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Summary Of Results In Global Wealth Management, Private Banking

Tom Burroughes, Group Editor, 3 June 2014

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Here is a summary of third-quarter/interim results for private banks, and the wealth management arms of large banks around the world.

Here is a summary of third-quarter/interim results for private banks, and the wealth management arms of large banks around the world. Further results will be added in the coming days. Not all the results are strictly comparable between stand-alone private banks, for example, and those institutions that are contained within a larger group. (This is significant when looking at cost/income ratios, for example.) Data may also be revised or re-stated. Some firms do not disclose their private banking performance on a quarterly basis. Not all results are comparable in terms of financial calendars, as is the case for the Canadian banks mentioned here.

Bank of America Merrill Lynch
Net income at the Global Wealth & Investment Management unit was $729 million at end-March 2014, down from $777 million in the final quarter of 2013 but up slightly from $721 million a year ago. Revenue rose 3 per cent from the year-ago quarter to what the bank said was a “record” $4.5 billion, driven by higher non-interest income related to improved market valuation and long-term AuM flows. Assets under management, meanwhile, totalled $841.8 billion, up on the previous quarter and year-on-year from $821.4 billion and $745.3 billion respectively, the latter reflecting an increase of 13 per cent.  Total client balances were $2.4 trillion, up 7 per cent from $2.2 trillion a year ago. (Total client balances are defined as AuM, client brokerage assets, assets in custody, client deposits and loans.)

JP Morgan
The firm’s private banking arm logged revenue of $1.5 billion, up 4 per cent compared with the first quarter of 2013. Revenue from institutional was $500 million, down 12 per cent, while retail logged $769 million, up 20 per cent.

Net income from asset management operations was $441 million, a decrease of $46 million, or 9 per cent, from a year ago. This reflects higher non-interest expence, largely offset by higher net revenue.

Client assets totalled $2.4 trillion across the whole business, up 10 per cent on the prior year, while AuM rose by 11 per cent to $1.6 trillion off the back of higher market levels and net inflows to long-term products.

Wells Fargo
Net income at the wealth, brokerage and retirement division jumped 41 per cent from the first quarter of 2013, to reach $475 million at end-March 2014. However, net income was down by 3 per cent from the last quarter of 2013, although revenue rose 8 per cent during the year, driven by growth in asset-based fees and higher net interest income. Revenue of $3.5 billion inched up 1 per cent from the fourth quarter of 2013, as higher asset-based fees were largely offset by lower gains on deferred compensation plan investments (offset in compensation expense).

On the retail brokerage side, client assets of $1.4 trillion were up 8 per cent year-on-year, while managed account assets increased $63 billion, or 19 per cent, from a year ago. Wealth management client assets, meanwhile, rose 6 per cent during the year to $217 billion and IRA assets increased 9 per cent to $344 billion.

Morgan Stanley
Morgan Stanley Wealth Management reported pre-tax income of $691 million for the first quarter of 2014, up from $597 million a year ago but down from $709 million in the previous quarter. Net revenues for the first quarter of 2014 were $3.6 billion, up slightly from $3.5 billion a year ago but again down slightly quarter-on-quarter (Q4 2013: $3.7 billion). Asset management fee revenues of $2.0 billion inched up from $1.9 billion a year ago, which the firm said primarily reflected a rise in fee-based assets and positive flows.

The firm logged an increase in wealth management representatives totalling 16,426, up from 16,284 at end-March 2013. Average annualized revenue per representative of $881,000 and total client assets per representative of $118 million increased 4 per cent and 7 per cent, respectively, compared to a year ago. Since the second quarter of 2013, net income no longer includes a non-controlling interest allocation to Citi, following the completed acquisition of the wealth management joint venture. The prior-year quarter included a non-controlling interest allocation to Citi of $121 million.

BNY Mellon
Assets under management rose 14 per cent year-on-year to a “record” $1.62 trillion at March 31, 2014, and rose by 2 per cent sequentially. Long-term AuM inflows totaled $21 billion, driven by the continued strong flows of liability-driven investments. Short-term outflows totalled $7 billion for the first quarter of 2014.

