Growing the Wealth

Growing the Wealth

Ray Ifert brings his knowledge of west central Florida to Bank of New York Mellon, which established a Tampa office in January to seek and serve the affluent.

banking by Dave Szymanski | Tampa Bay Editor

The Bank of New York Mellon, one of the oldest and largest financial institutions in the country, established an office in Tampa in January targeting the investment needs of the wealthy.

To crack that market, it recruited someone from within the community: Ray Ifert, 47, longtime banker with Bank of America and Regions Bank.

But it got more than Ifert. He also brought a team of six bankers he has worked with since 1995.

Starting in Ifert's South Tampa home using a wireless router, the team has moved to Corporate Center One in Westshore and will be moving to a new office building across the street when it is completed before year's end.

Bank of New York has moved to the Bay area because of demographics - specifically the net worth of residents. There are enough wealthy investors to meet the bank's $1.5 million per-person minimum requirement in investable assets.

"The most recent statistics place it in top 25 in the nation in wealth demographics," Ifert says.

While most big, established banks are re-trenching, Bank of New York is expanding because it sees an opportunity in the affluent niche.

The bank already has Florida wealth management offices in Naples, Vero Beach, Palm Beach, Fort Lauderdale and Miami and is looking at expanding into Sarasota and Bonita Springs.

The bank's health includes a strong investment-grade rating and $201 billion in total assets, $28 billion in total shareholder equity and a 9.33% Tier 1 capital ratio. Regulators typically a want at least a 6% rate.

Four services

BNY is primarily focused on private clients, individuals, families, family offices, endowments and foundations. It provides four main services: investment management; wealth and estate planning, such as trusts; private banking, including deposit services; and global custody and information management. Its total assets under management is $1.1 trillion.

Its competitors include investment banks such as Merrill Lynch, Smith Barney, UBS, Northern Trust, Bank of America and Wachovia.

It also does fiduciary help with philanthropic goals in private banking, handling customers deposits and borrowing needs.

What is the bank's strategy? Use its more than 220 years of experience and look for new markets with good demographics to attract more wealthy investors and grow its business.

The Bank of New York was one of the first stocks traded on the New York stock Exchange. It still uses the BK ticker symbol. The address of its headquarters office in New York is 1 Wall St.

"We have a track record and we have resources," Ifert says.

The bank stresses personalized service and says it has a 97% retention rate with customers.

"We do believe in hiring the best people," Ifert says.

Half of the staff lives in Pinellas County, the other in Hillsborough. Most of the work is done at clients' homes or businesses, sometimes at odd hours or on weekends.

Ifert, a Philadelphia native, has a banking career that spans several states. He moved to Tampa in 1992, then in 1999 to Seattle where he served Bank of America customers in Washington state, Idaho and Oregon. The bank then moved him back to Tampa.

Transition time

Ifert sees this as a transition time for banks. There are increasing non-performing loans and foreclosures are hitting records.

"We don't believe the excess inventory in housing liquidation is going away until 2010," Ifert says.

The list of problem banks increased from 90 by March 31 to 117 on June 30. There have been nine bank failures this year. The FDIC just borrowed from the U.S. treasury to cover other bank failures and the economy has slowed, although signs of recovery are already showing.

Even though they are relatively insulated, the economy affects the lifestyle of the wealthy investor, Ifert says.

"Especially those that are retired," he says. "We have discussions with clients, to make sure cash-flow assumptions are correct. We need to reaffirm and rebalance their portfolios."

Bank of New York has been able to grow in this downturn, in large part, because of fee income, which makes up about 80% of its earnings. That is from investment management fees and asset serving fees. The remaining 20% is from net interest from loans and deposits.

"We're not typical," Ifert says. Revenues rose 12% in its recent quarter, ended in June.

BNY also ties its strength to retaining good, high-value customers. And it does that by differentiating itself from brokers.

The fees BNY employees make are tied to the customer's assets, not how they increase over time. "It's not tied to how the asset values," Ifert says.

The bank knows it would be difficult to compete in the same services as mainstream banks.

"A typical bank grows by adding deposits and making loans," Ifert says. "The people in charge now are in credit policy. It's tougher for people to get loans and the price has gone up. Right now, I can see a lot of competitive rates. Some banks are offering CDs at 4%. I would be losing money if we did that."

Yet even residents with brokers and bankers still talk to Ifert.

"People always think they can do better," he says. "They want to know what the other guy is doing. I've never had anyone say they don't want to talk to you. We've got a great track history. Our fixed-income group in Boston has $25 billion managed in fixed income."

People and the future

The biggest lesson Ifert has learned in 25 years of banking: Work with a good team.

"Don't do it on your own," Ifert says. "You have to work with good people. Find a firm to support you and what you feel is important."

One of the things Ifert looked at: Fortune magazine rated the bank as one of the most admired companies, ranking it No. 1 in 2006 and 2007.

The future of banking will be specializing and being very large, to offer many services and assets, or being small enough to offer access and knowledge of a community, Ifert says.

"I have always believed in the barbell theory," Ifert says. "On one end are large super-regionals, constantly acquiring other firms, such as Wells Fargo and Wachovia. On the other end are community banks, well run community banks. There is always a need for them."

Then there is the bar between the two.

"The banks in the middle will have the hardest time," he says. "They don't have the resources. They're not small enough to give you the community-bank feeling. We're going to have fewer banks. With the economy, we see that happening."

REVIEW SUMMARY

Company: Bank of New York Mellon

Industry: Banking

Key: Determining wealth demographics then targeting top-end investors.

BY THE NUMBERS

Bank of New York Mellon Corp.

(Dollars in millions, loans in billions)

ASSETS AND LIABILITIES 6/30/07 6/30/08 %Change

Total assets 114,323 195,997 71%

Margin loans 5,563 5,802 4%

Non-margin loans 31,754 41,349 30%

Total liabilities 102,757 167,490 63%

Average deposits 19,183 30,537 59%

Total interest-bearing deposits 53,610 94,785 77%

Total securities 26,836 46,999 75%

Assets under management (in billions) 153 1,113 627%

INCOME AND EXPENSES Quarter ended 6/30/07 6/30/08 %Change

Net interest expense 710 681 -4%

Net interest revenue 452 411 -9%

Asset and wealth management fee income 168 844 402%

Total fee and other income 1,580 2,986 89%

Net income 445 309 -30.5%

PERFORMANCE RATIOS Quarter ended 6/30/07 6/30/08

Net interest margin 2.01% 1.16%

Return on average assets 1.57% 0.62%

Return on tangible common equity 37.3% 26.7%

Core capital (leverage) ratio 6.37% 6.39%

Tier 1 capital ratio 8.09% 9.33%

Total Tier I and II ratios 12.07% 12.9%

Sources: Bank of New York Mellon Corp.