Reports

Net Income Rises At Wealth, Investment Arm Of BoA/Merrill

Tom Burroughes Editor London 21 January 2010

Net Income Rises At Wealth, Investment Arm Of BoA/Merrill

The global wealth and investment management arm of Bank of America Merrill Lynch, now the world’s largest wealth firm, said its net income in 2009 rose to $2.5 billion from $1.43 billion a year before, as BoA’s earnings were lifted by its acquisition a year ago of Merrill Lynch.

Meanwhile, the parent banking empire’s net loss in the fourth quarter narrowed from a year ago. The loss narrowed to $194 million from a loss of $1.8 billion a year earlier. The firm reported full-year 2009 net income of $6.3 billion, compared with net income of $4.0 billion in 2008.

Year-on-year comparisons are complicated by the fact that BoA officially completed its purchase of Merrill Lynch at the start of last year. The takeover, which happened in the midst of the worst financial crisis to hit Wall Street since the 1930s, has been controversial, amid claims that BoA management did not fully inform shareholders of the scale of losses Merrill had had on its books. Among other developments, Kenneth Lewis, the bank's chief executive during the period of the takeover, has stepped down, replaced by Brian Moynihan.

However, the firms' merger has pushed the combined entity to the top of the rankings for wealth management, although this company is a predominantly domestic US firm, with UBS still arguably the world’s largest international wealth management business.

In the details of the results, BoA/Merrill said net revenue at the global wealth and investment management arm in 2009 more than doubled from 2008 to $18.1 billion, boosted by higher investment and brokerage service income from the addition of Merrill Lynch, a $1.1 billion gain related to the BlackRock equity investment and the lower level of support for certain cash funds.

The financial advisor network of more than 15,000 was up slightly from the third quarter as the retention rate stood at the highest level in recent years and the company increased hiring, training and development of new advisors, it said.

At Merrill Lynch Global Wealth Management, net income increased 22 per cent to $1.5 billion from a year earlier as the impact of lower residual net interest income, the migration of deposits and loan balances to the deposits and home loans and insurance businesses, and higher credit costs were more than offset by the addition of Merrill Lynch. At US Trust, Bank of America Private Wealth Management, net income declined to $174 million as net revenue fell and credit costs increased significantly, including the impact of a single large commercial charge-off in the third quarter.

The Columbia Management net loss narrowed to $7 million compared with a net loss of $469 million a year earlier, driven by a $917 million reduction in support provided to certain cash funds, partially offset by the impact of lower valuations in the equity markets, as well as net outflows in the cash complex. BoA has recently sold Columbia’s asset management business to rival US money manager Ameriprise.

Within the “All Other” category of BoA/Merrill’s wealth operations – a section covering an assortment of operations not included in its three main sections – net income was $478 million. Higher equity investment income and increased gains on the sale of debt securities were offset by $4.9 billion mark-to-market losses mainly related to certain Merrill Lynch structured notes as credit spreads improved, the statement said.

Among other changes during the past 12 months, Bank of America has agreed to sell First Republic Bank to a number of investors, including investment funds managed by Colony Capital and General Atlantic, led by First Republic's existing management. Both sales are expected to close in the second quarter of 2010.

BoA has also repaid the $45 billion of the US taxpayers' preferred stock investment in the company as part of the government’s Troubled Asset Relief Program.

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