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

Large United States banks’ wealth administration companies put in one other stellar efficiency within the third quarter, buoyed by report ranges of recent cash flowing into accounts and surging demand from shoppers to borrow in opposition to their funding portfolios.

Morgan Stanley Inc (MS.N), JPMorgan Chase & Co (JPM.N), Bank of America Corp(BAC.N)and Goldman Sachs Group Inc.(GS.N) every reported double-digit development 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 an enormous inventory market rally.

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

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

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

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

A booming space of lending for wealth administration brokerages, so-called securities based mostly loans or strains of credit score, permit shoppers 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 report revenues of $4.5 billion, up 19% over final yr, 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 yr.

Each Financial institution of America and JPMorgan mentioned the first driver of mortgage development was securities based mostly loans, adopted by mortgages and customized loans.

Morgan Stanley, which will get round half of its revenues from wealth administration, mentioned web new belongings rose by 89% to $135 billion within the third quarter from the prior quarter, helped partially by the acquisition of a gaggle of retirement advisers that introduced $43 billion in fee-based belongings to the financial institution. read more

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

Merrill Lynch additionally added 4,200 web new households, the financial institution mentioned.

Goldman Sachs, which has a smaller wealth administration unit catering to the extraordinarily wealthy, mentioned wealth administration web revenues jumped 40% from final yr to $1.64 billion, whereas mortgage balances had been additionally up 40% to achieve $42 billion.

JPMorgan doesn’t get away web new belongings for its asset and wealth administration enterprise.

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

Our Requirements: The Thomson Reuters Trust Principles.

Source : reuters