Legg Mason profits jump 25% in fiscal first quarter

Baltimore money manager Legg Mason Inc. said Thursday that profits in the three months ending in June rose 25 percent compared with a year earlier, to $60 million.

That 40-cent profit per share beat Wall Street analysts' expectations by two cents a share, according to Thomson Reuters.

Legg's assets under management, a key measurement, rose nearly 3 percent from a year earlier to $662.5 billion. But the total slipped 2 percent from the previous quarter, about $15 billion. Legg has battled to increase the amount of money it manages since losing ground during the 2008 financial crisis.

The earnings report gave Legg's stock price an initial boost. But the stock ended the day down $1.24 a share, to $29.30.

Chairman and CEO Mark R. Fetting said in a conference call with analysts Thursday that Legg had reduced long-term net outflows in its assets under management by 35 percent compared with the corresponding April to June period in 2010. And it saw an inflow of fixed-income assets for the first time since December 2007, he said.

"Near-term we have to be mindful of choppy market and industry conditions, with domestic equity fund outflows, a slowdown in institutional equity flows and global concerns around sovereign debt issues, not only in the euro zone, but in the U.S. as well," Fetting said, according to a transcript of the call. "However, it is our belief the big issues will ultimately be resolved."

Funds managed by Bill Miller's Legg Mason Capital Management, one of several divisions at the company, are still lagging their benchmarks. Citigroup analyst William R. Katz said the division "continues to be an anchor on flows and profitability" and asked Fetting if he'd be willing to sell it.

Fetting said no. Funds managed by that division are heavily weighted in some sectors that aren't doing well now, "but there are a lot of clients in there that think that could reverse, should reverse … and get back to the long-term returns that they've delivered for clients," he said.

Legg earned $717.1 million in operating revenue in the three months ending in June, up 6 percent from April through June in 2010.

The company is on a fiscal year that ends March 31 and reports April through June earnings as its first quarter.



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