Bank of New York's private bank plans to increase its revenue 12% to 13% in the next three years by expanding distribution through intermediaries.
"Our private-client business is really thriving here, and we feel we can really increase our revenue by going after intermediaries," said Lee Wortham, an executive vice president in Bank of New York's private-client services group.
The New York-based unit has $30 billion of assets under management and $32 billion of assets under custody. Mr. Wortham said the private-client group and BNY Asset Management had accumulated $333 million of fee revenue through Sept. 30 this year, up 19% compared with the year earlier. With new business up 20% from last year, he said, his unit expects to continue growing.
"I am looking longer term at strong growth," Mr. Wortham said. "We are starting to really gain some traction over the past several years, and we are ready to build on that."
Mr. Wortham said that in recent months the private bank has begun introducing its private-client services to intermediaries. The idea arose after Bank of New York bought Pershing Inc. in May 2003, he said, and the parent company began to look for ways to cross-sell its services to Pershing's broker-dealers.
The private bank created a directed trust platform that let Pershing offer the private bank's trust products and services through its broker-dealers, Mr. Wortham said, and this gave the brokers an ability to fill a gap in their product capabilities. It also gave Bank of New York's private bank "rapid access" to a national distribution network, he said.
Mr. Wortham said the response has been strong.
"We are winning business, booking new business, and the response from broker-dealers has been terrific," he said.
Now the unit wants to expand beyond its usual channels to broker-dealers nationally. Mr. Wortham said the private bank will offer similar trust services to other intermediaries in the next several months.
Analysts said banks are wise to cross-sell their products and services to intermediaries such as broker-dealers as an alternative to buying other companies for their distribution capability.
"Deals have been quiet, for the time being, but there is always potential for growth as long as a firm has strong products," said Kevin Daniels, a Boston analyst. "People want a wide array of nonproprietary products."
Mr. Wortham said intermediaries would give Bank of New York access to advisers on the ground nationally but that the private bank is not done making deals to expand its brand presence. During the past five years, the unit has made several key purchases to expand its product depth and geographic reach.
In 1999, it bought Ivy Asset Management in New York so that it could offer a hedge fund of funds. In 2000, it bought Estabrook Capital Management in New York in order to offer large-cap, value asset management. In 2002 it bought Gannet, Welsh and Hotler in Boston to expand its fixed-income asset management and expand its presence in New England.
"Over the last several years we have been willing to build, buy, or borrow where we have had gaps," Mr. Wortham said. "We really want to work to continue to build out."
He said the unit will look to continue to expand in Boston and to develop its trust business in Florida. Bank of New York has trust offices in Miami, but Mr. Wortham said there are opportunities elsewhere in the state.
"Setting up de novo operations in Florida is a very challenging undertaking economically," he said. "So I would think that we will continue to invest there, but what will continue to move the dial there is a possible acquisition."
Above all else, he said, the private bank will continue to find fertile fields in the New York area.
"The tri-state area is really an attractive wealth management market," he said of New Jersey, New York, and Connecticut, "but it is also highly competitive. But given our success rate with this business, we really do like our chance in this market a lot. We intend to continue to invest in our business here."
Mr. Wortham said the private bank is well positioned to grow in the next three years.
"We are in an attractive industry with an incredible distribution platform, and we plan to leverage that," Mr. Wortham said. "We will win the direct private-client business. That has been our bread and butter for as long as we have been in the game."
