AT&T Plum Bolsters First Chicago
First Chicago Corp.'s securities processing contract with AT&T American Transtech strengthens its position as a top player in a business many banks have left.
Under the deal, announced last week, First Chicago will handle shareholder services for American Telephone and Telegraph Co.
The telecommunications and computer company has more stockholders than any other U.S. corporation, providing a considerable addition to the Chicago bank's stock transfer business. The terms of the deal were not disclosed.
Bell Companies Involved
The First Chicago deal also marks the first step in AT&T American Transtech's plans to get out of the stock transfer business. In addition to handling the AT&T shareholders. Transtech provides shareholder services for the regional Bell operating companies.
Together, the seven regional phone companies represent the biggest portfolio of stock transfer business to come onto the market - about seven million shareholders. The regional phone companies are expected to announce contracts with stock transfer agents or provide the service themselves.
First Chicago and other major players in this technology-intensive business are expected to bid for each of these contracts.
The number of shareholders of the telephone companies makes up a large segment of the shareholders services market at a time when the business as a whole is shrinking. Mergers and acquisitions during the 1980s have reduced the number of shareholders.
And as in any processing business, the more volume, the better chance for higher profits.
First Chicago, for example, is already the No. 1 bank in stock transfer with 9.5 million shareholders. With the AT&T deal, it will add almost three million more, while only incrementally adding staff and computer power to its back-office operations.
"I can't think of better news for us," said M. Peter Miller, corporate vice president with First Chicago Corp. and the head of First Chicago Trust Corp., which runs the stock transfer business. He said the addition of AT&T also opens the door for the bank to sell the company other services.
Chemical Banking Corp., J.P. Morgan & Co., and BankAmerica have all left the transfer business in the last five years.
The Biggest Players
The field is increasingly left to the biggest players, which include nonbanks and First Chicago, which bought J.P. Morgan & Co.'s business last year, Mellon Bank Corp., Bank of New York Co., and Bank of Boston.
While AT&T has left the field, some big companies, including Disney Co., Du Pont, and Amoco continue to handle their own shareholder services. Disney, in fact, recently pulled its stock transfer business away from an outside company.