CACEIS’ Securities Finance desk takes a look at the current lending market, the hot topics that might drive change, and the opportunities this year for clients looking for extra performance.
The industry had doubts about how it would top the exceptional year 2022 but so far so (very) good. Total securities lending industry revenues for Q1-2023 are up 24.5% on the same period in 2022, reaching $3.414bn according to S&P Global. This makes Q1-2023 one of the best performing quarters in recent history, with an average lending fee of 53bps – up 39% on the same period in 2022. DataLend confirmed this, revealing a year-on-year worldwide increase across all asset classes of 27%, even with a 5% fall in loan balances.
How do we explain these excellent figures? Firstly activity on US equity specials continues to heat up, and in the EMEA equities space, Swiss equities have pulled ahead. The only notable decline has been on ETF activity. On the fixed income side, corporate bonds fees are on the rise but with the liquidity that will become less abundant, especially with the end of TLTROs and various ECB programs, we all anticipate a rising demand for HQLA assets as well. The second semester will be very interesting indeed.
The article also highlights the industry’s hot topics for the year, such as regulation, indemnification, technology, as well as why securities lending is still a great opportunity for beneficial owners in 2023 along the themes of ESG, cash reinvestment and collateral pledge.
Donia Rouigueb, head of Sales Securities Finance and Repo at CACEIS, said to Global Investor: “Regulation-driven transparency and ESG-focused best practices is good news for lenders as it gives them confidence to lend their securities, they are enhancing the value for their investors and playing a key role in maintaining market liquidity.”