RELATIVE TO THE MERGER OF
INVESTORS BANK & TRUST COMPANY
WITH AND INTO
STATE STREET BANK AND TRUST COMPANY
State Street Bank and Trust Company, Boston, Massachusetts ("State Street" or the "Petitioner") has applied to the Division of Banks (the "Division") for permission to merge with Investors Bank & Trust Company, Boston, Massachusetts ("Investors") pursuant to the provisions of Massachusetts General Laws chapter 172, section 36 under the terms of a Bank Merger Agreement and Plan of Merger (the "Agreement") approved by the Boards of Directors of State Street Bank and Trust Company and Investors Bank & Trust Company on February 4, 2007 and February 15, 2007 respectively. The Agreement provides for the merger of Investors with and into State Street under the charter and by-laws of State Street and under the name of State Street Bank and Trust Company. The main office of State Street would remain the main office of the continuing institution. Neither Petitioner nor Investors operates any retail branches in the Commonwealth. This transaction is part of a multi-step transaction which included an application before the Board of Bank Incorporation in which State Street Corporation, Boston, Massachusetts will acquire Investors Financial Services Corporation, Boston, Massachusetts. State Street Corporation is the holding company of the Petitioner and Investors Financial Services Corporation is the holding company of Investors. The Board of Bank Incorporation approved the transaction in its decision of this same date.
Notice of the application has been posted and published. The time period for interested persons to submit documents has passed. Accordingly, all documents and materials related to this multi-step transaction have been reviewed. The record has been considered with regard to the financial and managerial resources of each bank, the competitive effects of the proposed transaction, the convenience and needs of the communities to be serviced by the continuing institution, the record of performance under the Community Reinvestment Act ("CRA") of the banks involved in the transaction and other applicable criteria.
State Street Corporation conducts a large portion of its business through its principal banking subsidiary, State Street and State Street's subsidiaries. State Street is a Massachusetts-chartered trust company headquartered in Boston, Massachusetts. State Street Corporation employs over 10,000 people in Massachusetts and over 21,000 people worldwide. State Street offers core custodial products and value-added products and services, such as fund accounting, fund administration, securities lending, investment manager operations outsourcing, recordkeeping, performance and analytics, and transfer agency services to institutional investors worldwide. State Street does not provide traditional retail banking services or maintain retail bank branch offices. State Street is the largest bank based in Massachusetts and has considerable financial strength. As of March 31, 2007, it had approximately $98 billion in total consolidated assets and is a "well-capitalized" bank.
Investors is also a Massachusetts-chartered trust company headquartered in Boston, Massachusetts. Investors was founded in 1969 as a banking subsidiary of Eaton Vance Corporation, an investment management firm and reorganized in 1995 into its current holding company structure. It focuses on providing asset custody services to institutional investors based throughout the world. Investors Financial Services Corporation employs 3,200 people in Massachusetts and 4,300 people worldwide. Investors provides certain so-called "core" custody services, such as global custody, multi-currency accounting, fund administration, and middle office outsourcing. Investors also provides its institutional clients with "value added" bundled services, including securities lending, foreign exchange, cash management and investment advisory services. At March 31, 2007, Investors had total consolidated assets of $14.2 billion.
Materials have been submitted to address the issue that competition among banks will not be unreasonably affected by the proposed transaction. On the issue of whether competition will be unreasonably affected, the Division considers, but does not rely exclusively on, the various indices used by federal agencies in measuring competition in a given market. The Division also considers the proposed transaction in light of its impact on the citizens, communities and banking structure of the Commonwealth on a community by community basis. The Petitioner has presented analysis on competition under the standard banking market consideration of deposits controlled within a geographic area. It has also presented analysis considering those segments of commercial banking in which the involved entities directly compete. As noted previously, neither State Street nor Investors conduct retail banking operations or operate a retail branch office network. Accordingly, traditional federal banking market analysis does not trigger any deposit concentration issues. Similarly, the Division's additional review of a transactions impact on communities and municipalities is not triggered since the subsidiary banks have only their main banking offices in Boston. The Petitioner identifies asset custody services and related services including security services as the product market of commercial banking in which both holding companies compete. This product market is viewed as being national, if not global, with customers being large corporations, institutions and other financially sophisticated entities. State Street identifies itself as a global organization with 42% of its revenues generated from twenty-five countries outside the United States. A significant number of strong, "well-capitalized" institutions including, JP Morgan Chase and Company, Citigroup, as well as foreign based institutions compete in this product market. Based on the above, the Division finds that the proposed transaction will not unreasonably impact competition among banking institutions.
