JPMorgan Chase has made a significant strategic decision to expand its presence in the Asia-Pacific region. The banking giant has selected HSBC and Standard Chartered (StanChart) as its partners to oversee its substantial $500 billion custody business in Hong Kong and Taiwan. This partnership signifies a deep commitment to enhancing service quality and expertise for clients operating within these regions.
The custody business plays a pivotal role within the financial sector. It acts as a secure repository for various assets, including stocks, bonds, and securities, ensuring their safekeeping and protection.
JPMorgan’s Decision
JPMorgan’s decision to collaborate with HSBC and StanChart demonstrates its complete trust and confidence in these renowned financial institutions. This strategic partnership demonstrates their ability to effectively safeguard their clients’ assets.
In December, JPMorgan, the world’s third-largest global custodian, announced plans to sell its local custody business in Hong Kong and Taiwan. Citigroup, HSBC, and StanChart competed for the mandate. As a result, the Wall Street Bank decided to outsource its local custodian services in Hong Kong to HSBC and in Taiwan to StanChart, according to a spokesperson. However, specific financial information about the arrangement was not immediately disclosed.
In December, according to a report, total assets under custody across the two North Asian markets amounted to approximately $520 billion, citing a knowledgeable source. JPMorgan aims to finalize the transition to the two banks before the year’s end, according to unnamed sources familiar with the matter.
Fiona Horsewill, the global head of securities services at HSBC, expressed anticipation regarding JPMorgan’s appointment in its home market of Hong Kong, highlighting the bank’s eagerness to deepen its relationship in this space. Similarly, Margaret Harwood-Jones, the global head of Financing and Securities Services at StanChart, conveyed excitement about extending the bank’s relationship with JPMorgan through this appointment in a crucial Asian market.
The Global Custodian made the initial report of JPMorgan’s appointment on Wednesday. Asset custodians play a vital role in safeguarding investors’ securities to prevent losses and managing transactions and settlements to ensure compliance with tax and other regulations.
While JPMorgan offers global and local custodian services for clients in Hong Kong and Taiwan, it has decided to withdraw from the local level due to an increase in the cost-income ratio amid a decline in assets, as per sources familiar with the matter in December. The bank ceased offering local custody services for external clients in Australia in 2020 while maintaining one of the largest global custodian operations in the market.
According to a Morgan Stanley report citing data from fund flow tracker EPFR, China and Hong Kong equities experienced combined outflows of $3.1 billion from active long-only funds in October, marking the third consecutive month of selling exceeding $3 billion. Despite these fluctuations, JPMorgan reported a 9% year-on-year revenue increase in securities services, which includes its custody operations, in the third quarter of this year, with client custody assets worth $29.7 trillion worldwide.
Strengths of HSBC and StanChart
Both HSBC and StanChart have extensive experience and robust infrastructure, making them ideal for handling the complex demands of JPMorgan’s custody business.
With established presences in Hong Kong and Taiwan, HSBC and StanChart bring a wealth of local knowledge and expertise to the table, making them valuable partners in JPMorgan’s expansion efforts.
HSBC’s global network and StanChart’s extensive knowledge of Asian markets strengthen their suitability to manage JPMorgan’s custody business.
Shared Vision
HSBC and StanChart share JPMorgan’s vision of providing excellent custodial services. Their emphasis on innovation, technology, and responsible banking is consistent with JPMorgan’s values.
Collaborative Benefits
By leveraging the respective strengths and capabilities of HSBC and StanChart, JPMorgan aims to provide clients with a seamless and comprehensive custody service experience. This strategic collaboration enables JPMorgan to enhance its market presence and offer an expanded range of solutions tailored to meet clients’ evolving needs in Hong Kong and Taiwan.
JP Morgan’s Long-Term Strategy
JPMorgan’s partnership with HSBC and StanChart aligns with its long-term strategy of expanding its custody business in Asia-Pacific. Hong Kong and Taiwan are key markets with significant growth potential. JPMorgan’s collaboration with HSBC and StanChart positions it well to capitalize on emerging opportunities.
JPMorgan’s selection of HSBC and StanChart as partners for its $500 billion custody business demonstrates the trust and confidence placed in these institutions. This collaboration represents a significant step forward in JPMorgan’s journey to become a leading player in the Asia-Pacific custody market.