The conversion update, presented at an NYC press briefing, noted that roughly a third of that 88% (the so-called “optimistic”) have given no sign they will leave, while 6.7% have decided to go elsewhere – and 5.3% are “in discussions.” Of the 1300 clients involved, 375 have already been converted, and another 300 are slated for conversion over the next 60 days.
Still, State Street officials characterized the Deutsche acquisition as “your classic 80/20” configuration. Doug Miller, head of client relations, said that the largest 100 of the former Deutsche Bank clients generate about 70% of the revenues. Miller told PLANSPONSOR.com that “six or seven” US clients in that top 100 have not yet committed to stay with State Street, with a comparable number of non-US clients in that group still weighing their options. With the December 31 valuation cycle approaching, State Street anticipates that the status of currently “uncommitted” clients will be resolved in the next 90 days.
The $1.5 billion purchase, which was formally announced last November (see State Street to Acquire Deutsche Custody Business ) firmly established State Street’s position as the world’s largest securities custodian, potentially adding the 1,300 Deutsche clients to the roughly 2,000 in house at the time of the announcement. State Street anticipates that the full GSS integration will be completed on schedule by the middle of 2004. The conversion is hardly a monolithic effort, bringing together clients of the former Bankers Trust, and WM, as well as Deutsche Bank.
Regarding platform selection, Mike Williams, head of the Global Securities Services integration effort, noted that while the decision to migrate the Deutsche master custody business to State Street’s multicurrency Horizons platform was made “early,” final determinations about the fate of other platforms (notably WM’s DB Trader) were not yet nailed down.
In addition to the current revenue streams, Jay Hooley, executive vice president and head of Investor Services, noted that State Street has also secured over $60 million in annualized "out of scope" revenues in the past seven months. Asked to characterize that business, Hooley specifically cited a number of investment operations outsourcing deals, including the May 2003 appointment by Scudder Investments to offer fund accounting and fund administration services for Scudder's fund family, with total net assets of some $135 billion.
As part of the Deutsche transaction, State Street was also granted a long-term contract to provide investment services to Deutsche Asset Management for over $350 billion in assets, according to Hooley.
New NYC Facility
State Street also announced that it has secured a lease for 80,000 square feet of office space at 2 World Financial Center in lower Manhattan, across the street from the World Trade Center site, which it will occupy beginning next January. The space will allow State Street to consolidate several operations in New York and New Jersey, and will eventually house about 300 State Street employees.
Asked to characterize their sense of the pace of master trust/custody mandates in recent months (outside the Deutsche assimilation), Bob Tarter, head of State Street's Institutional Investor Services, noted that the volume of US requests for proposals (RFPs) were "back to what we might have considered normal" a few years ago.
Asked to comment on potential future acquisitions, Hooley demurred. "Acquisition is not a strategy," he said.
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