Societe Generale has reported that net banking income in its global markets & investor services division, which includes the bank's structured products, amounted to €1.5 billion in the second quarter of 2018, down 0.4% from the same period in 2Q 17, and €2.9 billion in the first half of 2018, down 9.8% compared to 1H17.
At €580m, the revenues of fixed income, currencies & commodities (FICC) were down 1% in 2Q18 versus 2Q17 while revenues amounted to €1.1 billion, down 18.2% in the first half of 2018 from the same period last year. The return of volatility, especially around the Italian elections, enabled flow activities to benefit from a good level of client activity on rates and commodities, which offset a less buoyant credit market, and, according to the bank, in this environment, 'structured product activities posted a good level of revenues despite slightly lower demand'.
The revenues of equities and prime services, at €696m, were down 4% year-on-year in the second quarter of 2018 and, at €1.4 billion, down 7.4% in the first half of 2018. Revenues from cash and listed product activities were lower in Europe, in an environment of still lacklustre volatility and in conjunction with the implementation of Mifid 2, according to the bank. However, the performance of flow derivatives and financing activities together with the prime services franchise, helped the flow activity post higher revenues. Commercial activity and market conditions remained mixed in Europe compared to other regions in the structured products segment, which saw its revenues increase from the first quarter of 2018 but remain lower than last year.
In the Americas and Asia, equities and prime saw a strong performance in flow products while the performance in structured products was mixed and in FICC the bank reported a sound commercial activity in a more favourable environment for structured products in the region.
Societe Generale marketed 97 structured products worth an estimated US$1.5 billion (€1.3 billion) to retail investors across eight different jurisdictions between April 1 and June 30, 2018, compared to 102 products with sales of US$1.4 billion during the second quarter of 2017, according to SRP data, while issuance in the first half of 2018 stood at 219 products worth US$2.6 billion (1H17: US$2.4 billion from 178 products).
The vast majority of sales, at €1.1 billion, were collected in France were the bank distributed 62 products - predominately wrapped as life insurance contracts - among other via Adequity, DS Investment Solutions, Kepler Cheuvreux, Nexo Capital and Vital Epargne.
In Sweden, the bank introduced 11 products with estimated sales of SEK137m (€13m) which were distributed via Exceed, SIP Nordic and Strukturinvest while the five products (€35m) in Belgium were available from Crelan, Deutsche Bank and Nagelmackers. Societe Generale was also active in Hungary (two products) and Austria and Germany. In the last two countries, apart from five products targeted at the primary market, the bank also introduced almost 38,000 flow and leverage certificates which are available for trading at the exchanges of Frankfurt and Stuttgart.
Outside Europe, SG was the bond provider behind 11 products worth JPY8 billion (€59m) while in China the bank collaborated with Citibank for the launch of QDII - Structured Notes 2018 S12.
As part of the parent company 2018 long term funding programme, Societe Generale's annual structured notes issuance volume at approximately €19 billion is in line with amounts issued over the past years, according to the bank. As of July 11, 2018, 62% of the vanilla funding programme was completed (including €1.5 billion of prefunding in 2017) and €13.2 billion of structured notes had been issued with the bank stating competitive funding conditions: MS6M+15bp and average maturity of 4.6 years (senior non preferred debt, senior preferred debt and covered bonds). An additional €3.3 billion was issued by subsidiaries.
'Societe Generale posted good results and an increase in profitability in Q218 due to a solid performance by all the businesses, disciplined cost management and good risk control,' Fréderic Oudéa, the group's chief executive officer, commented on the results. 'The group also carried out several strategic transactions contributing to the refocusing of its business model around its core franchises, with the signing of an agreement to acquire Commerzbank's equity markets and commodities operations and the disposal of activities not having critical mass or insufficiently synergistic.'
Click the link to view the Societe Generale second quarter and first half 2018 results, presentation and financial statements.
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