Bank of America reported that its wealth management unit's profits were down compared to last year, with expenses rising faster than revenues.

The bank said profits at its Global Wealth & Investment Management dipped 9.2% year-over-year, falling to $706 million for the fourth quarter from $778 million for the year-ago period.

Total revenues rose 2.7% year-over-year, rising to $4.6 billion from $4.4 billion. Non-interest expenses grew faster at 5.4% year-over-year, climbing to $3.4 billion from $3.2 billion.

Bank of America CEO Brian Moynihan said during a conference call with analysts that the rise in expenses was due to higher, performance-based incentives."

The division's assets under management flows dropped to $9.1 billion for the quarter from $15.9 billion for the year-ago period, and from $17 billion for the third quarter.

Client balances at the bank's Merrill Lynch unit rose to $2.03 trillion for the quarter from $1.91 trillion for the year-ago period, a 6.1% increase.

The bank also said FA productivity at Merrill Lynch increased to $1.07 million for the quarter from $1.03 million for the same period a year ago. Merrill Lynch's headcount grew by 85 during the quarter, reaching 14,085 advisors. The firm said its recruiting efforts boosted the ranks of experienced advisors by 73 for the year, resulting in an additional $12 billion in assets under management.

"Year-to-date retention remains at record levels," Moynihan said.

Overall headcount at Global Wealth & Investment Management was up about 700 advisors, topping 16,000 advisors. Alois Pirker, an analyst at Aite Group, notes that there have been articles about some high profile advisors leaving the firm, but the overall numbers are up and productivity remains high. Pirker, who says he isn't familiar with who the new hires are, says that the recruiting moves may be netting themselves out.

"At the end of the day, if you had an exclusive loss of big teams, then you would see that productivity drop more significantly than what you actually saw," Pirker says.

The company also said that 49% of its advisors had 50% or more of their client assets in fee-based relationships.

The bank's elite brokerage unit, U.S. Trust, which serves ultrawealthy individuals, reported that fourth quarter revenues dropped to $758 million from $762 million for the year-ago period, a 0.5% decrease.

U.S. Trust also reported that it had 310 private client advisors, a record high.

Client balances at U.S. Trust rose to $387 billion for the quarter from $376 billion from the year-ago period, a 3% increase.

Companywide, Bank of America reported $3 billion in profits, down from $3.4 billion for the same period a year ago.

Noninterest expenses at the Charlotte, N.C.-based company dropped to $14 billion from $17 billion, a 17.6% decrease. Total revenue also fell, dropping to $18.9 billion from $21.7 billion, a 12.9% decrease.

Litigation expenses dropped to $400 million from $2.3 billion from the year-ago period. During the third quarter, Bank of America reported that litigation expenses hit $6 billion.

"This is the lowest quarterly amount since the Merrill Lynch merger," CEO Moynihan said during the conference call.

Earnings-per-share dropped to $0.26 per share for the quarter from $0.30 for the year-ago period.

 

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