The agreement calls for US Bancorp to pony up $650 million in cash right away. Depending on how much corporate trust business it retains after 12 months, US Bancorp will pay as much as another $75 million.
State Street described the move as a continued focus on its “core businesses”, while US Bank managed to roughly double its corporate trust assets under administration. The move echoes a period of intense consolidation in the 1990s, although the past couple of years have been relatively quiet for the corporate trust industry. Corporate trust services are distinct from master trust or custody services, though traditionally both have been the linked to bank service providers.
The deal should add to US Bancorp’s cash earnings per share and, in 2004, to its bottom line earnings per share while the deal should not impact State Street’s 2003 EPS.
US Bank, which plans to keep most of the 500 corporate trust employees, will acquire about 20,000 new client issuances, 365,000 bondholders and $689 billion in assets under administration with deposits of $2.6 billion.
Upon completion of this transaction, US Bank’s corporate trust division will have $1.36 trillion in assets under administration, 1.3 million bondholders and 50,000 client issuances, making it the largest trustee in the area of municipal finance and the third largest in new corporate bond issuances and structured finance, according to the firm.
State Street’s Corporate Trust business includes serving as trustee and paying agent for the issuance of taxable and non-taxable securities, as well as bond administration, escrow services, investment banking, loan portfolio services, mortgage and asset-backed securities, and structured finance trust services.