Feb 1 Legg Mason Inc reported a quarterly loss on Friday on charges for impaired assets and continued outflows from its equity and bond funds, and said it should name a permanent chief executive soon.
The company's board is nearing completion of its search for a new CEO and should name someone to that position in the not-too-distant future, interim CEO Joseph Sullivan told investors on a conference call.
Sullivan, who has led the company since October and is seen as a leading candidate himself for the job, did not give more details.
Shares of Legg Mason were down 3.8 percent in early trading, at $26.61, after analysts expressed concern about the outflows.
Legg Mason reported a net loss of $453.9 million, or $3.45 per share, for its fiscal third quarter, ended Dec. 31, compared with year-earlier net income of $28.1 million, or 20 cents per share.
As Legg Mason had forecast, the results included pretax charges of $734 million, or $508 million after taxes, to account for writing down the value of assets like fund management contracts and uncertainties such as the ongoing search for a new CEO.
Excluding a tax expense of 7 cents per share, the loss was $3.38 per share, deeper than the $3.23 that analysts on average had expected, according to Thomson Reuters I/B/E/S.
Assets under management fell to $648.9 billion from $650.7 billion at Sept. 30. The decline was due to net client withdrawals of $7.5 billion, which were partly offset by market gains and other income of $5.7 billion.
During the quarter, equity outflows were $8.3 billion, and bond outflows were $6.8 billion, while clients added $7.6 billion to liquidity products like money funds.
Sullivan called the results disappointing but said the company had "made good progress during the quarter on a number of strategic fronts," such as the purchase of London hedge fund firm Fauchier Partners.
As part of that purchase Legg Mason struck a new revenue-sharing agreement with its Permal alternatives unit. Sullivan said on the call that deal could become the basis of similar agreements the company might strike with other investment units.
The agreement is a "good framework for creating strong alignment with other affiliates," Sullivan said.
Relations between these units and the parent have been a source of tension within Legg Mason. Big divisions include Legg Mason bond manager Western Asset Management and ClearBridge Investments, focused on equities.
In a note to investors, Sandler O'Neill analyst Michael Kim also said the results were disappointing and suggested the risk of further withdrawals remained high across the company's affiliates.
"Uncertainty around the strategic direction of the firm pending the appointment of a new CEO likely remains an overhang for the stock," Kim said.
In a separate note to investors, Nomura analyst Glenn Schorr also cited the outflows. "Quarter is further proof of how difficult turnarounds are" for asset managers, he wrote.
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