UPDATE 1-Schroders net assets rise 11 pct in first quarter

* Q1 net inflows 5.6 bln stg vs year-ago 1.6 bln

* Net assets rise to 236.5 bln stg

* Warns strong retail demand unlikely to continue

LONDON, May 2 (Reuters) – British fund manager Schroders attracted 5.6 billion pounds ($ 8.7 billion) of net new money in the first quarter, buoyed by strong retail demand for equities that it warned was unlikely to continue.

In a trading statement on Thursday, Schroders said assets under management rose to 236.5 billion pounds by the end of March, up 11.5 percent from 212 billion in December, with the rise coming from inflows and positive investment performance.

The net new money was far more than in the first quarter of last year, when Schroders added 1.6 billion pounds.

While Schroders’ asset management business saw strong net inflows, its private banking unit reported 200 million of net outflows. Schroders said its acquisition of rival Cazenove Capital – a move to bulk up its business of serving wealthy private banking clients – was is on track to complete in July.

Analysts at brokerage Numis described the update as “a good set of results”, with net inflows 1 billion pounds higher than it had forecast.

Rallying stock markets this year have encouraged investors to put more of their money in funds.

For some, such as Aberdeen Asset Management and Ashmore Group, the first quarter was one of their strongest for attracting new money in several years.

“We saw significant retail investor demand in the first quarter on the back of buoyant equity markets. While we do not expect demand to continue at this level, we remain well placed for continued growth,” Schroders said in the statement.

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KKR Financial’s 1Q earnings rise 4 percent

SAN FRANCISCO (AP) — Specialty finance company KKR Financial Holdings LLC said Wednesday that its first-quarter net income rose 4 percent as its costs and expenses fell sharply.

The San Francisco-based KKR reported earnings after paying preferred share distributions of $ 91.6 million, or 46 cents per share, in the three months ended March 31.

That compares with earnings of $ 88 million, or 48 cents per share, in the same period a year ago. An increase in the number of outstanding shares shaved 4 cents off the per-share results for the recent quarter.

The results nevertheless came in well above the 35 cents per share that Wall Street analysts expected, according to research firm FactSet.

Total revenue rose 2 percent to $ 140.5 million from $ 137.9 million in the first quarter. That’s above the $ 138.6 million in revenue that Wall Street expected.

Total costs and expenses fell 25 percent to $ 81 million in the first quarter from $ 107.8 million in 2012 period, mainly due to setting aside far less to cover bad loans. That was partly offset by higher costs related to its oil and gas investments, which grew through acquisitions over the past 12 months.

During the quarter, the company said it reduced high-yield debt 12 percent to $ 332.5 million. It also invested in four new commercial real estate projects during the quarter, bringing its total commercial real estate investments to seven.

KKR Financial’s board of directors declared a cash distribution of 21 cents per common share, payable May 28 to shareholders of record as of May 14.

KKR Financial Holdings is a unit of investment firm Kohlberg Kravis Roberts & Co. L.P.

Shares of the company rose 1 cent to $ 10.70 in morning trading Wednesday.

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GE 1Q earnings rise on NBC sale; Europe drags

NEW YORK (AP) — General Electric Corp. earnings rose in the first quarter on increased profit from selling aircraft engines and transportation equipment and the sale of NBC. But results were held back by economic conditions in Europe that were worse than expected.

GE reported net income of $ 3.5 billion, or 34 cents per share, on revenue of $ 35 billion. During last year’s first quarter, GE earned $ 3 billion, or 29 cents per share, on $ 35.2 billion in revenue.

Adjusted to reflect earnings only from continuing operations, GE earned 35 cents per share. That matches what analysts surveyed by FactSet expected. The analysts expected slightly lower revenue of $ 34.5 billion.

But the performance of the company’s core industrial operations were weaker than the company and analysts had anticipated. Sales of industrial equipment and services fell 6 percent and profit fell 11 percent.

GE CEO Jeff Immelt said in a statement that operations in emerging markets and the U.S. performed about as well as expected. But Europe — which he thought would be bad — worsened. Revenue from the region fell 17 percent.

“Some of our markets were more challenging than expected,” Immelt said on a call with investors.

Immelt said he thought the first half of this year would be difficult, but some customers delayed purchases and revenue came in about $ 200 million lower than he had hoped. He expects those customers to come back later in the year, and help improve the company’s performance.

But that’s not what investors wanted to hear. “Investors want to see results now,” said Christian Mayes, an analyst at Edward Jones. “They don’t like the whole ‘wait for the second half of the year’ approach.”

