2017 was a challenging year for the derivatives industry in Spain with a slowdown in the structured products market which was down to two fundamental reasons: firstly, the Priips and Mifid 2 regulation which has affected all distributors, and secondly, the interest rates environment which remains at historic minimum levels, according to Borja Bravo González (pictured), cross asset derivatives sales at BBVA.
"Providers had to accommodate to those conditions and changes, and incorporate in their strategies ways to diminish the negative impact especially when it comes to launching structured funds with capital protection," said Bravo.
In the context of near zero interest rates, structured products can provide potentially higher returns to investors although combined with increased risks. Despite the challenging environment BBVA was able to capitalize in its coverage of the private banking market where a large number of equity-linked issues of capital-at-risk products and credit-linked products, referenced to either individual assets or major indices, were sold, according to Bravo.
The Eurostoxx 50, the Ibex 35, the Euribor and the shares of Santander, Telefonica and BBVA were among the top underlyings for 2017 whereas the most popular structures included autocallables, reverse convertibles, as well as capped and uncapped calls, according to SRP data.
SRP data also shows that the Spanish bank has increased its market share by more than 10% over the last three years, mainly due to the bank's capacity to adapt to the market conditions - develop and improve communication with clients, as well as meet their needs accordingly, according to Bravo.
"We're facing challenging times with market conditions that complicate product issuance," said Bravo. "However, this situation can reverse any time and we have to remain attentive to any changes, be highly flexible and focused on our clients."
"However, this is currently changing due to the fear of possible interest rate hike and the fact that this type of structured products are usually issued with a term longer than two years," said Bravo, adding Investors tend to shift their attention to structures more suitable for such market conditions and short term products in order to be able to retrieve their capital as soon as possible and reinvest it. "When it comes to the private banking sector, autocalls have been our star products," said Bravo.
Furthermore, the bank was also able to leverage the launch year of the DLIB BBVA Portal pricing platform, which has proven to be a success on the Spanish bank with domestic and international clients benefitting from the new streamlined set up. The bank plans to continue developing this new service by expanding it, increasing the velocity, improving the experience of the clients and better adapting to the new trends on the market, according to Bravo. Among the top priorities is be able to list faster and be more efficient when it comes to completing a request, Bravo said.
Going forward BBVA is also seeking opportunities in the active management market with capital protection and net asset value consolidations. Similarly to 2016, collars of Euribor were among the most popular issues, according to Bravo.
For this year's SRP European awards, BBVA has been awarded both Best Distributor as well as Best Performance in Spain. SRP considered 54 structured products with combined sales of more than €900m from the bank - with strike dates between October 1, 2016 and September 30, 2017 - and 35 products, which on average returned 2.77% per annum, that matured during the same period.
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