Wealth-Focused Regional Banks Show Stronger Returns
Regional banks should treat wealth management as a central driver of shareholder value rather than a supplemental cross-selling business, according to a new report from Wealth Access and Alvarez & Marsal.
The study examined 106 publicly traded, traditional U.S. regional banks with less than $200 billion in deposits. It found that banks generating more than 30% of noninterest income from wealth management produced average return on assets of 1.25% and return on equity of 10.6%. Those deriving less than 6.5% of noninterest income from wealth posted average ROA of 0.91% and ROE of 8.5%.
Wealth-focused banks also recorded an average price-to-book ratio of 1.28 times and nearly 15% average share-price appreciation from 2022 through 2025. By comparison, the least wealth-oriented group averaged a 1.12 times price-to-book ratio and a 3.6% share-price decline, the report said. The figures indicate correlation, rather than proving wealth-management scale directly caused stronger performance.
The report arrives as regional banks face pressure on their traditional deposits-and-loans model. Across the 106-bank sample, net interest income accounted for approximately 77% of total revenue from 2021 through 2025. The authors cited net interest-margin compression, rising deposit costs, customer account fragmentation and competition from fintechs and universal banks as challenges to that model.
Wealth management can provide recurring, fee-based revenue that is less tied to interest-rate cycles, while potentially deepening client relationships and supporting deposit retention and lending activity, the report said. It also gives banks access to mass-affluent households, where the authors say a disproportionate share of retail-banking profit is concentrated.
The report recommends that bank boards establish a three- to five-year transformation agenda. Priorities include recruiting and retaining advisers, integrating wealth, lending and deposit data into a unified client view, using analytics to identify existing clients with wealth-management potential and aligning banker-adviser compensation around broader household relationships.
It also calls for explicit targets for assets under management, wealth fee revenue, client profitability and valuation progress, with CEO and CFO accountability. Banks that delay investment risk widening gaps with wealth-focused competitors, the authors said.