Second-quarter results from Bank of America Merrill Lynch and Citigroup showed these US titans enjoyed slightly varying fortunes in private banking and wealth management, with BofA taking a slight dent from the sale of a business unit, while Citi's private bank logged an uptick in performance. (For Citigroup figures, scroll down the page).
The global wealth and investment management arm of Bank of America Merrill Lynch said that net income fell by $40 million to $356 million from a year earlier, driven by the tax-related effects of the sale of the former Columbia Management long-term asset management business, offset by higher investment and brokerage activity
The world’s largest wealth management firm by asset size said revenue at the wealth and investment management firm rose by $369 million from a year earlier to $4.3 billion. This represents the division’s highest quarterly revenue other than the fourth quarter of 2009, which included a $1.1 billion gain related to the company's equity investment in BlackRock.
Assets under management fell to $603.3 billion from $705.2 billion in June last year, the firm said in its statement. (Assets under management and total net client assets include the former Columbia Management long-term asset management business through the date of sale on 1 May, 2010).
“The increase was driven by higher investment and brokerage income, higher net interest income compared to the second quarter of 2009, and the pre-tax gain on the sale of Columbia Management's long-term asset management business,” it said in a statement.
The provision for credit losses decreased $117 million from a year ago to $121 million due to improvement in the consumer real estate portfolio.
Merrill Lynch Global Wealth Management net revenue increased $234 million from a year earlier due to higher investment and brokerage income driven by the impact of higher average equity market levels, increased AUM flows, and higher transactional brokerage activity, as well as higher net interest income.
US Trust, Bank of America Private Wealth Management, and Retirement and Philanthropic Services net revenue increased $29 million and $15 million, respectively, from a year ago due to improved net interest margin at US Trust and higher valuations in the equity markets in Retirement and Philanthropic Services, the statement continued.
Global Wealth and Investment Management also includes the results of BofA Global Capital Management.
Across the banking group as a whole, BofA reported second-quarter 2010 net income of $3.1 billion, compared to net income of $3.2 billion a year ago. After preferred dividends, earnings were $0.27 per diluted share, compared to $0.33 in the second quarter of 2009.
Results were driven by lower credit costs, which improved for the fourth straight quarter, and the sale of non-core assets as the company focused on strengthening key business lines and divesting assets that do not directly contribute to providing financial services to customers. These positives were partially offset by lower trading account profits, reduced mortgage banking income and increased costs associated with the UK payroll tax on certain year-end incentive payments.
Private banking revenues at Citigroup rose to $512 million in the second quarter from $481 million in the same period last year, it said in a statement today giving few other figures on this business segment.
The private bank of Citigroup, which focuses on ultra high net worth clients, has been on a hiring drive in North America, as this publication has reported, embarking on a large-scale move to add to its advisory headcount.
Meanwhile, the parent bank has shed some assets to rebuild its balance sheet after the financial turmoil. One key barometer of banking strength showed improvement: Citigroup’s Tier 1 Capital ratio was 12.0 per cent, up from 11.3 per cent in the prior quarter.
Meanwhile, the US bank said its second quarter net income stood at $2.7 billion or $0.09 per diluted share, on revenues of $22.1 billion. A year ago, the comparable net income figure was $4.3 billion, the firm said in a statement.