) lead bank, U.S. Bank, is buying FSV Payment Systems, a
Florida-based prepaid card processing company. The deal is likely
to be accomplished in December but is currently subject to
MITSUBISHI-UFJ (MTU): Free Stock Analysis
UMB FINL CORP (UMBF): Free Stock Analysis
US BANCORP (USB): Free Stock Analysis Report
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Following the closure of the deal, FSV will operate under U.S.
Bank's Elan Financial Services brand. The deal terms were,
however, not made public.
A Strategic Fit
The deal is a strategic fit for U.S. Bancorp's banking unit as it
will strengthen its position in the prepaid market, which has
been the company's priority over the last decade. A reputed
organization in the prepaid card market, FSV both manages and
processes its own programs. Further, the company enjoys a leading
position in many domains, including business-to-business and
Therefore, the combined entity, which will capitalize on U.S.
Bank's payments strength and prepaid expertise, will be well
positioned to provide efficient end-to-end prepaid programs and
services to its clients.
Earlier in November, in an effort to augment its securities
services business, U.S. Bancorp's subsidiary -- U.S. Bancorp Fund
Services, LLC -- announced its plan to acquire AIS Fund
Administration, which offers fund administration and related
services to alternative investment managers. The deal will add
about $25 billion in hedge fund assets under administration to
the U.S. Bancorp subsidiary.
As a matter of fact, U.S. Bancorp has a well-balanced business
model, with non-interest revenue representing nearly half of its
total revenue. Its results have been driven by a combination of
acquisitions and organic growth.
In addition to strengthening its existing fee-based operations to
generate long-term revenue growth, U.S. Bancorp announced several
payment and trust-related acquisitions during the past year. This
includes a portfolio of approximately $700 million of credit card
assets, the institutional trust business of Union Bank, a unit of
UnionBanCal Corporation of San Francisco. Notably, UnionBanCal is
a subsidiary of
Mitsubishi UFJ Financial Group Inc.
Further, it comprises the Indiana corporate trust business of UMB
Bank N.A., a unit of
UMB Financial Corp.
). The company expects additional opportunities in payments and
corporate trust in the upcoming years.
In total, during the downturn, the company acquired over $3.2
billion in card assets and $1.1 trillion in trust assets under
administration. This diversification in business is expected to
continue to help maintain growth in an otherwise unfavorable
U.S. Bancorp currently retains a Zacks #2 Rank, which translates
into a short-term Buy rating. We believe such opportunistic
acquisitions will be appropriate for the company and will help
boost shareholders' confidence, which might lead to positive
estimate revisions. This, in turn, could trigger an improvement
in the Zacks Rank.