A bad economy has hit the bottom line of most bank wealth management programs, according to the Michael White IPI Bank Wealth Management Report.
In the first half of 2012, bank and thrift holding companies generated $59.4 billion in wealth management income, a 6.6% slide from the year before, according to the recently released report. Their median investment program income was $794,000, down 3.6% from $824,000 in 2011.
The growth of wealth management programs also slowed with fewer banks reporting gains in revenue and more reporting revenue declines. Of the 423 programs on track to earn at least $250,000 this year, 269, or 63.6%, showed some level of positive growth over 2011. Of those 269, 30.5% had double-digit gains with 18.4% growing more than 20%. In 2011, in contrast, 326 bank programs had positive growth, more than half of which grew by double-digits.
Wealth management income has decreased in the first six months of 2012 compared to 2011, and the number and percentage of wealth management programs with positive growth have declined, Jay McAnelly, president of Investment Professionals Inc., said in a statement.
Investment advisory and banking services were the biggest contributors to wealth management income in the first half of the year, bringing in $21.31 billion for bank and thrift holding companies, or 35.9% of their total wealth management income. The second largest contributor was securities brokerage, which generated $19.64 billion, or 33.1% of the total. Fiduciary activities, which drummed up $16.91 billion in revenue, ranked third at 28.5%, and annuities, with $1.55 billion, were fourth at 2.6%.
The overall decline in investment advisory and banking services was due to the bad economy and the uncertainty it created for many institutional and individual investors, White said in an email.
Among the largest financial firms, Morgan Stanley, J.P. Morgan Chase and Bank of America were the biggest producers of wealth management income. Among mid-tier financial firms, the top three were Stifel Financial Corp., SWS Group and Plains Capital Corp. And in the smallest category, First Command Financial, First National Bankers Bancshares and United Bankers Bancorp. led the charge.
The two banks with the fastest-growing wealth management programs were Northfield MHC and Valley Financial Corp., which more than tripled their income from wealth management. Home Bancshares Inc., Access National Corp. and M&T Bank Corp. were among the top five with the fastest-growing wealth programs.
The report was compiled by Michael White Associates and sponsored by Investment Professionals Inc., a third-party marketing firm dedicated to the bank brokerage industry. The report was based on data from 7,246 commercial banks, savings banks and saving associations and 1,070 bank and thrift holding companies operating on June 30, 2012.