BNP Paribas has reached an agreement with ING to acquire certain assets and liabilities related to the Dutch bank's structured notes business with an estimated notional value of €5bn.
SRP understands that, under the terms of the agreement, ING will transfer risk from its equity derivatives products portfolio to BNP Paribas through a series of trades with the French bank taking over the management, including income payments and redemptions, of around 250 structured notes issued by ING.
A spokesperson at BNP Paribas confirmed the transfer has already begun, with the full transaction expected to be completed by the end of the fourth quarter of this year, but declined to comment on the value of the deal. An ING spokesperson also confirmed the two banks are in the process of a risk transfer but declined to comment on details.
The SRP database lists 3,031 structured products from ING, of which 294 are live products. In Belgium, the bank has 138 products outstanding, which sold a combined €3.2bn at inception. The majority of ING's products in Belgium are notes, but the bank also has 11 structures wrapped as funds as well as two insurance products. The Dutch bank is also active in, among other, Austria (13 products), Luxembourg (34), Poland (24), Switzerland (five) and the Netherlands (41). In 2011, the bank's issuance across jurisdictions spiked to 871 tranche products on the back of a vast increase in the number of products sold in The Netherlands and the number of markets covered which stood at 15. In 2012, ING's overall issuance increased to 1,027 products across 12 markets of which 137 were tranche products which further increased to 3,422 products in 2013 as the Dutch bank bolstered its issuance of leverage and flow products in Germany, although issuance tranche-based products decrease to 131 products. This increased issuance remained in 2014, with 4,781 products of which 93 were tranche products but dropped in 2015 to 3,389 products globally across 11 markets with the issuance of tranche products further decreasing to 61 products.
BNP Paribas' move to buy ING structured notes book follows a number of acquisitions over the last few years, most prominently of RBS's structured retail investor products and equity derivatives (IP&ED) business. The two banks said in a joint statement that, following the start of exclusive talks in November 2013, they had reached an agreement for the sale of certain assets and liabilities of IP&ED to BNP Paribas global equities and commodity derivatives (GECD) in 2014. The notional of RBS' IP&ED portfolio was then £175bn ($282bn), with £30bn belonging to its public distribution network, £65bn to the listed options and futures division and £80bn over-the-counter products. The transaction transferred risk management of, and/or market making for, up to £15 billion of liabilities over time.
Before the RBS acquisition, in 2013, BNP Paribas GECD signed a partnership agreement with Credit Agricole corporate and investment bank to ensure the management and continuity of Credit Agricole's portfolio of equity derivatives, which was discontinued. The deal saw the administrative and operational management of Credit Agricole's €12.5bn portfolio of notional transferred to BNP Paribas GECD from January 2014, which ensured the continuity of service for investors in these products including redemptions, secondary market, valuations, reporting and client relationships. BNP Paribas also reached an agreement with Rabobank Group in December 2013 over the transfer of the 98.5% stake held by the Dutch bank in Bank Gospodarki Żywnościowej (Bank BGŻ) for PLN4.2bn (€1bn), bringing the total liabilities assumed by the French bank in equity derivatives portfolio acquisitions to over €295.5bn. In 2012, BNP Paribas acquired Macquarie's equity derivatives business in a transaction that involved more than 1,500 products being transferred to the French bank across seven exchanges.
ING Group announced, in October 2016, that it was in the process of reducing equity derivatives for financial institutions in Singapore, New York and Brussels as part of its Accelerating Think Forward strategy, which was launched in 2014. The bank's equity OTC and structured derivatives solutions for financial institutions has had a lower return on equity than other financial markets business lines, and the client base for the product does not align with the core bank client franchise as well as other financial markets products such as the foreign exchange and rates businesses "where financial market clients have a much better alignment to ING's core clients", stated the bank. The Dutch bank also moved as many as 60 trading jobs from Amsterdam and Brussels to London to consolidate operations and reduce costs, as part of its plans to move to an integrated digital banking platform, with the goal of making annual savings of €900m by 2021.
SRP data shows a dramatic decline in the issuance of tranche-based retail structured product by ING in recent years. In 2008, 2009 and 2010 the bank launched 483, 365, and 287 tranche products, respectively, across 13 markets.
Most recently, Alain Flas, head of sales for products for private investors at ING in the Netherlands, left the Dutch bank after 16 years of service. Flas had been ING's head of structured products since November 2013, when he succeeded Bert Korevaar who was promoted to global head, client solutions group (CSG) financial institutions.
Related stories:
ING reduces equity derivatives, moves trading to London
ING parts ways with head of products for private investors