In deregulated environment, Ameriprise may be moving back into retail banking

By acquiring or launching a bank, the firm would be able to recapture more profits from holding cash deposits.
FEB 16, 2018

Ameriprise Financial Inc. is exploring the idea of getting back into the banking business, which could boost the firm's profitability. The brokerage and insurance giant had its own bank prior to the credit crisis but wound down that operation in 2012 due to uncertainty around stricter federal regulation over banks and how that would affect the company's ability to boost its dividend or buy back its stock, analysts said. With the general mood under a Republican administration in favor of deregulation of industries, including financial services, Ameriprise is planning to relaunch its own bank, sources said. "The benefit of having its own bank would be to hold the cash deposits and earn the spread, or net interest income," said Erik Bass, an analyst at Autonomous Research. "When Ameriprise exited the bank, they outsourced that business to a third party and collect a fee. But for discount brokers who own banks, like [E*TRADE Financial Corp. and The Charles Schwab Corp.], they earn almost double" the recent Ameriprise fee, he said. The company's strategy was not clear, but Ameriprise could either apply for a bank charter or buy a small bank, Mr. Bass said, adding: "My take is it's something Ameriprise is strongly considering." On a conference call in January to discuss fourth quarter and 2017 results, one analyst, Suneet Kamath of Citigroup Inc., asked Ameriprise executives specifically about such a move, and the executives left the door open for such a move. "In the past you've talked about the reasons why you exited the bank largely due to regulatory concerns, and with some of the deregulation that's going on across financial services, are you contemplating or considering getting back into that business?" asked Mr. Kamath. "I think we're certainly evaluating that," replied Walter Berman, the chief financial officer at Ameriprise. "And I think your observations are good ones." One Ameriprise adviser, who asked not to be named, was more blunt about Ameriprise's intentions regarding banking. "Ameriprise is getting back into banking, not investment banking like Goldman Sachs, but a retail version for clients," the adviser said. "The company will likely have banking services available in 2019." A spokeswoman for Ameriprise, Kathleen McClung, said the company had no comment about future plans for a bank beyond Mr. Berman's recent response on the conference call. She added that the company offers trust services through its trust bank, as well as credit cards and certain loans through third parties. The company is not afraid of making acquisitions when it expands its various businesses. Last year, Ameriprise bought Investment Professionals Inc., an independent broker-dealer based in San Antonio, Texas, that focuses on the market for independent reps to operate in banks and credit unions. Ameriprise competitors like LPL Financial and Cetera Financial Group have long had a presence in the bank and credit union market, commonly referred to as the financial institution space in the industry.

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