To lessen its dependence on trading revenues, Bankers Trust New York Corp. is making the securities processing business an important part of its strategy.
Its recent deal to buy the institutional trust business of Boatmen's Bancshares from NationsBank Corp. would put Bankers Trust among a handful of banks that dominate securities processing.
The purchase, for an undisclosed price, would add approximately $133 billion of institutional trust assets from 465 customers. That would boost Bankers Trust's assets under custody to just under $2 trillion.
Executives at the bank said it is the first acquisition for its processing unit in several years.
"Our bank has the viewpoint that this business is a good one to be in," said Larry Klane, managing director of strategy and business development for Bankers Trust's client processing services group. "It should form one of the strategic legs of the BT stool."
The deal is significant in size and for the signal it sends, according to industry experts. Already the New York bank ranks fourth in securities processing.
"It reaffirms their commitment to the business," said Morgan Stanley & Co. analyst Arthur P. Soter.
Securities processing is highly automated and scale-driven. The few big names in the market-State Street Corp., Bank of New York Co., and Chase Manhattan Corp.-have had to make massive investments in technology to keep up to date, industry analysts said.
Bankers Trust, which spends $500 million on technology annually, funnels about one-third of that into its processing unit, Mr. Klane said.
But profit margins are thin. Building scale by internal growth and acquisitions is essential, analysts said.
In the past, Bankers Trust got big through aggressive sales efforts aimed at large institutional clients. Its clients are largely corporate pension funds, nonprofit institutions, municipalities, and labor unions.
Last year the bank hired the consulting firm McKinsey & Co. to help assess its place in the market. McKinsey recommended acquisitions, said Mr. Klane.
The NationsBank business was attractive for its size and because it had similar contours. "It's a nice fit," said Mr. Klane.
Bankers Trust has also been rapidly expanding its securities processing operation, adding staff in Chicago and San Francisco last year. It also has processing centers in New York, New Jersey, and Tennessee.
Two new offices-St. Louis and Kansas City-will form the center of the business acquired from NationsBank, and will be staffed with former Boatmen's employees.
Bankers Trust sees significant growth opportunities overseas, Mr. Klane said.
The bank has entered into marketing and distribution alliances with Credit Lyonnais in France and Amalgamated Bank of South Africa.
The alliances augment Bankers Trust's existing operations in the United Kingdom, Asia, and Australia, where it has its own processing facilities.
But Bankers Trust is not necessarily aiming to become the largest in the market. "Being big for its own sake isn't what we want to do," Mr. Klane said. "We want to outpace the competition in terms of customer satisfaction."
