Boston's UST Corp. hopes its planned acquisition of 20 Bank of Boston branches will boost both its market share and its stature among the region's giants.
Officials are expecting to reap the benefits of a large influx of deposits and small-business credits, and a virtual doubling of UST's consumer business.
"We're pleased to have this opportunity," said Neal F. Finnegan, president and chief executive of the parent of USTrust. "We think we'll make an important contribution to helping out these middle-market companies, which are USTrust's principal business."
The $2 billion-asset bank agreed last month to buy the Boston- area branches and an accompanying $860 million in deposits for a premium of about 7%, or $60 million. UST is not related to New York-based U.S. Trust Corp.
Also included in the purchase are $510 million in loans, consisting of $128 million in small-business loans and $383 million in home mortgages and home equity credits.
Analysts agreed that the price was reasonable for UST, which intends to use existing capital without issuing more stock. The average premium in New England over the past 18 months has been about 7%.
Gerard Cassidy, bank analyst at Hancock Institutional Equity Services in Portland, Maine, said the deal would probably enhance UST's earnings by as much as 30 cents per share in 1997, boosting estimates to $1.55 per share for that year.
The sale, subject to regulatory approval for USTrust, is expected to close in the fourth quarter.
"USTrust has been thought to be kind of the stepchild of Massachusetts banking and has languished without a focused strategy" for several years, said John Carusone, president of Hartford-based Bank Analysis Center. "This certainly responds to their critics."
The branch sale is intended to alleviate antitrust concerns by the U.S. Justice Department and the Massachusetts Attorney General's Office stemming from Bank of Boston's pending purchase of BayBanks, expected to close in the third quarter. Sixteen of the 20 branches are BayBanks offices.
Justice Department officials wanted to create a sizable alternative in small-business and middle-market lending to Bank of Boston and Fleet Financial Group, which otherwise dominate the Boston market.
"I think we fit that bill as well or better than anyone else," Mr. Finnegan said.
Because Justice Department officials wanted a single buyer, the branch sale was negotiated with UST instead of being thrown open to bidding by other banks, Bank of Boston officials said. The $46.5 billion-asset regional sold no other branches or assets.
UST has about $600 million in commercial and industrial loans, with a 9% share of middle-market lending. The deal with Bank of Boston would boost that market share to 11%, would double the bank's consumer business, and would increase its average branch size substantially.
The new branches themselves would also significantly enhance UST's 28- branch franchise, giving it the third-largest branch network in the metropolitan area. The branches are in communities or areas not currently served by UST, which had been focused in the southern and western parts of the market.
Ten branches are in Middlesex County, which Mr. Finnegan called the "most fertile of small-business and personal income counties in the state." Neighboring Norfolk and Suffolk counties have another five each.