27 April 2017
London
Reporter: Drew Nicol

Securities lending revenue drops as 2016 hot stocks fall short


Overall securities lending revenue fell 10 percent year over year in Q1 2017, according to DataLend.

In a presentation at the Finadium Investors in Securities Lending Conference in London, James Palmer, product specialist at DataLend, revealed that revenue for Q1 hit $2.05 billion, down $247 million from Q1 2016.

The drop off was primarily driven by poor equity revenue that was partly mitigated by an uptick in fixed income revenue, which Palmer put down to improved collateral valuations.

Equity revenue fell from $1.93 billion in Q4 to $1.53 billion in Q1. A closer look at DataLend's figures shows that this loss was caused by a significant decrease in borrowing fees for a handful of red hot securities that dominated lending revenues last year.

The shorting favourites of 2016, namely, Nordic tech firm Fingerprint, South Korean healthcare provider Celltrion, and Tesla in the US, have all come off the boil, causing a knock-on effect on lending revenue.

According to DataLend, revenue from hot securities, meaning anything that earns 250 basis points (or more) in borrow fees, dropped from $1.19 billion of the total $1.93 billion earned in Q4 2016, to $793 million worth of the total $1.53 billion in Q1 2017.

This trend began to form in Q4 last year, with revenue at the close of the year down from its yearly peak in Q3, but the effect on securities lending revenue only really came into focus with the first quarterly reports of this year.

The slow start to the year was reflected in the quarterly results of some of the largest entities in the market, with major agent lenders, such as BNY Mellon and BlackRock, posting lower revenue figures.

More Industry news
The latest news from Securities Lending Times
Join Our Newsletter

Sign up today and never
miss the latest news or an issue again

Subscribe now
Clearstream promises post-Brexit services continuity
19 October 2017 | London | Reporter: Jenna Lomax
Clearstream confirmed it will continue to offer stable custody services to its UK-based clients no matter how the Brexit negotiations evolve
EU commission lays down the law on MiFID II compliance
19 October 2017 | Brussels | Reporter: Jenna Lomax
Belgium, Malta, France, Greece, Luxembourg, Netherlands, Portugal, Spain and Sweden are among the 19 infringing member states due to face the commission’s wrath
AAOI and Euronav top FIS hot stocks lists
18 October 2017 | London | Reporter: Jenna Lomax
The Belgium-based operator of crude oil tankers and storage facilities, has been a regular feature on the list in the last month
BlackRock sees lending revenue growth
17 October 2017 | London | Reporter: Drew Nicol
BlackRock saw its securities lending revenue hit $150 million in Q3, compared to $142 during the same period in 2016
Nex appoints new CEO
16 October 2017 | London | Reporter: Jenna Lomax
Ken Pigaga, who was previously global COO at the fintech company, will begin his new role this month, but will remain as a director on the NEX board
Is the sec lending industry experiencing evolution or revolution?
13 October 2017 | London | Reporter: Jenna Lomax
The securities lending industry is facing an evolution, as opposed to a revolution, attendees heard at the ISLA 8th Annual Post Trade Conference
Brexit: next three years ‘crucial’ for sec lending industry
13 October 2017 | London | Reporter: Jenna Lomax
Panellists at the ISLA 8th Annual Post Trade Conference discussed how the UK’s exit will affect the securities lending industry