From the September 2013 issue of Research Magazine • Subscribe!

Wirehouse Wealth Results Strong in Q2

Bank of America said its second-quarter net income rose 63% to $4.0 billion, or $0.32 per share, from $2.5 billion, or $0.19 per share, a year ago, while revenue improved 3% to $22.9 billion from $22.2 billion last year.

“We are doing more business with our customers and clients, and gaining momentum across every customer group we serve,” said CEO Brian Moynihan, in a press release. “We must keep improving, but with the consumer recovering and businesses strong, we have lots of opportunity ahead.

The bank cut expenses about 6% to $16 billion. It also trimmed close to 7% of its positions over the past 12 months and now has some 257,000 employees.

“At the beginning of the year, we said we would focus on three things revenue stability, strengthening the balance sheet and managing costs,” said CFO Bruce Thompson, in a statement. “This quarter, we delivered on all three.”

BofA-Merrill Lynch’s Global Wealth and Investment Management unit increased its net income 38% from the second quarter of 2012 to $758 million. In addition, its pretax margin was 28% in the recent period vs. 21% in the year-ago quarter.

Revenue grew 10% year over year to $4.5 billion. The results were driven by “higher asset management fees related to higher market levels and long-term AUM flows, higher transactional revenue and higher net interest income,” the company says.

The number of financial advisors was 15,759 as of June 30, down 306 from 16,065 in the first quarter and a decrease of 1,005 reps from the year-ago quarter. Merrill Lynch FAs had average yearly fees & commissions of over $1 million as of Q2’13, up from $971,000 as of Q1’13 and $895,000 as of Q2’12.

The number of GWIM advisors was 16,989 in the second quarter vs. 17,293 in the prior quarter and 18,060 last year, while the total headcount for client-facing financial professionals was 19,689 in Q2’13 vs. 20,018 in the prior quarter and 20,844 a year ago.USTrust has 2,084 reps.

Net AUM flows for the wealth unit were $7 billion in the second quarter, down from $18 billion in the prior quarter, but up from $3.7 billion a year ago. For the first six months of 2013, total flows stood at $25 billion vs. $11.4 for the same period in 2012.

Client balances rose 8% (excluding certain balance transfers) from the year-ago quarter to $2.22 trillion; client balances in Merrill Lynch accounts were $1.8 billion. Total GWIM assets under management rose $76.2 billion, or 11%, year over year to $743.6 billion.

Asset-management fees grew 10% year over year to $1.7 billion, while long-term AUM flows more than doubled from the year-ago quarter to $7.7 billion.

Morgan Stanley

Morgan Stanley said its second-quarter income attributable to common shareholders was $802 million, or $0.41 per share, vs. $564 million, or $0.29 per share, in the year-ago period. Excluding special items, Morgan Stanley earned $0.45 per share. The Q2’13 results included a gain related to the bank’s debt valuation and a charge tied to its purchase of Citigroup’s remaining share of the Morgan Stanley Smith Barney joint venture.

Total revenue jumped 22% from last year and 4% from the previous quarter to $8.5 billion, while expenses increased roughly 12% year over year and 2% quarter over quarter to $6.73 billion.

“This quarter, we saw significant year-over-year revenue growth in each of our five major business units and higher year-over-year profitability,” said Chairman and CEO James P. Gorman, in a press release. “Of particular note, equity sales and trading results were strong across all products and regions … In addition, we look forward to the full benefits of the recently completed Wealth Management acquisition.”

The Wealth Management unit had net revenues of $3.5 billion, up 10% from last year and 2% from a year ago. The group’s pretax margin was roughly 19%, up from 17% in Q1’13 and 13% in Q2’12. Net income was $326 million, representing a jump of 41% over the year-ago period and an increase of 28% from the prior quarter.

The headcount of Morgan Stanley advisors is 16,321, an increase of 37 reps from the prior quarter and a decrease of 157 reps from the year-ago period. The Morgan Stanley financial advisors had average fees and commissions (or production) of $866,000 in Q2’13, up 2% from $851,000 in Q1’13 and up 12% from $770,000 in Q2’12.

Fee-based asset flows for the quarter were $10 billion, down 35% from the prior quarter’s $15 billion but up 233% from $3 billion in the year-ago quarter. Fee-based assets currently represent 35% of total assets, according to the company.

