Despite market conditions, Bank of New York Mellon Corp. says it added market share in its corporate trust business last year.
The company says it increased its share in seven corporate trust segments during 2008 and hiked its share of the overall corporate trust business by three percentage points, to 30%, which makes it No. 1 in the segment.
Troy Kilpatrick, who was named president of Bank of New York Mellon Trust Co. last week, said in an interview Thursday that early indicators this year show this growth continuing. In the municipal trust segment, for example, Bank of New York Mellon was responsible for 44% of all transactions in January. "That type of number may not hold up for the whole year," he said, "but considering how strong[ly] we finished last year and then to have that kind of jump in January is extreme."
Mr. Kilpatrick said that, after completing a deal with JPMorgan Chase & Co. more than two years ago, the business can expand organically this year despite the volatile market. He said he thinks Bank of New York Mellon will use its size to attract talent as competitors divest noncore businesses.
"We know one thing — this is a core business for us," he said. "We started growing it in 1994, and saw it expand through a really well thought out plan of building through acquisitions. We now have what we need domestically and will look to grow organically now. We have demonstrated better than anyone a real commitment to the corporate trust business."
In October 2006, Bank of New York (before its Mellon merger) swapped its network of retail branches to JPMorgan Chase for its $2.8 billion corporate trust business. The deal also added 15 corporate trust offices, which let Bank of New York expand its corporate trust business' footprint beyond New York and New Jersey into cities like Boston; Providence, R.I.; Pittsburgh; Richmond, Va.; Dallas; Houston; and Austin.
Mr. Kilpatrick, who succeeded Michael Klugman upon the latter's retirement, said BNY Mellon has 37 trust offices in 21 states. "We are really happy with our footprint now," Mr. Kilpatrick said. "We opened an office in Richmond last year because we felt we needed to fill out a bit in the Middle Atlantic region. I think we have a great national footprint now. From here we are going to expand our market share by developing our marketing efforts to really get our reputation out in the public market."
Bank of New York Mellon's corporate trust business serves more than $11 trillion in outstanding debt. It serves all major debt categories, including corporate and municipal debt, mortgage-backed and asset-backed securities, collateralized debt obligations, derivative securities, and international debt offerings.
Its share of the U.S. taxable debt business grew eight percentage points last year, to 30%; U.S. straight debt six points, to 31%; U.S. investment grade debt 10 points, to 35%; U.S. municipal debt three points, to 30%; U.S. structured debt 11 points, to 30%, U.S. asset-backed debt 15 points, to 34%; and U.S. collateralized debt 11 points, to 26%.
Analysts said Bank of New York Mellon is the clear leader in the global corporate trust business but competes with U.S. Bancorp, Wells Fargo & Co., and Deutsche Bank for business domestically.
Mr. Kilpatrick, who has worked at Bank of New York since 1999 and was head of its corporate and municipal finance group within the global corporate trust business, said that some regional banking companies, including Regions Financial and UMB Financial, compete with it for business but "the gap between No. 1 and No. 5 [in terms of market share] is huge and the gap between No. 1 and No. 3 is almost double."
Analysts expect more consolidation in the global corporate trust business, especially as Wells Fargo shakes out what it bought with Wachovia Corp., but Mr. Kilpatrick disagreed. No major global corporate trust player was consolidated in the past year. "The competition has shrunk in the past 10 to 15 years, but I don't think the major players are going anywhere," he said.
BNY Mellon's growth focus for the next several years is organic. "If there are opportunities that present themselves in terms of an acquisition, we'll take a look, but we feel like we have a dominant market share right now," Mr. Kilpatrick said. "We have grown geographically where we needed to be. Now our focus is on organic growth, innovating our services, and delivering transparency to the financial services market in terms of custody services."
"We have demonstrated a commitment to the custody business," he said. "We are perceived as a strong company in this space, and that has led to an increase in market share over the past year, and we expect it will continue to lead to more share for us."