Since U.S. Bancorp disclosed last month that it plans to spin off Piper Jaffray, some analysts and bank executives have wondered whether the Minneapolis company is as committed to asset management as it continues to say it is.
U.S. Bancorp executives say that they not only are still committed, but they plan to expand by building on the staff, distribution, and product additions that took place over the past year.
"Our asset management business is essential to the success of our private-client group and trust businesses," said Andrew Cecere, the vice chairman of U.S. Bancorp Asset Management's private-client group, trust, and asset management businesses.
He also said the company's retail brokerage arm, U.S. Bancorp Investments Inc., should add 400 brokers this year, bringing it to 1,800 by yearend.
U.S. Bancorp bought Piper five years ago for $730 million. It fared better than some other investment banking acquisitions by large commercial banks. Last year it generated $737 million of revenue but less than 1% of the parent's total revenues. Piper's assets accounted for only about 10% of U.S. Bancorp's asset management business, according to a U.S. Bancorp spokesman.
Thomas S. Schreier Jr., U.S. Bancorp Asset Management's chief executive officer, said the unit will continue to work with Piper. His sales staff has strong personal relationships with people at Piper, he said, and the asset management unit will look for every opportunity to sell its products.
"We in asset management supply our products and services through many of the bank's channels," Mr. Schreier said. "Asset management is central to the definition of this bank. The way we view Piper is that they are an important distribution partner. We want to maintain an arm's-length market relationship."
Analysts said U.S. Bancorp is not unique in this. Banking companies such as FleetBoston Financial Corp. have unwound brokerage relationships but maintained their asset management capabilities, if they were performing well.
U.S. Bancorp's asset management arm has been steady despite the last three years' difficult market conditions. When U.S. Bancorp Asset Management was created in the merger of First American Asset Management, U.S. Bancorp's asset management business, with Firstar Investment Research and Management Co. in May 2001, it had $113 billion of assets under management. It had about $113.4 billion at the end of last year and $115.5 billion on Jan. 31.
Despite its nearly flat performance the past two years, U.S. Bancorp Asset Management has gained market share; it was the 42nd-largest asset management company in 2001 but today is 37th-largest, according to an industry magazine, Pensions & Investments.
Rus Prince, a Shelton, Conn., analyst, said U.S. Bancorp could remain a strong asset management player with its approach.
"Piper was brokerage, investment banking, and to a lesser extent asset management. Losing their presence doesn't negate U.S. Bancorp's focus on asset management," Mr. Prince said. "U.S. Bancorp Asset Management can be more agile now. It is not encumbered by Piper's brokerage system or the trading desk. It can be a pure asset management firm."
Geoffrey Bobroff, an East Greenwich, R.I., analyst, said asset management provides U.S. Bancorp with a crucial block of assets and that isn't about to change, even though the separation from Piper does have some risks.
"U.S. Bancorp is a significant player in the overall world of asset management," he said. "They don't need [Piper] to maintain that. Over time, some of these assets may ultimately follow the Piper salesman."
Mr. Schreier said U.S. Bancorp Asset Management has invested to achieve growth.
In the past six months it has hired executives to run two business lines. Jose "Tony" Rodriguez, a former executive of Credit Suisse Asset Management in New York, was selected to run the U.S. Bancorp unit's fixed-income department. David Chalupnik, a former executive at Duff & Phelps Investment Management Co. in Chicago, was brought on board to handle investment process and performance in the equity investment group.
Mr. Schreier said U.S. Bancorp Asset Management is also examining new products. It has opened an offshore money market fund for its corporate trust investors and plans to expand alternative investments, real estate offerings, and stable value products.
The subsidiary also needs to explore distribution opportunities, he said. "There are a lot of fund companies that we can partner with."
