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Summary Of Financial Results In Private Banking, Wealth Management - Q1, 2021
Editorial Staff
7 July 2021
Here is a summary of the results from a range of the major banking groups - and some other financial actors - around the world. The results focus on the largest institutions which provide wealth management. Not all banks report on a calendar year schedule, and not all of the institutions are alike, so the results from standalone institutions such as Julius Baer should be viewed differently from wealth management results embedded within a larger institution. These results may be subsequently revised. As not all the banks reported on the same day, the exchange rate comparisons with the dollar have been taken out. We hope readers find it useful to see these figures collated into one article. To comment, email tom.burroughes@wealthbriefing.com. ABN AMRO Net income fell by 38 per cent year-on-year to £1.299 billion; total costs were marginally lower, at £952 million, narrowing by 8 per cent. The cut in wealth income reflected the transfer of business to the Schroders Personal Wealth JV business in 2019, and lower net interest income caused by very low interest rates, Wealth management fees rose by 24 per cent year-on-year to a record S$519 million. Investment banking fees rose by 36 per cent year-on-year to S$49 million, it said. Costs rose by 2 per cent from a year earlier, at S$1.59 billion.
Citigroup
The bank reported net income for the first quarter 2021 of $7.9 billion, or $3.62 per diluted share, on revenues of $19.3 billion. This compared with net income of $2.5 billion, or $1.06 per diluted share, on revenues of $20.7 billion for the first quarter 2020.
Revenues fell by 7 per cent from the prior-year period, as higher revenues in investment banking and equity markets were more than offset by lower rates, the absence of prior year mark-to-market gains on loan hedges within the institutional clients group, and lower card volumes in global consumer banking. Net income of $7.9 billion increased significantly from the prior-year period driven by the lower cost of credit. Earnings per share of $3.62 increased significantly from the prior-year period, reflecting the increase in net income, as well as a slight decline in shares outstanding.
Private bank revenues of $1.0 billion rose by 8 per cent, driven by higher lending volumes and strong managed investments revenues.
JP Morgan
The firm reported a net income of $14.3 billion, in comparison with $2.865 billion in the first quarter of last year. $5.2 billion of credit reserve releases caused the increase, along with rising revenues and a drop in provision for credit losses. Net revenues stood at $33.119 billion in Q1 2021, up from $29.01 billion a year ago. Non-interest costs rose to $18.725 billion from $16.791 billion a year earlier.
By contrast with the credit reserve releases of $5.2 billion in Q1, last year saw credit reserve builds of $6.8 billion. The bank bolstered its reserves last year as the COVID-19 pandemic hit, forcing lenders to set aside capital for bad loans. Within the asset and wealth management arm, which includes private banking, the bank said net income rose to $1.244 billion in Q1, up from $669 million; net revenues rose to $4.08 billion from $3.389 billion a year ago. Total assets under management stood at $2.8 trillion as of end-March.
Goldman Sachs
The business reported a surge in net earnings applicable to common shareholders, standing at $6.711 billion in the first three months of 2021, from $1.123 billion a year earlier. Total operating costs rose to $9.437 billion in Q1, from $6.458 billion, blunting some of the improvement in the profits result.
The firm had to set aside far less money for credit losses over the 12-month period as the COVID-19 crisis that broke last year began to unwind. Provision for credit losses was a net benefit of $70 million for the first quarter of 2021, compared with net provisions of $937 million for the first quarter of 2020 and $293 million for the fourth quarter of 2020.
Within the consumer and wealth management arm, Goldman Sachs said that net revenues were $1.738 billion, rising from $1.492 billion a year earlier, or up by 16 per cent. Within that mix, private banking and lending revenues were $371 million, up from $282 million a year before; wealth management revenues rose to $1.367 billion from $1.210 billion. The gain in private banking mainly reflected higher net interest income from lending, while incentive fees fell.
Morgan Stanley
Its acquisition last year of discount E*TRADE, one of the largest such wealth management deals in years, helped propel its earnings for 2020. It reported net revenues of $13.6 billion for the fourth quarter ending 31 December 2020 compared with $10.9 billion a year ago. Net income applicable to Morgan Stanley was $3.4 billion, or $1.81 per diluted share, compared with $2.2 billion, or $1.30 per diluted share, for the same period a year ago.
