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Summary Of Banks', Wealth Managers' Financial Results - Q1, 2020

Editorial Staff, 28 July 2020


Here is a roundup of the largest firms's results as they apply to the world of wealth management. The results cover the main banking groups in Asia, North America, Europe, and certain other areas. These are for the first quarter of this year unless otherwise stated. Certain figures may be revised.

Here is a summary of the results from a range of the major banking groups - and some other financial actors - around the world. The results focus on the largest institutions which provide wealth management. Not all banks report on a calendar year schedule, and not all of the institutions are alike, so the results from standalone institutions such as Julius Baer should be viewed differently from wealth management results embedded within a larger institution. These results may be subsequently revised. As not all the banks reported on the same day, the exchange rate comparisons with the dollar have been taken out. We hope readers find it useful to see thse figures collated into one article. To comment, email tom.burroughes@wealthbriefing.com

Goldman Sachs
The firm reported that its net revenue for consumer and wealth management in the first quarter of this year rose by 21 per cent from a year ago to $1.49 billion, also rising by 6 per cent from the end of December last year. Net wealth management revenues rose by 18.1 per cent from a year ago, driven by “significantly” higher management and other fees, including the effect of the acquired United Capital wealth business. Net revenues in private banking and the lending business fell, however.

The US banking group reported net income for the first quarter 2020 of $2.5 billion, or $1.05 per diluted share, on revenues of $20.7 billion. This compared with net income of $4.7 billion, or $1.87 per diluted share, on revenues of $18.6 billion for the first quarter 2019. Revenues increased by 12 per cent from the prior-year period, primarily reflecting higher revenues in Fixed Income Markets and Equity Markets, and the benefit of mark-to-market gains on loan hedges in the corporate lending portfolio, all in the Institutional Clients Group. Net income declined by 46 per cent year-on-year from the prior-year period, driven by higher loan loss reserves.

Bank of America
The group’s wealth management division, covering private banking and other lines, logged net income of $866 million, down by $177 million, or 17 per cent, as solid client activity was more than offset by higher provision expense driven by a reserve build, primarily related to COVID-19 impact. The firm booked a drop in pre-tax income of $1.1 billion, down by 17 per cent, producing a pre-tax margin of 23 per cent. Revenue of $4.9 billion increased by 2 per cent, reflecting higher asset management and brokerage fees, partially offset by the impact of lower interest rates.

Brokerage revenue increased by 10 per cent on higher transactional activity. Non-interest costs rose by 5 per cent. Total client balances declined by 6 per cent to $2.7 trillion, driven by lower end-of-period market valuations. There were assets under management flows of $7.0 billion since Q4-19 and $26 billion since Q1-19.

JP Morgan
The US banking group’s net income fell by 69 per cent in the first quarter of 2020, as the bank built reserves and adjusted to the impact of the global COVID-19 pandemic. Net revenue fell by 3 per cent in Q1 from a year earlier, reaching $29.07 billion. Provision for credit losses skyrocketed (454 per cent) to $8.285 billion. Earnings per share, at 0.78 dollars, collapsed by 71 per cent in Q1 from a year before. Assets at the end of March this year reached $2.2 trillion, up by 7 per cent.

Wells Fargo
The group said that for the first three months of 2020 its net income sank to $650 million from $5.86 billion a year earlier, as a reserve build-up of $3.1 billion and $950 million impairment of securities linked to COVID-19 hit headline results. First-quarter revenue came in at $17.7 billion, falling from $21.6 billion a year before. Its results followed those of JP Morgan, which also reported that a reserve build to cope with the global pandemic had hit its figures.

Net interest income fell to $999 million on a year earlier to $11.3 billion; non-interest income fell to $3.9 billion from $6.4 billion. The bank said its Common Equity Tier 1 ratio of 10.7 per cent exceeded the regulatory 9 per cent minimum. The CET1 ratio is a standard international measure of a bank’s capital buffer.

Morgan Stanley
The firm reported a drop in its wealth business in first-quarter 2020 net revenues from a year earlier, with the figure sliding to $4.04 billion from $4.389 billion a year earlier. Net interest income fell by 21 per cent on a year earlier, to $896 million. Total costs fell to $2.982 billion from $3.201 billion compared with the previous year. Investment management AuM rose to $584 billion from $480 billion. Within wealth management, the figure stood at $1.144 trillion in AuM, versus $1.151 trillion a year before.

