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January 16, 2019 at 01:40 PM
Bank of America beat estimates and reported adjusted fourth-quarter net income of $7.3 billion, or $0.70 per share, in the fourth quarter vs. $2.4 billion, or $0.20 per share. Revenue in the latest period was $22.7 billion.
The bank’s wealth business had a 43% year-over-year jump in profits to $1.1 billion. The unit’s pre-tax margin was 29% in Q4’18 vs. 26% in Q4’17. Revenue was roughly $5 billion, up from $4.7 billion a year ago.
For the full year, wealth revenue grew 4% from the prior year to $19.3 billion, while Merrill Lynch’s sales jumped 4% to roughly $16 billion in 2018.
“Record revenue in wealth management was driven by client acquisitions across Merrill Lynch and U.S. Trust and includes a record number of new clients and deepening relations with existing clients,” said Andy Sieg, president of Merrill Lynch Wealth Management, on a call with the press Wednesday.
(Related: 12 Best & Worst Broker-Dealers: Q3 Earnings, 2018)
“Seventy percent of experienced advisors had their best year ever in 2018,” he explained. “And we had a record number of $1 million and $5 million producers.” Sieg pointed to the firm’s 2018 Growth Grid for compensation as a key factor supporting these results.
The wealth unit added about 53,000 households as clients in 2018, which is roughly double its average results since being acquired by BofA; the average household brings $1.4 million in assets.
On a gross basis, new household additions by veteran Merrill Lynch reps rose 63% in 2018 from the prior year to roughly 4.6 new relationships per advisor.
Average fees and commissions were $1.36 million for experienced advisors in Q4’18, while total advisor productivity was $1.05 million.
Balances Update
Across the unit, client balances were $2.6 trillion as of Dec. 31. Flows of client balances were $56 billion in 2018 vs. $14 billion in 2017. “The lion’s share” of these flows come from rival financial institutions, Sieg says, via the transfer of clients.
There were assets-under-management outflows of $6 billion in Q4’18 tied to market volatility, including “some shift from AUM to deposits,” BofA says. The unit also had $17 billion of brokerage inflows in Q4’18, with average loan balances hitting $164 billion.
