U.S. Bank NA, one of the country’s two biggest trustee banks, announced Friday that it will absorb yet another of its smaller competitors. This time it’s LaSalle Bank NA, part of the Dutch-owned ABN AMRO network, and the 20th busiest municipal bond trustee so far this year, according to Thomson Financial.
In the business of municipal bond trustees, statistics show there are two major players — Bank of New York and U.S. Bank — and then there are all the others. The LaSalle acquisition is just the latest in a buying frenzy that has seen more and more of the market’s competitors consolidated into these top two trustees.
Chicago-based LaSalle announced this summer it would sell its muni trust business by year-end. The announced purchase will bring with it about $30 billion in par outstanding, or 2,875 issues under management, according to a U.S. Bank statement.
The Minneapolis-based bank emphasized that the move strengthens its Midwest presence.
“This acquisition complements U.S. Bank’s existing corporate trust business in Michigan and throughout Illinois, and will strengthen the U.S. Bank position as the number one trustee for new tax-exempt debt issuance in the nation,” said Diane Thormodsgard, president of U.S. Bank’s corporate trust and institutional trust and custody group.
While Thormodsgard would not specify exactly how much overlap there is between the operations of the two banks, she said her firm is most interested in keeping the LaSalle employees who work directly with clients.
“We have always maintained our relationship managers as close to our customers as possible,” she said. “Where efficiencies come in is through the back-room process. If you’re going to make your principal and interest payments to bondholders, one of the ways you build scale in this business is you run that through a centralized operation someplace.”
As of yesterday morning, Bank of New York led all other trustees with $59 billion of new business this year, acting as trustee on 898 issues, Thomson data shows. U.S. Bank had administered $46.6 billion of new deals through 974 transactions.
The third-busiest trustee is Wells Fargo Bank, a trustee for $27.9 billion of debt issued this year. No other trustee bank has logged $6 billion or more in new administrative duties so far this year.
By contrast, a flashback to 2001 shows a half dozen or so banks in the top tier of competition. Many of these have been gobbled up along the way.
State Street Bank & Trust Co. had the sixth busiest trustee department in 2001, before U.S. Bank acquired the unit in 2002. Bank One ranked third among trustee banks in 2001, but sold its corporate trust business to JPMorgan in 2003.
First Union National Bank, which later became part of Wachovia Corp., was the seventh-busiest trustee in 2001. U.S. Bank bought Wachovia’s corporate trust unit last year.
Even before the announcement Friday, two more of 2001’s biggest trustee departments had changed hands this year. U.S. Bank bought SunTrust Bank Inc.’s corporate trust business, and Bank of New York completed a swap for JPMorgan’s at the beginning of October.
U.S. Bank and LaSalle have not yet announced the terms of the their deal.
