Bank of N.Y. Planning to Double Its Stake in State Street to 10%

Bank of New York Co. said Thursday it filed applications with the Federal Reserve Board and the Massachusetts state banking board to double its investment in State Street Boston Corp., to 9.9%.

The New York bank acquired its current 4.99% in the third quarter of 1995, said Paul J. Leyden, senior vice president of investor relations.

While Bank of New York made the common disclaimer that its move is "for investment purposes," it is sure to fuel speculation about a closer alliance if not a full-fledged merger. The companies have been linked in merger speculation because of their strengths in securities processing and potential economies of scale.

David Berry, director of research at Keefe, Bruyette & Woods, said securities processing, essentially 100% of State Street's business, will produce about one-third of Bank of New York's net income this year.

Mr. Berry said he "does not take at face value" that Bank of New York is only interested in an investment. Though the bank has had 5% stakes in regional banks such as Shawmut National and Midlantic, Mr. Berry suggested a $500 million position in a company as profitable and prominent as State Street is "higher profile" and qualitatively different.

At the same time, Mr. Berry said if Bank of New York covets an acquisition but it is not consummated, it would still be satisfied with its investment.

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