The merger of Bank of New York Co. and Mellon Financial Corp. could spur similar deals, and the obvious matchup is State Street Corp. and Northern Trust Corp.
In order to remain competitive with the combined BNY Mellon's $16.6 trillion in assets under management, it would behoove State Street, which has $11.9 trillion in assets under custody to add Northern Trust's $3.3 trillion. In addition, State Street can afford its smaller Chicago-based rival since the Boston firm's $20 billion market capitalization is $8 billion more than Northern Trust's.
Interestingly, the mergers would also offer similar historical combinations. The Deal's Peter Moreira points out that the BNY-Mellon merger combines two institutions with deep roots in American finance. Bank of New York was founded in 1784 by Treasury Secretary Alexander Hamilton and was a defining element in forming his Federalist party; Mellon Bank, founded in 1869 by retired judge Thomas Mellon, financed the steel industry in the nineteenth century and was therefore key to American industrial expansion. Similarly, State Street was founded in 1792 and like Bank of New York played a key part in the economic development in the post-Colonial period; Northern Trust, founded in Chicago in 1889, like Mellon, catered to wealthy Midwestern industrialists. Another interesting historical detail, both Mellon and State Street sold their commercial banking businesses to Royal Bank of Scotland's U.S. unit Citizens Bank.
Of course, if Northern Trust isn't interested in playing, State Street may have other opportunities. The combined BNY Mellon also puts pressure on the bigger banks in the trust business namely Citigroup, which may opt to get out of the business or bulk up, notes a Reuters report. Either way, Monday's deal shook up an unglamorous, sleepy side of the financial services industry. —Matthew Wurtzel
See story about BNY-Mellon from The Deal
See story about State Street from The Boston Herald
See related story from Reuters
See related story from The Boston Globe
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