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Three key figures in Societe Generale CIB's securities finance business discuss how they are shaping their offering to meet their client's needs
PARTICIPANTS:
Lynn Strongin Dodds, chair
Ariel Winiger,
Sebastien Thiebault,
Richard Deroulede,
Chair: Each region has its own issues, but what are the common trends that you are seeing?
Sebastien Thiebault: Over the past year, we witnessed changes in terms of what was needed by market participants. Needs are evolving away from standard short covering towards more structured solutions with a focus on improved balance sheet management and liquidity usage.
Cash rich clients are also looking at new ways to improve yield and therefore are diversifying away from traditional government bond repo. Equity repo offers higher yield than the typical treasury repo product. We see the emergence of a market where investment banks and prime brokers refinance their equities using repo.
Chair: You mention the search for yield - is that the main driver behind the move that you have seen this past year?
Thiebault: Over the past year, the financing cost of equity assets has increased globally. This in turn impacted equity repo levels making the product more attractive in terms of yield for cash reinvestment activities.
Richard Deroulede: Investors, as well as regulators, have forced banks to reduce the amount of unsecured financing in favour of collateralised financing. Equities were one of the main asset classes to benefit from this trend and we have seen a significant increase in the size of the equity financing business.
Ariel Winiger: Furthermore, tenors have increased, with a greater emphasis on longer term financing, including evergreens/extendables. Since the 2011 crisis, there is an increased focus on securing part of financing needs for a longer duration.
Also, there is a shift to having a greater overlap of financing and flow activities. More banks are trying to optimise inventories internally as much as possible before they go out to the street to borrow or raise assets.
Chair: How has this impacted your business? Did you have to adjust your business model, to adapt to those changes?
Deroulede: We needed to adapt. First, all our traders can trade a wide range of wrappers, from stock loan and repo to total return swap and stock futures. That enables us...