Belfius odd one out as Belgian sales volumes drop in first half of 2017

Issuance and sales of structured products in Belgium in the first half of 2017 decreased by 8% and 26%, respectively, compared to the same period in 2016, according to SRP data. The 157 products, from 14 different distributors, that were issued between January 1 and June 30, 2017, collected combined sales of €2.2bn, down from 170 products worth €3bn launched in the first semester of 2016. With the exception of Belfius, which reported a 14% increase in sales, last year's top four providers each reported a drop in volumes in 1H 2017.

SRP reviews the data and the half-year results of four of the main distributors of structured products in Belgium.

KBC was the main provider of structured products in Belgium during the first half of 2017 with a share of 38% of the Belgian market. The bank-insurer issued 30 products - including 16 structured funds, 13 unit-linked life insurance (Class 23) products and one medium-term note - with estimated sales of €844m between January and June, 2017, down from 42 products worth €1bn during the same period last year. With the exception of the MTN, which was linked to the European inflation, all of KBC's products were linked to a basket of 30 shares.

KBC's best-selling product during the semester was KBC-Life MI+ European Selection 90-1. The three-year life-wrapped product which was issued via Arcade Finance, a KBC special purpose vehicle, sold €76m during its subscription period.
KBC reported a net result of €785m in the first half of 2017 for its Belgian business unit (1H 2016: 579m). Sales of life insurance products in the second quarter decreased 26% year-on-year and 14% compared to the first quarter, mainly due to lower sales of guaranteed interest products, although sales of unit-linked life insurance products, at €143 held up well due to the successful shift to the new discretionary based service proposition, according to the bank. As a result, guaranteed interest products and unit-linked products accounted for 58% and 42%, respectively, of life insurance sales in 2Q17.

Belfius, with a market share of 21% was the second most active provider in Belgium in half-year 2017. The bank distributed 22 structured notes worth a combined €474m, against 22 notes with a sales volume of €416m in the first half of 2016. Belfius' products were predominately linked to interest rates (13) and equity indices, of which the Eurostoxx 50 and the Solactive Digital Economy Index were the most popular.

The bank's best-selling product were the Callable Interest Notes 02/2027 which collected €64m in January. The note has a term of 10-years and, for the first five-years of investment, pays a fixed coupon of 1.20% per annum while for the remainder of the investment an annual coupon equal to the difference between the 30-year CMS rate and the two-year CMS rate is paid.

Belfius reported a net result after tax of €361m in the first half of 2017, up 45% compared to half-year 2016. In the first half of the year the bank contributed €3.9bn to innovate funding in the form of short-term issues (average outstanding commercial paper) and new long-term issues (MTNs and bonds).

BNP Paribas Fortis launched 25 structured products worth €400m in the first half of 2017 (1H 2016: 26 products / €548m). Nineteen of these were structured notes issued via the BNPP Fortis Funding vehicle while the remaining six products were Class 23 life-insurance products which are part of the bank's Smart Invest Bon series. The latter included Smart Invest Bon Europe ESG Leaders 2027/3, a 10-year product linked to the Stoxx Europe ESG Leaders Select 30 Index, which, with sales of €43m, was the bank's best-selling product in the semester.

Over the first six months of 2017, BNPPF recorded a profit of €4.2bn, up 4.9% compared to the first half of 2016. In Belgium, revenues increased by 5.2%, with the negative impact of the low interest rate climate largely offset by a considerable net profit on the sale of a private equity participation, a positive ALM contribution and higher commissions, according to the bank.

"Although the overall economic situation is improving, BNP Paribas Fortis still operates in a context of low interest rates and high bank taxes," said Max Jadot (pictured), CEO and chairman of the executive board, BNP Paribas Fortis, in a statement. "However, we managed to dampen those factors in our results for the first half of 2017."

ING Belgium saw its market share significantly decrease, from 10% in the first half of 2016, to just 2% in 1H 2017. The bank issued four structured products - each linked to the interest rates - worth €42m in the first semester, compared to 12 products with sales of €307m during the same period last year.

ING Belgium reported an underlying profit before tax of €462m for 1H 2017, a year-on-year increase of 4%. ING Belgium International Finance, the company which used to finance itself solely through the issuances of structured notes distributed mainly by the retail and private banking network of ING Belgium and which is held by ING Belgium (99.99%) and by ING Luxembourg (0.01%), reported a net profit of €264,332 for the six months that ended on June 30, 2017, down from €836,076 net profit as at December 31, 2016. The company's balance sheet amounted to €1.2bn at the end of June against €1.6bn at the end of December. From the beginning of 2015 ING decided to use another structure (ING Bank N.V.) for the issuance of both structured products and warrants and the company is now in run-off although the outstanding products will stay in circulation up to their redemption.

Click the link to view the full half-year 2017 report for Belfius (Dutch/French), BNP Paribas Fortis (Dutch/French), ING Belgium and ING International Finance and the KBC 2Q17 report and presentation.

Belgian savings bank hits purple patch with Natixis SPV

Few Belgian investors understand investment insurance products