Its shares (BAC) traded down more than 8.5%, around $14, on above-average volume Friday, July 16.
"The tone on the Bank of America earnings call was overwhelmingly negative," said Richard Bove of Rochdale Securities in a phone interview.
Executives, Bove notes, didn't outline how the bank will respond to new financial-reform regulations that are expected to negatively impact retail banking and other fees - though they certainly will do something. For instance, fees on retail-bank accounts and merchant services could go up, he says, but not fees in the capital- markets and wealth-management units.
BofA's wealth-management operations reported higher asset-management fees and brokerage income in the most-recent quarter than since early 2009. These operations include Merrill Lynch and U.S. Trust.
"Second-quarter earnings of $0.27, vs. $0.33, beat our $0.24 estimate, helped by gains from asset sales," said Matthew Albrecht, an equity analyst with Standard & Poor's, in a research note. (He maintains a buy rating on the stock.)
"Revenues fell, reflecting weak mortgage demand and a decline in capital markets activity, and BAC's loan portfolio continues to shrink. Non-performing loans and new delinquencies declined, allowing BAC to release loan loss reserves," he explained.
BofA's wealth-management unit had $2.24 billion in fees and brokerage income in the second quarter of 2010, which topped $2.15 billion in the first quarter and $2 billion in the same year-ago period. Total client assets, however, fell about 9% from the first quarter, which the company says was a result of market volatility and the sale of Columbia Management in May.
Merrill Lynch had $1.7 billion in fees and brokerage income in the second quarter vs. $1.5 billion a year ago and $1.6 billion in the first quarter.
While the full impact of the recently passed financial reforms on Merrill remains to be seen, Bove does not anticipate that BofA will increase wealth-management fees to cover lost fees in its retail bank operations.
"That would be a bad business practice," he explained.
BofA's wealth-management operations reported nearly $2 trillion in client assets, with some $1.4 trillion at Merrill Lynch. Merrill's assets declined $50 billion from the first quarter but grew $92 billion over the same year-ago period.
Merrill Lynch has 15,142 financial advisors vs. 15,005 in the previous quarter and 15,008 a year ago. One average, assets under management per broker are about $92.5 million.
The advisors' annual production average, based on fees and commissions in the first half of this year, is $836,000. Most wirehouses average $500,000- $600,000 in annual adviser production.
Based on second-quarter results, annual production was about $853,000 vs. $823,000 a year ago.
The wealth-management division reported $4.3 billion in total revenue for the second quarter, $3.2 billion of which came from Merrill Lynch. This represents a nearly 4% increase for the unit compared to the first quarter and a 2.5% jump for Merrill Lynch. The total revenue includes the asset management fees and brokerage income, as well as interest income and other income.
Despite rising revenue was up, the unit had a 23% decline in net income from the first quarter, to $356 million, as non-interest and income tax expenses rose. Within the group, Merrill's net income was $316 million, a 12% fall from the first quarter.
The earnings figures show Merrill Lynch contributing about 11% of Bank of America's overall revenue and 10% of its net income, while the wealth-management unit makes up about 15% of Bank of America's total revenue and 11% of its net income.
In the second quarter, the bank's introduced the online brokerage, Merrill Edge, which received 20,000 referrals resulting in 7,000 contacts, according to the company.