Banks reported record insurance brokerage fee income in the first nine months of last year, and part of the reason appears to be that they pushed harder for fee income as other fees came under pressure.
"I just think everyone is running as hard as they can to increase their business," Michael White, whose Michael White Associates LLC research firm announced its results in the Michael White-Prudential Bank Fee Income Report, said on Feb. 9.
In the first three quarters of last year, bank holding companies tallied $9.73 billion in insurance brokerage fee income, according to the report. That was up 7% from the year earlier. However, third-quarter insurance brokerage fees dropped 6.3% from the year earlier, for reasons that are not yet clear.
Of the 100 largest bank holding companies, "probably close to 45 improved their position in terms of earnings," said White.
The robust results for the first three quarters of last year also had something to do with new bank charters for investment banks like Morgan Stanley and Goldman Sachs Group Inc., he said.
Wells Fargo & Co. led the pack in fee income for the nine months, earning $1.34 billion from its insurance brokerage operations, according to the White report. And Citigroup Inc., with $1.32 billion, was a close second — up 71.34% from the year before.
Two banking companies stood out for the share of noninterest income contributed by their insurance brokerages.
BancorpSouth Inc.'s insurance brokerage revenue for the first three quarters of last year was $64 million, and this was 37% of its noninterest income.
BB&T Corp.'s $712 million of insurance brokerage fee income was 34% of its noninterest income.
Those companies "have really invested in" their insurance brokerage businesses, and are reaping the rewards, said White.
Insurance income as a percentage of noninterest income can be more important than overall insurance brokerage income, he added.
"A smaller company is obviously going to be dwarfed by one like Wells Fargo in terms of dollar amounts of fee income earned," White said. "But [it] may have a far greater success rate in terms of things like [its] contribution to net operating revenue."
Not all banking companies have adopted insurance brokerage as a way to boost fee income. About 64% of large-bank holding companies engage in it, meaning a significant minority have stayed on the sidelines.
