US banks are experiencing a boom in wealth management

The wealth management business of the major US banks posted another brilliant performance in the third quarter, supported by a record high inflow of new money into accounts and increasing customer demand for loans for their investment portfolios.

Morgan Stanley (NYSE: MS) Inc, JPMorgan Chase & Co (NYSE: JPM), Bank of America Corp (NYSE: BAC), and Goldman Sachs Group Inc (NYSE: GS). reported double-digit increases in credit and income in wealth management this week.

While the COVID-19 pandemic devastated large parts of the economy and left millions of people unemployed, extraordinary government measures to mitigate the economic shock have also strengthened the wealth of the wealthy by pushing interest rates down and sparking a massive stock market rally.

According to a June report by the Boston Consulting Group, global financial wealth rose to a record high of $ 250 trillion in 2020.

This has increased the demand for asset managers, increased the value of the assets these brokers manage, and made borrowing more attractive to clients.

"On the wealthy end of the spectrum, credit products have done very well, and you can see that at companies like Morgan Stanley, where asset management credit balances are up over 30% year-over-year," said Devin Ryan, an analyst at JMP Securities.

Morgan Stanley's wealth management business had sales of $ 5.935 billion, up 28% from a year earlier. Asset management loan balances hit $ 121 billion, up 33% year over year mainly due to taking out mortgages and borrowing against their investments.

A booming area of ​​lending for asset management brokers called securities-based loans, or lines of credit, enables customers to borrow up to a percentage of the value of their investment accounts, which they can spend on anything but other securities. As these investment accounts have grown in value, so have lending.

Bank of America's Merrill Lynch Wealth Management reported record revenues of $ 4.5 billion, up 19% from last year, while loan balances rose 10% to over $ 133 billion.

In JPMorgan's wealth management business, revenues grew 21% to $ 4.3 billion, while average loans increased 20% year over year.

Both Bank of America and JPMorgan said credit growth was primarily due to securities-based lending, followed by mortgages and custom loans.

Morgan Stanley, which derives roughly half of its income from wealth management, reported that net new assets rose 89% quarter over quarter to $ 135 billion, in part due to the acquisition of a group of retirement advisors , which raised $ 43 billion in chargeable assets to the bank.

Bank of America reported that it had gained over $ 112 billion in new assets in its global wealth management business over the past year.

According to the bank, Merrill Lynch was also able to win 4,200 new households.

Goldman Sachs, which has a smaller wealth management unit for extremely wealthy clients, said net wealth management revenue increased 40% year over year to $ 1.64 billion, while loan balances were also up 40% to 42 billion . USD have increased.

JPMorgan does not report net new money for its asset and wealth management business.