Continental Invests in Trust System
$30 Million Outlay Seen as Commitment to Business
Looking to provide sophisticated services to mid-size companies, Continental Bank has finished installing a $30 million trust system.
The Chicago-based banking company said the new system puts its capabilities on a par with the biggest trust banks in offering customers the latest methods of gathering and analyzing investment information as well as valuing foreign securities.
"We and everyone else had to make a decision - whether to invest and grow the business or get out. We decided to make the investment," said James J. Nemec, senior vice president at Continental.
"Continental has to do this to be competitive," said Thomas R. Abraham, a trust specialist with Andersen Consulting in New York. "Banks are spending that kind of money and more."
Among the biggest spenders in this business, where the state of the technology determines the quality of the service, are Bankers Trust New York Corp., State Street Bank, and Chase Manhattan Corp.
Master trust, where banks handle pension funds, is not growing. Any new business typically comes from big pension funds or institutional customers that switch from a competitor.
Continental Bank Corp., overall, has focused on the middle market under Thomas C. Theobald. The trust department has followed that lead. According to Mr. Abraham, by concentrating on mid-sized companies, the trust business has taken an important step.
Dominate or Play a Niche
Banks, he said, can take one of two approaches to the increasingly competitive trust business: either concentrate on the biggest institutional customers or be a niche player. So far, he said, Continental appears successful in carving out a niche.
The Chicago-based bank reports that trust assets now total nearly $100 billion, roughly double the total three years ago. In an annual American Banker survey of the trust business to be released tomorrow, Continental ranks 37th in revenues.
Continental began installing new systems for master trust three years ago, in an attempt to catch up to and leapfrog competitors. The new systems handle trust accounting, portfolio analysis, and securities processing.
Processing Is Retained
Unlike an increasing number of big trust banks, Continental decided not to hire an outside company to handle the trust processing.
The old trust systems were slow to deliver information to customers, and the information delivered was fragmented.
"There was a lack of timely and integrated information," which put Continental at a disadvantage in marketing, said Mr. Nemec.
Reports to Be Faster
The integration of the systems will allow Continental to give its customers a consolidated report on their accounts. Those reports can be delivered in as little as six days. Under the old systems, 20 days was the minimum time.
Mr. Nemec said some of the capabilities of the new system are comparable to those of the biggest trust banks. Most banks, for example, cannot handle the complex portfolio accounting to value foreign-issued securities, called multicurrency reporting, but the new system can.
Continental plans to finish two more additions to its master trust systems next year. Both are geared to give customers more information about their accounts with the bank.