JOHN CARUSONE – ‘A big deal’
A deal that would leave JPMorgan Chase with the largest market share in Greenwich came under fire earlier this week, but if the deal goes through, it will make a financial institution that already has 4 percent of the state’s market share even stronger.
JPMorgan Chase and The Bank of New York Co. announced a deal last week in which JPMorgan is to acquire The Bank of New York’s consumer, small-business and middle-market banking businesses in exchange for JPMorgan’s corporate trust business, plus a cash payment of $150 million.
On Monday, a community group in the Bronx, N.Y., filed a challenge with the Federal Reserve calling for public hearings on the deal. The Inner City Press/Fair Finance Watch claims the deal could result in higher prices and could close some local branches, according to the Associated Press. JPMorgan has confirmed it expects to close some branches following the deal.
If the deal moves forward, JPMorgan would acquire 338 bank branches that serve 600,000 households and more than 100,000 businesses, including nine branches in Connecticut. The Bank of New York has a heavy presence in Greenwich that came about when it acquired Putnam Trust 12 years ago. The increased presence by JPMorgan in Greenwich – a highly desirable banking town – is significant, according to John Carusone, president of the Bank Analysis Center in Hartford.
“It’s a big deal,” he said. “I think it’s significant because JPMorgan is much more of a retail-oriented institution.”
The Bank of New York has long been better known as a trust or wealth-management bank, while JPMorgan is more focused on the retail and small-business markets.
“The retail aspects and the business aspects were always an afterthought,” Carusone said.
Seven of the nine Connecticut branches are in Greenwich, which Carusone described as an attractive market for banks. The Bank of New York has $595 million in deposits in the city, where it will compete with People’s Bank, Wachovia, Bank of America and Patriot National Bank.
“[That’s] not inconsequential,” Carusone said.
The acquisition will give JPMorgan about 29 percent of the market share in Greenwich, with $719 million in deposits.
The acquisition by The Bank of New York of JPMorgan’s corporate trust business, however, will probably not have much of an impact on Connecticut, Carusone said.
“It appears to be a win-win situation for both companies,” he said. “It’s a very judiciously focused acquisition.”
Both companies’ boards of directors have approved the deal, which is expected to close in the third or fourth quarter of this year.
‘A Great Addition’
The deal would give JPMorgan Chase the largest branch network in New York City and its suburbs, with more than 800 branch locations and 2,000 ATMs in the tri-state area. The company, which is based in New York, is the nation’s third-largest bank by assets, behind Citigroup Inc. and Bank of America Corp.
In its complaint, Inner City Press/Fair Finance Watch cited the Community Reinvestment Act, a 1977 law that requires banks to make loans in low-income and minority areas where they operate as a condition for opening new branches, according to the AP.
In the transaction, JPMorgan also will receive consumer, small-business and middle-market loan balances of about $8 billion. And JPMorgan will gain about 2,000 middle-market clients from The Bank of New York, clients who will gain access to a full suite of cash management, trade finance and commercial banking services.
“This is a great addition to our New York City/tri-state franchise. We fully intend to remain the winner here,” said JPMorgan Chase Chief Executive Officer Jamie Dimon in a prepared statement. “The transaction reflects our disciplined strategy of investing capital in core businesses where we can leverage scale and expertise for competitive advantage. In addition to being a great strategic fit, the deal is compelling financially.”
The Bank of New York’s acquisition of JPMorgan Chase’s corporate trust business fits well with the bank’s model.
“This transaction further advances our strategic transformation while also realizing the attractive value that we have created in our retail banking business over a long period of time,” said Thomas A. Renyi, chairman and chief executive officer of The Bank of New York Co., in a prepared statement. “We are acquiring a business that fits neatly into our chosen business model, extending our leadership position and global presence in our well-defined set of securities-servicing businesses. These are businesses in which we have scale, skill and competitive advantage – and they offer excellent prospects for growth and profitability. When the transaction is complete, we will have an even sharper focus on securities servicing, asset management and private banking, uniquely positioned to help clients move and manage their assets anywhere in the world.”
