The race is on.
The April 15 deadline for individual retirement account contributions is looming, and banks are busily courting customers.
Chase Manhattan Corp., PNC Bank Corp., Sanwa Bank California, and Fifth Third Bancorp are among the banking companies dangling old-fashioned rate boosts and new investment products. Their aim: to capture a larger slice of the more than $915 billion held in IRAs.
Competition for IRA dollars peaks during March and April, when many Americans scurry to find tax shelters before filing their tax returns.
"Now is really when we concentrate a lot of our marketing efforts - when taxes are fresh on everyone's mind,"' said Christopher C. Binkert, a vice president for Fifth Third.
To be sure, gathering IRA assets has become a year-round business, because cash rolled over from retirement plans makes up the bulk of inflows. In 1994, IRA rollovers totaled $115 billion, according to the Investment Company Institute, which tracks the data.
However, roughly $12 billion of fresh retirement savings flows into IRAs each year, with most people making contributions close to the last possible minute. And that's the business that has banks and other financial intermediaries scrambling right now.
"This is our peak week," said Mitchell Ratliff, group marketing director at Chase Manhattan. "Most of our business is done between now and April 15."
Chase has been running advertisements in local newspapers and on radio stations promoting its proprietary Vista Funds as an alternative to opening an IRA with certificates of deposit.
Mr. Ratliff said the banking company has seen steady growth, especially since it began selling the Vista Funds through Chemical Banking Corp. branches earlier this year as a prelude to the April 1 merger of the two banking giants.
But Mr. Ratliff and other bankers say that low interest rates on deposits have slowed demand from many bank customers who are used to opening IRAs with CDs.
Some banks have chosen not to promote IRAs heavily because of the pace of industry consolidation and the unlikelihood that Congress will remove the penalty for early withdrawal this year, other observers added.
"The mergers have taken a lot of the banks' attention away from marketing IRAs, or any bank product for that matter," said Gail Liberman, editor of Bank Rate Monitor, a newsletter published in North Palm Beach, Fla. IRAs are "not a barn burner for banks right now."
Even so, banks are hungry for the spreads they gain from deposits in IRAs, as well as the management fees generated from accounts that contain investments. And many are competing more aggressively with mutual fund companies and nonbank brokerage firms for that business.
Banks' share of IRA funds has fallen to 14.5% in 1994 from 22.5% in 1990, according to the Investment Company Institute. However, that figure may understate the banks' role. For instance, investments in bank-managed mutual funds and brokerage accounts offered by banks are counted in other IRA categories.
Still, many banks find IRAs a good steady source of long-term assets and deposits.
"We don't see IRAs or CDs as a way to acquire new funds - we see it as a way to get new customers," said Jeffrey R. Springer, president of $3.6 billion-asset Citizens Bank in Laurel, Md.
Citizens has tried to attract IRA customers by advertising "upgradeable" CDs that let customers step-up to a higher yield before maturity, and others that allow withdrawals without penalties. Mr. Springer says that giving customers bonus points "pays off with a broader relationship."
Los Angeles-based Sanwa Bank is offering an above-average 5.15% interest rate on one-year IRA certificates of deposit - the highest in California. A similar campaign in February brought in $70 million of deposits, four times as much as was projected.
H. Gene Galloway, Sanwa's executive vice president of retail banking, said the bank is positioning itself to pick up disgruntled customers from Wells Fargo & Co., which completed its takeover of First Interstate Bancorp this month. He said customers want continuity in their long-term banking relationships.
"Our plan was to acquire new customer relationships," Mr. Galloway said. "We saw an opportunity, with all the mergers, to create a positive image of Sanwa as a stable place to bring your money."
PNC is taking a different tack, sending out statement stuffers and holding investment seminars to promote its brokered IRAs, which include investments such as mutual funds, stocks, and bonds.
Joel Calvo, president of PNC Brokerage Services, said IRAs cost the Pittsburgh-based bank very little to maintain, but are ideal platforms to cross-sell other bank products and services.
Still, experts say banks continue to be outgunned by mutual fund companies and brokerage firms when it comes to offering a broader range of savings options for IRAs, and in the amount of money they allocate to market the products.
Indeed, mutual fund giant T. Rowe Price spends 30% of its advertising budget on promoting retirement savings. The company will spend $3 million this year to promote IRAs, up 20% from 1995.
