February 18, 2014

Banks’ Wealth Management Biz Thrives

Growth critical to offsetting declining revenue from services charges and other traditional sources, IPI says

JPMorgan is the bank holding company with the most wealth management income. (Photo: AP) JPMorgan is the bank holding company with the most wealth management income. (Photo: AP)

Fee income from a variety of wealth management services provided by bank and thrift holding companies to individuals, families, business and nonprofits grew by 10.5% to some $99 billion in the first three quarters of 2013 over the same period in 2012, according to a new study.

The report, from Michael White Associates and Investment Professionals Inc., was based on data from all 6,891 commercial banks, savings banks and thrifts, and from 1,068 top-tier bank and thrift holding companies that were operating on Sept. 30.

Of the 1,068 BHCs, 573 engaged in wealth management activities.

The study found that 83% of the BHC wealth management programs were on track to earn at least $250,000 in 2013. Of those, 56% had double-digit growth over 2012, and 32% enjoyed growth of more than 20%.

“In the first nine months of 2013 compared to 2012, all components of wealth management showed positive growth,” IPI president Jay McAnelly said in a statement.

McAnelly said optimizing all components of a wealth management program in the current economy was critical.

“Community bank wealth management and investment program managers especially must continue to strengthen retail distribution of these essential products and services to help their banks offset declines in traditional banking revenues such as service charges and net interest margins.”

The report separated wealth management income into four main components, with 21% of 573 BHCs reporting earnings in each of the components.

  • Investment advisory and banking income, with a 38% share, was the biggest contributor to wealth management income at $37.5 billion, up 14.1% from 2012
  • Securities brokerage fees and commissions represented $32 billion, or 32%, of total BHC wealth management income, up 7.7% from 2012
  • Up 8.3% from 2012, fiduciary activities represented $28 billion, or 28%, of total wealth management income
  • Annuity income was the smallest contributor to overall wealth management income in 2013 at $2.5 billion, of 2.4%, up 7% from 2012

The report found that investment advisory and banking was the number one source of income for the largest BHCs with assets of more than $10 billion, but was only number three for those with less than $10 billion in assets.

Midsize BHCs with between $1 billion and $10 billion in assets generated most of their wealth management income from securities brokerage and fiduciary activities.

For banks with assets between $500 million and $1 billion, fiduciary was the most important source of income, and annuity income also played a larger role.

Following are the top five leaders in wealth management income as of Sept. 30.

Click to enlarge 

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Check out 10 Biggest Banks in the World (*With a Footnote) on ThinkAdvisor.

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