AllianceBernstein's 2nd-Qtr Net Revenue Falls 12 Pct
The real estate consolidation comes as clients continue to pull billions of dollars from accounts and funds. In the second quarter, clients retreated from investments in large-cap stocks.
The company said it had total net outflows of $2.8 billion in the quarter, which was its lowest quarterly level since early 2008. But at the same time, AllianceBernstein unveiled another round of cost cutting and expects to take a noncash charge of up to $250 million to consolidate its office space by nearly 500,000 square feet.
Investors also got some bad news when mutual fund company Vanguard said Thursday that AllianceBernstein will no longer be an adviser on three funds: the $12 billion Vanguard Windsor Fund, the $6 billion Vanguard International Value Fund and the $4 billion Vanguard Global Equity Fund.
AllianceBernstein, controlled by French insurer Axa SA , said net revenue fell to $642 million from $728 million in the year-ago quarter. Assets under management at the end of June were $407 billion, compared with $461 million in the year-ago quarter.
Base fees, which include what the company charges clients for managing their money, fell 16 percent to $422 million from year-ago levels. The company also booked an $11 million investment loss.
Operating income was $79 million, a 32 percent drop from year-ago levels.
Adjusted net income was 24 cents per unit, matching analysts' average estimate, according to Thomson Reuters I/B/E/S.
AllianceBernstein Chief Executive Peter Kraus, a former Goldman Sachs partner, is undertaking a massive real estate overhaul that will consolidate workers on fewer floors by restacking office space. The company projects noncash charges of $225 million to $250 million, with most of that hitting financial statements in the second half of this year.
The company estimates annual savings of $38 million to $43 million once all of the vacated office space has been successfully subleased. The actions center on excess space that includes the New York City headquarters and London office locations. Corporate headquarters will account for the majority of the estimated noncash charges, the company said.
In 2010, the company identified 380,000 square feet in metro New York to reduce and took $102 million in charges associated with the planned reduction. AllianceBernstein said it has so far consolidated its London office locations to one from two and is in the process of vacating and subleasing space in the remaining location.
The company's stock has fallen 26 percent over the past 12 months, underperforming the broader Dow Jones Index of U.S. Asset Managers, which is down 3.6 percent in the same period.
AllianceBernstein shares were down 1.5 percent at $11.94 on Thursday morning on the New York Stock Exchange.
(Reporting by Tim McLaughlin in Boston; Editing by Gerald E. McCormick, Maureen Bavdek and Matthew Lewis)
Copyright 2010 by Reuters. All rights reserved.
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