State Street Corporation (STT) wants to bulk up in Europe and its chairman is telling investors that it is eyeing deals for the custody operations of the continent’s largest banks.
U.S. banks dominate the global custody market, and State Street Chairman Jay Hooley said at the Boston company’s annual meeting last week that he believes some European banks will be looking to sell their trust and custody arms because they are unable to compete for the most attractive clients.
"We see in competing against these organizations, they don't have the latest product, they're not making investments and sometimes they don't even have the best talent," Hooley said at the meeting, according to a story published by Reuters Wednesday.
With roughly $23.2 trillion of assets under management, State Street is the world’s third-largest custody bank, behind BNY Mellon (BK) and JPMorgan Chase (JPM). The company has been steadily building up its overseas assets in the last decade and Hooley has made no secret of his desire to grow in Europe. Reuters reported that State Street has as much as $2 billion of capital available for acquisitions.
Some European banks could be looking to part with their custody operations because they need to bolster capital reserves. More than 30 of the continent’s banks were told by regulators late last year that would need to raise fresh capital to withstand another economic downturn and that figure could grow if the debt crises in Spain, Greece and other countries worsen.
But some observers told Reuters that European banks might be reluctant to part with their trust operations because they generate a steady stream of income in an otherwise uncertain banking climate.
Nonetheless, Hooley said he expects some banks to divest their trust operations. "We think over time, as we have shown in the past 10 years, there's an opportunity to make acquisitions in this space, if they are smart, well-priced and strategically in the right place," he said at the annual meeting.