Leonteq is pushing its platform development road map which includes a number of cooperation agreements with other issuers of structured products. The Swiss provider has marketed the first products under a cooperation partnership with Swiss cantonal bank Aargauische Kantonalbank (AKB) which will act as guarantor, offering its Standard & Poor's AA+ credit rating, while Leonteq will handle the structuring side through its technology platform, and also manage the products, covering the entire value-added chain: structuring, documentation, market-making and lifecycle management.
AKB, one of the leading Swiss cantonal banks with total assets of CHF24.3bn (€22.4bn) as of December 31, 2015, and Leonteq, announced their cooperation in structured investment products in early 2016. Under the agreement, any products launched will be distributed by both companies in Switzerland, and by Leonteq internationally.
The addition of AKB to Leonteq's platform makes part of the firm's strategic plans as its build its pool of counterparties and white-label partners, according to a Leonteq spokesperson.
"Leveraging our platform and adding new partners is a core element of our structured investment solutions offering," said the Leonteq official, adding that AKB is one of the leading Swiss cantonal banks and has a strong credit risk rating.
Peter Pastor (pictured), head of treasury & trading at AKB, said the bank's rating would be a "very appealing factor" of AKB's offering as well as the fact that investors will be able to diversify their exposure to a new issuer in Switzerland. "In uncertain times investors want security and to be exposed to counterparties that have strong balance sheets," said Pastor. "The collapse of Lehman Brothers taught the industry and investors a lesson, and we want to capitalise on our credit position. We are positive that AKB's issuer credit risk alongside Leonteq's structuring and distribution capabilities will allow us to provide appealing products and reach more clients."
The cooperation agreement came to life yesterday with the launch of a series of three-year callable barrier reverse convertible certificates linked to baskets of Swiss shares including ABB, Roche, Swatch, Zurich Insurance, Geberit, LafargeHolcim, Swiss Re, Nestlé, and Novartis which will be in subscription until December 14.
"This is a very important step for us," said Pastor. "In the past we offered third party products through our commercial network but this partnership with Leonteq will increase our profile in the market and open up new opportunities around products as well as increase our distribution."
According to Pastor, AKB's plan is to build a comprehensive range after agreeing a defined list of products with Leonteq comprising underlyings and payoffs that are on demand in the market. These products can also be tailored by using Leonteq's Constructor app, the firm's web-based application that enables intermediaries and professional investors to create and calculate structured investment products on over 1,000 underlyings and in a wide variety of currencies.
The current product scope already includes the majority of relevant pay-offs offered on Leonteq's platform. "The underlying universe comprises more than 200 single stocks (based on an agreed research list) and 50 indices," said the Leonteq spokesperson. "Products can also be issued in more than 10 currencies."
Initially, AKB's products will be targeted at the Swiss market but the bank sees opportunities in other key markets such as Singapore and Hong Kong where Leonteq has a presence, according to Pastor.
Year to date, Leonteq has gone live with three new structured investment products platform partners including JP Morgan (distribution in Switzerland, since April 4, 2016), Deutsche Bank (distribution in Switzerland and selected European countries, since February 4, 2016) and Bank of Montreal-BMO (distribution in Switzerland and selected other countries, since February 4, 2016), taking the total number of active platform partners to seven. Earlier this year, Leonteq also underpinned its existing strategic cooperation with Raiffeisen Switzerland with an agreement for the next ten years, and is in talks with Swiss Life and Standard Chartered. Other Leonteq partners include Malayan Banking (Maybank), and Swiss Mobiliar.
The Leonteq/AKB partnership launch comes amid an organisational strategic review triggered by a slow-down in growth in a 'challenging market environment', announced on Leonteq's half year results, with the aim of strengthening its management team and creating a new set up around three businesses: investment, banking, and insurance & wealth planning. The firm announced in mid-November that planned market entries in UK onshore, Norway, Finland, China onshore and South Korea onshore will be discontinued while it plans to open an office in Japan to gain a foothold in the 'largest structured products market worldwide'.
AKB has been a marginal provider in the Swiss structured products market and has 31 products distributed around retail investors since 2006. The bank has also three live tracker certificates including the AKB Dividendenaktienbasket Europa and AKB EU-Bankenbasket II in EUR linked to a basket of European shares, and the AKB SMI-Trend-Plus-Zertifikat a delta one certificate tracking the performance of the Swiss SMI index.
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