Bank of New York Corp. is in the market to buy a personal asset management firm, says Thomas A. Renyi, chairman and chief executive officer.
In an interview last week, Mr. Renyi and new president Gerald L. Hassell said that asset management, along with steady revenues from Bank of New York's securities processing businesses, would buffer the company's earnings from volatile markets.
They said they would pursue deals that would add to earnings in the first year. "We are talking to people now who might be interested," Mr. Renyi said. He declined to elaborate on the discussions.
Such an acquisition would mesh with the $63 billion-asset bank's focus on fee-based, market-oriented businesses that are less prone than underwriting to upheaval, the executives said.
Through Bank of New York's mix of fee-based businesses, "we have been able to differentiate ourselves" from other banking companies, Mr. Renyi said.
Analysts said they would expect the bank to buy a series of small to midsize asset managers.
"Clearly Bank of New York has cash flow and excess capital," said Katrina Blecher, an analyst at Brown Brothers Harriman & Co. "The timing is right."
Bank of New York manages $43 billion of assets, about evenly split between private and institutional clients.
A desire to expand in asset management was one reason Mr. Renyi proposed in April to merge with Pittsburgh-based Mellon Bank Corp. The Pittsburgh bank has $370 billion under management, nearly a third of it on behalf of private clients. Bank of New York withdrew its unsolicited bid in May.
Virtually all of the bank's recent acquisition activity has been in securities processing and custody. With more than 30 deals since 1994, it has amassed $4.4 trillion under administration and ranks among the top three providers of these services.
Mr. Renyi said these volume-driven businesses are poised to return double-digit results again this year. Fees for the businesses in 1997 were up 21%, to $790 million.
The bank also has expanded into trading execution and clearing services.
An asset management acquisition would not be a first for Bank of New York. In December 1996 it bought Putnam Trust Co. in Greenwich, Conn., which had about $3 billion under management.
The bank wants to bulk up in both equity and fixed-income management, Mr. Renyi said.
Though some observers said personal asset management would be a good fit with Bank of New York's affluent customer base, others said the company faces an uphill climb.
Banks have been buying, but finding willing partners and making deals pay off over the long term has not been easy, said Donald Putnam, an investment banker who specializes in asset managers.
Banks have fared best with firms that focus on institutional or mass- market clients, said Mr. Putnam, a partner with Putnam, Lovell, de Guardiola & Thornton in San Francisco.
They have been less successful in wooing personal asset firms, which cater to high-net-worth individuals, he said. Banks, including U.S. Trust Co., New York, have made some deals, but their targets generally have been small, with assets in the low billions. One reason is that these firms are scarce: Of 38 deals for asset management firms this year, only three were for private client firms; their assets ranged from $400 million to $900 million.
Personal asset management firms also see banks as regimented organizations reluctant to give autonomy to subsidiaries, Mr. Putnam said. That approach is inimical to the entrepreneurs who run these firms. And banks generally have not been willing to pay the premiums that private client firms demand, he said.
Banks' relatively small presence in the investment business is also a turnoff for some sellers.
"Banks tend to be less attractive as buyers than securities and insurance firms, because they lack large broker distribution networks," said Thomas W. Courtney Jr., who runs an investment banking boutique in New York. Because the sellers' compensation may hinge on future volume, distribution is a big consideration.
Bank of New York executives said they see opportunity, because the stock market decline may put pressure on companies with a small presence in asset management to sell.
"To the extent that there are marginal players, there might well be an opportunity to buy from them," Mr. Hassell said.