Margin-lending growth slows

The RBA has released its Statement on Monetary Policy for the quarter ended September 2000. The report contains statistics provided by margin lending institutions which shows the rate of growth of margin debt slowing to 3% for the September quarter. The growth from March 1999 to March 2000 was approximately 50% according to the RBA’s March 2000 quarterly statement.

Margin Loans outstanding have increased from $6.3 billion as at March 2000 to $6.75 billion as at September 2000. Further statistics published by the report are as follows :

Total margin loans approved $12.2 billion
Credit limit use 55%
Value of underlying shares $13.2 billion
Leverage 51%
Number of margin loans 86,400
Average loan size $78,000
Number of margin calls 12,100

The slowing in the rate of margin lending is not surprising given the market correction in April, the resulting margin calls and the reduction in the number of technology related securities that institutions are prepared to lend against. During these market conditions it’s surprising that margin debt managed to increase at all.

Margin debt now contributes 8% to all personal loans (excluding housing loans). An increasing share owning population, investor base becoming more sophisticated and the expanding range of gearing options available will only further fuel growth in this sector in the coming years.

Nb. All figures quoted are sourced from the RBA’s November Statement on Monetary Policy.