US securities lending revenues rebound
Year-to-date revenues generated by lending US assets are up by 8.9% over the same period last year, coming in just shy of $1.85bn, according to research by Markit.
Helping this surge in revenue, loan transaction fees have proven resilient over the last seven months. This a very different story to last year when a flood of new inventory saw the weighted-average fee commanded by US stock-loan assets fall to all-time low levels.
“Interestingly, this surge in fees was seen in spite of the fact that the aggregate value of assets in lending programmes, which many fingered as the cause for last years’ collapsing fees, continued its relentless climb to all-time high levels,” said Simon Colvin, analyst at Markit.
The largest share of the additional revenue has come from equities products, which generated just under $90m of the extra $151m. The majority of this extra revenue was generated by lending out non-conventional assets such as ETFs and ADRs, which posted a 37% and 47% jump in revenue since the start of the year.
While conventional equities didn’t see as strong a rise as the rest of the market, the asset class did see a 3% lift in revenue.
“While this number may seem disappointing at first glance, there are encouraging signs in the fact that lenders seem to be able to command better fees for their loans than they did in the second half of last year,” said Colvin.
The fee commanded by loans for companies whose fee is higher than 1% (specials) has jumped from 540bps a year ago to 625bps at the end of July.
Biotech heavy healthcare systems are in most demand, as the sector makes up just over a quarter of all specials. The likes of Inovio Pharmaceuticals and Organovo are currently among the shares commanding the highest fee.
Energy shares also continue to make popular shorts as these shares make up a fifth of all US specials.
“Not all special stories are directionally driven however as demonstrated by the recent CBS spin-off which proved a boon to the industry and lifted the group returns over the last couple of weeks,” said Colvin.
Fixed income also contributed to the surge in revenue figures as the aggregate revenue generated by both corporate and government bonds jumped by 12.6% in the last seven months. This jump in revenue was driven by both a jump in aggregate balances and improving fees.
Helping this surge in revenue, loan transaction fees have proven resilient over the last seven months. This a very different story to last year when a flood of new inventory saw the weighted-average fee commanded by US stock-loan assets fall to all-time low levels.
“Interestingly, this surge in fees was seen in spite of the fact that the aggregate value of assets in lending programmes, which many fingered as the cause for last years’ collapsing fees, continued its relentless climb to all-time high levels,” said Simon Colvin, analyst at Markit.
The largest share of the additional revenue has come from equities products, which generated just under $90m of the extra $151m. The majority of this extra revenue was generated by lending out non-conventional assets such as ETFs and ADRs, which posted a 37% and 47% jump in revenue since the start of the year.
While conventional equities didn’t see as strong a rise as the rest of the market, the asset class did see a 3% lift in revenue.
“While this number may seem disappointing at first glance, there are encouraging signs in the fact that lenders seem to be able to command better fees for their loans than they did in the second half of last year,” said Colvin.
The fee commanded by loans for companies whose fee is higher than 1% (specials) has jumped from 540bps a year ago to 625bps at the end of July.
Biotech heavy healthcare systems are in most demand, as the sector makes up just over a quarter of all specials. The likes of Inovio Pharmaceuticals and Organovo are currently among the shares commanding the highest fee.
Energy shares also continue to make popular shorts as these shares make up a fifth of all US specials.
“Not all special stories are directionally driven however as demonstrated by the recent CBS spin-off which proved a boon to the industry and lifted the group returns over the last couple of weeks,” said Colvin.
Fixed income also contributed to the surge in revenue figures as the aggregate revenue generated by both corporate and government bonds jumped by 12.6% in the last seven months. This jump in revenue was driven by both a jump in aggregate balances and improving fees.
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