Bank of America reported net income of $6.2 billion, or $0.56 per share, for the third quarter vs. a net loss of $7.3 billion, or $0.77 per share, last year — topping analysts' estimates by a wide margin. Revenue, net of interest expense (and calculated on a fully taxable-equivalent basis) rose 6 percent to $28.7 billion.
Its global-wealth operations, no longer led by Sallie Krawcheck, reported year-over-year increases in revenue and net income, as the total number of advisors at Merrill Lynch grew by about 500 to 16,722 on the expansion of the Merrill Edge platform. Sequentially, the unit reported slightly lower sales and profits vs. the second quarter of 2011.
"This quarter's results reflect several actions we took that highlight our ongoing transformation toward becoming a leaner, more focused company," said CEO Brian Moynihan in a press release. "The diversity and depth in our customer and client offerings provided some resiliency in a very challenging environment."
Wealth Management
The unit, now led by BofA co-CEO David Darnell, saw its net income rise 29 percent from the year-ago quarter to $347 million, which was a 31 percent decline from the second quarter of 2011 (due to a higher provision for credit losses and other factors). The wealth-management unit had a return on average equity of 7.72 percent in the most recent quarter, which is up from 5.91 percent a year ago, but down from 11.54 percent in the second quarter.
Revenue was $4.2 billion, an increase of about 9 percent year over year, driven by higher asset management fees, net interest income, and transactional activity; sales moved down 6 percent from the second quarter. Sales at Merrill Lynch improved 8 percent from last year to $3.43 billion, but dropped 2 percent from the second quarter.
Client balances, or assets, for the overall wealth-management unit were $2.06 trillion, down about 3 percent from the year-ago quarter and 6 percent from the previous quarter. Balances in Merrill Lynch accounts stood at $1.45 trillion on Sept. 30, a drop of 1 percent from last year and a decline of 6 percent from the previous quarter.
Net asset inflows in Q3'11, though, were $1.9 billion for the wealth-management unit vs. outflows of $2.6 billion a year ago and inflows of $764 million in Q2'11 and $7.5 billion in Q1'11.
The number of total client-facing associates stood at 21,554 as of Sept. 30, up from 20,011 a year ago and 20,833 in the previous quarter. The number of wealth advisors is now 18,488 vs. 16,988 last year and 17,823 last quarter. U.S. Trust includes 2,271 financial professionals.
Advisors with Merrill Lynch number 16,722, up by more than 1,000 from 15,486 a year ago and 16,247 in the second quarter. Much of this increase is from hiring for the Merrill Edge platform, which focuses on mass-affluent clients being serviced through bank branches and call centers.
BofA says that the productivity of Merrill Lynch financial advisors, excluding those with Merrill Edge, is about $854,000 in yearly fees and commissions based on the third quarter's results — down 4 percent from last quarter, but up 1 percent from last year. For the nine months ending Sept. 30, Merrill advisor production is averaging $892,000 in yearly fees and commissions, up 7 percent from the first nine months of 2010.
Morgan Stanley
Morgan Stanley said it had third-quarter net income of $2.2 billion, or $1.14 per share, from continuing operations compared with income of $314 million, or $0.05 per share, for the same period a year ago, beating analysts' estimates.
Net revenues were $9.9 billion for the current quarter compared with $6.8 billion a year ago. Results for the quarter included revenue of $3.4 billion, or $1.12 per share, compared with negative revenue of $731 million a year ago related to changes in Morgan Stanley's debt-related credit spreads and other credit factors, such as a debt valuation adjustment.
For the current quarter, net income applicable to Morgan Stanley, including discontinued operations, was $1.15 per diluted share, compared with a net loss of $0.07 per diluted share in the third quarter of 2010.
"Morgan Stanley effectively navigated turbulent markets while consolidating our market share gains with institutional clients and demonstrating resilience across the global wealth-management business as evidenced by record net new assets flows since the formation of MSSB," said President and CEO James P. Gorman, in a statement.
The wealth-management unit — which continues to prune lower-producing advisors — had pre-tax income from continuing operations of $362 million in the third quarter, up 12 percent from the previous quarter and 29 percent from the year-ago period. Income after the non-controlling interest allocation to Citigroup for the Morgan Stanley Smith Barney joint venture, $52 million, and before taxes was $310 million. Net income after these adjustments and taxes was $169 million in the third quarter, representing a 6 percent drop from the second quarter but a 17 percent increase for the year-ago period.
Net revenues of $3.3 billion declined 6 percent from last quarter but increased 5 percent from $3.1 billion a year ago "primarily reflecting higher asset management revenues and commissions partly offset by net losses from investments associated with the firm's deferred compensation and co-investment plans," the company said in a press release.
Revenues from commissions and fees were $670 million in the period ended September 30 vs. $689 million in the second quarter, representing a decline of 3 percent, and $564 million in the year-ago quarter, accounting for a jump of 19 percent. Sales from asset-management, distribution and related activities totaled $1.78 billion in the third quarter, a slight drop from the second quarter and an increase of 16 percent from last year.
Advisors, Assets
