Trust Updates Archive

Banks Trusts Revenue Fiduiciary Earnings Expenses 75% of Bank Trust Operations Undercharge for Fiduciary Services

(Nov. 12, 2008--Chicago, IL) -- The revenue gap between bank trust divisions and independent trust companies is widening, according to the Fiduciary Earnings & Expenses (FEE) report, a sister publication of TRN.

Though some bank trust divisions are raising fees, for most banks gross revenues as a percentage of total assets remains well below independent trust companies. A quarter of all FFIEC bank trust divisions report a gross-revenue return on asset equivalent to independent trust companies -- 0.58 percent or better. The remaining 75 percent are either undercharging or otherwise severely discounting their fees.

The upside for bank trust divisions, according to FEE, is the opportunity to increase fiduciary fees and still remaining competitive with independent trust companies.

Higher earnings are not limited to large fiduciary operations, based on FEE's analysis of independent trust companies. Small fiduciary operations, those with assets over $100 million but under $1 billion, generate the industry’s highest profit margins. These small trust operations differ significantly, however, from bank trust divisions. They specialize, rather than act as full-service fiduciaries, usually limiting operations to three fiduciary account categories -- often less.

Performing slightly better than bank trust divisions, but still below the independents, were trust company subsidiaries of national banks.

There were some surprises among expenses, according to FEE. While salaries and benefits continue to be the largest expense category of most fiduciaries, data service expenses are increasing, and run significantly higher among bank trust divisions.

For more on this topic, see the upcoming issue of Trust Regulatory News.
To order the FEE report, see the link below (or for a special introductory offer click here).

No statement in this issue is offered as or should
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