The Charles Schwab subsidiary said that the corporate trust business would have required a “significant commitment of capital” to maintain its systems, a rationale frequently cited by a growing number of institutions that have exited or outsourced those operations over the past several years.
The Bank of New York has been a primary beneficiary of these decisions, acquiring the bond trustee and paying agency businesses of a sizable number of financial institutions over the past several years.
Book of Business
US Trust’s Corporate Trust Division provides trust, agency and related services to public and private corporations, municipalities and financial institutions. The transaction, terms of which were not disclosed, involves the transfer of more than 5,000 bond trust and agency appointments representing more than $330 billion in outstanding debt securities. As of March 31, 2001, Corporate Trust had 113 employees.
The transaction, scheduled to close in the second quarter, has been approved by the boards of directors of The Charles Schwab Corporation (CSC) and US Trust, but remains subject to regulatory approvals and other customary closing conditions.
CSC expects to recognize a pre-tax gain of approximately $220 million as a result of the sale, although the specific amount of gain is subject to change depending on client retention, sale-related expenses and other matters.