The Blackstone Group’s second-quarter net income surged, more than tripled on fees and profits from its leveraged buyouts.
Revenue growth was strong across all four sectors of the firm, especially the core private equity and real estate units. But Blackstone acknowledged that the freeze in the credit markets can further damage its business.
In the quarter, net income increased to $774.4m from $224.1m a year earlier, whereas revenue surged to $975.3 million.
Blackstone posted buoyant results amid a backdrop of worries surrounding the private equity industry, which has been paralyzed by the US subprime mortgage. However, group succeeded to post the profitable quarter due to the favorable economic environment in the first half of the year, and the firm’s broad range of businesses - from hedge fund investing to corporate advisory.
Despite good earning, Blackstone isn’t sure about making as much profit from the existing quarter as its core private equity and real estate units can face fallout from the deteriorating debt markets. Investors have started to balk at the high-yield loans and bonds at the heart of leveraged buyouts, and banks have recently stopped committing financing for future deals.
With the threat of subprime loses, Blackstone has decided to away from the mega deals, but to keep the company’s momentum afloat, it’s shoring up other investment alternatives, including taking stakes in Chinese and Indian companies and buying buyout-related loans from banks at a discount.
Via: Reuters
