Equity lending survey - borrower results

Credit Suisse dominated the lenders rating borrowers section of this year's Global Investor/ISF equity lending survey.

Among group one of borrowers - which encompassed the 20 largest participating recipients of equity - Credit Suisse was rated by lenders as best overall borrower in the unweighted, weighted and weighted by importance tables.

Click here to see a pdf of the full results of this side of the survey.

In group two, Credit Agricole was top borrower in the weighted, unweighted and weighted by importance tables. 

The results of the survey were announced at Global Investor/ISF Equity Lending and Synthetic Finance Awards 2012, held on the evening of Thursday September 20 at the Grange Hotel, St Paul's, London.

Click here to see the results of the borrowers rating lenders section of the survey.

In this year’s equity lending survey the geographical spread of lenders was weighted towards EMEA (40%), followed by Asia Pac (35%) and the Americas (24%) and a record 2,983 individual responses were received. The vast majority of lenders dealt with less than 20 counterparties (43%) while a further third (31%) dealt with 20-40 counterparties.



Lenders which dealt with between 40-60 counterparties represented 15% of respondents while only 10% dealt with more than 60. The total value on loan was less than $25bn for 65% of respondents, comparable to last year’s survey (62%). A further 16% had a total value on loan between $25-50bn, while 10% had $50-100bn on loan and 8% had greater than $100bn on loan. Lenders were asked to rank their top three reasons for selecting a counterparty.

The most important reason for selection was relationship management (31% ranked this number one), followed by pricing (30%) then market capability (16%). Market knowledge, operational efficiency were considered less important and automation unimportant. The amount of business conducted on an exclusive basis declined compared to last year with 55% of lenders conducting 5% (the smallest option on the questionnaire in exclusives compared to 26% last year).

That said, there were lenders that did 100% of their business in exclusive arrangements. Nearly a quarter (24%) said their total business conducted via an exclusive increased on last year, while 15% said it decreased and 61% said it stayed the same.
Lenders were asked to rank various attributes of borrowers in order of how important they are on an ongoing basis. In Figure 1 (below), 10 service categories were ranked number one by the percentage of lenders stated.



Respondents were also asked to rank the regulatory initiatives of most concern to them. Basel III and financial transactions taxes topped the list of their concerns with responding saying they were ‘very concerned’ with these developments. The next most concerning regulatory initiatives were, in order of importance, Dodd-Frank, UCITS Directive, Solvency II, HIRE Act, AIFM Directive, EMIR and Fin 48.

The winners Credit Suisse swept the board in this year’s Global Investor/ISF Equity Lending Survey, clinching top spot in all three overall tables - unweighted, weighted (which attaches significance to scores according to how much business the lender conducts with the borrower) and weighted by importance (where respondents are asked to rank the importance of each of the 16 service categories, which creates a weighting for each service category that is applied to the overall scores).





Overall client satisfaction by lenders in Credit Suisse increased on last year as it raised its score from 89% in the unweighted table in 2011 to 89.9% in 2012. However, JPMorgan was crowned most improved borrower of the year in group one, raising its game by 5.15% in the unweighted table. One client said: “JPM has risen to become one of the top players in the European space.” Another said: “A sleeping giant. They have the ability to be a significant player.”

Last year Credit Suisse won the weighted table, Morgan Stanley the unweighted table and BAML the footprint table (which attached significance to the number of lenders rating borrowers). Regional responses were defined by where the underlying securities are traded rather than where the respondent is based. Credit Suisse cemented its position in the Emea rankings, which it also dominated last year, and it displaced Morgan Stanley in the Americas unweighted and Asia Pac weighted tables to give itself a practical clean sweep of these regional ranking (with the exception of the weighted by importance Asia Pac table which was won by Morgan Stanley).



Comments on Credit Suisse included: “Innovating counterparty - always participating in new markets and able to help with pricing. Good relationship management”; “CSFB has stolen the top spot by giving the support and dedication that they promised to the product”; and “has been a go-to borrower across multiple markets both domestically and internationally from their US desk.
 
Consistent market levels and willingness to dig to find the next trade has given them high marks and consistent allocations of specials and unique trades. Very impressed with their professionalism and client relationship.” Morgan Stanley achieved second position across all three overall tables.

Comments from clients on Morgan Stanley included: “Excellent counterpart, good two way relationship, stable and consistent balance”; “Top relationship management team on the Street”; and “Morgan Stanley has shown commitment to the business and has weathered headline risk in a highly professional manner. They do not miss a beat. Always willing to consider trade structures and where it makes sense they will execute. Long term strong borrower that has proven they are committed to being an important borrower in the markets.”





BAML took third position across all three overall tables and was named the ‘overall one to watch in group one’ by respondents. Comments on BAML included: “Has a strong international team in the US. They are proactive in looking to put on trades on a daily basis and are a key source of market color for us. Look forward to growing this relationship further. We see great potential”; “A great, globally coordinated team that is constantly improving through evolution and innovation”; and “is emerging as a leader and innovator in the Far East.”















Group two
Borrowers were divided into two groups, determined by their trading volume. Group one encompassed the 20 largest participating recipients of equity, according to Markit Securities Finance as of July 1 2012. The 20 largest borrowers are defined as those that had borrowed the greatest total amount. All trades were converted into US dollars and aggregated to calculate the total value of all current transactions for each lender or borrower.



Credit Agricole CIB was again the overall winner of the group two overall unweighted and weighted tables and also picked up top spot when responses were weighted by importance of service category. Again, mirroring last year, Unicredit achieved second place in the unweighted and weighted tables and similarly came second in the weighted by importance table. An addition to the group two tables this year was ABN Amro whose best finish was third in the overall weighted table.

Client satisfaction with all group two borrowers, as expressed in the unweighted table, declined compared to last year, with the exception of Jefferies which increased its score from 66.06% to 71.65%, meaning it is named most improved group two borrower of the year. It and CIBC were named the ones to watch in group two.
















METHODOLOGY

Questionnaires
The equity lending survey is divided into two main sections: lenders rating borrowers and borrowers rating lenders. It is also split across three geographical regions: Emea, Americas and Asia Pacific.

Questionnaires are tailored to borrowers/lenders for each of the three geographical regions, so in total there are six questionnaires. Questions concerning technology providers are shared across all questionnaires.

Regional responses are defined by where the underlying securities are traded rather than where the respondent is based. Counterparties that meet the qualification criteria are included in the appropriate tables regardless of whether they actively participated in the survey. Participants are required to rate between five and 25 counterparties in each geographical region.

Market division by scale
Lenders and borrowers are divided into two groups, determined by their trading volume. Group one encompasses the 20 largest providers/recipients of equity, according to Markit Securities Finance (formally Data Explorers) as of July 1 2012. The 20 largest lenders are defined as those that had the greatest total amount on loan. The 20 largest borrowers are defined as those that had borrowed the greatest total amount. All trades were converted into US dollars and aggregated to calculate the total value of all current transactions for each lender or borrower.

Markit Securities Finance collects data of securities lending trades every day from leading market participants. Information on counterparties submitted alongside securities lending transaction data allowed it to identify the volume of trading for those not directly
contributing information.

Group two includes all other qualifying providers.

Response validation
Respondents are required to rate a minimum of five counterparties for each region they are completing the questionnaire. Respondents can rate counterparties in one, two or all three regions. Whether the respondent or firm being rated is group one or group two is not relevant for validation, as in previous years.

A borrower/lender can only rate a counterparty once in each region. If we receive multiple responses from a single company an average of the scores is taken.