Five banks reported $426.1 billion in new domestic master custody and master trust tax-exempt business - more than four times the $52.6 billion in new business gains in those areas of 34 other major banks surveyed - as clients continue their shift of assets toward a few big banks.
The banks leading in new business for master trust and master custody assets for the 12 months ended June 30 are: State Street Bank & Trust Co., Boston; Chase Manhattan Bank, New York; Bank of New York, New York; Mellon Trust, Pittsburgh; and Bank of America, San Francisco.
Some of State Street's new customers include BellSouth Corp., which has $18 billion in tax-exempt assets; the $23 billion University of California Regents fund and the $18 billion Maryland State Retirement and Pension Systems. Chase Manhattan picked up business from the $400 million 401(k) plan of Ingersoll Rand Co. and the New York State Lottery.
Despite the giant increases in new business for these banks, several others reported no new domestic tax-exempt master custody or master trust business.
The Pensions & Investments annual survey revealed some startling bank numbers in the domestic master custody tax-exempt area.
The same five big banks reported $312.5 billion in new U.S. master custody tax-exempt assets, more than 12 times the total of $25.5 billion that the remaining 34 banks surveyed reported as gains in those assets.
The gains for the big banks shows that tax-exempt institutions are continuing to target their assets to fewer custody banks, according to a number of bank executives.
In the domestic tax-exempt master custody area, some banks only recently have been winning massive new business, the survey showed. Four of the five big banks - State Street Bank, Chase Manhattan, Bank of New York and Mellon - winning the most new master custody business had dramatic gains of $295.5 billion in new tax-exempt master custody assets compared to the $47.4 billion they reported adding over the previous 12 months.
Some bank executives said they suspect that the shift to big banks from regional master trust and custody banks has begun to intensify.
State Street reported a gain in new tax-exempt master custody business of $101 billion over what it made in the previous 12-month period.
Large gains in new master custody tax-exempt assets over gains made in the previous 12 months were also reported by Chase Manhattan, $77 billion; Mellon Trust, $36 billion; and Bank of New York, $35 billion.
The remaining banks that reported asset gains for the past two years recorded $26.6 billion less in new domestic master custody tax-exempt assets for the 12 months ended June 30. compared with the same period last year.
"It appears more and more that there are a half dozen key players in this business," said James Darr, an executive vice president at State Street Bank. "The investment in technology, in staff knowledge and in product offerings is tremendous to reach a critical mass" for master trust and custody banks, said Mr. Darr.
Total new tax-exempt business for master trust and master custody for the banks jumped sharply, with some bank executives saying the high numbers were partly the result of the shift from regional banks to first-tier banks.
In total, new business for tax-exempt master trust and master custody assets was $481 billion, a jump from $170 billion the previous 12 months. The amount of new tax-exempt master trust business reported was $142.7 billion, up from $67.6 billion the previous 12 months. The amount of new tax exempt master custody business was $338 billion, up from $102.3 billion the previous 12 months.
Commenting on the jump in new business activity recently, Paul Marengi, director of marketing at Mellon Trust, said: "I think what we are seeing is that your typical plan sponsor is looking at potential services he can get because he is seeing quantum leaps in capabilities. He or she wants better service to better support his investment process."
Mr. Marengi said he "sensed" that there has been tremendous activity in new master trust and custody business in recent months, but said, "It's the first I've heard of the quantified figures." He said he expects to see more changes.
Bank of New York also showed that it is jumbo player this year in gaining U.S. tax-exempt global custodian dollars, one of the most important areas in custodian banking today. Bank of New York reported in the most recent 12 months it gained $52.7 billion in U.S. tax exempt global custodian assets over the previous 12 months period.
Bank of New York's gains in tax-exempt global custodian assets during in the most recent 12 months pushed it to second place in the current ranking of banks holding tax-exempt global custody assets from North American banks. Bank of New York reported $59.1 billion in global custody assets, trailing only the $63.8 billion held by State Street Bank.
State Street Bank scored the third highest 12-month gain of tax-exempt global custody assets of $16.7 billion in year to year comparisons.
Other banks reporting major gains in tax-exempt global custody assets year to year are: Chase Manhattan Bank, which gained $15.5 billion; Bankers Trust, up $9.5 billion; Mellon Trust, up $8.4 billion; Barclays Bank, up $9.6 billion; and Bank of Boston, which gained $9.3 billion.
The current survey reported a total of $342 billion in tax-exempt global custody assets, a huge but expected increase over the previous 12-month period's $220 billion in tax exempt global custody assets.
In master trust assets, five banks - State Street, Chase Manhattan, Bank of New York, Mellon and Northern Trust, Chicago - racked up $119.5 billion in tax-exempt new business, more than five times the $23.4 billion of all other major banks surveyed.
The banks also were getting clients with larger assets because they has five times the assets with less than one-third of the new clients - 347 vs. 92.
However, Bankers Trust did receive sizable new business in the domestic master trust tax-exempt assets of $4.5 billion, and Montreal Trust of Canada gained slightly less with $4.2 billion in domestic master trust tax-exempt new business assets for the most recent 12 month period.
Referring to the major shifts in assets to big banks and the impact on trust and custody fees, Peter Derrenbacher, a vice president at Chase Manhattan said, "I think you are going to have a tier one and tier two, but those tier two players are always going to keep the tier one in check. There has been tremendous consolidation of banks, but there is still almost 11,000 banks, so there is a long way to go."
In total assets, the major banks surveyed reported a total of $3.4 trillion in master trust and master custody assets, up from $2.95 trillion the previous 12 months.
The survey reported a current $1.69 trillion in master trust assets, up from $1.44 trillion, and a current $1.66 trillion in master custody assets, up from $1.5 trillion the previous 12 months.