Bank of New York Mellon Corp. plans to expand its corporate trust business by adding offices and personnel at home and abroad.
Karen Peetz, the chief executive officer of the corporate trust business, said in an interview that it can be a major revenue generator and has natural cross-selling opportunities with the parent's asset management business.
"With the JPMorgan Chase deal we gained an instant global footprint, an instant presence in the collateralized debt obligation business, and we completed a 10-year strategic plan overnight," she said. "We can sit around and pat ourselves on the back for that, because it was quite dramatic what we received in that transaction, or we can look for ways to expand and develop from here."
The business doubled in size when Bank of New York Co. traded its branch network for JPMorgan Chase & Co.'s $2.8 billion corporate trust business 18 months before its merger with Mellon Financial Corp.
The JPMorgan Chase transaction increased the international network for Ms. Peetz's business from five to 18 offices, but there are more markets that the business wants to enter, she said.
"There are a lot of areas that are interesting including Brazil, Latin America, and the Asia-Pacific region," Ms. Peetz said. "We've had great success in Europe, Middle East, Africa, and tons of activity from the London financial sector."
Bank of New York had corporate trust offices in Toronto, Brussels, London, Singapore, and Sydney before the JPMorgan Chase transaction, which added offices in Sao Paulo, Mexico City, Buenos Aires, Dublin, Frankfurt, Luxembourg, Milan, Hong Kong, Taiwan, Manila, Tokyo, Seoul, and Bournemouth, England.
Global debt is growing at an annual rate of 20%, Ms. Peetz said. "We think that we are in an enviable position in terms of footprint and our product quality to take advantage of that growth."
Analysts said the business faces competition internationally from Deutsche Bank AG and domestically from U.S. Bancorp and Wells Fargo & Co. But Bank of New York Mellon is the largest provider of these services both domestically and internationally, according to Thomson Financial.
Ms. Peetz said the business services $11 trillion of debt. "We want to expand that. … Our real goal is to help generate revenue growth."
To accomplish this domestically, the company is expanding its corporate trust business in the area once served by Mellon, which stopped offering such services when it sold its corporate trust business to J.P. Morgan & Co. 10 years ago.
Last week Bank of New York Mellon announced that it would hire 150 people to staff an office it will open in downtown Pittsburgh by the end of next year. Ms. Peetz said it wants to find ways use Mellon's operations, but that does not necessarily mean just adding more offices in Mellon's area.
"At a bank level, we are looking at synergies with where Mellon was and where Bank of New York was," she said. "For my business, we were already in 36 locations in the United States … but we are not necessarily looking for further expansion and just putting in offices for the sake of offices."
The company plans to announce this month it will add 125 people at its Chicago office to expand its collateralized debt obligation business, she said.
The corporate trust business has employees in Houston and New York handling its collateralized debt obligation business, Ms. Peetz said, but now people in Pittsburgh and Chicago will also handle this growing business.
"The integration with JPMorgan Chase's corporate trust business doubled the size of our municipal corporate services business and put us on the map in terms of our CDO business," she said. "Now we want to find ways to expand that."
Analysts said that the market for collateralized debt obligations is likely to shrink to roughly half of its size before the credit crisis.
Last year about $1.1 trillion of CDOs were issued globally, including $551 billion based on bonds and loans, and $558 billion based on credit default swaps for a variety of assets, according to figures compiled by JPMorgan Chase. But analysts expect the market to shrink because CDOs are based on asset-backed securities, which include troubled subprime mortgage assets.
Despite the recent turmoil and concerns about subprime mortgages, Ms. Peetz said there are opportunities in the CDO market. The turmoil will give Bank of New York Mellon a chance to cross-sell and increase share, she said.
"Large corporate customers want to work with companies that can provide a heightened level of transparency and have a brand and a history in this business," she said. "We think that we have that transparency and we are working to continue to develop our range of services for all of our customers."
