- towering above second-place Chemical Banking Corp. - according to federal data. Thanks in large part to its ownership of the Dreyfus fund family, Pittsburgh-based Mellon reported $91.3 billion in mutual funds sales. As is the case with most banking companies, the bulk of those sales came from money market funds. The sales volume at second-place Chemical was $61 million - about two- thirds of Mellon's total, according to Federal Deposit Insurance Corp. call report data compiled by Sheshunoff Information Services Inc. Meanwhile, BankAmerica Corp. distinguished itself as the largest bank seller of annuities. According to the call report data, the San Francisco- based company registered $1.2 billion in annuity sales, just edging out hometown rival Wells Fargo & Co. This is the first time that bank holding companies have been ranked according to sales of all mutual funds they market, not just sales of proprietary funds. Last year was also the first year that banking companies were required to report annuity and mutual fund sales to the FDIC - thus data cannot be compared with prior years. Not surprisingly, the call report information shows that the vast majority of mutual sales came from money market funds, which generally have lower profit margins than stock, bond, municipal, and mixed portfolios. The call report information reflects only sales of money market funds, not movements of money in and out of the funds. Some experts say that including money market funds is misleading, because customers move money so frequently in and out of money markets. Although bank sales of all mutual funds rose from $119.5 billion in the first quarter of 1994 to $155.9 billion by the fourth quarter, sales of more profitable, long-term funds fell from $11 billion in the first quarter to $9 million by the last quarter. "The steady fall in long-term mutual funds was one of the key bank investment stories in 1994,"said Andrew Singer, a bank consultant based in Mamaroneck, N.Y. The call report data also showed that fees from the mutual fund business generally made up less than 3% of all fee income, even for most big fund sellers. A big exception was Mellon, which derived 25.5% - $304.5 million - of its total fee income from the sale and servicing of mutual funds and annuities. Dreyfus sales were included in Mellon's call reports for the last two quarters of 1994. Of the $91.3 billion in mutual funds sold, $7.5 billion was in long-term mutual funds. Wells Fargo also derived an unusually high percentage of its fee income - 8.9%, or $113.6 million - from the sale and servicing of mutual funds and annuities. At the other end of the spectrum, mutual funds generated 2.8% of all fee income at BankAmerica and 1.4% at Chemical. "Sales results are down across the country in all mutual funds," said Lawrence S. Kash, vice chairman of Dreyfus Corp. He said bond funds were particularly hard hit, and that sales of tax-exempt money market funds were also down, because of uncertainties about potential changes in tax laws. Chemical owed its No. 2 ranking largely to $60.8 billion in money market fund sales; its sales of long-term funds were only $222.8 million. BankAmerica Corp. was the third-largest bank seller of mutual funds last year, with almost $57 billion in sales. Several banks would have ranked much higher if money market sales were excluded. NationsBank Corp. ranked only 17th for all funds, but third for non-money market funds. Wells Fargo ranked 12th if money market funds were included, but fourth if they were excluded. "I was impressed with Wells Fargo throughout the year," Mr. Singer said. "The bank scored consistently high in terms of fee income from mutual funds sales, and high in terms of the ratio of funds sales to assets." U.S. Bancorp, which ranked eighth in annuities sales at $322.6 million, was unusual because that total more than doubled its mutual fund sales of $155.6 million. The reason? "We have a platform program," said Rick O. Bowman, president of U.S. Bancorp Insurance, a subsidiary of the Portland, Ore., bank. Branch employees have been selling fixed annuities since late 1993, while mutual fund sales are done entirely by full-service brokers in the bank's brokerage subsidiary. By 1996, Mr. Bowman said, branch employees will be selling variable annuities and mutual funds as well. Because 1994 was the first year banks reported all mutual funds sales, the process still has some kinks. At least one bank overreported its annuities sales, and the bank's comptroller submitted new, corrected figures to the American Banker. Observers expect the kinks to be ironed out over time.
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