Sales of stock funds fueled profits at banks' fledgling brokerage units in the second quarter, a study shows.
Bank brokerages generated $275 of net income per $1 million of deposits in the second quarter, 64% more than a year earlier, according to a new study by the Bank Securities Association. Banks use this measure to calculate the profitability of these units.
The Corte Madera, Calif., trade group says the results indicate a broader acceptance by the public of bank securities programs. The group also reported that bank brokers' productivity is up too, suggesting they are marketing themselves more aggressively.
"For the most part we have more qualified, tenured people, who are more confident and selling more equity funds," explained Gerald Thomas, president of the brokerage at St. Paul Bancorp, Chicago.
Mr. Thomas' brokerage generated about $680 per $1 million of deposits in the second quarter. More significantly, he said, his contribution to the $4 billion-asset banks' bottom line increased too.
In the second quarter, his brokerage contributed between 5% and 7% of the company's net income of $10.2 million, up from about 2% to 3% of $9 million in the same period a year before.
His brokers are selling more stock funds, which provide more revenue than many other products because commissions are higher, he said. The Bank Securities Association study showed that 38% of revenue at brokerage units came from mutual funds, up from 28% in the second quarter of last year.
The trade group has commissioned consultant Kenneth Kehrer, Princeton, N.J., to do similar studies every quarter. For this study Mr. Kehrer surveyed 24 banks, including Chase Manhattan Corp., BankAmerica Corp., First Bank System Inc. Banc One Corp., and Bank of New York Co.
The study also showed the productivity of the average bank broker increased 49% from the year-earlier level, to $24,656 of gross revenue per month.
Seventeen thousand dollars is considered the make-or-break level for traditional stockbrokers, the study said.
Last year the Securities Industry Association, the trade group of brokerage firms, reported the average monthly gross of a stockbroker at $16,920.
Bank brokers also stepped up sales of their own mutual funds. Bank- managed portfolios made up 21% of mutual fund sales at bank brokerages, up from 17% in last year's second quarter.
But bankers aren't resting on their laurels. "We have to plan for next time when the business gets tough again," Mr. Thomas said.
