NEW YORK: Bank of America Corp said on Thursday that quarterly net income at its wealth business, with about 14,000 advisers at its Merrill Lynch brokerage unit, fell to its lowest in two years as expenses climbed.
Noninterest expenses rose 5.5 percent to $3.4 billion in the fourth quarter from the same quarter a year earlier due to training and technology costs, the second largest US bank by assets.
Wealthy clients poured $9.4 billion of new money into Merrill Lynch and the bank's US Trust private banking unit during the quarter, the same as a year ago, and profit at the wealth division fell 3 percent to $706 million.
Bank of America, Morgan Stanley, UBS AG and other big banks have been investing more in their wealth management businesses, which generate stable income.
In contrast, trading businesses can be much more volatile.
The pretax profit margin at BofA's wealth division last quarter fell to 24.9 percent from 27 percent last year due to the rising expenses and lower interest income.
"We need that margin to get to 30 percent," BofA Chief Financial Officer Bruce Thompson said on a conference call with analysts after the bank reported that overall profit declined 14 percent on lower interest and trading income.
Thompson said he thinks BofA can hit that target relatively soon as the US Federal Reserve returns rock-bottom interest rates to more normal levels and as expensive retention packages to retain brokers when the bank bought Merrill in 2009 expire over the next year.
Brokerage firms book much of their profit from lending clients money to buy stocks and bonds and by investing client cash parked at the firms - activities that are less profitable when interest rates are low.
Merrill's escalating costs last quarter were caused in part by the revival of its once-vaunted training program that launched the careers of many Wall Street veterans.
Merrill has been recruiting about 1,700 novices into the program annually, and 130 graduated to become full-time brokers last quarter.
In addition, Merrill hired 85 new brokers last quarter, ending 2014 with 14,085 financial advisers.
It had more than 16,400 brokers two years earlier.
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