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.
NAB Asset Servicing suffers another blow
Matt Brown
Matt Brown, the chief executive of NAB Asset Servicing, resigned and left the job just before Christmas, after less than a year. The news has rocked the custody sector, as Australia’s largest – and only Australian owned – firm struggles in a new landscape for securities servicing.
Brown, who joined NAB Asset Servicing (NAS) in March last year after several years in senior roles overseas and in Australia at Citi and, before that, State Street, was the first professional custodian to be recruited to run the NAS business. He lifted morale after several years of client losses, and executed a landmark deal which replaced BNY Mellon as NAS’s global custodian of more than 20 years with Citi.
NAB’s handling of NAS in recent years could well become a text book case in how a bank should not manage a business – any business. The main problem is that, as the last Australian bank to have a custody operation – albeit the largest such operation in the country, with a big collection of blue-chip super fund clients – NAB has tried more than once to cash in its chips without success.
It has had discussions with JP Morgan over the years to either buy the US firm’s Australian domestic custody business or sell its own to JP Morgan and it has said ‘no’ to at least two offers from State Street to sell its whole master custody operation. Both deals would have involved either of the US banks retaining NAB’s global business.
The most recent attempt, which inexplicably was announced to the ASX, was in 2014 with a formal process to assess all options to do with custody. Once again, it is believed, State Street came up with a reasonable offer, rumoured to be around the $1 billion mark, but this was rebuffed. The problem is the bank wants to retain the lucrative cash and FX business which goes hand in glove with custody. So does everyone. And no-one’s going to pay a lot of money for the core custody business without the value-add services.
The net result was that clients became understandably nervous and several of the biggest went to tender, ultimately appointing another of the five majors (JP Morgan, BNP Paribas, Northern Trust, State Street and Citi). Then, NAB, with new senior management overseeing NAS, announced it would retain the business and invest in its future.
Matt Brown was recruited in March last year to fill the spot vacated by Christine Bartlett, a bank executive who had a successful background in technology. She decided to retire from full-time work to concentrate on several non-executive directorships.
Brown was the first new general manager of NAS (executive general manager, products and markets, NAB Asset Servicing) to have strong credentials in custody. He had had several senior positions at Citi over the 10 years to 2014, including overseeing securities services in the Middle East, Hong Kong and Japan. Prior to that he was a vice president at State Street in Boston head office, Tokyo and Sydney. He started his custody career with State Street in his native New Zealand.
Brown declined to comment last week. Various observers suggested his resignation reflected ongoing frustrations in dealing with the bank. Significantly, the available investment funding for technological development by NAS is understood to have been halved several months ago and was under constant pressure.
A recent incident at the micro level is said to have been bank opposition to the proposed outsourcing of NAS’s retail unit registry, which was being opposed by the Financial Services Union.
The fundamental problem for NAS is that big super funds now believe that they need a unified global platform for their increasingly global investments, rather than a bolt-on Australia-plus-the-world offering.
For what it’s worth, my view is that NAB should be sensible about NAS’s future and sell the remaining business to Citi, which has demonstrated a commitment to this part of the market.
Antony Cahill, the bank group executive who oversees NAS, along with Ubank, nabtrade and treasury, is no doubt considering his options over the Christmas/New Year break.
– Greg Bright
