Wells Fargo's wealth sector posts record quarterly profit

NEW YORK (Reuters) - Wells Fargo Corp's (WFC.N) more than 15,000 brokers marched to their parent's cross-marketing drum beat in the second quarter, increasing sales of loans and money-management products to clients, the San Francisco-based bank said on Tuesday.

The biggest U.S. mortgage lender, which like other banks urges brokers to sell lending and deposit products, said average loans among wealth and brokerage clients reached $59.3 billion during the quarter, up 16 percent from the comparable 2014 period. Credit quality remained strong despite the loan growth, allowing Wells to withdraw $10 million from its wealth management loss reserve.

Managed account assets - in mutual funds, outside money managers and company investment models that brokers suggest for a fee to clients - grew 6 percent from a year earlier to $434 billion, primarily on new money collected as opposed to market gains. Banks and brokerage firms generally book more profit and more predictable results from fee-based accounts than from traditional commission-paying accounts.

Overall, Wells Fargo's "Wealth, Brokerage and Retirement" sector, which also includes its private bank and its unit for administering corporate retirement plans and individual retirement accounts, reported an 11 percent gain in net income to a record $602 million from the April-June period of 2014.

Revenue jumped 5 percent, or $189 million, on higher asset-based fees and interest income, while noninterest expense grew 3 percent, or $80 million, primarily because of higher litigation reserves as well as higher commission payments to brokers.

On a conference call with analysts, Chief Financial Officer John Shrewsbury said Wells is considering a service to compete with the growing crop of so-called robo-advisers that use algorithms to pick portfolios for clients who don't want advice.

The company's brokerage force of 15,151 was unchanged from a year ago at the end of June.

Staining the upbeat wealth management report was a 1 percent decline in client assets from this year's first quarter to $1.4 trillion among its brokerage units.

Individual retirement account assets inched up 2 percent to $365 billion from a year earlier among Wells' wealth businesses and were flat with this year's first quarter.

Wells Fargo's wealth sector remains its smallest business. Its $602 million quarterly profit compares with net income of $3.4 billion in its Community Banking sector and $2.0 billion from investment banking and trading in its Wholesale Banking sector.

Overall second-quarter profit at the fourth-biggest U.S bank

fell on higher expenses and sluggish revenue growth.

(Reporting By Jed Horowitz and Elizabeth Dilts)