JPMorgan Plans Outsourcing $500 Bn Custody Business In Hong Kong, Taiwan
JPMorgan Chase is reportedly considering outsourcing its local custody business operations in Hong Kong and Taiwan, with Citigroup, HSBC and Standard Chartered vying for the opportunity, according to sources familiar with the matter.
The Wall Street giant, ranked third globally in custodial services, is in the process of selecting a replacement bank to take over these specific operations in Hong Kong and Taiwan, as per these sources. Financial specifics of the deal have not been disclosed as yet.
Local custody businesses manage transactions and oversee client books in specific markets, differing from global custody operations that handle cross-border investments on a larger scale.
JPMorgan is currently responsible for around USD 520 billion in client assets under custody (AUC) as a local custodian in both Hong Kong and Taiwan, shared a source directly involved in the situation. Despite this shift, the bank intends to persist in offering global custody services in these markets.
The transition of this business to another bank is anticipated to conclude by the end of the following year, marking JPMorgan's exit from the local custodian segment in the Asia Pacific region, per the initial sources.
This move aligns with JPMorgan's recent departures from lower-margin local custodian businesses across various Asia Pacific markets, including Australia and South Korea, which became less lucrative due to declining custodian assets, sources noted.
None of the sources were authorized to disclose this information to the media and declined to be named.
Representatives from JPMorgan, HSBC, Citi and Standard Chartered refrained from commenting on the matter.
JPMorgan's decision to withdraw from local custody services in Hong Kong and Taiwan reflects a strategic realignment amid economic uncertainties and geopolitical tensions reshaping investment and asset flows.
Continued Sino-U.S. tensions and challenges in the Chinese economy have accelerated the outflow of investments from China. Reports suggest substantial outflows from China and Hong Kong equities, signaling ongoing concerns.
Custodians play a critical role in safeguarding investors' securities and ensuring compliance with various regulations. While local custody services are considered lower-margin, JPMorgan has opted to refocus efforts, highlighting the growing cost-income ratio and declining assets in this segment.
The bank previously discontinued offering local custody services for external clients in Australia in 2020, leaving Hong Kong and Taiwan as the remaining markets for these services. Despite this shift, JPMorgan maintains a robust global custodian presence worldwide.
JPMorgan reported a 9 per cent year-on-year revenue rise in securities services, encompassing its custody operations, in the third quarter of this year, managing an extensive USD 29.7 trillion in client custody assets across the globe.
