Despite being a growing reservoir of funds under management, this critically important pool of capital is confronting mounting problems collating and disseminating key data in a timely manner.
The ratings house is pinning its growth strategy on a revamped methodology that increases the emphasis on governance to 25 per cent – a timely move considering APRA’s proposed reforms.
J.P. Morgan extends lead as custody rebounds
J.P. Morgan has increased its lead on the other major third-party asset servicing firms in Australia, with an 18.7 per cent jump in assets under custody to $973.2 billion in the six months to December last.
The latest figures from the Australian Custodial Services Association, compared with the six months to June, represent a strong rebound from the earlier period. They show an overall growth rate of 7.4 per cent to $4.03 trillion, compared with a 7.7 per cent decline in the six months to last June.
Rob Brown, ACSA’s chief executive, said the rebound was a result of the bounce in market valuations that occurred over the second half of 2020 on the back of improving market returns and ongoing client confidence in the custodians.
He said: “Looking behind the numbers, there has been continued operational adaption to pandemic impacts that have allowed the industry to remain resilient. As with the early lessons learned from the national lock-down, exception processing remains the weak link with some transaction types dependent on wet-ink signatures and physical documents – these transactions require new approaches to improve efficiency, contain risk and minimise the potential for disruption.
“Overall, the industry is highly automated, but a small proportion of asset types present challenges in normal times which are amplified through pandemic interruption. ACSA remains engaged with all parties in the service chain to improve efficiency.”
The period was particularly good for J.P. Morgan, which opened up its lead, but also good for second-placed Northern Trust (up 17.7 per cent) and third-placed Citi (up 8.2 per cent).
Nadia Schiavon, head of securities services in Australia and New Zealand for J.P. Morgan, said: “J.P. Morgan values its role as a trusted partner to our clients, and it is the strength of these relationships that ultimately supports our leading market position in Australia and New Zealand.”
Of the other majors, which also offer master custody services, State Street did best, with a 13.7 per cent increase, followed by newcomer HSBC (9.1 per cent). HSBC, the largest sub-custody provider in Australia for Australian assets (not included in these figures) made it known that it was entering the master custody market early last year, but it is unknown how far this ambition has advanced during the market volatility of 2020.
