U.S. Bank National Association – the lead bank of U.S. Bancorp (USB) – entered into a definitive agreement to obtain Deutsche Bank AG’s (DB) municipal bond trustee unit. The deal is anticipated to be completed in the third quarter of this year.
The agreement will expand the reach of U.S. Bank’s global corporate trust business, which has presence in CA, MS, NY, TN and TX.
The transaction will add roughly $57 billion in assets to U.S Bank’s existing $3 trillion of assets under administration, managed by the bank’s corporate trust division. The deal with Deutsche Bank will add an additional 1,100 contracts to the roughly 125,000 trust and agency contracts currently held by the bank.
Management at U.S. Bank believes that the acquisition is a step forward in augmenting its leadership position in municipal trustee and agency services. The deal is also part of U.S. Bank’s strategy to make opportunistic investments in order to further enhance its corporate trust services. Further, the MN-based bank will be committed to provide high-quality services, which it is known for, to the acquired clients.
According to Deutsche Bank, the partnership with U.S. Bank will be profitable as it will provide a better platform to serve clients with the help of U.S Bank’s expertise.
U.S. Bancorp seems to be on an acquisition spree. In Mar 2012, U.S. Bank National Association, acquired the Indiana corporate trust business of UMB Bank – a subsidiary of UMB Financial Corporation (UMBF). In the same month, it inked a definitive agreement to buy its institutional trust business from Union Bank, N.A. – a subsidiary of UnionBanCal Corp., which is owned by Mitsubishi UFJ Financial Group Inc. (MTU).
In Feb 2012, 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.
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 concerns.
U.S. Bancorp shares carry a Zacks Rank #3 (Hold).
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