What Proportion Of Revenues For The 4 Largest Custody Banks Came From Custody Banking Fees In 2016?

-8.60%
Downside
98.55
Market
90.07
Trefis
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STT
State Street Corporation

While custody banking fees are responsible for almost 50% of the top line for two largest custody banks in the world (BNY Mellon and State Street), their share in total revenues for the next two biggest custody banks (JPMorgan and Citigroup) is less than 4%. This discrepancy is easily understood given the fact that the latter two have extremely diversified business models, with investment banking and retail banking operations contributing the bulk of their overall revenues. For BNY Mellon and State Street, a bulk of their remaining revenues is in the form of net interest revenues on their balance sheet assets followed by investment management fees.

Custody_QA_CustodyFeeShare_FY16

The custody banking business is characterized by slim operating margins, as total fee revenues are typically less than 0.02% of the total assets under custody/administration – something that is shown in the chart below for State Street. Because of this, the industry is extremely concentrated, with incumbents looking to improve profitability through acquisitions in order to achieve greater economies of scale. Our estimates for the market share of the largest custodians in terms of total custody assets can be found here, while the change in their portfolio of custody assets over the last five years is detailed here.

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