U.S. Bancorp to Buy Trust Biz - Analyst Blog
February 03 2012 - 11:05AM
Zacks
U.S. Bancorp (USB) is making a
strategic acquisition for its institutional trust and custody
division. The company through its lead bank, U.S. Bank National
Association, has entered into a definitive agreement to buy from
Union Bank, N.A. its institutional trust business that offers
services to retirement plans, labor management trusts and
registered investment advisors.
Union Bank is a subsidiary of UnionBanCal Corp., which is
owned by Mitsubishi UFJ Financial Group Inc.
(MTU). Terms of the transaction were not disclosed.
The deal is a strategic fit for both U.S. Bancorp and Union
Bank. For U.S. Bancorp, the acquisition will bring in approximately
4,300 client relationships representing $42 billion in assets under
administration. The purchase will expand the company’s footprint
and boost its market share in retirement plan, labor management
trust and registered investment advisor business segments.
On the other hand, Union Bank plans to strategically augment its
banking, global treasury management, asset management, brokerage,
corporate trust and institutional custody business segments
nationwide. Hence, the sale would help the company to reinvest
capital in its core business.
Recent Acquisitions
U.S. Bancorp seems to be on an acquisition spree. Recently, the
company’s lead bank, U.S. Bank National Association, agreed to
acquire the Indiana corporate trust business of UMB Bank, a
subsidiary of UMB Financial Corporation (UMBF).
The deal will expand its trust business and is expected to be
accomplished on March 2, 2012. However, the terms of the agreement
were not disclosed by the company.
Last week, through its lead bank, U.S. Bancorp acquired the
banking operations of BankEast, a subsidiary of BankEast
Corporation, in a deal assisted by the Federal Deposit Insurance
Corporation. BankEast is based in Knoxville, Tennessee.
For U.S. Bancorp, the deal is a strategic fit as the community
banking model of BankEast is quite attractive and the deal would
help it to expand in the Tennessee market. The 10 branches of
BankEast in the Knoxville area will raise U.S. Bank’s total branch
count in Tennessee to 91.
Our Take
U.S. Bancorp has a well-balanced business model, with
non-interest revenue representing nearly half of its total revenue.
Its results have been driven by a combination of acquisitions and
organic growth. Also, we expect continued investments in core
banking and fee-based operations to generate long-term revenue
growth.
Going forward, we expect U.S. Bancorp to benefit from its
diversified revenue base and strategic acquisitions, thereby
posting growth in core earnings going forward. Yet, a tardy
economic recovery and a low interest rate environment along with
regulatory issues remain our concern.
U.S. Bancorp shares maintain a Zacks #2 Rank, which translates
into a short-term Buy recommendation.
MITSUBISHI-UFJ (MTU): Free Stock Analysis Report
UMB FINL CORP (UMBF): Free Stock Analysis Report
US BANCORP (USB): Free Stock Analysis Report
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