NationsBank Corp. has become the latest bank to exit the bond administration part of the corporate trust business, an area under increasing pressure to achieve economies of scale.
NationsBank, Charlotte, N.C., said it would sell its bond trustee, registrar, paying agent, and escrow services by yearend. An offering package has been prepared for distribution to major trust organizations.
The NationsBank unit administers $167 billion of debt securities and services over 71,500 accounts through 87 offices in nine states and the District of Columbia.
James B. Sommers, president of NationsBank Trust, said the business was not growing fast enough to meet the company's return-on-equity projections. "To meet those targets, we would be forced to build volume through acquisition, and this is not an attractive option for us," Mr. Sommers said.
John Munce, executive vice president for trust and investments, said compressing margins last year persuaded NationsBank to quit the bond administration business, even after opening a new unit in New York last summer.
"Our belief is that margins compressed dramatically during 1994," Mr. Munce said. "The business changed around us rapidly, and that tipped the balance."
NationsBank Trust, to which the corporate trust unit belongs, is one of the top 10 trust banks in the United States, with $163.6 billion of assets under administration and $57.4 billion of total managed assets.
Mr. Sommers said NationsBank Trust will focus more of its resources on corporate asset and investment management and retirement services. "These are areas where customer demand is rising dramatically, and we anticipate steep growth in volume and profitability in these businesses," he said.
NationsBank corporate trust has also been hit by a rash of high-level defections. Four top executives, including unit head Kenneth J. Phelps, left in 1992 to join Atlanta-based Reliance Trust Corp. Susan L. Adams, a senior vice president and sales supervisor, departed last fall for Charlotte-based First Union Corp.