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T. Rowe earnings, assets fell during Q1 coronavirus sell-off

T. Rowe Price Group Inc. President and CEO William J. Stromberg speaks to stockholders at the company's annual meeting. (The Daily Record /Maximilian Franz)

T. Rowe Price Group Inc. President and CEO William J. Stromberg (File photo)

Market volatility from the coronavirus pandemic hurt equity markets during the year’s first quarter, but moves made this month by the federal government and central banks have helped the markets rebound and find surer footing, T. Rowe Price Group, Inc. President and CEO William J. Stromberg said Tuesday.

The volatility hurt T. Rowe during the first three months of the year, when it saw earnings, profits and assets under management decline. But Stromberg, working from home like 97% of the firm, said governments demonstrating a willingness to do whatever it takes to shore up the markets has instilled confidence.

“The moves in equity markets and in credit marks were just breathtaking, both in how quickly they corrected and how quickly they bounced here as well,” he said. “A lot of things have fallen into place. The central banks around the world, including the Federal Reserve, put out their very aggressive plans to put liquidity into the market through quantitative easing. Congress has passed the CARES Act as well as several additions to it.”

COVID-19 fears sparked a prolonged sell-off last month. 

The S&P 500 Index hit an all-time high on Feb 19. March 23, 33 days later, it had fallen 35%.

T. Rowe’s assets under management declined, falling to $1.009 trillion by March 31, down from $1.081 trillion at the end of last year’s first quarter. But in a sign of how volatile the first quarter was, the firm’s average assets under management for the quarter was $1.162 trillion, up from $1.043 trillion last year.

The firm’s bottom line also took a hit from the sell-off. Its earnings per share fell to $1.41, down 32.5% from $2.09 at the end of last year’s first quarter. Profit fell too, with net income attributable to T. Rowe falling 33.1% to $343.1 million.

But steps the government has taken since the quarter ended March 31 have T. Rowe more hopeful. Those steps include aggressive actions by the Fed to pump more money into the economy, and the CARES Act, which included funding for small businesses, higher education and individual stimulus payments to people.

T. Rowe’s advisory fees increased to $1.3 billion, up 11.2% from $1.2 billion during last year’s first quarter. But the firm won’t be collecting advisory fees as people look to take advantage of federal changes allowing them to draw some funds from retirement accounts to account for disease-related pandemic financial hardships, Stromberg said.

Employers have also made changes that could affect T. Rowe, with some saying they will pull back on contributing to employee retirement funds to save money. Employees themselves could also be contributing less to retirement as many have been laid off, furloughed or seen their pay cut.

“It means that there will be less inflows into retirement-related accounts,” Stromberg said. Those accounts are about two-thirds of T. Rowe’s accounts.

It is important not to lose sight of retirement goals, he said. “Americans need to save for retirement. The need has never been greater,” Stromberg said. 

He hopes the government incentivizes people to repay what they have had to withdraw from their retirement accounts.

“It’s very important for the long-term health of our country,” he said. 

T. Rowe has also taken advantage of the market decline to buy back more of the firm’s own shares. It repurchased 8.8 million shares, and outstanding shares are at their lowest level since 1986.

“It’s consistent with our long-term strategy to buy on weakness,” Stromberg said.

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