconference should dial, from the United States, (800) 374-0176, or from outside the United States, (706) 679-8281, shortly before 8:30 a.m. and reference the BlackRock Conference Call (ID Number 39041891). A live, listen-only webcast will also be available via the investor relations section of www.blackrock.com.

Both the teleconference and webcast will be available for replay by 12:30 p.m. (Eastern Time) on Friday, January 13, 2017 and ending at midnight on Friday, January 27, 2017. To access the replay of the teleconference, callers from the United States should dial (855) 859-2056 and callers from outside the United States should dial (404) 537-3406 and enter the Conference ID Number 39041891. To access the webcast, please visit the investor relations section of www.blackrock.com.

About BlackRock

BlackRock is a global leader in investment management, risk management and advisory services for institutional and retail clients. At December 31, 2016, BlackRock’s AUM was $5.1 trillion. BlackRock helps clients around the world meet their goals and overcome challenges with a range of products that include separate accounts, mutual funds, iShares® (exchange-traded funds), and other pooled investment vehicles. BlackRock also offers risk management, advisory and enterprise investment system services to a broad base of institutional investors through BlackRock Solutions®. As of December 31, 2016, the firm had approximately 13,000 employees in more than 30 countries and a major presence in global markets, including North and South America, Europe, Asia, Australia and the Middle East and Africa. For additional information, please visit the Company’s website at www.blackrock.com | Twitter: @blackrock_news | Blog: www.blackrockblog.com | LinkedIn: www.linkedin.com/company/blackrock

CONSOLIDATED STATEMENTS OF INCOME AND SUPPLEMENTAL INFORMATION

(in millions, except shares and per share data), (unaudited)

 
          Three Months  
Three Months Ended Ended
December 31,

September 30,

2016 2015 Change 2016 Change
Revenue
Investment advisory, administration fees and securities lending revenue $2,486 $2,460 $26 $2,546 $(60 )
Investment advisory performance fees 129 169 (40 ) 58 71
BlackRock Solutions and advisory 197 171 26 174 23
Distribution fees 9 11 (2 ) 10 (1 )
Other revenue 69   52   17   49   20  
 
Total revenue 2,890   2,863   27   2,837   53  
 
Expense
Employee compensation and benefits 987 989 (2 ) 969 18
Distribution and servicing costs 109 103 6 114 (5 )
Amortization of deferred sales commissions 7 11 (4 ) 8 (1 )
Direct fund expense 183 189 (6 ) 200 (17 )
General and administration 355 410 (55 ) 312 43
Amortization of intangible assets 24   24   -   25   (1 )
 
Total expense 1,665   1,726   (61 ) 1,628   37  
 
Operating income 1,225 1,137 88 1,209 16
 
Nonoperating income (expense)
Net gain (loss) on investments 6 57 (51 ) 31 (25 )
Interest and dividend income 7 5 2 22 (15 )
Interest expense (51 ) (51 ) -   (52 ) 1  
 
Total nonoperating income (expense) (38 ) 11   (49 ) 1   (39 )
 
Income before income taxes 1,187 1,148 39 1,210 (23 )
Income tax expense 336   279   57   333   3  
 
Net income 851 869 (18 ) 877 (26 )
Less:
Net income (loss) attributable to noncontrolling interests -   8   (8 ) 2   (2 )
 
Net income attributable to BlackRock, Inc. $851   $861   $(10 ) $875   $(24 )
 
Weighted-average common shares outstanding
Basic 163,441,552 165,826,808 (2,385,256 ) 164,129,214 (687,662 )
Diluted 165,854,167 168,632,558 (2,778,391 ) 166,256,598 (402,431 )
Earnings per share attributable to BlackRock, Inc. common stockholders (4)
Basic $5.21 $5.19 $0.02 $5.33 $(0.12 )
Diluted $5.13 $5.11 $0.02 $5.26 $(0.13 )
Cash dividends declared and paid per share $2.29 $2.18 $0.11 $2.29 $-
 

