Securities services revenues at the 12 largest banks in the sector have remained flat during the first half of 2021, despite equity markets reaching a historic high. The Coalition Index for Securities Services found that revenues remained largely stable year-on-year across banks providing securities services (including custody services, fund services and other services, such as broker-dealer clearing and settlement).
Revenue over the first six months of 2021 hit $18.1bn, compared to $18bn in 2020 and $17.9bn in 2019. The last time there was a significant increase was in the first half of 2018, when industry revenues hit $18.8bn, up from $16.7bn in the same period the year before.
Custody services (covering areas such as asset servicing and custody foreign exchange (FX)) continue to account for the largest share of revenues at $9bn — a 2% fall compared to the first half in 2020. Other securities services (comprising areas such as agency securities lending and collateral management) revenues also fell by 4% year-on-year, from $3.8bn to $3.7bn. Only fund services (services such as middle-office outsourcing and fund administration) saw an increase, with revenues increasing by 7% year-on-year from $5bn to $5.4bn.
For custody services, revenues declined due to lower net interest income and custody FX revenue, particularly in the first quarter of 2021, although the decline was partially offset by moderate growth in fee income. In other securities services, the decline was led by a significant decrease in agency securities lending. Collateral management revenue, however, continued to grow, although the growth rate has slowed from previous periods. Fund services revenues improved due to higher assets under administration. Growth was observed in most categories but particularly in exchange-traded fund servicing, alternative fund services and front-to-back servicing offerings.
When broken down to a regional level, Americas revenues declined by 2% year-on-year from $9.2bn to $9bn. There were slight increases in Asia-Pacific and Europe, the Middle East and Africa (EMEA) — up 1% from $2.4bn to $2.5bn and $6.4bn to $6.6bn, respectively.
EMEA revenues performed well, as asset growth within the industry outpaced fee compression. Market share consolidation by Coalition Index banks also contributed to the outperformance. Asia-Pacific revenues marginally increased on the back of consistently high transaction volumes, but this was partially offset by a decline in net interest income. Americas revenues declined primarily due to lower net interest income and a higher level of money market fund waivers in the US.
Productivity within the index has also continued to fall, reaching its lowest level since the first quarter of 2016.
The index tracks performance at Brown Brothers Harriman, BNP Paribas, BNY Mellon, Caceis, Citi, Deutsche Bank, HSBC, JPMorgan, Royal Bank of Canada, Northern Trust, Société Générale and State Street.
