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Fiduciary Earnings Expenses 2016 BNY Mellon Chase Citibank Northern Trust Wells Fargo Fifth Third Bernard Garbo Trust Performance Report A.M. Publishing financial institutions trust companies banks More Institutions Offering Less, Leads to Stronger Industry

(Dec. 13, 2016 --Chicago, IL) -- Revenue performance kept pace with expense increases at most trust operations, leading to stable strong profit margins, according to Fiduciary Earnings & Expenses 2016. However, many smaller and some larger players continue to review exiting the industry.

For the seventh consecutive year, the industry continues to post positive revenue growth. These results are driven in part by trust executives continuing to focus on fee increases and better policing existing fee schedules. The rate of revenue growth has been slowing, however, according to FEE's sister publication Trust Performance Report.

Independent trust company executives remain more confident than their counterparts of achieving their revenue and account goals. This may explain why only executives at bank trust divisions say they are looking to sell or outsource operations.

A.M. Publishing’s Annual Survey of Trust Assets asks trust executives if their institutions were considering outsourcing or selling their trust operation. As in the prior year, the only respondents contemplating selling or outsourcing were bank trust divisions. None of this year’s respondents indicated a sale was under consideration, but 2 percent said outsourcing was a possibility, up from 1 percent in the prior year.

More Offering Less

Institutions reporting the highest profit margins continue to be those focusing their business on 3 or fewer product categories. These include personal trust, employee benefit, investment management agency, foundation, corporate trust, and custody accounts.

More institutions than in prior years report having pared back the number of product categories they offer.

Though only 16 percent of institutions surveyed say they are reviewing the possibility of limiting product categories, down from 20 percent in the prior year, more institutions report limiting services. In 2014, only a quarter of all survey respondents said that their business strategy included limiting the number of product categories they focus on. However, in 2016's survey, nearly a third (32 percent) said they now do. The majority of these focus on traditional product categories, shorthanded as P.I.E. (personal trusts, investment management agencies, and employee benefit trusts; includes foundation accounts, formerly reporting under personal trusts).

Bank trust divisions continue to favor the full-service model. This may be driven by beneficial synergies between a bank’s commercial lending, investment, and trust areas. This would explain why the data show many banks continuing to subsidize trust operations.

Raising Fees and Productivity

Nearly 1 in 7 trust institutions raised its fees in 2015, compared to 1 in 5 the prior year. Raising fees, however justified, still makes many trust bankers nervous. This may be why over the last three years more and more respondents say their focus is on policing fee schedules to ensure full implementation of their existing fee schedule.

Trust institutions, across institution type, remain on average uniformly productive. The metric for measuring productivity, according to management consultants, is profit per employee. For comparison across industry type or sector (independent trust companies, national trust companies, and bank trust departments), FEE 2016 uses gross revenue per account officer and per fulltime equivalent employee. The information by institution is obtained through direct surveying.

Trust Performance Report -- annual data book, published in May, provides both industry and peer group performance data by assets, gross revenue, net income, and account category. Subscribers receive quarterly updates. TPR findings are based on its annual survey of the top 1500 fiduciary institutions. For more best practices and benchmark data see TPR. For information on ordering click here or the link below.

Fiduciary Earnings & Expenses -- annual data book comparing performance among independent trust companies to that of OCC national trust companies and to bank trust divisions. For information on ordering click here or the link below.

For Sample copies of both publications click here and then, on the web page, check "Trust Performance Report."

No statement in this issue is offered as or should be construed as legal opinion or advice or as an indicator of future performance.
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