US Banks See Wealth Management Boom for Loans and New Assets

The wealth management businesses of large US banks had another stellar performance in the third quarter, driven by record levels of new money coming into accounts and growing demand from clients to borrow against their investment portfolios.

Morgan Stanley Inc, JPMorgan Chase & Co, Bank of America Corp and Goldman Sachs Group Inc. reported double-digit growth in wealth management loan balances and income this week.

While the COVID-19 pandemic devastated large portions of the economy and put millions out of work, extraordinary government measures aimed at mitigating the economic shock have also improved the lot of the rich, by pushing down interest rates and drive a massive stock market rally.

Global financial wealth soared to a record $ 250 trillion in 2020, according to a report released in June by the Boston Consulting Group.

That has increased the demand for money managers, increased the value of the assets managed by these brokerages, and made it more attractive for clients to borrow.

“At the high-net-worth end of the spectrum, loan products have been very healthy, and it’s being seen by companies like Morgan Stanley, where wealth management loan balances have risen more than 30% year-on-year,” said Devin Ryan, analyst at JMP values.

Morgan Stanley’s wealth management business reported revenues of US $ 5.935 million, 28% more than last year. Wealth management loan balances reached US $ 121 billion, 33% more than the previous year, mainly from clients who took out mortgages and borrowed against their investments.

Bank of America’s Merrill Lynch Wealth Management reported record revenue of $ 4.5 billion, up 19% from last year, while loan balances grew 10% to exceed $ 133 billion.

In JPMorgan’s asset and wealth management business, revenue was up 21% to $ 4.3 billion, while average loans were up 20% from last year.

Both Bank of America and JPMorgan said the main driver of loan growth was value-based loans, followed by mortgages and personalized loans.

Morgan Stanley, which derives about half of its income from wealth management, said net new assets increased 89% to $ 135 billion in the third quarter from the prior quarter.

Bank of America reported that over the past year, it generated more than $ 112 billion in new net assets in its global wealth management business.

Goldman Sachs, which has a smaller wealth management unit that serves only the very wealthy, said earnings from wealth management were up 40% from last year to $ 1.64 billion, while loan balances also grew. 40% to reach US $ 42,000 million.

JPMorgan does not disclose new net assets for its asset and wealth management business.