Lloyds TSB Abandons Global Custody in Favor of State Street

Strategic Insights -

Lloyds TSB, the UK retail banking group, has made the decision to exit the global custody business, citing the need to focus on its core markets and achieve economies of scale. The move allows HSBC to remain the sole surviving UK-owned contender in the US-dominated industry. Lloyds will recommend that its 430 customers transfer their £140 billion in assets under its custody to State Street, a global leader in investment portfolio administration and servicing.

Key Takeaways:

  • Lloyds TSB will shut its custody and fund trusteeship operations, citing the need to focus on its core markets and achieve economies of scale.
  • The bank will recommend that its 430 customers transfer £140 billion of assets under its custody to State Street, a global leader in investment portfolio administration and servicing.
  • State Street will gain a significant client base, with the assets transferred representing a notable increase to its existing £3,354 billion in assets under custody.
  • Ken Farquhar, managing director of Lloyds TSB Securities Services, stated that the biggest US participants have multiples of Lloyds' numbers under custody, giving them significant economies of scale.
  • Ronald Logue, State Street's vice chairman, noted that the bank has invested heavily in the UK in the past 18 months, including the purchase of Bank of Scotland's unit trust trustee business.
  • Lloyds employs 825 permanent staff in the custody and trusteeship business, with over 1,000 jobs potentially affected, according to Unifi, the UK's main financial services trade union.
  • The bank will offer permanent staff the option of voluntary redundancy or voluntary early retirement, with the goal of finding jobs for all within the group.

Statistics:

  • £140 billion: The amount of assets under custody being transferred from Lloyds to State Street.
  • 430 customers: The number of customers transferring their assets to State Street.
  • 825 permanent staff: The number of employees in Lloyds' custody and trusteeship business.
  • 1,000 jobs: The number of jobs potentially affected, according to Unifi.
  • £500,000: The net assets to be transferred to State Street.
  • £3,354 billion: The amount of assets under custody managed by State Street.
  • 18 months: The timeframe for State Street's significant investment in the UK market.
  • $5,300 billion: The amount of assets under custody managed by State Street (in US dollars).

Sources:

  • Financial Times Limited 1999.