In an aggressive bid to expand in mutual funds, Citicorp is enclosing promotional materials in mailings to credit card customers.
Along with their monthly bills, selected MasterCard and Visa holders are getting brochures from Citicorp Investments Services.
While some other banks have tried to boost sales by marketing a range of products to credit card customers, none has access to a list as big as Citicorp's industry-leading 20 million accounts.
Cross-Selling Trend
The marketing of mutual funds to customers is a new phenomenon, but it is in keeping with the trend toward cross-selling.
"Banks are always looking for ways to solidify and expand their relationship with customers," said Robert Skolnick, executive vice president at BAI Mail Monitor, a Tarrytown, N.Y., company that tracks credit card and direct mail solicitations.
His firm has not yet begun monitoring the mutual fund-credit card connection consistently. But Mr' Skolnick said he has noticed an increase in the activity.
The Citicorp Investments brochure appeals to investors' dissatisfaction with the current low yields on certificates of deposit.
"With today's high taxes and low interest rates, how should you be investing?" the brochure states. "Couldn't you be doing better?"
Handpicked Fund
The flier highlights two funds - an insured tax-free income fund from Franklin Resources and the Massachusetts Financial Services Total Return Fund - and has a mail-in coupon for information requests.
The brochure also invites prospective investors to come into a Citibank branch and meet with an investment counselor, or call a toll-free information line.
A Citicorp spokeswoman declined to say how long the program has been going on or what effect it is having on mutual fund sales.
Elsewhere, credit card powerhouse MBNA Bank, Newark, Del., has introduced a cross-selling pilot. The bank is offering eight choices from mutual fund companies, including John Nuveen & Co., Kemper, and Franklin.
MBNA, with more than nine million cardholders, ranks in the industry's top five. Executive vice president David W. Spartin declined to say exactly how many customers are being targeted as mutual fund sales prospects.
Cross-selling of mutual funds makes sense in light of card issuers' shrinking profitability, said Robert McKinley, president of RAM Research Corp., a credit card tracking firm in Frederick, Md.
Over the past few years, he said, issuers' returns on assets have shrunk from upwards of 5% to 2% or less. "They are feeling the pressure from the price wars and bad consumer debt, and they are looking for ways to increase profitability," he said.
Casting a Wider Net
But some banks with ambitious plans for mutual funds favor a broader approach.
Instead of focusing just on its 1.4 million cardholders, First Union Corp. cross-sells a range of investment products to customers who have a strong relationship with the bank and who come into branches regularly.
"A bank customer usually wants to sit down and talk to someone, so we reach to checking account, IRA, and brokerage account customers," said Susan Koch, marketing director for the Charlotte, N.C., bank's capital management group.
First Union also sends out reply cards for investment products with its annual reports and other financial materials.
Ms. Koch said the response from the annual report was good and that the bank would continue this strategy. "It makes sense because the people who get the reports are likely to be investors," she said.
Ms. Koch said First Union has not ruled out targeting the cardholder base.
