State Street dominated this year's Global Investor/ISF equity lending survey in the borrowers rating lenders section.
Among group one of lenders - the top 20 providers defined by Markit - State Street was rated by borrowers as best overall lender across the unweighted, weighted and weighted by importance tables.
In group two, Amundi was ranked number one in the unweighted overall lender table while RBS came top in the weighted and weighted by importance overall lender tables.
Click here to see the PDF version of the borrowers rating lenders section.
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 lenders rating borrowers section of the survey.
Most borrowers (43%) were from the Americas, followed by EMEA (32%) and Asia Pac (25%). Borrowers typically dealt with many more counterparties than lenders. Indeed, 22% dealt with 60 or more counterparties and a further 22% dealt with 40-60 counterparties. The values of respondents’ global borrow books were concentrated at the bottom end of the scale: 53% had less than $25bn and a further 19% had books valued between $25-50bn.
That said, 13% had books greater than $100bn. Borrowers were asked to rank their prime reasons for selecting a lender. The largest proportion, 30%, gave availability/ responsiveness as their top answer and a further 15% and 21% gave it as their second and third choice respectively. The second most important reason for selecting a lender was stability of supply (18%, 17% and 16% respectively), followed by relationship, pricing and ability to do specials.
Borrowers, as a group, did not conduct much of their business in exclusive deals with over half (51%) doing 5% or less of their business via an exclusive in the last year and a further fifth doing less than 10% via an exclusive. Three fifths (60%) said their total business conducted via an exclusive had stayed the same since the last year, 26% said it had decreased and 13% said it had increased.
Overall, borrowers seemed far more concerned about new regulation than lenders. The amount of respondents that were ‘very concerned’ by Basel III and Dodd-Frank topped more than half of respondents (54% and 50.5% respectively). A third (33%) of respondents were also very concerned by financial transactions taxes.
The Solvency II Directive, HIRE Act, UCITS, EMIR and AIFM Directive were also at the forefronts of their minds (17%, 15%, 15%, 14% and 14% respectively). Fin48 (11%) was of least concern. Borrowers were asked to rank various attributes of lenders in order of how important they are on an ongoing basis.
These 10 attributes were ranked number one by the following percentage of borrowers (see Figure 2). Respondents were also quizzed on how much client choice is driven by the type of collateral they can accept. Over half (53%) said this was very important (4 or 5 on a scale where 5 was considered ‘essential’). A further 30% posited a score of 3 in terms of importance.
State Street once more retained its preeminent position among lenders, dominating the overall 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 19 service categories, which creates a weighting for each service category that is applied to the overall scores) tables.
Overall client satisfaction by borrowers in State Street increased by over two percentage points, and its results mirrored last year when it also topped the unweighted and weighted tables and the footprint table (which attached significance to the number of lenders rating borrowers).
Client said of State Street: “Strong desk knowledge in all markets for Asia and quick response to locates”; and “always market leaders in terms of availability, breadth and depth of supply, stability, relationship management, product knowledge/ trade structures. Strong desk management team out of Boston. Value not only overall revenue of relationship but quality of the revenue. Market leaders in trade differentiation, spread trades (wrap stock borrow and re-invest) and non cash/nontraditional asset class trades.”
The most improved group one lender overall, however, was DWS which achieved a score a full six percentage points better than last year. One client said: “DWS operate a very professional and efficient lending service.” Regional responses were defined by where the underlying securities are traded rather than where the respondent is based. State Street dominated the Americas and Asia Pac tables but was challenged by Citi in EMEA where it won in the unweighted and weighted by importance rankings.
Claiming runner-up spot, Citi came second in both the overall unweighted and weighted by importance tables, client satisfaction increasing by over three percentage points. One client commented: “Citibank is very good at providing us with a diverse pool of supply in both developed and emerging markets. They always have some sort of availability in the small cap/micro stock space.
Citi is a valuable relationship for us both regionally in the Americas and across the globe. Relationship management, global focus and breadth of supply differentiates Citi from its peers. We saw an increase in lending value and supply with the addition of clients from MetWest (Wells Fargo) book. We would like to see Citi’s automation platform and collateral flexibility improve across cash and non-cash.”
Finishing second in the overall weighted table, BNY Mellon increased client satisfaction by over three percentage points. Clients said: “BNY Mellon has had a change of management in the US and has improved in automation, relationship and collateral management”; and, “strong breadth and stability of supply make BNY a strong lender. Global co-ordination between desks across markets also very good.”
JPMorgan came third in the overall weighted and weighted by importance tables, and second in all three Asia Pac regional rankings. One client said: “JPM Chase continues to outperform in terms of providing stable borrow positions, global coordination, improved product scope of their business and looking at the relationship across equity and fixed income books.”
However, another client said: “Stability over corporate events can on occasion cause problems in the chain.” UBS polled third in the overall unweighted table. One client said: “UBS Zurich is a valued euro sec lender for Americas securities. We find them to be a market leader for the US/CAD product trading out of the euro time zone. Good with specials and they utilise technology and automation to keep ahead of their competitors.”
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
Group two includes all other qualifying providers.
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.