Global securities lending revenues for Q2 2019 totalled $2.6bn, 10% below the average Q2 revenue over the last three years. There were some bright spots, with an increase in special balances in some of the larger markets along with continued expansion in emerging asset classes. Total loan balances fell 12% YoY, with the largest driver being declining demand for government bonds. The largest contributor to the revenue shortfall was European equities, however even within that asset class there were some bright spots such as specials demand for UK equities.
The YoY revenue shortfall in the first half of 2019 relative to 2018 appears rather large, however it’s worth noting that H1 2018 was the best six month span post-crisis, making for a tough comparison. For some perspective, the H1 2019 revenues were a 4% improvement compared with H1 2017. Against the broad trend of declining fees and balances, some asset classes have presented opportunities to generate incremental income, notably including the Cannabis sector, emerging markets, ex-USD corporate bonds, US IPOs and hard-to-borrow UK equities.
The full securities lending Q2 2019 update is available at https://ihsmarkit.com/research-analysis/securities-lending-q2-update.html