JPMORGAN CHASE sealed its ranking as the world’s third largest financial services group at the weekend with a deal to acquire Bank of New York’s $2 billion-plus branch network.

The deal, announced on Saturday night after just a month of talks, will not involve an outright purchase by JPMorgan, however. Rather, the banking group will swap its corporate trust business for Bank of New York’s huge branch network and will make a cash payment of $150 million (£86 million) to make up the difference in value.

JPMorgan’s corporate trust arm is valued at $2.15 billion, while the Bank of New York retail arm is worth $2.3 billion. Bank of New York may also be paid a further $50 million as part of the deal, depending on the performance of some of the branches in the coming years.

Both companies anticipate that the deal will be complete by the end of the third quarter of the year, depending on regulatory approval.

JPMorgan has been quietly building up its retail branch network in America for the past two years in the belief that customers still prefer to visit a local bank once in a while, even if they conduct most of their business online. “In addition to being a great strategic fit, the deal is compelling financially,” Jamie Dimon, JPMorgan’s chief executive, said.

JPMorgan will gain 338 branches and deposits of about $15 billion under the deal. The group will also gain about 100,000 small business accounts in the New York and New Jersey areas. Analysts believe, however, that the network, which will change its name to JPMorgan Chase by 2007, will need substantial investment.

Bank of New York, America’s oldest bank, opened in 1784 with the help of founding father Alexander Hamilton, has one of the most lucrative branch networks in the US. The company will keep its private banking business, which manages $60 billion in assets for high-net-worth clients.

The New York-based company is one of the leading corporate trust firms in the United States, looking after clients who hold some $3 trillion of debt. Corporate trust providers are appointed by corporations, municipal governments and other entities that issue debt to perform a variety of duties, including servicing and maintaining the debt issue and processing principal and interest payments for investors.

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