Summit Bancorp. is using the momentum from its recent merger with UJB Financial Corp. to expand its investment sales force and to launch a brokerage subsidiary.
The Princeton, N.J.-based banking company plans to increase its brokerage force from 50 to 65 by December. And it has hired BHC Financial Inc., Philadelphia, to oversee program compliance and provide investment clearing services.
"When we combined the banks," said Jack D. Cussen, Summit's senior vice president in charge of insurance and investment services, "we found we needed to go with a company that had the technology to take us to the next level."
Mr. Cussen added that Summit, which merged with UJB in April, is drawing up plans to launch a brokerage unit in the next six to 12 months.
The moves are part of an aggressive push by $22 billion-asset Summit - now the largest banking company based in New Jersey - to attract retail customers to its investment services. The bank has more than one million customers in New Jersey and eastern Pennsylvania, including wealthy communities like those in the Garden State's Essex County.
"What they're building is better than either Summit or UJB had separately," said Joy P. Montgomery, president of the consulting firm Money Marketing Initiative, Morristown, N.J. "They are putting more strategic and financial muscle behind this effort."
Before the merger, Summit relied on an investment sales program run by Essex Corp., while UJB's brokers operated out of the trust department.
The new arrangement also helps shore up beleaguered BHC, which in recent months has been hammered by the loss of several large bank clients that have been acquired by other banks or have outgrown the need for BHC's services.
With BHC's help, Summit has begun offering an investment management product that links customers' mutual fund accounts and bank accounts. The product gives customers a consolidated statement and access to their money market fund balances through checks or debit cards.
Mr. Cussen said he expects Summit's investment sales to reach $250 million this year, 22% greater than the combined 1995 investment sales of UJB and Summit.
He added that sales should go higher once BHC finishes developing a client/server computer network for Summit this autumn. The server will give brokers access to broad information about a customer's relationships with the bank and should help brokers craft individual financial plans.
"We expect the client/server network will be a significant step for us to be able to compete more effectively," Mr. Cussen said.
Summit exemplifies BHC's expansion of services offered to banks and other financial services companies in efforts to boost their revenue and client bases.
BHC is expecting a serious loss of revenue this year when Citicorp and First Chicago NBD Corp., two of its biggest clients, switch to other clearing services. It's widely expected that Norwest Corp. will also drop BHC, and bring the clearing function in-house.
Stock analysts estimated that the lost revenue could reach $17 million, or 26% of BHC's total 1995 revenues.
Morris L. Miller, senior vice president of BHC Securities, a subsidiary, said that while Summit is small in comparison to the bank clients it has lost, the deal shows that the clearing firm is diversifying and bringing in new clients.
"We continue to focus our energies on offering services not just to banks but also to regional brokerages, mutual fund companies, and financial planners too," Mr. Miller said. In addition to Summit, he said, three other banks - which he would not identify - have signed clearing agreements with BHC this year.
BHC recently added the ability to clear annuity sales quickly through a network link with more than 38 insurance companies. Previously, annuity transactions could take days to close because no central clearing network existed similar to the one for mutual funds.
BHC's progress is impressing some observers.
"BHC's business strategy makes sense," said Peter McGratty, an analyst at Montgomery Securities, San Francisco. "I think they'll be able to pull through."