Supplemental information:

 
AUM (end of period) $5,147,852 $4,645,412 $502,440 $5,117,421 $30,431
Shares outstanding (end of period) 163,121,291 165,596,139 (2,474,848 ) 163,858,070 (736,779 )
GAAP:
Operating margin 42.4 % 39.7 %

270

 bps

42.6 %

(20

) bps

Effective tax rate 28.3 % 24.5 %

380

 bps

27.6 %

70

  bps

As adjusted:
Operating income (1) $1,232 $1,143 $89 $1,216 $16
Operating margin (1) 44.4 % 41.6 %

280

 bps

44.8 %

(40

) bps

Nonoperating income (expense), less net income (loss) attributable to noncontrolling interests (2) $(38 ) $1 $(39 ) $(1 ) $(37 )
Net income attributable to BlackRock, Inc. (3) $852 $801 $51 $854 $(2 )
Diluted earnings attributable to BlackRock, Inc. common stockholders per share (3) (4) $5.14 $4.75 $0.39 $5.14 $-
Effective tax rate 28.6 % 30.0 %

(140

) bps

29.7 %

(110

) bps

 

See the reconciliation to GAAP and notes (1) through (4) for more information on as adjusted items.

 
 

CONDENSED CONSOLIDATED STATEMENTS OF INCOME AND SUPPLEMENTAL INFORMATION

(in millions, except shares and per share data), (unaudited)

 
  Year Ended  
December 31,
2016   2015 Change
Revenue
Investment advisory, administration fees and securities lending revenue $9,880 $9,840 $40
Investment advisory performance fees 295 621 (326 )
BlackRock Solutions and advisory 714 646 68
Distribution fees 41 55 (14 )
Other revenue 225   239   (14 )
 
Total revenue 11,155   11,401   (246 )
 
Expense
Employee compensation and benefits 3,880 4,005 (125 )
Distribution and servicing costs 429 409 20
Amortization of deferred sales commissions 34 48 (14 )
Direct fund expense 766 767 (1 )
General and administration 1,301 1,380 (79 )
Restructuring charge 76 - 76
Amortization of intangible assets 99   128   (29 )
 
Total expense 6,585   6,737   (152 )
 
Operating income 4,570 4,664 (94 )
 
Nonoperating income (expense)
Net gain (loss) on investments 55 116 (61 )
Interest and dividend income 40 26 14
Interest expense (205 ) (204 ) (1 )
 
Total nonoperating income (expense) (110 ) (62 ) (48 )
 
Income before income taxes 4,460 4,602 (142 )
Income tax expense 1,290   1,250   40  
 
Net income 3,170 3,352 (182 )
Less:
Net income (loss) attributable to noncontrolling interests (2 ) 7   (9 )
 
Net income attributable to BlackRock, Inc. $3,172   $3,345   $(173 )
 
Weighted-average common shares outstanding
Basic 164,425,858 166,390,009 (1,964,151 )
Diluted 166,579,752 169,038,571 (2,458,819 )
Earnings per share attributable to BlackRock, Inc. common stockholders (4)
Basic $19.29 $20.10 $(0.81 )
Diluted $19.04 $19.79 $(0.75 )
Cash dividends declared and paid per share $9.16 $8.72 $0.44
 

Supplemental information:

 
AUM (end of period) $5,147,852 $4,645,412 $502,440
Shares outstanding (end of period) 163,121,291 165,596,139 (2,474,848 )
GAAP:
Operating margin 41.0 % 40.9 % 10 bps
Effective tax rate 28.9 % 27.2 % 170 bps
As adjusted:
Operating income (1) $4,674 $4,695 $(21 )
Operating margin (1) 43.7 % 42.9 % 80 bps
Nonoperating income (expense), less net income (loss) attributable to noncontrolling interests (2) $(108 ) $(70 ) $(38 )
Net income attributable to BlackRock, Inc. (3) $3,214 $3,313 $(99 )
Diluted earnings attributable to BlackRock, Inc. common stockholders per share(3) (4) $19.29 $19.60 $(0.31 )
Effective tax rate 29.6 % 28.4 % 120 bps
 

See the reconciliation to GAAP and notes (1) through (4) for more information on as adjusted items.

