Higher rates drive global securities services revenues to new record in 2023

Global securities services revenues hit a new record high in 2023 thanks to a surge in net interest income driven by rising interest rates.

The world's 12 largest securities services banks posted a combined revenue of $41.6 billion from custody, fund and other securities services in 2023, up 8% year over year and the best result achieved since 2016, new data by Coalition Greenwich shows.

This result was mainly due to higher net interest income (NII) and growth in assets under custody and administration across the sample of banks, the research company said in its latest sector index report. Fee income, on the other hand, was weaker, "owing to margin compression and lower client transactional volumes," the company said.

Coalition Greenwich — a division of CRISIL, an S&P Global company — tracks securities services revenues at Brown Brothers Harriman & Co., BNP Paribas SA, Bank of New York Mellon Corp., CACEIS Bank SA, Citigroup Inc., Deutsche Bank AG, HSBC Holdings PLC, JPMorgan Chase & Co., Northern Trust Corp., Royal Bank of Canada, Société Générale SA and State Street Corp.

Fee compression and reduced client activity resulted in a marginal decline of 1% year over year in revenues from global fund services in 2023. Fund services were under bigger pressure in the first half of the year but recovered some ground in the second half, thanks to improved investor flows in exchange-traded fund (ETF) and alternative fund services, the Coalition Greenwich analysis shows.

Revenues from other securities services, including corporate trust, depository receipt, agency securities lending, broker/dealer clearing, and settlement and collateral management services, recorded the highest annual increase of 15% in 2023, the report shows. This was attributable to "robust issuer services where both corporate trust and depositary receipts grew," increased collateral management revenues on the back of higher US tri-party repo balances, and stronger agency securities lending in the US and Asia-Pacific, Coalition Greenwich said.

Asia-Pacific recorded the strongest revenue growth in 2023, 16% year over year, mainly due to a surge in custody services revenues, which were boosted by higher NII and increased flows from domestic institutional investors, according to the research company's report.

Revenues in Europe, the Middle East and Africa rose 8% year over year due to higher interest rates across the region and a continued flurry of activity in the Middle East, Coalition Greenwich said. Ongoing improvements and enhancements to the market infrastructure in the region have been attracting strong foreign direct investment and greater involvement of global services securities banks, Duncan Woodward, senior research manager at Coalition Greenwich, previously told S&P Global Market Intelligence.

Growth in the Americas stood at 5%, driven by corporate trust and custody revenues, which were boosted by an increase in NII. This was partially offset by lower client deposit balances and the currency devaluation in Argentina in the second half of 2023, Coalition Greenwich said in its report.