Merrill revenue falls, headcount flat as parent BofA's profits surge

April 18, 2023 6:42 PM

Merrill Wealth Management had a mixed earnings report Tuesday in the wake of longtime president Andy Sieg's recent departure, despite parent Bank of America's strong quarter.

Revenue and profits at Merrill and sister unit Bank of America Private Bank were down both quarter-on-quarter and year-on-year for the first three months of 2023, although the combined units added a quarterly record of around 14,500 net new households. The bank attributed the decreases to market declines that were partially offset by higher net interest income, a Merrill statement said.

Advisor headcount across the bank's lines of business also stalled and logged a small decline, despite the bank hiring over net new 800 advisors during the prior two quarters.

Merrill canceled its customary quarterly earnings call for reporters, which is usually held separately from the parent bank's earnings call on the same day. In the past, former president Sieg would field reporter questions during the calls.

Sieg left Merrill on March 30 for rival Citigroup, where he will become the head of Citi Global Wealth. He is replaced by Eric Schimpf and Lindsay Hans, who are the new presidents and co-heads of Merrill Wealth Management.

"As we move forward, we're excited to have Eric Schimpf and Lindsay Hans lead this business," Bank of America chairman and CEO Brian Moynihan said on an earnings call Tuesday. "They'll work closely with Katy Knox [the president of the Private Bank] to drive our global wealth and investment management business across the company." Moynihan added that the three wealth heads expected to improve operational efficiency by investing more into digital products for advisors and clients.

Parent company Bank of America had strong results in its first-quarter earnings, with profits of $8.2 billion showing a gain of 15% over the past quarter and the same on the year-ago quarter's $7.1 billion.

Revenue firmwide was $26.3 billion for the quarter, up 7% over the past quarter's $24.5 billion and up 13% year over year.

Bank of America beat Wall Street analysts' expectations with earnings per share of $0.94, 15% above the consensus of $0.82.

SIFMA Private Client Conference Andy Sieg, president of Merrill Lynch Wealth Management, 2019 photo

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To see the main takeaways from Merrill's first-quarter earnings, scroll down the slideshow. For coverage of the firm's fourth-quarter earnings, click here. For a look at the results from the third quarter, click here.

Financials

Profits in the bank's Global Wealth and Investment Management division, which includes Merrill and the Private Bank, were $917 million for the quarter, according to the earnings supplement. They fell 24% from last quarter's $1.20 billion, and were down 19% from $1.13 billion a year ago.

Revenue for the division fell 3% year over year to $5.32 billion from $5.48 billion, and was down 2% from the previous quarter's $5.41 billion. The decline was "driven by the impact of lower equity and fixed income market valuations on asset management fees, partially offset by higher [net interest income]," the bank said in an earnings presentation.

Client acquisition

The bank added a "record ~14,500 net new relationships across Merrill and Private Bank in 1Q23," an earnings presentation showed. Of these, Merrill claimed around 13,600, and the Private Bank added 975.

The figure was up 88% year over year and 61% quarter over quarter, Merrill said in a supplemental release. The firm added over 9,000 net new client relationships in the fourth quarter of 2022.

A Merrill spokesperson declined in an email to confirm the firm's total number of client relationships.

The quarter also saw a record-high growth in business from new clients with $10 million or more in investable assets — considered to be either high net worth or ultrahigh net worth, as definitions of the terms vary. The bank said it had grown this number by around 70% year over year and 32% from the past quarter.

Over the past five years, Merrill said that new households under the age of 40 nearly doubled.

Client assets

Client assets under management in the GWIM business rose to $1.47 trillion at the quarter's end. AUM was up 5% from $1.4 trillion the prior quarter but down 6% from $1.57 trillion year over year.

Total client balances for GWIM were $3.52 trillion — up 4% from the prior quarter, but down 5% year over year. Merrill held $2.95 trillion of the client balances and Private Bank held $569 billion.

Digital advice update

Digital tools are helping Merrill advisors grow their business, the bank said. Merrill rolled out Merrill Advisor Match in October to help advisors improve outreach to prospects. Around "7,000 Merrill advisors have enrolled in this tool since its launch," the firm said in a release.

The new Merrill Video Pro tool, launched in February to allow advisors to record videos to connect with clients and grow their reach, also showed traction. "In initial weeks, advisors have created nearly 700 videos," the bank said.

Remarks

"Throughout the country, Merrill advisors are meeting the evolving needs of clients during what continues to be a choppy market environment, while also attracting new clients across generations and at all levels of wealth," Schimpf said in a statement.

"We're delivering a modern experience to advisors and clients through a range of integrated solutions for investing, banking, lending, trust and other services, and leading digital capabilities," Hans added in a statement.

The wealth units continue to refer clients aggressively to banking products. During the quarter, "we added 35,000 new bank accounts for people in our Wealth Management franchise," Alastair Borthwick, the bank's chief financial officer, told analysts in the earnings call.

He added that the figure "is a significant indicator that what we're offering has value to people."