Global custodians thrive on scale, based on the strong fundamentals of growth in their client assets driving revenue. Data on assets under custody collected by globalcustody.net over the past two decades shows healthy trend growth for the industry as a whole.
Growth in assets under custody in the past decade has largely been organic, with the fastest-growing industry players winning more business (and losing fewer clients) than their rivals. It has been a quiet period in terms of wholesale acquisitions of competitors, with a peppering of M&A activity focused principally on expanding fund administration footprints and buying technology.
A marked change comes with the proposed acquisition by State Street of BBH Investor Services, the asset servicing and technology solutions division of Brown Brothers Harriman. If it goes through, it will be the biggest consolidation deal in more than a decade and will have State Street overtake BNY Mellon to take top spot in the global custody league table.
The 2010s saw State Street vying with BNY Mellon for the number one ranking, ending 2013, 2014 and 2017 within a whisker of its rival. But the closing years of the last decade saw BNY Mellon outpace State Street. Over the past two decades, the industry as a whole has experienced solid growth and there have been significant shifts in the market share of several players, as illustrated in this trend chart based on data collected by globalcustody.net
If the proposed Brown Brothers Harriman transaction goes ahead, could it be a precursor to a series of M&A deals in the global custody and asset servicing sector, such as occurred with a series of transactions in 2003, 2007 and 2010? Or could it turn out to be an isolated transaction and was State Street's drop in market share in the late 2010s a factor?
Ron O'Hanley, chairman and chief executive officer of State Street Corporation has said: "This combination with BBH Investor Services helps us consolidate our position as the industry innovator and leader. We are enhancing our leadership position across a range of services, augmenting our position in a number of key markets, growing relationships with many of the leading global asset managers and owners, and increasing our capabilities and scale. Additionally, BBH Investor Services brings us strong talent, including industry-leading service excellence and quality execution."
Going back to 2003, State Street notably achieved top ranking through its acquisition of the cross-border custody business of Deutsche Bank. This propelled the firm from third place to top spot – leapfrogging J.P. Morgan while jumping from a 20%+ lag to a 20%+ lead against The Bank of New York in becoming the first asset servicing firm to achieve the milestone of more than USD 10 billion in worldwide assets under custody. The proposed acquisition would lead to the firm joining BNY Mellon in surpassing USD 40 billion.
The number one place was held for some four years until State Street was pushed into the number two spot with the 2007 formation of BNY Mellon through the merger of The Bank of New York and Mellon Group. State Street acquired Investors Bank & Trust in the same year and Banca Intesa in 2010, a year which saw BNY Mellon acquiring BHF Asset Servicing and PNC’s Global Investment Servicing business.
At the end of 2020, Brown Brothers Harriman was pushed into tenth place in the league table of global custodians, following a quantum leap in the client assets of CACEIS. Nevertheless, throughout the past two decades, BBH – through organic growth – has achieved a proportionate rise in assets under custody which has come close to that of BNY Mellon and State Street. This accomplishment and the firm’s strengths noted above suggest it's a very good acquisition target – one which if successfully absorbed has great potential to deliver strong organic growth in the coming years.
Update October 2022: on State Street's third-quarter earnings call, CEO Ron O'Hanley characterized the acquisition as "increasingly uncertain", adding to doubt that had plagued the proposed acquisition, includng a July 2022 announcement by State Street that it was looking to amend the transaction's terms, whether as to purchase price or the combined entity's structure or operating model.
Update December 2022: State Street has called off the tie-up with Brown Brothers Hariman, guiding that proposed modifications made the deal "increasingly complex" and added risk that would limit the anticipated benefits. "The decision not to proceed with this transaction was not taken lightly and is in no way a reflection of the quality of the BBH franchise," O’Hanley said. "We remain confident in the organic growth trajectory of our business".
This site, like many others, uses small files called cookies to customize your experience. Cookies appear to be blocked on this browser. Please consider allowing cookies so that you can enjoy more content across fundservices.net.
How do I enable cookies in my browser?
