Wells Fargo earnings down in 1Q — but advisory biz sees big jump in profit

Wells Fargo may have seen a modest dip in income in the first quarter of the year, but its advisory biz saw a big jump in productivity -- and profit

Wells Fargo & Co. announced its first-quarter results today, reporting that earnings fell 1 percent to $2.37 billion as the bank dealt with continuing losses on consumer loans.
The bank said it believes it has “turned the corner” with its credit problems. “We believe quarterly provision expenses and quarterly total credit losses have peaked,” Wells Fargo chief credit and risk officer Mike Loughlin said in a statement.
Likewise, Wells’ advisory business appears to be on the upswing. The bank said it ended the first quarter with 15,119 registered representatives in its three channels, with a majority in its full-service Wells Fargo Advisors network. That compares with the 18,140 brokers Morgan Stanley Smith Barney LLC had worldwide as of March 31 and 15,005 at Bank of America Merrill Lynch.
Wells said its brokers oversaw $1.1 trillion of client assets, up 22% from the first quarter of 2009 and about 3% from the end of last year. About $208 billion resides in managed accounts, up 47% from a year earlier and 6% higher than three months earlier. Wells also said that institutional retirement plan assets grew 35% from a year ago and 4% from three months earlier to $232 billion, reflecting the market recovery and new business gains.
Wells characterized its brokerage recruitment effort in the quarter as “solid,” saying those who joined the firm were twice as productive as those who left.
The numbers bear this out. First-quarter revenue in the wealth, brokerage and retirement unit jumped 16% from a year ago and 10% from three months earlier to $2.9 billion on growing asset-based fees and stepped-up trading by clients. Moreover, the unit’s net income of $282 million was up 60% from a year earlier. Wealth, brokerage and retirement, which includes the former Wachovia Securities unit, is Wells’ smallest business segment. It booked $1.5 billion from its retail, or community banking, sector and $1.2 billion from wholesale banking.
The results at Wells Fargo seem to be mostly in line with the first-quarter performance of rivals.
Merrill Lynch earlier this week said its brokers oversaw $750.7 billion of assets under management at quarter’s end, up 7.6% from a year earlier and about flat with the end of 2009.
Morgan Stanley released data today showing that its tie-up with Smith Barney is starting to pay dividends. The company said its brokerage force maintains $1.6 trillion of client assets, up 3% from Dec. 31. About $413 billion of the total, or 26%, was in fee-based accounts and $1.2 trillion was in accounts with $1 million or more of assets. Morgan Stanley, which didn’t give a comparable asset number from a year ago, before its joint venture with Smith Barney, shuttered 25 branch-system offices in the U.S. in the first quarter, ending the period with 870 locations. Brokers in the branches attracted $5.8 billion of new assets during the quarter, reversing an outflow of $4.7 billion in the fourth quarter of 2009.
Morgan Stanley said its global wealth management group recorded a 9% pretax profit margin in the just-ended quarter. But James Gorman, chairman and chief executive of Morgan Stanley, said in a conference call today that the integration with Smith Barney “remains on track” and the firm continues to expect the pretax profit margin at its wealth management unit to top 20% by the end of 2011.