T. Rowe Price reported a 27% drop in quarterly earnings Friday, citing continued weakness in stock market valuations amid a grinding bear market.

The Baltimore-based investment management firm posted a first-quarter net profit of $38.8 million, or 31 cents a share, down from the $53 million, or 41 cents a share, it earned in the year-ago period. The results were ahead of Wall Street’s expectations of 29 cents a share, according to a 12-analyst poll conducted by research firm Thomson Financial/First Call, parent company of the publisher of Mutual Fund Market News.

Total revenue slipped to $218.7 million from $242 million last year. Advisory fee revenue for the quarter fell to $164.4 million from $188.5 million. Assets under management fell to $139.9 billion from $159.6 billion at the end of the year-ago quarter.

Chairman and President George Roche said in a prepared statement that with the war in Iraq moving toward a favorable resolution, the remainder of the year should be one of an improving environment for both the financial markets and the company.

"The economy is cyclically poised for recovery and should continue on a slow growth path. Inflation should remain contained within acceptable parameters, and we anticipate gains in the equity markets that are more in line with historical trends," he said.

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