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

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
APR 20, 2010
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.

Latest News

Wealth management industry is facing a looming retirement crisis, report warns
Wealth management industry is facing a looming retirement crisis, report warns

Despite technology adding capacity, an advisor shortage is predicted.

Just 30% of people are very confident in managing their finances right now
Just 30% of people are very confident in managing their finances right now

And there's a large gap between the fears they have and the action they take.

Stocks waver on tariff concerns, gold hits new record high
Stocks waver on tariff concerns, gold hits new record high

Cautious investors are also awaiting US inflation stats.

Will Asian economies give in to Trump demands?
Will Asian economies give in to Trump demands?

Threat of tariffs may leave some countries with no choice.

Musk wants to buy OpenAI, here's how Altman responded
Musk wants to buy OpenAI, here's how Altman responded

AI firm's leader has made a cheeky counter-offer in response to $97B bid.

SPONSORED Taylor Matthews on what's behind Farther's rapid growth

From 'no clients' to reshaping wealth management, Farther blends tech and trust to deliver family-office experience at scale.

SPONSORED Why wealth advisors should care about the future of federal tax policy

Blue Vault features expert strategies to harness for maximum client advantage.