From The Purple Issue 2:
MACROECONOMIC cycles can have a significant impact on a sector or business’ profitability, which in turn
can affect fees and revenues earned in the securities lending marketplace.
A great example of this can be seen in late 2014 and throughout 2015 when the overproduction of oil caused a supply glut, driving oil prices down to levels that hadn’t been seen in years. That caused economic uncertainty across many energy securities, most notably the drillers. Securities lending activity in the sector increased and made energy the hottest sector of 2015 with fees averaging 121 basis points (bps) for the year. But as the price of oil (and the share prices of energy stocks) stabilized and started to rebound, fees to borrow energy stocks began to wane.
However, the decrease in fees for the energy sector did not prevent it from claiming the title of the hottest sector of the year again in 2016. Energy sector fees averaged 102 bps for the year, generating $767.2 million in revenues for securities lending participants. Coal and consumable fuels was again the hottest industry within the energy sector with lending fees averaging 243 bps for the year. The most pro table security within the energy sector was French energy giant Total, generating $104 million in gross revenues. Despite a bounce in oil prices, the share price of Seadrill also remained under selling pressure and brought in a combined total of $64 million in revenues from the U.S. and Norway for securities lenders.
The full issue is available here.