Bank brokerages set a record for profit penetration in the third quarter despite relatively flat investment product revenues, according to a survey for the Bank Securities Association.

A study of 26 bank and thrift securities programs by Kenneth Kehrer Associates found they earned an average of $1,032 on investment product sales per $1 million of retail deposits, up 41% from the same period last year and 25% from the second quarter.

A shift in sales away from equities and mutual funds to fixed and variable annuities - which have higher profit margins - offset a slight decrease in third-quarter gross commission revenues, said Kenneth Kehrer, head of the Princeton, N.J.-based consulting firm. Mr. Kehrer conducted the study on behalf of the BSA

Full-time representatives earned average monthly gross commissions for banks of $25,289 in the third quarter, down 9% from the second quarter.

Branch employees selling investments generated $1,667 per month for banks, up 3% from the previous quarter.

Observers said stock market volatility helped fuel the increase in fixed annuity sales, which constituted 25% of bank brokerage revenues in the third quarter, up from 18% in the second quarter and 9% the year before.

sales of stocks and bonds made up 8% of third-quarter revenues, compared with 10% in the preceding quarter and 19% the year before.

"There has been a change in the mix of business," said Christopher O'Gorman, president and chief executive of the securities arm of Republic New York Corp. "People are choosing more conservative investments."

A decrease in activity among dedicated brokers has actually helped the bank's platform program, Mr. O'Gorman said. "They're taking some of their downtime and channeling it into training platform people," he said.

Other banks have weathered market volatility by preaching asset allocation. "You can't dictate product mix," said Scott B. Grauer, president and chief executive of the brokerage subsidiary of BOK Financial Corp. in Tulsa, Okla. But when stock prices fall, he said, "we make sure a packaged product can provide some diversity."

J. Pamela Dawson, president of the brokerage arm of Seattle-based Washington Mutual Inc., said that an emphasis on packaged products had insulated the unit from market volatility as well.

Equities account for less than 6% of sales, she said.

Although the unit had a "tough October," Ms. Dawson said, third-quarter investment sales had been brisk, aided by a seasonal sales campaign.

Fixed annuity sales will grow as Washington Mutual's platform sales program - introduced this year - matures, she added.

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