Wealth divisions at Bank of America Merrill Lynch and Morgan Stanley mirrored that of several other large banks and wirehouses, with strong third-quarter earnings results.
Wealth performance was welcome news for Morgan Stanley, which, like several other firms, saw a decline in fixed-income trading, and for Merrill, following the U.S. Treasury’s disclosure of a $1.2 billion settlement with Bank of America over its anti-money laundering compliance supervision.
In some cases, the earnings mimicked those reported earlier by firms like JPMorgan Chase, Goldman Sachs and Wells Fargo, with equities and wealth revenues outstripping slowdowns in fixed-income business lines.
In Morgan Stanley’s case, wealth assets doubled analysts’ expectations with a record $232 billion in net new assets, a 57% jump quarter-over-quarter and a 187% increase from the prior year.
According to the firm, more than half of those assets are tied to initial public offering-related flows, including the blockbuster SpaceX IPO earlier this year. Chief Financial Officer Sharon Yeshaya expected the IPO market to continue (with Anthropic and OpenAI among the companies expected to go public in the coming months) and said the firm (and its wealth division) should “continue to benefit from it.”
Net revenue in Morgan Stanley’s wealth division was at $9.06 billion, a 10% year-over-year jump, with net interest income at $2.23 billion, up 12% from the prior year (though down 1% from the previous quarter).
Self-directed households and workplace participants were up 5% and 2% from the previous year, respectively. Additionally, the firm’s equities division also had a strong quarter, hitting $5.8 billion in revenue and exceeding expectations of $4.9 billion.
Bank of America Merrill Wealth’s earnings indicated $7.1 billion in revenue, a 13% year-over-year increase, and a 16% increase in asset management fees to $4.5 billion (Bank of America regularly groups together Merrill and Private Bank figures).
Additionally, the division boasted $1.5 billion in net income; at Merrill specifically, the firm gained 4,200 in net new household relationships in the third quarter with assets totaling more than $500,000. According to Merrill Co-Head Lindsay Hans, the year-over-year percentage increases for clients in the $1 million and $10 million-plus segments were in the double digits.
However, the firm’s bond trading fell by 17%, and equity trading was down by 10%, according to the bank. Additionally, the $1.2 billion fine levied by the U.S. government cut into the firm’s net income by 17 cents per share. According to Bloomberg, Bank of America affirmed that the costs of remediating money-laundering issues had already been factored into expenses.
During the bank earnings call, Bank of America CEO Brian Moynihan said the firm understood the “seriousness of compliance, noting that it “invested billions of dollars in technology and dedicated thousands of employees to combat financial crime. The team is far along with and committed to completing the work required to be addressed by the regulators.”
The earnings call came a day after the Treasury Department imposed a fine totaling more than $1.2 billion against Bank of America for violating anti-money laundering and sanctions laws.
The fines include a $1.2 billion penalty from the Treasury’s Financial Crimes Enforcement Network for the bank’s failure “to mitigate and report priority national security risks,” including Chinese money laundering networks and “illicit finance along the southwest border,” and a $750 million fine from the Office of the Comptroller of the Currency for the bank’s “deficient and ineffective (Bank Sercey Act/Anti-Money Laundering) compliance program. The fines were the third-largest and the biggest in the Treasury’s and the OCC’s history, respectively.
In a wealth-focused earnings call, Merrill Co-Head Eric Schimpf had little to add to Moynihan’s earlier statements, beyond saying he and Hans will “continue to deepen relationships, add clients and invest in our advisors.”
