Magna Group Inc. said it has agreed to acquire the tiny financial services company that now sells investment products in the bank's lobbies.
Gary Hemmer, executive vice president for retail banking at the $3.6 billion-asset St. Louis company, said it expects to see an immediate contribution to profits from the acquisition of MGI Group Inc. The bank will acquire the company for approximately $3.8 million in stock.
"We just see substantial potential from this company for new fee income," Mr. Hemmer said on Wednesday.
May Develop Proprietaries
The acquistion will bring in house investment and advisory services and will enable the bank to begin marketing the services as a new line of business through more than 200 correspondent banks in Missouri and Illinois.
Mr. Hemmer said the bank may also develop its own Magna family of funds to market to customers, but said no final decision had been made.
With a staff of 35, MGI Group offers products ranging from stocks and bonds to mutual funds and annuities to bank customers. The nonbank company, which has approximately $3.5 million in revenues, was originally part of Landmark Bank, which Magna acquired in 1991.
Acquiring Sister Firm
The company was spun off as an independent entity, but has worked almost exclusively for Magna, providing investment services to customers in about two-thirds of the bank's 85 metropolitan St. Louis branches. "We've been about 95% of their business," Mr. Hemmer said.
Magna officials said they will also acquire a sister company of MGI Group, Inbank, which provides identical services to institutions other than Magna.
The acquisitions are expected to be completed by yearend.
The move comes at a time when banks of all sizes are expanding their efforts to sell customers alternatives to low-yielding certificates of deposit.
Joseph A. Stieven, bank analyst at Stifel, Nicolaus & Co. in St. Louis, said the acquisition is important. "I think it makes sense, but it's a very small factor in the bank overall," he said.
