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Fee-Business Bolsters Wells Fargo

Fee-Business Bolsters Wells Fargo

Wells Fargo said Friday that it posted top-line growth in its advisory business by 1 percent during the third quarter, generating $3.3 billion in revenues for its brokerage, wealth management and retirement unit. That's up 9 percent from the previous year, bolstered, the bank said, by strong growth in is asset-based fee business and net interest income, even as brokerage transaction revenue fell.

Net income for for the business unit grew 4 percent to $450 million from the prior quarter's net income of $434 million and 33% from last year's $338 million. 

The gain comes despite the fact that non-interest expenses in the division increased $162 million to $2.6 billion, thanks mostly to an increase in commissions. The bank also reported it increased its cross-selling ratio in the business unit, from 10.27 units per household a year ago to 10.41 units in the most recent quarter.

Wells Fargo's wealth management programs—its fee-based advice and estate-planning businesses—pulled in $6 billion more in assets this quarter, a 3 percent boost, to $209 billion. Client assets grew 5 percent from last year, to $209 billion.

Headcount within Wells Fargo Advisors’ remained fairly flat as well. The brokerage arm added 17 advisors in the third quarter, up from the 15,268 advisors reported earlier this year. But the number of employees overall rose about 3,600, or 1 percent, to 270,600, Sloan said during the conference call Friday.

The brokerage, wealth management and retirement business remains a vital income generator for Wells Fargo. The brokerage advisory services, commissions and other fees generated 22 percent of Wells Fargo’s non-interest income in the third quarter. The division also makes up 16.1 percent of Wells Fargo’s overall $20.5 billion reported revenue this quarter, up from 15.3 percent last quarter.

Managed account assets also saw an increase, up 6 percent to a record $350 million from last quarter, driven by strong markets, according to Wells CFO Tim Sloan.

Overall, Wells said revenues for the company fell from $21.2 billion to $20.5 billion in the third quarter. But the bank's net income hit record highs of $5.6 billion in its overall business this quarter, up 13 percent.

Wells said that transaction activity was seasonally lower, which led to the slowdown. Retail brokerage client assets remained around $1.3 trillion, a three percent increase since last quarter. The division also experienced higher expenses related to regulatory environment and compliance activities, said Chief Financial Officer Tim Sloan.

Wells, along with JPMorgan Chase & Co, were the first major Wall Street firms to announce quarterly results. Bank of America and Morgan Stanley are set to release their earnings next week, while UBS will wait until the end of the month. 

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