Updated at 4:30 pm ET
It was an ugly quarter for Bank of America, which reported an $8.8 billion loss in the second quarter. Mortgage settlement costs erased the bank’s profit, as a $14.5 billion net loss in consumer real estate services cancelled out $5.7 billion in net income from all other divisions.
But the bank’s global wealth and investment management business (GWIM) pulled in a solid quarter, primarily due to strong asset flows into long-term investment strategies. GWIM, which includes Merrill Lynch, U.S. Trust, retirement services and BofA Global Capital Management (formerly the Columbia cash management business), reported $506 million in net income for the quarter. That’s down 5 percent from the previous quarter on higher expenses from investment in financial advisors as well as higher credit costs. But it’s a tough comparison: In the first quarter, GWIM reported its strongest earnings  since Bank of America took over Merrill Lynch. And this quarter’s numbers are certainly an improvement over last year’s second quarter, when the division reported a net loss of $27 million.
Merrill Lynch contributed the bulk of revenues for GWIM, with $3.5 billion, up from $3.1 billion a year ago. Total GWIM revenues were $4.5 billion, up from $301 million in the year ago quarter. That huge jump in revenues was driven by record asset management fees, the firm said, which were buoyed by strong long-term asset inflows. Long-term client assets (any discretionary assets invested in a strategy lasting over a year) increased $4.5 billion for the quarter, while “liquidity assets” (those assets invested in strategies with a duration of less than one year) declined by $3.8 billion. Total client assets under management rose a net $764 million. Brokerage revenue fell for the quarter, meanwhile, on lower market activity.
GWIM added a net 546 financial advisors in the three months ended June 30, the eighth straight quarter of headcount gains, bringing total FAs to 16,241. That puts headcount “over 16,000 for the first time since the Merrill merger,” said Bruce Thompson, chief financial officer, on a conference call Tuesday morning. None of these 500 new FAs is a trainee, according to a Merrill spokeswoman. Average annualized revenue per financial advisor hit $912,000 for the first six months of the year, up from $826,000 in the year-ago period. Merrill advisors are among the most productive in the business.
Another 100 advisors were added to the trainee program and/or the firm’s online brokerage platform Merrill Edge, as “client facing professionals” totaled 20,876 at the end of the second quarter up from 20,273 in the first quarter. Registered Rep. reported in March that Merrill (as well as Wells Fargo and Edward Jones) was planning to ramp up hiring  in 2011.
Total client balances slipped 1 percent versus the 1st quarter to $2.2 trillion but were up from $2.0 trillion last year. This decline was driven by lower market valuations and seasonal outflows in deposits and brokerage. Merrill accounted for over half of those client assets, with $1.5 trillion. The GWIM division recorded $3.8 billion in liquidity asset outflows, and $4.5 billion in long-term asset inflows. Pre-tax margins fell to 17.5 percent from 18.9 percent in the previous quarter and 19.1 percent in the year-ago quarter.
Average loans for the division were up $1.3 billion versus the first quarter, making it the fifth consecutive quarter of loan growth.
In April, Sallie Krawcheck named John Thiel  to run Bank of America’s brokerage division. Thiel joined Merrill Lynch as an advisor in 1989. Six years later he joined the Global Private Client Advisory Division leadership team and later served as regional director in both Oakbrook and Northbrook, Ill. He also opened Merrill’s private wealth management business in the Pacific West Region as the regional managing director, headquartered in San Francisco.