Bank of America Corp. is continuing to invest in its wealth management division while reining in other lines of business to prepare for new Basel III capital requirements.
BofA posted a record quarterly loss of $8.83 billion this morning due in part to an $8.5 billion proposed settlement with a group of 20 institutional investors over the bank's production and sale of mortgage-backed securities. The bank set aside another $11.9 billion for expected future claims relating to its mortgage business. Without the mortgage-related charges, the bank would have earned $3.7 billion.
In expectation of the higher capital requirements of Basel III bank rules, BofA reduced its risk-weighted assets by nearly $41 billion in the quarter and plans to cut them by another $200 billion to $250 billion in the near future. “Our actions in the second quarter and our planned actions going forward give us comfort that we don't need to raise capital to comply with Basel III,” Mr. Moynihan said in an earnings conference call.
The wealth management division, at least for the time being, is being spared the knife. In fact, the bank is investing more in the business. BofA's Global Wealth & Investment Management division, which includes Merrill Lynch, had revenue of $4.49 billion in the quarter — down slightly from the first quarter but up more than 7% from the comparable quarter last year. Net income fell just over 5% to $506 million, due largely to higher adviser recruiting costs.
The firm added 546 financial advisers to the division during the second quarter, pushing total adviser count to 16,241 — the highest it's been since the merger of
Bank of America and Merrill Lynch. Most of the new hires will work on the Merrill Edge platform servicing self-directed investors. Total client balances at the firm fell 1% to just over $2.2 trillion and adviser productivity — not including Merrill Edge advisers — fell to $894,000 per adviser, from $931,000.
Wells Fargo & Co., the fourth-largest bank in the country, with the third-largest retail-brokerage force, posted record earnings of $3.95 billion in the second quarter. That was up 5% from the first quarter and 29% better than 2Q last year. Revenue increased just 0.3% for the quarter and was down nearly 5% compared with the comparable quarter in 2010. As is the case with most of the major banks, improving asset quality and the reversal of previously booked loan loss reserves helped the bank's bottom line.
Both revenue and earnings in the Wealth, Brokerage and Retirement division declined by 2% to $3.1 billion and $333 million, respectively, compared with the first quarter.
The number of advisers fell by 242 to 15,194 at the end of the quarter, and assets under management in the retail brokerage were flat at $1.2 trillion. AUM in the wealth management division was also flat at $204 billion.
Wells Fargo does not disclose adviser productivity statistics.
Morgan Stanley & Co. Inc. will report second-quarter earnings on July 21, and
UBS AG reports on July 26.