Assets under custody and/or administration, meanwhile, totalled $27.9 trillion at March 31, 2014, an increase of 6 per cent compared with the prior year and 1 per cent sequentially - primarily driven by higher market values. Investment management and performance fees were $843 million at end-March 2014, up 3 per cent year-over-year but down 7 per cent sequentially.

Northern Trust
Northern Trust has reported first quarter net income of $181.4 million, up 11 per cent from $164.0 million a year ago and up 7 per cent from $169.7 million in the prior quarter. Revenue of $1.04 billion was up $64.1 million, or 7 per cent, from $976.4 million in the prior-year quarter and down slightly from $1.05 billion in the prior quarter.

Return on average common equity was 9.3 per cent in Q1 2014, compared to 8.8 per cent a year ago and 8.7 per cent in the prior quarter.

Trust, investment and other servicing fees in wealth management totaled $300.3 million in the first quarter, increasing $18.3 million, or 6 per cent, from $282.0 million in Q1 2014.

Northern Trust attributed the increased fees to higher equity markets and new business, partially offset by higher waived fees in money market mutual funds and the impact of fee reductions in certain mutual funds. Compared to the final quarter of 2013, such fees are down 1 per cent from $302.7 million.

At end-March 2014, assets under management stood at $915.4 billion, up 3 per cent on the previous quarter and up 13 per cent year on year. Total wealth management assets were $217.2 billion, down 2 per cent from the final quarter of 2013 but up 5 per cent year-on-year.

Royal Bank of Canada
Wealth management net income was $278 million at end-April 2014, up $56 million or 25 per cent compared to last year. The surge in wealth management net income reflects higher average fee-based client assets from capital appreciation and strong net sales, along with positive operating leverage. Compared to the prior quarter, net income was up $43 million or 18 per cent, mainly due to higher average fee-based client assets. Within the US & International segment, revenue was $553 million, up 2.6 per cent from the $539 million logged at the end of this year’s first quarter and up from $545 million a year ago.

Canadian Imperial Bank of Commerce
Its wealth management arm- logged net income of $117 million for the second quarter, up $26 million or 29 per cent from the same period a year ago. Net income at the unit for the six months ended April 30, 2014, was $231 million, up $51 million from the same period in 2013, which the New York- and Toronto-listed firm said was primarily due to higher revenue and partially offset by higher non-interest expenses.

Wealth management revenue of $548 million was up 24 per cent compared with Q2 2013 and up 9 per cent from the prior quarter, due to a number of factors: higher client assets under management driven by market appreciation and net sales of long-term mutual funds; higher fee-based and commission revenue; the acquisition of US-based Atlantic Trust; and higher contribution from the firm's stake in American Century Investments.

Asset management revenue at the business, meanwhile, was up $28 million from the same quarter last year and up $9 million from the prior quarter - primarily due to higher client AuM as well as higher contribution from its equity-accounted investment in ACI. Private wealth management revenue was up $47 million from the same quarter last year, and up $29 million from the prior quarter, mainly due to the acquisition of Atlantic Trust on December 31, 2013, and higher AuM spurred by client balance growth.

Goldman Sachs
The firm reported net revenues of $9.33 billion for the first quarter ended March 31, 2014, up 6 per cent from $8.78 billion at end-December 2013 but down 8 per cent from $10.09 billion a year ago. Net earnings were $2.03 billion for the first quarter ended March 31, 2014, down 13 per cent from $2.33 billion on the previous quarter and down 10 per cent year-on-year.

Net revenues in investment management were $1.57 billion for the first quarter of 2014, 20 per cent higher than the first quarter of 2013 but 2 per cent lower than the fourth quarter of 2013. During the quarter, total assets under supervision increased $41 billion to reach $1.08 trillion, while long-term assets under supervision rose $54 billion, including net inflows of $40 billion - primarily in fixed income assets.

