Securities lending revenue for Q2 down 18 percent
26 July 2019 New York
Image: Shutterstock
IHS Markit’s Sam Pierson revealed that securities lending revenue for Q2 stood at $2.59 billion, down 18 percent from Q2 2019.
The H1 revenues for this year were reported at around $5 billion, down 15 percent from last year, according to Pierson.
Results showed that Q2 this year, compared to the average of the last threes years, saw a decline of 10 percent.
Within that, the equity revenue yield dropped 17 percent, corporate bonds decreased by 18 percent, and government bonds are down by 24 percent.
Pierson outlined that part of the picture is the supply of securities into the market. Each of the equities, government bonds and corporate bonds reached a new all-time high in lendable assets in Q2.
The average lendable assets for the first half of this year was reported at $20.8 trillion but the total at the end of Q2 was $22.3 trillion with some of the lower balances of the earlier part of the year following the Q4 sell-off weighing on that a little bit, Pierson explained.
He indicated that the supply of securities into the market could be weighing on fees, while the demand picture is reasonably strong relative to other years, excluding borrow demand for US treasuries and European equities.
Overall, average fees regionally for equities are 5 percent lower for Q2 2019 than last year.
Meanwhile, trends in the changes in collateral in recent years have been towards non-cash collateral, Pierson said.
He said: “The decline in balances this year in percentage terms has affected cash and non-cash similarly. Non-cash balances are down 7.5 percent year-on-year, while cash balances are down 6.4 percent.”
“There is no bias there, with the ratio of cash to non-cash being stable but given that the non-cash balances are significantly larger at around $1.5 trillion, the decline in non-cash balances is also larger at around $120 billion, versus cash balances at around $39 billion.”
Pierson also looked at trends in exchange-traded funds (ETF) lending and highlighted that last year was a record year for ETF revenues with $398 million, while H1 2019 revenues came in at $155 million representing a 28 percent year on year decline.
ETFs generated 3.9 percent of all equity revenue in H1, and fixed income and emerging markets equity drive special balances, Pierson explained.
Looking at average balances, the Asia balances are about the same as last year so that underperformance is more of a function of fee spreads.
Pierson added: “In Europe, we saw a fair bit lower balances overall and a fairly significant underperformance relative to last year.”
“There is a marginal increase in specials balances in Q2 in the US, which was mainly a result of Lyft and Beyond Meat.”
“Canada specials continue to be strong, and we did see some increase in UK equity special balances, but there was a decline in Asia as a result of fees.”
The H1 revenues for this year were reported at around $5 billion, down 15 percent from last year, according to Pierson.
Results showed that Q2 this year, compared to the average of the last threes years, saw a decline of 10 percent.
Within that, the equity revenue yield dropped 17 percent, corporate bonds decreased by 18 percent, and government bonds are down by 24 percent.
Pierson outlined that part of the picture is the supply of securities into the market. Each of the equities, government bonds and corporate bonds reached a new all-time high in lendable assets in Q2.
The average lendable assets for the first half of this year was reported at $20.8 trillion but the total at the end of Q2 was $22.3 trillion with some of the lower balances of the earlier part of the year following the Q4 sell-off weighing on that a little bit, Pierson explained.
He indicated that the supply of securities into the market could be weighing on fees, while the demand picture is reasonably strong relative to other years, excluding borrow demand for US treasuries and European equities.
Overall, average fees regionally for equities are 5 percent lower for Q2 2019 than last year.
Meanwhile, trends in the changes in collateral in recent years have been towards non-cash collateral, Pierson said.
He said: “The decline in balances this year in percentage terms has affected cash and non-cash similarly. Non-cash balances are down 7.5 percent year-on-year, while cash balances are down 6.4 percent.”
“There is no bias there, with the ratio of cash to non-cash being stable but given that the non-cash balances are significantly larger at around $1.5 trillion, the decline in non-cash balances is also larger at around $120 billion, versus cash balances at around $39 billion.”
Pierson also looked at trends in exchange-traded funds (ETF) lending and highlighted that last year was a record year for ETF revenues with $398 million, while H1 2019 revenues came in at $155 million representing a 28 percent year on year decline.
ETFs generated 3.9 percent of all equity revenue in H1, and fixed income and emerging markets equity drive special balances, Pierson explained.
Looking at average balances, the Asia balances are about the same as last year so that underperformance is more of a function of fee spreads.
Pierson added: “In Europe, we saw a fair bit lower balances overall and a fairly significant underperformance relative to last year.”
“There is a marginal increase in specials balances in Q2 in the US, which was mainly a result of Lyft and Beyond Meat.”
“Canada specials continue to be strong, and we did see some increase in UK equity special balances, but there was a decline in Asia as a result of fees.”
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