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THE BIZNOB – Global Business & Financial News – A Business Journal – Focus On Business Leaders, Technology – Enterpeneurship – Finance – Economy – Politics & LifestyleTHE BIZNOB – Global Business & Financial News – A Business Journal – Focus On Business Leaders, Technology – Enterpeneurship – Finance – Economy – Politics & Lifestyle

Finance

Finance

Exclusive: JPMorgan to outsource $500 bln custody business in Hong Kong, Taiwan

] A view of the exterior of the JP Morgan Chase & Co. corporate headquarters in New York City May 20, 2015. REUTERS/Mike Segar/File Photo
] A view of the exterior of the JP Morgan Chase & Co. corporate headquarters in New York City Ma... ] A view of the exterior of the JP Morgan Chase & Co. corporate headquarters in New York City May 20, 2015. REUTERS/Mike Segar/File Photo
] A view of the exterior of the JP Morgan Chase & Co. corporate headquarters in New York City May 20, 2015. REUTERS/Mike Segar/File Photo
] A view of the exterior of the JP Morgan Chase & Co. corporate headquarters in New York City Ma... ] A view of the exterior of the JP Morgan Chase & Co. corporate headquarters in New York City May 20, 2015. REUTERS/Mike Segar/File Photo

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According to two people with knowledge of the situation, JPMorgan Chase (JPM.N) plans to outsource the management of its local custody business in Taiwan and Hong Kong, with Citigroup (C.N.), HSBC (HSBA.L), and Standard Chartered (STAN.L) vying for the contract.

According to the sources, the Wall Street Bank, now ranked as the third largest global custodian, is currently choosing a different bank to assume responsibility for the local custodian operations in Taiwan and Hong Kong.

The deal’s exact financials were not immediately revealed. When customers access specific marketplaces, local custodial businesses handle the bookkeeping and transactions. On the other hand, global custody maintains connections with clients and uses a vast network to handle cross-border investments.

According to a third source with intimate knowledge of the situation, JPMorgan is a local custodian for client assets under custody (AUC) totaling over $520 billion in those two North Asian regions.

In those two areas, the bank will keep offering worldwide custody services. According to the third source, the bank plans to finish switching to a different bank in Taiwan and Hong Kong by the end of the following year.

According to the first two reports, this move would signal the company’s departure from the local custodian business in the Asia-Pacific area.

JPMorgan has recently withdrawn from lower-margin local custodian operations in Australia and South Korea, among other Asia-Pacific regions. The two sources said it was less profitable due to declining custodial assets.

Since none of the sources had permission to communicate with the media, they all declined to be identified. JPMorgan, HSBC, Citi, and Standard Chartered spokespeople declined to comment.

The decision by JPMorgan to stop offering local custody services in Taiwan and Hong Kong demonstrates the company’s shift in focus as macroeconomic uncertainty and geopolitical tensions alter asset and investment flows.

Tensions between the U.S. and China and a contracting Chinese economy drove the country’s investment flight. According to Morgan Stanley research that cited data from fund flow tracker EPFR, active long-only funds withdrew $3.1 billion from China and Hong Kong stocks in October, marking the third consecutive month that sales of this magnitude exceeded $3 billion.

Asset custodians keep the securities owned by investors safe and secure. They also oversee transactions and settlements to guarantee that client accounts comply with tax and other requirements.

Comparing local custodian services to global custody operations, the former is thought to have lower profit margins.

According to the two sources, JPMorgan presently offers customers in Taiwan and Hong Kong both local and global custodian services; nevertheless, the company has chosen to leave the local market since the cost-income ratio has increased in tandem with a drop in assets.

While continuing to run one of the industry’s most significant worldwide custodian operations, the bank stopped providing local custody services for external clients in Australia in 2020. Following that change, the only markets where it provided local custodial services were Taiwan and Hong Kong.

In the third quarter of this year, JPMorgan reported a 9% year-over-year revenue gain in securities services, which includes its custody operations, with $29.7 trillion worth of customer custody assets worldwide.


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