KKR’s earnings drop 11% on lower transaction fees but beats estimates

KKR’s earnings drop 11% on lower transaction fees but beats estimates

Private equity firm KKR & Co Inc’s (KKR.N) after-tax distributable earnings fell 11% in the third quarter from a year earlier on a steep drop in transaction fees, although the result came in ahead of expectations.

Initial public offerings and debt refinancings, which KKR’s capital markets unit helps arrange, were down sharply this quarter, while the Federal Reserve’s hiking of interest rates pushed about financing costs and fueled stock market volatility.

After-tax distributable earnings – which represents cash used to pay dividends – fell to $823.7 million. That translates to after-tax distributable earnings per share of 93 cents, greater than the average analyst forecast of 85 cents, according to Refinitiv data. KKR’s shares were up 1.18% at $49.24 per share around noon on Tuesday.

KKR said income from its capital markets unit tumbled 41% to $116.1 million a year earlier. Income from investments made out of its balance sheet fell to $285 million, a 36% slide as the firm cashed out fewer assets from its private equity portfolio amid the volatility.

“High levels of inflation are clearly impacting global consumers, while the sharp increase in interest rates has had multiple knock-on effects that will invariably slow much of the global economy,” said KKR Chief Financial Officer Robert Lewin during an analyst earnings call on Tuesday.

KKR said its private equity funds depreciated by 4% during the third quarter. Opportunistic real estate funds were down 1% while leverage credit funds gained 1%.

By contrast, Blackstone Inc (BX.N) reported a 0.3% decline in its corporate private equity funds and a 0.6% drop in its opportunistic real estate funds.

KKR’s fee-related earnings rose 2% to $541.8 million due to an increase in management fees owing to strong fundraising and the closing of its acquisition of Japanese real estate asset manager Mitsubishi Corp-UBS Realty Inc.

KKR struck deals worth $16 billion during the quarter, raised $13 billion of new capital, generated $496.5 million as carried interest, and held $113 billion of unspent capital.

Total assets under management stood at $496 million. The firm declared a regular dividend of 15.5 cents per share.