1st Union Outsources Corporate Trust Processing

First Union Corp. said it is farming out the processing of its $130 billion corporate trust business.

The $140 billion-asset banking company signed a five-year agreement with Sungard Shareholder Systems of San Mateo, Calif., to handle equity and debt record keeping remotely through Sungard's service bureau in Voorhees, N.J.

Financial terms were not disclosed.

First Union's securities transfer unit has grown rapidly in recent years through acquisition.

In addition to its merger with New Jersey's First Fidelity Bancorp., First Union has acquired corporate trust units of several other banks. It expects to complete the purchase this month of a $10 billion portfolio from Meridian Trust Co., Reading, Pa., now a unit of CoreStates Financial Corp.

As a result of these and other deals, the Charlotte, N.C., bank company ranks sixth in corporate trust, according to Securities Data Co., Newark, N.J. The bank operates 12 corporate trust offices in nine states.

"We have benefited from the bank's aggressive acquisition strategy," said James H. Cornelius, senior vice president of corporate trust. "First Fidelity brought us into Pennsylvania and New Jersey, and we wanted to expand our market there even more."

Mr. Cornelius said the outsourcing contract with Sungard - the first such deal for First Union's corporate trust group - was a response to the unit's rapid growth. Previously, the work had been done in-house on software developed by Servantis Systems Inc., which now is part of Checkfree Corp., Columbus, Ohio.

"If you grow too fast, service can suffer," said Mr. Cornelius. "The bank supports a plethora of products, but Sungard is strictly in securities processing. We think that will help our business be more efficient."

First Union executives were also looking for a company that could process transactions on a single system, said Mr. Cornelius. Processing through the Servantis system was segmented. "That makes it very labor intensive," he said.

The bank will process transactions such as issuing stock certificates, paying dividends, paying coupons, and tabulating proxies remotely from Charlotte by linking itself to Sungard's mainframe, supported by the company's Sunstar processing software.

Sungard officials said more than two-thirds of their clients, including Bankers Trust Co., Norwest Corp., and National City Corp., also process through the service bureau.

"The advantage is that they don't need the programmers and the technical staff," explained James M. Petraglia, senior vice president at Sungard. "They can focus their efforts on other projects."

First Union will begin converting its processing unit to Sungard in October, when the Meridian business will be the first to go through the system.

Ten employees in the corporate trust department will be dedicated to the Meridian transfer. "They will be trained and can help in the integration of the other business," said Mr. Cornelius.

The remaining business will be converted through October and November.

In news that could make the transition smoother, Sungard Shareholder Systems - a unit of Sungard Data Systems Inc., Wayne, Pa. - said it plans to acquire Servantis record holder, the accounting technology used by First Union.

The $20 million purchase, announced Aug. 22, moves Checkfree further out of the securities transfer market.

"From a strategic standpoint, it complements Sungard's product line," said a Checkfree spokesman. "It was really outside our focus on electronic commerce products."

For reprint and licensing requests for this article, click here.
MORE FROM AMERICAN BANKER