11 takeaways from wealth management's Q1 earnings season

May 5, 2022 4:53 PM

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First-quarter earnings reports are always eagerly anticipated, but inflationary pressures and Russia’s mid-quarter invasion of Ukraine combined to create even more tension than usual.

From record-breaking revenue increases to missed analyst estimates, here are 11 key announcements covered by Financial Planning in Q1 2022.

Bloomberg News

These 10 wealth managers paid their CEOs an average of $27M in 2021

CEOs at 10 of the largest wealth managers benefited from stronger earnings in 2021 than the previous year by receiving higher overall compensation.

Base CEO salaries increased by about 3% last year, but incentive pay provisions in executive contracts led to larger increases for many, according to Ed Steinhoff, a managing director with Pearl Meyer who works with several banks and insurance companies.

In a highly competitive market for top talent, this was the result of firms “recalibrating to adjust” their executive compensation in 2021 after the coronavirus wiped out a lot of their earnings a year earlier, said Eric Labourdette, a principal at ClearBridge Compensation Group.

Read more: These 10 wealth managers paid their CEOs an average of $27M in 2021

BNY Mellon Pershing bank picture Bloomberg April 22, 2019

Bloomberg News

Pershing takes in $18B in net new assets; revenue, fees fall

BNY Mellon announced a first-quarter increase of $18 billion in net new assets in Pershing, the largest business line in its Market and Wealth Services unit, while the unit’s overall earnings were down and revenue remained flat.

The bank’s earnings call went on to detail a 2% rise in investment and wealth management AUM to $2.3 trillion due to cumulative net inflows into cash and long-term products, as well as higher market values.

CEO Todd Gibbons also spoke about making “solid progress” on Pershing X, its new technology-focused business unit for RIAs and broker-dealers, describing it as “an investment in the medium- to long-term.”

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Pershing takes in $18B in net new assets; revenue, fees fall

J.P. Morgan adds hundreds of financial advisors as profits slip

Concerns about a potential recession brought on by “high inflation, supply chain issues and the war in Ukraine” were in marked contrast to the optimism engendered by the number of advisors joining the firm, a net increase of 650 in the past year.

The April 13 first-quarter earnings call reported solid numbers across the company, including an 8% rise in AUM to $777 billion in the private bank and a 13% increase in total client assets to $1.88 trillion, despite the challenging circumstances.

“Our focus this quarter remained on helping our clients navigate difficult markets and unpredictable events, which included working with governments to implement economic sanctions of unprecedented complexity,” said CEO Jamie Dimon.

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J.P. Morgan adds hundreds of financial advisors as profits slip

Wells Fargo’s wealth management arm is reaping profit from the Fed’s rate hikes

First-quarter results revealed net income of $465 million for Wells Fargo’s Wealth and Investment Management division, an increase of 11% on the same quarter last year, as announced in the company’s April 14 earnings call. Net interest income also grew to $799 million, up 22% from Q1 2021, driven by higher interest rates, combined with higher deposit and loan balances.

While benefiting from the Fed’s rate hikes, CEO Charlie Scharf expressed an air of caution in the call. “We would expect deposit betas to accelerate after the initial rate hikes and customer migration from lower-yielding to higher-yielding deposit products would also likely increase,” he said.

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Wells Fargo’s wealth management arm is reaping profit from the Fed’s rate hikes

Merrill Lynch Wealth Management takes in record revenue despite choppy stock market

Earnings and revenue both increased by double-digit amounts for MLWM and Private Bank, fueled by higher asset management fees and strong growth in deposits and loans, according to Bank of America’s first-quarter earnings call on April 18.

Against a backdrop of high inflation, rising interest rates and conflict in Ukraine, net income grew year-on-year by 28% to $1.1 billion, while revenue rose by 10% for a record-breaking haul of $5.5 billion. However, this was offset by an increase in expenses, up 4% to $4 billion.

President Andy Sieg also discussed new hires in the firm’s $71.5 billion alternative investment business that would allow them to launch new funds “at a greater rate.”

