UPDATE 1-Merrill's herd loses some thunder but produces Q4 lightning

Reuters

(Corrects paragraph 4 to say balances "rose to $1.04 trln from $960.3 bln," not "$1.04 bln, from $960.3 mln"; corrects paragraph 5 to show some layoffs were from training program)

By Jed Horowitz

NEW YORK, Jan 15 (Reuters) - Merrill Lynch's once-thundering herd of retail brokers fell below 14,000 during the fourth quarter of 2013, but average broker productivity rose to $1.03 million, fueling a 6 percent jump in quarterly revenue.

Officials at the United State's third-biggest brokerage firm, which Bank of America Corp bought in 2009 during the financial crisis, said quarterly revenue of $3.7 billion reflected record asset management fees that grew 8.8 percent from a year earlier to $1.4 billion as well as higher sales of bank loans and deposit accounts to brokerage customers.

About one-third of Merrill's brokerage revenue comes from traditional brokerage commissions, another third from fee-based accounts that grew on market gains and asset-gathering and the final third from net interest income related to loans and other bank products that brokers sell, a spokeswoman said.

Traditional brokerage client balances at Merrill climbed 9.9 percent to $1.04 trillion at yearend 2013 from $960.3 billion one year earlier. Assets under management at Merrill and Bank of America's U.S. Trust private bank ended the year at $821.4 million, up 17.7 percent from $698.0 million one year earlier.

Merrill, which trails Morgan Stanley and Wells Fargo & Co. in number of brokers, said its adviser force fell by more than 1,000, or 8.3 percent, since the end of 2012 to 13,771. Most of the drop was deliberate, as Merrill continued to lay off underperformers in its training programs. Among brokers who left voluntarily, two-thirds were in the bottom 40 percent of producers at the firm, the spokeswoman said.

Two-thirds of brokers that Merrill recruited last year rank among its top 40 percent of producers, she said, and generally bring 75 percent of client assets from their former firms in the first year, she said.

Average annualized revenue per broker at Merrill grew from $927,000 in 2012 to $1.03 million in 2013, excluding Merrill Edge brokers who are part of Bank of America's consumer bank.

Merrill was more effective in 2013 at preventing broker defections to other big firms, which recruit brokers by paying high bonuses. The number of brokers that Merrill unsuccessfully tried to prevent from bolting to rivals fell by 50 percent, the spokeswoman said.

Merrill Lynch Wealth Management's fourth-quarter revenue of $3.7 billion was about flat with its third-quarter results and made up 82 percent of all revenue in its Global Wealth and Investment Management sector. U.S. Trust generated $762 million for the division from its 280 advisers in the fourth quarter, up 10.5 percent from a year ago.

The wealth and investment management sector's pretax profit margin, a key indicator of how efficiently the business is run, climbed more than five percentage points in the fourth quarter from a year ago to 26.6 percent. Merrill's contribution excluding U.S. Trust was about 25 percent, Bank of America chief executive Brian Moynihan said in a conference call with analysts.

The second-largest U.S. bank company as a whole reported a higher-than-expected fourth-quarter profit of $3.18 billion on Wednesday (Reporting By Jed Horowitz; Editing by David Gregorio)

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