Profits were down last quarter at Merrill Lynch but the brokerage’s performance still helped to lift the fortunes of its new parent, Bank of America Corp. Advisor defections were flat from the end of 2009, but average production declined.
Merrill, which represents the bulk of Bank of America’s Global Wealth and Investment Management business, reported first quarter net income of $360 million on total revenue of $3.1 billion, compared to the year-earlier quarterly net income of $446 million on revenue of $3.3 billion.
Bank of America said the lower revenue was chiefly the result of Merrill deposits and loan balances migrating to other divisions within the bank. The bank itself reported first-quarter profit of $3.2 billion compared with a net loss of $194 million in the fourth quarter of 2009, and profit of $4.2 billion a year earlier. Net income for Global Wealth and Investment Management, which includes U.S. Trust and Columbia Asset Management, totaled $497 million, up 3 percent from the comparable quarter a year earlier. Today’s results provided the first year-over-year comparison for Merrill since Bank of America finished its controversial acquisition at the beginning of last year, a deal valued at $29 billion.
Merrill reported it had about 15,000 advisors in the first quarter, the same as in the preceding quarter and down about 5 percent from a year earlier. Advisor productivity last quarter was reported at $807 million, down about 3 percent from the preceding quarter and up less than 1 percent from a year earlier. Alois Pirker, research director at Aite Group in Boston, said the advisor figures likely don’t reflect the full complement of advisor staffing at Merrill, and the company leads productivity in the industry. Merrill’s assets under management were $296.2 billion last quarter, up 35 percent year over year amid sharp runup in the stock market, while the Global Wealth and Investment Management’s client brokerage assets of $1.3 trillion were up 16 percent.
Pirker says the jury’s still out on whether Merrill’s integration into Bank of America will be a success, although the apparent staunching of advisor defections is a stabilizing trend. Recent Aite Group research indicates that just 15 percent of Merrill advisors plan to stay put; another 20 percent indicate they are more likely than not to move on. The synergy that Bank of America had hoped for in the merger is starting to appear, the bank reports; about 60,000 lending and deposit products were sold to Merrill clients, and referrals between the global wealth division and the commercial and corporate businesses were up 56 percent from the previous quarter, showing that cross-selling is occurring. What’s less clear is how many retail bank customers are bringing investable assets to Merrill. Pirker says that’s a harder undertaking because Merrill clients are typically higher-net-worth than those at the retail bank. The next few quarters will be “critical” for the merger, he says.