Two of the U.S.’s largest custodian banks, BNY Mellon and State Street, both reported increased revenues during the fourth quarter of 2014, as increased custody mandates and stronger markets boosted earnings.
Fees from State Street’s asset servicing business, State Street Global Services, increased 5.6% to $1.3 billion due to new business and stronger U.S. equity markets, according to the bank. Assets under custody and administration rose 2.8% to $28.2 trillion.
In addition, securities finance revenue jumped 39.5% in the quarter to $106 million, primarily due to higher volumes and new business in enhanced custody.
“Despite the low interest rate environment in 2014, our revenue experienced solid growth compared to 2013 from both asset servicing and asset management,” says Joseph Hooley, chairman and CEO, State Street.
“As a result of this we achieved new asset servicing commitments in 2014 of $1.1 trillion, including approximately $400 billion in the fourth quarter of 2014, and 2014 net new assets to be managed of approximately $28 billion, including approximately $7 billion in the fourth quarter of 2014.”
However, expenses were up from $1.85 billion to $1.99 billion, due to increased costs associated with its withdrawal from derivatives clearing and execution activities. As a result, net revenue decreased 1.5$ to $587 million.
Meanwhile BNY Mellon reported estimated new assets under custody and administration (AuC/A) wins in asset services of $130 billion in the fourth quarter of 2014. Asset servicing fees were $1 billion, an increase of 4% year-over-year.
AuC/A of $28.5 trillion, increased 3% over the quarter, primarily reflecting higher market values and net new business, partially offset by the unfavourable impact of a stronger U.S. dollar
The year-over-year increase primarily reflects organic growth and net new business, partially offset by the unfavorable impact of a stronger U.S. dollar, says BNY Mellon.
Within investment services over the last quarter, BNY Mellon reported a 31% increase in foreign exchange business driven by higher volumes and volatility, partially offset by lower depositary receipts related activity. Securities lending business increased 19% driven by volume.
In 2014, investment services fees increased 2% reflecting higher asset servicing and clearing services fees, partially offset by lower depositary receipts and corporate trust fees.
BNY Mellon reported fourth quarter net income of $807 million, compared to $513 million in the fourth quarter of 2013 and $1.07 billion in the third quarter of 2014.
Overall, it achieve total revenue of $3.7 billion, a 2% increase.
“We generated positive operating leverage for the full year – even while absorbing elevated regulatory compliance costs and investing in our business to enhance future growth. Gerald Hassell, chairman and chief executive officer. BNY Mellon’s earnings were adjusted for the gains on the sales of its investment in Wing Hang Bank and the One Wall Street building in New York.
Custody Mandates Boost Global Custodians’ Q4 Earnings
Two of the U.S.’s largest custodian banks, BNY Mellon and State Street, both reported increased revenues during the fourth quarter of 2014, as increased custody mandates and stronger markets boosted earnings.