Bank of America's Most Important Business

Net income from one of Bank of America's businesses grew by 32% year over year, and its total now bests that posted by both Wells Fargo and JPMorgan Chase.

Jan 23, 2014 at 7:00AM

Bank of America (NYSE:BAC) has a number of compelling things going for it, but investors should principally see its continued execution and success from one of its smaller businesses: Wealth & Investment Management.


Bank of America corporate headquarters.

Bank of America has four principal business lines, including Wealth & Investment Management, which delivered an impressive $16.1 billion in net income in 2013 -- a 12% improvement over the $14.4 billion posted in 2012.

While its Consumer & Business banking arm is by far its biggest, with an impressive $6.6 billion in net income last year, Bank of America actually has a rather diverse income and revenue stream:

Source: Company earnings reports.

Interestingly, while Bank of America is not often thought of as having an impressive wealth management business, of the three other major banks, both Wells Fargo (NYSE:WFC) and JPMorgan Chase (NYSE:JPM) only had roughly 8% of their net income from core operations from their wealth management divisions, netting $1.7 billion and $2.0 billion respectively.

Most profitable and fastest growing business
Yet while it is Bank of America's second smallest business, the Wealth & Investment Management division at Bank of America could be its most important. Of the four core businesses, it delivered the most impressive growth in net income year over year:

Source: Company earnings reports.

In fact, not only was the Wealth & Investment Management business the fastest at growing its net income, it was also the most profitable of all the businesses:

Source: Company earnings reports.

Impressive gains
There were a number of reasons for this stunning growth, including the growth of its assets under management from $698 billion to $821 billion, a gain of 18%. In total, its total client balances grew to $2.4 trillion, up from $2.2 trillion at the end of 2012. All while it reduced the number of advisors from 20,400 to 19,300.

Ultimately, these gains resulted in a record number of asset management fees, topping $1.8 billion, and it even averaged more than $1 million in revenue per financial advisor in 2013. Clearly, the business had a remarkable 2013.

Not finished growing
Even with the impressive growth year over year, it's highly likely the growth in Bank of America's Wealth Management business will continue into the future. First, many have noted that broader industry trends are changing for the better. Consider a recent working paper by consultancy Booz & Company that noted, "despite the trials of the last few years and the challenges that lie ahead, wealth management is an attractive growth industry for the long term with return on equity superior to that of any other financial-services segment." 


At a recent presentation at the Goldman Sachs Financial Services Conference CEO Brian Moynihan noted that despite its incredible size, Bank of America's investments business had only 1% of the $5.6 trillion in investment balances that its current customers have. All of this is to say that impressive growth can be had by simply extending those relationships with its existing customers. 

Certainly there is a lot to dive into when it comes to a bank with more than $2.1 trillion in assets -- but the Wealth & Investment Management business at Bank of America had an impressive 2013 in delivering bottom-line results, and all signs point to that continuing for years to come.

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Fool contributor Patrick Morris owns shares of and Bank of America. The Motley Fool recommends, Bank of America, Netflix, and Wells Fargo. The Motley Fool owns shares of, Bank of America, JPMorgan Chase, Netflix, and Wells Fargo. Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.

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