Will today’s increased focus on DC plans and the growth of assets in them boost overall returns of the “Big 3” banks that participate in this market? According to Felix Salmon of the Seeking Alpha website [free registration required], trends show that retirement is on more people’s minds and therefore more money should flow to participant directed plans — putting banks in a prime position to take advantage.
Bank of America, JP Morgan and Wells Fargo are all focused on cross-selling and are able to leverage their credit relationships, especially as long as credit remains tight and interest rates remain low. One bank executive said that the highest-selling product his bank uses to extend relationships is their 401(k)s.
So does that mean that these banks’ stocks will improve above their peers? Profits from DC businesses are relatively small compared with overall results, but the prospects of managing Americans’ retirement has definitely caught the attention of the Big 3 as they leverage their relationships with companies and consumers. Instead of 401(k) assets driving the market, the 401(k) business may someday drive market valuations of banks that can derive more fee-based versus interest rate revenue.