 
 
ASSETS UNDER MANAGEMENT

(in millions), (unaudited)

Current Quarter Component Changes by Client Type and Product
    Net        
September 30, inflows December 31,
2016 (outflows) Market change FX impact (1) 2016 Average AUM (2)
 
Retail:
Equity $196,131 $1,742 $1,525 $(3,177 ) $196,221 $193,865
Fixed income 230,842 (1,832 ) (4,798 ) (1,956 ) 222,256 226,160
Multi-asset 111,369 (1,699 ) (1,115 ) (558 ) 107,997 108,785
Alternatives 16,436 (655 ) (33 ) (270 ) 15,478 15,977
Retail subtotal 554,778 (2,444 ) (4,421 ) (5,961 ) 541,952 544,787
iShares:
Equity 891,010 50,650 15,721 (6,129 ) 951,252 909,727
Fixed income 329,462 (326 ) (10,344 ) (4,085 ) 314,707 320,334
Multi-asset 2,506 695 (49 ) (3 ) 3,149 2,730
Alternatives 23,188 (1,719 ) (2,586 ) (112 ) 18,771 20,869
iShares subtotal 1,246,166 49,300 2,742 (10,329 ) 1,287,879 1,253,660
Institutional:
Active:
Equity 123,770 (2,804 ) 2,652 (2,919 ) 120,699 120,590
Fixed income 560,799 1,267 (14,537 ) (10,802 ) 536,727 546,842
Multi-asset 280,406 5,657 (2,403 ) (6,727 ) 276,933 275,203
Alternatives 74,678 2,186   71   (1,320 ) 75,615 75,069
Active subtotal 1,039,653 6,306 (14,217 ) (21,768 ) 1,009,974 1,017,704
Index:
Equity 1,355,128 8,377 52,752 (27,253 ) 1,389,004 1,360,085
Fixed income 507,165 26,197 (15,902 ) (18,785 ) 498,675 492,827
Multi-asset 7,980 203 (727 ) (528 ) 6,928 7,645
Alternatives 7,228 (176 ) 214   (192 ) 7,074 7,102
Index subtotal 1,877,501 34,601   36,337   (46,758 ) 1,901,681 1,867,659
Institutional subtotal 2,917,154 40,907   22,120   (68,526 ) 2,911,655 2,885,363
Long-term 4,718,098 87,763 20,441 (84,816 ) 4,741,486 4,683,810
Cash management 388,982 17,671 225 (3,294 ) 403,584 397,661
Advisory (3) 10,341 (7,384 ) 51   (226 ) 2,782 8,018
Total $5,117,421 $98,050   $20,717   $(88,336 ) $5,147,852 $5,089,489
 
 
Current Quarter Component Changes by Product Type (Long-term)
Net
September 30, inflows December 31,
2016 (outflows) Market change FX impact (1) 2016 Average AUM (2)
 
Equity:
Active $281,726 $(4,549 ) $3,063 $(5,207 ) $275,033 $275,078
iShares 891,010 50,650 15,721 (6,129 ) 951,252 909,727
Non-ETF index 1,393,303 11,864   53,866   (28,142 ) 1,430,891 1,399,462
Equity subtotal 2,566,039 57,965 72,650 (39,478 ) 2,657,176 2,584,267
Fixed income:
Active 782,858 (1,485 ) (18,984 ) (12,393 ) 749,996 764,415
iShares 329,462 (326 ) (10,344 ) (4,085 ) 314,707 320,334
Non-ETF index 515,948 27,117   (16,253 ) (19,150 ) 507,662 501,414
Fixed income subtotal 1,628,268 25,306 (45,581 ) (35,628 ) 1,572,365 1,586,163
Multi-asset 402,261 4,856 (4,294 ) (7,816 ) 395,007 394,363
Alternatives:
Core 88,731 1,217 19 (1,337 ) 88,630 88,715
Currency and

commodities (4)

