Revenues in the global securities services market declined during 2020, according to intelligence provider Coalition Greenwich’s new report on the banking industry: “The FY20 Securities Services Index”.
The heightened market volatility paved the way for significant growth in transaction volumes but the Coalition Index banks’ revenue failed to grow due to materially lower interest income, the report reveals.
Coalition index banks ended the year with the highest assets under custody/administration in history owing to the recovery of markets from the first quarter sell-off.
Custody revenues declined despite high levels of assets under custody and record deposit levels due to a sharp fall in net interest income in H2 2020.
The report outlines that the drop in custody income was partially offset by higher transaction related fees and higher Foreign Exchange revenue.
Fund services revenues were slightly higher for the year bolstered by the recovery of assets
under administration into the latter half of the year.
It has been identified that exchange-traded funds servicing led the growth while the outsourcing pipeline continues to be very strong.
Other securities services declined, which the report reveals was led by significant underperformance by agency securities lending because of lower balances and spread compression.
Issuer services also declined, while collateral management revenues grew which was primarily driven by increased client demand amid uncertain financial market conditions.
Meanwhile, in terms of regional performance, revenues in the Americas declined following a comparatively weaker H2 2020 which offset the resilient performance seen in H1 2020.
According to the report, the North American market outperformed that of Latin America.
The report affirms that Europe, the Middle East and Africa revenues improved primarily due to currency translation gains despite a somewhat weaker market recovery.
Elsewhere, following four years of robust growth, Asia Pacific (APAC) revenues declined in 2020. Record levels of assets entered the APAC market in 2020, but the net interest income also significantly declined, says Coalition Greenwich.
Looking at revenue productivity, the report reveals that coalition index banks’ revenue productivity declined to its lowest point in the past five years.
Despite assets under custody/administration reaching its highest level since the last financial crisis, Coalition Greenwhich says there was no corresponding revenue elevation, owing to acute fee pressure and declining interest income, particularly in 2019 and 2020.
Coalition Greenwich is an analytics and business intelligence provider to the global financial services industry.
It is a business division of CRISIL, a global analytics company driven by its mission of making markets function better.
