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Bank Investment Productivity Down From Last Year: BISA

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The monthly productivity of bank broker-dealers fell 8%, to $25,708, during the second quarter of 2003, from an average of $28,058 in terms of gross investment product revenue in the second quarter last year, reports the Bank Insurance & Securities Association, Wayne, Pa. The survey was conducted by Kenneth Kehrer Associates, Princeton, N.J.

However, bank investment sales during the most recent quarter were up 8% from the first quarter of this year, when the average monthly gross revenue was $23,763 per broker-dealer.

The average licensed branch banker generated monthly gross commissions of $2,010 during the second quarter, down 23% from $2,602 in the same period last year and 16% from the first quarter of 2003, BISA found.

Despite the revenue drop, profit margins for banks investment products rose slightly, from 36% in the second quarter 2002 to 37% in the same period this year. This was largely due to the improved sales of variable annuities, BISA says.

VAs accounted for 21% of bank securities revenue in the second quarter, up 8% over the same period last year.

“For the fourth consecutive quarter, VA revenue exceeded mutual fund revenue in the typical bank brokerage,” BISA said in its quarterly productivity and performance report.

Banks sales of fixed annuities fell from 56% of investment product revenue in the second quarter of 2002 to 37% in the most recent quarter.

Life insurance accounted for 2.3% of bank brokerage revenue in the quarter, up from 1.7% the previous quarter. (BISA did not track this figure until the third quarter of last year.)

The average bank retail securities program produced annualized revenues of $2,316 per $1 million in retail deposits in the quarter, 2% higher than the same period in 2002, Kehrers study found.

Profit penetration improved in the same period, as measured by the net income if banks retail securities program per $1 million in bank retail deposits.

On an annualized basis, profit penetration in the second quarter was $1,077 per $1 million of retail deposits, up from $976 per $1 million in the same period last year.

“While declining revenues more than offset an improvement in profit margins, bank brokerages nonetheless produced their second best monthly profit contribution ever,” BISA stated.

Reproduced from National Underwriter Life & Health/Financial Services Edition, September 15, 2003. Copyright 2003 by The National Underwriter Company in the serial publication. All rights reserved.Copyright in this article as an independent work may be held by the author.


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