32,799 (1,581 ) (2,353 ) (557 ) 28,308 30,302
Alternatives subtotal 121,530 (364 ) (2,334 ) (1,894 ) 116,938 119,017
Long-term $4,718,098 $87,763   $20,441   $(84,816 ) $4,741,486 $4,683,810
 
 
Current Quarter Component Changes by Investment Style (Long-term)
Net
September 30, inflows December 31,
2016 (outflows) Market change FX impact (1) 2016 Average AUM (2)
Active $1,547,473 $(546 ) $(19,402 ) $(26,473 ) $1,501,052 $1,514,526
Index and iShares 3,170,625 88,309   39,843   (58,343 ) 3,240,434 3,169,284
Long-term $4,718,098 $87,763   $20,441   $(84,816 ) $4,741,486 $4,683,810
 

(1)

 

Foreign exchange reflects the impact of translating non-U.S. dollar denominated AUM into U.S. dollars for reporting purposes.

(2) Average AUM is calculated as the average of the month-end spot AUM amounts for the trailing four months.
(3) Advisory AUM represents long-term portfolio liquidation assignments.
(4)

Amounts include commodity iShares.

 
 

ASSETS UNDER MANAGEMENT

(in millions), (unaudited)

Year-over-Year Component Changes by Client Type and Product
    Net          
December 31, inflows December 31,
2015 (outflows) Acquisition (1) Market change

FX impact(2)

2016 Average AUM (3)
 
Retail:
Equity $193,755 $(7,429 ) $ - $15,456 $(5,561 ) $196,221 $192,311
Fixed income 212,653 8,407 - 3,130 (1,934 ) 222,256 221,797
Multi-asset 115,307 (9,367 ) - 3,100 (1,043 ) 107,997 111,416
Alternatives 19,410 (2,935 ) - (835 ) (162 ) 15,478 17,424
Retail subtotal 541,125 (11,324 ) - 20,851 (8,700 ) 541,952 542,948
iShares:
Equity 823,156 74,914 - 56,469 (3,287 ) 951,252 849,017
Fixed income 254,190 59,913 - 3,782 (3,178 ) 314,707 301,061
Multi-asset 2,730 354 - 61 4 3,149 2,448
Alternatives 12,485 5,298   - 1,055   (67 ) 18,771 18,561
iShares subtotal 1,092,561 140,479 - 61,367 (6,528 ) 1,287,879 1,171,087
Institutional:
Active:
Equity 121,442 (7,449 ) - 11,112 (4,406 ) 120,699 119,604
Fixed income 514,428 10,234 - 20,242 (8,177 ) 536,727 542,332
Multi-asset 252,041 13,322 - 18,516 (6,946 ) 276,933 265,652
Alternatives 74,941 1,811   - 619   (1,756 ) 75,615 74,919
Active subtotal 962,852 17,918 - 50,489 (21,285 ) 1,009,974 1,002,507
Index:
Equity 1,285,419 (8,612 ) - 135,997 (23,800 ) 1,389,004 1,307,812
Fixed income 441,097 41,401 - 55,665 (39,488 ) 498,675 478,444
Multi-asset 6,258 (82 ) - 843 (91 ) 6,928 7,464
Alternatives 6,003 784   - 790   (503 ) 7,074 6,642
Index subtotal 1,738,777 33,491   - 193,295   (63,882 ) 1,901,681 1,800,362
Institutional subtotal 2,701,629 51,409   - 243,784   (85,167 ) 2,911,655 2,802,869
Long-term 4,335,315 180,564 - 326,002 (100,395 ) 4,741,486 4,516,904
Cash management 299,884 29,228 80,635 430 (6,593 ) 403,584 358,498
Advisory (4) 10,213 (7,601 ) - (68 ) 238   2,782 9,687
Total $4,645,412 $202,191   $80,635 $326,364   $(106,750 ) $5,147,852 $4,885,089
 
