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U.S. banks see wealth management boom on borrowing, new assets By Reuters


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© Reuters. FILE PHOTO: Individuals cross the JP Morgan Chase & Co. Company headquarters within the Manhattan borough of New York Metropolis, Might 20, 2015.REUTERS/Mike Segar

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By Elizabeth Dilts Marshall

NEW YORK (Reuters) – Large U.S. banks’ wealth administration companies put in one other stellar efficiency within the third quarter, buoyed by document ranges of recent cash flowing into accounts and surging demand from shoppers to borrow towards their funding portfolios.

Morgan Stanley (NYSE:) Inc, JPMorgan Chase & Co (NYSE:), Financial institution of America Corp (NYSE:) every reported double-digit development in wealth administration mortgage balances and revenues this week.

Whereas the COVID-19 pandemic devastated giant chunks of the economic system and put tens of millions out of labor, extraordinary authorities measures aimed toward mitigating the financial blow have additionally boosted the fortunes of the rich by pushing down rates of interest and driving an enormous inventory market rally.

World monetary wealth soared to a document excessive of $250 trillion in 2020, in line with a June report by Boston Consulting Group.

That has elevated demand for cash managers, elevated the worth of belongings managed by these brokerages, and made it extra interesting for patrons to borrow.

“On the excessive internet price finish of the spectrum, lending merchandise have been very wholesome and also you’re seeing that at corporations like Morgan Stanley the place wealth administration mortgage balances are up over 30% yr over yr,” mentioned Devin Ryan, an analyst at JMP Securities.

Morgan Stanley’s wealth administration enterprise reported revenues of $5.935 billion, up 28% from final yr. Wealth administration mortgage balances reached $121 billion, up 33% year-on-year, principally from shoppers taking out mortgages and borrowing towards their investments.

A booming space of lending for wealth administration brokerages, so-called securities based mostly loans or strains of credit score, enable shoppers to borrow as much as a sure % of the worth of their funding accounts to spend on something besides extra securities. As these funding accounts have grown in worth, so have loans.

Financial institution of America’s Merrill Lynch Wealth Administration reported document revenues of $4.5 billion, up 19% over final yr, whereas mortgage balances grew 10% to high $133 billion.

At JPMorgan’s asset and wealth administration enterprise, revenues 21% to $4.3 billion, whereas common loans rose 20% from final yr.

Each Financial institution of America and JPMorgan mentioned the first driver of mortgage development was securities based mostly loans, adopted by mortgages and customized loans.

Morgan Stanley, which will get round half of its revenues from wealth administration, mentioned internet new belongings rose by 89% to $135 billion within the third quarter from the prior quarter, helped partly by the acquisition of a bunch of retirement advisers that introduced $43 billion in fee-based belongings to the financial institution.

Financial institution of America reported that, over the previous yr, it has introduced on greater than $112 billion in internet new belongings throughout its world wealth administration enterprise.

Merrill Lynch additionally added 4,200 internet new households, the financial institution mentioned.

JPMorgan doesn’t escape internet new belongings for its asset and wealth administration enterprise.

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