While JPMorgan Chase has long offered trustee services to clients, JPMorgan just recently fully integrated its operations following the January 2002 acquisition of Systems & Services Technologies Inc. (SST). The firm hopes to be the one-stop shop for asset- and mortgage-backed lenders of all sizes.
After edging out the competition, SST is now the leading candidate to take over the servicing rights for the Union Acceptance Corp. portfolio should bond insurer MBIA be successful in its quest for a successor servicer. Although it is not yet final, UAC disclosed last week that it "has agreed in principle to a proposal on such a servicing platform transfer transaction," with SST, according to records filed with the Securities & Exchange Commission. The runner-up in the bidding for the servicing rights to UAC's portfolio was said to be Wells Fargo.
If finalized, this would be the largest portfolio acquisition to date for the new JPMorgan subsidiary, for which the parent has a three-scope plan to expand its servicing, trustee and underwriting businesses globally. SST is a unit of the JPMorgan Institutional Trust services group.
The plan, according to Joe Giordano, senior vice president in JPMorgan's institutional trust services group, is to act as both a backup and a third-party servicer in addition to purchasing servicing rights for the portfolios of distressed issuers. JPMorgan could then cross-market various services to one client.
As the only bulge-bracket underwriter that also offers both servicing and trust services, JPMorgan even finds itself being hired by competing Wall Street firms. Giordano estimates that 70% of JPMorgan's trustee business comes from the Street. Of course, being a sister company to last year's top asset-backed underwriter - JPMorgan Securities - helps too. Even though the firm's consumer banking arm, Chase Manhattan Bank, has its own servicing operations for the auto loan, credit card and home equity loans it makes, "the underwriting group of the investment bank is a major client of ours," said Giordano.
Following the recent announcement of its acquisition of Guardian Trust Australia Ltd., JPMorgan has its sights set globally. As a cross-border market heats up, Asia and Australia appear to be the next big growth area for securitization. JPMorgan has an early foothold in the South Pacific.
In announcing the acquisition of Guardian, Robert Priestley, managing director of JPMorgan Australia, said, "The most immediate opportunity will be providing trustee services in the area of securitizations, where the Australian market has a combined total of A$80 billion outstanding, making Australia the second largest securitization market in Asia after Japan."
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