Assets in most bank trust departments grew at a snail's pace last year, according to a consulting firm study.
Assets increased by a mere 1% in 1994, down from an 8% gain in 1993, said the study, which set out to measure the internal performance of about 150 bank trust departments.
Fewer trust assets typically mean a slowdown in new client acquisitions, according to a study for client banks by Financial Services Associates Inc., a trust and private banking consulting concern in Niles, Mich.
Information for the survey is based on data provided by Trustcompare, a Financial Services system that analyzes trust banking profitability, productivity, pricing, and sales for client banks.
The slowdown in bank trust asset growth has occurred over the past several years, but has become more apparent last year by a decrease in the market value of trust portfolios, said David A. Hall, president and chief executive officer of Financial Services.
"Banks have not had a great deal of success in increasing their penetration of the business," said Mr. Hall.
Paul Groncki, a vice president and director of affluent market research at Payment Systems Inc., Tampa, said that the Financial Services study confirms the trend his firm has seen.
A recent Payment Systems study, for example, shows that bank trust departments and trust companies have decreased their overall share of the affluent market to less than a third, down from a traditional 40% to 50% of the market.
"Banks have had a slow year because others had a better year," Mr. Groncki said, adding that such competitors as brokerage firms and lawyers have taken away most of that lost business.
But Mr. Hall, who declined to give out specific figures about individual banks, said that his study does not say that banks are not trying to increase their business.
"It confirms the pattern of several years that trust is a very attractive business, with high-growth margin, but not a rapidly growing business," said Mr. Hall.
Mr. Hall said that a well-managed bank trust department can add as much as 30% to 40% to a bank's annual profitability.
The median profitability of the banks surveyed, meanwhile, increased by 8% in 1994, down from 19% in the previous year.
That is because 1994 bank trust revenues apparently could not offset higher expenses.
Payment Systems' Mr. Groncki said that his research shows that banks has seen that they have been better than the competition in attracting large assets.
"But they're still far from where they want to be," Mr. Groncki said.
