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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.
… as BNP Paribas sets its sights on best, not biggest
David Braga
The market share charts in Australia’s quickly moving custody and securities servicing sector will be “interesting” over the next two years, according to the new head of BNP Paribas Securities Services in Australia, David Braga. But BNP, the third largest, is not aiming to be number one in assets. Rather, it wants to be the number one ‘brand’.
Braga joined BNP Paribas in May from JP Morgan, filling the spot vacated late last year by Peter Baker, who now runs Mercer Sentinel. Ian Perkins, the head of sales and marketing, elected to remain in that role after being acting chief executive for a period.
Notwithstanding the period of management uncertainty, BNP Paribas has had a very good past few months, picking up the prize scalp of UniSuper from NAB Asset Servicing, and re-signing several smaller clients such as Media Super.
In his first media interview since settling into the new role, Braga says that, globally, BNP Paribas wants to be the number one brand. “It’s more about who you are, your knowledge, thought leadership and the recognition we aspire to by providing quality service.” The firm is the fifth-largest custodian and largest non-US custodian in the world but a long way behind BNY Mellon, State Street and JP Morgan globally. In Australia, it has come from almost nowhere on the market share charts to be number three after NAB and JP Morgan over the past five years. Fourth-placed Northern Trust has been the most successful for new business in the past two years, most recently winning the prestigious Mercer trusts tender away from NAB.
Part of the reason for BNP Paribas’ recent success, Braga says, is its investment in technology, systems and people.
Asia Pacific is seen as the biggest potential growth area for the parent bank generally and securities servicing has been a beneficiary of its commitment. Australia, specifically, is one of seven countries singled out by the bank for substantial growth.
Braga says: “My intention is not to do anything particularly different. We aim to do well for our clients and to look after our people. Size is an interesting question. We don’t want to be the biggest globally. We want to be the best, with the best brand.”
Given the record level of custody tender activity among Australian super funds over the past and coming year, Braga admits the ‘charts’ will be interesting to watch. But it’s unlikely NAB, as the largest, is going to be unseated any time soon, especially with its mooted new deal with Citi.
What will be more interesting to watch is that, given the investment by most major players in various technologies, whether they will be more commonly differentiated by clients on their service and features, rather than price, in the future.
Braga believes that BNP Paribas’ capabilities in the “front of middle office” are unique. The middle office, requiring increasingly sophisticated reporting, appears to be the new battleground for custodians in their competitive space. This includes things such as dealing services, complementing traditional fund accounting and tax reporting.
BNP has put a lot of effort into its analytics and reporting, with an integrated workflow to assist construction of board reporting as an example. “Our risk analytics reporting is superb,” Braga claims.
The areas he wants to extend BNP’s next efforts into include private equity and real estate investments reporting. This needs “a bit of work”, he says. Historically, the needs have not been as great in those areas.
The other battleground for custodians generally is the growing retail space. Due to the growth of SMSFs and their increasing propensity to have direct investments rather than managed funds, coupled with the big super funds’ provision of member-directed investment options, the retail world represents a new field for all custodians.
BNP Paribas has partnered with OneVue as its retail provider. Competitors State Street (FNZ), JP Morgan (Linear) and NAB (MLC) have slightly different arrangements. Unlike the others, though, BNP Paribas’ biggest client, AMP, is also the biggest institution operating in the SMSF space. OneVue provides RE, retail registry and other services.
“Fund managers want to be able to buy a bundled service,” Braga says. He and his colleagues think a lot, too, about fintech and disruption, which is happening in the retail space, but institutional servicing is likely to be BNP Paribas’ main business in Australia for many years.
– Greg Bright
