SRP reviews the data and fourth quarter 2019 financial results of SEB and Swedbank, two leading Swedish manufacturers who in recent months both decided to stop offering new structured products.
One hundred and seventy-nine structured products worth SEK 2.4 billion (US$253.5m) had strike dates in the fourth quarter of 2019 in Sweden, an increase – in issuance and sales – from the 115 products with sales of SEK1.7 billion in the previous quarter.
Seven out of the top 10 issuers in 4Q2019 were foreign investment banks, including BNP Paribas, Credit Suisse, Danske Bank, Goldman Sachs, Investec, Société Générale and UBS with, apart from SEB and Swedbank, Nordea the only other (part) Swedish issuer.
Despite its decision to halt all new structured products business at the end of 2019, SEB dominated the structured products market in Sweden in 4Q2019 with a market share of 21.4% – actually increasing is sales volumes compared to the third quarter.
The bank collected SEK 522.2m from 24 products in the period (3Q2019: SEK413.6m from 19 products) which were distributed via Garantum (13 products), Strukturinvest (six products), and Consensus Asset Management (three), respectively.
The bulk of the sales volume was collected via 10 credit-linked notes (CLNs) which sold SEK359.2m. A further 10 products were linked to a basket of shares (SEK106m) while four structures were tied to a single share (SEK56.32m).
SRP reported a ‘strong’ operating income in 4Q2019, which, at SEK14.1 billion, was up 18% from the previous quarter. For the fourth quarter the effect from structured bonds offered to the public was approximately SEK345m (3Q2019: SEK215m) in equity related derivatives and a corresponding effect in debt related derivatives SEK-115m (3Q2019: SEK65m).
As of December 31 2019, total assets on the bank’s balance sheet included SEK238.6 billion worth of debt securities (End-2018: SEK156.1 billion) while total liabilities included SEK858.2 billion of debt securities issued (End-2018: SEK680.7 billion).
‘We experienced yet another quarter of high client activity and, as a universal bank, we continued to benefit from our diversified business model,’ said Johan Torgeby (pictured), president and CEO, commenting on the bank’s results. ‘Demand for corporate lending and advisory services, combined with higher activity among institutional customers in SEB’s Markets business, drove income.’
Swedbank had a 3.5% share of the Swedish market in the fourth quarter of 2019. The bank sold 18 structured products worth SEK86m to retail investors during the period, a 57% decrease in sales volumes compared to the SEK199m (from 10 products) that was collected in the third quarter of 2019.
The bank’s products, which were distributed via Sparbanken Skåne (12), Sparbanken Sjuhärad (four), and its own network (two), included 11 products linked to a single index, of which the Solactive Sustainable Development Goals World Index was the most frequently used (six products).
Swedbank posted a total income of SEK11.9 billion in the fourth quarter of 2019, up seven percent from the previous quarter.
As of December 31 2019, the outstanding volume for structured retail bonds stood at SEK8.9 billion, a 17% decrease from end-December 2018 (SEK10.7 billion). Total debt securities in issue at end-December stood at SEK855.8 billion, up six percent from December 31 2018 (SEK804.3 billion).
Funding activity was higher in 2019 than in the previous year and the large part was accomplished with the help of covered bonds. In the fourth quarter Swedbank also issued senior non-preferred liabilities for the first time to fulfil the MREL subordination requirements. In the full-year 2019 Swedbank issued SEK132 billion in long-term debt instruments, of which SEK12 billion related to issues in the fourth quarter.
‘We finished the year with a slightly weaker result than in the previous quarter,’ said Jens Henriksson (above), president and CEO, Swedbank. ‘[However,] our capital position is robust and […] the buffer relative to the Swedish financial supervisory authority’s minimum common equity tier 1 capital ration requirement was 1.9 percentage points at the end of the year.
Click the link to view the SEB fourth quarter/full year 2019 results and presentation, and the Swedbank fourth quarter 2019 results.