GERMANY/US - US bank, State Street Corporation, has signed definitive agreements with Deutsche Bank to acquire its global custody business. The business has assets under custody of approximately e2.2trn, taking State Street’s assets under custody up to almost e8trn. The move will result in State Street becoming the largest custodian worldwide, when the transaction closes in four months. Presently State Street ranks third behind JP Morgan Chase and the Bank of New York.

In an announcement today State Street said that it has “signed definitive agreements with Deutsche Bank to acquire substantial parts of Deutsche’s global securities services business.”

The move will see State Street take on Deutsche Bank’s fund administration services, Depotbank services, securities lending, performance measurement (including the WM company), benefit payments businesses, and UK and US-based domestic custody and securities clearing.

State Street will assume approximately 3,200 employees worldwide, and operations is New York, Nashville, London, Frankfurt, Dublin, Edinburgh and Singapore.

Deutsche Bank will, however, retain its sub-custody network in Europe, Latin America and Asia, and will be State Street’s preferred sub-custodian in related markets.

As part of the agreement, State Street will provide global investment services to Deutsche Asset Management (DeAM). Under the long-term agreement, State Street will provide custody, fund administration and global securities lending with the potential to expand the mandate to DeAM’s investment management affiliates.

Speaking in New York today, David Spina, chief executive office and chairman at State Street, estimated redundancies, as a result of the acquisition, to reach 1,000 within the first 12 months – the bulk of which will take place in the US.

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.

For 2002, the acquired business is expected to have revenues of e700m, and the amount State Street ends up paying for the business will depend on its performance. An initial payment of e1.2bn will be made, although this may be reduced depending on run rate revenues at close. State Street will then make payments to Deutsche of up to e300m – also dependent on revenues.

Bids for Deutsche’s custody business were also made by Bank of New York and ABN AMRO Mellon.