12 July 2017
Reporter: Drew Nicol

EU equities revenue fails to deliver in Q2

Poor equities lending revenue continued to vex in Q2, with 14 of the 17 main markets registering a year-over-year drop, according to IHS Markit.

In its second quarterly review, the data provider underscored the extent of the revenue slip, which was down 23 percent on the same time last year.

The drop off is the second consecutive quarter where European equities failed to perform, having fallen short of their Q1 target by 22 percent.

This quarter’s result includes countries such as Italy and Germany, which had resisted the negative trend of Q1.

Both countries saw their Q2 aggregate securities lending revenue fall by more than 30 percent year-over-year.

IHS Markit data noted that Belgium was the only market to buck the trend, with a revenue increase of 50 percent to £24.2 million.

UK equities saw increased borrowing in the 12 months since the Brexit referendum, but total revenue was down by 25 percent from Q2 2016.

“While revenues proved challenging across the board, inventory levels continued to climb ever higher and the industry now has to spread the dwindling revenues across a lending pool that is 13 percent higher on average than that seen in Q2 2016,” IHS Markit stated.

“The one solace the industry can take from this quarter is that balances have held up relatively well as the $155 billion of loans that were lent out over the quarter are only 1 percent off the average registered over Q2 2016.”

American equities didn’t fare much better, falling short of their Q2 2016 target by 20 percent.

Meanwhile, exchange-traded funds garnered strong demand and better loan rates over Q2 allowing beneficial owners to bank $43.4 million over the quarter.

IHS Markit commented: “North American listed funds, which had a disappointing first quarter, were able to turn their fortunes around over Q2 as lenders capitalised on increased demand for the asset class and achieved higher fees for the loans against the asset class.”

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