Global Custody Pro - 25 April 2025

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📰 Welcome to the Newsletter

Welcome to Global Custody Pro! I'm Brennan McDonald, Managing Editor. I write about the global custody industry based on my 12+ years in financial services, including working at a global custodian. The audio version of this newsletter is read by an AI voice. Have feedback? Just reply to this email or connect with us on LinkedIn.

Table of Contents

• 📠 Editor’s Comment

• 🌏 Global Custody News

  • Northern Trust Posts Strong YoY Growth in Q1

  • BNP Paribas’ Securities Services revenue jumps 13. …

  • Record Clearing Volumes Boost CME Group Q1

  • U.S. Bank Consolidates Fund Services, Corporate Tr …

  • Butterfield Q1: Trust, Custody AuA Drops

• 🚀 Digital Asset News

  • Lynq Network Targets Tokenized Treasuries

  • Circle Launches Stablecoin Payment Network

📠 Editor’s Comment

Our news coverage is sharpening its focus on the big shifts in the global custody industry, particularly on new regulations and the growth of digital assets. While digital assets promise change, it looks like established players – the world’s largest custody banks – will win this race.

Our analysis shows that while specialised digital asset firms offer new technology, major clients often prefer their existing banks. This isn't just habit, it's about practical needs. Specialist firms often struggle to provide the full suite of services large clients need. For instance, they might not handle ETFs, use the SWIFT network, or be able to manage liquidity and foreign exchange risks effectively.

Beyond technology, there are basic issues of trust and stability. Investors must weigh placing large pools of assets with firms that still have substantial build out of institutional servicing capability to complete, or relying on the financial strength and regulatory experience of a major global bank. Big banks also have the resources to invest heavily in secure systems, cover potential operational losses either directly or through insurance coverage, and meet strict regulatory requirements.

Because of this, the future likely involves the big players absorbing change, not being replaced. Expect large institutions to expand their digital asset services aggressively this year, speeding this up by acquiring specialist custodians. Understanding how established trust and systems shape tech adoption will be central to our ongoing reporting in this area.

🌏 Global Custody News

BNY Tops $53T in Q1 US Custody Rankings

• State of play: BNY maintained its lead among US custody banks in Q1 2025 with $53.1 trillion in Assets under Custody/Administration, significantly ahead of State Street at $46.7 trillion and JPMorgan Chase at $35.7 trillion.

• The big picture: The substantial scale concentrated within the top four US providers underscores their systemic importance and the significant operational dependency of the market on their infrastructure resilience.

• Why it matters: This continued stratification reinforces the high barriers to entry in core custody and increases competitive pressure on mid-tier players like Northern Trust and U.S. Bank to differentiate through service niches or technology specialization.

Northern Trust Posts Strong YoY Growth in Q1

• Why it matters: Northern Trust kicked off 2025 showing robust year-over-year expansion, driven by increases in core trust fees (+6%) and net interest income (+7%), contributing to an 18% jump in total revenue to $1.94 billion.

• Client asset growth remained steady, with assets under custody/administration reaching $16.9 trillion (+3% YoY) and assets under management hitting $1.6 trillion (+7% YoY), reinforcing the scale and performance of its core franchises.

• Achieving a third consecutive quarter of positive operating leverage alongside significant capital return ($435 million) indicates operational efficiency, even as net income saw a sequential dip compared to Q4 2024 but nearly doubled from Q1 2024.

BNP Paribas’ Securities Services revenue jumps 13.4% in Q1

• Driving the news: The Securities Services business unit reported revenue rose 13.4% versus 1Q24 to €793 million, citing strong business development and balanced growth from net interest revenues and fees. This performance was supported by increased assets under custody (€14,284 billion, +6.9%) and a higher number of transactions (46.5 million, +26.5%), driven by market conditions and high volatility. AuC/A reached EUR17 trillion (USD19.3 trillion) up 7% YoY.