Wealth management produced a pre-tax margin of 26.1 per cent. Bank lending rose by 15 per cent; deposits rose to $55 billion from a year before. Across the whole of Morgan Stanley, net revenues fell to $9.5 billion in Q1 from $10.3 billion a year earlier.

BNY Mellon
The group said that net income applicable to common shareholders rose by 4 per cent year-on-year to $944 million in Q1 2020, but fell by 32 per cent on a year earlier. Investment services total revenue fell by 4 per cent; assets under management, which stood at $1.8 trillion at the end of March, fell by 2 per cent on a year earlier. Wealth management revenues, at $278 million, fell by 6 per cent year-on-year. 

Northern Trust 
The group reported first quarter net income per diluted common share of $1.55, compared with $1.48 in the first quarter of 2019 and $1.70 in the fourth quarter of 2019. Net income was $360.6 million, compared with $347.1 million in the prior-year quarter and $371.1 million in the prior quarter. Total revenue fell by 3 per cent year-on-year to $416.2 million. AuM fell by 4 per cent from end-March 2019 to $1.119 trillion at the end of March. Wealth management AuM stood at $862.6 billion, down by 6 per cent.

The world’s largest asset management group said that AuM stood at $6.47 trillion at the end of the first quarter of 2020, slipping from $6.515 trillion a year earlier. Total net flows decelerated sharply to $34.988 billion in Q1, from $64.7 billion a year earlier. Adjusted net income stood at $1.032 billion, slipping by 2 per cent year-on-year. Revenue rose by 11 per cent to $3.71 billion.

The firm said its first-quarter 2020 pre-tax profit stood at $2.0 billion, a 30 per cent rise on a year earlier, while net profit attributable to shareholders was $1.595 billion - a 40 per cent rise. It boosted risk-weighted assets by 10 per cent, or $27 billion, during the quarter, to $286 billion. Higher credit risk RWAs were mainly caused by new business, draws on existing credit facilities, a rise in more derivative exposures as market volatility surged, and more securities financing turnover.

Global wealth management operating income in GWM rose to $4.547 billion in Q1 from $4.0 billion a year ago. Invested assets stood at $3.236 trillion across all of UBS’s business lines, including its wealth arm. That compares with $3.607 trillion at the end of December last year. Net new money was $12 billion

Credit Suisse
It logged net profit for the quarter of SFr1.3 billion ($1.3 billion), a 75 per cent year-on-year increase, caused largely by a negative tax rate including improved interest deductibility. It put aside SFr568 million to cover loan losses, compared with SFr 81 million a year ago. Some of the results were affected by Credit Suisse's sale last year of the InvestLab business to Allfunds. Without the InvestLab sale, the group said that pre-tax income would have fallen by 11 per cent on the same period a year ago. The SFr268 million sale of its funds platform boosted revenues for the quarter by 7 per cent to SFr5.8 billion. Return on tangible equity stood at 13.1 per cent for the quarter, again boosted by the deal and a negative tax rate.

The international wealth management arm saw pre-tax income up by 3 per cent year-on-year to SFr537 million based on more client activity. Return on regulatory capital in the division stood at 34 per cent, but would have been down by 39 per cent to SFr 319 million, were it not for the Allfunds deal, with the hit largely coming from losses in asset management, the group said. Its APAC business reported a pre-tax income of SFr 252 million, up by 38 per cent year-on-year for Q1 2020. Discounting the InvestLab transfer, pre-tax income would have been up by 24 per cent, with revenues in the region up by 17 per cent year-on-year. The bank reported a "strong performance" in both its markets and the private banking business within wealth management.

Julius Baer
The firm said assets under management fell to SFr392 billion ($403.1 billion) at the end of April 2020, a year-to-date 8 per cent fall as a result of new money inflows being more than outweighed by the impact of virus-induced market declines. Another force pulling down AuM was an appreciation in the Swiss franc, particularly against the euro, Brazilian real, and British pound. The annualised net new money growth rate for the first four months of 2020 was slightly higher than 2 per cent, as solid inflows in Julius Baer’s wealth operations (particularly from clients domiciled in Europe) were partly offset by client deleveraging-driven outflows

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