Challenging market conditions drove down business in the fourth quarter for Bank of America’s wealth management unit, with the firm reporting a nearly 13 percent dip in profits.
Bank of America reported Tuesday its Global Wealth & Investment Management unit took in $614 million in net income during the fourth quarter, down from the $705 million reported a year ago. Revenues were also down 3.5 percent, or $159 million, to $4.4 billion.
Overall, the Charlotte, N.C.-based bank reported profits rose 9 percent for a profit of $3.34 billion, or $0.28 a share, for the fourth quarter. That beat analysts’ estimates of $0.26, according to Seeking Alpha. Revenue rose to $19.53 billion from $18.73 billion a year ago, missing analysts’ estimates by $250 million.
Bank of America’s Paul Donofrio says the company is “staying focused on the things that we can control.” The firm said it still saw strong client activity in its wealth unit, but that difficult markets offset positive long-term assets under management flows and deposit flows. This caused lower asset management fees and transactional revenue.
“The reality is the number one issue they face in the wealth, investment and brokerage services revenue line is the decline in transactional revenue,” CEO Brian Moynihan said Tuesday. “If you look it underneath, the flows are strong. It’s a good business; it does a good job for its clients. And we expect more out of it and that’s the job for John [Thiel], Keith [Banks], Andy [Sieg] and Terry [Laughlin] going forward.”
Here are the highlights from Merrill Lynch Wealth Management:
- Revenue for Merrill Lynch Wealth Management came in at $3.7 billion, a 0.8 percent decrease from the prior quarter, which the firm noted was due to impacts of market on both fee-based and transactional revenue. The firm does not break out Merrill’s net income from the overall GWIM profits reported.
- Asset management fees were $1.6 billion, down almost 2 percent from the third quarter and over 1 percent from a year ago. Fees for 2015 overall were up 6 percent from 2014.
- Client balances were nearly $2 trillion at the end of the fourth quarter, up $43 billion from the third quarter, but down $48 billion from a year prior. The firm cited lower market valuations, partially offset by positive client balance flows.
- Referrals from Merrill Lynch and U.S. Trust to other lines of business across the enterprise have increased 54 percent year-over-year.
- Advisor headcount for Merrill Lynch was 14,533 at the end of the fourth quarter, down by 30 reps. The firm noted that many of the fourth quarter departures were due in large part to exits from the Global Client Strategy group.
- But year-over-year, the firm grew its advisor force by 448 people, or 3 percent. Firm spokesman Matthew Card said in an email that 2015, during which the firm hired 209 experienced advisors, was Merrill’s strongest year for recruiting since 2012.
- When hiring advisors from another firm, Merrill Lynch brings over about 80 percent of the advisors’ assets on average. When advisors leave Merrill, the firm retains between 40 and 50 percent of the departing rep’s assets, twice the industry average of 20 percent as recorded by Cerulli Associates.
- Advisor productivity is at $1.3 million per “experienced” advisor (meaning those not still in the training program), down slightly from the previous quarter’s $1.31 million.
