State Street Corp. moved ahead of Bank of New York Mellon Corp. as the largest custody bank in terms of assets, with a slight increase in assets under custody and related revenue in the third quarter, while BNY Mellon, J.P. Morgan Chase & Co. and Northern Trust Corp. all saw slight decreases in both categories.
However, all four reported 12-month gains in both assets under custody and asset servicing revenue on the strength of higher equity markets and new business.
Boston-based State Street had assets under custody and administration of $28.5 billion in the quarter ended Sept. 30, up 0.2% for the quarter and 9.3% higher than a year earlier, the company reported Oct. 24. New business spurred the rise, the bank said in its quarterly earnings release.
In the second quarter, BNY Mellon had $28.5 trillion, and State Street, $28.4 trillion.
BNY Mellon, New York, in its Oct. 17 third-quarter earnings call, reported $28.3 trillion in assets under custody and administration as of Sept. 30, down 0.7% from three months earlier but up 3% from Sept. 30, 2013.
The 12-month increase was because of higher market values, but the quarterly decline was attributed to market losses, according to the transcript of an Oct. 17 conference call in which Thomas P. Gibbons, BNY Mellon vice chairman and chief financial officer, spoke to analysts. He said BNY Mellon had $115 billion in new custody business in the third quarter and the market value of securities on loan showed strong growth.
New York-based J.P. Morgan Chase, in its Oct. 14 earnings statement, reported $21.25 trillion in assets under custody, down 2% for the quarter but an 8% increase from the third quarter 2013.
Northern Trust, Chicago, which reported its quarterly earnings on Oct. 22, had $5.91 trillion in assets under custody in the latest quarter, down 2% from the second quarter but up 13% from Sept. 30 a year ago.
All four firms saw increases in revenue from asset servicing for the 12 months ended Sept. 30, although J.P. Morgan experienced a decline in the third quarter while BNY Mellon and Northern Trust had gains.
State Street reported asset servicing revenue of $1.3 billion in the three months ended Sept. 30, a 1.1% rise from the previous quarter and 7.5% above the quarter ended Sept. 30, 2013. The company in its earnings released said both increases were because of net new business and stronger global equity markets, although the quarterly rise was partially offset by the impact of the stronger U.S. dollar.
BNY Mellon's asset servicing revenue was $998 million for the quarter, up 1% from three months earlier and 6% higher than the third quarter of 2013.
The third quarter was a good example where we actually saw the fees rise faster than the assets under custody, Gerald L. Hassell, BNY Mellon chairman and CEO, said in the earnings call. So some of our other services, our "value-added services' like collateral and some of the other things, are starting to kick in ... And (I) can't promise it every quarter, but this is a good quarter where we actually are seeing the fee increase. And some of the pricing discipline we're putting in place around the transactions and clients that we do business with are starting to pay off.
J.P. Morgan Chase had third-quarter securities services revenue of $1.1 billion, down 5.2% for the quarter but up 8% from the year earlier. Marianne Lake, CFO at J.P. Morgan Chase, said in the company's Oct. 14 earnings call that the year-over-year increase was because of higher net interest income on increased deposits and higher fees and commissions.
Northern Trust saw $275 million in custody and fund administration revenue in the third quarter, up 5.4% from the previous quarter and 15% higher than the quarter ended Sept. 30, 2013. The company in its earnings statement attributed the 12-mionth increase to new business, strong equity markets and movements in foreign exchange rates. n