Siam Commercial Bank (SCB) has doubled its structured note offerings to 693 in 2020 with an increase in sales of 35.2% year-on-year (YoY) amid an overall scale-down in Thailand.

The Thai bank's outstanding balance of structured notes dropped by 57.3% to THB434m (US$14.1m) as at the end of 2020 from its highest level in the year - THB1.02 billion recorded a quarter ago, which was close to the level posted in Q1 20, but 72.8% lower YoY, according to SCB’s financial statements.

Phatra Securities and CGS-CIMB Securities retained their leading positions in the distribution ranking despite the slow-down in market activity, while SCB took over Thanachart Securities as the third most active distributor on the back of its market growth in 2020.

Thailand saw its overall structured note issuance in the market shrink by 43.1% to 4,791 in 2020 YoY, which led to a 29.4% decrease of sales volume at THB50.4 billion, SRP data shows.

All structured notes offered by SCB are issued either in-house or by its sister company - SCB Securities. The securities house slightly increased its issuance of structured notes to 216 from 197 in 2020, with a sales volume of THB2.5 billion and a market share of 5%, SRP data shows.

Majority of the notes are sold as short-term ‘structured debentures’ with a tenor of less than 270 days and structured products with less than 80% of capital protection are only available to institutional clients as well as high-net-worth individuals (HNWIs), as required by Thai regulations.

The commercial bank kicked off the year of 2020 with a strong momentum with 149 products filed in the first quarter, 84% higher quarter-on-quarter (QoQ), according to SRP data. Following the March crash, it offered 218 notes in the second quarter - a record high in the last two years.  

Along with the growth in issuance, the number of underlyings featured also rose to 70 in 2020 from 41 in 2019. Oil & gas remained the most favoured sector followed by travel & leisure and technology at the expense of basic resources and G10 currencies.

The shares of Minor International were featured in 35 out of the 52 non-principal protected notes (NPPNs), which generated THB242m in 2020. In the meantime, there were 44 products linked to equity baskets covering Microsoft and Alibaba ADR.

Meanwhile, the USD/THB currency pair, which was the most used underlying asset in 2019, only appeared in 22 products in 2020. The most popular underlying was the shares of PTT, a Thai state-owned oil and gas company, which was linked to 126 products in 2020 – up from 26 in 2019.

New underlyings

Besides the traditional underlying assets, SCB introduced the shares of Gulf Energy Development, an electric power generation company, amid growing demand for renewable energy assets. The shares were linked to 36 NPPNs sold at THB258m, all of which except one were marketed after the March 2020 sell-off.

Also, in October, the bank as the first in Thailand introduced the Thai Overnight Repurchase Rate (THOR)-linked structured notes as an alternative with ‘reliable yields’ for every client segment. Investors subscribing the notes included PTT Global Chemical and SCB Asset Management.  

‘Particularly amid the high volatility of yields from international financial markets, Thor-linked structured notes reflect Thai baht liquidity and offer an interesting choice for investors amid the current financial situation,’ said Wasin Saiyawan (pictured), chief wholesale banking officer at SCB.

The bank reported a consolidated net profit of THB27.2 billion in 2020, 33% lower YoY, mainly due to higher provisions. The Q4 20 contributed THB5 billion of the net profit, a 9.8% decrease YoY or a 7% increase QoQ driven by higher net fee income.

Click the link to view Siam Commercial Bank’s Q4 20 financial statement.