Securities lending revenue stumbles in April
06 May 2020 New York
Image: Toria/Shutterstock.com
Global securities lending revenues totalled $700m, a decline of 14% compared with April 2019, according to IHS Markit data.
Compared with March, the month-on-month average daily revenues declined by 5.6 percent.
The US was the only region to record revenue growth last month, albeit modest, compared to significant revenue shortfalls in Europe and Asia.
US equity lending revenues came in at $190 million for April, an increase of 2.7 percent year-on-year (YoY).
IHS Markit’s securities finance director, Sam Pierson, explains in a research note that “a headwind on the horizon for YoY comparison of US equity returns is the run of IPOs which kicked off with LYFT on 29 March 2019”.
He adds that lending revenue in the second half of 2019 were 45 percent higher than the first six months, “which will be a tough act to follow”.
In Europe, equity lending remains in a downtrend, with $116 million in April revenues reflecting a 41 percent YoY decline. Wirecard Ag (WDI) continues to be the most revenue-generating security in the region, with $6.5 million in April revenue, according to IHS Markit.
The WDI corporate bond has seen declining borrow balances, Pierson explains, adding that this likely relates as much to it being the most expensive to borrow corporate bond globally as it does to an underlying desire to borrow the bonds.
Meanwhile, Asia equity lending revenues continue to be subdued, with April revenues of $120 million reflecting a 29 percent YoY decline, IHS Markit data shows. The downturn mirrors the 29 percent YoY decline also seen in March.
Pierson says the blame for the shortfall is “entirely lower fees, with balances in the region increasing by 4.8 percent YoY in April”.
He notes that the one bright spot is that Asia exchange-traded fund lending revenues continue to increase, albeit from a relatively low base, with $2.9 million in April revenue reflecting 230 percent YoY growth and the most for any month this year.
Compared with March, the month-on-month average daily revenues declined by 5.6 percent.
The US was the only region to record revenue growth last month, albeit modest, compared to significant revenue shortfalls in Europe and Asia.
US equity lending revenues came in at $190 million for April, an increase of 2.7 percent year-on-year (YoY).
IHS Markit’s securities finance director, Sam Pierson, explains in a research note that “a headwind on the horizon for YoY comparison of US equity returns is the run of IPOs which kicked off with LYFT on 29 March 2019”.
He adds that lending revenue in the second half of 2019 were 45 percent higher than the first six months, “which will be a tough act to follow”.
In Europe, equity lending remains in a downtrend, with $116 million in April revenues reflecting a 41 percent YoY decline. Wirecard Ag (WDI) continues to be the most revenue-generating security in the region, with $6.5 million in April revenue, according to IHS Markit.
The WDI corporate bond has seen declining borrow balances, Pierson explains, adding that this likely relates as much to it being the most expensive to borrow corporate bond globally as it does to an underlying desire to borrow the bonds.
Meanwhile, Asia equity lending revenues continue to be subdued, with April revenues of $120 million reflecting a 29 percent YoY decline, IHS Markit data shows. The downturn mirrors the 29 percent YoY decline also seen in March.
Pierson says the blame for the shortfall is “entirely lower fees, with balances in the region increasing by 4.8 percent YoY in April”.
He notes that the one bright spot is that Asia exchange-traded fund lending revenues continue to increase, albeit from a relatively low base, with $2.9 million in April revenue reflecting 230 percent YoY growth and the most for any month this year.
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