Q3 Earnings: BofA Tops Estimates as Merrill Boosts Advisor Count

Net inflows of client assets were nearly $2 billion in the third quarter for the wealth-management unit vs. outflows of about $2.5 billion last year.

BofA CEO Brian Moynihan. (Photo: AP) BofA CEO Brian Moynihan. (Photo: AP)

Bank of America (BAC) reported net income on Tuesday of $6.2 billion, or $0.56 per share, for the third quarter vs. a net loss of $7.3 billion, or $0.77 per share, last year–topping analysts’ estimates by a wide margin. Revenue, net of interest expense (and calculated on a fully taxable-equivalent basis) rose 6% to $28.7 billion.

Its global-wealth operations, no longer led by Sallie Krawcheck, reported year-over-year increases in revenue and net income, as the total number of advisors at Merrill Lynch grew by about 500 to 16,722 on the expansion of the Merrill Edge platform. Sequentially, the unit reported slightly lower sales and profits vs. the second quarter of 2011.

"This quarter's results reflect several actions we took that highlight our ongoing transformation toward becoming a leaner, more focused company," said CEO Brian Moynihan in a press release. "The diversity and depth in our customer and client offerings provided some resiliency in a very challenging environment."

The bank’s latest results were affected by $4.5 billion adjustments on structured liabilities, a pretax gain of $3.6 billion from the sale of shares of China Construction Bank, a $1.7 billion pretax gain in trading debit valuation adjustments, and a pretax loss of $2.2 billion related to private equity and strategic investments, excluding CCB. The year-ago quarter included a $10.4 billion goodwill impairment charge, according to the company.

"Our focus this quarter was on strengthening the balance sheet by selling non-core assets and building capital to position the company for future growth," said CFO Bruce Thompson in a statement. "In that regard, we accomplished a great deal. We reduced the size of our balance sheet by $42 billion from the second quarter of 2011, nearly doubled our Tier 1 common equity ratio since early 2009, and continued to have strong liquidity levels even after significantly reducing both short- and long-term debt."

Wealth Management

The unit, now led by BofA co-CEO David Darnell, saw its net income rise 29% from the year-ago quarter to $347 million, which was a 31% decline from the second quarter of 2011 (due to a higher provision for credit losses and other factors).

The wealth-management unit had a return on average equity of 7.72% in the most recent quarter, which is up from 5.91% a year ago, but down from 11.54% in the second quarter.

Revenue was $4.2 billion, an increase of about 9% percent year over year, driven by higher asset management fees, net interest income, and transactional activity; sales moved down 6% from the second quarter.

Sales at Merrill Lynch improved 8% from last year to $3.43 billion, but dropped 2% from the second quarter.

Client balances, or assets, for the overall wealth-management unit were $2.06 trillion, down about 3% from the year-ago quarter and 6% from the previous quarter. Balances in Merrill Lynch accounts stood at $1.45 trillion on Sept. 30, a drop of 1% from last year and a decline of 6% from the previous quarter.

Net asset inflows in Q3’11, though, were $1.9 billion for the wealth-management unit vs. outflows of $2.6 billion a year ago and inflows of $764 million in Q2’11 and $7.5 billion in Q1’11.

The number of total client facing associates stood at 21,554 as of Sept. 30, up from 20,011 a year ago and 20,833 in the previous quarter. The number of wealth advisors is now 18,488 vs. 16,988 last year and 17,823 last quarter.

U.S. Trust includes 2,271 financial professionals.

Advisors with Merrill Lynch number 16,722, up by more than 1,000 from 15,486 a year ago and 16,247 in the second quarter. Much of this increase is from hiring for the Merrill Edge platform, which focuses on mass-affluent clients being serviced through bank branches and call centers.

BofA says that the productivity of Merrill Lynch financial advisors, excluding those with Merrill Edge, is about $854,000 in yearly fees and commissions based on the third quarter’s results–down 4% from last quarter, but up 1% from last year.

For the nine months ending Sept. 30, Merrill advisor production is averaging $892,000 in yearly fees and commissions, up 7% from the first nine months of 2010.

For more Q3 news, go to AdvisorOne’s Earnings Calendar for the Finance Sector.

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