Consolidation in the corporate trust sector heated up again Wednesday as Philadelphia-based CoreStates Financial Corp. agreed to sell two units - one to Mellon Bank Corp. and the other to Bank of New York Co.

Terms of the deals were not disclosed.

Analysts estimated Bank of New York agreed to pay at least $4 million, or two to three times the revenues of the portfolio it will buy. A conservative estimate put the price for Mellon's purchase at about $6 million.

CoreStates said it sold the businesses because it could not afford to spend what it would take to keep the operations profitable.

"Corporate trust services have become major product line niches for certain financial services institutions, requiring significant investment in technology," said Rosemarie B. Greco, president and chief executive of CoreStates Bank. "We do not have the scale necessary for continuing in this business for the long term."

Under the Mellon-CoreStates agreement, CoreStates will sell its Pennsylvania corporate trust portfolio with some 900 bond trustee and agency accounts and total outstanding securities of more than $10 billion.

Meanwhile, CoreStates will also sell the corporate trust business of New Jersey National Bank, its Trenton-based subsidiary, to a New Jersey unit of Bank of New York.

The New Jersey agreement involves around 725 municipal bond trustee and agency relationships - primarily appointments for municipal bond issuers in the New Jersey market - and $5.8 billion of outstanding securities.

Analysts said the final prices for the two deals will depend on how many accounts Bank of New York and Mellon retain after the transactions are finalized. Under New Jersey law, Bank of New York has to go to clients to get authorization to continue serving them. Mellon does not, because of an automatic succession provision in Pennsylvania law.

Corporate trust covers a broad range of services such as trustee, paying agency, registrar, and securitization trusteeship for issuers and holders of corporate and public-sector bonds.

Consolidation has gathered steam in recent years, but analysts and consultants believe it may now be peaking.

"We find that the level of interest in these transactions and whether to stay in or get out has increased significantly," said James H. McKenzie, consulting director with San Francisco-based Spectrem Group, which advised CoreStates on the sale.

"But within the next year or two, we actually believe prices will begin to cool, because the significant players involved in those businesses will have established themselves geographically and in the products they want to be in."

These latest deals do not affect CoreStates' institutional trust services, including employee benefits and institutional custody services, the bank said.

The acquisition agreement is Mellon's second in Pennsylvania in a year. U.S. and Canadian trustee and agency accounts at the Pittsburgh-based bank will total 5,000, with $75 billion in outstanding securities, once the acquisition closes. Last year, the bank bought a similar business from Keystone Financial Group.

For Bank of New York, the purchase represents its "ongoing commitment to remain the nation's leading provider of securities processing services," according to Thomas A. Renyi, Bank of New York's president and chief operating officer.

The bank has embarked on a drive to build up its corporate trust and securities processing operations. Since January, Bank of New York has reached agreements to acquire a $167 billion corporate trust business from NationsBank Corp.; $800 billion in global custody assets from J.P. Morgan & Co., and $462 billion in assets under custody from BankAmerica Corp.

The corporate trust acquisitions have added more than 16,000 issues and $215 billion in outstanding securities to the bank's portfolio. Bank of New York has more than 24,000 trust and agency appointments and more than $310 billion in outstanding securities. Over the last few years, it has become the largest bank in overall securities processing, handling nearly $3 trillion worth of securities.

Rising investments and price competition have prompted a growing number of banks to sell off their corporate trust operations. Analysts estimate around three dozen banks still handle significant amounts of corporate trust business.

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