U.S. Bank Closes BofA Unit Purchase - Analyst Blog

U.S. Bancorp's (USB) lead bank, U.S. Bank, completed the purchase of Bank of America Corp.'s (BAC) U.S. and Europe-based securitization trust administration businesses on December 30, 2010.

As per the terms of the agreement, U.S. Bank Corporate Trust Services acquired around 2,153 active securitization and related transactions, over 2.4 million residential mortgage files and 84,000 commercial files, as well as $1.1 trillion in assets under administration. Moreover, the transaction provided U.S. Bank with about $8 billion of related deposits upon closure.

The conversion of the acquired BofA unit is currently anticipated to be completed by the end of the third quarter of 2011. Following the conversion, the acquired businesses in U.S. and Europe will operate under the U.S. Bank trade name.

The deal with BofA was announced in November and involved a cash purchase price of up to $35 million and one-time merger expenses of approximately $40 million to $45 million.

Over the last 20 years, U.S. Bank has effectively completed 18 corporate trust acquisitions. This very acquisition offers U.S. Bancorp an opportunity to strengthen its market position within the U.S. structured finance trust business and compliments its current market position in the country's corporate and municipal trust business. It solidifies the company's positions in collateralized debt obligations and commercial and residential mortgage-backed securitizations.

Moreover, the acquisition provides the bank with a prospect of expanding its presence in the European market with offices in Ireland and London, England. The sell-off is a strategic fit for BofA as well as it is shrinking its non-core businesses to better align its focus on the banking business.

We currently have a long-term Neutral” recommendation on both U.S. Bancorp and BofA shares.

 
BANK OF AMER CP (BAC): Free Stock Analysis Report
 
US BANCORP (USB): Free Stock Analysis Report
 
Zacks Investment Research