After setting a record in the first quarter, bank brokers' productivity declined in the second quarter, according to the Bank Securities Association's performance report.
The average bank's monthly gross revenue per series 7 investment specialist broker fell 12% from the first quarter, to $27,378. Revenue per branch broker fell 15%, to $2,028, which was still 26% higher than the second quarter last year. As productivity slipped, so did the rate of broker penetration in their banks' depositor bases, said Kenneth Kehrer, a principal at Kenneth Kehrer & Associates of Princeton, N.J., who prepared the report. According to the survey, the typical bank's rate of retail deposits spent on investment products fell 0.82% from the first quarter, to $2,169 per million dollars of deposits.
Meanwhile, profit penetration - net income from investment products revenue per million dollars of deposits - fell 13%, to $804, reflecting the impact of a soft stock market, Mr. Kehrer said.
Market penetration is a good indication of the profitability of a bank's brokerage, he said. While overall revenue was flat in the second quarter, variable annuity sales were up, and fixed annuity sales and general securities sales were off, he said.
"Altogether, the average bank broker-dealer experienced a modest decline in net income," he said.
The typical bank broker-dealer's revenue remained at March's high level in April, but slipped 18% in May, and was flat in June, Mr. Kehrer said. He attributed the decline to a sluggish market that resulted in cautious investing.
The revenue mix continued to favor mutual funds over other investments, though sales of variable annuities rose. Bank broker revenue from mutual fund sales remained unchanged, at 29%. Fixed annuities accounted for 23%, variable annuities 23%, and stocks and bonds 7%.
While revenue from mutual fund sales was flat, revenue from general securities transactions and fixed annuities was down. Mutual fund revenue fell 7.3% from the second quarter last year, to $687 per million of deposits. Stock and bond revenue declined 35%, to $145 per million.