Internet Explorer
1. Click the Tools button (or press ALT and T on the keyboard), and then click Internet Options.
2. Click the Privacy tab
3. Move the slider away from 'Block all cookies' to a setting you're comfortable with.
Firefox
1. At the top of the Firefox window, click on the Tools menu and select Options...
2. Select the Privacy panel.
3. Set Firefox will: to Use custom settings for history.
4. Make sure Accept cookies from sites is selected.
Safari Browser
1. Click Safari icon in Menu Bar
2. Click Preferences (gear icon)
3. Click Security icon
4. Accept cookies: select Radio button "only from sites I visit"
Chrome
1. Click the menu icon to the right of the address bar (looks like 3 lines)
2. Click Settings
3. Click the "Show advanced settings" tab at the bottom
4. Click the "Content settings..." button in the Privacy section
5. At the top under Cookies make sure it is set to "Allow local data to be set (recommended)"
Opera
1. Click the red O button in the upper left hand corner
2. Select Settings -> Preferences
3. Select the Advanced Tab
4. Select Cookies in the list on the left side
5. Set it to "Accept cookies" or "Accept cookies only from the sites I visit"
6. Click OK
Global custodians thrive on scale, based on the strong fundamentals of growth in their client assets driving revenue. Data on assets under custody collected by globalcustody.net over the past two decades shows healthy trend growth for the industry as a whole.
Growth in assets under custody in the past decade has largely been organic, with the fastest-growing industry players winning more business (and losing fewer clients) than their rivals. It has been a quiet period in terms of wholesale acquisitions of competitors, with a peppering of M&A activity focused principally on expanding fund administration footprints and buying technology.
A marked change comes with the proposed acquisition by State Street of BBH Investor Services, the asset servicing and technology solutions division of Brown Brothers Harriman. If it goes through, it will be the biggest consolidation deal in more than a decade and will have State Street overtake BNY Mellon to take top spot in the global custody league table.
The 2010s saw State Street vying with BNY Mellon for the number one ranking, ending 2013, 2014 and 2017 within a whisker of its rival. But the closing years of the last decade saw BNY Mellon outpace State Street. Over the past two decades, the industry as a whole has experienced solid growth and there have been significant shifts in the market share of several players, as illustrated in this trend chart based on data collected by globalcustody.net
If the proposed Brown Brothers Harriman transaction goes ahead, could it be a precursor to a series of M&A deals in the global custody and asset servicing sector, such as occurred with a series of transactions in 2003, 2007 and 2010? Or could it turn out to be an isolated transaction and was State Street's drop in market share in the late 2010s a factor?
Ron O'Hanley, chairman and chief executive officer of State Street Corporation has said: "This combination with BBH Investor Services helps us consolidate our position as the industry innovator and leader. We are enhancing our leadership position across a range of services, augmenting our position in a number of key markets, growing relationships with many of the leading global asset managers and owners, and increasing our capabilities and scale. Additionally, BBH Investor Services brings us strong talent, including industry-leading service excellence and quality execution."
Going back to 2003, State Street notably achieved top ranking through its acquisition of the cross-border custody business of Deutsche Bank. This propelled the firm from third place to top spot – leapfrogging J.P. Morgan while jumping from a 20%+ lag to a 20%+ lead against The Bank of New York in becoming the first asset servicing firm to achieve the milestone of more than USD 10 billion in worldwide assets under custody. The proposed acquisition would lead to the firm joining BNY Mellon in surpassing USD 40 billion.
The number one place was held for some four years until State Street was pushed into the number two spot with the 2007 formation of BNY Mellon through the merger of The Bank of New York and Mellon Group. State Street acquired Investors Bank & Trust in the same year and Banca Intesa in 2010, a year which saw BNY Mellon acquiring BHF Asset Servicing and PNC’s Global Investment Servicing business.
At the end of 2020, Brown Brothers Harriman was pushed into tenth place in the league table of global custodians, following a quantum leap in the client assets of CACEIS. Nevertheless, throughout the past two decades, BBH – through organic growth – has achieved a proportionate rise in assets under custody which has come close to that of BNY Mellon and State Street. This accomplishment and the firm’s strengths noted above suggest it's a very good acquisition target – one which if successfully absorbed has great potential to deliver strong organic growth in the coming years.
Update October 2022: on State Street's third-quarter earnings call, CEO Ron O'Hanley characterized the acquisition as "increasingly uncertain", adding to doubt that had plagued the proposed acquisition, includng a July 2022 announcement by State Street that it was looking to amend the transaction's terms, whether as to purchase price or the combined entity's structure or operating model.
Update December 2022: State Street has called off the tie-up with Brown Brothers Hariman, guiding that proposed modifications made the deal "increasingly complex" and added risk that would limit the anticipated benefits. "The decision not to proceed with this transaction was not taken lightly and is in no way a reflection of the quality of the BBH franchise," O’Hanley said. "We remain confident in the organic growth trajectory of our business".