GE shares dropped 90 cents, or 4 percent, to $ 21.77 in morning trading Friday.

Europe’s struggles hit GE’s sales of power generation and water treatment equipment especially hard. Revenue for that division fell 26 percent in the quarter, and profit fell 39 percent.

Profits in the oil and gas segment and GE’s tiny energy management division also slipped in the quarter, offsetting profit gains in aviation, healthcare, transportation and home and business appliances.

“It’s a big company and it takes a lot to get it firing on all cylinders,” Mayes said.

The company’s sale of NBC added earnings of 8 cents per share, while profit rose 9 percent at GE Capital, the company’s finance arm.

GE is in the midst of shaping itself into a more focused conglomerate that sells and services industrial equipment and appliances. It is shedding divisions such as NBC Universal and shrinking its banking operations. GE sold its 49 percent of NBC Universal to Comcast for $ 16.7 billion in the first quarter. Earlier this month, GE announced an agreement to buy the oilfield equipment maker Lufkin Industries Inc. for $ 3.1 billion, as part of a push to grow its oil and gas equipment division.

Orders for oil and gas equipment rose 24 percent in the first quarter. Orders for aviation equipment, powered by a new jet aircraft engine, rose 47 percent.

But GE is not expecting any growth this year from two divisions that make up half the company’s revenue — power and water and GE Capital. That will make growing the company as a whole difficult.

Immelt said the company remains on track for the year, but it will have to aggressively cut costs to meet its targets.

Jonathan Fahey can be reached at http://twitter.com/JonathanFahey .

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Capital One shares rise on 1Q results

LOS ANGELES (AP) — Shares of Capital One Financial Corp. climbed Friday, after two Wall Street analysts raised their earnings outlook on the lender, citing the company’s first-quarter results.

THE SPARK: Capital One reported on Thursday that its net income after paying preferred dividends fell to $ 1.05 billion, or $ 1.79 per share, in the first three months of the year. That compares with net income of $ 1.4 billion, or $ 2.72 per share, a year earlier.

The earnings beat the analysts’ consensus estimate of $ 1.61 per share.

Revenue jumped 13 percent to $ 5.55 billion but was below the analysts’ forecast.

THE BIG PICTURE: Capital One, based in McLean, Va., is best known for its credit card business, but it has taken steps in recent years to increase its profile as a national bank. The acquisition of ING Direct, a deal that closed in February 2012, made Capital One the nation’s sixth-biggest bank, based on deposits.

In the first quarter, the company’s net interest income, or money earned from loans, grew 34 percent to $ 4.57 billion. Non-interest income, which includes service charges and other customer-related fees, fell 35 percent to $ 981 million.

THE ANALYSIS: In a research note Friday, Janney Capital Markets analyst Sameer Gokhale raised his 2013 earnings per share estimate on Capital One to $ 6.49 from $ 6.29, citing the first-quarter results. He also increased his 2014 earnings per share estimate to $ 6.61 from $ 6.41.

Susquehanna Financial Group analyst James E. Friedman said the company’s first-quarter results were better than expected.

“Meaningful expense reductions should enable earnings growth next year,” Friedman wrote in a research note.

He raised his forecast for Capital One’s 2013 earnings to $ 6.45 from $ 6.19. He also raised his revenue estimate to $ 22 billion from $ 21.6 billion.

Sterne Agee analyst Todd Hagerman highlighted Capital One’s announcement that it plans to deliver a “meaningful” buyback later this year.

A call to Capital One for comment was not immediately returned.

THE SHARES: Up $ 3.49, or 6.6 percent, to $ 56.28 in afternoon trading. Since the beginning of the year, Capital One shares have declined about 3 percent.

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GE earnings rise in 1Q on NBC sale

GE says net income rose 16 percent in the first quarter, helped by improved profit from selling aircraft engines and transportation equipment and a gain from its sale of NBC Universal.

General Electric Corp. reported net income of $ 3.5 billion, or 34 cents per share, on revenue of $ 35 billion. During last year’s first quarter, GE earned $ 3 billion on $ 35.2 billion in revenue.

Adjusted to reflect earnings only from continuing operations, GE earned 35 cents per share, in line with what analysts had expected, according to FactSet.

Orders for oil and gas equipment rose 24 percent in the quarter. Orders for aviation equipment rose 47 percent.

But GE, based in Fairfield, Conn., said deteriorating economic conditions in Europe dragged down results, especially in sales of power and water equipment.

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