Temasek takes stake in Santander custody business

Singaporean sovereign wealth fund Temasek has partnered with private equity firm Warburg Pincus to buy 50% of Santander's custody business in Spain, Brazil and Mexico, in a move set to make the Spanish bank "a leader in the custody business", Santander said.

Santander already looks after €738 billion in assets under custody in the three countries. The transaction values the business at €975 million and will generate a net capital gain for the Santander Group of approximately €410 million, which will be used to strengthen the balance sheet, the bank said.

The boost to the balance sheet will be welcome in light of the comprehensive assessment of the eurozone's big banks currently being undertaken by the European Central Bank (ECB), and the stress tests being conducted by the European Banking Authority (EBA).

Santander will continue to run the business. The bank's chief executive, Javier Marín said the link-up with Temasek and Warburg Pincus will "significantly increase its fund administration, depositary and custody business in markets where we are already leading providers".

The global custody business is becoming increasingly competitive. Northern Trust, which won Central Banking Publications' award for best custodian 2014, plans to invest $1.7 billion over the next three years in new technology alone.

Meanwhile last month, Norway's $884 billion sovereign wealth fund picked Citi to replace JP Morgan as its custodian. Temasek would not disclose who it itself uses for custodian services.