Global securities finance revenues rise by 2% YoY for February
09 March 2022 Global
Image: AdobeStock/nirutft
Global securities finance revenues have risen by 2 per cent YoY during February to US$825 million, according to recently published figures from IHS Markit
This YoY increase relative to February 2021 data was driven by growing loan balances, with most major lending asset classes experiencing growth apart from EMEA and American Depositary Receipts (ADRs).
However, month-on-month global securities finance revenues were slightly down from the US$836 million recorded in January.
After a weak January, American equity revenues recovered in February, rising 5 per cent YoY to US$305 million. This was driven by a 22 per cent YoY increase in average loan balances, notwithstanding a 14 per cent contraction in average fees for Americas equity lending and utilisation remaining flat over the period.
APAC equity finance revenues continue to perform strongly, rising 25 per cent YoY to US$155 million for February — following on the back of a 37 per cent YoY rise in January. For the APAC region, average equity loan balances were up 10 per cent to US$230 billion, with the average loan fee rising 13 per cent to 0.88 per cent.
Taiwan and South Korea again recorded powerful YoY growth for February. Taiwan saw equity finance revenues rise 172 per cent to US$45 million, with average loan fees up 72 per cent to 2.53 per cent. In South Korea, equity finance revenues were up 365 per cent YoY to US$30 million, with average loan fees up 81 per cent to 2.33 per cent.
This said, month-on-month, equity finance revenues contracted in both of these markets, with Taiwan down 8 per cent and South Korea down 14 per cent relative to January 2022 figures.
For EMEA, equity finance revenues were down 3 per cent YoY to US$74 million — and down 7.5 per cent on January 2020 revenues. Average loan balances have increased 16 per cent YoY to US$229 billion, but average fee rates have dropped 16 per cent YoY to 0.42 per cent, reflecting the impact of fee compression on revenue generation through the region.
Revenue from lending ADRs contracted 88 per cent YoY and 24 per cent month-on-month to US$16 million for February. IHS Markit indicates that this was the lowest monthly ADR lending revenue recorded since October 2020.
In contrast, IHS Markit notes that use of exchange-traded products in institutional long portfolios and for short hedging has resulted in record highs for lendable assets and loan balances for this asset class. This delivered a record US$70 million in lending revenue, up 78 per cent YoY.
For fixed income lending, fee-spread revenues from global sovereign debt rose 12 per cent YoY to US$128 million for February, although positive fee balances were down 5 per cent month-on-month.
US government bond loans generated US$63 million, characterised by a 7 per cent contraction YoY in positive fee balances and a 7 per cent decline in average fees.
For European government debt, lending revenues rose 35 per cent YoY to US$48.6 million, driven by a 9 per cent YoY rise in average fees and a 24 per cent YoY increase in average balances.
IHS Markit notes that inflationary pressures have impacted demand for US treasuries and this is expected to spill over into the EMEA region in coming months — with the inflationary impact of the Russia-Ukraine crisis also likely to weigh on borrower demand in months ahead.
On a positive note, lending revenues from corporate debt increased 102 per cent YoY to a record US$64 million during February. This high point has been powered by a rise in loan balances (up 37 per cent YoY) and average fee spreads (up 48 per cent YoY to 0.29 per cent).
This average fee trend indicates stronger demand for borrowing high-yield corporate bonds, although these fee rates have not yet reached the levels registered in early 2019.
This YoY increase relative to February 2021 data was driven by growing loan balances, with most major lending asset classes experiencing growth apart from EMEA and American Depositary Receipts (ADRs).
However, month-on-month global securities finance revenues were slightly down from the US$836 million recorded in January.
After a weak January, American equity revenues recovered in February, rising 5 per cent YoY to US$305 million. This was driven by a 22 per cent YoY increase in average loan balances, notwithstanding a 14 per cent contraction in average fees for Americas equity lending and utilisation remaining flat over the period.
APAC equity finance revenues continue to perform strongly, rising 25 per cent YoY to US$155 million for February — following on the back of a 37 per cent YoY rise in January. For the APAC region, average equity loan balances were up 10 per cent to US$230 billion, with the average loan fee rising 13 per cent to 0.88 per cent.
Taiwan and South Korea again recorded powerful YoY growth for February. Taiwan saw equity finance revenues rise 172 per cent to US$45 million, with average loan fees up 72 per cent to 2.53 per cent. In South Korea, equity finance revenues were up 365 per cent YoY to US$30 million, with average loan fees up 81 per cent to 2.33 per cent.
This said, month-on-month, equity finance revenues contracted in both of these markets, with Taiwan down 8 per cent and South Korea down 14 per cent relative to January 2022 figures.
For EMEA, equity finance revenues were down 3 per cent YoY to US$74 million — and down 7.5 per cent on January 2020 revenues. Average loan balances have increased 16 per cent YoY to US$229 billion, but average fee rates have dropped 16 per cent YoY to 0.42 per cent, reflecting the impact of fee compression on revenue generation through the region.
Revenue from lending ADRs contracted 88 per cent YoY and 24 per cent month-on-month to US$16 million for February. IHS Markit indicates that this was the lowest monthly ADR lending revenue recorded since October 2020.
In contrast, IHS Markit notes that use of exchange-traded products in institutional long portfolios and for short hedging has resulted in record highs for lendable assets and loan balances for this asset class. This delivered a record US$70 million in lending revenue, up 78 per cent YoY.
For fixed income lending, fee-spread revenues from global sovereign debt rose 12 per cent YoY to US$128 million for February, although positive fee balances were down 5 per cent month-on-month.
US government bond loans generated US$63 million, characterised by a 7 per cent contraction YoY in positive fee balances and a 7 per cent decline in average fees.
For European government debt, lending revenues rose 35 per cent YoY to US$48.6 million, driven by a 9 per cent YoY rise in average fees and a 24 per cent YoY increase in average balances.
IHS Markit notes that inflationary pressures have impacted demand for US treasuries and this is expected to spill over into the EMEA region in coming months — with the inflationary impact of the Russia-Ukraine crisis also likely to weigh on borrower demand in months ahead.
On a positive note, lending revenues from corporate debt increased 102 per cent YoY to a record US$64 million during February. This high point has been powered by a rise in loan balances (up 37 per cent YoY) and average fee spreads (up 48 per cent YoY to 0.29 per cent).
This average fee trend indicates stronger demand for borrowing high-yield corporate bonds, although these fee rates have not yet reached the levels registered in early 2019.
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