BankAmerica Corp. is closing a government securities processing business and is looking to sell a related software unit originally run by the former Security Pacific Corp.
Both units were top players in niche fee-income markets, bringing in millions of dollars in annual revenues, industry observers said. But BankAmerica has decided the businesses don't fit into its post-merger game plan.
"It's a specialized and tiny business," said BankAmerica spokeswoman Sharon Tucker about the processing part of the business, which clears government securities for primary dealers.
"It's not something that was determined to be a core business."
Before the merger, Security Pacific was a powerhouse in processing transactions for the 39 primary dealers that dominate the market for Treasury securities.
Handling the business through its Sequor unit, Security Pacific split the primary dealer market roughly three ways with Bank of New York and Manufacturers Hanover, now part of Chemical Banking Corp.
Rumors of BankAmerica's departure from the business stated in February, when three top Sequor executives, Ralph Monda, Tom Ford, and Ken Rindos, moved to the Bank of New York.
Later, Sequor customers said that BankAmerica confirmed it planned to close down the unit. The customers then began taking their business elsewhere.
Some Top Defections
Those that have signed contracts to move to Chemical thus far include First Chicago Capital Markets Inc., PaineWebber Inc., and Chase Securities Inc.
Dean Witter and Kidder, Peabody & Co. are among a handful of primary dealers that have agreed to move to Bank of New York, according to bank officials.
"We've nailed five or six of their better clients," said Allen Clark, Chemical's senior vice president of broker dealer services.
"Its been a big boost to our business."
Mr. Clark said that once the contracts kick in over the next two years, the total revenue gain for Chemical will be $5 million to $10 million a year.
Bank of New York is believed to have won a roughly comparable quantity of business.
Industry officials, who requested anonymity, estimated that the three major players collected a total of between $60 million and $70 million of processing fees from primary dealers in 1991.
Security Pacific's slice was said to have totaled between $15 million and $25 million.
Industrywide, pretax operating profits are estimated by insiders to have totaled about 30% of fee revenues.
BankAmerica is also selling Sequor's software unit, SPC Software Services Inc. as part of a strategic decision to get out of the software vendor business, according to Richard Maier, former president of the unit.
After leaving SPC earlier this year, Mr. Maier worked for Bankers Trust for a few months but is now leaving the bank.
Speed and Speedway
Mr. Maier said most of SPC's revenues came from government securities processing software called Speed, and a related data processing service called Speedway.
A handful of banks used the software to process government securities trades.
Industry officials estimated that annual license, transaction processing, and maintenance fees from the Speed software and Speedway operation totaled millions of dollars.
Mr. Maier said that to his knowledge, BankAmerica has not yet finalized a deal to sell SPC.
Consortium Effort Fails
He said a group of institutions had tried this year to form a consortium to buy the Speedway operation and use it to form a government securities processing alternative to Bank of New York and Chemical.
But he said this effort recently fell apart.
John Sceppa, chief executive of Participant Trust Co., said his institution was negotiating to buy a version of Speed that it uses to provide book-entry trade clearing services for most of the country's Ginnie Mae mortgage-backed securities trades.
The Participant Trust has licensed the Speed software for years. Mr. Sceppa said he was optimistic that a deal to buy the rights to the Speed software would be finalized by the end of this year.
Ms. Tucker, the BankAmerica spokeswoman, acknowledged that her company was "disengaging" itself from the SPC software unit, but she declined to comment further.