After living for years with competition-inspired rumours that their relationship was rocky, chiefly because it was palpably short of commitment, ABN Amro and Mellon today confirmed that they had agreed to formalise their global custody marketing alliance by creating a 50:50 joint venture company. The two banks have chosen to create a new, separately capitalised financial services company, which will provide global custody and related services to clients around the world outside North America, where Mellon continues to reserve the territory for itself (in the United States) and CIBC Mellon (in Canada). The new entity will operate with a banking licence. Regulatory approval from the Central Bank of the Netherlands is expected to be a formality.
The ABN Amro-Mellon alliance dates back to November 1998, and was interpreted at the time as a defensive manoeuvre by two bit-part players, cemented only by the need of one for a new securities processing platform (ABN Amro) and the other for clients outside North America (Mellon). Indeed, Mellon will continue to supply the IT to the company, including any upgrades it manufactures for its North American operations. Unlike the CIBC Mellon deal, however, ABN Amro always refused to transfer its existing custodial clientele to a joint venture, so the two banks had to rely on a marketing alliance only. The Dutch bank was to retain its domestic business, but work with Mellon to find cross-border clients, but the main effect on ABN Amro was to kill the then-extant idea that it might be willing to compete with Citibank, HSB and others on the global scale. Its retreat since then from securities trading and asset management, notably from Asia, has made those global ambitions look even less realistic, so the decision to ally itself more closely with Mellon on the custody side is not a surprise.
The two banks say they had always planned to review their marketing alliance after three years, and formalise it in this way if the experience had proved positive. They say that they have doubled both clients and assets in custody since 1998 – to 111 clients with over Euros 250 billion in assets under custody in 26 markets – and so the decision to go the whole way (as it were) was a no-brainer. It will certainly reassure clients that both parties are serious, and ought therefore to make winning further business easier. Yet it will remain focused on global custody (as opposed to local custody, which ABN Amro will continue to provide in the Netherlands -an exclusion which made it easier for ABN Amro to agree to the deal) and the existing processing factories in Amsterdam, Breda and London will continue to operate as before.
The relatively slim contribution of ABN Amro to a global custody venture may not be reflected in the ownership structure, but the top job has gone to Nadine Chakar, the Mellon executive who has fronted it since the outset. She swaps the title of Managing Director for that of Chief Executive Officer of the new company, and will head a Managing Board. This will, in the European style, be overseen by a Supervisory Board consisting of four representatives from both ABN AMRO and Mellon. Indeed, the company, to be known as ABN AMRO Mellon Global Securities Services B.V., will be domiciled in The Netherlands but keep a branch in London. Overall, the company will employ approximately 300 people in both countries.
“ABN AMRO Mellon has been a huge success from day one,” says Jim Palermo, President of Mellon Global Securities Services. “Its unique combination of strengths has served clients extremely well for the past three years. The agreement to establish a legal entity will demonstrate our mutual commitment to our clients, employees and the custody business.” Senior Executive Vice President and Head of Global Transaction Services at ABN AMRO, Robert van Paridon, is equally effusive. “The decision to form this new company sends a clear signal to the market: both ABN AMRO and Mellon are fully committed to the custody industry, and we intend to become an even more successful player in the global custody marketplace,” he says. “The outstanding results we have already seen in the global custody surveys, coupled with the excellent service that our people deliver to clients, make ABN AMRO Mellon a force to be reckoned with.”
“In the past three years we have more than doubled our initial client base and assets under custody,” concludes Chakar. “The proven success of our technology and the excellence of our people mean that ABN AMRO Mellon is in an excellent position to grow and prosper.”