In an effort to augment its securities services business,
) subsidiary - U.S. Bancorp Fund Services, LLC - is acquiring AIS
Fund Administration ("AIS"), which offers fund administration and
related services to alternative investment managers.
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The deal leads to the addition of about $25 billion in hedge fund
assets under administration to the U.S. Bancorp subsidiary. Along
with AIS's assets, its staff consisting of 176 members at its
offices in New Jersey, the United Kingdom and the Cayman Islands,
will also be integrated into U.S. Bancorp Fund Services.
Following this deal, $50 billion in alternative investment assets
would be serviced by this U.S. Bancorp unit. However, the terms
of the deal were not made public and the transaction is subject
to regulatory approval.
We are encouraged with this deal as it would help the company
augment its fund servicing capacities and assist it to increase
focus on corporate trust services.
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
included 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.
). Going forward, the company expects additional opportunities in
payments and corporate trust in the coming 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. Considering the fundamentals, we
maintain a long-term Neutral recommendation on the stock.