The Swiss specialist structured product provider made ‘good progress’ with its key strategic initiatives in 1H2019 and is on track towards becoming a ‘globally renowned platform for structured investment solutions’, said chief executive officer Lukas Ruflin (pictured).

According to Ruflin, Leonteq’s smart hedging issuance platform (Ship) project – a new approach to hedging derivatives – is well on track with three hedging counterparties providing external quotes for around 20% of all transactions in products such as autocallables and barrier convertibles, representing approximately 40% of Leonteq’s total automated product offering.

The company is currently onboarding up to four additional hedging counterparties and expects to connect them to the platform in the second half of 2019. The initiative is expected to be implemented in stages and to be fully operational by mid-2020.

In the second quarter of 2019, more than 600 trades ran through Ship with a notional of CHF350m, the majority of which is currently still hedged by Leonteq.

Leonteq has reported turnover in structured products of CHF15 billion for the first half of 2019 in Switzerland, down 5.7% from the same period last year (1H2018: CHF15.9 billion). Turnover in the Swiss structured product market as a whole stood at CHF181 billion in half-year 2019, up from CHF174 billion in the first half of 2018.

Fifty-seven percent of Leonteq’s volumes, or CHF8.6 billion, was accumulated via yield enhancement products. Compared to the first half of 2018, there was increased demand for leverage products and capital protected products, with a turnover of CHF4.4 billion and CHF0.75 billion, respectively.

In the first half of 2019, net fee income decreased by 17% to CHF120.9m, reflecting the ‘subdued start to the year’ and ‘reduced contributions from large ticket transactions,’ according to the company.

Leonteq generates its net fee income primarily by manufacturing and distributing its own products, as well as products issued by its banking partners, Aargauische Kantonalbank, Cornèr Bank, Crédit Agricole CIB, Deutsche Bank, EFG International, JP Morgan, PostFinance, Raiffeisen Switzerland and Standard Chartered Bank.

Fee income in Leonteq’s Swiss home market decreased by 17% in the first half of 2019, reflecting ‘stable demand’ for its long-term savings solutions with Swiss insurance partners and ‘reduced client activity’ for structured products.

In Europe, the business generated net fee income of CHF55.2m, down 14% from CHF64.3m in the prior-year period. European clients predominantly sought products issued by EFG International, Leonteq, Raiffeisen and increasingly by Standard Chartered Bank with express certificates, barrier reverse convertibles and leverage products being the most popular product types.

Net fee income in Asia decreased by CHF4.8m year-on-year to CHF 13.3m. The most traded product types were OTC products guaranteed by Raiffeisen and barrier reverse convertibles.

Leonteq was the third most active provider by product issuance in the first half of 2019 in Europe, behind Vontobel and Landesbank Baden-Wuerttemberg, according to SRP data. The company launched 1,067 investment certificates, which were issued via Leonteq Securities (713 products), EFG International Finance Guernsey (238), Cornèr Bank (115), and Aargauische Kantonalbank (one).

Eight hundred and ninety-nine products were linked to a basket of shares with a further 103 structures tied to a single stock. During the first six months, there were alsoproducts linked to an index basket (50), commodities (10), a single index (three), and credit (two).

Click the link to read the full Leonteq half year report 2019 and the presentation.