Bankers Trust's ACQUI-sition of $133 billion in institutional trust business from NationsBank was driven in equal parts by technology, portfolio management, and broader, strategic considerations, say participants.
Institutional trust businesses are mainly custodial and, therefore, technology-intensive. Since these businesses are all gravy after they clear operating and amortized investment costs, the more assets under management, the more gravy. BT targeted the business as a means of stabilizing earnings made volatile by its securities and currency trading, investing about $200 million a year in technology to make a go of it and intends to continue doing so, says Timothy Keaney, BT's senior managing director in charge of global custody. "Part of the reason for the great consolidation in our field today is the very high cost in systems," he says. "You need a very sophisticated custody infrastructure worldwide, including an agent bank network, which requires tremendous data communications capability; plus, you need very sophisticated multi-currency accounting and reporting systems, as well as on-line information and performance measurement systems and securities lending and benefit payment services. It's all part of the same bundle."
NationsBank would have had to make substantial investments in technology to service the portfolio it inherited from Boatman's Bancshares. Since most of the business is already in other hands, doing so would have been marginally more expensive than it was worth. NationsBank officials would not comment.--reinbach tfn.com