At last count, the Global Wealth & Investment Management (GWIM) business of Bank of America had staggering $2.4 trillion in assets under management and delivered nearly $3 billion to the bottom line of the bank in 2013. Competitor Wells Fargo (NYSE:WFC) also has a massive Wealth, Brokerage and Retirement (WBR) business with $1.4 trillion in assets that netted it $1.7 billion last year.
But a dive into the details reveals the GWIM business at Bank of America delivers remarkable results now, and could be poised to do even more in the future.
After a relatively flat year between 2011 and 2012, last year the revenue delivered by the wealth management lines at both banks grew by roughly 8%.
Yet Bank of America saw the net income delivered by its business jump by 33% from just 2012 to 2013. On the other hand, the Wealth, Brokerage and Retirement business at Wells Fargo increase by just 34% in total over the last two years:
So how has it done this? Its bottom line profit margin highlights an impressive trend:
As you can see, the two were roughly equal in 2011, but over the last two years Bank of America has been able to expand its margin by more than 6 percentage points, which is 2.5 times higher than the gain by Wells Fargo. All of this is to say the Global Wealth & Investment Management business at Bank of America hasn't just been adding to its top-line revenue and other metrics, but it too has been able to expand its profitability in a staggering way.
The reason for the growth
The bank has done an incredible job at cutting costs through its New BAC initiative, as its efficiency ratio -- which measures the cost of each dollar of revenue -- has fallen from 83% in 2011 to 73% in 2013. In addition, it's also become much more productive, as the total revenue per advisor has grown by 8% on average annually since 2009.
Bank of America also recently highlighted it has done a better job at expanding its services to clients -- whether businesses or individuals -- who may have a loan or checking account with the bank, but don't utilize its asset management services.
And the bank believes this won't simply be growth recognized over the last few years, but it should continue into the future as well. At a recent presentation on its GWIM business, Bank of America executives noted there are a staggering nine million households with existing B of A relationships that have more than $11.6 trillion in investment assets not held at Bank of America.
It is no wonder they said these customers of its consumer banking unit "represent a substantial wealth management opportunity."
The key takeaway
All too often we can become distracted by the headline grabbing -- and often troubling -- news about Bank of America (especially when compared to peers like Wells Fargo.)
But when exploring the operations and value of its businesses to truly grasp where it will stand once the legal woes are finally behind it, there is more and more reason to be optimistic about its future.
Patrick Morris owns shares of Bank of America. The Motley Fool recommends Bank of America and Wells Fargo. The Motley Fool owns shares of Bank of America and Wells Fargo and has the following options: short June 2014 $48 puts on 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.