Toronto Dominion
In the bank’s “second quarter” ending April 30, it said reported diluted earnings per share were C$1.04, compared with C$0.89. Adjusted diluted earnings per share were C$1.09, compared with C$0.95; reported net income was C$1.988 billion, compared with C$1.717 billion.

Assets under administration increased by C$14 billion, or 5 per cent, compared with the prior quarter, it said. Assets under management increased C$8 billion, or 4 per cent, compared with the prior quarter. These increases were mainly driven by market appreciation and growth in new client assets for the period, it said.

Europe
UBS

Pre-tax operating profits at the wealth management arm of UBS rose in the first quarter of 2014; it also announced plans to change its legal structure at home and abroad to deal with regulatory developments in its domestic and overseas markets.
In wealth management, it set a net new money growth rate of 3 per cent to five per cent; a gross margin of 95 to 105 basis points, and an adjusted cost/income ratio of 55 to 65 per cent from 2015 (it remains 60-70 per cent for this year).

In the wealth management Americas business, the net new money growth rate target is 2-4 per cent; gross margin is 75-85 per cent bps, and the adjusted cost/income ratio is 75-85 per cent from 2015 (remains 80-90 per cent for 2014). The firm said it also plans SFr2.1 billion in net cost cuts versus the 2013 financial year.

In the wealth management segment, pre-tax operating profit was SFr619 million, 31 per cent higher than the final three months of 2013; in the Americas wealth business, pre-tax operating profit rose 5 per cent to SFr242 million. Pre-tax adjusted profit was SFr659 million. Gains were driven by higher operating income and lower costs; transaction-based income rose, driven by more client activity, particularly in Asia. In Americas, the pre-tax adjusted profit was SFr284 million and the bank experienced net new money growth rate of 0.9 per cent, with improved performance of experienced financial advisors being offset by outflows from financial advisor attrition. There was a net new money inflow at the wealth business of SFr10.9 billion, equating to a net new money growth rate of 4.9 per cent, at the upper end of the firm’s target range. The Americas wealth business logged net new money of SFr2.1 billion.

Credit Suisse
The bank said private banking and wealth management pre-tax income rose 15 per cent year-on-year to SFr1.012 billion ($1.149 billion), while net revenues slipped 1.0 per cent to SFr3.24 billion in the same period. Total operating expenses at this segment of the bank fell 7 per cent to SFr2.195 billion; provision for credit losses rose 18 per cent to SFr33 million.

Net revenues were stable overall because higher transaction- and performance-based revenues and higher recurring commissions and fees were counterbalanced by lower net interest income and lower revenues in other areas. This segment of the bank had a cost/efficiency ratio of 67.6 per cent in the first quarter, compared with 67 per cent at the end of December 2013.

Julius Baer
Total assets under management stood at SFr264 billion ($296.9 billion), up 4 per cent from the end of last year. The AuM figure includes around SFr53 billion of Merrill Lynch IWM business, which the bank is in the final phase of transferring. Of that sum, SFr42 billion has been booked onto Julius Baer platforms and paid for.

Total client assets rose 3 per cent to SFr359 billion. The increase in group AuM was bolstered by the inclusion of SFr6 billion from Brazilian subsidiary GPS, which was consolidated for the first time following the increase in ownership from 30 per cent to 80 per cent in March 2014. Other drivers were continued net inflows and a positive market performance, partly offset by a negative currency impact due to the appreciation of the Swiss franc against a number of leading currencies, especially the US dollar. Net inflows were, on an annualized basis, within the 4-6 per cent medium-term range, with continued strong contributions from the growth markets and the local business in Germany, it said.

The gross margin improved to 95 bps, up 4 bps from the second half of 2013. Excluding the Merrill Lynch transfers, the extrapolated Julius Baer “stand-alone” gross margin was approximately 98 bps, up from approximately 96 bps in the second half of 2013, supported by an improvement in client transaction activity in all regions. Julius Baer’s cost/income ratio – a closely-watched measure of a firm’s margins - was slightly above the 73.3 per cent realized in the second half of 2013.

