Rabobank's Rabo Wereld Note February 2017 has reached maturity delivering 170% of the nominal value. The seven-year medium-term note (MTN), which was sold to investors in both Belgium and the Netherlands, was linked to a basket comprising three indices (S&P 500, Eurostoxx 50, Nikkei 225) and two exchange-traded funds (iShares MSCI Emerging Markets Index Fund, iShares MSCI Pacific ex-Japan Index Fund).
The underlying basket, boosted by the strong performance of the S&P 500, which had a 50% weighting and saw its value increase by 116.48%, from 1,075.51 points on February 12, 2010 to 2,328.25 points on February 13, 2017, achieved a result of 72.1%. However, since the return was capped at €170 per note, the redemption was at 170%.
The note is not the first from the Rabo Wereld Note series to provide investors with a positive return: two similar structures, the Rabo Wereld Note January 2017 and Rabo Wereld Note July 2016, returned 155.7% and 165.99%, respectively.
Rabo closed its equity derivatives division in 2013 following a review of the business and the bank does not offer any rollover opportunities. "Rabobank is no longer active in equity derivatives, so we are no longer able to offer this type of product [Rabo Wereld Note], and even if we could, it would be near enough impossible to structure these products because interest rates are so low," said Ron Deckers (pictured), cross asset sales private investment products, Netherlands and Belgium at Rabo Global Markets.
Rabo's current focus lies with interest-linked products, although the last of these distributed by the bank to the Dutch public, the BNG Variabele Lange Rente Obligatie 2, dates back to September 2011. "We do still offer interest-linked products. That's correct," said Deckers. "In principle, we could come up with new products in this segment, but interest rates would have to go up first. There is not much joy in interest rate products at the moment, and certainly not for retail investors."
There are 171 structured products issued by Rabobank listed on the SRP Netherlands database. Of these, 22 are live, including 15 linked to the interest rate and three linked to equities. Rabo Wereld Note April 2018 is the sole product in the Wereld Note series yet to mature.
Rabo reported a decrease in its gross structured notes and hedge accounting in 2016 by €170 million, to €106m (2015: €276m). In 2016, the first-day gains on several newly-issued notes were partly offset by a negative revaluation result due to interest rate volatility, according to the bank. The net result on structured notes decreased from €275m to €150m. In 2015, driven by the Greek turmoil, a widening of credit spreads fuelled the result on structured notes.
Click the link to view the full year 2016 results for Rabobank.
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