In the prevailing low-interest rate environment, investment businesses, such as trust and retail brokerage, “add tremendous value to banks,” Mark Czarnecki, president of M&T Bank, which owns Wilmington Trust, said at a recent conference.
Czarnecki laid out a vision that, following last year's completed acquisition of Delaware-based Wilmington Trust, M&T Bank has an opportunity to “develop the wealth [unit] as a major business line, not just a service.” Within the wealth management space, Czarnecki said he viewed the retirement sector as “really open,” and that banks in particular were well positioned to “own it.”
Trust, wealth management and corporate services are together the largest generator of non-interest income at M&T, accounting for 34 per cent of fee income compared to 15 per cent before the merger.
The Wilmington Trust acquisition was completed in May 2011, following which all of Wilmington's bank customers became M&T customers. However, the owner firm retained the Wilmington Trust Wealth Advisory Services brand, reflecting the latter firm's relative strength in that area. The deal gave M&T a wealth management business with around $81 billion in assets under management at the completion, and ended Wilmington Trust's history as an independent bank, which stretched back to 1903.
Czarnecki's comments, made at the Bank Insurance & Securities annual convention in Hollywood, FL, were prompted by the Federal Reserve's 2014 Guidance, which he said had set in the realization that low interest rates, tight net interest margins and slow revenue growth would be the reality for some time.
"The next three years [for banks] will be as challenging as the last five," he said, with proposed regulations, if enacted, putting a further dampener on lending.
Despite this, he predicted that all of the top 20 US banks will be profitable in 2012.