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Bank of America's wealth management revenue is likely to stagnate in the coming years



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The Bank of America Merrill Lynch logo is displayed on the facade of the OUE Bayfront building in Singapore on Friday, June 14, 2013. Photographer: Munshi Ahmed / Bloomberg

BLOMBERG NEWS

After the economic downturn, Bank of America has evolved from a traditional consumer and consumer credit bank to a balanced bank with significant wealth management and investment banking. Trefis analyzes trends in Bank of America Wealth Management business since 2006 in an interactive dashboard, along with our expectations for the next three years. While wealth management will remain the second largest operating unit for US banking giants in the foreseeable future, we expect the wind industry to weigh in on wealth management revenue over the next three years.

Trafis' ratings Bank of America rating to be $ 33 per share, which is 10% higher than the current market price and includes changes to our forecast next Bank of America Income release earlier this month. Plus you can see more Data from Trefis for financial services companies here,

How are Bank of America earnings Changed over the last decade and what is the forecast?

  • Consumer banking is the single largest contributor to Bank of America's top line and has dominated its revenue charts over the last decade (2009-18). The average share of consumer banking revenue was 42% during this period.
  • Securities trading revenues have been steadily declining over the last decade as the bank shrinks its dependency on this segment and focuses its wealth management efforts to drive growth.
  • Bank of America's wealth management revenue has nearly tripled since 2006 thanks to the acquisition of Merrill Lynch by the bank at the height of the downturn. This helped the unit's share revenue jump from 10% in 2006 to over 21% in 2018.
  • Bank of America's total revenue is expected to grow at an average annual rate of 1.6% and reach $ 95 billion by 2021.
Trefis

How has Bank of America's wealth management leverage evolved over the last decade and what is the forecast?

  • Wealth management fee revenue increased from below $ 4 billion in 2006 to $ 13 billion in 2018. However, it is expected to remain largely due to a decline in fee rates in the coming years.
  • Charges as a% of client assets rose above 2006-15, reaching an average of about 0.51%. However, increased competition in the global wealth management industry weighed heavily on fees as a% of client assets, shrinking from 0.54% in 2015 to 0.48% in 2017.
  • The figure jumped to 0.53% in 2018 due to a decline in asset valuation in December 2018, and Trefis expects the figure to normalize to 0.47% in 2019 before gradually falling to 0.45% to 2021

How has net interest income from wealth management changed and what is the forecast?

  • Net interest income decreased from $ 6 billion in 2009 to $ 5.5 billion in 2015, before rising to $ 6.3 billion in 2018. Mainly driven by a decline in net interest, partially offset by growth of wealth management loans in 2009-2015. In addition, we expect it to pass $ 6.7 billion by 2021.
  • Net interest income has been declining for most of the last decade due to the impact of a sustained low interest rate environment between 2009 and 2015. While interest rates have improved over the past few years, strong competition in the wealth management industry has kept the yield low.
  • In particular, average wealth management loans have grown by 65% ​​over the last decade and are expected to reach $ 175 billion over the next three years.

Overall, wealth management revenue has grown at an average annual rate of 2% over the last decade, from $ 16.1 billion in 2009 to $ 19.3 billion in 2018. However, we expect it to decline slightly in the coming years.

How does Bank of America's wealth management business compare to its peers?

  • The five largest banks in the world in terms of their wealth management operations are UBS, Bank of America, Morgan Stanley, Credit Suisse and JPMorgan (in decreasing order of client assets)
  • Focusing on the top three wealth managers in the US, Morgan Stanley is the one with the most dependency on the wealth management segment (43% of 2018 total revenue), followed by Bank of America (21% of total revenue in 2018) and JPMorgan (13%) of total revenue in 2018).
  • Although Morgan Stanley has grown at a CAGR of 7% over the last decade (the highest of its peers), Bank of America tops the revenue chart with an average annual revenue of 17.5 billion.
  • In addition, Bank of America performed better than its counterparts in terms of wealth management fees, with an average annual figure of $ 11.6 billion. However, JPMorgan quickly increased this revenue component with a CAGR of 5.8% over the 10-year period 2009-18.
  • In particular, Morgan Stanley has seen a 6.5x increase in net interest income over the last decade, the highest among its peers and may be due to its focus on increasing traditional banking services to wealth management clients.
  • Also, Bank of America recorded the highest average net interest income of $ 5.9 billion over the same period.

Per Trefis, Bank of America earnings (shows key revenue components) is expected to reach $ 92 billion for 2019, bringing the EPS to $ 2.85. This EPS, combined with a P / E multiple of 11.7x, works out to a $ 33 price tag Bank of America Shares (shows cash analysis and valuation), which is 20% above the current market price.

