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BAC Global Wealth Mgmt Posts 1Q Profit; Flat With 4Q

Bank of America Corp. posted a first-quarter profit of $4.2 billion that nevertheless cast fresh doubt on the health of U.S. banking industry due to the depth of problems in many of the company's core banking businesses.

"Make no doubt about it," said Kenneth Lewis, chairman and chief executive of the Charlotte, N.C., bank. "Credit is bad and will eventually get worse before it stabilizes and improves." In a sign of how the wave of shaky loans is expected to rise beyond current levels, Bank of America set aside $13.4 billion for future credit losses, up 57% from the fourth.

While the acquisition of Merrill Lynch helped Bank of America Corp. (BAC) post a profit in the first quarter, income in the Global Wealth Management segment, which includes Merrill's thundering herd of brokers, was roughly the same as in the fourth quarter.

Despite boosting its broker head count by sevenfold, the bank's wealth management group brought in a $510 million profit, a gain of only $1 million over the fourth quarter.

The Global Wealth Management segment consists of U.S. Trust, Columbia Management, and Global Wealth Advisors, which includes Merrill and BofA brokers.

Global Wealth Advisors benefited from the Merrill deal, however, as it posted net income of $565 million, up from $396 million in the fourth quarter and more than tripled from a year ago. Net income at U.S. Trust fell sharply, and other wealth management businesses posted $150 million in losses in the quarter.

Global Wealth Advisors now holds nearly $1.3 trillion in client assets and deposits. Merrill Lynch brokers alone had more than $1.6 trillion in client assets a year ago. The client assets fell largely due to the market's plunge, and also as some clients followed Merrill advisers who left to join competitors when Bank of America bought the brokerage.

The Global Wealth Advisors segment had 15,822 advisers as of March 31. Merrill had 16,090 brokers and BofA had 2,007 at end of the fourth quarter when the two companies merged. A year ago, Merrill boasted 16,660 financial advisers and was the largest retail brokerage by adviser head count. Wells Fargo & Co. (WFC), which says it has about 16,000 financial advisers, reports earnings Wednesday, when it will likely give specific data on its brokerage ranks.

Merrill Lynch says most high-producing advisers who were offered Bank of America's retention package agreed to stay with the combined firm. However, the retail brokerage isn't immune to departures that have stung other businesses at BofA following the acquisition.

Several hundred Merrill rookie brokers were cut late last year and early in 2009 based on performance metrics and in an effort to cut costs. These trainees received a salary, while brokers are paid on a commission-only basis.

The addition of Merrill's advisers has taken a toll on the average broker production at Bank of America. Based on first-quarter results, brokers are set to generate an average of $800,000 in fees and commissions this year. In the fourth quarter, the average annualized production for BofA's brokers was more than $1.5 million.

Bank of America says its financial advisers typically have had higher amounts of credit and banking business. The average annual production at most big brokerages generally ranges from $500,000 to $800,000.



http://online.wsj.com/article/BT-CO-20090420-715508.html