Trust Institutions Information
2005 FDIC Trust Report
In 2000, the FFIEC discontinued the Annual Report of Trust Assets. Banks have subsequently been required to report trust and fiduciary activities in schedule RC-T of the Call Report. Since this change, the FDIC has received numerous requests from bankers, the press and other interested parties regarding general trends among trust institutions. In an attempt to meet this demand, this report discusses the performance of trust institutions, by account type, and provides historical industry data. The statistics detailed in this report reflect the fiduciary and custody-related activities of a diverse group of banks, thrifts, and non-depository trust companies.1
Trust institutions, as the term is used in this publication, are banks and trust companies that exercise powers granted by a state or national regulatory authority to administer accounts in a fiduciary capacity. Typical fiduciary accounts include trusts; estates; guardianships; conservatorships; various corporate agencies, such as a paying agent, registrar of bonds, or transfer agent; and investment management/advisory services, as well as accounts for which the institution exercises investment discretion on behalf of another. Although custody and safekeeping accounts are not considered fiduciary accounts, trust institutions are important providers of custody and safekeeping services to both retail and institutional clients.
As of year-end 2005, trust institutions held more than $20 trillion in fiduciary assets for retail and institutional clients.2 Commercial banks and savings institutions held $37 trillion in custody and safekeeping accounts, while non-depository trust companies held $31 trillion in these accounts as of year-end 2005. In 2005, banks, savings associations, and trust companies serviced 15 million fiduciary and related accounts, down from 20 million in 2004.3 In 2005, trust institutions exercised investment discretion over almost 27 percent, or $4.9 trillion, of their fiduciary assets.4 About half of fiduciary assets are held in retirement accounts. Corporate trust and collective and common trust funds represented the next largest categories, with 14 and 11 percent of total trust assets, respectively.
Fiduciary and Related Activity Income5
In aggregate, trust institutions earned $27.6 billion in gross fiduciary and related activities income, up 8 percent from $25.5 billion in 2004. Net fiduciary and related services income was up more than 16 percent, reaching $9.3 billion in aggregate for 2005.6 Trust institutions earned income primarily from custodial and safekeeping activities and personal trust services. Retirement account services also represented a relatively high share of income (see Chart 1).
Trust institutions earned about 35 percent of their total noninterest income from fiduciary and related activities, basically unchanged from 2004. Smaller trust institutions, which tend to be more specialized, earned approximately 45 percent of noninterest income from fiduciary services, while the larger, more diversified institutions earned about 14 percent of their noninterest income from fiduciary activities.
Overall, expenses incurred from fiduciary activity were up about 2 percent from 2004, reaching $18.7 billion by year-end 2005. This is down from the 15 percent increase seen in the 2003 to 2004 period.
Trends in Trust and Fiduciary Assets Held
In 2005, the top 25 institutions held 92 percent of trust assets and earned 75 percent of fiduciary and related income.7 (Table 4) The assets trust institutions hold to generate fiduciary and related income include: 1) retirement assets, 2) personal trust and agency accounts, 3) investment management agency accounts, 4) corporate trust and agency accounts, 5) custody and safekeeping, 6) collective common and trust funds, and 7) foreign office accounts. The following sections explore trends in these asset categories.
Retirement Assets: Employee Benefits, IRAs, and Keoghs
In 2005, total retirement related trust and agency assets-employee benefit assets plus IRAs and Keoghs-represented about half of non-custodial fiduciary assets and amounted to $9.8 trillion.
Standing at $7.3 trillion, employee benefit assets, which include defined benefit and defined contribution accounts, continue to represent the vast majority of all retirement accounts at banks, savings associations, and non-depository trust companies. The percentage of employee benefit to total retirement assets stood at 75 percent in 2005 down from 78 percent in 2004. In aggregate, employee benefit assets make up about 54 percent of industry fiduciary assets.
Assets held in defined benefit accounts increased approximately 9 percent last year, from $4.9 trillion to $5.3 trillion, and represented slightly more than half of employee benefit assets. Of the more than $4 trillion in employee benefit assets held in fiduciary accounts, about a third were managed by the institution. Defined contribution plan assets also increased, rising by more than 15 percent from 2004 and standing at almost $2 trillion in December 2005. Of the defined contribution assets held at banks, savings associations, and federally chartered trust companies, about a fifth are managed by the institutions. Retirement assets held in accounts other than employee benefit accounts grew 29 percent from 2004 to 2005.8
Personal Trust and Agency Accounts
Both the number of accounts and the amount of assets held in personal trust and agency accounts increased in 2005. Trust institutions held $1.1 trillion in personal trust and agency account assets, up slightly from 2004. The number of personal trust and agency accounts grew modestly, reaching 1.1 million for 2005 and up 7 percent from 2004.
