Two large financial firms have just raised their dividends in the past few days, and with those increases comes more good news – acquisitions that should better position them both for future growth.
One of these companies is US Bancorp (NYSE: USB), which acquired another bank to expand its geographic presence, and the other is State Street (NYSE: STT), which bought a rival to make it the world’s largest custodian bank. Let’s see how these moves should benefit these two actions.
US Bancorp acquires MUFG Union Bank
US Bancorp, the holding company of US Bank, the country’s fifth largest bank, has just grown a bit with the acquisition of San Francisco-based MUFG Union Bank. US Bancorp bought the bank from Mitsubishi UFJ Financial Group for about $ 8 billion. It has around $ 133 billion in assets and 342 branches, of which 315 are in California, with most of the rest in Oregon and Washington. In addition, the acquisition adds 1 million personal customers and 190,000 small business accounts, while increasing the balance sheet with $ 58 billion in loans and $ 90 billion in deposits. The purchase will strengthen US Bank’s already strong position in California, making it the state’s fifth largest bank in terms of deposits, down from 10th.
US Bancorp predicts that the transaction, after closing in the first half of 2022, will be accretive by about 6% to earnings per share in 2023 assuming a 75% integration by then, and 8% when fully consolidated. integrated by 2024. Bank expects to achieve savings of $ 900 million, or about 40% of estimated non-interest expense, through real estate consolidation, technology and systems conversion, and other efficiencies back office.
This should help the performance of one of the most efficient banks in the country, with an efficiency ratio (how much a bank spends to generate $ 1 in income) of 58%, among the lowest of the major banks. Meanwhile, the acquisition is also expected to boost the return on tangible common stocks, to 21%, also among the top of the nation’s largest banks. It currently has an operating margin of 42%, which is higher than that of all major banks except JPMorgan Chase.
Earnings growth and efficiency also bode well for the dividend, which US Bancorp just increased to $ 0.46 per share in the third quarter – or $ 1.84 per year. US Bancorp has a dividend yield of 3.2%, which is above the financial industry average of about 2.6% and the S&P 500 average, which is about 1.3%. It also has a low dividend payout ratio equal to just 37.2% of earnings. This acquisition of MUFG Union Bank is expected to strengthen US Bank’s already strong position as the leading super-regional bank.
State Street expands with the acquisition of its rival
On September 7, State Street took a big hit when it bought out the Investor Services business of Brown Brothers Harriman for $ 3.5 billion in cash. This includes its custody, accounting, fund administration, global markets and technology services. As a result, State Street will become the world’s largest global custodian of assets when the transaction closes at the end of 2021. BBH Investor Services had $ 5.4 trillion in assets under custody (AUC) as of June 30, which would add further at State Street $ 42.6. one thousand billion. The combination would make State Street the world’s largest custodian bank, exceeding BNY Mellon, which has approximately $ 45 trillion in AUC.
The deal is expected to generate profits in the first year. Once BBH Investor Services is fully integrated, the company expects a 31% increase in its operating margins. The company said it expects to see spending cuts of $ 260 million
through efficient operational systems, infrastructure and overhead consolidation. The purchase not only gives State Street greater stature and the leading share of the conservation market, but it also expands State Street’s reach into non-U.S. Markets that State Street has targeted for growth, including Japan, Luxembourg, Ireland and Latin America.
In addition to custodial services, State Street also has a strong asset management division as the third largest exchange-traded fund manager after Black rock and the Avant-garde. There has been speculation that State Street is interested in buying the fourth-largest exchange-traded fund company, Invesco, which could help it gain market share as well. State Street invented ETFs, but has since fallen behind its two biggest rivals. The acquisition of Invesco, which owns some of the most popular ETFs in the market, such as the Invesco Trust QQQ – would be a major boon.
State Street’s stock price is up about 15% year-to-date. It did relatively well in 2021 with commission income up 6%, while net profit rose 10% in the second quarter compared to the previous year. In addition, AUC grew 27% in the second quarter year-on-year while assets under management jumped 28%.
