BofA Boss Pokes The Bull; Insults Merrill Lynch Advisors On Earnings Call

During the company’s third quarter earnings call on Tuesday, Bank of America’s Chief Executive, Brian Moynihan, highlighted the bank’s Global Wealth division as its least efficient unit, stating that significant efforts are underway to ameliorate this situation. He pointed out that the co-heads of Merrill Wealth Management, Lindsay Hans and Eric Schimpf, are fully engaged in initiatives to enhance the unit’s performance and drive better results.

The Global Wealth segment, which encompasses the Merrill brokerage unit as well as the Bank of America Private Bank, posted an efficiency ratio – a critical metric used to assess the relationship between cost and revenue – of approximately 74%, a noticeable increase from 70% reported in the same quarter of the previous year. Although the bank did not disclose a specific target for this ratio, it is notably higher than the significantly more impressive 50% efficiency ratio posted by the Consumer Banking segment.

For the third quarter, the wealth division of Bank of America, inclusive of Merrill Lynch and its private bank, reported a decrease in net income of 13% year-over-year, bringing the total to $1 billion. Revenue experienced a slight dip of almost 2%, settling at $5.3 billion, while non-interest expenses witnessed an increase of 3.5%, reaching just shy of $4 billion.

Despite these challenges, Moynihan was quick to praise the organic growth observed among both Merrill and the Private Bank’s clientele and their asset holdings. He underscored the significant acceleration in net household growth, highlighting that the current rate is outpacing those achieved in previous years.

During the quarter, the wealth unit successfully added 7,000 new client relationships, showcasing a robust growth of approximately 20% year-over-year. The unit also reported a substantial 60% increase year-over-year in the number of clients possessing household wealth in excess of $10 million.

In a subsequent media call addressing the earnings report, when queried about Merrill’s strategy to reduce costs, Hans and Schimpf underscored their commitment to revenue enhancement without a commensurate increase in expenses. They pointed towards digital initiatives, such as digital account opening tools, and advanced technology designed to prompt brokers with innovative strategies for client relationship management and growth.

Despite the broader trend within the bank towards a reduction in the overall headcount, which currently stands at 212,752 employees, both co-heads of Merrill emphasized that this strategy does not extend to advisors or their support staff. They highlighted their dedication to growing the advisor force to meet the demands of an expanding industry.
“We are going to continue to grow our client-facing businesses to support revenue growth,” Hans affirmed.

As of the end of the quarter, the bank’s total advisor roster, which includes Merrill brokers, private bankers, and consumer bank-based Edge advisors, stood at 19,130. This represents a net increase of 289 advisors year-over-year, and an addition of 31 advisors sequentially. The co-presidents of Merrill, however, chose not to provide a detailed breakdown of these numbers, nor to specify the roster size changes for each of the channels mentioned.

Recently, Merrill has adjusted some of its hiring and growth initiatives. This includes increasing the eligibility requirements for its early-career advisor recruitment program – a change expected to substantially reduce the number of participants – and the dissolution of its community markets program.

In closing, Hans reiterated Merrill’s ongoing commitment to driving efficiencies across the business, although she opted not to disclose specifics regarding the revival of Merrill’s veteran broker recruiting efforts.

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