Revenue Review: Top Securities Lending Earners in 2024
January 29, 2025
North American Equities
As U.S. equity markets rallied in 2024, securities lending revenue for U.S. equities faced significant challenges, with Q4 revenue down 7% year-over-year (YoY), contributing to a total annual decline of 17%. A 22% drop in fees drove the decrease and offset a 5% increase in balances, which was driven by increased valuations.
In 2024, Sirius XM (SIRI US) and Lucid (LCID US) were the top two earners globally, generating $245 million and $120 million, respectively, in securities lending revenue for lenders. However, revenue in both names tailed off significantly in Q4. Sirius XM’s decline followed the completion of the Liberty merger in September. The majority of Lucid’s securities lending returns were accrued earlier in the year as the company missed earnings for multiple quarters. Lucid began cooling late in the year after announcing better-than-expected deliveries of their vehicles.
The Canadian equity market also experienced a 2024 rally, but the securities lending market showed a bit more resilience, with a smaller revenue decline of 2% YoY. Unlike the U.S., fees in Canada rose by 17%, partially offsetting a 15% drop in balances.
Cannabis stocks were back in focus, specifically Canopy Growth (WEED CN), which saw a rise in stock price. This increase in valuation led to increased shorting activity with an average fee of nearly 10,000 basis points, resulting in $37 million generated for securities lenders. Looking ahead to 2025, several stocks are emerging as the top “specials” in the North American market, including Tempus AI, Spirit Airlines and Endeavor Group.
EMEA Equities
EMEA equities faced a challenging year, with securities lending revenue down 24% in 2024. Both fees and balances declined across the region, and the top five markets (France, Sweden, United Kingdom, Switzerland and Germany) all reported double-digit percentage declines in revenue. Notably, Communication Services was the sole sector to show improvement over 2023.
Swiss pharmaceutical researcher Idorsia LTD (IDIA SE) and French satellite operator Eutelsat Communications (ETL FP) were the top revenue earners in EMEA for the year, the latter of which was responsible for the sector’s improvement in the lending market. Despite the broader decline, Q4 provided a glimmer of hope, with revenue increasing 8% YoY, driven by a 2% rise in fees and a 6% uptick in balances. France and the UK spearheaded the Q4 rebound, with revenue surging by 80% and 26%, respectively. France’s gains were bolstered by a remarkable 103% increase in fees, while the UK benefited from a 31% increase in balances.
APAC Equities
APAC equities wrapped 2024 on a relatively stable note, with revenue remaining flat as a slight increase in fees balanced out a minor dip in balances. Taiwan emerged as a standout performer, with a 41% revenue increase over 2023. Leading contributors from Taiwan included IT companies such as Vanguard International, Giga-Byte Technology, Novatek and Jinan Acetate Chemical, which represented four of the top five earners in APAC.
Japanese equities also showed modest growth in 2024, with a 5% revenue increase YoY, driven by a 13% increase in fees. If Q4, however, is any indicator of performance for 2025, Japanese equities may see suppressed lending activity as revenue dropped 5% in Q4 when compared to Q4 2023 due to decreased loan balances.
While Hong Kong and Australia saw decreases in revenue for the full year, both saw double-digit increases in revenue in Q4 due to 25% jumps in loan balances in both markets. The Republic of Korea’s decision to lift its short-selling ban in March is expected to boost market activity in 2025, setting the stage for a potentially strong Q1 for the region.
Fixed Income
Fixed income securities delivered mixed results in 2024. Government-issued bonds experienced an 8% revenue increase YoY, led by U.S. Treasurys. Balances for U.S. Treasurys grew by 14%, while the Federal Reserve’s interest rate cuts resulted in a 5% decrease in borrowing costs. With further rate cuts anticipated in 2025, the impact on securities lending remains a focal point.
Conversely, corporate bond lending revenue fell by 21%, primarily due to a 29% decline in fees. High-yield corporate bonds saw a 14% revenue drop, while investment-grade debt suffered a steeper 28% decline. However, Q4 showed signs of recovery for high-yield bonds, with balances up by 26%, driving a 29% YoY revenue increase.
Securities lending revenue in 2024 painted a diverse picture across regions and asset classes. While North America and EMEA equities grappled with declines, APAC equities displayed resilience, and fixed income markets revealed opportunities amid shifting monetary policies. As 2025 begins, evolving market dynamics, including policy changes and sectoral shifts, will play a critical role in shaping securities lending performance.