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.
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|
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. 
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.Notes: