Leonteq Securities and Crédit Agricole Corporate and Investment Bank (CIB) have entered a cooperation agreement in the area of structured investment products. Crédit Agricole CIB will deploy Leonteq's technology to customise and distribute structured products to its client network.
The cooperation with Leonteq is aimed at leveraging the Swiss firm's automated platform in the area of custom investment products to accelerate time-to-market for the benefit of its clients, according to Credit Agricole CIB. The move was is seen as 'key in the current competitive environment where service quality, productivity and adherence to evolving regulation are the corner stones of the structured product segment'.
"Our cooperation with Leonteq enables us to accelerate the industrialisation and digitalisation of our structured products enhancing the value we bring to our clients including the Crédit Agricole Group entities," said Isabelle Girolami (pictured), head of global markets at Crédit Agricole CIB, in a statement. "Given our respective strengths, this project will benefit from the natural synergies between both institutions and we look forward to its success."
One of the product types in scope will be credit-linked notes (CLNs) as suggested by Sami Beji, global head of structuring at Credit Agricole CIB, in a panel discussion at SRP's 14th Annual European Structured Products & Derivatives Conference, on February 1, in London. According to Beji, although "these products have an increased risk because of liquidity events CA CIB as a manufacturer will provide them to investors that understand the risks".
Leonteq has developed a platform solution specifically for Crédit Agricole CIB, a first version of which has been rolled out and is being tested ahead of a full deployment in the near future.
"The depth and scale of [Crédit Agricole CIB's] internal and external distribution make it a partner of choice for our Banking Solution Business, where we are offering distinct services for financial institutions who want to enhance their in-house capabilities to serve their clients," said Jan Schoch, CEO of Leonteq, in a statement.
Credit Agricole (CIB) is seeking to accelerate the rebuilding of its equity derivatives business through this joint venture after withdrawing from 'certain activities' and selling its €12.5bn portfolio of equity derivatives notional to BNP Paribas Global Equities and Commodity Derivatives (GECD) in 2013.
The French bank is also expanding the scope of the products offered to its clients as part of the structured products redeployment. The revamped business will deploy the bank's pricing and risk management technology, but there is no intention 'to open or white-label' its platform externally. CACIB has been focusing on rebuilding its structured products capabilities over the last couple of years, on the back of its Strategic Equity Transactions business, which has continued offering structured solutions and equity financings via products indexed to certain underlyings, such as rates as well as a bond repack platform and secured funding.
The agreement will also boost Leonteq's revenues at a time when the Swiss firm expects estimated pre-tax profit of approximately CHF17m (EUR15.8m) for the full year 2016, down from CHF69m the previous year, as a result of lower contributions from hedging activities on the second half of 2016. The Swiss provider of structured investment products and related services said that it plans to reduce CHF10m in costs in 2017 and at the same time reassess its dividend policy for the year 2016.
Despite the reorganisation, Leonteq is pushing its platform development road map which includes a number of cooperation agreements with other issuers of structured products. Year to date, Leonteq has gone live with four new structured investment products platform partners including JP Morgan (distribution in Switzerland, since April 4, 2016), Deutsche Bank (distribution in Switzerland and selected European countries, since February 4, 2016), Bank of Montreal-BMO (distribution in Switzerland and selected other countries, since February 4, 2016), and Swiss cantonal bank Aargauische Kantonalbank (AKB) taking the total number of active platform partners to eight. Earlier in 2016, Leonteq strengthened its existing strategic cooperation with Raiffeisen Switzerland with an agreement for the next ten years, and is in talks with Swiss Life and Standard Chartered. Other Leonteq partners include Malayan Banking (Maybank), and Swiss Mobiliar.
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