The financial analysis of the transaction has been considered. Accordingly, upon review, financial and managerial considerations support the application.
The Petitioner states that the transaction will enhance State Street's leadership and competitiveness in this particular industry. According to the application, State Street's clients will be able to take advantage of Investor's strengths in private equity and hedge fund servicing areas. Investor's clients will also now have access to State Street's many various client services which are detailed in the application. The Petitioner acknowledges that similar services are provided by both State Street and Investors but does not plan to eliminate any services currently provided by Investors. The transaction, they believe will result in synergies in these core operations allowing for greater efficiencies to the benefit of their customers. As set forth in the analysis of competitive effects of the transaction, the Petitioner again comments on the highly competitive aspect of the asset custody business and the ongoing consolidation on a national and global basis. Accordingly, State Street argues that the transaction will enable it to better serve existing clients, allow it to expand its customer base in the United States and internationally, as well as offer more products and services.
In determining whether or not to approve a petition under the statutory criteria, the Commissioner is also required to consider a showing of "net new benefits" related to the transaction. That term includes initial capital investments, job creation plans, consumer and business services, and commitments to maintain and open branch offices, among other factors, which the Commissioner may deem necessary. The Petitioner has addressed this requirement.
The Division's consideration of net new benefits from the proposed transaction centered on the job creation component of that criteria. The employment ramifications of the transaction were part of the Petitioner's supplementary filing, a major part of its oral and written testimony and the subject of several questions at the public hearing before the Board of Bank Incorporation held on May 9, 2007. In its filings and testimony, the Petitioner detailed the number of positions that would be eliminated over a period of eighteen months following consummation of the transaction, if approved. It was clearly stated that the positions eliminated would primarily be in Massachusetts. The Petitioner stressed that the numbers given reflected positions, not individuals, as some employees of Investors may fill open positions at State Street. The Petitioner emphasized in its filings that it is the top banking employer in Massachusetts and in the top twenty of employers in the Commonwealth. Hiring and payroll information over the last few years were also provided. The number of employees of State Street and Investors are set out earlier in this Decision. All of these records were submitted to strengthen the argument that the Petitioner, as a stronger company resulting from the transaction, will be well positioned for continued future growth and increased employment which will outweigh the short term impact of the transaction on jobs.
The Division's review of this transaction includes an assessment of the subsidiary banks' performance under CRA. Such assessment for a state-chartered bank, such as State Street and Investors, includes examination by Division of Bank personnel, as well as an analysis of the legitimate concerns raised by the community and the bank's response to those concerns. Here, the relevant evaluations were submitted as part of Petitioner's application materials. Since neither State Street nor Investors offer traditional deposit and credit products and services to retail consumers nor maintain retail branch offices, each as been designated as a wholesale bank for purposes of analyzing their compliance with the federal and Massachusetts CRA. The application provides additional information on State Street's actions in meeting the needs of its community. Both State Street and Investors have received an "Outstanding" CRA performance rating from the Division of Banks.
Upon review of this application with reference to the relevant statutory and regulatory criteria, the Division has concluded that all such requirements have been met and that consummation of the proposed merger would be in the public interest. On the basis of these considerations, approval is granted for Investors to merge with and into State Street under the charter and by-laws of State Street and under the name State Street Bank and Trust Company pursuant to Massachusetts General Laws chapter 172, section 36.
The approvals granted herein are subject to the following conditions:
- that the merger of Investors and State Street shall not become effective until a certificate signed by the Presidents and Clerks or other duly authorized officers of the banks involved in the merger indicating that each such institution has complied with the provisions of Massachusetts General Laws chapter 172, section 36, or other applicable statute, has been returned;
- that the proposed transaction shall not become effective until Articles of Merger are filed with the Secretary of State;
- that the proposed merger shall be consummated within one year of the date of this decision.
June 26, 2007
Steven L. Antonakes
Commissioner of Banks