Deutsche Bank
Deutsche Asset & Wealth Management’s income before income taxes fell by 23 per cent to €169 million, reflecting a 14 per cent decline in revenues from lower non-recurring fund management revenues and higher cost-to-achieve. For the bank as a whole, its first-quarter group net revenues were €8.4 billion, down 11 per cent from the prior year while noninterest expenses fell by 2 per cent to €6.5 billion.

BNP Paribas
The investment solutions arm said assets under management fell only slightly – 0.2 per cent at the end of March this from a year earlier, at €874 billion ($1.21 billion). AuM rose, however, by 2.4 per cent, from the end of last year, boosted by a €8.9 billion gain driven by favourable equity and interest rate developments. Inflows of €.87 billion also drove AuM gains. As at 31 March, Investment Solutions’ assets under management broke down as follows: Asset Management: €376 billion; Wealth Management: €295 billion; Insurance: €185 billion; and Real Estate Services: €18 billion.

Societe Generale
The bank logged a 5 per cent year-on-year rise in revenues in this segment to €207 million ($288 million). Gross margin on private banking stood at 107 basis points. At the end of March, the private bank held €114 billion of assets under management, buoyed by a first-quarter inflow of €1.2 billion, particularly in France and the UK. For the banking group as a whole it logged a €525 million write-down connected to activities in Russia.

ABN AMRO
It reported a profit in its private banking arm of €56 million ($76.8 million) for the first quarter, up 60 per cent from €35 million for the same period last year, due to an improved operating result and low impairments. Net interest income, at €159 million, rose 18 per cent compared with end of the last quarter, mainly due to improved margins and higher volumes on savings in the Netherlands. The bank said that assets under management in private banking grew 1.3 per cent to €170.6 billion, up from €169.3 billion at the end of the last quarter, mainly due to better market performance.

KBL

KBL European Private Bankers, or KBL epb, the Luxembourg-headquartered parent of UK-based Brown Shipley that has been restructuring its business after suffering a €249.9 million ($343.9 million) loss in 2012, swung back into a net profit for 2013 of €84.5 million. Net banking income rose sharply year-on-year to €540.6 million last year, from €393.5 million a year earlier. The pre-tax profit was €111.2 million, swinging back from the loss of €243.8 million in 2012.

HSBC
The bank said global private banking logged a pre-tax profit of $201 million in the first three months of 2014, bouncing back from a loss in the same period last year of $125 million. Pre-tax profit in the region amounted to $449 million across all business lines, up from $140 million a year ago. In Asia, its biggest region by size of business, pre-tax profit was $3.764 billion, down from $5.514 billion a year before.

Across all divisions and regions of the bank, pre-tax profit in Q1 2014 was $6.785 billion, down by 20 per cent from $8.434 billion a year earlier. There were declines in some business lines such as global banking and markets over the 12-month period.

Barclays
It said its wealth and investment arm logged a 15 per cent year-on-year fall in pre-tax profit to £51 million ($86.2 million) in the first three months of 2014, affected by the cost of its Transform programme. When that process is stripped out, pre-tax profits rose 22 per cent. Total income fell 4 per cent year-on-year to £451 million, mainly caused by adverse currency movements.

Client assets fell to £198.3 billion, affected by a cut in institutional deposits; loans and advances to clients increased 2 per cent to £23.5 billion. Excluding £22 million of Transform investment costs, operating expenses decreased 9 per cent to £363 million; the cost/income ratio narrowed by five percentage points to 80 per cent compared with a year earlier. Return on equity was 8.1 per cent, reflecting an improvement from Q1 2013.

Lloyds
The partly state-owned bank reported 22 per cent year-on-year rise in underlying profit for the first three months of 2014, at £1.8 billion ($3.04 billion). On a statutory basis, however, pre-tax profit was £1.369 billion, a fall from £2.04 billion in the same quarter of 2013. Net interest income rose 10 per cent from a year ago, driven by margin improvement of 36 basis points to 2.32 per cent. Other income, excluding the St James's Place wealth management business which has been sold, fell by 7 per cent given disposals and a challenging environment.

