On Wednesday, Northern Trust Corporation (NTRS) announced the completion of its acquisition of Bank of Ireland Securities Services (BoISS) from Bank of Ireland Group for €60 million ($82 million).
In February 2011, Northern Trust announced its plan to acquire the fund administration, investment operations outsourcing and custody business of the Bank of Ireland Group (IRE).
Northern Trust is now expected to combine the fund administration business with its existing activities in Ireland. The acquisition will improve and expand Northern Trust’s Global Fund Service capabilities, particularly in the field fund administration and ETFs.
BoISS includes the fund administration, investment operations outsourcing and custody business of the Bank of Ireland Group. Dublin-based BoISS is the largest Irish-owned asset administration provider of specialized and client-driven services to a broad range of funds, including mutual money market, multi-manager, exchange-traded funds (ETFs), and property funds, serving both the on-shore and off-shore markets.
Owned 36% by the government, Bank of Ireland is selling assets in an effort to raise €2.2 billion ($3 billion) of additional capital required by the central bank. The Irish banks are under pressure as bad loan losses are escalating following the collapse of the domestic real-estate.
This transaction will boost Northern Trust’s combined assets under custody and administration in Ireland by €70 billion ($96 billion) as stated before. On the other hand, the deal will increase Bank of Ireland’s core Tier 1 capital by €40 million ($55 million). Since 2000, Northern Trust has been providing custody and fund administration services to clients from its Dublin office and opened its Limerick operations in 2006.
Our Take
The acquisition will enhance Northern Trust’s asset administration services in Ireland, making it more competitive in the market. The company is also poised to benefit from the growth in client network. However, we expect low interest rate environment to continue restraining earnings, impacting net interest income and securities lending fees.
Northern Trust currently retains its Zacks #4 Rank, which translates into a short-term Sell rating. Northern Trust’s peer — The Bank of New York Mellon Corporation (BK) also retains a Zacks #4 Rank (a short-term Sell rating).
BANK OF NY MELL (BK): Free Stock Analysis Report
IRELAND BK-ADR (IRE): Free Stock Analysis Report
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