First Maryland Bancorp is taking a cue from bigger banks and creating a separate institutional investment advisory firm.
The Baltimore-based banking company is starting its own money management firm, Allied Investment Advisors, to accommodate $5 billion in institutional assets under administration.
The spinoff, effective Jan. 1, might be unusual for a regional bank, but the move is in keeping with the money management focus of First Maryland's parent, Allied Irish Banks, Dublin.
Bank officials say that separating institutional money management from the rest of the bank can give the business a stronger identity, which in turn will help draw more customers.
But with that added attention comes added responsibility, said Jennifer W. Lambdin, president of Allied Investment Advisors.
"When you spin something out, it tends to come under greater scrutiny," she said.
The initiative follows growth in First Maryland's institutional trust business, which has added almost $1 billion in 1995 alone.
Currently, that money sits with individual assets in the trust group, which has approximately $40 billion in custodial assets and $2.9 billion in discretionary assets.
"The image in the marketplace in respect to institutions is that banks don't have good performance and don't keep good people," Ms. Lambdin said.
Ms. Lambdin says that perception does not meet reality at $9.2 billion- asset First Maryland. The Allied portfolio managers will get compensation pegged to their performance and the overall bottom line, a common practice at stand-alone investment advisory firms.
By providing that vested interest, the bank hopes to reduce potential turnover to nonbank investment management firms.
Breaking out the institutional business replays a previous move by Walter R. Fatzinger Jr., now president of First Maryland's Washington, D.C., subsidiary. In 1983 Mr. Fatzinger created NationsBank's ASB Capital Management at the former MNC Financial Inc.
ASB has been built up since then to a current $9.6 billion under management. Yet last month it lost seven people who joined its former president, Terence W. Collins, at a his new firm Columbia Partners in Washington.
But Mr. Collins is supportive of First Maryland's efforts to isolate institutional management.
"I think it's a good move on their part because everyone has to get away from a bank trust operation," Mr. Collins said.
"It's much easier to retain high-quality people and motivate them, which results in better investment performance and better client service," he added.
