July 19, 2011

Q2 Earnings: BofA Posts Big Loss; Merrill Adds Advisors

Loss spurred by mortgage settlement; Merrill Lynch now includes more than 16,240 advisors with average yearly sales of $894,000.

Bank of America's headquarters in Charlotte, N.C. (Photo: AP) Bank of America's headquarters in Charlotte, N.C. (Photo: AP)

Bank of America said Tuesday that it had a net loss of $8.8 billion, or $0.90 per share, for the second quarter, compared with net income of $3.1 billion, or $0.27 per share, in the year-ago period. Revenue fell to $13.23 billion from $29.15 billion a year ago as the company settled mortgage-related issues.

The loss met analysts’ expectations and was in the upper range of BofA’s estimated results. Last month, the bank said its loss could be as much as $9.1 billion.

BofA says results were hurt by charges related to a recently announced agreement to resolve “nearly all of the legacy Countrywide-issued first-lien non-GSE residential mortgage-backed securitization (RMBS) repurchase exposures, as well as the impact of other mortgage-related costs,” according to a press release.

Still, the charges were partially offset by lower credit costs, gains from the sale of non-core assets and debt securities, improved sales and trading revenues and higher asset management fees and investment banking fees, the company explains.

brian moynihan"Obviously, the solid performance in our underlying businesses continues to be clouded by the costs we are absorbing from our legacy mortgage issues," said Bank of America CEO Brian Moynihan (left) in a statement. "But it is clear that - from deposits to wealth management to investment banking - our customers and clients are choosing to do more with us every day. We intend to continue our efforts to put the mortgage uncertainty behind us, build capital through the strength of the franchise, and deliver the returns for shareholders that we owe them."

Wealth Management

Total sales for the unit, which is led by Sallie Krawcheck, were nearly $4.5 billion in the second quarter vs. $4.2 billion a year ago and $4.5 billion in the first quarter of 2011. Total-client balances were $2.20 trillion, up from $2.05 trillion a year ago and down slightly from $2.23 trillion in the first quarter of 2011.

Net Income for GWIM was $506 million, up from $329 million in the year-ago quarter but down from $533 million in the previous quarter. Return on equity for the group rose to 11.54% in the most-recent period vs. 7.27% last year and 12.06% in earlier quarter.

BofA says referrals from Global Wealth and Investment Management to Global Commercial Banking rose 75% from the prior quarter, and referrals from GBC to the wealth-management group grew 23%.

The number of wealth-management associates increased for the eighth consecutive quarter, with the company adding 546 financial advisors in the quarter and 942 since the second quarter of 2010. The total number of client-facing professionals is 20,876 vs. 19,744 last year and 20,273 in Q1.

Merrill Lynch

The number of Merrill Lynch advisors rose to 16,241 in the second quarter, up from 15,299 last year and 15,695 in the first quarter. Sales (or fees and commissions) per advisor on a trailing-12-month basis totalled $894,000 in Q2 vs. $843,000 last year and $931,000 in Q1.

Revenues for all Merrill Lynch advisors were $3.494 billion, up from $3.138 billion a year ago and down from $3.540 billion in the first quarter. 

Total client balances for Merrill Lynch were $1.54 trillion in the second quarter, up from $1.40 trillion a year ago but a slight drop from $1.55 trillion in the first quarter of 2011.This means that average assets per advisor are now about $95 million. 

Merrill Lynch is also moving to provide its high-net-worth advisors with more incentives to boost business by getting rid of smaller accounts. 

(U.S.Trust now has 2,280 financial professionals, up 3 from last year and down 33 from the earlier quarter.) 

Merrill Edge

Bank of America says that — as part of its expansion of the mass-affluent-investor Merrill Edge platform — it has hired 70 financial solutions advisors (FSA) to be added to banking centers in the Metro-New York region by the end of this month. (These advisors are not included in the GWIM advisor figures cited above.)

These hirings are part of BofA's plan to double the number of Merrill Edge advisors to 1,000 by year-end.

“We have made a very strong commitment to building out solutions and adding experts for our preferred customer base of about 8 million individuals,” said Cary Grace (left), a Preferred Sales executive for Bank of America’s Consumer & Small Business Bank, in an interview with AdvisorOne.

According to Grace, these customers have about $5 trillion in financial assets that are not yet held in BofA accounts. “We want to serve these clients more with our experts and find better ways to serve them comprehensively through Merrill Edge,” she explained.

As of June 30, assets held by Merrill Edge clients were $69 billion, up from $51.1 billion a year ago and $66.7 billion in the quarter ended March 31. 

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