BankAmerica Corp. has disclosed plans to shed a handful of businesses that provide administrative, trust, and financing services to institutional investors.
The businesses are ones in which BankAmerica ranks among the largest players.
But the San Francisco-based banking company has decided the returns it can get from these activities don't justify the investment in new technology required to stay competitive, a spokeswoman said.
BankAmerica "determined that making alternative investments would better serve the long-term interests of the shareholder," explained the spokeswoman, Sharon Tucker.
She said the banking company disclosed the plans in a memo last week to employees of its institutional trust and securities services division, in which the businesses are housed.
The businesses to be sold include BankAmerica's corporate and municipal trust services, securities custody and trade clearing, and securities lending, she said.
The only institutional trust business BankAmerica plans to keep are those in which it acts as a trustee for 401(k), pension, and other employee benefit plans.
Industry experts say the businesses BankAmerica is shedding are technology-intensive, and fraught with the risk of big losses from legal and technical snafus. As a result, they are dominated by large players who can build economies of scale.
In corporate and municipal trust, for example, trustees use computers to maintain records of the owners of bonds issued by corporations and municipalities. They also have a fiduciary responsibility to make sure that bond holders are dealt with properly and regulations are followed.
Custodians use computers to keep track of securities held in institutional investment portfolios, and to settle trades.
Securities lending involves facilitating overnight investments in short- term securities for cash-management purposes.
Industry experts, who declined to be identified, asserted that these business have languished at BankAmerica.
Ms. Tucker declined to disclose BankAmerica's revenues from the areas. But she acknowledged that the company faced "a lot of challenges" when it merged with Security Pacific Corp. and Continental Corp. and acquired their sizable trust and custody businesses.
"We've been waiting quite a while for a shakeout," said Harold C. McIntyre, managing partner of bank consultancy the Summit Group, Murray Hill, N.J. "This a step in that direction."
In October, Institutional Investor magazine ranked Bank of America as the world's 25th-largest custodian of global investment portfolios, with a total of $29 billion of assets in this area.
Ms. Tucker would say only that the businesses to be sold service $500 billion of assets. She declined to say how assets are split between custody, trust, and securities lending.
Ms. Tucker also declined to say if any companies had expressed interest in buying the businesses, or if a deal had been struck for them to be purchased. Nor would she say if the business are to be sold in one piece or in multiple pieces, or how much money the banking company expects to make.
But James H. McKenzie, a consulting director with the Spectrem Group, a bank consultancy based in San Francisco, said the corporate trust businesses will likely fetch two to three times yearly revenues, and the other businesses will get one to two times yearly revenues.
State Street Boston Corp. said it has just started to consider whether to buy the businesses. Experts said other big trust and custody banks may also be interested, including Bank of New York and Chase Manhattan Corp. Officials from these two institutions declined to comment. The businesses to be sold employ 2,000 people.