Wealth management stagnates at Canada's big banks

Thu Aug 30, 2012 3:49pm EDT
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By Andrea Hopkins

TORONTO (Reuters) - Wealth management profits at Canada's big banks shrank or stagnated in the sector's third quarter, as market malaise and skittish investors again neutralized a segment expected to emerge as a future money-maker for the nation's big lenders.

With billions of dollars of assets under management in the mutual fund, investment advisory and brokerage services of Canada's big five banks, wealth management can add big profits in bull markets -- but languish in bearish ones.

"Higher volatility and lingering concern about Europe returned, and I'm not surprised to see assets under management and under administration flat to down over the quarter," said Edward Jones analyst Tom Lewandowski.

"You need both of those things to go in the right direction for this business to work."

Assets under management (AUM) were little changed for the big five Canadian banks that reported third-quarter earnings in recent days -- Royal Bank of Canada (RY.TO: Quote), Bank of Nova Scotia (BNS.TO: Quote), Toronto-Dominion Bank (TD.TO: Quote), Bank of Montreal (BMO.TO: Quote) and Canadian Imperial Bank of Commerce (CM.TO: Quote) -- as flat or falling markets hurt investments.

With both retail and institutional investors staying on the sidelines, the banks mostly stuck with existing product lines in a bid to keep costs contained until market confidence comes back and they can start selling advice and investments again.

"Investor activity levels were low, reflecting uncertainty and lack of new issuance. These two trends depressed top-line performance in many wealth management divisions," Moody's banking analyst David Beattie said in an email.

Canada's biggest bank stumbled hardest, though the results included a C$29 million charge in the third quarter. Excluding that, profits were down 8 percent compared with a year earlier.   Continued...