National Australia Bank (NAB) Asset Servicing has announced that it has appointed Citi as its global custodian, severing a 20-year relationship with Bank of New York Mellon.
NAB Asset Servicing chose Citi because it would allow NAB to deliver “a unique service offering by combining the bank’s local expertise with Citi’s superior global network,” says Antony Cahill, NAB group executive product and markets. Cahill cited Citi’s access to more than 60 markets around the world, saying this will provide NAB clients with “richer market information and easier access to subject matter experts for complex issues.”
“Citi’s operating model and significant local presence will allow NAB Asset Servicing to provide even better solutions for our clients,” says Matt Brown, NAB executive general manager asset servicing. “We are committed to delivering the best service in the market and look forward to working with our clients over the coming months to allow them to benefit from Citi’s extensive market coverage and expertise.”
NAB Asset Servicing is Australia’s largest single custodian, with AU$702 billion in assets under custody, according to the latest figures from industry group the Australian Custodial Services Association (ACSA). Citigroup has AU$318.39 in domestic Australian custody. The agreement will not impact on Citi’s domestic Australian clients, says Martin Carpenter, managing director, head of securities services Citi Australia and New Zealand.
“It’s a really exciting new growth opportunity for our business in Australia,” Carpenter tells Global Custodian. “It’s a validation to our commitment to the custody business and the funds industry down here. The other important thing is that it’s a good news story for all of our clients in Australia because this helps create more investment, more local resourcing to support the Australian business.”
Citi and NAB Asset Servicing have been in discussions for a number of months. Citi’s ability to provide access to more markets was part of the appeal, Carpenter says.
“The distinction between Citi and the other participants in this process is our on-the-ground custody capability in those 60 markets,” Carpenter says. “At a time when I think that Australian investors are looking to invest more offshore and a lot more investment activity overseas, having a global custodian who can better support that activity, I think that was a big factor.”
The transition of global custody service provision from BNY Mellon to Citi should take a few months, Carpenter says.
“It is a fairly vanilla type of transition, because it is core custody,” he says. “But it is large, and it something you want to plan very carefully. So we’re looking at anywhere from a three to five month transition.”
The announcement by NAB Asset Services comes after a period of uncertainty and transition regarding its existence. In November 2014, NAB confirmed that it would retain its existing relationship with BNY Mellon and invest in technology, after announcing in June of that year to the ASX that it was “undertaking discussions” with global custody providers “regarding potential options for the future operations of the NAB Asset Servicing” custody business, according to a statement at the time.
NAB Asset Servicing prior strategic alliance with BNY Mellon saw BNY Mellon provide global custody and other services for NAB, while NAB provided domestic custody services for BNY Mellon. The two banks re-signed their agreement in June 2013. NAB Asset Servicing and BNY Mellon also went through a process to establish a joint venture vehicle, which failed in late 2010/early 2011.
The agreement between NAB Asset Servicing and Citi strengthens NAB’s offering to Australian custody clients, says Séamus Ó Concheanainn, managing director, Foxrock Consulting.
“It certainly seems to give [NAB Asset Servicing] a lot more market coverage globally, which will bring down the cost of global custody,” Ó Concheanainn says. “It places NAB Asset Servicing very well, and shows that NAB Asset Servicing is in it for real. It’s seen as one step of a broader strategy that Matt Brown is implementing. Coming off the back of this, we should see stronger strategic positions on technology and service offerings from NAS.”
The agreement between NAB Asset Servicing and Citi could see NAB Asset Servicing win mandates in the asset manager space and even claw back some of the business it had lost over the past few year, Ó Concheanainn says.
“It will position NAB Asset Servicing,” he says. “There may be some mandate that get lost because that’s the nature of the beast, but it places NAS very well for asset manager based mandates, rather than [just] asset owner mandates. We could see some of those bigger asset manager mandates come into place for NAB Asset Servicing, as part of a broader strategy.”
NAB also has partnership arrangements with Deutsche Securities Australia Limited to provide transition management services; Brown Brothers Harriman to provide new capabilities, potentially including technology services; and an agreement with tax quant provider GBST for pre-trade tax optimisation.
NAB Asset Servicing Selects Citi As Global Custodian
National Australia Bank (NAB) Asset Servicing has announced that it has appointed Citi as its global custodian, severing a 20-year relationship with Bank of New York Mellon.