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US Banks Could See Subdued Asset Management Growth in 2H17

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Asset management

Asset managers and commercial banks (XLF) have added long-term assets under management over the past few quarters. Factors leading to this trend include wealth generation enhanced by fundamentals, reforms pitched by the Trump administration, and deployment toward equities.

Among the major bankers, Bank of America’s (BAC) Global Wealth and Investment division posted net income of $804.0 million in 2Q17, up 14.0% on a YoY (year-over-year) basis.

Bank of America reported ~$2.6 trillion in client balances, which represents 8.0% growth year-over-year. The division’s net income was helped by a 6.0% rise in revenues to $4.7 billion.

Bank of America saw net interest income growth of 14.0% to $1.6 billion for its Wealth Management division. However, its non-interest income grew by a subdued 3.0% to $3.1 billion on asset management fees, partially offset by lower transactional revenues.

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Adding new assets, market appreciation

JPMorgan Chase’s (JPM) Asset Management business posted $1.9 trillion on June 30, 2017, representing 11% growth on a year-over-year basis and 2% growth on a sequential basis. This increase was helped by strong inflows and the broad market rise (SPX-INDEX) (SPY).

JPM’s Asset Management division reported net income of $624 million, a 20% rise due to slower growth of expenses and higher performance fees. Its pretax margin grew to 32% in 2Q17, compared to 29% in 2Q16.

Commercial bankers are facing competition from ETF providers like BlackRock (BLK) and State Street (STT), as well as alternative asset managers like Blackstone (BX), Carlyle Group (CG), and KKR (KKR). ETF providers have attracted the highest amount of allocation toward the industry over the past few years, mostly due to cost and product effectiveness. Among the major US bankers, JPMorgan Chase also provides customized ETFs in the US and internationally.

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