 
Year-over-Year Component Changes by Product Type (Long-term)
Net
December 31, inflows December 31,
2015 (outflows) Acquisition Market change

FX impact(2)

2016 Average AUM (3)
 
Equity:
Active $281,319 $(20,230 ) $ - $21,045 $(7,101 ) $275,033 $275,656
iShares 823,156 74,914 - 56,469 (3,287 ) 951,252 849,017
Non-ETF index 1,319,297 (3,260 ) - 141,520   (26,666 ) 1,430,891 1,344,071
Equity subtotal 2,423,772 51,424 - 219,034 (37,054 ) 2,657,176 2,468,744
Fixed income:
Active 719,653 16,625 - 22,742 (9,024 ) 749,996 756,110
iShares 254,190 59,913 - 3,782 (3,178 ) 314,707 301,061
Non-ETF index 448,525 43,417   - 56,295   (40,575 ) 507,662 486,463
Fixed income subtotal 1,422,368 119,955 - 82,819 (52,777 ) 1,572,365 1,543,634
Multi-asset 376,336 4,227 - 22,520 (8,076 ) 395,007 386,980
Alternatives:
Core 92,085 (1,165 ) - (291 ) (1,999 ) 88,630 90,028
Currency and

commodities (5)

20,754 6,123   - 1,920   (489 ) 28,308 27,518
Alternatives subtotal 112,839 4,958   - 1,629   (2,488 ) 116,938 117,546
Long-term $4,335,315 $180,564   $ - $326,002   $(100,395 ) $4,741,486 $4,516,904
 
 
Year-over-Year Component Changes by Investment Style (Long-term)
Net
December 31, inflows December 31,
2015 (outflows) Acquisition Market change FX impact (2) 2016 Average AUM (3)
Active $1,462,672 $(774 ) $ - $65,187 $(26,033 ) $1,501,052 $1,501,176
Index and iShares 2,872,643 181,338   - 260,815   (74,362 ) 3,240,434 3,015,728
Long-term $4,335,315 $180,564   $ - $326,002   $(100,395 ) $4,741,486 $4,516,904
                                   

(1)

  Amount represents AUM acquired in the BofA® Global Capital Management transaction in April 2016.
(2) Foreign exchange reflects the impact of translating non-U.S. dollar denominated AUM into U.S. dollars for reporting purposes.
(3) Average AUM is calculated as the average of the month-end spot AUM amounts for the trailing thirteen months.
(4) Advisory AUM represents long-term portfolio liquidation assignments.
(5)

Amounts include commodity iShares.

 
 

SUMMARY OF REVENUE

         
 
 

Three Months Ended

December 31,

Three Months

Ended

September 30,

Year Ended

December 31,

(in millions), (unaudited)

2016

 

2015

Change

2016

Change

2016

 

