In its latest move to augment its enormous global trust business, Bank of New York Co. has signed a definitive agreement to buy the corporate trust portfolio of U.S. Trust Corp., a unit of Charles Schwab Corp.
The deal was announced Wednesday. The terms were not disclosed, but Bank of New York said it would acquire more than 5,000 bond trust and agency appointments, representing more than $330 billion of outstanding debt securities, in the transaction.
Bank of New York, with more than 75,000 issues representing $750 billion of outstanding securities, does not expect to lay off employees as a result of the deal, according to Mark F. Ferraris, the head of corporate trust services.
The bank will absorb U.S. Trust's operations in the four cities - New York, Dallas, Los Angeles and San Francisco - where both companies operate.
Since Bank of New York started acquiring trust businesses in late 1994, it has completed about 35 deals. The most recent was last month's acquisition of Summit Bancorp's corporate trust business. (Summit merged with FleetBoston Financial Corp. on March 1.) In the past two years Bank of New York has bought Dai-Ichi Kangyo Bank of California's corporate trust business; Bank of Montreal's trust company and the trust business of the Canadian bank's Harris Trust and Savings in Chicago; and the global trust business of Barclays Bank PLC.
"We think there'll be more opportunities for us down the road," Mr. Ferraris said. There are "literally dozens, scores of other providers out there," he said.
Like many other companies, Schwab is getting out of the corporate trust business because it is hard to maintain on a small scale. "Corporate trust would require a significant commitment of capital to maintain its systems," said Jeffrey S. Maurer, the chief executive officer of U.S. Trust, in a written statement.
Schwab, which bought U.S. Trust for $2.7 billion in May 2000, said that it expects a pretax gain of about $220 million from the corporate trust sale, but that it doubts the deal will have a significant effect on revenues, earnings, or cash flows.
The Schwab and U.S. Trust directors have approved the sale to Bank of New York, which is expected to close during this quarter. The complete conversion of the business is expected to take place in the fourth quarter, Bank of New York said.