Uncertainty Pinches BofA's Wealth Arm
July 18 2016 - 12:01PM
Dow Jones News
By Anna Prior
Bank of America Corp.'s wealth arm boosted its second-quarter
profit from a year earlier as a decline in expenses offset a slight
drop in revenue.
The bank's global wealth and investment-management unit, which
includes Merrill Lynch and private bank U.S Trust, increased profit
7.9% to $722 million from the year-earlier quarter. Unit revenue
slipped 2.4% to $4.46 billion.
"Transactional revenue was down and continues to be impacted by
market uncertainty, as well as the migration of brokerage to
managed relationships," BofA Chief Financial Officer Paul Donofrio
said on a conference call Monday.
Meanwhile, noninterest expense for the quarter decreased 5.7% to
$3.29 billion from a year earlier, due in large part, said Mr.
Donofrio, to the expiration of retention deals given to brokers
when Bank of America purchased Merrill in 2009. The rest of the
improvement in expenses came from "lower revenue related to
incentives and other support costs," he added.
While these expired deals remove an expense from Merrill's
books, they also mean those advisers can leave the firm without
having to worry about repaying the remaining balances on those
deals. This could make independent practice -- or big signing
bonuses from rival firms -- more attractive to some advisers.
Still, Bank of America Chief Executive Brian Moynihan told
analysts that attrition and retention have been relatively stable,
with most of the broker attrition due to changes in the company's
international operations. Last summer, Merrill trimmed its
international effort to focus on 29 countries and curtailed
brokers' ability to travel outside the U.S., while also raising the
minimum account size overseas clients need to work with a Merrill
broker.
Broker staffing was basically flat in the second quarter, with
Merrill's total number of brokers inching up by 4 to 14,416 from
the first quarter.
The global wealth unit's pretax profit margin was unchanged from
the first quarter at 26%, and up from 23% in the year ago
period.
Long-term asset-management flows, which include new advisory
money, were positive after a negative turn in the first quarter
ended 26 consecutive quarters of positive growth. The wealth unit
reported inflows of $10.06 billion from long-term assets under
management, compared with $8.59 billion of inflows in the second
quarter a year earlier.
Write to Anna Prior at anna.prior@wsj.com
(END) Dow Jones Newswires
July 18, 2016 11:46 ET (15:46 GMT)
Copyright (c) 2016 Dow Jones & Company, Inc.
Bank of America (NYSE:BAC)
Historical Stock Chart
From Feb 2024 to Mar 2024
Bank of America (NYSE:BAC)
Historical Stock Chart
From Mar 2023 to Mar 2024