Lending Boosts Bank of America’s Wealth Business to Record Revenue

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Bank of America
‘s

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wealth management unit, which includes Merrill Lynch, notched record revenue for the second quarter, lifted by a surge in net interest income.

The wealth unit benefited from higher interest rates and loan growth. Like its competitors, Bank of America’s Merrill Lynch has been striving to serve more of its clients’ lending needs, providing wealthy investors with mortgages, securities-based loans, and customzied loans.

The Bank of America Merrill Lynch logo

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Munshi Ahmed/Bloomberg

The bank’s wealth unit generated $5.4 billion in revenue for the second quarter, up 7% from the previous year, according to the company’s earnings report, Net interest income soared 33% year over year, reaching a record $1.8 billion. The wealth unit’s average deposits increased 9% to $364 billion, and average loans and leases grew 13% to $219 billion, the company said.

Andy Sieg, president of Merrill Lynch Wealth Management, says the company has been making a concerted effort to be a one-stop shop for clients’ every financial need, adding that lending specialists work alongside advisors on a local basis.

“We have over 1,000 banking and lending specialists who are part of BofA and work with advisors and clients,” Sieg said during a media call July 18. “They are the bridge between the Merrill Lynch wealth management business and Bank of America’s world-class capabilities.”

The surge in net interest income offset lower transaction and fee-based revenue. Total client balances for BofA’s wealth unit dropped 8% to $3.4 trillion, driven by lower market valuations, according to the company. The unit reported just $1 billion in net new client assets under management, compared with $12 billion for the same period last year.

Bank of America’s wealth management business is one of the largest in the nation. In addition to Merrill Lynch, it includes a digital advice platform and a private bank. Despite market volatility, Merrill Lynch advisors brought in approximately 4,500 net new client households during the quarter. That was down from the roughly 6,000 net new households advisors added during the same period last year.

Bank of America’s wealth unit counted 18,449 wealth advisors at the end of the quarter, down 122 from the previous quarter. The company does not break out advisor headcount for Merrill Lynch.

Wells Fargo

and

Morgan Stanley
,

both of which issued earnings reports last week, also reported surges in net interest income for their wealth management businesses.

Overall, Bank of America said it expects net interest income to increase by between $900 million and $1 billion during the third quarter from the second quarter, CFO Alastair Borthwick said during an analyst call on Monday. Companywide, total revenue rose 6% year over year to $22.7 billion. Profits dropped 32% to $6.2 billion due in part to higher provisions for credit losses.

CEO Brian Moynihan said in a statement that “solid client activity across our businesses, coupled with higher interest rates, drove strong net interest income growth and allowed us to perform well in a weakened capital markets environment.”

Write to Andrew Welsch at [email protected]

,

Credit: www.barrons.com /

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