State Street’s pain has turned out to be JPMorgan’s gain.
BlackRock, the world’s largest asset manager, announced that it will move over $1 trillion of its assets from the custody of State Street to rival JP Morgan to cut costs for clients. JPMorgan noted it expects to take charge of BlackRock’s the next two years.
The bank has been working on growing its Custody & Fund Services business, and the BlackRock deal provides a huge boost to these efforts. Custody involves things like settlement, safekeeping and asset servicing of securities, and accounting and administration services for funds.
“This historic deal expands our relationship with BlackRock and is a validation of the investments we’ve made and the resources we’ve added to the custody and fund services business,” Daniel Pinto, CEO of JPMorgan’s corporate and investment bank, said in a press release on Wednesday.
JPMorgan’s business with existing custody services clients has grown by 10% in the last 12 months, and 95% of its clients also use either the bank’s investment banking or markets business. The unit enjoys a healthy operating margin of around 25%.