State Street blames tighter spreads for YoY earnings drop off
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State Street blames tighter spreads for YoY earnings drop off 20 January 2021US Reporter: Drew Nicol
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State Street recorded a slight uptick in securities finance revenue quarter-on-quarter (QoQ) for Q4 2020 but, full-year earnings still represent a multi-year low for the agent lender, primarily due to lower balances and spreads.
Q4 revenue reached $88 million, up from $84 million in Q3 but down on the $92 million achieved in each of the first two quarters of 2020.
The Q4 QoQ 5 per cent uptick was due primarily to higher agency lending and Enhanced Custody balances.
Meanwhile, Q4 2020 revenue was down 21 per cent year-on-year from $111 million, which State State says is primarily driven by lower balances and spreads on its Enhanced Custody offering.
In its latest earning report State Street notes that 4Q 2020 securities on-loan balances outpaced industry growth, based on IHS Markit securities finance market data on average loan balances for equities and fixed income.
Total securities finance revenue for the year was $356 million, marking a 24.4 per cent decrease from $471 million the year prior and marking the bank’s lowest yearly returns since at least 2015 when returns fell just short of $500 million.
A YoY earnings drop-off was a key trend of 2020 across the market with global securities lending revenue decreasing 7 per cent from 2019 to sit at $9.3 billion.
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