France’s Credit Agricole and Spain’s Santander plan to combine their custody and asset servicing operations, in a deal that could point the way for European banks to achieve scale without the complexity of a full merger.
The new business will have around $3.8 trillion of assets under custody, closing the gap on European leaders and providing scope for savings and cost reductions.
Banks’ custodian services departments look after assets for clients in return for fees. But it is often a low margin business and growing competition is making scale more important.
Santander’s business is relatively small, generating €80 million in profit last year. It will transfer its S3 business, which covers Spain and Latin America and had €710 billion of assets under custody and €138 billion of assets under administration as of Dec. 31, to CACEIS, the asset-servicing arm of Crédit Agricole. CACEIS had €2.6 trillion in assets under custody and €1.7 trillion in assets under administration as of December.
Credit Agricole recorded a €174 million net income from asset servicing last year. It will hold 69.5% of the entity and Santander will hold the remaining 30.5%, with the Spanish bank retaining a majority stake in the Latin American operations. The banks said the combination will help them seek clients in growth markets like Latin America and Asia.
“S3 and CACEIS are highly complementary businesses, and by working together we can create a custody and asset servicing platform that leverages our collective scale and global presence,” Santander Chairman Ana Botin said in a statement.