Bigger isn't necessarily better for banks in the investment products business, a survey has found.

Small banks can mine their customer bases much more effectively than large financial institutions, according to the study, commissioned by the Consumer Bankers Association.

The report, which contains responses from 60 banks, said banks with less than $2 billion of retail deposits could expect annual investment product sales of $2 million, or 10% of the deposit base.

Institutions with $7 to $18 billion of assets would garner sales equal to just 2.4% of that base, and banks with over $18 billion of deposits would cull sales of 1.8%, the survey said.

Larger banks fare poorly on a percentage basis because of internal politics and disruptions from acquisitions, said the study's author, Kenneth Kehrer, a Princeton, N.J., consultant.

The study covers a period from July 30, 1993, to June 1, 1994. The staff of the bankers association undertook a similar survey the prior year, although the effort addressed other issues.

The latest survey found that programs operating in highly populated areas are not necessarily successful. Investment products sales efforts on the West Coast and in the Northeast can expect sales equal to just 2.7% of their deposit base. This percentage jumps to 6.6% in the Midwest, the region that scored highest in the survey.

The survey also found that banks sell $1 of their own proprietary mutual funds for every $2 of outside funds.

On average, banks sold $854 million of their own funds annually, although one large Northeast bank reported $34 billion of sales, largely through proprietary money market products.

In fact, most banks build their proprietary fund operations around conservative investments, including money market products, Mr. Kehrer said.

Bank-run fund families range from a single portfolio to 32, with 12 being the average, the survey found.

The average fund family contained $2.4 billion in all its portfolios. But the figures ranged widely, from $5,000 in one bank's fund family to $30 billion in another's.

Banks that sold fixed annuities reported an average of $64 million in annual sales, with one institution reporting $1.1 million of volume and another $595 million.

Banks also reported averaging $17 million in variable annuity sales, although one institution had $230 million, the survey said.

Most investment products are sold through full-service brokerages at banks. Discount brokerages, although the vehicle most banks used to enter the trading business, have largely been converted to full-service operations that are more adept at offering mutual funds and annuities, the survey indicated. Just 50% of banks still operate discount brokerages, the survey said.

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