Wealth management delivered a strong quarter for Wells Fargo, which reported surging profits and record client assets for the unit despite falling adviser headcount.
Rising net interest income played a key role in boosting wealth management's performance. The firm reported that net interest income, which is partially derived from lending products, rose 14% year-over-year to $1.074 billion.
That helped boost the wealth management unit's profits to $623 million, up 22% from the prior year. However, net income was down from the prior quarter, when Wells Fargo reported $653 million for the unit.
The overall company, which reported little change in profits from the prior year, has been shadowed by account scandal that has cost the firm millions in fines and led to the resignation of CEO John Stumpf last year.
Wells Fargo's wealth management unit includes businesses such as Wells Fargo Advisors, the Private Bank and Abbot Downing, which caters to ultrawealthy clients.
The unit's noninterest expenses rose to $3.2 billion from $3 billion for the prior year, a 5% increase. The firm attributed that increase to higher non-personnel expenses and broker pay.
Total client assets grew 9% to reach $1.8 trillion, according to the firm. Higher market valuations and positive net flows also pushed advisory assets for retail brokerage up 14% to $490 billion.
The growth comes even as adviser headcount ticked downward 3% year-over-year, falling by almost 400 advisers to 14,657. The firm has reported lower headcount for four of the five last earnings reports.
Wells Fargo's adviser force is shrinking at a time when some rivals are attempting to push their broker numbers higher. Merrill Lynch, which fields more than 14,600 advisers, recently said it will recruit and train more brokers to reach an unspecified growth target. And Edward Jones unveiled a new recruiting campaign targeting experienced brokers. The St. Louis-based firm already has one of the industry's largest training programs and currently has over 14,900 advisers.
Wells Fargo is the first wirehouse to report earnings. Bank of America Merrill Lynch and Morgan Stanley report next week.
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