The average personal trust and agency trust account balance was about $1 million, down slightly from the prior year. Personal trusts and agencies represented about 6 percent of fiduciary assets in 2005, and about 72 percent of personal trust and agency account assets were managed in 2005. Similar to prior years, the bulk of personal trust and agency account assets, 64 percent in 2005, were held in common and preferred stocks. The next most popular allocation was municipal bonds, in which more than 10 percent of personal trust and agency account assets were invested.
Investment Management Agency Accounts
The number of individual and institutional investment management agency accounts administered and managed by fiduciary institutions was down last year, from 3.0 million in 2004 to 1.8 million in 2005. Despite an almost 30 percent decline in the number of accounts, investment management assets increased by about 3 percent in 2005. Investment management accounts represent approximately 8 percent of trust assets, roughly unchanged from the previous three years.9
The average investment management account grew 65 percent in 2005 to about $756,000 in assets. Slightly more than half of all trust institutions offered these accounts.
Corporate Trust and Agency Accounts
Banks held $2.8 trillion in corporate trust and agency accounts in 2005, up almost 20 percent from $2.3 trillion in 2004.
In 2005, these accounts represented almost $12.5 trillion in principal outstanding, up more than 14 percent since 2004. About 350 institutions serviced corporate and municipal bond offerings. Approximately 348 institutions served as transfer or paying agents. Average assets for these institutions were about $16 billion.
Corporate trust and agency assets represented slightly more than 14 percent of total fiduciary assets.
Custody and Safekeeping
In 2005, trust institutions held $68 trillion in custody and safekeeping assets, up 10 percent from 2004. The total number of accounts declined from 16.3 million in 2004 to 11.9 million in 2005. In 2005, more than half of trust institutions performed custody and safekeeping services.
Collective and Common Trust Funds
In 2005, 173 institutions held $2.2 trillion in collective investment and common trust funds. These assets represented 11 percent of aggregate fiduciary assets. The institutions that offer this type of product tend to be larger; average assets for this group stood at $31 billion in 2005.
Foreign Office Accounts
In 2005, 15 of the largest institutions held $2.9 trillion in 150,000 foreign fiduciary accounts, and banks exercised discretion over about 4 percent of these assets. The average asset size of banks with foreign fiduciary operations was $249 billion. This group earned $4.2 billion from fiduciary services abroad, almost double the $2.8 billion earned in 2004.
Anthony DiMilo, Examination Specialist, Trust
Alison Touhey, Economic Analyst
Ross Waldrop, Senior Banking Analyst
1 In 2005, there were 2,600 institutions with trust powers; however, only 1,873 reported trust activity. This analysis includes 86 noninsured federally chartered trust companies and two noninsured state chartered trust companies (Depository Trust Company and Northern Trust Company of New York) that file Call Reports because of their Federal Reserve membership.
2 Some double counting is inherent in Schedule RC-T. For example, a trustee who had discretionary powers would report the same assets as the fiduciary to whom he has delegated investment management authority. While double counting is not allowed for an institution, it is not practical to eliminate it when more than one institution provides services for a fiduciary account.
3 Historically, large fluctuations in the number of accounts have been due to reporting errors and to the shifting of accounts from reporting subsidiaries of the largest institutions to nonreporting subsidiaries.
4 Because nonmanaged funds can be invested in collective and common trust funds, they are excluded from this calculation.
5 Not all institutions report detailed data on fiduciary income in Schedule RC-T. Therefore, for most small institutions holding less than $100 million in fiduciary assets, only the total fiduciary income amount is available; a breakdown of revenues, expenses, or loss data is not available.
6 Due to reporting errors, some institutions report revenues but not expenses, which may overstate aggregate net income.
7 Because the holding company Y-9 report does not include a trust schedule, assets of reporting subsidiaries were aggregated to holding company level.
8 This line item does not include IRA and Keogh custodial deposit accounts administered solely by the commercial department.
9 As previously noted, large fluctuations could be due to reporting errors, the shifting of accounts to non-reporting subsidiaries, or acquisitions by non-reporting entities.