State Street Acquires Wachovia's Custody Business
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Thursday, September 09, 1999

State Street Acquires Wachovia's Custody Business

State Street Bank and Trust Company said today it will purchase the institutional trust and custody lines of business from Wachovia Bank. The business represents about 270 clients with about $61 billion in assets.

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  • Wachovia will remain custodial for endowments and foundations, clients with nonqualified executive plans and clients with 401(k) and other defined contribution plans whose assets are under Wachovia management.

    "They have a nice middle market business with portfolios of $500 million or bellow," said Ronald E. Logue, vice chairman of State Street Corporation. "It is within the Southeast where we don't have a large presence. We're also planning on establishing a local office there."

    "Wachovia's strategy is based around helping individuals manage their wealth," said Ray McKinney, executive vice president for institutional trust and retirement services, when asked why Wachovia was getting out of the custody business. "With institutions you don't deal with individuals."

    Another reason for leaving the business, according to McKinney, was the significant technology investment that was needed. To warrant that kind of investment the company would need a much higher volume than its current level.

    State Street will offer positions to 43 Wachovia client relationship managers and sales and marketing staff who currently service the business. However, there are an additional 140 individuals who will be displaced, a spokesperson for Wachovia said.

    State Street will open an office in Winston-Salem in North Carolina to house Wachovia's trust and custody employees. In addition, State Street is planning on expanding its existing office in Atlanta to augment its presence in the Southeast.

    "Having the local presence is what is important to retain the 40 plus customers which are highly thought of," Logue said.

    "The sale will allow Wachovia to devote full attention to core businesses in asset management and consulting-related services," said G. Joseph Prendergast, Wachovia's president and chief operating officer. "Focusing on these businesses will enable us to provide our clients the most value and accelerate our growth in wealth management."

    State Street will be offering their new clients a technology based product and services, and features that help them do their job better, Logue said, although he would not discuss the details. "I would say it would be in accounting, recordkeeping and administration as opposed to custody."

    As for future purchases, Logue said that there were not any being planned. "What I will say is that the middle market segment is very important for us, one which we don't talk about a lot but provides profitability."

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