Global lender revenue fell 12% YoY in 2020, says DataLend
04 January 2021 US
Image: Nikola One
Global revenue for agent lenders fell by 11.6 percent year-over-year (YoY) in 2020, representing $7.66 billion, according to DataLend, the market data division of EquiLend.
Despite a year high volatility, usually an indicator of strong returns for the securities finance universe, the market failed to replicate the $8.66 billion returns for lenders recorded in 2019. Global revenue was also down 20.7 percent compared to the $9.96 billion in record-setting 2018.
Global broker-to-broker activity, where broker-dealers lend and borrow securities from each other, totalled an additional $2.87 billion in revenue in 2020, a 1.6 percent decrease YoY.
The top five revenue-generating securities in the global securities lending market in 2020 were US IT firms Match Group, cannabis product manufacturer Canopy Growth, German car battery manufacturer Varta, Inovio Pharmaceuticals and electric truck manufacturer Nikola Corp, which together generated $482 million in lending revenue in 2020.
The data provider says the decline in lender-to-broker revenue was experienced across equity markets globally: Americas (-3.4 percent), Europe, the Middle East and Africa (EMEA) (-19.2 percent) and Asia Pacific (-26.8 percent).
Across fixed income globally, corporate debt was down 37 percent, while government debt finished the year up 15.3 percent relative to 2019.
As the COVID-19 pandemic first took hold in Asia and then Europe in the opening months of 2020, the subsequent equity markets drop-offs led to lower on-loan volumes, while the spate of short selling bans across both regions ensured lacklustre revenues in the first six months of the year.
Meanwhile, Nancy Allen, global product owner of DataLend, says that in the Americas, “while equity loan values declined YoY, average fees increased, driven by a number of COVID- and non-COVID related names trading at very high fees to borrow”.
“However,” Allen states, “as the year progressed, short positions in US equities dropped to significant lows as markets not only rebounded but hit record highs.
She adds: “As a result, the lending market experienced depressed fees and on-loan balances, which drove the considerable decline in revenue. As we approached the year-end, equity lending revenue in the Americas and EMEA did increase as there was a slight uptick in short activity.”
Despite a year high volatility, usually an indicator of strong returns for the securities finance universe, the market failed to replicate the $8.66 billion returns for lenders recorded in 2019. Global revenue was also down 20.7 percent compared to the $9.96 billion in record-setting 2018.
Global broker-to-broker activity, where broker-dealers lend and borrow securities from each other, totalled an additional $2.87 billion in revenue in 2020, a 1.6 percent decrease YoY.
The top five revenue-generating securities in the global securities lending market in 2020 were US IT firms Match Group, cannabis product manufacturer Canopy Growth, German car battery manufacturer Varta, Inovio Pharmaceuticals and electric truck manufacturer Nikola Corp, which together generated $482 million in lending revenue in 2020.
The data provider says the decline in lender-to-broker revenue was experienced across equity markets globally: Americas (-3.4 percent), Europe, the Middle East and Africa (EMEA) (-19.2 percent) and Asia Pacific (-26.8 percent).
Across fixed income globally, corporate debt was down 37 percent, while government debt finished the year up 15.3 percent relative to 2019.
As the COVID-19 pandemic first took hold in Asia and then Europe in the opening months of 2020, the subsequent equity markets drop-offs led to lower on-loan volumes, while the spate of short selling bans across both regions ensured lacklustre revenues in the first six months of the year.
Meanwhile, Nancy Allen, global product owner of DataLend, says that in the Americas, “while equity loan values declined YoY, average fees increased, driven by a number of COVID- and non-COVID related names trading at very high fees to borrow”.
“However,” Allen states, “as the year progressed, short positions in US equities dropped to significant lows as markets not only rebounded but hit record highs.
She adds: “As a result, the lending market experienced depressed fees and on-loan balances, which drove the considerable decline in revenue. As we approached the year-end, equity lending revenue in the Americas and EMEA did increase as there was a slight uptick in short activity.”
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