Uncertainty Pinches BofA's Wealth Arm

By Anna Prior 

Bank of America Corp.'s wealth arm boosted its second-quarter profit from a year earlier as a decline in expenses offset a slight drop in revenue.

The bank's global wealth and investment-management unit, which includes Merrill Lynch and private bank U.S Trust, increased profit 7.9% to $722 million from the year-earlier quarter. Unit revenue slipped 2.4% to $4.46 billion.

"Transactional revenue was down and continues to be impacted by market uncertainty, as well as the migration of brokerage to managed relationships," BofA Chief Financial Officer Paul Donofrio said on a conference call Monday.

Meanwhile, noninterest expense for the quarter decreased 5.7% to $3.29 billion from a year earlier, due in large part, said Mr. Donofrio, to the expiration of retention deals given to brokers when Bank of America purchased Merrill in 2009. The rest of the improvement in expenses came from "lower revenue related to incentives and other support costs," he added.

While these expired deals remove an expense from Merrill's books, they also mean those advisers can leave the firm without having to worry about repaying the remaining balances on those deals. This could make independent practice -- or big signing bonuses from rival firms -- more attractive to some advisers.

Still, Bank of America Chief Executive Brian Moynihan told analysts that attrition and retention have been relatively stable, with most of the broker attrition due to changes in the company's international operations. Last summer, Merrill trimmed its international effort to focus on 29 countries and curtailed brokers' ability to travel outside the U.S., while also raising the minimum account size overseas clients need to work with a Merrill broker.

Broker staffing was basically flat in the second quarter, with Merrill's total number of brokers inching up by 4 to 14,416 from the first quarter.

The global wealth unit's pretax profit margin was unchanged from the first quarter at 26%, and up from 23% in the year ago period.

Long-term asset-management flows, which include new advisory money, were positive after a negative turn in the first quarter ended 26 consecutive quarters of positive growth. The wealth unit reported inflows of $10.06 billion from long-term assets under management, compared with $8.59 billion of inflows in the second quarter a year earlier.

Write to Anna Prior at [e-mail]

(END) Dow Jones Newswires

July 18, 2016 11:46 ET (15:46 GMT)

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