Reports
Bank Of America's Wealth Arm Prospers; AuM Rises; Parent Reaches AIG Settlement

Bank of America produced a robust set of results across its wealth management business for the second quarter of this year.
Bank of America’s global wealth and investment management arm
today reported record revenue in the second quarter of this year
of $4.6 billion, up from $4.499 billion in the same period a year
ago, and up from $4.547 billion three months earlier.
In its results statement, Bank of America
said net income at the GWIM division stood at $724 million, a
fall from $759 million a year earlier. Total assets under
management were $878.7 billion, up from $841.8 billion at the end
of March and up from $743.6 billion a year earlier.
This division logged a pre-tax margin of 25.1 per cent, which is
the sixth consecutive quarter where the margin has been 25 per
cent or over.
There was a $8 million provision for credit losses in the latest
quarter, narrower than the $15 million figure a year earlier.
Asset management fees were $1.95 billion, up 15 per cent, the
US-listed banking group said.
Over the past year, BoA has spun off its non-US wealth management
arm to Switzerland’s Julius Baer and the Zurich-listed bank has
been in the process of switching over client accounts in recent
months.
Second-quarter long-term assets under management flows of $11.9
billion were the 20th consecutive quarter of positive flows, the
bank said.
Merrill Lynch Revenue increased by $49 million to $3.8 billion,
due to higher fee-based revenue from the markets and flows.
Results are 1.3 per cent higher than prior year and 7 per cent
higher than prior quarter. The number of financial advisors rose
by 120 for the quarter; current headcount is 13,845 at that part
of the Merrill Lynch business. Financial advisor productivity
stood at $1.34 million per experienced advisor, a 7 per cent rise
over the prior quarter; total FA productivity stood at $1.06
million, BoA said.
Group results
Group results fell sharply, however. For the banking group as a
whole, BoA reported net income of $2.3 billion, or $0.19 per
diluted share, for the second quarter of 2014, compared to net
income of $4.0 billion, or $0.32 per diluted share, in the
year-ago period. Revenue, net of interest expense, on an FTE
basis declined 4 percent from the second quarter of 2013 to $22.0
billion.
"The economy continues to strengthen, and our customers and
clients are doing more business with us," chief executive Brian
Moynihan said.
"Among other positive indicators, consumers are spending more,
brokerage assets are up by double digits and our corporate
clients are increasingly turning to us to help finance business
expansion and merger activity. We are well positioned for further
progress,” he added.
Shares in BoA were down 2.25 per cent in mid-morning New York
trade. AIG settlement
On July 15, BoA carried out a “definitive settlement agreement”
with AIG, the insurance and financial service firm, to resolve
all outstanding residential mortgage-backed securities litigation
between the parties. Under the terms of the settlement, AIG will
file notices of dismissal in its securities lawsuits against Bank
of America and its affiliates pending in California and New York
federal courts. Also, AIG has agreed to withdraw its objection to
the Bank of New York Mellon private-label securities
settlement.
The AIG settlement amount of $650 million was covered by
litigation reserves as of June 30. BoA said it has resolved about
95 per cent of the unpaid principal balance of all RMBS as to
which RMBS securities litigation has been filed or threatened for
all Bank of America-related entities.
In addition, the parties agreed to settle three actions brought
by BoA seeking to collect mortgage insurance proceeds due from
AIG’s United Guaranty mortgage insurance subsidiaries on legacy
Bank of America originated and serviced loans.
US Trust
Commenting its US Trust arm, BoA said second-quarter revenue was
$783 million, the highest quarter since the merger of that
firm. Q2 asset management fees were $413 million, up 9 per cent
from the same quarter last year, and a record level. The firm
said there had been a 100 per cent retention of top-tier private
client advisors during the first half of this year..
UST client balances ended the quarter at $383 billion, up $29
billion higher than Q2 2013.