Merrill Purchase Boosts Wealth Earnings At BoA, But Group Makes Loss

Tom Burroughes

16 October 2009

Bank of America, now the world’s biggest wealth manager after its takeover of Merrill Lynch, said the Merrill deal boosted net income at its wealth and investment management arm, producing a figure of $271 million in the third quarter of this year, surging from $80 million a year before.

The results contrasted with the US banking group’s overall net loss of $1.0 billion, compared with net income of $1.2 billion in the same quarter of 2008, the bank said in a statement.

The results came out shortly after it was revealed that the group’s chief executive, Kenneth Lewis, is giving up his salary and bonus for 2009 in the wake of what has been a difficult year for the bank. Mr has been criticised by regulators and investors for not disclosing losses and bonuses at Merrill Lynch before shareholders voted to approve the purchase of the world’s biggest broker last December.

Global wealth and investment management net income increase was driven by the addition of Merrill Lynch and a decline in support for certain cash funds. This was partially offset by higher credit costs, lower net interest income partly due to the transfer of certain client balances to the deposits and the home loans and insurance segments.

At Merrill Lynch Global Wealth Management, net income increased by 9 per cent year-on-year to $310 million as the addition of Merrill Lynch was partially offset by higher credit costs. Net revenue rose to $3.0 billion from $1.0 billion a year ago as investment and brokerage income increased mainly from the addition of Merrill Lynch, the statement said.

US Trust, Bank of America Private Wealth Management swung to a net loss of $52 million, however, as net revenue declined and credit costs rose mainly due to a single large commercial charge-off. Net revenue fell 11 per cent driven by lower equity market levels and reduced net interest income.

Columbia Management's net loss narrowed to $48 million compared with a net loss of $356 million a year earlier, driven by lower support for certain cash funds. As a result of actions taken during the quarter, Columbia's Prime Funds no longer have exposure to structured investment vehicles or other troubled assets and all capital support agreements have been terminated, the statement said.

Global Wealth and Investment Management was ranked No. 1 among US wealth managers with more than 25 percent of the nation's top 100 financial advisors, according to two surveys conducted by Barron's, the statement said.

Bank of America said its Tier 1 capital ratio rose to 12.46 per cent.