Sales volumes of structured products in the US market in the first quarter of 2018 have increased by 21.05% on the year on the back of a 21.9% increase in issuance. Sales of structured products in the US in the quarter stood at US$18.4bn across 5,052 products compared to US$15.2bn across 4,198 products marketed during the same period of 2017.
UBS was the most active issuer during the first quarter, with over 1,313 products striking and $2.9bn in sales. However, Baml took the lion's share, with sales of $3.1bn across just 126 products. SRP reviews the data and the financial results of the top US structured products manufacturers.
Bank of America-Merrill Lynch remains the top distributor of structured notes in the US, with a 17% market share, according to SRP data. The bank marketed 126 products worth $3.19bn in the first quarter of 2018, compared to 113 during the same period last year, when it sold over $2.6bn. Most of Baml's products in the first quarter were digital structures (51) as well as enhanced trackers (47), protected trackers (39) as well as knockout products and capped calls (45). The most utilised underlying for Baml over the quarter was the Eurostoxx 50 Index (48 products), followed by the S&P 500 (29), and the Russell 2000 (20). As a bond provider, Baml remains a marginal player with a 4% market share and US$892m hedged by the bank's issuing vehicle BofA Finance.
The bank's Global Wealth and Investment Management pretax income increased 12% to a record $1.4bn, as solid revenue growth more than offset increased revenue-related expenses. Net income increased $262 million, or 34%, to $1bn while revenue rose $264 million, or 6%, to a record $4.9bn. Baml global markets division posted a pretax income of $2bn. The division's net income increased $161 million, or 12%, to $1.5bn while revenue increased $78 million, or 2%, to $4.8 billion, driven by higher sales and trading revenue. The bank also reported that non-interest expense increased $61 million, or 2%, to $2.8 billion, reflecting continued investments in technology. Average total assets increased $71 billion, primarily due to targeted growth in both equities and fixed income, currencies and commodities (FICC).
JP Morgan took a 13% market share in US retail structured products market in the first quarter on the back of a $2.6bn sales volume, selling 901 products, mainly knockout structures (350), worst-offs (343), enhanced trackers (318) as well as and reverse convertibles (271) and protected trackers (270). The bank also sold a number of capped call products (144), uncapped calls (60), bull bear structures (48), digital (40), and snowballs (37). JP Morgan's underlyings of choice in the quarter was the S&P 500 (287) followed closely by the Russell 2000 (246). The third most used underlying by the bank was the Eurostoxx 50, which featured in 211 products. The bank also used a number of proprietary indices, including the Efficiente Plus DS 5 (90 products), Meridian (four), Mozaic II (five) as well as ETF-linked structures tracking the iShares MSCI Emerging Markets ETF (42) and the SPDR S&P Oil & Gas Exploration & Production ETF (15), among others. As bond provider, JP Morgan took the lion's share hedging 14% of the products marketed in Q1.
The bank's asset and wealth management division reported a net income of $770 million. Net revenue was $3.5 billion, an increase of 7%, driven by higher management fees on growth in assets under management and strong banking results driven by higher net interest income from deposit margin expansion and loan growth. Corporate and investment banking posted a net income of $4 billion, an increase of 23% while net revenue was $10.5 billion, up 9%. Banking revenue was $3.0 billion, down 3%. Investment banking revenue was $1.6 billion, down 7%, driven by lower debt and equity underwriting fees, which were partially offset by higher advisory fees. Treasury Services revenue was $1.1 billion, up 14%, predominantly driven by higher interest rates and growth in operating deposits. Equity markets revenue was $2.0 billion, up 25%, driven by strong performance across products, predominantly in derivatives and Prime Services. Fixed income markets revenue reflected strong performance in currencies & emerging markets and commodities, offset by lower client activity in Rates and Credit. Securities Services revenue was $1.1 billion.
Goldman Sachs was the fifth most active US issuer in the retail structured products market in terms of sales in the third quarter, with a 16% market share. The bank sold over $2.4bn across 665 products, according to SRP data. Goldman's products in the quarter were sold in the form of enhanced (272) and protected (221) trackers, reverse convertibles (172), Knockout (151) and capped calls (136). The S&P 500 and Russell 2000 indices were used in 247 and 217 products, respectively, with the Eurostoxx 50 the third most used, with 181 appearances. The bank also featured a number of proprietary indices, including its GS Momentum Builder Multi-Asset 5S ER Index which appeared in 90 products, as well as thematic indices relating to the bank's partnership with Motif including the Motif Capital National Defense 7 ER (33 products), and the Motif Capital Aging of America 7 ER (eight products). As a bond provider GS Finance was behind 12% of the products marketred in Q1 with a sales volume of US $2.7bn.
