Regional banks see gold in wealth management

Less cyclical than traditional banking, the business is helping offset lending losses

May 2, 2010 @ 12:01 am

By Hilary Johnson

Regional banks, still reeling from their real estate exposure, are finding relief — and a healthy measure of profitability — in their wealth management businesses.

“The wealth management business, if properly managed, is often quite successful in enhancing the profitability of a regional bank,” said Gerard Cassidy, a managing director at RBC Capital Markets, who said that banks want to call attention to these efforts.

In the first quarter, most of the 50 banks in the KBW Regional Banking Index that offer wealth management services reported positive results from the business.

Wintrust Financial Corp., which has $12 billion in assets, exceeded analysts' earnings estimates in the first quarter, thanks in part to the performance of its Wayne Hummer Wealth Management unit, which reported a 46% increase in revenue.

At PrivateBancorp, which has $12.8 billion in assets, a 16% increase in wealth management fee income helped mitigate an increased provision for loan losses of about $54 million.

Boston Private Financial Holdings Inc., a bank with $6 billion in assets, eked out a profit in the first quarter after several losing periods.

But the bank's fee income, which includes its wealth advisory and investment management businesses, showed a 12% increase from the year-earlier quarter.

“As the economy continues to recover, we will focus on our existing markets, where we can deliver locally driven wealth management services,” Timothy L. Vaill, the bank's chairman and chief executive, said in its earnings release.


Daniel Arnold, an analyst at Sandler O'Neill Partners LP who covers several regional banks, said that wealth management is a positive driver of earnings.

“From an earnings stability perspective, it's more attractive than traditional banking revenue, which fluctuates dramatically with credit cycles,” he said.

“The wealth business is largely based on assets under management plus the transactional fees that you get. The fluctuations are a lot less severe, so you're looking at a more stable revenue stream,” Mr. Arnold said.

At City National Corp., which has $20.1 billion in assets, first-quarter earnings rose by 110% to $15.7 million, helped in part by the company's wealth management fee income, which grew by 9% from a year earlier.

“The acquisitions of Convergent Wealth Advisors and Lee Munder Capital Group have added significantly to our capabilities,” Christopher Carey, the bank's chief financial officer, said during a teleconference related to the company's earnings report.

“Regional banks understand that wealth management is a better business” than their core banking business, Mr. Cassidy said.

E-mail Hilary Johnson at


What do you think?

View comments

Recommended for you

Featured video


Women's retirement needs and the opportunity they present for advisers

Assistant managing editor Lorie Konish speaks with contributing editor Mary Beth Franklin about the unique planning considerations for women as they prepare for income needs later in life.

Video Spotlight

A Teacher’s Lesson Plan

Sponsored by Prudential

Latest news & opinion

Will Jeffrey Gundlach's Trump-like approach on Twitter work in financial services?

The DoubleLine CEO's attacks on Wall Street Journal reporters is igniting a discussion on what's fair game on social media.

Fidelity wins arb case against wine mogul but earns a rebuke from Finra

In the case of investor Peter Deutsch, Fidelity doesn't have to pay any compensation, but regulator said firm put its interests ahead of his.

Plaintiffs win in Tibble vs. Edison 401(k) fee case

After a decade of activity around the lawsuit, including a hearing before the U.S. Supreme Court, judge rules a prudent fiduciary would have invested in institutional shares.

Advisers get more breathing room to make Form ADV changes

RIAs can enter '0' in some new parts of the document before their annual filing next year.

Since banking scandal, Wells Fargo advisers with more than $19.2 billion leave firm

Despite a trying year, the firm has said it will sweeten signing bonuses for veteran advisers.


Subscribe and Save 60%

Premium Access
Print + Digital

Learn more
Subscribe to Print