A pool of $45 billion is up for grabs in a tender with the potential to transform Australia’s sub-custody landscape, and it’s reportedly been enough for one of the Big Four Bank CEOs to start hitting the phones.
Clearstream, the custody and settlement arm of Deutsche Borse, has for several years used ANZ Custodian Services for settlement and safekeeping of its client’s Australian assets, but is now preparing to send formal requests for proposal to all of the major sub-custodians here.
Apart from ANZ, that includes HSBC Securities Services (the largest sub-custodian post its Westpac acquisition), National Australian Bank Asset Servicing, JPMorgan Worldwide Securities Services and Citi Global Transaction Services.
Even at the sub-1 basis point fee rates which prevail in sub-custody, the Clearstream account is a multi-million dollar annual revenue opportunity which ANZ is said to be loathe to lose, particularly after image problems related to its facilitation of collapsed broker Opes Prime were blamed for its replacement as sub-custodian for Northern Trust, the custodian of the Future Fund.
Clearstream’s sub-custody contract is understood to be ANZ’s largest. At the end of 2008, before its loss of Northern Trust, the bank reported $51.5 billion in assets under sub-custody for foreign clients.
There are unconfirmed reports that ANZ’s CEO, Mike Smith, has personally telephoned major custody clients to reassure them of the bank’s commitment to the business, even though he has been closing or reviewing other institutionally-focused units, such as securities lending, he sees as a distraction from core commercial banking.
Commonwealth Bank and Westpac have both sold their custody businesses this decade, describing custody as a global business requiring the scale of a global bank.
ANZ’s head of custody, Geoff O’Callaghan, said his group was "responding confidently and professionally" to Clearstream’s tender, and its "simplified" operation was "open for business and ready to win new clients". He said Mike Smith had a regular routine of contacting major clients across the bank.