U.S. banks have some wood to chop when it comes to their commitment to the investment product business, according to a new study by Dalbar Inc.
The Boston-based financial research firm found that 76% of the top 50 U.S. banks by market capitalization had investment products sales measuring less than 1% of their domestic deposits during the second quarter of 1997.
The survey also indicated that cultural differences between commercial banks and their Wall Street counterparts persist, despite mergers between banking and securities firms, according to Louis S. Harvey, president of Dalbar.
In its annual bank survey, this year Dalbar introduced a "commitment index" to rank the efforts commercial banks put into selling mutual funds.
The index assigns up to 50 points to a bank for each of three criteria:
Sales of long-term investment products in last year's second quarter.
The ratio of such sales to the bank's domestic deposits at the end of the quarter.
The change in that ratio from two years earlier.
With 137 points, Chicago-based Northern Trust took first place, beating out No. 2 National City Corp. and No. 3 First American Corp. National City, with 128 points, was 4 points ahead of First American.
Mark Stevens, an executive vice president with Northern Trust, said its winning top honors was "a positive reinforcement of the things that we're trying to do to encourage the development of our investment management services."
Though Northern Trust has traditionally had a strong focus on the trust business, in the last two years the bank has emphasized the development of its mutual funds and securities business, Mr. Stevens said.
Also in the top 10 were First Union Corp. of Charlotte, N.C., which placed fourth, and Pittsburgh-based Mellon Bank Corp., which placed seventh. Both banks have in recent years made substantial investment management acquisitions.
Not everyone agreed with Dalbar's findings.
Lawrence S. Kash, vice chairman of Dreyfus Corp., Mellon Bank's fund subsidiary, took issue with the Mellon rank.
"It's hard for us to believe that any bank out there has a larger and more successful commitment to the mutual fund business than Mellon does," Mr. Kash said.
Mellon more than doubled its mutual fund sales from 1995 to 1997, going from $5 billion to $12 billion, he said. The banking company is also acquiring Denver-based Founders Asset Management.
Mr. Harvey declined to discuss the scores of specific banks. Dalbar did point out, however, that Mellon did four times the sales volume of the next bank in the survey, Chase Manhattan Corp., which came in eighth.
Fleet Financial Corp., Boston, lagged in 33d position. This week it bought the broker-dealer Quick & Reilly Group for $1.6 billionHaving, having recently acquired the fund company Columbia Management Co. for $600 million.
Mr. Harvey said Fleet is likely to improve its score considerably when Columbia's mutual fund capabilities and Quick & Reilly's distribution are factored into the equation.
According to Mr. Harvey, the highest-scoring banks, though they derive substantial portions of their earnings from investment management, continue to expand in the business.
Good personnel and compensation policies, employee training, and access to technology also indicate the level of bank commitment to the investment product business, Dalbar said.
Norman R. Lubin, chief executive at FMS Group, a Bluebell, Pa., company that tracks mutual funds, said Dalbar's findings confirmed his own beliefs.
"People who invest in sales professionals-who give them the tools, the training, and compensation-tend to have better results than people who don't," Mr. Lubin said.
"Minimizing (personnel) turnover over time adds revenue,"he added.
Though banks are providing a lot of the same services as Wall Street firms, many have yet to adjust their corporate culture.
"Securities firms are organized to distribute investment products, and banking organizations haven't viewed themselves as being organized to sell investment products," said Peter J. Succoso, a practice leader with San Francisco-based Spectrem Group. "That's the major difference."
He said that the continuing consolidation between banks and the securities business will probably change that.
"The level of capital spending that organizations are making in order to improve services in these areas, that's a level of commitment," he said.
