As a result, the Putnam unit posted a first-quarter operating loss of $26 million, compared with operating income of $103 million for the first quarter of 2003.
Barbara Perlmutter, Marsh & McLennan spokeswoman, said that Jeff Greenberg, chairman and CEO, had addressed the loss in the earnings release on April 21. He said at the time: "We are gratified that Putnam reached settlement agreements with regulators … a critical step in restoring investor confidence. We believe the changes Putnam is making will result in a strong organization, and we are positive about Putnam's long-term business prospects."
Putnam also reported that quarterly revenues increased 4% to $461 million, reflecting modest investment gains, compared with a loss in 2003. Average assets under management in the quarter were $234 billion, down 4% from $244 billion for the same period last year. Total assets under management slid 6% to $227 billion, down from $241 billion as of March 31, 2003. Marsh & McLennan closed at $45.14 April 28, down from $46.30 on March 31.
Morningstar's Ms. Barnard observed that these were one-time charges for Putnam. "The company was still profitable, with good operating margins, well above 20% for the year. They should be able to bounce back. The $110 million they had to pay in penalties was fairly modest."
Bank of America Corp. reported that it took a $285 million pre-tax charge in the first quarter to cover settlements for the mutual fund trading improprieties at Banc of America Capital, which negatively affected total earnings by 16 cents a share. In addition, the settlement reduced the asset management unit's pre-tax income by $142.5 million. Asset management earned $53 million in the quarter, down 62% from $139 million earned in the same period last year. Expenses increased 55% because of the professional and legal fees related to the inquiry, the company said. Yet the unit's revenue increased 15% to $669 million, from $586 million a year ago. And assets under management rose 14% to $337 billion.
"We're glad to have it behind us, said spokesman Robert Stickler. He wouldn't comment further.
Bank of America stock closed at $80.90 April 28, nearly unchanged from $80.98 on March 31.
Among highlights of other asset managers' first-quarter earnings reports:
-- Federated Investors Inc., Pittsburgh, said its first-quarter earnings included expenses of $4.3 million in connection with various legal, regulatory and compliance matters. Of that, $2.8 million was for an additional accrual of estimated costs for its internal review of past mutual fund trading practices. Federated reported total assets were $193.8 billion as of March 31, down $1.8 billion, or 1%, from $195.76 billion a year ago. Federated closed at $29.46 April 28, down from the $31.43 closing price on March 31.
-- AMVESCAP LLC, London, reported that assets under management rose to $381.4 billion as of March 31, up 20% from $318.5 billion a year earlier. Company officials also said profits before tax and goodwill amortization for the three months ended March 31 surged to $132.3 million, up 71% from $76.6 million for the period ended last year.
AMVESCAP closed at $13.57 April 28, down from $15.13 on March 31.
-- Franklin Resources Inc. said in its fiscal second-quarter earnings report that it would take a pre-tax charge of $60 million to cover costs related to probes into improper trading. The San Mateo, Calif., company also reported that assets under management rose to $351.6 billion as of March 31, up 40% from $252.4 billion a year ago and up 4.4% from $336.7 billion in the previous quarter. The company also said sales exceeded redemptions by $6.5 billion in the quarter, compared with $7.4 billion in the previous quarter. It reported that net income in the quarter was $172.8 million, or 68 cents a share, up from $109.6 million, or 43 cents a share, a year ago. Franklin closed at $55.15 April 28, nearly unchanged from its end of quarter closing price of $55.68.
-- T. Rowe Price Group Inc., Baltimore, reported that net income nearly doubled to $77 million from $39 million, and earnings per share increased 91%, to 61 cents a share from 32 cents a share, thanks to strong net equity inflows and robust performance. Assets under management jumped 44% to $201 billion from $140 billion as of March 31, 2003. T. Rowe closed at $51.98 April 28, compared with $53.83 on March 31.
-- Alliance Capital Management Holding LP's assets under management were $484 billion, up 25.2% over a year ago, mainly because of equity market appreciation, company officials announced. At Alliance, New York, the institutional division experienced net asset outflows of $6.3 billion; net inflows to the private client and retail divisions were $1.6 billion and $1.2 billion, respectively.
Overall, Alliance's first-quarter diluted net income per share was 58 cents, up 56.8% from the same period last year.
Robert Lee, vice president and analyst at Keefe, Bruyette & Woods Inc., a New York investment banking firm, pointed out that Alliance shareholders suffered the most from the mutual fund scandals because the firm eliminated its fourth-quarter distribution when it took $300 million in charges to settle federal and state accusations of trading irregularities.
Alliance closed at $34.60 April 28, down from $36.80 on March 31.
Mr. Lee pointed out that Janus, Putnam and Alliance each had performance problems in the years preceding the scandals, and that the combination of the scandals and poor performance motivated investors to shift assets out of those firms. That resulted in higher net outflows than at other firms not implicated.
"Nevertheless, Alliance has been generating net positive inflows, boosted by a strong private-client high-net-worth business," Mr. Lee said.