Merrill Results Improve Despite Bank of America's Q3 Loss

Assets at Merrill Lynch came to $1.52 trillion vs. $1.44 trillion a year ago and $1.46 trillion in the second quarter.

A subset of GWIM assets, brokerage assets – which include fee-based assets — were up slightly both year over year and sequentially to $1.44 trillion.

GWIM asset flows, however, were in negative territory, with outflows of $1.5 billion in the third quarter, mainly due to outflows within non-Merrill Lynch segments (such as BofA Global Capital Management and BofA's investment in BlackRock). Still, this is an improvement over outflows of $17.8 billion a year ago and $7.4 billion in the second quarter.  

"The fact that Merrill Lynch production and assets are up slightly year over year, when other segments are lagging somewhat, are other indicators of its success," Elzweig said. "In terms of recruiting, Merrill offers advisors good deals and a good brand name."  

Overall, BAC said in its Q3 2010 release, operating profit rose due to improving credit conditions for both businesses and consumers. Credit costs declined for the fifth consecutive quarter while Tier 1 capital ratios continued to strengthen and the wealth management business reported strong asset management fees.

"Our results this quarter demonstrate continued traction with each customer group – consumers, businesses, and institutional investors," said BAC President and CEO Brian Moynihan said in a statement. "Our strategy is to leave nothing to chance in our goal of doing everything we can for each of our customers. We are adapting to the regulatory environment, credit quality continues to improve, and we are managing risk and building capital."

BAC stock after the earnings release was trading near $12.30 per share on above-average volume vs. Monday's close of $12.34.

Specifically, the BAC earnings release said the write-down resulted from the limits to be placed on debit interchange fees under the financial reform legislation enacted in July 2010, which will reduce future revenues in the Global Card Services business.

"As a result of the legislation and other changes in the environment, the company is changing the way its consumer bank does business, focusing on a relationship enhancement strategy designed to incent customers to bring more business and to make pricing more upfront and transparent," according to the release. "This change moves away from a dependence on penalty fees, which the industry had adopted over the years, and provides the customer with a better banking experience. These changes are expected to result in additional revenue."

Highlights reported in the third quarter included:

• Approximately 200,000 loan and deposit products sold to Bank of America Merrill Lynch customers. In addition, referrals between Global Wealth and Investment Management and the company's Global Commercial Bank and Global Banking and Markets businesses totaled approximately 3,500 in Q3 and approximately 10,700 year to date. The company's retirement business continues to win more business.
• Strong growth in client assets driven by higher market prices and increased inflows into higher-yielding products reported by Global Wealth and Investment Management. These included a $14 billion increase in deposits and a $6 billion increase in long-term assets under management. Global Wealth and Investment Management increased the number of its client-facing associates for the fifth consecutive quarter.
• Bank of America Merrill Lynch ranked No. 2 in global investment banking revenues with a 7% market share, according to Dealogic's third-quarter 2010 league tables. The company has No. 1 positions in both global and U.S. rankings in leveraged loans, syndicated loans, mortgage- and asset-backed securities, and high-yield corporate debt.

Read about Bank of America's Q2 2010 earnings at AdvisorOne.com.