The Bank of New York Company and Mellon Financial Corporation have agreed to merge to create the world's biggest ‘asset services' company with $16.6trn in assets under custody and corporate trustee, and $8trn in assets under trusteeship.
The move will also create a new top-10 global asset manager with more than $1.1trn of assets under management.
All business will be carried out under the new company name The Bank of New York Mellon Corporation, although The Bank of New York will hold an advantage in the number of seats allocated directors: 10 as against eight from Mellon. The new business will be headquartered in New York.
Pittsburgh, currently headquarters for Mellon, will become the location for the new company’s technology, operations and administration through a so-called “center for excellence”. Total revenues under the new corporate structure are set to be more than $12bn, with about 29% from asset management and private wealth management. Future growth is closely pegged to what is seen as an increasing global need for people to save for retirement.
The market capitalisation value is estimated at $43bn, making it the 11th biggest US financial institution.
By merging the two companies believe they will jointly save some $700m annually, which will come about through cost-cutting, including a near 10% cut in the combined employee base – currently about 40,000.
Jon Little, chief executive Mellon Global Investments, and co-chair of Mellon's European business, says there are unlikely to be any major changes felt anytime soon in the UK, Dublin, and other offshore locations currently served by his part of the new venture.
He expects some 1,300 positions out of the 3,900 slated for elimination over the next three years to come from international operations of both Bank of New York and Mellon. However, in areas such as custody administration the natural rate of attriction may already be 10%-15%, so it could simply be a matter of not hiring new staff rather than any massive culling through involuntary redundancies.
The Bank of New York does not significant business in Europe currently, so any talk of change is likely to focus on Mellon, Little says. However, he does not see any real impact beyond plans to initiate a new brand, which is likely to become "BNYMellon". The story for other asset mangers, of course, is both The Bank of New York and Mellon separately already are big players as transfer and custody agents, a role likely to be boosted by the combined ability to spend more on IT in future.
Sheer size can help in terms of IT expenditure required just to stand still in an era when there are ever greater regulatory demands on asset managers, Little says. The merged company will be able to spend $500m annually on systems without much difficulty, he adds.
If you have any comments you would like to add to this story or would like to speak to its author about a similar subject, telephone Jonathan Boyd on 020 7484 9769 or email [email protected].IFAonline
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