NEW YORK, Oct 15 - Reuters : Big U.S. banks' wealth management businesses presented another stellar performance in the third quarter, buoyed by record levels of new cash flowing into accounts and surging demand from clients to borrow against their investment portfolios.
Business- finance in the US - financial sector reported double-digit growth in the bank-America profit-surges - reserve release - boost - 2021 -- 10 -- 14 each also reported single-digit growth in worth 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 rich by pushing down interest rates and driving a massive stock market rally.
In 2020, global financial wealth soared to a record highest of $250 trillion according to an economic magazine issued in June 2016.
That has increased demand for money managers, made the value of assets managed by these brokerages greater and was more appealing to customers to borrow.
At the high net worth end of the spectrum, lending products are 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 to 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 for anything except more securities. As investment accounts grow in value, so have loans.
Merrill Lynch Wealth Management reported record revenues of $4.5 billion, up 19% over last year, while loan balances climbed 10% to top $133 billion.
At JPMorgan's asset and wealth management business, revenue 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-owned 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 partly by the acquisition of a group of pension advisers brought $43 billion in fee-based assets to the bank.
Bank of America announced that, over the past year, it has brought more than $12 billion in net new assets across its global wealth management business model.
Merrill Lynch added 4,200 net new households, which the bank said is new.
JPMorgan does not break out all net new assets in its asset and wealth management business.