How Have The Custody Asset Portfolios For The World’s Largest Custody Banks Changed In Recent Quarters?

+4.15%
Upside
72.49
Market
75.50
Trefis
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State Street

The global custody banking industry shrunk in size over the last quarter of 2016 despite steady growth in corporate mandates inked by custody banks for the period. This is primarily because of the reduction in value of debt securities held by the banks following the Fed’s decision to hike rates by 25 basis points in early December.

The custody banking industry has seen steady inflows since 2010, as stricter regulatory requirements have forced financial institutions around the globe to outsource a bulk of their services to custodians. However, the total size of global custody assets was under pressure over Q3 2015 – Q1 2016 as weak global equity market conditions hurt asset valuations even as the banks continued to get additional mandates from new clients over this period. Negative exchange rate movements aggravated the situation – leading the asset base sharply lower in Q3 2015 from the high seen in Q2 2015. But with equity and debt market valuations improving steadily over subsequent quarters, total AUC/A reached record levels by the end of Q3 2016 before nudging lower in Q4 2016. Estimates for the market share of the largest custodians in terms of total custody assets can be found here.

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With the U.S. economy looking strong, the industry is expected to grow in the near future. However, with BlackRock recently announcing its decision to shift $1 trillion of its ETF assets from State Street to JPMorgan, State Street is expected to slip to the third position in this list by the end of this year.

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