Spinoff Planned for Piper Jaffray

U.S. Bancorp on Wednesday became the latest big bank to exit the brokerage business, as the Minneapolis company said it would spin off its Piper Jaffray unit to shareholders.

The eighth-largest U.S. bank said Piper no longer fits with the parent company’s long-term growth plan. Like other brokerages, Piper has been hurt as the three-year bear market on Wall Street has sapped demand for stocks and for merger advice.

“We like businesses that are predictable, and the capital-markets business, by its very nature, is less predictable and more volatile,” said U.S. Bancorp Chief Executive Jerry Grundhofer.

He is jettisoning the securities business his older brother, John, bought in 1998 for $730 million -- before Jerry’s Firstar Corp. acquired John’s U.S. Bancorp and took its name in 2001. John retired as U.S. Bancorp chairman last year.

Piper’s profitability “overall doesn’t move the needle for our company,” Jerry Grundhofer said. The brokerage, which has about 120 offices and 2,900 employees, accounted for less than 1% of the bank’s total net income last year, he said.

U.S. Bancorp’s move follows FleetBoston Financial Corp.’s decision last year to shut down brokerage Robertson Stephens, which the bank bought in 1998 as the bull market raged.

A spinoff, which U.S. Bancorp said it expects to complete in the third quarter, would give the bank’s shareholders full ownership of the brokerage via a tax-free share distribution. The bank wouldn’t retain any equity stake.

Piper has never been a major player on Wall Street. It ranked 19th last year in stock underwriting revenue, the same position it held in 2000. Investment-banking revenue fell 20% to $207 million in 2002 from the year before.

Even so, Piper in December agreed to pay $32.5 million to settle allegations it misled customers with biased stock research during the market’s boom years, ending yearlong federal and state conflict-of-interest probes of a dozen big brokerages.

U.S. Bancorp’s shares eased 5 cents to $20.65 on the New York Stock Exchange on Wednesday.