to be blurring, and that may spell lower profits for banks, a study suggests.

A recent survey by Kenneth Kehrer Associates in Princeton, N.J., found that banks' revenue per sale is declining as brokers sell fewer high-margin products such as annuities and rely less on lucrative, first-time customer referrals by branch employees.

"Bank brokerages have long stood out as different from nonbank brokerages," said Kenneth Kehrer, the author of the study. Traditionally brokers at banks have focused on selling packaged investments, such as mutual funds and annuities, with less emphasis on sales of stocks and bonds. That meant fewer sales per broker, larger average sales, and lower compensation of salespeople.

But times are changing as savvier bank brokerage investors turn increasingly to individual securities, which generate smaller commissions.

The reversal of those trends during the past several years "suggests that we will see margins in banking programs going down," Mr. Kehrer said.

Bank investment sales programs had generated higher profits than the average retail brokerage firm, he said, but the gap appears to be closing.

The profit margin on the average sale decreased to $343 in 1998, from $413 in 1997, though bank-employed brokers are, on average, handling more transactions every year -- 900 in 1998, compared with 764 in 1997.

However, bank executives feel obligated to offer stocks and bonds in their brokerage branches to stop customers from defecting to nonbank broker-dealers, Mr. Kehrer said. But doing so "tends to dilute profits," he said.

"There is big competition for banks to look more like Schwab and Merrill Lynch," agreed Jim Nonnengard, a senior vice president and director of retail sales at SouthTrust Securities Inc., the brokerage arm of Birmingham, Ala.-based SouthTrust Corp., which participated in Kehrer Associates' survey.

But, he said, while sales of stocks and bonds had increased, SouthTrust had seen little cannibalization from other product lines.

Mr. Nonnengard declined to give sales figures, but said packaged product sales doubled from 1998 to 1999, while the discount brokerage had a 70 percent increase in sales.

Indeed, stock sales may even help sales of packaged products. "Many times, the customer's first trade is through the discount brokerage," Mr. Nonnengard said. "Then they buy a mutual fund."

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