State Street, ABN & BoNY line up for Deutsche deal
GLOBAL- State Street, ABN AMRO Mellon Bank and Bank of New York are rumoured to be interested in buying Deutsche Bank’s custody business, put up for sale this year. Valued at $1.1bn-$1.8bn (e1.12bn-e1.84bn) and with approximately $3.7trn (e3.8trn) assets under custody, the division is the fifth largest in the field world-wide.
The three are believed to have completed due diligence in July although bidding will not begin for several weeks. None of the parties involved would comment but industry sources say State Street is most likely to prevail.
The US giant has already expressed an interest in upping revenues out of Europe to 40%, which the acquisition could support. Furthermore, State Street has recently sold its institutional trust business, leaving it with $750m in cash.
Observers believe the deal could prove tricky. One market participant said: “this is a big acquisition. Concerns include the fact that Deutsche Bank has yet to put to bed its merger with Bankers Trust, that the buyer would be taking on 4,000 people in a difficult employee law environment and that they would need to potentially review their sub-custodian arrangements taking into account Deutsche Bank’s proprietary network.
“That said, whichever bank buys this and makes it work in the long run will be taking a big step forward in the domination of Europe and it will put the winner firmly on the map. However, questions should still be asked about how big Deutsche’s book of custody business is outside the US and Germany.”
JP Morgan Chase and Citibank were also rumoured to be applying for the business, but it is believed that Deutsche Bank is reluctant to sell its custody division to a bank that also has significant investment banking business, thereby putting the German bank in direct competition with the buyer.
Deutsche announced earlier this year that it would be streamlining its low-profit businesses as part of a cost-cutting and restructuring programme, and the custody business is reported to have been steadily losing market share.