Goldman Sachs investment banking net revenues stood at $1.79 billion for the first quarter of 2018, 5% higher than the first quarter of 2017 and 16% lower than the fourth quarter of 2017.Net revenues in Financial Advisory were $586 million, 22% lower than the first quarter of 2017, reflecting a decrease in industry-wide completed mergers and acquisitions transactions. Net revenues in underwriting were $1.21 billion, 27% higher than the first quarter of 2017, due to significantly higher net revenues in debt underwriting, reflecting higher net revenues from investment-grade, leveraged finance and asset-backed activity, and higher net revenues in equity underwriting, primarily due to higher net revenues from initial public offerings.
The bank's investment management net revenues were $1.77 billion for the first quarter of 2018, 18% higher than the first quarter of 2017 and 6% higher than the fourth quarter of 2017. The increase in net revenues compared with the first quarter of 2017 was due to higher management and other fees, primarily reflecting higher average assets under supervision, as well as higher incentive fees and higher transaction revenues. During the quarter, total assets under supervision increased $4 billion to $1.50 trillion. Long-term assets under supervision increased $9 billion, due to net inflows of $13 billion, reflecting inflows in fixed income and equity assets, partially offset by net market depreciation of $4 billion, primarily in equity assets. Liquidity products decreased $5 billion.
Morgan Stanley almost matched Baml's figures, with structured product sales volumes standing at $3.11bn at the end of the quarter, giving the bank a 16% market share. The bank marketed 527 retail structured products, of which almost half were reverse convertibles (239). The bank's issuance was dominated by knockouts (211), enhanced trackers (183), protected trackers (148), and worst-of option (134). Morgan Stanley's choice of underlyings was also dominated by the S&P 500 (160) and the Russell 2000 (116). The bank marketed 22 products linked to its Morgan Stanley MAP Trend Index as well as 18 products linked to the iShares MSCI Emerging Markets ETF, and five to the Bloomberg Commodity Index. The bank's issuance vehicle, Morgan Stanley Finance, hedged 8% of the products marketed in Q1 which sold US$1.9bn
Wealth Management reported pre-tax income from continuing operations of $1.2 billion compared with $973million in the first quarter of last year. The quarter's pre-tax margin was 26.5%.9 Net revenues for the current quarter were $4.4 billion compared with $4.1 billion a year ago. Asset management revenues of $2.5 billion increased from $2.2 billion a year ago reflecting higher asset levels and positive flows. Wealth Management client liabilities were $80 billion at quarter end compared with $74 billion in the prior year quarter.
The bank's investment management division reported pre-tax income from continuing operations of $148 million compared with $103 million in the first quarter of last year. Net revenues of $718 million increased from $609 million in the prior year. Asset management revenues of $626 million increased from $517 million in the prior year quarter driven by higher levels of assets under management. Investment revenues of $77 million decreased from $98 million in the prior year quarter primarily driven by lower investment gains in certain private equity funds compared with the quarter a year ago.
Citi returned to the top 10 ranking on the back of 141 products and US$395m in sales. Most of Citi's products in Q1 were knockouts (66), reverse convertibles (58) and worst of option (52). The bank also sold a number of protected trackers (36), enhanced trackers (30) and capped calls (22). As a bond provider Citigroup Global Markets was behind 4% of the products marketed which sold US$947m.
Markets and Securities Services revenues of $5bn increased 3%, as a decline in Fixed Income Markets revenues was more than offset by strong revenue growth in equity markets and securities Services. Fixed income markets revenues of $3.4 billion in the first quarter 2018 decreased 7%, driven by a less favourable environment and lower investor client activity in G10 rates and spread products partially offset by strong corporate client activity in G10 foreign exchange and local markets rates and currencies. Equity markets revenues of $1.1 billion increased 38%, with growth across all products, as volatility increased and momentum with investor clients continued. Securities Services revenues of $641 million increased 16%, driven by continued growth in client volumes and higher interest revenue.