Bank executives are attributing brisk growth in income from annuity and mutual fund sales to the strong stock market, retirement plan rollovers, and industry consolidation.
Banks' first-quarter revenue from annuities and mutual funds rose 40% over the previous quarter and 12% from a year earlier, according to the Michael White-Symetra Bank Holding Company Fee Income Report.
They generated revenue of $5.6 billion from the sale and servicing of mutual funds and annuities, the report said, compared with $4 billion in the fourth quarter and $5 billion a year earlier. Commissions from annuity sales were $891 million and accounted for nearly 16% of mutual fund and annuity income overall, the report said.
At Wachovia Corp., first-quarter annuity sales rose 17.2% from a year earlier, said Lynne Ford, the director of Wachovia's retail retirement group. "We've been seeing increasing growth in the variable annuity space," she said.
A 35% increase in individual retirement account rollover inflows in 2006 has helped, Ms. Ford said. "Increasingly, variable annuities are getting their fair share of that," she said.
Lifetime-income products are helping sales at Wachovia — three-quarters of its new variable annuities sold included riders meant to ensure lifetime income, Ms. Ford said.
Wachovia's annuity sales commissions accounted for nearly 16% of its mutual fund and annuity revenue, according to the White-Symetra report. Its annuity and fund income rose 37% in the first quarter from a year earlier.
Several major banks' fees from mutual funds and annuities surged or plunged because of mergers and divestitures.
Regions Financial Corp., for example, benefited from its 2006 acquisition of AmSouth Bancorp.
AmSouth's mutual fund and annuity income accounted for the lion's share of the combined companies' 57% year-to-year jump, said G. Douglas Edwards, the president and chief executive of Morgan Keegan & Co. Inc., Regions' investment banking and brokerage unit.
"It's not the whole story, but it is a big part of the story," he said.
Regions had $42.6 million of fund and annuity fee revenue in the first quarter, versus $27.1 million a year earlier, the White-Symetra report said.
Morgan Keegan has also had "a fair amount of organic growth," Mr. Edwards said, noting that it has hired about 100 brokers in the past year.
Wells Fargo & Co. last year bought the employee benefit trust business of Chicago's LaSalle Bank Inc., adding 350 employee benefit plans and $12.4 billion of assets. Wells' mutual fund and annuity revenue rose more than 250%, to $344 million, in the first quarter from a year earlier.
At PNC Financial Services Group Inc., however, fund and annuity fee income fell 88%.
A PNC spokesman cited BlackRock Inc.'s 2006 purchase of Merrill Lynch & Co. Inc.'s investment management unit. That halved PNC's 70% stake in BlackRock, a money manager.
Other declines occurred organically. Fifth Third Bancorp's first-quarter fee income slipped by a little more than 3% compared with the year-earlier period.
David J. Pittman, executive vice president and president of Fifth Third Bank Investment Advisors, said the drop resulted from a strategic decision.
"The change is driven by our desire to change our mix of business and decrease annuities as a percentage of our revenue," he said. "Overall, our fee-based revenue continues to grow at a very strong pace."
Wachovia topped the first-quarter fund and annuity fee income rankings with $587 million, followed by Bank of America, with $488.6 million.
Bank of America's year-over-year increase in fee revenue of a little more than 8% was driven by mutual funds, said John Pyndus, an insurance and annuities executive for the global wealth and investment management division of Banc of America Investment Services Inc.
The "flat" annuity numbers reflect Bank of America's judicious sales of the products, he said.
"We're not doing any programs like 'talk to everybody about an annuity,' " Mr. Pyndus said. "We are working to fit them into a financial plan, and that is not a method that is going to get big results all of a sudden."
Citigroup Inc. ranked fourth in first-quarter fund and annuity income, with $439 million, followed by JPMorgan Chase & Co., with $383 million.