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Merrill Lynch Wealth Management takes in record revenue despite choppy stock market

Goldman Sachs’ wealth and consumer arm reels in record business

Goldman Sachs’ Consumer & Wealth Management unit maintained its revenue growth streak for a third consecutive quarter by recording an increase of 21% year over year to $2.1 billion, as reported in the firm’s April 14 earnings call.

“We continue to be focused on that opportunity,” CEO David Solomon said in reply to a question about the firm’s wealth business.

In the call, Solomon addressed the bank’s position on crypto and blockchain, and condemned the invasion of Ukraine “in the strongest possible terms” as Goldman continues to wind down its operations in Russia.

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Goldman Sachs’ wealth and consumer arm reels in record business

Assets up, revenue down for Morgan Stanley Wealth Management

Morgan Stanley Wealth Management’s first-quarter earnings announcement was a tale of contrasting fortunes. Net new assets increased by $142 billion, up 12% from Q4 2021 and 35% from the same quarter last year. However, net revenues of $5.935 billion were down 5% on the previous quarter and remained flat year over year.

CEO James P. Gorman maintained a positive attitude in the company’s earnings statement toward these first-quarter ups and downs, particularly given the market volatility and economic uncertainty. “The quarter’s results affirm our sustainable business model is well positioned to drive growth over the long term,” he said.

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Assets up, revenue down for Morgan Stanley Wealth Management

Citigroup’s global wealth management revenues slide while assets and advisors are up

Citigroup Global Wealth Management announced revenue of $1.92 billion in Q1, a year-over-year decrease of 1% resulting from a reduction in client investments, in the company’s first-quarter earnings statements in April. This was offset by a 4% increase in client assets to $788 billion.

“Investment revenues declined as geopolitical tensions impacted the capital markets, which resulted in clients pulling back their trading activity, particularly in Asia,” Citigroup CFO Mark Mason said during the earnings call, as per a transcript by Motley Fool.

However, with average deposits up 14%, average loans up 5%, client assets up 4% and client advisors up 6%, Mason believes the outlook “remains strong.”

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Citigroup’s global wealth management revenues slide while assets and advisors are up

Charles Schwab misses estimates, gains client assets for the quarter

Schwab reported an increase of 11% in total client assets year over year for the first quarter, up to $7.86 trillion, but rising inflation, volatile equity markets and the war in Ukraine among other challenges resulted in company performance that fell short of analyst estimates for Q1 2022.

Adjusted earnings per share came in at 77 cents, well below the 84-cent estimate of analysts surveyed by Bloomberg. Similarly, the $4.7 billion in net revenue came in slightly below consensus estimates of $4.8 billion.

Despite these near misses, CEO Walt Bettinger said the company’s business momentum remained “quite strong,” noting the growth in total client assets, core net new assets and active brokerage accounts as contributors to that continued momentum in the firm’s quarterly earnings statements.

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Charles Schwab misses estimates, gains client assets for the quarter

Ameriprise wealth unit’s growth offsets equity volatility with ease

Ameriprise’s Advice & Wealth Management unit brought in $440 million in pretax adjusted operating earnings on net revenue of $2 billion, a margin of 21.5%, as reported in the company’s first-quarter earnings statement, despite the impact of declining asset values.

The unit’s growth was accompanied by an increase in the number of Ameriprise advisors to 10,149, a total headcount that reflects the company’s “excellent advisory retention.”

“Ameriprise delivered another good quarter during a period of heightened market volatility and geopolitical uncertainty,” CEO Jim Cracchiolo said. “As I look ahead, we are well positioned to continue to drive organic growth and will benefit from the rising rate environment in the U.S.”

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Ameriprise wealth unit’s growth offsets equity volatility with ease

Stifel more than doubles its recruits and reaches record revenue

Stifel registered its highest overall revenue and asset management fees and topped previous records for net interest income in the first quarter, as per the firm’s earnings statement and an analysts’ call on April 27. The firm also added 39 advisors, twice the number in the same period last year.

“The market environment has not been exactly what we had initially projected,” CEO Ron Kruszewski said in prepared remarks transcribed by investing website Seeking Alpha. “This is why we’ve consistently emphasized the importance of the diversification of our business model.”

This strategy has resulted in a small first-quarter increase in profit and a steep decline in margin.

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Stifel more than doubles its recruits and reaches record revenue