Christopher Sturdy arrived in Hong Kong nearly a year ago to a newly created position as chairman of Asia-Pacific for Bank of New York Mellon. It is the first time the firm has placed all of its business lines under one regional head, and represents a ramping up of its ambitions.
The idea came after the 2007 merger between BNY and Mellon, when the senior management was able to survey what exactly they had under the combined entity. The Asian business was growing four times as fast as those in Europe, which in turn were growing twice as fast as North America. The firm realised it needed to boost Asia-based resources and continues to hire people in certain markets.
"We're all right at the senior level but we need more boots on the ground, in-country, for sales and client relations," Sturdy notes.
The global financial crisis has been of relative benefit to BNY Mellon, which also gives it the confidence to go out and hire right now. "Ours is not the sexiest business but the credit crisis has shown that our role is critical, and central to that of other financial institutions," he says.
The bank's key business lines are asset management (in Asia, run by David Jiang), corporate trust (Gary Lew), broker/dealer services and alternative investment services (Andrew Gordon), asset services including custody (Leow Chong-Jin), depository receipts (Chris Kearns) and treasury services (Richard Brown). There is also, in Singapore, a regional arm of asset servicing, originally that of clearing firm Pershing, which was acquired by BNY.
It is Sturdy's job to better integrate these operations, where appropriate, from market to market. Out of the 12 markets in which BNY Mellon operates in Asia, there are five in its top tier, where he is concentrating his efforts: Japan, China, Korea, India and Australia. Sturdy, who arrived last year having run the DR business in New York, spent his first several months validating these as the bank's key markets. Now it's time to build, he says.
In Japan and Australia, the focus is on asset management and custody for those nations' large savings pools. In the emerging markets, it's about bringing BNY Mellon's securities services onshore.
In Korea, for example, BNY Mellon has a branch of 20 years standing (thanks to BNY having acquired Irving Bank, which had a wide Asia footprint, in 1988). Today BNY Mellon conducts cross-border asset servicing, corporate trust and DRs. It sees its growth in Korea more in asset management (last year its AM arm opened a rep office in Seoul) and, where possible, securities services, if it can JV with a local partner.
Asset management is institutional-only, preferably providing sub-advisory services for international portfolios. The bank already works with local financial institutions in the areas of cash and trade finance, DRs and trusteeship, and Sturdy wants to see these relations extend to cooperation in the asset-management field. "It's a matter of introducing our boutique asset managers to local wealth managers and institutional investors," he says.
Sturdy adds value to this strategy because the banking relationships belong to BNY (Irving), but the asset-management capability is Mellon's, which has 17 boutiques in its stable, including Newton Investment Management and Hong Kong-based Hamon Investments.
In China, the Irving legacy goes back over 50 years and the bank maintains relationships with domestic financial institutions for cash and trade, custody and FX, all cross-border. It has also provided QDII asset servicing and sub-advisory, including for China Southern Fund Management.
Now, thanks to a funds JV with Western Securities, a domestic partner, BNY Mellon can do local asset management; this JV is not yet live as it is pending regulatory approval, but Sturdy hopes to be in business by the fourth quarter. The firm is in the process of staffing under CEO Hu Bin in Shanghai, which is required before the regulators will sign off. "This adds a domestic string to our bow," Sturdy says.
The bank is also applying to upgrade its Beijing rep office into a branch, which would allow it to put "real product people" on the ground. "Where else is there space in other securities services?" Sturdy wonders, noting the bank would be interested in partnering with local counterparts if BNY Mellon can help them build their domestic capability. (His pitch: BNY Mellon doesn't do broking, retail banking or wealth management, so it's not a threat to local financial institutions; nor is it interested in taking equity stakes.)
Sturdy calls India "the big conundrum". In addition to a longstanding rep office in Mumbai, the bank's software development is run by a big office in Chennai, with over 3,000 employees, a legacy of the Pershing acquisition that was expanded to provide support to all of BNY Mellon's businesses. There's also a processing office in Pune with another 1,125 employees.
India's a puzzler because it is such a retail market in areas such as asset management, but BNY Mellon is not a retail firm, it limits itself to the business-to-business world. It currently has some business in India for cash and trade, corporate trust and cross-border custody. To grow this would mean expanding its rep office to a branch. "We're still looking at whether it makes sense to localise in order to build an asset-management business," Sturdy says.
The opportunity, he says, would be to bring international fund products to local wealthy investors. Today there is a quota for such products in India but demand has been scant. Sturdy recognises it will take some time for demand to emerge. The question is timing. "If we wait until it's about to happen, it will be too late. We're looking at whether we can develop the infrastructure and capacity, without facing a big cost." He says a funds JV is one possibility, but the scale required to be effective in India means such a project cannot be entered into lightly.
Finally, in Australia, BNY Mellon has a trust company (having bought 100% of a previous JV called Trust Company of Australia) and a corporate trust business acquired from JP Morgan Chase (via a swap of businesses). It has a new asset-management JV in Sydney called Ankura Capital, and a BNY Mellon asset-management office for sub-advisory work. The BNY arm has a Melbourne office for DRs and cash and trade, and the bank is now applying to turn this into a branch license, again so it can put salespeople on the ground.
The one key business of BNY Mellon that Sturdy is not bringing to Asia is Mellon's huge private-banking franchise in America, partly because its managers see more opportunities in the US, and partly to ensure it doesn't undermine BNY Mellon's relationship with Asian financial institutions.