JPMorgan Institutional Trust Services' acquisition of Bank One's corporate trust services will create a new leader in the structured finance industry, with the combined entity acting as trustee on more securitized product sold this year than any of its competitors. While there may be a new market leader, the top five trustees, which account for nearly 40% of structured finance trustee relationships, remains largely unchanged.
The integration of Bank One's trustee operations, split between Columbus, Ohio, and Chicago, with JPMorgan's New York-based operations, is expected to take three to six months. Bank One announced it had retained Goldman Sachs to sell its corporate trust unit in late April. JPMorgan shelled out $720 million for Bank One's trust unit, of which 10% is contingent upon business retention, according to a release. JPMorgan reportedly beat out Deutsche Bank for the purchase.
With almost $80 billion in securitized assets, the new entity should take over the top spot in the market once the acquisition closes sometime before the end of the year. Bank of New York, the current leader, acts as trustee for almost $70 billion of ABS, MBS and CDOs. Deutsche Bank has acted as trustee on $61 billion of structured finance product sold this year with Wells Fargo slightly behind Deutsche Bank, at $60 billion.
The consolidation is seen as giving JPMorgan synergies, as Bank One has trustee relationships with some of the larger issuers in the ABS and MBS markets. "Bank One has some major client relationships, including Ginnie Mae and General Motors Acceptance Corp.," said Joe Giordano, senior vice president in JPMorgan's institutional trust services group. After closing, JPMorgan trust portfolio, including structured finance, escrow and municipal finance, will total $4.5 trillion.
Giordano added that Bank One's strengths as ABS and MBS trustee are what made this acquisition most attractive, and very little is gained in the CDO market, where JPMorgan is already the market leader.