U.S. banks see wealth management boom on borrowing, new
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[October 15, 2021] By
Elizabeth Dilts Marshall
NEW YORK (Reuters) - Big U.S. banks' wealth
management businesses put in another stellar performance in the third
quarter, buoyed by record levels of new money flowing into accounts and
surging demand from clients to borrow against their investment
Morgan Stanley Inc, JPMorgan Chase & Co, Bank of America Corp each
reported double-digit growth in wealth management loan balances and
revenues this week.
While the COVID-19 pandemic devastated large chunks of the economy and
put millions out of work, extraordinary government measures aimed at
mitigating the economic blow have also boosted the fortunes of the
wealthy by pushing down interest rates and driving a massive stock
Global financial wealth soared to a record high of $250 trillion in
2020, according to a June report by Boston Consulting Group.
That has increased demand for money managers, increased the value of
assets managed by these brokerages, and made it more appealing for
customers to borrow.
"At the high net worth end of the spectrum, lending products have been
very healthy and you're seeing that at firms like Morgan Stanley where
wealth management loan balances are up over 30% year over year," said
Devin Ryan, an analyst at JMP Securities.
Morgan Stanley's wealth management business reported revenues of $5.935
billion, up 28% from last year. Wealth management loan balances reached
$121 billion, up 33% year-on-year, mostly from clients taking out
mortgages and borrowing against their investments.
A booming area of lending for wealth management brokerages, so-called
securities based loans or lines of credit, allow clients to borrow up to
a certain percent of the value of their investment accounts to spend on
anything except more securities. As those investment accounts have grown
in value, so have loans.
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People walk past a Citibank branch in New York October 15, 2013.
Bank of America's Merrill Lynch Wealth Management reported record revenues of
$4.5 billion, up 19% over last year, while loan balances grew 10% to top $133
At JPMorgan's asset and wealth management business, revenues 21% to $4.3
billion, while average loans rose 20% from last year.
Both Bank of America and JPMorgan said the primary driver of loan growth was
securities based loans, followed by mortgages and custom loans.
Morgan Stanley, which gets around half of its revenues from wealth management,
said net new assets rose by 89% to $135 billion in the third quarter from the
prior quarter, helped in part by the acquisition of a group of retirement
advisers that brought $43 billion in fee-based assets to the bank.
Bank of America reported that, over the past year, it has brought on more than
$112 billion in net new assets across its global wealth management business.
Merrill Lynch also added 4,200 net new households, the bank said.
JPMorgan does not break out net new assets for its asset and wealth management
(Reporting by Elizabeth Dilts Marshall and Matt Scuffham in New York; editing by
Michelle Price and David Gregorio)
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