Banks logged a record amount of insurance brokerage fee income over the first nine months of last year, and part of the reason appears to be that they pushed harder for fee income as other fees came under pressure.
“I just think everyone is running as hard as they can to increase their business,” said Michael White, whose research firm just announced the results in the Michael White-Prudential Bank Fee Income Report.
In the first three quarters of last year, bank holding companies tallied $9.73 billion in insurance brokerage fee income, according to the report. That was up a full 7% from the same period in 2009. However, third-quarter insurance brokerage fees dropped off 6.3% from the third quarter of 2009, for reasons that aren’t yet clear.
Of the 100 largest bank holding companies, “probably close to 45 improved their position in terms of earnings,” said White.
The robust results for the first three quarters of last year also had something to do with new bank charters for the likes of Morgan Stanley and Goldman Sachs Group, Inc., says White.
Wells Fargo led the pack in fee income for the nine-month period, earning $1.34 billion in insurance brokerage fee income, according to the White report. But Citigroup, with $1.32 billion, was a close second—and its result was a 71.34% improvement from the prior year.
Two banks stand out among the leaders for the percentage of non-interest income that their insurance brokerage revenue accounts for. BancorpSouth, Inc.’s insurance brokerage revenue for the first three quarters of last year was just $64 million, but it represented 37% of its non-interest income. BB&T Corp.’s $712 million of insurance brokerage fee income represented 34% of its non-interest income.
The companies “have really invested in” their insurance brokerage businesses, and are reaping the rewards, said White.
Insurance income as a percent of non-interest income can be a more important figure than overall insurance brokerage income, he added.
“A smaller company is obviously going to be dwarfed by one like Wells Fargo in terms of dollar amounts of fee income earned,” White said. “But they may have a far greater success rate in terms of things like their contribution to net operating revenue.”
Not all banks subscribe to insurance brokerage as a way to boost fee income. About 64% of large bank holding companies engage in it, meaning a significant minority have stayed on the sidelines.