Two months after buying Barnett Banks Inc., NationsBank Corp. is selling the Florida bank's institutional trust business to CCB Financial Corp.
The deal, announced last week, calls for $3 billion of assets in custody, escrow, and employee benefits accounts to go to Durham, N.C.-based CCB. Terms of the transaction, which is expected to close in the second quarter, were not disclosed.
The deal would bring CCB, the $7.1 billion-asset parent of Central Carolina Bank in North Carolina and American Federal Bank in South Carolina, into the Florida trust market.
It plans to apply to the Florida Department of Banking and Finance for a trust company charter and maintain offices in Fort Lauderdale, Jacksonville, and Tampa with former Barnett employees.
The portfolio will make CCB's institutional trust more "economically feasible," said Thomas W. Murray, senior vice president and manager of its trust and investment management division.
CCB has $600 million of assets under administration and $1.7 billion of assets under management.
Charlotte, N.C.-based NationsBank, on the other hand, has made no bones about its desire to get out of institutional trust. After acquiring Boatmen's Bancshares last year, NationsBank sold that bank's $133 billion- asset institutional trust portfolio to Bankers Trust New York Corp.
"We'd been in the process of divesting businesses not consistent with our long-term strategy, which is to be a major player in the investment management business," said Holly Deem, president of TradeStreet Investment Associates Inc., a subsidiary of NationsBank.
"We felt that the administrative sides of the business were not where our future focus would lie," Ms. Deem added. NationsBank manages more than $100 billion of assets for individual and institutional investors.
Institutional trustees provide custody for investment assets of corporations, public and private pensions and other retirement plans, foundations, and endowments. Like corporate trust, in which a bank holds bonds issued by companies, the institutional business requires expensive computer systems.
CCB is much smaller than other buyers of institutional trust portfolios. Leading custodians-Bankers Trust, Bank of New York, Chase Manhattan Corp., and State Street Corp.-have size on their side in a low margin business that demands volume.
But CCB will not be biting off more than it can chew, an observer said.
"They have infrastructure in place from a systems standpoint that they believe can handle more volume," said Edward R. Najarian, an analyst at Wheat First Union, Richmond, Va. "They say it will be a couple of pennies accretive to earnings in 1999."
Adele Heller, director of RogersCasey, a Darien, Conn.-based consulting firm for institutional investors, said the sale itself is not surprising, but the buyer is.
"The norm is for them to go to some of the major players," she said.
"Some of the more national and international global custodians have much more sophisticated technology that is superior to local players that are smaller."