Q3 2013 U.S. Banking Review: Assets Under Custody

by Trefis Team
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BNY Mellon
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The third quarter of the year wasn’t a great period for investment banks around the globe, especially because of the marked decline in activity in the debt trading market in anticipation of the Fed’s tapering plan. However, things were actually quite good for custody banks, as a bulk of the debt and equity securities managed by them saw an improvement in valuation from favorable market movements. Because of this, the total assets under custody for each of the largest custody banks received a boost in Q3, even though there really wasn’t a strong inflow of net new assets over the period.

In this article, we focus on the size of assets under custody for the world’s four largest custody banks - Bank of New York Mellon (NYSE:BK), JPMorgan Chase (NYSE:JPM), State Street (NYSE:STT) and Citigroup (NYSE:C) – and how it has changed over the last two years. These custody banking giants are all based in the U.S. and together have a share of at least 60% of the global custody industry.

See the full Trefis analysis for BNY MellonJPMorganState StreetCitigroup

The table below summarizes the size of assets under custody for each of the four biggest custody banks at the end of each quarter since the first quarter of 2011. The data has been compiled using figures reported by the individual banks as part of their quarterly announcements.

(in $ bil) Q1’11 Q2’11 Q3’11 Q4’11 Q1’12 Q2’12 Q3’12 Q4’12 Q1’13 Q2’13 Q3’13
BNY Mellon 21,000 21,700 21,200 21,000 22,100 21,600 22,800 22,700 22,700 22,600 23,800
JPMorgan 16,619 16,945 16,250 16,870 17,868 17,665 18,219 18,835 19,294 18,929 19,736
State Street 16,692 16,789 15,714 15,863 16,912 16,387 17,287 17,806 18,588 18,881 19,206
Citigroup 13,000 13,500 12,500 12,000 12,500 12,200 12,800 13,200 13,500 13,400 13,900

It should be noted that unlike the other three banks, BNY Mellon adds up the total size of its assets under custody (AUC) and assets under administration (AUA), to report a single “assets under custody and administration” (AUC/A) figure each quarter. To facilitate a side-by-side comparison, we have assumed that BNY Mellon’s AUA value remained at the current figure of $3.6 trillion over the last two years, and deducted this number from the reported figure to arrive at the bank’s AUC. [1]

Getting to the figures themselves, the jump in the asset base in Q3 is clear, with the combined AUC for these four banks put together increasing by 3.7% from the end of Q2 to the end of Q3. That is a considerable change, given that the the average assets overseen by these banks is more than $19 trillion.

BNY Mellon continues to maintain a strong grip on the industry, extending its lead over second-ranked JPMorgan to $4.1 trillion at the end of the third quarter, compared to $3.4 trillion at the end of the first. However, it BNY Mellon’s diversified geographical presence also makes its asset base more sensitive to currency fluctuations – something that worked in the bank’s favor this time around. None of the custody banks detail the proportion of the growth in AUC figures that come from actual inflows, currency movements and market value changes.

State Street, however, provides a break down of the total AUC by products and we believe this information can be used to generalize quarterly changes across the industry. State Street’s data shows a marked improvement in assets from mutual funds as well as collective funds in Q3 after two lukewarm quarters earlier this year. Assets in pension products largely remained unchanged, whereas insurance and other products actually saw a reduction in assets for the period.

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Notes:
  1. BNY Mellon Key Facts, Global Custody Website []
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