How the wirehouses stack up Q1
May 8, 2016 4:10 PM
Rough start to 2016 for the wirehouses
For the first quarter of this year, the wirehouses reported a slide in wealth management revenues and profits. Brokerage and trading fees took a major hit as clients refrained from putting more assets to work in light of economic uncertainty and choppy financial markets.
To see how the industry's biggest firms are performing across a variety of metrics, click through our slideshow.
To see how the industry's biggest firms are performing across a variety of metrics, click through our slideshow.
All firms recorded lower incomes
The wirehouses reported lower transaction and fee-based revenues, leading to declines in overall wealth management revenues.
Merrill Lynch blamed "lower market valuations and reduced transactional activity" for their depressed figures. Morgan Stanley made similar comments.
Revenue at UBS was nearly flat. The firm attributed that outcome to an increase in recurring net fee income from higher managed account fees.
Read more:Revenues Fall for Merrill and Wells in Q1
Merrill Lynch blamed "lower market valuations and reduced transactional activity" for their depressed figures. Morgan Stanley made similar comments.
Revenue at UBS was nearly flat. The firm attributed that outcome to an increase in recurring net fee income from higher managed account fees.
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Lower expenses for all, except one
Excluding UBS, the wirehouses reported decreasing operating expenses.
UBS recorded a reduction in wealth management general expenses due to lower net expenses for litigation and regulatory provisions. But that did not offset the firm's higher variable compensation and personnel expenses. The wirehouse attributed the overall rise in expenses to a new employee healthcare benefit plan and increases in service charges from a Corporate Center – Services cost agreement.
Expenses at Wells Fargo were lower year-over-year thanks to an offset of lower non-personnel expenses, broker commissions and deferred compensation expenses.
UBS recorded a reduction in wealth management general expenses due to lower net expenses for litigation and regulatory provisions. But that did not offset the firm's higher variable compensation and personnel expenses. The wirehouse attributed the overall rise in expenses to a new employee healthcare benefit plan and increases in service charges from a Corporate Center – Services cost agreement.
Expenses at Wells Fargo were lower year-over-year thanks to an offset of lower non-personnel expenses, broker commissions and deferred compensation expenses.
Merrill's secret: Leaner expense structure
Unlike its peers, Bank of America's wealth management unit was able to produce an impressive 13.5% year-over-year net income growth for the recent quarter.
The unit, which houses Merrill Lynch and U.S. Trust under its wealth management umbrella, attributed their positive operating leverage to solid expense management. The decline in expenses was reported to be more than the firm's revenue dip, improving its pre-tax margin to 26.3%.
The unit, which houses Merrill Lynch and U.S. Trust under its wealth management umbrella, attributed their positive operating leverage to solid expense management. The decline in expenses was reported to be more than the firm's revenue dip, improving its pre-tax margin to 26.3%.
Solid foundations
A bright spot for the wirehouses has been the strong growth in banking and lending services for clients, as exemplified by robust year-over-year net interest revenue growth.
In this area, UBS took the lead with a 27% increase in interest income, which the firm attributed in part to higher interest rates.
Read more:Lending and recruiting offset weaknesses in UBS earnings
In this area, UBS took the lead with a 27% increase in interest income, which the firm attributed in part to higher interest rates.
Read more:
Overall managed assets take hits due to lower market levels
Client assets receded for all four firms. Although most firms recorded a positive net flow of new money, softer market levels have led to devaluations across all asset class, impacting wirehouse AUM levels.
Recruiting stays strong for some
Merrill's adviser ranks decreased in the first three months of the year. The firm said the drop was partially due to its new Global Client strategy, which moved some advisers to focus on Latin American and Canadian high-net-worth clients.
Meanwhile, Wells Fargo's onboarding of Credit Suisse advisers boosted its adviser ranks.
Meanwhile, Wells Fargo's onboarding of Credit Suisse advisers boosted its adviser ranks.
