Bank of New York Co. said Wednesday that it has agreed to acquire the securities processing business of BankAmerica Corp.
The deal would push the New York bank's assets under custody above the $2 trillion mark.
Analysts estimated the purchase price - which the banks refused to disclose - at $100 million to $125 million.
The transaction will make Bank of New York No. 1 in securities custody in the United States, observers said.
Assuming that current BankAmerica customers do not take their business elsewhere, Bank of New York will add $462 billion of custodial assets to its present $1.65 trillion.
The combined total will put the bank slightly ahead of State Street Boston Corp. and Chase Manhattan Corp., now around $1.9 trillion and $1.8 trillion, respectively.
Securities processing and custody services accounted for 20% of Bank of New York's $749 million of net income last year.
The acquisition "clearly enhances Bank of New York's position as a competitor in the industry," said Marshall Carter, State Street's chairman and chief executive.
Bank of New York executive vice president Thomas J. Perna said the deal - the company's ninth such transaction in 12 months - will increase revenues without adding significantly to operating costs.
"We have a very efficient existing platform to which we can add these businesses," Mr. Perna said.
He added that the bank hopes to upgrade services offered to BankAmerica customers by providing more sophisticated performance measurements and portfolio analytics.
Analysts said it is difficult to judge the deal's value. Typically, custodial and securities processing businesses sell for prices close to their annual revenues.
Most observers were pleased about the transaction. David Berry, a bank analyst with Keefe, Bruyette & Woods Inc., raised his earnings per share estimate for Bank of New York to $4.30 from $4.15 for 1995, and to $4.75 from $4.50 for 1996.
This "represents another type of consolidation by line of business, or function, rather than by bank," he said.
BankAmerica disclosed in February that it was planning to sell its institutional trust and custodial services, after a review concluded the bank would have had to invest substantial amounts to remain competitive. Analysts estimated that the business, portions of which were acquired from Security Pacific Corp. in 1992, barely broke even or suffered a slight loss last year.
The deal transfers BankAmerica's U.S. and global custody operations, securities lending, securities clearing, and master trust business to Bank of New York. No decision has yet been made as to the future of the 1,100 BankAmerica employees working in these areas.
BankAmerica is currently looking for a buyer for the other main portion of its institutional trust operations: the corporate trust and agency business, which provides fiduciary and financial services to issuers and holders of bonds.
Analysts noted that NationsBank Corp. has similarly indicated it plans to sell off its securities processing and custody buiness. +++ NBD Bancorp Detroit Dollar amounts in millions (except per share) First Quarter 1Q95 1Q94 Net income $140.9 $107.3 Per share 0.88 0.67 ROA 1.18% 1.20%* ROE 16.12% 14.79%* Net interest margin 4.02% 4.31% Net interest income 420.7 381.3 Noninterest income 135.7 138.8 Noninterest expense 323.5 322.3 Loss provision 20.1 15.5 Net chargeoffs (.5) 15.4 Balance Sheet 3/31/95 3/31/94 Assets $47,755.8 $42,932.7 Deposits 31,560.7 30,175.6 Loans 30,725.9 25,877.7 Reserve/nonp. loans 274.76% 170.18% Nonperf. loans/loans 0.54% 0.96% Nonperf. assets/assets 0.41% 0.66% Nonperf. assets/loans + OREO 0.63% 1.10% Leverage cap. ratio 6.81% 7.12% Tier 1 cap. ratio 8.20% 9.14% Tier 1+2 cap. ratio 12.14% 12.94% *Before extraordinary item and accounting change Editor's Note: The agate for NBD Bancorp that ran in the American Banker on Monday, April 17th incorrectly reported the bank's results for the first quarter of 1994. The agate above gives the correct figures. ===