After virtually ignoring investment product sales for years, Albuquerque banks are getting into the business as loan demand sags, deposits languish, and the banks in New Mexico's financial center look to keep customers and develop fee income.

A third of the state's 1.5 million people reside in this sundrenched city. In the past, the handful of banks dominating the market left investment product sales to the brokerage houses.

Of the six largest banking companies, only two had brokerage operations older than three years, and they were limited in size and product variety.

|Tunnel Vision'

Albuquerque bankers "tend to have tunnel vision," said Norman Betts, manager of the start-up discount brokerage service at United New Mexico Bank, a $1.8 billion holding company that recently agreed to merge with Norwest Corp.

"They worry too long about all the deposits going out the door to the [bank's] brokerage. The fact is, the money's going out the door to brokerage firms," Mr. Betts said.

Now things are changing. The major out-of-state banks operating in New Mexico are scrambling to launch or improve investment-product sales programs. Two independent banks - Western Bancshares and Bank of New Mexico - also are carving out a place in the business.

Worked at Rival Bank

Mr. Betts, 61, started the discount brokerage operation at rival Sunwest Bancorp 10 years ago after coming to the bank from a local securities firm.

He joined United New Mexico to launch its program earlier this year after $3.5 billion-asset Sunwest was acquired by Boatmen's Bancshares of St. Louis. Now that United New Mexico and Norwest have agreed to merge, Mr. Betts expects to expand his two-person operation.

Boatmen's has brought in its investment services unit, increased the number of brokers and locations to nine, and hopes to have 20 brokers by the end of 1994, according to Albuquerque sales manager Mark Grieman.

Seven Brokers

BankAmerica Corp., which purchased two savings and loans and their approximately 30 branches in 1991, introduced its investment services in Albuquerque this spring. Seven brokers serve the branch network on a floating basis, with the downtown office as their base.

Utah's First Security Corp. has not decided whether it will replace the three-person brokerage operation in place since 1986 at First National Bank of Albuquerque, which it is in the process of acquiring.

But Fletcher Howe, manager of First Security Investor Services said he wants to expand brokerage sales at yearend, assuming the merger goes through. First National now splits fees with a securities firm operating in the bank.

Mr. Howe believes that Albuquerque banks have also been held back in their efforts by a state law prohibiting banks from selling insurance products.

|Has Been a Hindrance'

"Seeing as how annuities are a major part of what banks sell, that has been a hindrance," Mr. Howe said.

In ignoring the annuities market, Western Bancshares, with eight branches and $154 million in assets, started its own "bond department" in 1992. It sells mostly municipal bond mutual funds, in addition to bonds.

Option for Depositors

At $220 million-asset Bank of New Mexico, chairman George Clark has decided to hire a third-party marketer to set up an investment sales program. He said he views the move as a necessity, not a profit center.

"It's not a great savior, in our opinion. To maintain those customers [seeking higher rates] we need to offer them other products, and this is a way to do that. Our purpose is to give our depositors an option," Mr. Clark said. He added that he is thinking of placing two brokers in downtown Albuquerque, another in more affluent northeast Albuquerque, and yet another in either Springer or Las Vegas.

Deposits should be growing at his bank, Mr. Clark says, but instead they've been stagnant the past year, at about $210 million. He blames poor loan demand.

Mr. Clark wants his brokers to be fairly laid-back in approaching customers, whom he wants to retain when the bond and equity markets falter.

"The bank lobby's not going to look like an automobile dealer's floor. We perceive this as a short-term swing in the market - and rates will go back up. If they [depositors] decide to go back to the CD market, really, they've never left the bank."

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