Wells Fargo’s wealth management division reported stronger earnings, revenues and FA headcount in the first quarter, while cross-selling hit a record and client asset inflows were at their highest since Wells acquired Wachovia in late 2008.
Chairman and Chief Executive John Stumpf said on a conference call that he was very pleased with the quarter and the progress of the integration of Wachovia. “We had a very strong quarter, we’re very pleased with record earnings across business segments and record cross-sell. We believe that our franchise remains very well positioned for the future.” The bank posted overall earnings up 48 percent to $3.76 billion, on reduced loan losses. Total bank revenue fell 5.2 percent to $20.3 billion. Investors were less enthusiastic than Stumpf about the results. Wells stock (NYSE: WFC) was trading off around 5 percent in midday trading.
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On the call, Stumpf dodged questions about the recent and abrupt departure of the firm’s chief financial officer, Howard Atkins, on February 8. “That is so yesterday,” he said. “We have a terrific new CFO; we are moving forward,” he said, referring to Tim Sloan who was picked to succeed Atkins.
The bank’s wealth, brokerage and retirement (WBR) division recorded a profit of $339 million, up 20 percent versus the year-ago quarter. Revenue totaled $3.2 billion, up 8 percent from 2010, driven by higher asset-based revenues and net interest income.
Cross-selling improved dramatically, with loan origination by financial advisors up 56 percent from the first quarter of 2010, said Stumpf on the call. Overall, Wells advisors are cross-selling 9.82 products per Wells bank customer, up from 9.67 products in the year ago quarter, a new record, he said.
The wealth management division experienced its strongest quarterly net inflows since Wells Fargo acquired Wachovia in late 2008, Stumpf said. Total client assets in the WBR division reached $1.4 trillion, up 5 percent from a year ago, with retail brokerage assets at $1.2 trillion and wealth management assets at $203 billion. Meanwhile, managed account asset climbed by $45 billion, or 21 percent, from the year ago quarter, driven by strong net flows and market gains.
The firm also added a net 48 financial advisers during the quarter, bringing the total to 15,236 advisers, putting the firm in a close third behind Merrill Lynch, which has 15,695 FAs. Morgan Stanley Smith Barney is the largest retail brokerage with 18,043 financial advisors. Merrill reported earnings last week, while Morgan Stanley reports Thursday.
Wells’ wealth management results benefited in part from the integration of the firm’s financial advisors onto a single brokerage platform, said Stumpf. The firm successfully completed this conversion in January, transferring legacy Wells Fargo brokerage customers onto the Wells Fargo Advisors common platform, providing greater access to more products and services.
In its quarterly report, Wells Fargo said growth opportunities for the firm include the potential to sell investments to the 5.2 million affluent Wells Fargo households who have $1.7 trillion in investment assets with other firms and no investments with Wells. It also plans to increase loan cross-sell to the 2.9 million traditional brokerage households in its wealth, brokerage and retirement division.
Last quarter, when Wells Fargo reported earnings, Stumpf voiced interest in possible wealth management acquisitions. No mention was made of that possibility on Wednesday’s conference call.