2015

Change

Investment advisory, administration fees and securities lending revenue:
Equity:
Active $390 $413 $(23 ) $409 $(19 ) $1,591 $1,709 $(118 )
iShares 681 666 15 691 (10 ) 2,651 2,751 (100 )
Non-ETF Index 166 169 (3 ) 170 (4 ) 674 680 (6 )
Equity subtotal 1,237 1,248 (11 ) 1,270 (33 ) 4,916 5,140 (224 )
Fixed income:
Active 421 404 17 427 (6 ) 1,658 1,566 92
iShares 184 147 37 188 (4 ) 696 554 142
Non-ETF Index 80 72 8   78 2   297 282 15  
Fixed income subtotal 685 623 62 693 (8 ) 2,651 2,402 249
Multi-asset 278 311 (33 ) 285 (7 ) 1,138 1,253 (115 )
Alternatives:
Core 146 172 (26 ) 156 (10 ) 634 653 (19 )
Currency and commodities 22 17 5   24 (2 ) 83 73 10  
Alternatives subtotal 168 189 (21 ) 180 (12 ) 717 726 (9 )
Long-term 2,368 2,371 (3 ) 2,428 (60 ) 9,422 9,521 (99 )
Cash management 118 89 29   118 -   458 319 139  
Total base fees 2,486 2,460 26 2,546 (60 ) 9,880 9,840 40
Investment advisory performance fees:
Equity 35 84 (49 ) 14 21 102 205 (103 )
Fixed income 4 16 (12 ) 2 2 13 26 (13 )
Multi-asset 13 15 (2 ) 1 12 19 34 (15 )
Alternatives 77 54 23   41 36   161 356 (195 )
Total performance fees 129 169 (40 ) 58 71 295 621 (326 )
 
BlackRock Solutions and advisory 197 171 26 174 23 714 646 68
Distribution fees 9 11 (2 ) 10 (1 ) 41 55 (14 )
Other revenue 69 52 17   49 20   225 239 (14 )
Total revenue $2,890 $2,863 $27   $2,837 $53   $11,155 $11,401 $(246 )
 

Highlights

  • Investment advisory, administration fees and securities lending revenue increased $26 million from the fourth quarter of 2015 reflecting the impact of organic growth and higher markets on average AUM, and the effect of AUM acquired in the BofA Global Capital Management transaction, partially offset by the impact of divergent beta and mix shift, and the impact of foreign exchange movements. Securities lending revenue of $138 million in the current quarter compared with $137 million in the fourth quarter of 2015.

    Investment advisory, administration fees and securities lending revenue decreased $60 million from the third quarter of 2016 despite higher average AUM, reflecting the impact of foreign exchange movements and beta divergence. Securities lending revenue of $138 million in the current quarter compared with $142 million in the third quarter of 2016.
  • Performance fees decreased $40 million from the fourth quarter of 2015, primarily reflecting lower fees from equity products.

    Performance fees increased $71 million from the third quarter of 2016, primarily due to seasonally higher fees from funds with a performance measurement period that ended in the fourth quarter and improved investment performance.
  • BlackRock Solutions® and advisory revenue increased $26 million from the fourth quarter of 2015. BlackRock Solutions and advisory revenue included $156 million of Aladdin revenue in the current quarter compared with $138 million in the fourth quarter of 2015.

    BlackRock Solutions and advisory revenue increased $23 million from the third quarter of 2016, primarily due to higher Financial Markets Advisory Services revenue. BlackRock Solutions and advisory revenue included $156 million of Aladdin revenue in the current quarter compared with $152 million in the third quarter of 2016.
  • Other revenue increased $17 million from the fourth quarter of 2015 and $20 million from the third quarter of 2016, primarily due to higher earnings from strategic investments and higher transition management service fees.

SUMMARY OF OPERATING EXPENSE

 
 

Three

Months Ended
December 31,

     

Three

Months Ended
September 30,

   

Year Ended
December 31,

 
(in millions), (unaudited) 2016   2015 Change 2016 Change 2016   2015 Change
Operating expense
Employee compensation and benefits $987 $989

$(2

)

$969 $18 $3,880 $4,005 $(125 )
Distribution and servicing costs 109 103 6 114 (5 ) 429 409 20
Amortization of deferred sales commissions 7 11 (4 )

8

(1 ) 34 48 (14 )
Direct fund expense 183 189 (6 ) 200 (17

)

766 767 (1 )
General and administration 355 410 (55 ) 312 43 1,301 1,380 (79 )
Restructuring charge - - - - - 76 - 76
Amortization of intangible assets 24 24 -     25 (1 ) 99 128 (29 )
Total operating expense $1,665 $1,726 $(61 ) $1,628 $37   $6,585 $6,737 $(152 )
 

