Following a difficult couple of years, sales of annuities through banks are set to increase this year, but they could face difficulties if a proposal by President Barack Obama to restrict the size and activities of large commercial banks is enacted.

In an effort to reduce the risk posed by banks, the President said Thursday he would ask Congress to bar them from proprietary trading or from owning, investing in or sponsoring hedge funds or private equity funds.

 Analysts said these regulations could be bad news for banks that sell wealth management products, including annuities.

“These new restrictions on banks could be quite harmful,” said Michael White, who heads the research firm Michael White Associates. “Going backwards is not the answer and what bothers me about this environment is really someone needs to regulate the regulators. I get frustrated considering the prospects.”

Thomas A. James, the chief executive officer at Raymond James Financial Inc., said during the company’s earnings call on Thursday that re-regulation “ought to start in moderation.” He said these proposed regulations would make it difficult for domestic banking companies to keep up with global competitors.  “As much as I liked Glass Steagall, we can’t go back to Glass Steagall,” James said. “We don’t need to limit bank growth.”

White reported that income earned from the sale of annuities at bank holding companies rose 2.5% to $2 billion in the first three quarters of last year from the same period a year earlier.

According to the Michael White-ABIA Bank Annuity Fee Income Report, third-quarter annuity commissions rose 12.9% to $669.8 million from the previous quarter. The report, which is compiled by Michael White Associates and sponsored by American Bankers Insurance Association, measures and benchmarks the banking industry’s performance in generating annuity fee income. It is based on data from all 7,319 commercial and FDIC-supervised banks and 922 large top-tier bank holding companies operating on Sept. 30.

Of the 922 bank holding companies, 42.1% sold annuities during the first three quarters of last year. Their $2 billion in annuity commissions and fees constituted 13.5% of their total mutual fund and annuity income. Of the 7,319 banks, 13.3% sold annuities, earning $705.5 million in annuity commissions or 35.3% of the banking industry’s total annuity fee income.

Under the current regulatory structure, White said in an interview Thursday he expects annuity sales to improve in the bank channel this year. “I can’t imagine that there isn’t a great future for annuities,” he said. “Pure and simple there is a need for these tools in retirement income planning.”

Fixed annuity sales outweighed variable annuity sales last year as many banking companies shied away from variable products because the guarantees associated with these products became too expensive, White said. The strain that the market crash put on guaranteed-income rider providers is behind much of the change. Many providers have eliminated guarantees or raised their prices.

Second-quarter figures from the research firm Kehrer-Limra showed that variable annuity sales rose 17% in the quarter, compared with the first quarter, well behind the 55.9% gain posted by mutual funds. The disparity is striking, because sales of the two products usually move in tandem.

Many providers, including MetLife, are simplifying and streamlining their variable annuity products in an effort to attract customers. White said he expects variable annuity sales will improve as these new products are introduced.

“I know that they have been hit hard, not only by the marketplace but by guarantees,” he said. “Carriers have found these products are poorly priced or had to be re-priced, but I can’t imagine they won’t come back.”