China’s Citic issuer entities retain second tier status

As an issuer group, Citic Group is a top 10 manufacturer in the Chinese structured product market with 146 structured products worth US$2.1 billion, a market share of 3.73%. Citic Group is part of a group of second tier issuers in terms of issuance and sales behind the top providers who make up half of the market share (China Merchants Bank, Agricultural Bank of China, HSBC and China Guangfa Bank). 

SRP data also shows that Citic Group has already increased the overall sales volume achieved in 2019 which stood at US$1.9 billion across 239 products. Most of the products launched this year with strike dates between January and August are dual currency structures with USD/CAD, EUR/USD and GBP/USD as the most favoured underlying currency pairs.

China Citic Bank has reported an increase of 2.6% in revenues over the second quarter which has led to a net profit of CNY37.4 billion for the period from January to September – down 10.1% YoY.

The issuer’s on-balance sheet derivative assets were up 63.5% to CNY27.98 billion while derivative liabilities increased by 65.1% to CNY27.79 billion as a result of ‘increase in positive or negative revaluation of foreign exchange and interest rate derivatives’. The Chinese bank also increased its holdings of precious metals by 72.2% to CNY11.8 billion.

In addition, the bank has reported a 4.1x growth of held-for-trading liabilities worth CNY4.3 billion as a result of an ‘increase in structured products’.

The bank’s net interest income rose by 4.6% to CNY34.1 billion while net fee and commission income fell by 8.6% to CNY11.2 billion at the bank YoY.

Operating expenses dropped by 7.4% to CNY12.4 billion in the 3Q, bringing those during the nine months to CNY36.1 billion, down 5.2% YoY.   

Citic Securities

Citic Group’s securities house Citic Securities reported a significant spike in on-balance sheet derivative assets which hiked by 157.9% to CNY19 billion while derivative liabilities rose by 125.9% to CNY31.6 billion.  

The Shenzhen-headquartered broker-dealer has issued 394 structured notes with strike dates during the first half of 2020 with an estimated sales volume of CNY11.46 billion, SRP database shows.

Nearly half of the notes were targeted at institutional investors with the reminder aimed at retail or private banking clients - 278 products offered zero capital protection while the rest offered full protection at maturity.  

The CSI 500 index, traditionally favoured by Chinese investors, was tied to 304 of the products issued with the autocall, index enhance, snowball and digital being the most featured payoff profiles – together contributing to sales volume of CNY9.19 billion, or 80.2% of the total.

安泰回报系列615期收益凭证 was the only short note with a knock-in digital payoff and a put option, which delivered a return of 0.1% at maturity. The three-month product for institutional investors was sold at CNY20m. 

Another structure issued by Citic Securities includes the AU9999, a product listed on Shanghai Gold Exchange and Citic Securities’ in-house index - GMAT.

The firm also saw some of its products reaching maturity and delivering above market returns - four tranches of the two-year 策略点金系列收益凭证- series 1097, 1073, 1071 and 1066, for institutional investors returned 22% at the end of the investment period. Linked to CSI 500, the non-principal protected autocall snowball notes racked up an estimated CNY257m.

Net fee and commission income was up 74.5% to CNY8 billion while investment income up 76.5% to CNY7.3 billion in the 3Q YoY. Net interest income also saw an increase of 150.1% to CNY1 billion YoY.

At the same time, operating expenses nearly doubled to CNY10.1 billion YoY.

Click to view the 3Q 20 report of China Citic Bank and Citic Securities.