Highlights

  • Employee compensation and benefits expense decreased $2 million from the fourth quarter of 2015 but increased $18 million from the third quarter of 2016. The increase reflected higher incentive compensation, driven primarily by higher performance fees and higher operating income.
  • General and administration expense decreased $55 million from the fourth quarter of 2015, reflecting lower discretionary marketing and promotional spend in the current quarter and $23 million of transaction-related expense recorded in the fourth quarter of 2015.

    General and administration expense increased $43 million from the third quarter of 2016, reflecting higher marketing and promotional spend, and higher foreign exchange remeasurement expense in the current quarter.

INCOME TAX EXPENSE

             
 
     

Three

Months Ended
December 31,

Three

Months Ended
September 30,

Year Ended

December 31,

(in millions), (unaudited) 2016   2015 Change 2016 Change 2016   2015 Change
Income tax expense $336 $279 $57 $333 $3 $1,290 $1,250 $40
 

Highlights

  • Fourth quarter 2016 income tax expense included a $4 million net noncash tax benefit, primarily related to the revaluation of certain deferred income tax liabilities as a result of domestic state and local tax changes.
  • Fourth quarter 2015 income tax expense included a $64 million noncash benefit, primarily related to the revaluation of certain deferred income tax liabilities, including the effect of tax legislation enacted in the United Kingdom.
  • Third quarter 2016 income tax expense included a $26 million net noncash tax benefit, primarily related to the revaluation of certain deferred income tax liabilities as a result of legislation enacted in the United Kingdom, and domestic state and local tax changes.

SUMMARY OF NONOPERATING INCOME (EXPENSE)

 
   

Three Months
Ended
December 31,

   

Three Months
Ended
September 30,

   

Year Ended
December 31,

 
(in millions), (unaudited) 2016   2015 Change 2016 Change 2016   2015 Change
Nonoperating income (expense), GAAP basis $(38 ) $11 $(49 ) $1 $(39 ) $(110 ) $(62 ) $(48 )
Less: Net income (loss) attributable to NCI -   8   (8 ) 2   (2 ) (2 ) 7   (9 )
 
Nonoperating income (expense)(1) $(38 ) $3   $(41 ) $(1 ) $(37 ) $(108 ) $(69 ) $(39 )
 
 
Estimated
economic
investments at
December 31, 2016(2)
Three Months
Ended
December 31,
Three Months
Ended
September 30,
2016

Year Ended
December 31,

(in millions), (unaudited) 2016 2015 Change Change 2016 2015 Change
Net gain (loss) on investments(1)
Private equity

20-25

% $(5 ) $36 $(41 ) $2 $(7 ) $6 $71 $(65 )
Real assets

5-10

% 3 3 - 2 1 8 12 (4 )
Other alternatives(3)

15-20

% 8 4 4 9 (1 ) 21 (2 ) 23
Other investments(4)

55-60

% -   5   (5 ) 16   (16 ) 22   (18 ) 40  
 
Subtotal 6 48 (42 ) 29 (23 ) 57 63 (6 )
Other gains(5) -   1   (1 ) -   -   -   46   (46 )
 
Total net gain (loss) on investments(1) 6 49 (43 ) 29 (23 ) 57 109 (52 )
Interest and dividend income 7 5 2 22 (15 ) 40 26 14
Interest expense (51 ) (51 ) -   (52 ) 1   (205 ) (204 ) (1 )
 
Net interest expense (44 ) (46 ) 2   (30 ) (14 ) (165 ) (178 ) 13  
 
Total nonoperating income (expense)(1) (38 ) 3 (41 ) (1 ) (37 ) (108 ) (69 ) (39 )
Compensation expense related to (appreciation) depreciation on deferred compensation plans -   (2 )