Barclays considers custody sale

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The Independent Online
Barclays Bank is talking to Morgan Stanley about selling its global custody business in a deal that could create one of the world's biggest global custodians. Global custody covers services ranging from safe-keeping of shares and bonds to investment accounting and performance measurement.

In a statement issued yesterday the banks said that "due to their extensive customer/provider interrelationships in global custody Barclays and Morgan Stanley are in discussions to explore the potential for future co-operation".

This was interpreted as signal that the two were in the process of striking a deal in which Morgan Stanley would buy the Barclays business which handles approximately pounds 170bn of funds a year.

Morgan Stanley wants to expand in an area that provides a stable source of income as well as giving it an entry point in its search for new clients in other areas of its business. The deal would push Morgan Stanley, which according to the US magazine, Institutional Investor, is ranked 12th in size with $102bn under management, well into the world's top 10 of custodians.

It would allow the US investment bank to challenge rivals, including Deutsche Bank and Citibank, but leave Chase Manhattan well in the lead with its $1,000bn in custody.

No price has been placed on the deal. However, when Lloyds Bank bought the pounds 57bn custody business of National Westminster Bank last year, it paid about pounds 17m, suggesting this deal could be worth three times that amount.

It comes amid growing consolidation among global players and the realisation that to remain competitive, custodians must invest larger amounts in new technology. Earlier this year, Royal Bank of Scotland became one of the biggest custodians after reaching a deal with Mercury Asset Management to set up a joint bank, RBS Trust Bank.

Apart from the Lloyds purchase from NatWest, Bank of New York, the third- largest custodian, took over the business of Bank of America and JP Morgan.