Legg Mason Inc. has bounced back from the worst of the financial crisis by many counts.

The Baltimore financial powerhouse has cleaned up its balance sheet without government help, returned to profitability and initiated a major cost-cutting program to boost profit margins.

Yet one key measure stands in the way of a full recovery: Clients continue to pull money from Legg Mason's mutual funds even as the market rebounds and shell-shocked investors regain their footing. For 13 consecutive quarters, clients have taken more money out of the funds than they put in, resulting in billions of dollars being moved out of Legg accounts.

Last week, while posting a profit for the most recent quarter, Legg announced that net fund withdrawals had worsened from the previous period to nearly $17 billion, disappointing analysts and Wall Street. The news sent Legg's stock down 5 percent, the largest one-day slide in eight months.

The setback underscores the imperative of reversing withdrawals. Legg and other financial services firms laid off workers to cope with shrinking assets during the depths of the recession. Now, Legg could see growth stall until the company can woo investors back, said Matt Snowling, an analyst at FBR Capital Markets.

"Clearly, that is the final chapter to complete the turnaround," Mark R. Fetting, Legg's chairman and chief executive, acknowledged in an interview.

He said the company is up to the task. Fundamental financial measures, including earnings and the balance sheet, have improved, as has the performance of some of Legg's mutual funds.

"Therefore, the spirit across our firm is very much on the upbeat," Fetting said. "It's game on."

Wall Street analysts, however, aren't so upbeat.

At this point, efforts to improve fund inflow at Legg are "still more talk than substance," Douglas Sipkin, an analyst at Ticonderoga Securities, wrote in a research note.

And despite measurable improvements, Legg lags behind competitors, said J. Jeffrey Hopson, an analyst at Stifel Nicolaus. While Legg is not the only money manager seeing withdrawals, others are increasing assets, Hopson noted.

Baltimore's T. Rowe Price Group is one of them. Price announced Friday that its assets under management at the end of last year reached a record $482 billion. That is more than in the high-flying days before the recession, even though market indexes remain far below records set then. For the year, clients poured a net $30.3 billion into Price's funds and other accounts.

Hopson, who had predicted that Legg would stop bleeding assets and start showing positive fund flows by March, now believes the company will not turn that corner until June.

In the quarter through December, Legg clients withdrew a net $16.7 billion from its stock, bond and money market accounts, up from $12.7 billion in the previous three months. Net withdrawals amounted to $63 billion last year. While it was an improvement over $134 billion of net client redemptions in 2008 — a high-water mark — the latest withdrawals were not encouraging.

At its peak, Legg managed more than $1 trillion for clients. Then the worldwide financial crisis pushed Legg and other money managers into a freefall as spooked investors withdrew record amounts from their mutual funds and other investments.

Today, Legg manages $671.8 billion in assets.

In recent years, Legg never seemed to be positioned to fully capitalize on market trends — a skill at the heart of a money manager's livelihood.

The company's assets under management are heavily weighted toward the bond market, where many investors flocked in recent years; those fixed-income and liquidity or money market funds account for 73 percent of its assets. But its California-based subsidiary Western Asset Management, which specializes in bonds, saw an uptick in fixed-income withdrawals.

Wells Fargo Securities analyst Jim Shanahan said the company "may have missed its best opportunity to grow organically when industrywide flows were stronger into fixed income."