by Greg Bright
Suncorp, which announced last year that it would be transitioning its $25 billion securities services contract from NAB Asset Servicing to BNP Paribas Securities Services, has suspended the process. It is one of the strangest events to happen in the custody sector in recent memory.
Suncorp did all the right things. Its then-head of operations, Caroline Murall, a former senior executive of BNP Paribas, employed the services of Mercer Sentinel to run the tender in the middle of last year. Mercer Sentinel is generally regarded as one of the go-to consulting firms for securities servicing. However, Mercer was not asked to actually make a definitive recommendation. Suncorp took the decision itself. And then Murall resigned from Suncorp to join Macquarie Bank last December. Now, Suncorp has stopped the transition. Meantime, NAB is continuing with its business-as-usual servicing, apparently without a renewed contract.
None of the key people at the interested parties involved wanted to speak about the matter when contacted last week. They each expressed their bemusement, though. NAB, for instance, which was given notice last year, has not yet been formally reappointed, even though it is continuing to do its job.
Suncorp is now doing due diligence, once again, on NAB. This may become a lesson for the industry about transitioning custody and other securities services contracts. It’s not as easy as you think it should be. Here’s our story from last year.
The reason, or reasons, for the shift in sympathies from BNP Paribas are unclear. One theory has to do with BNP’s insistence on using its global system, whereas Suncorp is an Australian company with a large number of fund products attracting different taxes. The problem is to do with replacing the bespoke reporting currently being done by NAB. One suspects that NAB was not so unhappy to ‘lose’ Suncorp last year and may not be so happy to ‘win’ it back this year, if that is what eventuates. When last year’s tender was announced, for instance, both JP Morgan and State Street declined to make a bid, which indicates what they thought of the task at hand.
Both BNP Paribas and NAB have had a good last couple of years. Both firms have won significant competitive tenders. There is no suggestion that either provider has come up short on its services.
NAB has had a long history with Suncorp, starting with its New Zealand business. Peter Hele, NAB’s Australia and New Zealand head of business development for asset servicing, and his team, secured Suncorp’s New Zealand business in 2012 along with its NZ strategic partner, MMC. This then led to Suncorp Australia appointing NAB to provide custody services for its global equities portfolios in 2013 – about $1.2 billion in assets.
Then, in 2014, Suncorp went to market with the help of M&A consultants at PwC, looking for interested parties to lift out its backoffice and custody functions undertaken internally, along with critical staff. NAB Asset Servicing was happy to oblige and lifted out two internal systems and a core of the staff, along with the $25 billion in assets.