Consolidation, a long-familiar trend in the financial advisor channel, may be getting a boost from the federal Troubled Asset Relief Program. Eager to raise cash and get out from under taxpayer loans, PNC Financial Services Group is looking to sell its custody and clearing division, PNC Global Investment Servicing to Bank of New York Mellon, The Wall Street Journal reports. The bank wants to make the sale because it needs funds to pay off $7.6 billion in TARP money, according to the story, which cites unnamed sources at the bank.
BNY Mellon already has a substantial custody business in Pershing, which had $770 billion in assets under custody as of December 2009 and 1,150 b/ds, RIAs, and other customers globally. PNC’s Global Investment Servicing unit has $1.8 trillion in assets, 75 million shareholder accounts, and a number of service programs for independent b/ds and RIAs.
“The core business of $2 trillion in fund asset service is reason enough for Bank of New York Mellon to be interested,” says Aite Group senior analyst, Doug Dannemiller. Margins are low in custody and clearing, so scale is an important driver in the dynamics of the industry, he says.
PNC’s Global Investment Servicing also owns Albridge Solutions, an information aggregation program that helps financial advisors tracks client wealth over multiple platforms. Dannemiller sees Albridge as a sweetener in any possible deal, calling it “a very nice complement to cross-sell to other Pershing clearing customers and integrate into their total offering.” Spokespersons for PNC could not be reached for comment; Pershing spokeswoman Barbara Gallo said the company doesn’t comment on “speculation.”
Could other banks with TARP obligations be looking to cut loose low-profit custody/clearing businesses? “I think it’s a review they’re all doing,” Dannemiller says.