Study: Banks boom when they sell insurance

Banks that sold insurance were more profitable than those that didn’t in 2007, according to data from the Bank Insurance Market Research Group. Using call report data from the Federal Deposit Insurance Corp. on 7,787 banks, the research group in Mamaroneck, N.Y., found that the median net income of banks with insurance activity was 44% higher than that of the whole group. Overall, median net income was $1.07 million in 2007. This number shot up to $1.54 million for the 3,596 banks with some insurance activity. Though the majority of banks in the survey had less than $250 million in assets, these institutions were the ones that experienced the greatest jump in net income due to their insurance sales. Median net income for these smaller banks was $655,000. This went up by 40% for the banks that had some kind of insurance brokerage. “The data suggests that pursuing a diversification strategy — of which insurance brokerage is often a key part — may have paid off for banks in 2007, particularly at a time when banks’ traditional income sources are under pressure,” said Andrew Singer, managing director of the Bank Insurance Market Research Group, in a statement.