US Bank Fourth Quarter Results Show Wealth Management Mostly In Good Health

Charles Paikert Family Wealth Report Editor New York 21 January 2010

US Bank Fourth Quarter Results Show Wealth Management Mostly In Good Health

If yesterday’s fourth quarter earnings news were any indication, 2010 looks very promising indeed for the wealth management and financial advisory businesses at a number of the US’ largest financial institutions, including Morgan Stanley, Bank of America, and Bank of New York Mellon.

Results, however, were not so promising at Wells Fargo, where figures for its wealth management arm showed a decline in 2009 profits from a year before.

At Morgan Stanley, fourth quarter numbers released yesterday showed an increase in revenue from the global wealth management group to $3.1 billion, compared with $1.3 billion a year ago. Profit from continuing operations stood at $231 million, compared with a loss of $51 million in the fourth quarter of last year.

Of course, the wealth management results have been affected by Morgan Stanley's joint venture deal with Citigroup's Smith Barney brokerage unit, finalised last March.. For the whole of 2009, pre-tax income from continuing operations fell to $559 million, versus $1.169 billion a year before.

The firm said results for the prior year included pre-tax income of $688 million related to the sale of Morgan Stanley Wealth Management, which was largely offset by write-downs and charges of $566 million related to Auction Rate Securities. Net revenues were $9.4 billion, up 53 percent from a year ago, excluding the gain from the sale asset management sale, primarily reflecting higher net revenues related to MSSB.

In general, the outlook appears more positive. What is more, brokerage disruption and bidding wars are coming to an end, Morgan Stanley CEO James Gorman said in a conference call, according to reports.

“We went through a frenetic period as an industry over the last couple of years in terms of deals and dislocation. I truly believe the industry is moving toward a more rational recruiting model,” Mr Gorman said in response to a question about turnover.

“The lower turnover is for real. For the next couple of years it should stay low and relatively stable,” he said.

That sentiment was echoed in Bank of America’s quarterly earnings report, also released yesterday.

Merrill Lynch, BoA’s brokerage arm, had 15,006 financial advisors at the end of the year, a slight increase from the 14,979 it had at the end of the third quarter.

The numbers confirmed comments by Sallie Krawcheck, president of Bank of America's Global Wealth and Investment Management division, last week when she said that attrition at Merrill Lynch in the fourth quarter of 2009 reached a record low.

“We've seen some [attrition] but not as much as we would have expected,” Ms Krawcheck said.

However, yesterday’s edition of “Blog On Wealth” noted that "the fourth quarter is almost always the lowest quarter for broker turnover.”

Net income from Merrill's global wealth and investment management rose to $1.3 billion in the quarter, up from $515 million a year earlier. Profit rose 9.5 per cent to $446 million from a year earlier. Fuller details on these results were reported elsewhere in this publication today.

Asset and wealth management revenue also surged at  Bank of New York Mellon. Asset and wealth management fees rose 5 percent to $736 million, due in part to the acquisition of Insight Investment Management, which closed during the quarter.

Total client assets for BNY Mellon Wealth Management were $154 billion on 31 December 2009, up $15 billion, or 11 per cent from the year before, and $3 billion, or 2 per cent, from 30 September, 2009.

At Wells Fargo, the West Coast-based banking group, its Wealth Brokerage and Retirement division saw profits fall by nearly half in the fourth quarter of 2009, hit by payments made to clients with money locked up in the auction-rate securities market. This unit's net income was $131 million for the quarter, down by 46 per cent from $244 million in the third quarter.

Additional reporting by Tom Burroughes in London. Family Wealth Report is the sister publication of WealthBriefing.



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