There is nothing like starting the New Year with a statement of intent, and the Bank of New York (BNY) has certainly been fast out of the gate. It marked the arrival of 2005 with a clutch of new deals, alliances and acquisitions, including the purchase of Luxembourg retail transfer agent/registrar Continental Fund Services and the making of an arrangement with Natexis Banques Populaires in France that will strengthen the bank’s hand in that key continental European market.
While not in the same category as the bank’s existing European alliances with Ireland’s AIB and ING Bank in the Netherlands, the arrangement – which sees the US bank providing global custody
services to e80bn of Natexis assets across 48 markets, with Natexis
taking over as sub-custodian to a “large proportion” of BNY’s French assets – can nonetheless be viewed as a partnership, says Ivan Royle,
the bank’s European director of communications.
“Essentially this is a straight custody deal, but it is a relationship we would like to develop,” says Royle. “We are looking at ways of distributing our products more widely in the French market, which is an important market for us, and Natexis is clearly a big player there. So we will be looking at much closer co-operation across products like fund administration and transfer agency and in other areas of common ground.
“These European_countries can be difficult for outsiders to crack, and consequently we recognise the importance of strategic partnerships with big local players that extend our product or geographic reach. In that respect we believe we are more European than our US peers,” he adds.
That was certainly the thinking behind the bank’s ING Bank alliance, an arrangement that bore further fruit in January with the announcement that the bank had signed a letter of intent to provide a middle office trade and processing outsourcing
service to the e67bn asset base of ING Investment Management (Europe) via its BNY SmartSource business.
The bank has also announced a strategic alliance between its global agency brokerage, clearing and financial services outsourcing subsidiary, BNY Securities Group and Standard & Poor’s. The arrangement will see the acquisition by BNY Brokerage Inc, BNY Securities’ global agency
brokerage, of S&P’s institutional brokerage subsidiary, Standard & Poor’s Securities Inc (SPSI), which currently provides brokerage services for
investment managers who subscribe to various S&P analytic and research products.
BNY Brokerage will assume SPSI’s client relationships, allowing investment managers to obtain S&P’s equity research and corporate data products through execution services provided by BNY Brokerage, including a wide range of direct market access and broker-assisted capabilities that offer choice in trading models
The CFS acquisition sees the bank strengthening is position in increasingly combative transfer agency arena. The deal bolsters its existing multi-currency/multi-lingual European transfer agency platform GTA, which is offered out of Luxembourg and Dublin under the auspices of the bank’s European fund services (EFS) division.
Servicing Luxembourg SICAVs run by two US fund managers, Davis Selected Advisers and Alger Associates, as well as sub-transfer agency and sub-registrar services to European shareholders of Alger’s US domestic funds, CFS administers the accounts of some 32,000 shareholders. “This deal is a nice fit for us and will bolster our offering to clients,” says Tim Keaney, executive vice-president and the BNY’s head of Europe.
“Transfer agency in Europe is a growth business for the BNY, and as a major player in the business we’re seeing a lot of industry consolidation right now,” he adds. “The smaller transfer agency companies are finding it hard to keep pace with the escalating demands made by developments in technology, regulation and distribution. We have the scale and commitment to ensure that our transfer agency platform provides clients with a greater level of transparency, so they stay ahead of market demands.”
Transfer agency is one component of the mandate the bank recently won from Prudential Asset Management to act as global custodian and fund administrator to the firm’s international opportunities fund, a $1.8bn (e1.3bn) Luxembourg umbrella fund distributed in Asia. It already services another five funds on behalf of
Prudential Assurance Company Hong Kong.
A bigger recent catch, however, was Abbey National Asset Management (ANAM), the investment arm of Banco Santander Central Hispano’s UK subsidiary Abbey, which has decided to consolidate global custody for £30bn (e43.7bn) of assets with just one provider, having previously used four custodians, including the BNY. The move is expected to help Abbey improve its investment administration across ANAM, improving economies of scale and creating a tighter operating infrastructure.
All of this comes as the bank unveiled strong performance in securities servicing fees during the fourth quarter of 2004, up 8% sequentially to $742m. Execution and clearing services revenues also rose, up 15% sequentially, while investor services fees rose by 5% on the back of higher global fund services fees driven by new business wins. As a comparison, the bank’s nearest rival - State Street - saw servicing fees hit $570m during the quarter.
“We are feeling very confident about the state of our business in Europe,” says Royle. “We are well positioned in our core markets, we have a fully deployed product set and our new business pipeline, and the opportunities for growth have never been stronger.”