CUSTODY

JP Morgan tipped to overtake State Street in custody rankings

Strong custody inflow expectations for JP Morgan could push it ahead of its rival.

By Joe Parsons joe.parsons@strategic-i.com May 11, 2017 10:03 AM GMT

JP Morgan could overtake State Street as the world’s second largest custodian bank this year, according to estimates from statistics analytics firms Trefis.

State Street reported assets under custody (AUC) of $22.5 trillion in the first quarter of the year, and a growth rate of over 8%. Meanwhile JP Morgan recorded $21.4 trillion of AUC, an increase of around 5.5%.

However, data gathered from Trefis predicts increased custody flows to JP Morgan, predominantly from the $1.3 trillion of BlackRock’s assets – mostly common trust funds - that will begin to migrate throughout the rest of the year. This could see JP Morgan leapfrog over the Boston-based custodian.

Daniel Pinto, CEO of JP Morgan’s corporate and investment bank, outlined in its 2016 annual report that it is planning to increase spending in technology for the custody and fund services (CFS) business by 30% in order to facilitate increased flows.

“Using technology-driven solutions, CFS is enhancing its stability and enabling the business to grow in a more scalable way,” said Pinto.

AUC at the top four global custodians increased 7% year-on-year to $86.9 trillion, representing almost half of all AUC globally.

While JP Morgan could see its status increase in the custody rankings, the actual custody banking business is responsible for less than 5% of its total share value according to Trefis.