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Bank of America Posts Q3 Profit, Merrill Lynch Average Adviser Productivity Drops

18 October 2012 - News - Editor

With earnings of $340 million in the third quarter of 2012, Bank of America made a narrow profit, beating Wall Steet analysts' predictions that the financial giant would post an 11 cent per share loss. Factors which dragged Bank of America's profits down included the $1.6 billion that went into settlements with shareholders who took the bank to task for misleading them with its 2008 purchase of Merrill Lynch, as well as an accounting rule that erodes bank profits when its corporate debt value rises, with the reasoning that the bank would have to pay more on the open market to buy that debt back. This rule cost Bank of America $1.9 billion for the quarter.

Analysts note that comparing the third quarter of 2012 with the same period last year is not particularly helpful as that period also had a number of once-off losses and gains. While Bank of America made $6.2 billion in the third quarter of 2011, this was boosted in part by the sale of its investment in a Chinese bank.

Current CEO Brian Moynihan is reportedly trimming Bank of America by, among other measures, cutting jobs and expenses. Around 6 percent of BOA's workforce - more than 16,100 jobs - have been shed in the past year. It is likely that number would have been higher had the bank not needed staff to work through and sort out problem mortgage loans inherited in its purchase of Countrywide Financial in 2008.

Merrill Lynch, the wealth management division of Bank of America, has reported that its main brokerage workforce lost 75 financial advisers in the third quarter of 2012. Clients often move with top financial advisers when they leave one company for another, which has a negative impact on average adviser productivity - a figure which is closely monitored in the industry. While big brokerage firms aspire to reach and retain a level of $1 million, adviser productivity at Merrill Lynch dropped $5,000 from the previous quarter to $910,000, measured as annualized total revenue of Merrill Lynch Global Wealth Management divided by the number of full service financial advisers. However, according to recruiters and advisers to the brokerage, there are indications that this situation is turning around, which may be reflected in the final quarter figures for 2012.


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