• The division secured new mandates across segments and geographies, highlighted by winning ProCapital (Crédit Mutuel Arkéa subsidiary) for local/global custody (€22 billion assets) and listed derivatives clearing. Growth was also noted as robust in the Private Capital segment, with average outstandings increasing 11.6% versus 1Q24 due to market performance and new mandates.

Record Clearing Volumes Boost CME Group Q1

• Driving the news: CME Group's Q1 revenue hit $1.6 billion, up 10% year-over-year, propelled by record client demand for hedging tools amid economic uncertainty, resulting in unprecedented clearing activity across its markets.  

• The exchange's clearinghouse processed a record average of 29.8 million contracts daily (+13% YoY), demonstrating the critical scale and market reliance on CME's infrastructure for managing risk across major asset classes.  

• This surge generated $1.34 billion in clearing and transaction fees and contributed significantly to strong net income ($956 million), underscoring the central role—and financial performance—of market infrastructure providers during periods of heightened volatility.

U.S. Bank Consolidates Fund Services, Corporate Trust to Investment Services Unit

• The big picture: U.S. Bank merged its Global Fund Services and Global Corporate Trust teams into a unified Investment Services division, signalling a strategic move towards a more integrated service model for institutional, corporate, and government clients.

• The combined unit, led by newly appointed president Jay Martin, brings together capabilities like fund administration, custody, investor servicing, and trustee services, aiming to provide a cohesive offering across the investment lifecycle.

Butterfield Q1: Trust, Custody AuA Drops

• Driving the news: Butterfield (Bank of N.T. Butterfield & Son Limited) reported Q1 2025 net income of $53.8 million ($1.23/share), down from $59.6 million ($1.34/share) sequentially but up year-on-year from $53.4 million ($1.13/share). Critically for asset servicers, Assets under Administration for trusts fell to $120.9 billion and for custody dropped to $24.7 billion, down significantly from $131.3 billion and $30.5 billion respectively at year-end 2024.

• The substantial quarter-on-quarter decrease across both trust and custody AuA signals potential client asset outflows or mandate reductions, directly pressuring fee-based revenue streams. This scale reduction could influence perceptions of market share and competitive standing within the specialised administration space.

• While a higher net interest margin provides some offset, monitoring the drivers behind the sharp AuA decline and its impact on non-interest income is key.

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🚀 Digital Asset News

Lynq Network Targets Tokenized Treasuries

• Why it matters: The planned Q2 2025 launch of the Lynq network (Arca, Tassat, tZERO) introduces a blockchain-based settlement solution using tokenized U.S. Treasuries (Arca's TFND) to potentially generate yield even during transit, aiming directly at reducing traditional settlement friction and improving capital efficiency for institutions.

• This model merges on-chain asset movement with traditional custody infrastructure (U.S. Bank providing custody for underlying assets), necessitating robust operational workflows for reconciling tokenized fund positions and ensuring asset safety within a licensed framework (tZERO's) featuring proof of reserves.

• The "Yield-in-Transit" concept represents a potential evolution in settlement mechanics, requiring custodians and market participants to evaluate the implications for counterparty risk management, treasury operations, and the required infrastructure to support real-time, yield-bearing settlement flows.

Circle Launches Stablecoin Payment Network

• Driving the news: Circle's unveiling of the Circle Payments Network (CPN) marks a direct attempt to overhaul institutional cross-border payments, utilizing regulated stablecoins (USDC, EURC) for real-time, 24/7 settlement aimed at significantly reducing costs and delays compared to traditional systems.

• The network's success hinges on financial institutions integrating stablecoin operations, including compliant custody solutions, liquidity management for USDC/EURC pairs, and adapting internal processes to leverage the near-instant settlement capabilities, supported by expertise from major banking partners.

• With a limited launch anticipated in May 2025, CPN signals a potential acceleration in the adoption of stablecoins for regulated institutional payments, challenging established correspondent banking models and requiring payment providers and custodians to refine their digital asset strategies and infrastructure readiness.

© Global Custody Pro. Published by Digital Content Operations LLC. All Rights Reserved. This newsletter was edited by Brennan McDonald.