The financial group suffered a 31% fall in issuance and a 20% decrease in sales with 960 structured products valued at MXN 49.2 billion (US$2.4 billion) during the fourth quarter of 2020, compared with 1,403 products in Q4 19 worth MXN 62.2 billion.

Despite the slowdown in activity which was felt across the market Monex continues to dominate the Mexican structured products market. It was able to maintain its top ranking for the entirety of 2020.

The most popular products at Monex in 2020 were wedding cakes and double no-touch (DNT) options with short maturities of one to two weeks while structured notes gained popularity, due to the decrease in interest rates in Mexico during the pandemic, according to Ricardo Guido, (pictured) director at Mexican bank Monex.

Monex has always been known as the FX house in the local market

“The dual currency deposit still has a good market of people willing to take the FX risk in order to obtain a good return, especially in episodes of higher volatility as we have experienced in the last couple of weeks,” he said.

Capital-protected notes in USD have almost extinguished but the firm sees this environment as an opportunity to grab the attention of potential investors and expand its footprint.

“Monex has always been known as the FX house in the local market and our structured products have focused on this market,” said Guido. “Our issuing minimum amount is smaller than in other banks, giving smaller investors a chance to have something tailor made to their needs.”

SRP data

Monex’s product issuance fell during the first quarter of 2020 in comparison to the previous quarter although sales shot up to MXN116.5 billion (988 products), the highest figure during the year.

Sales, however, crashed to MXN33.9 billion during the second quarter just as financial markets across the world had to contend with the Covid-19 pandemic.

Issuance did recover in the following quarter reaching a figure of 1,096 while sales began to improve standing at MXN45.8 billion at the end of Q3.

According to the SRP database, the number of structured products tied to the USD/MXN underlying grew by US$1.7 billion in 2020 reaching US$12 billion from US$10.3 billion.

In 2019, a total of 47 products valued at US$110.4m were tied to TIIE 28, compared to the following year where just one product was issued with a sales volume of US$5m.

While issuance of the bank deposit certificates and structured bond wrappers both decreased, sales stayed strong at US$7.2 billion and US$4.8 billion, respectively.

Earnings

The Mexican bank reported accrued net revenues of MXN8 billion (US$377m) at the end of 2020, which represents a decrease of one percent compared to FY2019.

Net income at the end of 2020 reached MXN878m, which represents a decrease of 36% compared to the same figure in 2019.

Derivatives products reached MXN862m at the end of December 2020, reflecting a growth of 76% compared to the previous year.

Operating revenues during 2020 are made up of 44% in domestic foreign exchange operations, 31% in foreign exchange operations from our international subsidiaries, 11% in derivatives products and 9% in securities brokerage and trading services.

Total operating revenues of Monex’s domestic foreign exchange operations reached MXN3.5 billion at the end of 2020, an increase of 17% compared to the previous year.

Total operating revenues of securities brokerage and trading services reached MXN737m at the end of 2020, a jump of 37% from 2019.

Click here to view the earnings release.