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NAS sale falls through (again)

Talks between NAB Asset Servicing and HSBC for the latter to take charge of the former’s 30 largest clients have allegedly faltered.

HSBC was 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. But the deal, first rumoured in March is off – for reasons currently unknown. However, NAS will still make an effort to simplify its business by pushing at least 30 of its smaller clients onto other custodians.

As to why the sale fell through, your guess will likely be as good as ours – though a sticking point in past attempted sales (of which there have been a great many) has been the lucrative cash and FX part of the business, which NAS has historically tried to keep. The highest bid ever made for NAS – which currently sits at fifth on the Australian Custodial Services Association table – was around $1.6 billion, from State Street. That bid included the cash and FX business, which goes hand in glove with custody. But nobody is going to pay a lot of money for the core custody business without the value-add services.

NAS has also previously rebuffed offers from J.P. Morgan as far back as 2003, 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.

HSBC recently recruited State Street veteran Sinclair Scholfield for an expected expansion of its Australian master custody business, and the NAS acquisition would have given it significant scale to compete in what other custodians are describing as a time of “chunky winners and losers”. Still, it’s not all bad news for HSBC; its appointment as global custodian to ETF Securities, announced earlier this week, will come as something of a consolation prize.

HSBC declined to comment. NAB did not provide comment before deadline.

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