BofA Wealth Profit Dips Almost 10 Percent

BofA Wealth Profit Dips Almost 10 Percent

Bank of America reported double-digit declines in profit for the fourth quarter and its wealth business was not shielded from the dip, posting an almost 10 percent drop in net income from the year prior.

The Charlotte-based bank reported a profit of $3.05 billion, or 25 cents a share, for the quarter, down 11 percent from the $3.43 billion, or 29 cents a share, in net income earned a year ago. Bank of America saw $18.73 billion in revenue (excluding accounting adjustments) for the fourth quarter, missing estimates of $20.9 billion by a wide margin, and down 13 percent from the $ 21.49 billion reported a year earlier.  The results were partially blamed on lower bond trading revenue and lower interest rates, as well as the sharply higher market volatility seen in the fourth quarter.

Chief Executive Officer Brian T. Moynihan said throughout 2014, the company continued to invest in the business, while reducing expenses and resolving the most significant litigation issues. During the webcast Thursday, Moynihan said “we've accomplished a lot,” adding he was confident that the investments created a “simplified and stronger company."

"Our task now is to continue to build on that foundation,” he said.

Yet after several quarters with record-high legal costs, the bank’s legal expenses fell to $393 million. Chief Financial Officer Bruce R. Thompson said Thursday during an earnings webcast that it was the lowest level of expenses since the merger with Merrill Lynch in 2009. 

Profits for Bank of America’s wealth business fared no better during the fourth quarter, with the Global Wealth and Investment Management unit reporting net income of $706 million, down $107 million, or 13 percent, from the third quarter and down 9.2 percent from the $788 million reported a year ago. The division’s revenues of $4.6 billion were also down 1 percent from the third quarter, but up by almost 3 percent from the end of 2013.

Within Merrill Lynch Wealth Management, client balance flows were up $22 billion from the end of 2014, reaching $49 billion in the fourth quarter. The unit reported client balances of over $2.03 trillion, an over 5 percent increase from the end of 2013. But non-interest expenses increased 5 percent to $3.4 billion, driven by higher revenue-related incentive compensation and support costs, the firm said.

Asset management fees hit a record $1.6 billion, up $19 percent over the prior year. Additionally, spokeswoman Susan McCabe said that as of December, 49 percent of Merrill advisors had half or more of their client assets under a fee-based relationship.

Merrill ended the year with a total of 14,085 financial advisors, up from the 14,000 advisors reported at the end of the third quarter. McCabe noted that the unit saw a net gain of  73 in experienced advisor headcount for the year, bringing in more than $12 billion in AUM.

“We continue to have historic low attrition rates,” she said noting that looking back from 2000 to 2008, Merrill Lynch’s best year in overall advisor attrition was 2007. Merrill reported 5.5 percent. Today attrition is less than 5 percent and attrition among top producers (those in the first and second quintile) is at 3 percent, down from the 4 percent reported in 2007.

Advisor productivity also hit record levels during the fourth quarter at $1.4 million per experienced advisor, a 3 percent increase from 2013.

 

Updated Jan. 15 at 2:30 p.m. to reflect a correction to the previously reported comparison net income earned by the GWIM division in the third quarter of 2014 and fourth quarter of 2013. We regret the error. 

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