Sumary of UPDATE 1-U.S. banks see wealth management boom on borrowing, new assets:
- By Elizabeth Dilts Marshall4 Min ReadNEW YORK (Reuters) -Big U.S. banks’ wealth management businesses put in another stellar performance in the third quarter, buoyed by record levels of new money flowing into accounts and surging demand from clients to borrow against their investment portfolios.
- Co, Bank of America Corp here and Goldman Sachs Group here Inc. each reported double-digit growth in wealth management loan balances and revenues this week.
- While the COVID-19 pandemic devastated large chunks of the economy and put millions out of work, extraordinary government measures aimed at mitigating the economic blow have also boosted the fortunes of the wealthy by pushing down interest rates and driving a massive stock market rally.
- Global financial wealth soared to a record high of $250 trillion in 2020, according to a June report by Boston Consulting Group.
- “At the high net worth end of the spectrum, lending products have been very healthy and you’re seeing that at firms like Morgan Stanley where wealth management loan balances are up over 30% year over year,” said Devin Ryan, an analyst at JMP Securities.
- Morgan Stanley’s wealth management business reported revenues of $5.935 billion, up 28% from last year.
- Wealth management loan balances reached $121 billion, up 33% year-on-year, mostly from clients taking out mortgages and borrowing against their investments.
- A booming area of lending for wealth management brokerages, so-called securities based loans or lines of credit, allow clients to borrow up to a certain percent of the value of their investment accounts to spend on anything except more securities.