Total client assets were $1.78 trillion at quarter end versus $1.79 trillion in the earlier quarter and $1.64 trillion last year. (One Morgan Stanley advisor recently added a client with $70 million in assets by using the website LinkedIn. See the story at ThinkAdvisor.com.)

Wells Fargo

Wells Fargo saw its second-quarter profit grow roughly 20%: Net income rose to $5.52 billion, or $0.98, from $4.62 billion, or $0.82. Revenue, though, expanded just 0.5% to $21.4 billion from $21.3 billion.

“Wells Fargo again demonstrated an ability to grow during a dynamic economic and interest-rate environment,” the bank’s chairman and CEO, John Stumpf, said in a statement.

Wells Fargo’s Wealth, Brokerage and Retirement unit reported revenue of close to $3.3 billion, up 10% from the year-ago period and 2% from the prior quarter, partly due to higher asset-based fees, the bank says. Net income rose 27% from last year and 29% from last quarter to $434 million.

The retail brokerage reported client assets of $1.3 trillion, up 9% from last year. Managed accounts grew 19% to $52 billion, “driven by strong net flows and market performance,” the bank notes.

Wells’ wealth-management group said it had client assets of $203 billion as of June 30, up 3% from the prior year. Also, retirement IRA assets grew 12% year over year to $315 billion, while institutional retirement plan assets expanded 11% to $277 billion.

Also, the bank says it added 34 teams and some $5.4 billion in assets under management to its independent-advisor channel during the first half of 2013, which was “the second-most successful half-year recruiting effort in its history.” (Its top recruiting results came in early 2009, when the financial crisis led many wirehouse and other advisors to seek out new career options.)

With the latest additions, the Wells Fargo Advisors Financial Network (or FiNet) includes 577 practices composed of 1,205 financial advisors. Overall, Wells Fargo has 18,608 registered reps, of which 15,268 are financial advisors vs. 15,354 in the prior quarter; most of the rest—2,930—are in-bank advisors, with the remainder—408—working with clients via phone.

UBS

UBS saw its second-quarter profit improved 32% to 690 million Swiss francs ($742 million), or 0.18 Swiss francs per share, from 524 million Swiss francs ($563 million), or 0.14 Swiss francs per share, a year ago. (In the first quarter, profits were 988 million Swiss francs—about $1.06 billion—or 0.26 Swiss francs a share.)

Sales across the company grew 15% year over year to 7.4 billion Swiss francs ($8 billion), though they dropped 5% from the earlier quarter.

“I am very pleased with our performance this quarter. The results show that our strategy is right, and we’re ahead on execution,” said Group CEO Sergio P. Ermotti, in a statement. “Every quarter since we set the strategy in 2011, we have executed it in a very clear and disciplined way building an unmatched capital position and delivering for our clients.”

The non-U.S. Wealth Management operations delivered their “highest profit in four years, excluding charges related to the Swiss-U.K. tax agreement and restructuring costs,” while drawing “robust inflows,” the company said.

The Wealth Management-Americas’ financial-advisor headcount grew by 34 from last quarter and by 78 from last year to 7,099. Invested assets per financial advisor stand at $126 million, close to last quarter’s results and up 11% from $114 million in the year-ago period.

Average production per advisor was $1,012,000—an improvement of 3% from $984,000 in the first quarter and up 12% from the second quarter of 2012.

In Wealth Management Americas, net new money totaled 2.7 billion Swiss francs ($2.8 billion), a drop from 8.6 billion Swiss francs ($9.2 billion) in the first quarter and from 3.7 billion Swiss francs ($4 billion) in the prior quarter. (The unit has had 12 consecutive quarters of net inflows, and its results exclude interest and dividend income.)

“The second quarter result mainly reflects outflows related to financial advisors employed with UBS for more than one year and included client withdrawals of around 2.2 billion Swiss francs or $2.5 billion associated with annual income tax payments as well as seasonal declines compared with the first quarter,” the company reported.

As a result, the annualized net new money growth rate for the second quarter was 1.3% vs. 4.4% in the prior quarter and below the target range of 2% to 4%, according to UBS. Overall, the unit had a pretax profit of $258 million, up 3% from $251 million in the prior quarter and a jump of 21% from $214 million a year ago.

Assets stood at $892 billion as of June 30, a slight increase from $891 billion on March 31 and an increase of 12% from $797 billion last year. Revenues for the unit expanded 13% year over year and 3% from last quarter to nearly $1.8 billion.

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