Central Carolina Bank and Trust Co. is launching its own full-service brokerage next month, in an effort to boost its retail mutual fund business.
Although mutual fund and annuity sales have been sluggish lately, the $3.4 billion-asset bank, which is based in Durham, N.C., will offer full-service brokerage through its CCB Investment and Insurance Service Co.
The securities unit will offer investment services including stocks, bonds, mutual funds, and annuities.
Last month, Thomas Ficquette, head of marketing for Central Carolina Bank, said that the economy, and sales of investment products, seemed to be slowing down, "neither moving one way or the other."
But Eddie W. Whitfield, who will head the brokerage, said that, in spite of the rocky year experienced by the stock and bond markets, brokerage firms are still profitable.
"Some say that, given the market conditions in '94, why start a brokerage in '95?" said Mr. Whitfield. "I say that there are individuals who are looking for services that a full-service brokerage can offer."
Some experts say it is unusual for a bank to launch a brokerage unit after creating and distributing proprietary funds.
Central Carolina Bank unveiled its own family of proprietary funds, the 111 Corcoran Funds, two years ago and offered them through bank employees who were trained and licensed to sell investments.
The funds were sold through the bank's brokerage firm, Jefferson Pilot Investor Services of Greensboro, N.C. Last year, the brokerage sold $33 million of mutual funds and annuities. The new brokerage will be inside the bank.
"This indicates they are going after the retail side, the individual who is not a trust client," said Kurt Cerulli, principal of Boston-based Cerulli Associates. "You need a full-service brokerage to do that."
Carolina Central Bank is the latest North Carolina midsize bank to launch a full-service brokerage. Last May, Rocky Mount-based Centura, a $4.1 billion-asset company, unveiled a brokerage unit, Centura Securities.
Banks like Centura and Central Carolina face fierce competition from the state's three giants. NationsBank Corp., First Union Corp., and Wachovia Corp. control 60% of the state's deposits.
But Mr. Whitfield said the launching is more a "customer-service issue" than a competitive one. He said his bank is responding to increased consumer demand for a full range of investment services.
"Not a day goes by when a consumer doesn't inquire about services that you associate with full-service brokerages," he said.
The brokerage project has been in the making for about four months.
Last July, Mr. Whitfield was hired away from Barnett Securities, Jacksonville, Fla., in order to help put the pilot in place.
He said he hopes to start the brokerage unit by the end of January after approval from the National Association of Securities Dealers.
Mr. Cerulli, the consultant, said that, when it comes to distribution power, banks have a "great" position in the brokerage market.
"The bank system is hard to duplicate," he said. "There is a tremendous amount of trust, an established relationship with the community."
Mr. Cerulli added that the successful bank brokerages are full-service operations.
Mr. Whitfield declined to comment on the new brokerage's specific goals.
However, he said his bank is looking to meet the needs of its 3,000 mutual fund and annuity customers and "attract customers from other areas who may not be satisfied with the level of service they have been receiving."
Geoffrey H. Bobroff, a consultant in East Greenwich, R.I., warned against an aggressive attempt to lure customers away from other brokerages.
"Take-aways are tough when trying to unseat established relationships," he said. "If they have reasonable expectations -- they're not trying to be the Merrill Lynch of the South -- this does not look bad at all."
