Things Looking Up At Bank Of America, Merrill Lynch

Bank of America Corp.'s wealth management unit, which includes Merrill Lynch, generated more asset management fees and brokerage income in the second quarter than it has since the first quarter of 2009.

The $2.24 billion in management fees and brokerage income posted by the Global Wealth and Investment Management group, or GWIM, bested last quarter's $2.15 billion and the $2 billion from the same period a year ago, according to the company's quarterly numbers released on Friday. Despite the rise in business, total client assets in the group fell about 9% from the first quarter, due to the market volatility and the sale of Columbia Management in May.

Bank of America acquired Merrill Lynch at the end of 2008. The GWIM unit also includes U.S. Trust and Retirement and Philanthropic Services.

Despite the sale of Columbia Management, the division still boasts nearly $2 trillion in client assets. Of that total, $1.4 trillion is at Merrill Lynch, which saw a decline from $1.45 trillion the previous quarter. Rival wealth management groups at Morgan Stanley and Wells Fargo & Co. had $1.6 trillion and $1.25 trillion in client assets, respectively, as of the first quarter. Both report their second quarter earnings Wednesday.

The Merrill Lynch division, now with 15,142 financial advisors, is on track for a better year than 2009. The advisors' annual production average, based on the first half of this year, will be $836,000. Most wirehouses average half a million or $600,000 in annual adviser production.

Merrill Lynch is also faring well in the recruiting war among the wirehouses, with about 140 more advisors than it had at the end of the first quarter. It still is topped in total headcount by Morgan Stanley Smith Barney, which has about 3,000 more advisors.

The wealth management division reported $4.3 billion in total revenue for the second quarter, $3.2 billion of which came from Merrill Lynch. That amounted to a 3.9% increase for the overall division compared to the first quarter and a 2.5% rise for Merrill Lynch. The total revenue includes the asset management fees and brokerage income, as well as interest income and other income.

Even though revenue was up, the unit saw a 23% decline in net income from the first quarter, to $356 million, as non-interest and income tax expenses rose. Within the group, Merrill's net income was $316 million, a 12% fall from the first quarter.

The earnings figures show Merrill Lynch contributing about 11% of Bank of America's overall revenue and 10% of its net income. The larger GWIM unit makes up about 15% of Bank of America's total revenue and 11% of its net income.

The bank continues to tout its ability to leverage wealth advisory and banking relationships through referrals, claiming 74% of its advisors sold banking products in the second quarter, and nearly 2,000 commercial leads were sent to wealth advisers.

The second quarter also marked the launch of the bank's new online brokerage, Merrill Edge, which received 20,000 referrals resulting in 7,000 contacts, according to the company.

Bank of America continues to push for referrals between the bank and brokerage, adding "financial solutions advisors" to act as gatekeepers in the bank branches directing potential clients to the right investment arm of the company, and "wealth management bankers" to work as the liaison to the bank branches in the Merrill Lynch branch offices.

When the bank acquired Merrill Lynch, it lost thousands of legacy Merrill advisors initially, many of whom didn't want to be part of a big bank conglomerate and worried they would have to start pushing bank products. But since the initial outflow of advisors in the first quarter of 2009, Merrill Lynch's headcount has remained stable in the 15,000 range. And many of the remaining advisors are taking advantage of the additional revenue referrals can provide.