Buoyed by strong stock and bond markets, trust assets managed by the top 100 banks in the field surged by nearly 25% last year, according to an American Banker survey.
The survey also found a big shift in the ranking of the top players in 1995, with Wells Fargo & Co. supplanting Bankers Trust New York Corp. in the No. 1 spot. Also pulling ahead of Bankers Trust was State Street Boston Corp., which moved up to No. 2 from No. 3.
The overall performance was a marked improvement over the stagnant growth rate of 5.4% the year before. But some observers saw little reason for cheer, saying that banks appear to be attracting few new customers and the asset growth mainly reflects strong investment performance amid booming markets.
"Even if they're just performing at market level there is not much new money," said Jeb Britton 3d, a senior consultant with San Francisco-based Spectrem Group. "And, if an awful lot of new money did come in, then it shows they aren't performing at market level.
"It makes you wonder how much is new growth," he added.
The top 100 players posted an aggregate lift in gross trust income of 9.17%, to $14.3 billion. The gain lagged 1994's growth rate of 11.08%.
"Larger portfolios are thinning the pricing and there is a lot of competition," one banker said.
J.P. Morgan & Co. remained the leader in trust income last year, pulling in more than $1.1 billion. Citicorp was next, reaping income of $983 million from its trust business.
Some observers said the survey results indicate that banks are having a difficult time attracting assets amid rising competition.
"While gaining in terms of assets, banks are losing in market share relative to other investment opportunities" said Michael P. Kostoff, managing director of Advisory Board in Washington, D.C. "It's not that their investment performance is worse than anyone else, but they're not selling new accounts and not retaining old ones."
Mutual fund companies, brokerage houses, and even attorneys have all taken aim at the trust market. Banks generally do a good job competing against these new entrants in terms of investment performance, the survey suggests. But, when it comes to marketing, they fall behind.
"The performance may be there, but maybe a bank isn't as good at getting the story out," Mr. Britton said. "They may not be paying the right kinds of people to go out and do the marketing."
Some banks experienced asset growth that went well beyond market averages, thanks to mergers or acquisitions. State Street got a shot in the arm early last year by acquiring Kansas City, Mo.-based Investors Fiduciary Trust Co.. It ended 1995 with $233 billion in assets under management, a 41% jump from the previous year. Income from trust climbed 14% to $823 million.
"The argument is that it's much more efficient to compete with a larger asset base," said Daniel W. Drake, a Morgan managing director who heads the American Bankers Association's committee on trust and investment management. "It's much easier to have a broader product line."
Acquisitions are expected to further shuffle the ranks for 1996. At the close of business 1995, Wells sold Wells Fargo Nikko Investment Advisors to Barclays PLC. When adjusted for that transaction, the rankings show the new entity, BZW Barclays Global Investors, as the nation's second largest trust bank, with $223 million in discretionary trust assets.
Wells slips to a No. 12 berth, with $57 billion in trust assets.
Some don't subscribe to the merge-or-die outlook, noting that niche outfits, such as Glenmede Trust and Bessemer Trust hold their own ground.
"I'm not sure that I'm a real believer that in this business you have to have a huge amount of money under management," said Mr. Britton."You see some people who are making a decent living with $100 million under management."