JPMorgan Chase & Co is set to outsource the operations of its local custody business in Hong Kong and Taiwan, with Citigroup, HSBC, and Standard Chartered in the race for the mandate. The Wall Street Bank, the world’s third-largest global custodian, is selecting another bank to take over the local custodian operations in Hong Kong and Taiwan, with financial details of the deal not immediately apparent.
The move to exit the low-margin local custodian business in the Asia Pacific is part of a shift for the U.S. bank to focus on its core securities services businesses. In recent years, the company has exited lower-margin local custodian businesses from other markets, such as Australia and South Korea, due to falling custodian assets.
Asset custodians keep investors’ securities safe to prevent losses while managing transactions and settlements to ensure compliance with tax and other regulations for client accounts. Local custody is a smaller business offering lower margins than global custody operations.
According to the sources, JPMorgan currently holds around $520 billion in client assets under custody as a local custodian in Hong Kong and Taiwan. The bank will continue to offer global custody in those two North Asian markets.
The company has a global custody network that manages cross-border investments for clients across various asset classes, including equity and fixed income. In addition to local custody, the company provides global fund administration services, overseeing and maintaining investor records. In addition, the company provides investment banking, asset management, private wealth management, corporate and investment banking, and treasury services globally.
Despite the challenging economic environment, the bank is on track to meet its profitability targets this year and next. Its net interest income rose 7% to $11.8 billion in the first quarter, driven by higher earnings from its securities services and consumer banking businesses. The company’s consumer banking segment recorded a 14% increase in profit, while the corporate and investment banking division posted an 18% rise in profits.
JPMorgan’s investment banking division topped its targets, posting a headline profit of $878.5 million in the first quarter. Its return on equity (ROE) rose to 12.5%. Its debt capital markets and credit-card businesses were among the most profitable, with returns of 13.2% and 12.7%, respectively.