The organisation said the E*TRADE transaction affected comparisons of current year results with prior periods in its wealth segment. That deal was completed at the start of October 2020. In the same month, Morgan Stanley announced that it was buying the asset manager, Eaton Vance. The transactions have consolidated the firm’s presence in the discount brokerage and asset management space, where scale is crucial in a low-margin business which is also subject to ferocious competitive pressures.
BNY Mellon
Assets under custody/administration came in at $41.7 trillion, rising by 18 per cent, buoyed by higher market values, net new business and the exchange rate effect of a weaker US dollar. Assets under management stood at $2.2 trillion, rising by 23 per cent.
Northern Trust
The firm reported first quarter net income of $375.1 million, compared with $240.9 million in the prior quarter and $360.6 million in the prior-year quarter. Total wealth management assets at the end of March stood at $355 billion, up from $347.8 billion at the end of 2020, and up from $276.7 billion a year earlier. Across all its business lines, AuM was $1.449 billion, up from $1.405 billion and $1.119 billion, respectively.
BlackRock
The world’s largest asset manager reinforced its status by reporting $9 trillion in AuM at the end of March, up from $6.466 trillion a year before. It booked total net inflows of $171.6 billion in the first three months of this year, surging from $34.9 billion in Q1 2020. The firm logged $1.199 billion of net income, up from $806 million.
UBS
The global wealth management arm of UBS chalked up a first-quarter 2021 pre-tax profit of $1.409 billion, up from $1.218 billion a year ago. GWM operating income stood at $4.848 billion, against $4547 billion a year earlier. Meanwhile, operating costs rose slightly to $3.439 billion from $3.329 billion a year before.
Total invested assets were $3.1 trillion in global wealth management at the end of March. There were net new assets of $36.2 billion, with inflows coming from all regions. Fee-generating assets stood at $1.328 trillion at the end of March, rising by 4 per cent sequentially.
Deutsche Bank
Deutsche Bank reported that its private bank’s profits surged by 92 per cent year-on-year in the first quarter 2021 to €274 million. Private bank net revenues were flat on a year ago at €2.2 billion. Continued deposit margin compression from interest rate headwinds was mitigated by continued business growth, with record net new business volumes of €15 billion in the quarter. The net new business volume figure includes net inflows of investment products of €9 billion and net new client loans of €4 billion. In the private bank in Germany revenues rose by 1 per cent, while in the international private bank, revenues slipped by 1 per cent on a year before.
Assets under management rose by €26 billion to €519 billion during the quarter, exceeding half a trillion euros for the first time since 2017, reflecting net inflows in investment products and positive effects from market performance and currency translation. Across the whole Deutsche Bank group, its provision for credit losses collapsed by 86 per cent, down from €506 million in the first quarter of 2020.
BNP Paribas
The wealth and asset management arm booked revenues of €784 million in the first three months of 2021, versus €743 million a year ago, although it fell from €786 million in the final quarter of last year. Pre-tax income surged to €275 million from €102 million. Operating costs and depreciation fell to €612 million from €642 million a year earlier. There were “very good net asset inflows, particularly with large accounts and very good level of fees on AuM and on transactions” in the wealth business during the quarter, the firm said, but did not elaborate with numbers.
Explaining its results, the group said that the impact of the low-interest-rate environment on wealth management’s net interest income was partly offset by higher fees. Asset management’s revenues were “solid,” driven by 2020 strong net asset inflows and the performance effect. Real Estate Services’ revenues “are very gradually returning to normal”.
After settling a two-year AML investigation by Dutch prosecutors, ABN AMRO reported a €54 million loss for the first quarter. Net interest income was down by 11 per cent for the year, attributed to continued pressure on deposit margins and lower corporate loan volumes as the bank continues to shed non-core areas in a bid to refocus on commercial and retail businesses. It reported a net impairment of €77 million for the quarter. Excluding the hefty AML fine logged for the quarter, net profits would have stood at €426 million.
Societe Generale
Revenues rose by 21 per cent vs Q1 20 at €6.2 billion. Underlying operating expenses fell -2.2 per cent vs Q1 2020. There was an underlying group net income of €1.3 billion. Private banking’s assets under management totalled €72 billion at end-March 2021. Net inflow was €1.3 billion in Q1. Asset and wealth management’s net banking income totalled €225 million in Q1 this year, falling by 1.7 pr cent year-on-year.
