First Bank to Buy Comerica's Corporate Trust Business

In a move that would strengthen an already impressive corporate trust business, First Bank System Inc. said it would buy Comerica Inc.'s municipal and corporate bond trustee division for an undisclosed sum.

The Comerica business would add 2,400 outstanding bond issues to First Bank's portfolio of 27,500 and $26 billion in bonds under administration to First Bank's $500 billion.

The sale is expected to close in the first quarter of 1997.

Minneapolis-based First Bank, which claims to run one of the nation's largest bond indenture services, has been an aggressive acquirer in recent years.

A $36 billion-asset company, First Bank operates the service through its corporate trust division, which accounted for $14 million, or 8%, of total income in the second quarter.

The acquisition adds "scale and further geographic diversification to our leadership positions in the corporate trust business," said First Bank chairman John F. Grundhofer.

For Comerica, a $35 billion-asset Detroit bank company, the sale came after a series of announcements to exit unprofitable or marginally profitable businesses. It recently agreed, for example, to sell its Illinois bank subsidiary to ABN Amro North America.

"This is a continuing internal reassessment of every piece of Comerica's business," said Michael Moran, an analyst at Roney & Co. in Detroit.

Comerica officials said the bond indenture business is low-margin and would be expensive to continue. And as with a number of back-office processing operations, the number of banks in the business is shrinking.

"As we look down the road, this business is consolidating," said Comerica president Michael T. Monahan. "It's a scale-driven business, and in the long run it's going to require more investment in technology."

Analysts said First Bank has made the technology investments and has been active in acquiring business from banks like BankAmerica Corp. and J.P. Morgan & Co.

"They've been an aggressive buyer of corporate trust for some time," said Joseph Duwan of Keefe, Bruyette & Woods Inc.

Analyst Ben Crabtree of Dain Bosworth Inc. in Minneapolis agreed. "First Bank has a way of targeting a few businesses where it can get advantages through scale and technology," he said.

Mr. Monahan said 50 people work for Comerica's bond indenture department and he believed First Bank would offer jobs to a "good number" of those people.

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