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U.S. Bancorp

(USB) - Get U.S. Bancorp Report

is planning to ditch its

Piper Jaffray

investment banking division.

The Minneapolis-based bank announced after the market's close on Wednesday that it anticipates spinning off Piper Jaffray by the third quarter of this year. Piper Jaffray would then become its own publicly traded company.

U.S. Bancorp investors, under the spinoff plan, would receive shares of the new company in a tax-free distribution.

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The bank's stock closed down 5 cents on Wednesday at $20.65.

U.S. Bancorp bought Piper Jaffray in 1998 for $730 million. Following the spinoff, the bank said, it will no longer retain an equity stake in the investment bank.

During the bull market, many U.S. banks bought investment banks, latching on to investors' demand for hot stock offerings. But during the bear market many of those purchases no longer look so good.

Last year, for instance,

FleetBoston

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decided to shutter its Robertson Stephens investment bank.