Credit Agricole's Guernsey-domiciled issuance vehicle reports gains on EMTNs

Credit Agricole CIB Financial Products, the Guernsey domiciled issuance vehicle of Credit Agricole, has reported an outstanding amount of issued notes of €119,769k, from 22 products, on June 30, 2017, down from €158,913k (from 31 products) on December 31, 2016.

Net gains on euro medium-term notes (EMTNs) at fair value stood at €1,566k as of the end of June, down from €3,928k, at the end of December last year. Term loans and time deposits, and options recorded outstanding volumes of €471,000 and €706,000, respectively, while the company reported losses for index swaps (€1,937k) and warrants (€706,000) as of the end of June. The results all relate to continuing activities, according to the company.

Financial liabilities at fair value through profit or loss as of June 30, 2017, consisted solely of EMTNs worth €138,580k (December 31, 2016: €184,397k) while financial liabilities held for trading included warrants and index swaps worth €947k and €3,512k, respectively.

Credit Agricole CIB Financial Products (Guernsey)'s sole activity is issuing notes or warrants with returns linked to underlying equity, indices and funds listed on the Luxembourg Stock Exchange. The notes and warrants are systematically bought by the bank and funds raised by the company are systematically loaned back to the bank (at market floating rate plus a spread and a margin used to cover general operating expenses of the company). Since January, 2014, the company outsourced the management of equity derivatives related activities to BNP Paribas Arbitrage.

In addition, derivatives, such as swaps and options, are systematically entered into by the company with the bank to hedge the notes, warrants and loans, and, as a consequence, the company bears no net market risk and no credit risk other than the risk on its parent.

The 22 live products at the end of June included 21 euro-denominated notes linked to indices (15), shares and funds (three each), respectively. One of the fund-linked products was Auventas Life Hedge Fund Note Series III, a 12-year EMTN with a constant proportion portfolio insurance (CPPI) strategy and distributed in Austria by Vienna Life. The product was issued in 2007 via Calyon Financial Products (Guernsey) (the company's former name) and is linked to an equally-weighted basket comprising La Fayette Regular Growth Fund, HFRX Offshore Global Tracker Fund and Permal 2.5 Leveraged Basket Fund.

Of the 22 outstanding products, six are due to mature this year; 10 in 2018; four in 2019; one in 2023; while the remaining product matures in 2037 - the Enman Digital, the sole product denominated in Japanese yen, had an outstanding nominal amount of JPY100,000k (€780k).

The parent company is the only counterparty for all the index swaps held for trading. There is no collateral agreement nor netting arrangement between the company and its parent. The potential impact of netting arrangements on its financial position is, therefore, nil. EMTNs issued by the Guernsey subsidiary are guaranteed by its parent and can be held by the bank on the secondary market.

The subsidiary is incorporated in Guernsey and is a wholly owned subsidiary of CACIB (after the universal transfer of capital of Calyon Capital Market International SA), in turn a wholly-owned subsidiary of Credit Agricole SA (the 'ultimate parent company') incorporated in France.

Click the link to view the Credit Agricole CIB Financial Products half year 2017 financial statements.

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