U.S. banks see wealth management boom on borrowing, new assets

NEW YORK, Oct 15 (Reuters) – Large U.S. banks’ wealth administration companies put in one other stellar efficiency within the third quarter, buoyed by document ranges of recent cash flowing into accounts and surging demand from purchasers to borrow towards their funding portfolios.

Morgan Stanley Inc , & Co , and Inc. every reported double-digit progress in wealth administration mortgage balances and revenues this week.

Whereas the COVID-19 pandemic devastated massive chunks of the financial system and put thousands and thousands out of labor, extraordinary authorities measures aimed toward mitigating the financial blow have additionally boosted the fortunes of the rich by pushing down rates of interest and driving a large inventory market rally.

World monetary wealth soared to a document excessive of $250 trillion in 2020, in keeping with a June report by Boston Consulting Group.

That has elevated demand for cash managers, elevated the worth of property managed by these brokerages, and made it extra interesting for purchasers to borrow.

“On the excessive internet value finish of the spectrum, lending merchandise have been very wholesome and also you’re seeing that at companies like Morgan Stanley the place wealth administration mortgage balances are up over 30% 12 months over 12 months,” stated Devin Ryan, an analyst at JMP Securities.

Morgan Stanley’s wealth administration enterprise reported revenues of $5.935 billion, up 28% from final 12 months. Wealth administration mortgage balances reached $121 billion, up 33% year-on-year, largely from purchasers taking out mortgages and borrowing towards their investments.

A booming space of lending for wealth administration brokerages, so-called securities primarily based loans or traces of credit score, enable purchasers to borrow as much as a sure % of the worth of their funding accounts to spend on something besides extra securities. As these funding accounts have grown in worth, so have loans.

Financial institution of America’s Merrill Lynch Wealth Administration reported document revenues of $4.5 billion, up 19% over final 12 months, whereas mortgage balances grew 10% to high $133 billion.

At JPMorgan’s asset and wealth administration enterprise, revenues 21% to $4.3 billion, whereas common loans rose 20% from final 12 months.

Each Financial institution of America and JPMorgan stated the first driver of mortgage progress was securities primarily based loans, adopted by mortgages and customized loans.

Morgan Stanley, which will get round half of its revenues from wealth administration, stated internet new property rose by 89% to $135 billion within the third quarter from the prior quarter, helped partly by the acquisition of a bunch of retirement advisers that introduced $43 billion in fee-based property to the financial institution.

Financial institution of America reported that, over the previous 12 months, it has introduced on greater than $112 billion in internet new property throughout its world wealth administration enterprise.

Merrill Lynch additionally added 4,200 internet new households, the financial institution stated.

Goldman Sachs, which has a smaller wealth administration unit catering to the extraordinarily wealthy, stated wealth administration internet revenues jumped 40% from final 12 months to $1.64 billion, whereas mortgage balances had been additionally up 40% to succeed in $42 billion.

JPMorgan doesn’t escape internet new property for its asset and wealth administration enterprise.

Reporting by Elizabeth Dilts Marshall and Matt Scuffham in New York; modifying by Michelle Worth and David Gregorio

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