on their commitment to offering mutual funds, according to a study by Deloitte & Touche. The survey - which polled executives representing 100 banks that offer mutual funds to their customers - found that 66 felt their programs are meeting or exceeding expectations. None of the banks polled - not even the 34 that rated their programs unsuccessful - said they planned to decrease their investment in the business or withdraw from it. Indeed, more than three-quarters of the banks surveyed said they plan to increase their investment in the fund business. "The results don't surprise me," said W. Christopher Maxwell, Keycorp's executive vice president in charge of mutual funds. "You should be able to make money in managing or distributing funds if you are aggressive in managing your costs." The findings were a surprisingly upbeat assessment for banks. The industry rushed into managing and distributing mutual funds in the early 1990s, but recently has begun to question whether they can compete profitably. Many fund analysts, for instance, have pointed out that few of the 119 banks that manage their own mutual fund assets have yet been able to turn a profit. Thus, the industry's rosy assessment represented by the findings raised eyebrows among analysts. "It's fascinating to hear banks say that this is what they wanted," said Geoffrey Bobroff, a consultant based in East Greenwich, R.I. "Many banks have established limited goals and aspirations. Therefore, they have been able to meet them." Of the 100 banks that were part of the survey, 53% offered proprietary or bank-managed funds. Almost all of the bank programs offered funds managed by outside firms. The banks also ranged in size. Twenty-nine percent had total book assets of more than $10 billion; 61% were between $1 billion and $10 billion; and 10% had assets of less than $1 billion. Not surprisingly, banks that were satisfied with their forays into the mutual fund business were by and large focused on sales results, while those disappointed with their efforts put the emphasis on profitability. Among the successful banks, 89% cited sales as the most important measurement of success, while only 24% of the unsuccessful banks cited sales as more important than profits. One banker said that the age-old debate between which indicator is the best measure of success depends more on where a fund program is in its life cycle. "If you are a new organization entering the business, you better not look at the bottom line," said Evelyn E. Guernsey, managing director of J.P. Morgan Funds Management. "You ought to be gathering assets. "Once you get to that core level of assets, then you want to start turning our attention to managing that bottom line," Ms. Guernsey added. The survey also indicated that self-described success might be related to a bank's decision to take on the management of its own funds rather than merely serving as a marketing agent for outside funds. Of the banks that considered themselves successful in the business, 64% offered their own mutual funds. Only 29% of the "unsuccessful" group offered their own funds. In other findings, 92% of successful banks identified "organizational commitment" as critical. "Organizational commitment is a tone that needs to be set at the top by senior management as a strategic focus to foster cooperation among operation units," said Stephen Herbert, a Deloitte & Touche partner involved in the study. "Our survey suggests that, to be successful, banks need to deliver seamless service based on strong internal relationships between retail, investment units, and mutual fund operations," he said. Deloitte & Touche is an international consulting firm that provides accounting, tax, and management consulting services.

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