Boston Private Financial Holdings Inc.BPFH

Morningstar Rating

Stock Research and Analysis

by Michael Kon, CFA

Although Boston Private Financial Holdings' business model should work well in theory, the firm's actual execution of it seems faulty to us.

Boston Private is a collection of three businesses: private banking, asset management, and wealth advisory Read more

Bulls Say

With its decentralized operating model, the firm is an attractive buyer for boutique firms looking to maintain their independence. This hands-off approach is also beneficial in preserving relationship continuity with clients.

Boston Private targets newly affluent individuals and those with less than $20 million in assets. Thus, the firm can grow without challenging its larger and more-established rivals head to head. Read more

Bears Say

Despite its rapid growth, Boston Private has been unable to create any economies of scale that, in turn, could have led to positive operating leverage. Operating expenses have consistently kept pace with revenue growth.

The firm's growth-through-acquisition model has not translated into robust profitability. Returns on equity have averaged in the low teens, and returns on assets have barely exceeded 1%.

Loan growth that is far outpacing deposit growth and an unfavorable yield curve have caused net interest margins to fall more than 100 basis points since 2001, with continued compression on the horizon.

The firm has significantly raised its reserve for loan losses following its initial 2007 earnings release, and auditors identified a number of material weaknesses in the firm's internal controls over financial reporting. Read more

Strategy

Boston Private has grown largely through the acquisition of boutique private banking, wealth management, and advisory firms serving high-net-worth individuals. The company seeks to expand in regions Read more

Management

Several concerns about Boston Private's management merit, in our opinion, a D Stewardship Grade. Auditors identified a number of material weaknesses in the firm's internal controls over financial reporting, which resulted in Boston Private restating Read more

Profile

Boston Private Financial Holdings is a collection of four private banks and eight investment management and wealth-advisory subsidiaries. Around half of revenue is generated Read more

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