NEW YORK, April 16 Bank of America's
wealth management businesses slowed in the first quarter, with
profit at its Merrill Lynch brokerage and U.S. Trust private
banking units slipping 6.5 percent to $729 million from $777
million in the last quarter of 2013.
The return on the $12 billion of capital allocated to the
wealth businesses fell to 24.7 percent from 29.4 percent in the
2013 first quarter and 31 percent from the fourth quarter.
The returns, however, are still far higher than those in
Bank of America's riskier trading and investment banking
businesses, which have been hemmed in by new regulations
designed to prevent another financial crisis. That explains why
big banks continue to invest in businesses aimed at rich
families and individuals.
The results Bank of America reported on Wednesday track an
industrywide trend in which banks are countering client caution
about markets by nudging them from commission-based trading
accounts to fee-based accounts tied to growth of their assets.
They also are urging them to buy loans and other bank products.
Merrill Lynch said that for at least the second straight
quarter, revenue from wealthy and "ultra-high-net-worth" clients
in its core wealth management businesses was split almost
equally among fees, trading commissions and interest income from
loans and deposits. Measured by another metric, 45 percent of
Merrill's almost 14,000 brokers have more than half of their
clients in at least one fee-based relationship.
The trend is part of a cultural shift in which big brokerage
firms are encouraging brokers to talk less about individual
stocks, bonds and funds and more about helping clients meet
long-term goals such as saving for children's college,
healthcare and retirement. This allows banks to book more stable
income that is less subject to the whims of investor trading
Wells Fargo & Co, whose U.S. brokerage unit has the
second largest number of financial advisers, last week reported
a 41 percent jump in first-quarter profit in its wealth business
on a big jump in fees. But the $475 million of profits trailed
those at Bank of America's wealth business.
The banks also are encouraging brokers to sell loans and
other bank products and to work in teams, in hopes of locking
clients into relationships that will outlast the retirement of
brokers whose average age is in the mid- to late-50s.
Wells said its wealth management clients average more than
10 product relations with the bank. Merrill said
referrals within Bank of America to and from wealth management
have grown by 30 percent since a year ago.
While profitability at Merrill and U.S. Trust slowed,
revenue rose 3 percent from a year ago and 2.9 percent from the
fourth quarter to a record $4.5 billion, pumped by $2 billion of
asset management fees. In the fourth quarter, revenue soared
10.4 percent over the year-ago period.
Balances in clients' brokerage, advisory, lending and
deposit accounts rose 7 percent from a year ago and 1 percent
from the fourth quarter to $244 billion.
Wealth is the smallest contributor to Bank of America's
profit, excluding its residential mortgage business whose legal
problems caused an overall first-quarter loss.
Wealth's $729 million of first-quarter profit trailed the more
than $1 billion earned by each of Bank of America's consumer
banking, trading and investment banking businesses.
Merrill Lynch, which once had the most brokers in the world,
continues to trim its staff. Its broker force fell by 749
financial advisers in the past year to 13,725 as of March 31.
Most of the 47 who left in the past three months were poorly
performing brokers in its training program, the company said.
Merrill, which plans an enhanced college-level intern
program this years, said its average broker last quarter brought
in $1.06 million in fees and commissions. That exceeds the $1
million benchmark for a top-producing broker in the U.S.
For the second straight quarter, Merrill also said the
number of its most successful brokers who left for other jobs
during the quarter is at historically low levels.
(Reporting by Jed Horowitz; Editing by Richard Chang)