State Street increased its quarterly dividend by 10% in the third quarter to $ 0.57 per share, or $ 2.28 per year. This corresponds to a dividend yield of 2.8% with a payout ratio of 31%.
Custodian banks hold assets in secure accounts and handle administrative tasks for large institutional clients. Income is generated by fees and is very regular and stable – the type preferred by income seeking investors. Combine that with State Street’s ETF activity, which has huge growth potential over the next decade, and you’ve got a good mix of income.
This agreement to acquire the conservation business of Brown Brothers puts State Street on an even better conservation footing and is expected to lead to increased earnings growth. This is good news for dividend investors.
This article represents the opinion of the writer, who may disagree with the official recommendation position of a premium Motley Fool consulting service. Were motley! Questioning an investment thesis – even one of our own – helps us all to think critically about investing and make decisions that help us become smarter, happier, and richer.
The mention sources can contact us to remove/changing this article
What Are The Main Benefits Of Comparing Car Insurance Quotes Online
LOS ANGELES, CA / ACCESSWIRE / June 24, 2020, / Compare-autoinsurance.Org has launched a new blog post that presents the main benefits of comparing multiple car insurance quotes. For more info and free online quotes, please visit https://compare-autoinsurance.Org/the-advantages-of-comparing-prices-with-car-insurance-quotes-online/ The modern society has numerous technological advantages. One important advantage is the speed at which information is sent and received. With the help of the internet, the shopping habits of many persons have drastically changed. The car insurance industry hasn't remained untouched by these changes. On the internet, drivers can compare insurance prices and find out which sellers have the best offers. View photos The advantages of comparing online car insurance quotes are the following: Online quotes can be obtained from anywhere and at any time. Unlike physical insurance agencies, websites don't have a specific schedule and they are available at any time. Drivers that have busy working schedules, can compare quotes from anywhere and at any time, even at midnight. Multiple choices. Almost all insurance providers, no matter if they are well-known brands or just local insurers, have an online presence. Online quotes will allow policyholders the chance to discover multiple insurance companies and check their prices. Drivers are no longer required to get quotes from just a few known insurance companies. Also, local and regional insurers can provide lower insurance rates for the same services. Accurate insurance estimates. Online quotes can only be accurate if the customers provide accurate and real info about their car models and driving history. Lying about past driving incidents can make the price estimates to be lower, but when dealing with an insurance company lying to them is useless. Usually, insurance companies will do research about a potential customer before granting him coverage. Online quotes can be sorted easily. Although drivers are recommended to not choose a policy just based on its price, drivers can easily sort quotes by insurance price. Using brokerage websites will allow drivers to get quotes from multiple insurers, thus making the comparison faster and easier. For additional info, money-saving tips, and free car insurance quotes, visit https://compare-autoinsurance.Org/ Compare-autoinsurance.Org is an online provider of life, home, health, and auto insurance quotes. This website is unique because it does not simply stick to one kind of insurance provider, but brings the clients the best deals from many different online insurance carriers. In this way, clients have access to offers from multiple carriers all in one place: this website. On this site, customers have access to quotes for insurance plans from various agencies, such as local or nationwide agencies, brand names insurance companies, etc. "Online quotes can easily help drivers obtain better car insurance deals. All they have to do is to complete an online form with accurate and real info, then compare prices", said Russell Rabichev, Marketing Director of Internet Marketing Company. CONTACT: Company Name: Internet Marketing CompanyPerson for contact Name: Gurgu CPhone Number: (818) 359-3898Email: [email protected]: https://compare-autoinsurance.Org/ SOURCE: Compare-autoinsurance.Org View source version on accesswire.Com:https://www.Accesswire.Com/595055/What-Are-The-Main-Benefits-Of-Comparing-Car-Insurance-Quotes-Online View photos
to request, modification Contact us at Here or [email protected]