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U.S. Bank to Buy SunTrust Trustee Unit

JUL 25, 2006 7:57pm ET
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BRADENTON, Fla. — Atlanta-based SunTrust Banks Inc. announced Monday that it would sell its bond trustee business unit to U.S. Bank NA, the top-ranked trustee bank in the first half of 2006, according to Thomson Financial.

Terms of the SunTrust purchase were not disclosed.

The transaction, expected to close in the third quarter, is the second acquisition in less than a year of a Southeast-based trust business by U.S. Bank, the lead bank of U.S. Bancorp, which is headquartered in Minneapolis.

“This acquisition complements U.S. Bank’s existing corporate trust business and will strengthen our competitive position by increasing our existing scale and leveraging our industry leading technology and operational platforms,” said Diane Thormodsgard, president of U.S. Bank Corporate Trust, in a statement.

The sale includes SunTrust’s corporate and municipal bond trustee business as well as trustee and paying agency services on debt securities. The sale does not include SunTrust’s public finance group, which provides underwriting, financial advisory, and remarketing services.

U.S. Bank said it would be acquiring approximately 4,700 new clients and assets under administration totaling $123 billion in outstanding principal.

SunTrust said the transaction essentially would be neutral to 2006 earnings, generating a third-quarter pre-tax gain of approximately $111 million, or approximately $70 million after-taxes, expected to be used for balance sheet management and other corporate purposes.

An additional gain of up to $16 million pre-tax, or $10 million after-tax, also may be realized as a result of post-closing payments from U.S. Bank linked to business retention levels in the year following the completion of the transaction, SunTrust said.

“The decision to sell our corporate and municipal bond trustee business is the latest example of SunTrust’s focus on adjusting our business mix to capitalize on changing business trends so our management, financial, and technology resources are efficiently directed to areas where we see the greatest growth opportunities,” said William Rogers, corporate executive vice president of wealth and investment management.

The SunTrust transaction will give U.S. Bank $2.5 trillion in assets under administration, 716,000 bondholders, and more than 92,000 client issuances. It also gives U.S. Bank’s trust division a new office in Orlando, Fla., and enhances existing offices in Atlanta, Miami, Nashville, and Richmond. U.S. Bank currently has 44 corporate trust offices across the country.

While there has been some contraction in bond trust business between larger banks, indications are that new players are entering the field. Such was the case late last month when Cherry Hill, N.J.-based Commerce Bancorp Inc. opened its first corporate trust office in Jacksonville, Fla., as part of the bank’s expansion plans into the state and the rest of the Southeast.

Meanwhile, U. S. Bank and the Bank of New York Co. have been the leading contenders when it comes to bond trustee business on a national basis and competition between the two is stiff.

In April, BoNY announced an asset swap to acquire JPMorgan’s corporate trust business. In exchange, JPMorgan would receive BoNY’s underperforming retail branches. The $3.1 billion transaction is expected to close in the third quarter.

In January, U.S. Bank completed the purchase of the corporate trust and institutional businesses of Charlotte-based Wachovia Corp., acquiring its 15,800 clients and $980 billion in assets.

That deal helped propel U.S. Bank to become the top municipal trustee, administering $74.86 billion in debt in 2005.

In the first half of this year, U.S. Bank had $27.8 billion in bond trust business compared to second-ranked Bank of New York’s $22.3 billion. U.S. Bank has been the top-ranked bond trustee since 2002, according to Thomson Financial.

In the first half of 2006, SunTrust ranked in 10th place with just over $2 billion in bond business. The bank ranked seventh from 2002 through 2005.

Chicago-based LaSalle Bank Corp. announced yesterday that it intends to sell its municipal trustee business before the end of the year.

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