BankAmerica Finds a Niche For Economics
Though many banks have scaled back their economics departments, BankAmerica Corp. continues an aggressive campaign to sell information produced by its international economics unit.
Under the trade name World Information Services, the company's principal subsidiary, Bank of America, markets regularly updated economic briefings on 30 countries. It also provides data forecasts and risk evaluations on 80 countries.
BankAmerica thus continues to make a business out of an activity that many other institutions have deemed not a core business, and rarely if ever a money-maker.
"This is a cost-effective way for the bank to fly the flag," said vice president Emanuel A. Frenkel, director of World Information Services.
BankAmerica officials note that their economics effort is modest and inexpensive to operate. They decline to disclose financial details. Although the program makes a small profit, they stress that the program is not aimed at turning the economics department into a profit center.
Benefit Is Called Internal
Mr. Frenkel said banks that did not succeed with economics offerings were misguided in viewing them as potentially significant profit generators. "The difference is that, at BankAmerica, economics primarily serves an internal function," he said.
BankAmerica's decision to remain a seller of economic information contrasts with the general industry trend toward paring back expensive research departments to cut costs.
For example, Citicorp cut Citibank's economics department to 40 people from about 100 in the early 1980s. The company dissolved the unit entirely in 1986, assigning the remaining economists to work in line business units. The bank shelved services that sold international economic forecasts and foreign curency analyses, but still markets a weekly economics newsletter.
Chase Sold Its Boutique
Chase Manhattan Corp. sold Chase Econometrics, a pioneering forecasting unit, in 1987.
Other banks also tried to slug it out in the hotly contested business of analyzing and forecasting the economy, but have generally been overmatched by such leaders as the WEFA Group, Philadelphia, and DRI/McGraw Hill, Lexington, Mass.
"Banks found that benefits [of selling economic data] were only marginal. Many got out because of cost concerns," said John Mara, a Boston-based banking consultant with the MAC Group.
BankAmerica's economics unit was already producing country-specific data for internal use when it decided in 1986 to package and sell the information to outsiders, Mr. Frenkel said.
BankAmerica's country outlook gives two-year projections of business conditions, economic policy, and trade conditions for 30 countries. Customers receive six briefings each month.
Country data forecasts, updated twice a year, include 23 statistical indicators and five-year economic forecasts for 80 countries. Country risk monitor, also updated twice a year, ranks 80 countries according to 10 risk indicators.
Subscriptions Not Extensive
Together, the three services have about 545 subscribers who pay $495 a year for one of the products, or $1,290 for all three.
Subscribers are primarily businesses, government units, and private agencies. BankAmerica markets the products through direct mail.
The bank has succeeded in attracting buyers because it provides a standardized service at a reasonable price, rather than an expensive customized service, Mr. Frenkel said. In addition, collecting, processing and distributing international economic data is a relatively uncrowded specialty for which BankAmerica is well suited.
"With its worldwide network, BankAmerica should have a comparative advantage in this product," said Allen Sinai, chief economist at Boston Co., a unit of the American Express Co.