There is a pretty simple explanation why BankAmerica Corp.'s private banking business has been prospering: there are a lot more people with a lot more money, and the $260.2 billion-asset bank knows how to reach into its deep customer base to find them.
"There is nothing sleepy about this business at all," said William Goodyear, head of BankAmerica's global private bank, based in Chicago. "This economy has created a lot of wealth, the market is growing, and we can offer clients an integrated value set of credit, deposits, cash management, trust services, investments, estate planning, and just about anything else."
The bank manages the wealth of about 25,000 customers, all of whom have at least $1 million of investable capital, $250,000 of income, and a net worth of at least $2 million, excluding real estate. Total private assets managed by the bank are roughly $30 billion.
Like other banking companies such as Fleet Financial Group Inc. and PNC Bank Corp., BankAmerica has streamlined its asset management business. Previously managed separately in California, the Midwest, Pacific Northwest, Southwest, and internationally, the company in August consolidated the private bank under Mr. Goodyear, who had managed the Midwest market.
BankAmerica also has been shifting its focus to address the increasing knowledge that clients have of financial markets.
"These people have created their own wealth during their own lifetime, and they are very demanding," Mr. Goodyear said.
Rather than simply serving as a fiduciary, the institution is targeting today's more self-directed client base by focusing on building its asset management and advisory services, said Richard W. Spitler, managing vice president with First Manhattan Consulting Group in New York.
"They are investing in the business, and are intent on transforming it into a modern interpretation of private banking," Mr. Spitler said.
BankAmerica and other depository institutions are facing more and more competition from mutual funds, brokerage firms, trust companies, and insurance companies, Mr. Goodyear said. But banks do have a decided advantage, he argued.
"We as banks have a full set of capabilities, such as a full product line, that are valued in the private banking sector," Mr. Goodyear said. In addition, most prospective private banking clients already have a retail relationship with a bank.
The challenge for the banking industry, he said, is to manage and migrate those relationships into the wealth management department.
"If we can do that, we can remain competitively advantaged," Mr. Goodyear said. "It should be a high growth, high return business - that's why everyone is interested in it."