Royal Bank of Scotland
The wealth division, which includes Coutts, logged a pre-impairment profit of £77 million (around $130 million) in the first three months of 2014, up from £61 million a year ago and £70 million in the previous quarter. Operating profit in the wealth segment was £78 million, up from £56 million a year before; its net interest margin was 3.72 per cent, up from 3.55 per cent. A total of 4,500 people worked in the wealth division at the end of March this year, a fall from 4,900 a year earlier. The wealth division’s cost-income ratio fell to 72 per cent at the end of March this year from 75 per cent at the end of December and 78 per cent from a year ago; its return on equity was 16.9 per cent, up from 12.1 per cent a year before.

Total assets under management, excluding deposits, were £28.5 billion at end-March, a fall of 4 per cent from the end of last year and down 7 per cent 12 months earlier. Customer deposits were £36.6 billion, down 2 per cent from the end of March.

Standard Chartered
The firm said its consumer banking division, which includes wealth management, reported a “mid-single digit” rate of decline in income in the first quarter of 2014. The bank, which earns the bulk of its income outside the UK in regions such as Asia, gave few numbers in its interim statement.

“Wealth management income, although down by a low single digit percentage, is ahead of the run rate seen in the second half of 2013 following improved investor sentiment, with a particularly strong performance in Hong Kong,” the bank said. “Consumer banking income was down by a mid single digit rate on the comparable period of 2013 impacted by continued selective de-risking of the book and further management actions in Korea, as previously guided," it added.

Asia-Pacific
DBS Group
The Singapore-headquartered firm, which earlier this year bought the Asia private bank of Societe Generale, today logged first-quarter net profit of S$1.03 billion ($812 million), a 9 per cent year-on-year rise and a rise of 29 per cent from the previous three months. The bank said the results marked the first time that quarterly earnings crossed the S$1 billion mark. Including one-time items, net profit was S$1.23 billion.
The statement today gave few details on specific performances within the DBS wealth management arm.

Oversea-Chinese Banking Corporation
Net profit after tax was S$899 million for the first quarter of 2014, an increase of 29 per cent from S$696 million a year ago. Sustained momentum across all customer-related businesses contributed to record total income, which rose 19 per cent to S$1.89 billion. Costs were also well-managed, with operating expenses rising 5 per cent year-on-year to S$706 million. Fee and commission income grew 12 per cent to a record S$353 million from S$316 million in 1Q13, attributed to increased contributions from wealth management, loan-related and trade-related activities.

DBS said its overall income from wealth management activities (comprising income from insurance, private banking, asset management, stockbroking and sales of other wealth management products) rose to a quarterly record of S$572 million, a 10 per cent increase from S$520 million of the previous year. As a share of the Group’s total income, income from wealth management activities contributed 30 per cent.
OCBC’s private banking business continued to record steady growth, reporting an 11 per cent increase in assets under management to US$49 billion (S$62 billion) as at 31 March 2014, up from US$44 billion (S$55 billion) a year ago.

ANZ
Australia and New Zealand Bank posted an 11 per cent rise in its global wealth division for the half year to 31 March 2014, complementing a 15 per cent increase in statutory profit to A$3.4 billion ($3.15 billion). The global wealth arm saw profit grow 11 per cent and operating income rise 8 per cent in the period, with expenses also up 7 per cent.

Underlying performance was driven by growth in funds under management and inforce insurance premiums, as well as an improved claims and lapse experience, with retail lapse rates in the country declining a further 120 bps in the year.

Macquarie
The bank said net profit $A764 million, up 52 per cent on 1H14 and up 56 per cent on 2H13; AuM increased $A80 billion or 23 per cent since 31 March last year, largely due to the favourable impact from the depreciation of the Australian dollar, acquisitions, market movements and positive fund flows.

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