BAC’s Global Wealth and Investment Management division
Bank of America (BAC) was managing client balances of ~$2.5 trillion on December 31, 2016, which represents a growth of 2% on a YoY (year-over-year) basis. The Global Wealth and Investment Management division has seen lower non-interest income over the past few quarters on lower transactional values, partially offset by higher asset management fees.
In 4Q16, this segment was managing net income of $634 million, as compared to $623 million one year previously, mainly due to lower expenses and higher interest income. Bank of America attracted $18.9 billion in long-term flows, reflecting a shift from brokerage to asset management.
BAC’s asset management faces competition from traditional asset managers and banks (XLF) like BlackRock (BLK) and J.P. Morgan (JPM) and alternative managers like Blackstone (BX) and Carlyle (CG). Notably, investors have been deploying more funds toward low-cost ETFs (exchange-traded funds) and index funds, as active managers have failed to generate alpha or superior returns as compared with the broad index (SPX-INDEX) (SPY).
BAC’s Global Markets segment has seen growth in recent quarters based on high sales and trading revenues. The returns on its average allocated capital increased to 7% in 4Q16, as compared to 2% in 4Q15.
BAC was managing traded related assets of $417 billion on December 31, 2016, as compared to $416 billion one year previously. Overall, its investment banking fees have remained stable, and its efficiency ratio has improved due to lower spending. In 1Q17, the bank’s global markets division hope to see higher sales and trading revenues on rising equities and volatile markets.
Continue to the next part for a closer look at BAC’s operating margins.