European banks to merge custody, asset units

PARIS: France’s Credit Agricole and Spain’s Santander plan to combine their custody and asset servicing operations to create a business with US$3.8 trillion (RM15.7 trillion) assets under custody and close the gap on European leaders.

The banks said the new entity would have about €3,340 billion (RM15.7 trillion) in assets under custody and about €1,833 billion in assets under administration.

Banks’ custodian services businesses look after assets for clients in return for fees.

Credit Agricole will own 69.5 per cent of the merged unit, which will keep the brand name of Agricole’s existing asset management arm — Caceis. Santander will hold 30.5 per cent.

Santander’s ‘S3’ Securities Services arm in Spain and Latin America will be combined with Caceis.

Low profitability among European banks has sparked calls from officials at the European Central Bank and investors for cross-border consolidation, but regulatory issues and political opposition to foreign takeovers have stymied deals so far.

Joint ventures in areas such as fund management can provide an easier option, allowing banks to benefit from scale by collaborating without having to go into any full-blown takeovers.

Santander and Credit Agricole’s combined custody operations would make them one of the largest European players behind BNP Paribas, HSBC and SocGen, while creating a stronger competitor to United States leaders such as State Street.

“I welcome consolidation in the European banking sector,” said Clairinvest fund manager IonMarc Valahu, who owns a position in the European banking index.

“We use Caceis for our funds and it makes sense for CA to take over the custody and asset-servicing operations from Santander. Credit Agricole is increasing its foot print in Spain and Latin America,” added Valahu.

Santander said it would see a capital gain of around €700 million from the deal.

“S3 and CACEIS are complementary businesses, and by working together we can create a custody and asset servicing platform that leverages collective scale and global presence, and offers clients a comprehensive service,” said Santander chairman Ana Botin.