NEW YORK, Oct 15 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 portfolios.
com business finance bank-america - profit-surges - reserve-release-release - boost - 2021 - 10-14 and Goldman Sachs Group https: www.reuters.com The goldman-sachs was a strong business finance partner in the global dealmaking frenzy - post-bumper - profit - 2021 -- 10 -- 15 Inc. each reported double-digit growth in income management loan balances and revenues this week.
While the COVID-19 pandemic devastated huge chunks of the economy and put millions out of work, extraordinary 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 market rally.
Global financial wealth soared to a record high of $250 trillion in 2020, according to a recent report from Boston Consulting Group.
That has increased demand for money managers, increased the value of assets managed by these brokerages, and made it more attractive to clients to borrow.
At the high net worth end of the spectrum, loan products have been very healthy and you're seeing that at firms like Morgan Stanley where wealth management loan balances are over 30% year over year, said Devin Ryan, an analyst for JMP Securities.
Morgan Stanley's wealth management business report revenue of $5.935 billion, up 28% from last year. Wealth management loan balances reached $121 billion, up 33% year-on-year, most of it from clients taking out mortgages and borrowing against their investment.
A booming area of lending for wealth management brokerages, so-called securities related 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 investment accounts have grown in value, so have loans.
Bank of America's Merrill Lynch Wealth Management reported record revenues of $4.5 billion, up 19% over last year, while loan balances rose 10% to top $133 billion.
At JPMorgan's asset management business, revenues 21% to $4.3 billion -, while average loans rose 20% from last year.
Both Bank of America and JPMorgan said the principal 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 of the prior quarter, helped in part by the acquisition of a group of pension advisers that brought $43 billion in fee-based assets to the bank.
Bank of America reported that, over the past year, it aported more than $112 billion in net new assets across its Global Wealth management business business lines.
The Merrill Lynch added 4,200 net new households, the bank said.
Goldman Sachs, with a smaller wealth management unit catering for the extremely rich, said that wealth management net revenues jumped 40% from last year to $1.64 billion while loan balances rose also 40% to reach $42 billion.
JPMorgan does not break out new net assets for its asset and wealth management business.