Aiming to keep pace with the rise in global investing and securities processing, State Street Boston Corp. is upgrading foreign offices.
The bank's Toronto-based Canadian affiliate, State Street Canada Inc., has been granted a federal trust license and will operate under the name State Street Trust Company Canada.
The company said it plans to use its new license to set up treasury operations and provide banking, trading, and risk management services. The new license also will allow State Street to act as a trustee for pension funds, deferred income plans and pooled investments, and serve as a custodian for Canadian mutual funds.
Marshall N. Carter, chairman and chief executive, said State Street plans to further invest in products and technology in Canada in order to expand services to institutional investors.
State Street recently obtained a banking license for an office in Munich. The Boston-based bank also has applied to Taiwanese banking authorities to upgrade its representative office in Taipei to a branch. State Street plans to develop short-term trade financing to Taiwanese companies and market the bank's custody and asset management services.
Offices in other countries are also slated for improvements and expansion, Mr. Carter said.
State Street, the second largest securities custodian among U.S. banks after Bank of New York Co., has approximately $1.9 trillion assets under custody and $180 million in assets under management.
The bank's decision to upgrade its network of offices in 16 foreign countries comes as cross-border investments by institutional investors is increasing and as the U.S. securities custody and processing business is consolidating.
As part of the consolidation trend, the bank this month acquired BayBank Inc.'s corporate bond trusteeship business which has $4.4 billion in assets.
"There are about 70 countries around the world you can invest in with reasonable security," Mr. Carter said. "You can no longer manage the increased complexity of cross-border investments without massive computer power and global custodians."
Mr. Carter estimated worldwide securities investments now total $24.5 trillion. Roughly $15 trillion of that is invested in bonds and $9.5 trillion in equities.
He added that an aging population worldwide, and a need to build alternative retirement funds to government-sponsored social security programs is likely to increase the market for domestic as well as international investments in securities.
Around 16% of the population in industrialized countries is now 60 years or older, but that figure could rise to as high as 33% by the year 2030, Mr. Carter said.
"There will be a substantial increase in pension fund assets," he predicted.
Analysts did not dispute Mr. Carter's views or his commitment to taking a long-term view. But they insisted the trends he outlined are occurring slowly. They said State Street faces more immediate problems in the near term, particularly in the United States.
"Global trends are strong, but developing only gradually," said David L. Verlander, an analyst with NatWest Securities Corp. "At the same time, the company must contend with severe price competition and a hostile operating environment."
The analyst also suggested State Street might need to reconsider its longstanding policy of building its business from within and opt for further acquisitions in order to strengthen its U.S. franchise.
There is growing competition on pricing in the securities custody business, Mr. Verlander said.
