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Wirehouses Post Wealth Results

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Bank of America said its fourth-quarter profits increased 9% to $3.3 billion, or $0.28 per share, from $3.1 billion, or $0.25 per share, a year earlier. Excluding accounting adjustments and onetime items, its net income was $0.29 a share, topping analysts’ estimates.

Revenue, however, fell short of estimates at $19.5 billion, a jump of roughly 4% from last year.

The bank’s global wealth group, which includes Merrill Lynch, saw its results weaken — with net income falling 9% year over year to $614 million and revenue down nearly 4% to $4.4 billion. Its pretax margin was 21%, while long-term assets flows were $6.7 billion in Q4.

“Strong client activity, as demonstrated by long-term AUM flows and deposit flows, was more than offset by difficult markets causing lower asset management fees and transactional revenue,” BofA said in a statement.

For the full year, the wealth and investment unit reported a 2% drop in revenue to $18 billion in 2015, with about $15 billion related to the Merrill Lynch operations. Net income declined 13% to $2.6 billion. Client assets for the group stood at about $2.5 trillion as of Dec. 31, 2015.

The Merrill Lynch group of advisors includes 14,533 registered reps, up 448 from a year ago but down 30 from the prior quarter. U.S. Trust has close to 2,200 registered reps.

On average, the Merrill Lynch advisors have annual fees & commissions of $990,000; however, veteran advisors’ average productivity is $1.3 million. With total assets of about $2 trillion, Merrill FAs have about $138 million in assets under management per rep.

Morgan Stanley

Meanwhile, Morgan Stanley reported fourth-quarter net income of $908 million, or $0.39 per share, up from a loss of $1.6 billion, or $0.91 per share, a year earlier. After accounting adjustments, earnings were $0.43 a share, beating estimates.

The wealth group had revenues of $3.75 billion, down from $3.80 billion in the year-ago period. Pretax net income, though, rose to $768 million in the most recent quarter vs. $736 million in Q4’14; the pretax margin for Q4’15 was $20%.

For the full year, the group’s net revenues totaled $15.1 billion, up from $14.9 billion in 2014. Pretax profits for the year were $3.3 billion compared with $3.0 billion in the prior 12 months. The pre-tax profit margin for all of 2015 was 22%. After-tax profits were $2.1 billion, down from $3.2 billion in 2014.

Client assets were nearly $2 trillion, while fee based assets stood at $795 billion on Dec. 31 — an increase of 3% from Q3’15 and 1% from Q4’14.

The total number of advisors stands at 15,889, representing a 1% increase from the prior quarter and a 1% drop for the year-ago period.

Financial-advisor productivity, which measures advisors’ total yearly fees and commissions, was about $947,000 for 2015; it stood at $944,000 in 2014. Average client assets per rep was $125 million in 2015.

On a recent call with equity analysts, Morgan Stanley Chairman & CEO James Gorman emphasized loans as an area of growth for the wealth management group. “For example, only 1.9% of our clients have a mortgage loan through Morgan Stanley. Increased penetration of all loans will drive $20 billion of lending growth through 2017,” he says.

Wells Fargo

Wells Fargo says its fourth-quarter profit was nearly unchanged from a year ago at $5.7 billion, or $1.03 per share, and revenue grew less than 1% to $21.6 billion. (Analysts estimated the bank would earn $1.02 in Q4’15.)

The wealth and investment management unit posted a profit of $595 million, a 15% gain, on a roughly 1% jump in revenue, which totaled $3.95 billion in Q4’15. The operations include some 14,960 advisors.

The average loan of loans for the unit was $63 billion, up from $55 billion a year ago. The bank says advisor clients had an average of 10.55 cross-sold products in their accounts in the most recent period, up from 10.49 a year ago.

Client assets stood at $1.6 trillion, with $420 billion in managed accounts and $350 billion in IRAs. (Wells Fargo revenue tied to mortgages and related services improved nearly 10% to $1.66 billion on $47 billion in originations. According to Bloomberg, Wells Fargo’s assets totaled $1.79 trillion at the end of 2015, which topped Citigroup’s $1.73 trillion.)

UBS plans to report earnings in early February.


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