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BlackRock’s Compensation & Benefits, which refers to employee-related costs, are expected at $4.2 billion in 2019, making up 42% of the bank’s $10 billion expected total costs in 2019.The company spends the maximum proportion on the operating expenses, including general and administrative, direct fund expenses and distribution, servicing & other costs, which are expected to contribute around 44% to the total expected costs in 2019.Over the last 3 years, the increase in total expense figure was mainly driven by a jump in operating expenses, which saw a rise of 63%. However, we expect the operating expense figure to increase only 3% over 2019-2020 – an addition of $200 million.This implies that expense growth in the subsequent years would slow down, however, lower expected revenue growth due to asset management headwinds would offset its favorable impact on net income margin.
BlackRock's Total Expenses were $9.9 Billion, with Compensation Expenses of $4.3 Billion, and $4.4 Billion in Operating Expenses
Breakdown of BlackRock's Total Expenses (2018):
Total $9.9 Bil
Operating Expenses $4.4 Bil
Compensation & Benefits $4.3 Bil
Income Taxes $1.1 Bil
Total Non-Operating (Income) / Expense $0.1 Bil
BlackRock's Total Expenses have increased from $8 billion in 2016 to $9.9 billion in 2018, and are expected to cross $10.3 billion by 2020
Total Expenses [A]
% Change in Total Expenses
The company's expense figure has increased 24% over the last three years from $8 billion in 2016 to $9.9 billion in 2018. Distribution, servicing & other costs have been the largest contributor to this increase, with expenses rising from $0.6 billion in 2016 to just $1.8 billion in 2018.Further, total expenses are expected to grow at an average annual rate of 1.9% in the near term, leading it to the figure of $10.3 billion by 2020.BlackRock's Total expenses as a % of Revenue dropped from 71.6% in 2016 to 63.3% in 2017, before increasing to 69.7% in 2018 due to higher tax expenses. Further, the metric is expected to hover around the 69.8% mark in the near term.The increase in 2018 can be attributed to higher income taxes as compared to 2017. The 2017 figure was low due to $1.2 billion of net tax benefit related to the 2017 Tax Act and $173 million of discrete tax benefits.
2. Operating Expenses :
BlackRock's Operating Expenses include 3 key components:
A. Distribution, Servicing & Other Costs
B. General & Administrative (G&A) Expenses
C. Direct Fund Expenses
Breakdown of BlackRock's Operating Expenses in 2018 :
Total $4.4 Bil (100%)
Distribution, Servicing & Other Costs $1.8 Bil (40%)
G&A Expenses $1.6 Bil (37%)
Direct Fund Expenses $1 Bil (23%)
BlackRock’s Operating Expenses include general and administrative (G&A) expense, direct fund expense, and distribution, servicing & other costs. Operating expenses have increased 63% since 2016, rising from $2.7 billion in 2016 to $4.4 billion in 2018, led by a $1.2 billion jump in distributions, servicing & other costs and $300 million from G&A expenses.Distribution Servicing & Other Costs are Assets under Management (AuM) driven and includes payments made to third parties, primarily associated with obtaining and retaining client investments in certain Company products. Further, Other costs components include amortization of intangible assets, deferred sales commissions and restructuring cost incurred by the company.This expense figure has jumped 180% from $0.6 billion in 2016 to $1.8 billion in 2018, mainly driven by higher distributions & servicing costs in 2017 due to higher average AUM and the effect of AUM acquired in the BofA Global Capital Management transaction, constituting 97% of the total increase. We expect it to slightly decrease in subsequent years and be around $1.8 billion in the near term.Moreover, BlackRock’s general and administrative expenses accounted for 37% of the company's operating expenses in 2018. Further, it has increased over the last 3 years from $1.3 billion in 2016 to $1.6 billion in 2018. We expect it to further increase in the near term and be around $1.8 billion by 2020.Direct Fund Expense accounted for 23% of the company's operating expenses in 2018. It primarily consists of third-party non-advisory expenses incurred by the Company related to certain funds for the use of reference data for indices, custodial services, fund accounting, transfer agent services, legal expenses, etc.The expense figure has increased $200 million over 2016-2018, from $0.8 billion in 2016 to $1 billion in 2018. However, we expect it to slightly decrease in the subsequent years and hover around the $1-billion mark.
(A) Distribution Servicing & Other Costs have increased from $0.6 billion in 2016 to $1.8 billion in 2018. As a % of Revenues, G&A has increased from 5.7% in 2016 to 12.6% in 2018
Distribution, Servicing & Other Costs
Distribution, Servicing & Other Costs as % of revenues
(B) G&A expenses have increased from $1.3 billion in 2016 to $1.6 billion in 2018. As a % of Revenues, G&A has decreased from 11.7% in 2016 to 11.5% in 2018
General & Administration
General & Administration as % of revenues
(C) Direct Fund expenses have increased from $800 million in 2016 to $1 billion in 2018. As a % of Revenues, G&A has increased from 6.9% in 2016 to 7% in 2018.
Direct Fund Expenses
Direct Fund Expenses as % of revenues
Disagree With Our Forecasts? Create Your Own
1. How to save your forecasts:
Click on the blue Try Trefis button in the header to create an account, then navigate back to this dashboard. Now, any changes you make to these inputs will be auto-saved as a scenario (see left panel of dashboard).
2. How to monitor your scenario vs. actual results
Once you have saved your forecast, you can rename your scenario by clicking on the gear icon next to the scenario (on the left panel). For more info, see this quick, 30-sec video (look at the 9 sec mark)
With your forecast saved and named, you can see how well you forecast the performance of the company at the end of each period and compare your forecasts to hundreds of other Trefis users who came up with their own forecasts. Lastly, you can share with friends and colleagues to show them how you fared and compare your forecasts to theirs.