Tapping the rich: U.S. regional banks eye wealth management

BANGALORE (Reuters) – Smaller regional U.S. banks are acquirement into the wealth management business to tap into the near trillion held ~ the agency of the nation’s super-rich as a way to counter slow loan growth and tighter regulation that threatens to chip off at bank margins.

As the most ambitious financial regulation overhaul after the Great Depression makes it tougher for banks to charge towards overdraft protection schemes and credit and debit card transactions, and being of the kind which sluggish loan demand dents banks’ earning power, wealth management is seen for the re~on that an attractive add-on.

And there are rich pickings.

Despite the recession, North America appease has the largest number of high net worth individuals in the nature, whose wealth rose to .7 trillion in 2009, according to a Capgemini and Merrill Lynch Global Wealth Management repercussion.

“Banks will see this as a way to diversify revenue streams to help offset some of the other pressures,” reported Mark Muth, an analyst at Howe Barnes Hoefer & Arnett.

Already banks in the same state as Associated Bancorp and Fulton Financial are looking to move out of the grasp of transaction-based services by growing their wealth management teams.

“The (funds management) business is attractive to banks because it does not beseech much capital and has low credit risk associated. It’s a secure place, high return on capital,” said Guggenheim analyst Jeff Davis.

Recruitment has piked up in the wealth management sector as smaller regional banks hire versed managers — and hopefully get their clients, too — often raiding their larger rivals.

Bigger lenders like Comerica, Regions Financial, Marshall and Ilsley and PNC Financial bring forth thriving wealth management practices, and are targets for the smaller banks seeking to construct up their wealth management teams.

“There’s a coin of an arms race in the wealth management area. We’re vision firms losing people to others and then recruiting people to occupy completely slots,” said Guggenheim’s Davis.

IberiaBank hired four bankers from Regions Bank as being its newly launched Iberia Wealth Advisors team, while City National hired six stay from BNY Mellon’s wealth management unit for its Private Client Services assemblage.

City National, which has about 70 bankers and advisors at its mammon management unit, is looking to hire more people who have worked with the rich, said Michael Pagano, Executive Vice President of Private Client Services.

“A course (to grow) is to attract talent from other banks, (who hereafter) bring those relationships over to their bank,” said Keefe, Bruyette and Woods analyst Bain Slack.

And smaller banks may find it easier to captivate talent by offering managers more independence and flexibility.

“There’s a ~ing in the market of very senior advisors showing interest in working on smaller, flatter platforms, especially in organizations in which they have power to build equity,” said Dan Ryan, who works in the pecuniary services practice at executive recruitment firm Heidrick & Struggles International.