Lending revenue down for 2019
02 January 2020 London
Image: Shutterstock
Macro market uncertainty and skittish hedge funds resulted in securities lending revenue falling by 13 percent last year, compared to the bumper year in 2018, according to DataLend.
The latest figures from the market data provider, which is owned by EquiLend, showed that lenders earned $8.66 billion in 2019, representing a decline in revenue across all regions globally and in both the equity and fixed income markets.
On-loan balances and fees to borrow also fell in all regions, with the exception of Asia-Pacific, which experienced a marginal increase in balance, DataLend explained.
The year-on-year drop-off was widely expected by the securities finance industry following the previous record-breaking year for global revenue ($10.7 billion), which marked the industry's best result since the 2008 financial crisis.
Warning signs that a repeat performance was not on the cards initially emerged in , when Q1 and Q2 revenue fell by 18 percent and 15 percent respectively, compared to the year before. Revenue in H1 2019 overall peaked at around $5 billion, down 15 percent from 2018.
Lacklustre H1 revenue only 鈥渟lightly recovered鈥� in Q3 and Q4, driven primarily by an uptick in the equity markets, where a handful of specials 鈥� which DataLend classifies as securities trading at 500bps and above 鈥� were responsible for a significant portion of overall revenue gains.
The global top-five revenue-generating securities last year were , Cannabis producers Aurora Cannabis and Canopy Growth, the Chinese automobile manufacturer NIO, and the French retail giant Casino Guichard-Perrachon, which together generated $680 million for lenders.
Commenting on today鈥檚 figures, Nancy Allen, global product owner of DataLend, highlights that global macro uncertainty, driven by trade wars, Brexit and central bank actions, resulted in a general lack of conviction by hedge funds and alternative investment managers in 2019.
鈥淎s uncertainty loomed, the securities lending markets experienced lower on-loan balances and fees globally,鈥� she adds. 鈥淗owever, a significant amount of revenue was generated from lending a very concentrated number of securities.
As a result, Allen notes, beneficial owners lending those 鈥榟ot鈥� securities likely will have experienced a more positive 2019 than others.
The latest figures from the market data provider, which is owned by EquiLend, showed that lenders earned $8.66 billion in 2019, representing a decline in revenue across all regions globally and in both the equity and fixed income markets.
On-loan balances and fees to borrow also fell in all regions, with the exception of Asia-Pacific, which experienced a marginal increase in balance, DataLend explained.
The year-on-year drop-off was widely expected by the securities finance industry following the previous record-breaking year for global revenue ($10.7 billion), which marked the industry's best result since the 2008 financial crisis.
Warning signs that a repeat performance was not on the cards initially emerged in , when Q1 and Q2 revenue fell by 18 percent and 15 percent respectively, compared to the year before. Revenue in H1 2019 overall peaked at around $5 billion, down 15 percent from 2018.
Lacklustre H1 revenue only 鈥渟lightly recovered鈥� in Q3 and Q4, driven primarily by an uptick in the equity markets, where a handful of specials 鈥� which DataLend classifies as securities trading at 500bps and above 鈥� were responsible for a significant portion of overall revenue gains.
The global top-five revenue-generating securities last year were , Cannabis producers Aurora Cannabis and Canopy Growth, the Chinese automobile manufacturer NIO, and the French retail giant Casino Guichard-Perrachon, which together generated $680 million for lenders.
Commenting on today鈥檚 figures, Nancy Allen, global product owner of DataLend, highlights that global macro uncertainty, driven by trade wars, Brexit and central bank actions, resulted in a general lack of conviction by hedge funds and alternative investment managers in 2019.
鈥淎s uncertainty loomed, the securities lending markets experienced lower on-loan balances and fees globally,鈥� she adds. 鈥淗owever, a significant amount of revenue was generated from lending a very concentrated number of securities.
As a result, Allen notes, beneficial owners lending those 鈥榟ot鈥� securities likely will have experienced a more positive 2019 than others.
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