Credit Suisse
The bank booked an expected net loss in the first three months of 2021 – SFr252 million – as a result of the heavy blow sustained by the Archegos hedge fund blow-up to which it was exposed, taking the shine off what would otherwise have been a strong quarter. On a pre-tax basis, the Q1 loss was SFr757 million. The Zurich-listed bank said that provision for credit losses surged to almost SFr4.4 billion in Q1, standing at SFr4.394 billion, up from SFr568 billion a year ago – or up by 80 per cent. Return on tangible equity attributable to shareholders slipped into to the red, to -2.6 per cent, against 13.1 per cent a year before.
To bolster its capital, the bank announced that it will offer two series of mandatory convertible notes , Series A MCNs and Series B MCNs, which will be convertible into 100 million shares and 103 million shares of Credit Suisse Group, respectively. The offering is expected to close on or around 12 May. Credit Suisse has suspended its share buyback programme.
Barclays
Barclays delivered a record quarterly group profit before tax in Q1 2021 of £2.4 billion , a return on tangible equity of 14.7 per cent and earnings per share of 9.9p .
HSBC
The bank logged an adjusted pre-tax profit of $6.4 billion in the first three months of this year, surging by 109 per cent. This was helped by last year’s bad loan provisions made amid the pandemic having been reversed. The improved economic outlook meant that the UK/Hong Kong-listed group released allowances for expected losses.
Within wealth and personal banking – the segment including coverage for high net worth and ultra-HNW clients – adjusted pre-tax profit rose to $1.914 billion in Q1, against $688 million a year earlier. Global private banking adjusted revenue stood at $488 million, slipping by 8 per cent year-on-year. Results were squeezed by lower net interest income amid lower global interest rates.
Standard Chartered
The bank reported a first-quarter 2021 income of $3.9 billion, down by 3 per cent on a year ago. Underlying pre-tax profit rose by 18 per cent year-on-year to $1.8 billion, benefiting from a fall in business impairments as the impact of the pandemic abated; it also benefited from rising business momentum, the UK-listed bank said in a statement. On a statutory basis, pre-tax profit rose by 59 per cent to $1.4 billion; the first quarter of 2020 included $258 million of goodwill impairments.
Its Common Equity Tier 1 ratio stood at 14 per cent, at the top of its target range. The bank said it had logged a “record quarter” in its wealth management arm, with income rising by 21 per cent on a year ago, and a “particularly strong sales performance” in forex, equities and structured notes.
Natwest
The private banking arm of Natwest Group, which includes Coutts and Adam & Co, reported an operating profit of £64 million in the first three months of 2021, rising by 31 per cent from the same period a year ago. Contrasting with Q1 of 2020, when the bank reported impairment losses – anticipated amid the pandemic – of £29 million, there were no such impairments in the latest quarter, helping to improve the bottom line. Operating costs rose to £121 million in Q1 from £91 million from the previous quarter but were a touch lower than a year earlier. Total income slipped to £185 million from £201 million a year earlier.
Lloyds Banking Group
The insurance and wealth arm of Lloyds Banking Group – a segment including Lloyds’ wealth joint venture with Schroders – was squeezed by the harsh economic conditions of 2020, posting an underlying profit for last year of £338 million, falling by 68 per cent on a year earlier.
OCBC, Bank of Singapore
The bank’s group net profit for Q1 2021 of S$1.50 billion rose from the S$698 million a year ago, and rose by 33 per cent from S$1.13 billion in the previous quarter. The quarter’s earnings were driven by broad-based income growth and lower allowances
Net fees and commissions grew by 13 per cent to a high of S$585 million. This was driven by a 28 per cent increase in wealth management fees. The group’s wealth management income, comprising income from insurance, premier and private banking, asset management and stockbroking, rose 40 per cent to S$1.21 billion. As a proportion of the group’s total income, wealth management income contributed 41 per cent. Bank of Singapore’s assets under management rose 1 per cent quarter-on-quarter to $123 billion as at 31 March 2021.
DBS
The Singapore-based bank’s net profit for the first quarter of 2021 stood at S$2.01 billion, rising by 72 per cent year-on-year, helped by rising loans, deposits and fee income. Allowances for non-performing loans, which had risen a year ago as the pandemic struck, have been dialled back to the levels before COVID-19. In Q1, there was a general allowance write-back of S$190 million, it said in a statement. Net interest income rose by 2 per cent on an adjusted basis to S$2.11 billion; net interest margins held steady at 1.49 per cent.