In a bold move to expand its private banking, Eastern Bank is set to acquire Cambridge Trust in a hefty $528 million deal, while simultaneously exiting the insurance sector through the sale of its insurance business to brokerage behemoth Arthur J. Gallagher & Co for $510 million. The Boston-based bank’s holding company, Eastern Bankshares, announced the twin deals on Tuesday, signifying a strategic shift in its business model, pivoting away from insurance towards strengthening its wealth management services.
The acquisitions, while coincidental, are highly complementary according to Eastern’s Chief Executive, Bob Rivers, as they allow the bank to exit one sizeable fee business and bolster its presence in another. The deal will effectively double Eastern’s presence in wealth management and private banking, transforming it into the largest bank-owned investment adviser in Massachusetts. The acquisition is also expected to boost Eastern’s venture-backed startups portfolio, a segment the bank has been eager to tap into.
Eastern Bank Acquires Cambridge Trust for $528 Million and Sells Insurance Business for $510 Million
Eastern Bank has announced a significant expansion in its private banking sector with a $528 million deal to acquire Cambridge Trust. This move aligns with the bank selling its insurance business to Arthur J. Gallagher & Co for $510 million.
A Strategic Shift
The Boston-based bank’s holding company, Eastern Bankshares, made the official announcement after the stock markets closed on Tuesday. These transactions indicate Eastern Bank’s strategic shift from the insurance sector to strengthening its wealth management operations.
Eastern’s CEO, Bob Rivers, stated that while the deals were coincidental, they were highly complementary, marking a significant change as the bank exits one large fee business to build its presence in another. The insurance business being sold, Eastern Insurance Group, was one of the largest bank-owned insurance businesses in the country.
Doubling Down on Wealth Management
Eastern Bank’s acquisition of Cambridge Trust, although one-fifth the size of Eastern, will more than double Eastern’s presence in the wealth management space. Cambridge’s wealth management business is almost 40% larger than Eastern’s, making Eastern the largest bank-owned investment adviser in Massachusetts post-acquisition.
Cambridge Trust also brings a strong private banking operation and a team catering to venture-backed startups to Eastern. Eastern plans to retain the Cambridge Trust brand name for its investment management and private banking operations.
Creating a Stronger Entity
Cambridge CEO, Denis Sheahan, expressed optimism about the merger, stating that the companies together will be stronger than they were separately. The merger will also boost the banks’ lending relationships with the Massachusetts Housing Partnership, a quasi-public agency that finances affordable housing projects. The banks’ combined contribution is expected to increase from $175 million to $225 million annually post-merger.
Leadership Changes and Future Plans
Upon completion of the deal, expected in early 2023, the combined bank will have $27 billion in assets, further solidifying Eastern’s position as Greater Boston’s fourth-largest bank. Denis Sheahan will take over as Eastern’s new CEO, with Bob Rivers transitioning to Executive Chairman and current Eastern president Quincy Miller assuming the role of COO.
While the merger may lead to some branch closures due to overlap, displaced branch employees will be offered jobs in the remaining branches. However, some job losses in corporate office roles are anticipated.
This deal signifies a significant pivot for Eastern Bank toward the wealth management sector. By acquiring Cambridge Trust, Eastern Bank is doubling down on this area, aiming to leverage Cambridge’s larger wealth management business and robust private banking operation. It will be interesting to see how this shift impacts Eastern’s overall strategy and business performance in the coming years.