US global custodian State Street will tighten its grip on the UK
pension fund market custody market
as result of Lloyds TSB’s precipitate exit from global custody. Lloyds
TSB Securities Services’ (LTSS) custody customers are recommended to
transfer to State Street as are the
unit trusts clients for their trusteeship arrangements.
According to State Street, LTSS is ranked one of the largest custodians of UK pension pension funds by value of assets. State Street vice chairman Ronald Logue, says that if “all the Lloyds’ pension clients came our way, it would significantly increase our presence in the UK market. We think we already are the dominant player in the pensions market in the UK.”
With assets under custody of over $200bn (e190bn), LTSS came in third place to Midland with over $980bn and RBS with around $500bn in assets, but it is the last of the significant UK-owned players to quit the arena.
About a third of the LTSS assets are reckoned to be non-domestic and less than 10% to be outside the European area. Altogether LTSS has 430 institutional clients in the UK and on the continent. Thirty are unit trust customers with over 250 trusts, for which trustee and administration services are provided. Pensions assets are around $50bn and unit trust assets $65bn.
The trustee administration is regarded by State Street as a key area of business growth. Logue says that the collective funds market globally is going to grow faster than the traditional pensions business.
The Lloyds TSB group’s proprietary business, for which State Street is the preferred provider for custody, trustee and administration services, has been a growing proportion of the business. Logue says: “We are confident we can win the Lloyds TSB customer and that will serve as testimony of our ability to service the third party customers as well.”
Referring to how the deal was structured, Logue says: “Here we have everything to win, while in an acquisition, we have everything to lose.” But he refuses to comment on the financial aspects of the arrangement or how the transaction was structured, saying: “Between Lloyds TSB and ourselves there is an economic consideration. It is an economically based deal, but we are not prepared to say anything further.”
Ken Farquhar, managing director of LTSS, commenting on the withdrawal refers to his group as “a relatively small player”, adding that size is important in the business to cover the substantial on-going investment needed in systems development. The decision was taken after “long consideration” by the bank, he says. On the State Street side the view is the deal was not something that came up suddenly. “It was a well considered deal,” says Logue. Fennell Betson