The stock experienced its most substantial increase in ten months.
According to a statement released on Thursday, distributable earnings rose by 5.5% to $1.28 billion compared to the previous year, primarily supported by the lending division. This profit figure translates to $1.01 per share, surpassing the average analyst estimate of 91 cents as reported by Bloomberg.
During the three months ending September 30, the credit and insurance segment attracted $21.4 billion in inflows, representing over half of Blackstone's total collections from all its business lines during that timeframe.
At the end of the quarter, credit accounted for $354.7 billion of Blackstone's total assets of $1.1 trillion, surpassing real estate as the largest unit. The firm also opted to reclassify a portion of its real estate lending operations under the credit category.
The robust performance of the credit division enabled the firm to mitigate weaker results in private equity and real estate.
“We appreciate having a diversified business,” stated President Jon Gray in an interview.
The growth in the credit sector highlights a trend among leading alternative-asset managers to evolve into comprehensive financial service providers. This shift has made them resemble banks more closely and has offered some respite during a difficult period for their private equity operations.
Shares of Blackstone, based in New York, surged by 6.3%, marking the largest increase since December, to close at $169.73. The stock has risen 30% this year, although it still lags behind competitors such as Apollo Global Management Inc., KKR & Co., and Ares Management Corp.
High Valuations
Buyout specialists have cautiously returned to the negotiation table, yet many are finding it challenging to achieve the high valuations they had expected.
At Blackstone, key business lines experienced subdued realizations in the third quarter, as the firm had indicated last month. Distributable earnings decreased by 11% in private equity and 3% in real estate.
The real estate sector continues to be impacted by a downturn in property values and elevated debt costs. However, redemptions for the firm’s prominent Blackstone Real Estate Income Trust slowed significantly during the third quarter from their previous peak, while investments into the fund have increased since October 1.
“If current trends persist, we are heading towards positive net flows in BREIT,” Gray noted.
The investment giant has achieved a significant milestone, managing $250 billion in assets for individual and bank clients. Corporate private equity and infrastructure sectors recorded the highest gains during this period, contributing to the firm’s best fund appreciation in three years.
As the largest alternative asset manager globally, Blackstone is the first major firm to disclose its financial results. A tentative recovery in deal-making and the uncertainty surrounding a closely contested presidential election cast a shadow over the industry this earnings season.
The divided political landscape in the US is likely to lead to “fairly narrow margins” in the upcoming November election, Gray remarked in a separate interview with Bloomberg Television. He emphasized that investors should be aware that the rhetoric from candidates may differ from the actual policy decisions and political compromises that will ensue.
“Investors need to adjust their expectations regarding what will ultimately transpire versus the current dynamics of the election.”