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Merrill Lynch Mario Tama/Getty Images News/Getty Images

Merrill Lynch Revenues Down 10% in Second Quarter

Wells Fargo Securities senior bank analyst Mike Mayo called the performance 'worst-in-class wealth management.'

While Merrill Lynch managed to grow client balances, assets and advisor head count in the second quarter, the Bank of America wealth unit said revenues fell 10% year over year to $3.6 billion. Merrill officials attributed the performance to lower net interest income and transactional revenue.

In an analyst note, Wells Fargo Securities senior bank analyst Mike Mayo called the performance “worst-in-class wealth management.”

Comparatively, Morgan Stanley’s wealth unit posted $4.6 billion in revenue for the quarter, up 16% sequentially, while struggling Wells Fargo reported $3.7 billion in revenues for the period, down only 1% from the first quarter.

That said, the Thundering Herd managed to boost client balances by 11% sequentially to $2.4 trillion, while assets under management rose to $941 billion during the quarter, up 12% sequentially and 1% from a year ago.

Head count at the wealth management unit, which includes Merrill’s high-net-worth business and Bank of America’s ultra-high-net-worth private client business, rose for the second straight quarter to 19,851, 2% higher than a year ago.

Merrill’s Thundering Herd totaled 17,888, up 2% year over year and 242 sequentially, but this figure also includes lesser-trained financial associates. Company officials said that Merrill’s competitor attrition rate was only 2.4% on an annualized basis for the quarter.

Productivity per advisor was at $1.38 million among experienced ones and $1.07 million across all of its advisors, down 1% year over year.

Wealth management officials touted net new household acquisitions of 6,000 for the quarter; in previous years, the firm has averaged about 5,700 net new accounts on an annual basis.

Also, in the wake of the racial unrest sparked by the murder of Minneapolis resident George Floyd in June, which generated calls for greater attention to diversity and inclusion from the financial advisor community, Merrill revealed diversity and inclusion statistics at the company for the first time Thursday.

Merrill’s senior leadership team, which includes COO Kirstin Hill, who was promoted in January and was one of’s Ten to Watch in 2020, is 50% diverse, meaning half of the team is either made up of females or persons of color.

“We are trying to set an example from the top,” the firm said.

Meanwhile, over the past 18 months, 54% of Merrill’s advisor hires were women or people of color, up from 39% in 2017, when Merrill first set “aggressive goals” to promote diversity.

Also since 2017, Merrill has incented its market executives, divisional executives and senior leadership team to increase diversity by tying their annual reviews to diversity performance metrics.

Overall, Bank of America reported $3.5 billion in earnings, or 37 cents per share, which beat analyst consensus expectations by 9 cents per share, led by a very strong investment banking performance.

Wells Fargo’s Mayo maintained his overweight rating on the company. Future results, he said, “should benefit from rates, revenues, regulation and risk.”

Goldman Sachs analysts Richard Ramsden and James Yaro also maintained a Buy rating on the firm.

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