Sell Side

U.S. Bank Bulks Up By Buying First Citizens' Bond Trustee Unit

U.S. Bank NA, the second-largest municipal bond trustee bank, plans to bolster its business in Virginia and the Carolinas by purchasing the bond trustee business of Raleigh-based First Citizens Bank.

The bank announced the purchase agreement last week but did not disclose its terms. A subsidiary of Minneapolis-based U.S. Bancorp, U.S. Bank said the acquisition will expand its corporate trust division to $2.4 trillion of assets that it administers for 725,000 bondholders and more than 114,000 client issuances.

U.S. Bank served as trustee for 570 tax-exempt and Build America Bond issues totaling $40.9 billion through the first nine months of 2009, according to preliminary data from Thomson Reuters. The bank was ranked second-largest muni bond trustee with  14.2% of the market, down from 17.1% through the same period last year. The Bank of New York Mellon is the largest muni bond trustee bank.

“This transaction complements the existing U.S. Bank bond trustee business in North Carolina, South Carolina, and Virginia, and strengthens our competitive position as a leading national trustee for new municipal issuances,” Diane Thormodsgard, vice chairwoman of U.S. Bancorp wealth management and securities services, said in a statement.

U.S. Bank has been growing it trustee business through acquisitions. In July 2006, Atlanta-based SunTrust Banks Inc. sold its bond trustee business to U.S. Bank, which acquired 4,700 new client issuances and $123 billion of assets. In November 2005, U.S. Bank bought the corporate trust and institutional custody business of Wachovia Corp., gaining 15,800 new client issuances and $710 billion in assets.

First Citizens Bank, a subsidiary of First Citizens BancShares Inc., decided to leave the bond trustee business “to focus on strengths in other areas,” such as institutional asset management, Gene Lewis, senior vice president at First Citizens, said in a statement.

First Citizens was the 10th largest trustee bank in the first half of 2009. It served as trustee for 11 new issues totaling $745.3 million through June. Trustee banks act as a fiduciary for bondholders in enforcing the terms of the trust indenture with the issuer. In many cases, the trustee also acts as paying agent, registrar and transfer agent for the bonds.


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