Magazine article American Banker

Mellon Reveals a Plan: Nurture Niche Businesses

Magazine article American Banker

Mellon Reveals a Plan: Nurture Niche Businesses

Article excerpt

WHEN MELLON BANK Corp. announced two weeks ago that it was getting into the insurance premium financing business, it was exhibiting a new strategy: Use core strengths to develop niche businesses.

"We are rich in core funds at the moment, and, like many banks, trying to find ways to generate assets," said Martin G. McGuinn, the Mellon vice chairman who coordinated the insurance deal.

Mellon is paying $100 million to buy the premium-financing unit, Afco Credit Corp., from Continental Corp., a New York-based property and casualty insurer. Afco has $1.2 billion of assets, 500 employees, and 25 offices in the United States and Canada.

Deals like buying Afco are all in a day's work for Mr. McGuinn. The former Marine captain, who oversees strategic: planning and several operating divisions, said the Pittsburgh-\based bank will combine its funding' strength with its formidable processing capabilities to continue to develop new business lines.

A look at Mellon's balance sheet explains everything about the rationale behind buying Afco, Mr. McGuinn said in a recent interview. The bank's wholesale funding has dropped to 17% of assets from 41% over the past three years, even as its loan-to-deposit ratio fell to 81% from 85%.

Afco fits another of Mr. McGuinn's criteria: It is a business that can be regeared quickly for profit. Mellon expects to collapse Afco's nine data processing units to one or two by grafting them onto Mellon's computers. …

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