What's behind Trephis? See how to create a new collaboration and what to do

For & Nbsp;Finance and finance teams| & Nbsp;Products, research and development and marketing teams

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The Bank of America Merrill Lynch logo is displayed on the facade of the OUE Bayfront building in Singapore on Friday, June 14, 2013. Photographer: Munshi Ahmed / Bloomberg

BLOMBERG NEWS

Following the economic downturn, Bank of America has transformed from a traditional consumer and consumer-oriented bank to a balanced bank with significant wealth management and investment banking businesses. Trefis analyzes trends in Bank of America Wealth Management business since 2006 in an interactive dashboard, along with our expectations for the next three years. While wealth management will remain the second largest operating unit for US banking giants in the foreseeable future, we expect the wind industry to weigh in on wealth management revenue over the next three years.

Trefis estimates Bank of America's estimate of $ 33 per share, which is 10% higher than the current market price and includes changes to our forecast after the release of Bank of America's earnings earlier this month. You can also see more Trefis data for financial services companies here.

How have Bank of America earnings changed in the last decade and what is the forecast?

  • Consumer banking is the single largest contributor to Bank of America's top line and has dominated its revenue charts over the last decade (2009-18). The average share of consumer banking revenue was 42% during this period.
  • Securities trading revenues have been steadily declining over the last decade as the bank shrinks its dependency on this segment and focuses its wealth management efforts to drive growth.
  • Bank of America's wealth management revenue has nearly tripled since 2006 thanks to the acquisition of Merrill Lynch by the bank at the height of the downturn. This helped the unit's share revenue jump from 10% in 2006 to over 21% in 2018.
  • Bank of America's total revenue is expected to grow at an average annual rate of 1.6% and reach $ 95 billion by 2021.

How has Bank of America's wealth management leverage evolved over the last decade and what is the forecast?

  • Wealth management fee revenue increased from below $ 4 billion in 2006 to $ 13 billion in 2018. However, it is expected to remain largely due to a decline in fee rates in the coming years.
  • Charges as a% of client assets rose above 2006-15, reaching an average of about 0.51%. However, increased competition in the global wealth management industry weighed heavily on fees as a% of client assets, shrinking from 0.54% in 2015 to 0.48% in 2017.
  • The figure jumped to 0.53% in 2018 due to a decline in asset valuation in December 2018, and Trefis expects the figure to normalize to 0.47% in 2019 before gradually falling to 0.45% to 2021

How has net interest income from wealth management changed and what is the forecast?

  • Net interest income decreased from $ 6 billion in 2009 to $ 5.5 billion in 2015, before rising to $ 6.3 billion in 2018. Mainly driven by a decline in net interest, partially offset by growth of wealth management loans in 2009-2015. In addition, we expect it to pass $ 6.7 billion by 2021.
  • Net interest income has been declining for most of the last decade due to the impact of a sustained low interest rate environment between 2009 and 2015. While interest rates have improved over the past few years, strong competition in the wealth management industry has kept the yield low.
  • In particular, average wealth management loans have grown by 65% ​​over the last decade and are expected to reach $ 175 billion over the next three years.

Overall, wealth management revenue has grown at an average annual rate of 2% over the last decade, from $ 16.1 billion in 2009 to $ 19.3 billion in 2018. However, we expect it to decline slightly in the coming years.

How does Bank of America's wealth management business compare to its peers?

  • The five largest banks in the world in terms of their wealth management operations are UBS, Bank of America, Morgan Stanley, Credit Suisse and JPMorgan (in decreasing order of client assets)
  • Focusing on the top three wealth managers in the US, Morgan Stanley is the one with the most dependency on the wealth management segment (43% of 2018 total revenue), followed by Bank of America (21% of total revenue in 2018) and JPMorgan (13%) of total revenue in 2018).
  • Although Morgan Stanley has grown at a CAGR of 7% over the last decade (the highest of its peers), Bank of America tops the revenue chart with an average annual revenue of 17.5 billion.
  • In addition, Bank of America performed better than its counterparts in terms of wealth management fees, with an average annual figure of $ 11.6 billion. However, JPMorgan quickly increased this revenue component with a CAGR of 5.8% over the 10-year period 2009-18.
  • In particular, Morgan Stanley has seen a 6.5x increase in net interest income over the last decade, the highest among its peers and may be due to its focus on increasing traditional banking services to wealth management clients.
  • Also, Bank of America recorded the highest average net interest income of $ 5.9 billion over the same period.

Per Trefis, Bank of America Revenue (shows key revenue components) is expected to reach $ 92 billion for 2019, bringing the EPS to $ 2.85. This EPS, combined with a P / E multiple of 11.7x, works up to a $ 33 price target on Bank of America (shows cash analysis and valuation), which is 20% above the current market price.

What's behind Trephis? See how to create a new collaboration and what to do

For Finance and finance teams| Product, R&D and marketing teams

More information on Trefis

Like our charts? Take a look at sample interactive dashboards and create your own

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