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BofA, Merrill See Q4 Drop in Profits

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Bank of America (BAC) said early Thursday that its net income fell 11% in the fourth quarter of 2014 to $3.05 billion, or $0.25 per share, from $3.44 billion, or $0.29 per share, a year earlier. Its total revenue dropped close to 13% to $18.96 billion.

The results, which missed analysts’ estimates, included three one-time items tied to the valuation of debt and other underlying securities and reduced the Q4 earnings by $0.07. BofA’s fixed-income trading dropped dramatically to $1.5 billion from $19 billion a year earlier.

“In 2014, we continued to invest in our businesses while reducing expenses and resolving our most significant litigation matters,” said CEO Brian Moynihan, in a press release. “Last quarter, consumer deposits and loan originations were solid; wealth-management client balances grew to $2.5 trillion; we increased lending to middle-market and large companies; and we retained a leadership position in investment banking.

BofA’s stock traded down about 4.5% on Thursday afternoon, near $15.30.

Wealth Results

Global Wealth and Investment Management boosted revenue 3% from a year ago to $4.6 billion, “driven by higher noninterest income with record asset management fees, partially offset by lower transactional activity,” according to BofA-Merrill Lynch. (Merrill Lynch revenue accounted for $3.8 billion, or 83%, of total wealth management sales.

Noninterest expenses, though, grew 5% to $3.4 billion, tied to higher revenue-related incentive compensation and support costs. This contributed to a 9% drop in net income for the unit to $706 million in Q4.

Merrill Lynch’s wealth unit had a 2014 pre-tax margin of 25%, according to its recent earnings report, and a 23% margin in Q4’14.

Client balances increased 6% to $2.5 trillion as of Dec. 31, thanks to both higher market levels and net inflows; $2.03 trillion of the balances are held in Merrill Lynch accounts. The unit’s assets under management totaled $903 billion. Long-term asset flows were $9.4 billion in Q4 and $49.8 billion for the year.

BofA-Merrill says asset management fees grew 16% from a year ago to hit $2.1 billion, while average loan balances expanded 7% to $123.5 billion.

Headcount, Production

The unit’s total number of wealth advisors increased by 714 advisors from the year-ago quarter and 192 from the third quarter to reach 17,231, and “full-year attrition levels were at historical lows since the Merrill Lynch merger,” the bank said in a statement. The number of financial advisors in the unit was 16,035, up from 15,317 a year ago and from 15,867 in Q3.

Excluding advisors in consumer and business banking, the number of advisors was 14,085 in Q4, an increase from 13,772 a year earlier and from 13,999 in the prior quarter.

Productivity of these Merrill Lynch reps, as measured by average yearly fees and commissions, was roughly $1.07 million in the fourth quarter, down slightly from $1.08 million in Q3 but up from $1.04 million in Q4’13.

US Trust currently includes 2,155 advisors, which are not included in the figures for BofA-Merrill reps. 

— Check out JPMorgan Profits Drop in Q4; Wells Fargo Sees Modest Improvement on ThinkAdvisor.