This year’s top 10 stories included a peek into AustralianSuper’s international equities build out in London, AMP’s move to slash employee benefits, and plenty of hard-hitting analysis of the issues that matter in institutional investment. But the real story is how readers helped shape all of that coverage.
Orbis’ Stuart Place is riding from Melbourne to the Moon and Back to fund a treatment for the “monster of a disease” that his youngest son was born with. The investment industry is rallying behind him.
HSBC talks re-open old NAB wound
Rumoured talks between NAB Asset Servicing (NAS) and HSBC have re-opened the possibility that Australia’s last homegrown custody business will finally close its doors.
The latest rumour circulating through Australia’s tight-knit asset servicing industry is that HSBC is pitching to negotiate the potential transfer of NAS’ 30 largest clients to its business, while NAS would place smaller clients with other custodians. HSBC recently recruited State Street custody veteran Sinclair Scholfield for an expected expansion of its master custody business in Australia, where State Street, J.P. Morgan, and Northern Trust have taken a leading position. It’s unclear whether other parties are involved at this time.
A critical question for any prospective sale is whether NAS will try to hold on to the lucrative cash and FX part of the business, which has been a sticking point in past attempted sales. The highest bid ever made for NAS was around $1.6 billion, from State Street – a bid that included the cash and FX business, which goes hand in glove with custody. As previous editor Greg Bright noted at the time, “no-one’s going to pay a lot of money for the core custody business without the value-add services.”
That abortive sales process, which was announced to the market in 2014, spooked some clients who took their business to another of the five major managers – JP Morgan, BNP Paribas, Northern Trust, State Street and Citi. The announcement also sparked a competitive bidding process where Northern Trust also did due diligence, with experts from its Chicago office coming Down Under to assist the team. When they and State Street pulled out, NAB ultimately opted to retain the business and invest in its future.
Following that unsettling period, NAB has tumbled from the largest provider of asset servicing to Australian clients to number five, according to the latest market share figures from the Australian Custodial Services Association. HSBC – which has not had a significant presence in master custody until very recently – is number seven.
NAB has also previously rebuffed offers from J.P. Morgan as far back as 2006, in a plan known by J.P. Morgan as “Project Mexico” (south of the border) which would result in NAS running J.P. Morgan’s own domestic custody business and the US bank taking over NAS’ global custody, then run by BNY Mellon. NAS has also turned down at least one other offer from State Street since.
One of the 30 large clients apparently on the table, Suncorp, is owned by NAS’ parent, and a client NAS essentially considers “in-house.” NAS’s biggest client, the former MLC – now part of IOOF – also still has strong ties to the bank. HSBC is understood to be looking to do a deal similar to that which Citi completed last year with Royal Bank of Canada (RBC) whereby it took over almost all of the former RBC asset servicing clients in Australia. Some of the larger RBC clients had a formal review and at least one of them, Perpetual, chose another provider.
If talks have progressed beyond the “high level” that sources say, NAS is playing its cards a lot closer to the chest this time. And while NAS has faced its share of challenges, it has continued to win new business, with 2019 bringing appointments from REI Super and RACV, which had both previously retained BNP Paribas as their custodian.
But as others have noted, there have been a lot more rumours about NAS being for sale than NAS sales, though their frequency suggests that when a sale is rumoured, one might as well pay attention.
Spokespeople for HSBC did not provide comment before deadline.
