Key players in the trust business last year posted major gains in both income and assets under management.

Gains by Bankers Trust New York Corp., Bank of New York Co. Inc. and Mellon Bank Corp. helped lift trust assets managed by the 100 largest trust banks by 17.1%, to $2.2 trillion.

Total trust income for these banks grew 14.8%, to $12 billion, according to an American Banker survey.

But while some trust banks fared well, the data indicate that as a whole the largest players are struggling to maintain market share.

"Some banks do an excellent job of servicing what can be a demanding clientele," said Diane B. Glossman, a bank stock analyst with Salomon Brothers Inc., in New York.

Industry Losing Share

"But the industry as a whole is losing share, if that is defined as an exclusive position to help manage investment needs," she added.

This is because much of the increase in assets and fees came from appreciation in the value of assets.

Approximately 2% of asset growth came from acquisitions, leaving only modest gains attributable to new business.

The biggest beneficiary of acquisition activity was Mellon Bank, which in May 1993 purchased the Boston Co. of Massachusetts.

The deal contributed 92% of Mellon's $238 million increase in trust fees. The increase -- the largest recorded by any trust bank last year -- catapulted Mellon to 5th place in total trust fees, with $529 million, up from 10th place last year.

The fact that existing business grew at a rate commensurate with the industry led officials to crow about their management of the deal.

"The merger with the Boston Co. has gone extremely well," said Mellon vice chairman W. Keith Smith.

"We have seen a tremendous flow of new business, retained clients, and the two organizations have blended together quite nicely," he added.

The biggest gain in discretionary trust assets - where banks act as investment adviser -- was posted by Bank of New York, which had a 75% increase to $54 billion.

The bank ranked as the 11th largest discretionary trust manager, up from 15th in 1992.

Newton P.S. Merrill, senior executive vice president of Bank of New York's investment management business, said the increase was spread throughout product lines, and did not result from acquisitions.

Bankers Trust, the largest manager of discretionary trust assets, also fared well.

Its discretionary trust assets rose 20% in 1993, to $182 billion.

The growth came from business with existing clients, new clients, and good investment performance, said managing director Anthony Bowe.

Mr. Bowe added that the biggest asset growth was in foreign equity and foreign fixed-income instruments, which performed well last year.

Mr. Bowe said that profits also grew, as customers used more high margin services, including so-called alternative investments, where the bank makes investments for clients that mirror trading in its own account.

Mr. Bowe said these assets grew 183% last year.

The forces driving the trust-business differed depending upon the segment of the industry in which a bank was involved.

Amy J. Errett, chairman of the Spectrem Group, a consultancy in San Francisco, said that the transaction-processing segments of the trust business -- including bond trustee, custody, and shareholder servicing, are in a state of consolidation.

She said these businesses are driven by economies of scale, and that the biggest players, with the best computers and software, are buying smaller players that can't afford to compete.

Investment management for institutions and people continues to be a fragmented business that both large and small banks covet.

Banks are trying to increase investment business by cross-selling services, and by buying or forming alliances with money managers and mutual funds.

"It's a business that we like," said D. Paul Jones, Jr., chairman of Compass Bancshares Inc., of Birmingham, Ala., the 82nd-largest bank in total trust income.

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