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SEB sees major opportunities in custody

Nordea has announced that it is closing its sub-custody business. Thus SEB is the only remaining larger regional actor in the Nordic market. This opens major opportunities, say Joachim Alpen and Ann Magnusson.

"This is a gigantic opportunity to continue growing in sub-custody, which is a profitable and important business. It is also good for our total custody business over the long term," says Ann Magnusson, head of Investor Services.

Custody consists of two parts. First there is global custody, where banks help financial institutions with their securities services worldwide. To be able to do this, the global custody bank in turn uses the services of local custodians in various markets. This is what is referred to as sub-custody.

In general, custody is a technology-dependent, low-margin business that requires large scale to be profitable.

In 2018 and 2019 two of SEB Nordic competitors announced that they are leaving the sub-custody market, and now Nordea is following them and shutting down its sub-custody business. In its place the bank is referring its customers to a global player that is now expanding its capacity to deliver sub-custody services in the Nordic region.

Strategic decision

SEB has chosen another path. In 2014 the bank made the strategic decision to invest in a new technical platform in order to stay relevant for its global custody customers. This was done through a partnership with the US custody bank Brown Brothers Harriman, which provides the infrastructure for the new Institutional Global Custody platform.

"This is great confirmation that our long-term approach is paying off. It is expensive being in this race – it has been tough at times, but now we have a position that no other Nordic bank has," says Joachim Alpen, co-head of the Large Corporates & Financial Institutions division.

How has custody business developed in recent years?

"It is going very well," says Ann Magnusson. "We set a super aggressive growth target and have made good progress on that journey. Between 2017 and 2020 we brought in 1,200 billion Swedish kronor in new assets, and in total we now have 12,400 billion kronor in assets under custody."

Within Global Custody, SEB has grown by 65 per cent during the past four years. In sub-custody, SEB has tripled the volume of Nordic securities in custody during the same period.

"This means that we have grown twice as fast as the market, according to an analysis of assets and revenues in post-trade services conducted by Boston Consulting Group. SEB is by far the largest provider in the Nordics and is ready to take over clients from Nordea as they now exit the business"