J.P. Morgan & Co. said Thursday that it would sell its European corporate trust and agency business to Citicorp for an undisclosed sum, completing its exit from securities processing.
The operation, which is based in London and Brussels, would bring Citicorp a portfolio of 12,000 bond issues on behalf of 500 companies and governments.
J.P. Morgan has been shedding its corporate trust and other securities processing units for the last year.
This summer it sold its global custody business to Bank of New York Co. for an undisclosed sum.
The sale of the European operations, which is slated for completion in the second quarter, would allow J.P. Morgan "to focus on our core investment banking business," said spokesman Richard Mahoney.
Indeed, analysts said securities processing had little strategic importance for J.P. Morgan, which has spent most of its recent efforts building its investment banking and asset-management capabilities.
The exit from corporate trust could signal, in part, J.P. Morgan's growing success in securities underwriting, analysts said. The corporate trust and agency business, in which banks represent buyers, can conflict with underwriting activities, in which banks represent sellers.
"The conflict becomes more immediate as J.P. Morgan's underwriting business gets larger," said Lawrence Cohn, an analyst at Ryan Beck & Co. "They may have decided, 'Why bother?'"
Citicorp said the purchase would make it the largest European trustee and agent, followed by Chase Manhattan Corp. and Bankers Trust New York Corp.
It would also more than double Citicorp's agency and trust portfolio, to $700 billion of assets under administration. Citicorp said it would hire all 109 of J.P. Morgan's employees.
Analysts said the move made sense, given the massive scale that is necessary to compete in securities processing.
Huge investments in technology to keep up with the volume of debt issuances, combined with relatively low profit margins, have sent many banks running for the exits.
In May, Barnett Banks Inc. sold its corporate trust operations to Bankers Trust. In October, First American Corp. in Nashville sold its operations to Bank of New York.
Citicorp, which this summer had reviewed the performance of its corporate trust and agency business, has decided to expand rather than get out, executives said.
"We see this as the corporation's continued commitment to grow this business," said Sandra Jaffee, head of Worldwide Securities Services, the umbrella unit for Citicorp's securities processing operations.
