T. Rowe continues to invest in workforce, expansion in China

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T. Rowe Price Group Inc. plans to continue to invest in its workforce and infrastructure while expanding its presence in China, President and CEO William J. Stromberg said Wednesday while discussing the firm’s second quarter.

The Baltimore-based investment advisory firm grew its assets under management and increased profits in 2019’s second quarter as stock markets continued to bounce back during the first several months of the year.

“We thought it was a very good quarter,” Stromberg said. “Obviously the markets had a lot of wind in their sales. May was a difficult month but June finished on a strong note.”

During the quarter, the firm hired a head of intermediary business for greater China, a new job it created as it aims to capture more of the China market.

The firm is looking to China as both a source of new clients and for new businesses to invest in, Stromberg said.

“We have a long-term plan that we have been executing on for quite some time to grow our presence in China, both in terms of working with Chinese clients … but also to invest in Chinese companies,” he said.

The China plan is just one of several long-term growth plans T. Rowe has underway. Over the past year, its staff size grew 3.5% to 7,225 employees by the end of the second quarter — even though its planned closure of a Tampa office led to a loss of about 170 employees July 1.

The company also made investments in technology infrastructure, spending nearly $105 million on technology, occupancy, and facility costs last quarter, an increase of 12.6% from last year’s second quarter. Most of the funds went into improving its technology capabilities.

At the same time, T. Rowe has been repurchasing its own stock, buying back 1.6 million shares during the second quarter. Through the first half of the year the firm has spent $393.6 million to repurchase 4.1 million shares, or 1.7%, of its outstanding common shares at an average price of $96.50.

“We continued our pattern of being opportunistic in share repurchases,” Stromberg said. “We tend to buy more when the stock is down.”

That is consistent with T. Rowe’s preferred strategy of long-term thinking, both with itself and with its investments.

“We want a good long-term outcome,” Stromberg said. “We worry less about the quarter-to-quarter.”

When asked about Baltimore’s recent struggles — since its last quarterly results the city has had a new mayor and crime has been a more prevalent issue — Stromberg said T. Rowe is concerned about violent crime but optimistic about the city’s new plan to deal with it.

“We’re going to continue to contribute here for as long as we can and hope that Baltimore can get its arms around the crime,” he said. “We are very encouraged by Police Commissioner (Michael) Harrison and his plan to get ahead.” 

The firm increased its assets under management to $1.125 trillion, up 7.7% from the end of the second quarter last year. It increased the amount of money it took in from advisory fees to $1.27 billion, up 4.6% from the same period last year.

The company posted a net operating income of $615 million, up 3.4% from last year’s second quarter. It grew earnings per share to $2.15, up 21.5% from last year.