The world has been seeking a perpetual motion machine for centuries. Bank of New York (BoNY) has one: its global custody business.
Totaling over $11 trillion in assets, BoNY's global custody business has been feeding its own success for close to a decade. The bank is now one of the largest custodians in the country and continues to attract assets because its size enables great cost efficiencies through economies of scale. Built on a computer platform with roots in BoNY's acquisition of Irving Trust in the 1980s, and updated to the tune of some $200 million per year, the bank has been adding to its asset base hand over fist for the past four years.
The most recent acquisition: First American National Bank's $5 billion book, bought in late October. It was the fourth BoNY acquisition of a corporate trustee business this year. Terms weren't disclosed, which is typical; BoNY often doesn't even disclose the size of the portfolios it acquires. That book of business joins 19 other corporate trust businesses bought since 1993 from the likes of J.P. Morgan, Wells Fargo, and NationsBank, which sold BoNY Boatmen's Bancshares' book in April.
Global custody is part of BoNY's securities processing division, which comprised about 30 percent of the bank's earnings and totaled $861 million last year. Figures for 1997 were unavailable. It's the fastest growing part of the bank, growing 14 percent in 1996.
The beauty of the custody business, says BoNY's Thomas J. Perna, evp in charge of the division, is that it allows the bank to add other computerized, fee-earning businesses to its supporting structure. An example: BoNY's acquisition this year of BondNet and ESI Securities Co., both technology-based securities businesses closely related to the vast bond holdings in BoNY's global trust business. Says Perna, "The order execution process is right at the front end of the investment process, and a lot of our customers want an automated system," he says. "We have a lot of the buy side here, and what we can do now is to put out at the customer's site an easy process to execute and settle (a securities) order through to the back end, and then look at how their (portfolio) performance is affected by the decisions they've made."