After 60 years in the custody business, Westpac has sold its domestic book to HSBC for A$150 million ($113 million), making HSBC the second largest sub-custodian in the market behind National Australia Bank.

At the end of 2005, Westpac had A$225.8 billion in assets under custody, of which about 40% were sourced locally and 60% from offshore. In the same period, HSBC reported a total of A$11 billion in assets.

In an announcement issued Wednesday (July 26), Westpac said it was approached by HSBC to sell the business and ôafter a strategic review, decided to pursue the option.ö

The bankÆs chief executive officer, David Morgan, says Westpac no longer holds a sustainable comparative advantage in the custody arena. ôWe believe that custody is increasingly an international business and that natural owners require global scale,ö he says.

The decision by one of the countryÆs oldest custodians to get out of the game catapults HSBC almost to the top of the asset tables in the tightly held Australian market. The market leader is National Custodians with A$242.8 billion in assets at the end of 2005.

HSBC says all employees will be offered a role in the combined organisation, though the fate of Barry Dench, the former head of the Westpac business, is not known.

Proceeds from the sale will not have a significant impact on WestpacÆs 2006 full year earnings.

The sale is expected to be concluded at the end of August.