Higher market values and increased mandates were cited by the largest publicly traded banks for the rise in assets under custody and in asset servicing revenues in the second quarter, according to their latest quarterly earnings statements.
The top two banks in terms of assets under custody and administration — Bank of New York Mellon Corp., with $28.5 trillion, and State Street Corp., with $28.4 trillion — retained their positions from the previous quarter. New York-based BNY Mellon was up 2% from the first quarter and 9% above the second quarter of 2013, while Boston-based State Street rose 3.4% from March 31 and jumped 10.3% from June 30, 2013.
BNY Mellon cited higher market values for the gains in both periods, while State Street attributed its second-quarter increase to $250 billion in new custody business.
J.P. Morgan Chase & Co., New York, reported $21.7 trillion in assets under custody at the end of the second quarter, up 2% from three months earlier and up 14% from June 30, 2013. Northern Trust Corp., Chicago, said its corporate and institutional assets under custody totaled $5.48 trillion as of June 30, up 5% from three months earlier and 21% from a year earlier.
For BNY Mellon, State Street and Northern Trust, the latest percentage gains in assets under custody were slightly better than the first quarter, when BNY Mellon’s AUC rose 1%, State Street edged up 0.2% and Northern Trust rose 3.2%. J.P. Morgan’s second-quarter increase was a percentage point below its 3% rise in the first quarter.
The banks’ second-quarter revenue from asset servicing saw percentage increases in the low single digits, with somewhat larger year-over-year gains, all attributed to new business and higher securities lending and cash management fees.
State Street had the highest revenue from its asset servicing business, at $1.29 billion for the three months ended June 30, up 4% from the first quarter and up 7.2% from the quarter ended June 30, 2013. J.P. Morgan Chase had securities services revenue of $1.1 billion, up 1% from the first quarter and 5% higher than the prior year; BNY Mellon reported fees of $1.02 billion, up 1.2% for the quarter and 3.4% from a year earlier; and Northern Trust had custody and fund administration fees totaling $261.1 million, up 3.6% from the first quarter and 11.4% from the second quarter 2013.
Citigroup Inc. no longer breaks out its assets under custody and asset servicing revenue in its quarterly statement, said Nina Das, spokeswoman. Citigroup reported AUC of $14.7 trillion in the first quarter.
In a note to clients issued July 27, Robert Lee, equity research analyst at Keefe, Bruyette & Woods in New York, warned that third-quarter results related to banks’ trust and custody businesses are expected to be reduced as a result of a seasonal slowdown “and as tailwinds of rising asset values potentially dissipate. Low rates, moderate investor engagement, and low FX volatility continued to be a drag.”
