Three big banks each sold more than $10 billion of mutual funds in the first three months of the year, according to data amassed under a new regulatory reporting requirement.
Bank of America topped the banking industry, with $14.2 billion in sales. It was followed by State Street Bank and Trust C State Street Bank and Trust Co. and Bankers Trust Co.
In all, banks reported $109,1 billion in mutual fund sales during the quarter, according to Veribanc Inc., Woburn, Mass. The research firm based its findings on a study of call reports, which have been amended to include information about fund sales and revenues.
While the study confirmed that many banks are. selling mutual funds avidly, it also contained some disconcerting findings.
Veribanc found that sales of stock and bond funds - a critical measure of banks' ability to compete with big mutual fund companies - accounted for just over 10% of the total.
Sales of these long-term investments totaled $11.4 billion in the first quarter. In contrast, sales of money market mutual funds came to. $97.8 billion. These short-term investments have long dominated banks' mutual fund business.
The regulators are collecting data on banks' sales of and revenues from mutual funds and annuities to get a handle on the growing investment business.
Data Have Been Skimpy
Information on this nascent business has been scarce. The regulators' effort is a starting point for in-depth analysis.
These data "will form the baseline going forward," said Warren Heller, technical director of Veribanc.
Industry analysts say the information gathered so far will need considerable fine-tuning before it sheds light on banks' fund activities.
For one thing, experts note that money market sales figures aren't directly comparable with stock and bond fund data.
"Money moves in and out of money funds very quickly, creating the appearance that sales are higher," said Avi Nachmany, a partner in Strategic Insight, New York.
"The data might be useful over time, but it will take a while to figure out what the numbers mean," he said.
No Adjustments Made
Also, the sales data reflect only gross sales. The numbers are not adjusted for redemptions, reinvested dividends, and transfers among funds.
As a result, the $109 billion figure "sounds huge to me," said A. Michael Lipper, president of Lipper Analytical Services, Summit, N.J.
One reason the numbers could be so high is that money market funds had huge outflows at the end of the year, followed by a big increase at the beginning of the year, due to normal tax-time increases, Mr. Lipper said.
Fund sales were reported by 1,928 banks - about one out of every six, according to Veribanc's Mr. Heller.
Banks earned $310 million in fee income from sales and service charges on mutual funds and annuities, Veribanc found.
Bank of America and Citibank each earned $24 million in fees, followed by Wells Fargo Bank, ($21 million), PNC National Bank, Delaware ($15 million), and Bank of New York ($13 million).
During the same period, 1,681 banks sold $1.9 billion of annuities, which are tax-deferred insurance contracts.
