The Spanish bank boosted its structured product sales volume in the Mexican market by 42% during the second quarter of 2021 from the same period a year prior.

Sales totalled MXN23.8 billion (US$1.2 billion) over 383 products, compared to MXN16.8 billion across 423 products in Q2 20.

SRP data shows that BBVA Bancomer is the second most prolific issuer group in the Mexican structured products market for the second quarter. The bank trails behind Monex which continues to dominate the league tables with MXN 44.6 billion (965 products).

We expect further increases in volumes linked to QIS with both ESG and 5G-related indices - Liliana Figueroa, BBVA Bancomer 

Other top-ranking firms are Citi with MXN4 billion (31 products), Santander with MXN943m (25 products), and Scotiabank with MXN745m (seven products).

BBVA’s sales and issuance has remained steady over the past year, peaking in the third quarter of 2020 with MXN19.2 billion (506 products). Sales declined to MXN17 billion in the final quarter and stayed stagnant during Q1 21, while product issuance gradually dropped.

During the second quarter, BBVA issued 258 structured products tied to the USD/MXN underlying with an estimated sales volume of US$634m. Other popular underlyings include TIIE 28, Invesco QQQ Trust Series 1, Amazon and Alphabet.

The SRP database also notes the emergence of six products issued to Uber Technologies during Q2 21, a trend that was not detected in the same period of 2020. The best-selling product was a growth warrant, American Warrant- Uber (UBR206LDC012), which sold for MXN199m.

According to Liliana Figueroa (pictured), executive director at BBVA Bancomer, issuance in Mexico showed a marked increase year-over-year for all asset classes, with the second quarter also being more diversified in terms of underlyings.

“Whereas Q2 20 saw rate-linked notes almost disappear, Q2 21 was aided by a more hawkish stance from the Central Bank, rendering a more attractive market. In the warrants market, we also saw more diversified portfolios because of the drop in volatility of the favourite go-to underlyings of the Mexican investor,” said Figueroa.

Figueroa notes that BBVA is very active in terms of product development in the Mexican market when it comes to wrappers, payoffs and underlyings. For instance, this year ESG strategies were marketed in MXN for its private banking clients through QIS in a warrant wrapper and further expansion to the QIS thematic family will continue.

“For FX products, we have supplemented our catalogue by slightly modifying preferred payoffs to adapt to the exact changing expectations of our clients on the path of the USDMXN Spot rate through window barrier structures,” she said.

The bank expects a continuation of increased volatility for the TIIE 28 rate and a continued observing growth in this market. 

An appreciation of the Mexican peso is also expected for the rest of the year, and, with a low FX volatility environment, BBVA expects that it will give investors a chance to prepare for the relative weakness of the currency compared to the USD expected to come at the end of 2022.

“In the equities market, we expect further increases in volumes linked to QIS with both ESG and 5G-related indices [to be introduced in the Mexican market for MXN-denominated structured products]. More diversification on underlyings will continue to enrich portfolios and protect them against further impact from the Covid-19 pandemic,” said Figueroa.

Business lines

BBVA Bancomer’s net profit totalled MXN23 billion during the first half of 2021, an annual increase of 44.8%.

Net interest income stands at MXN32.5 billion for the second quarter of 2021, representing a 17.7% increase from the same period a year prior. For the first half of the year, net interest income reached MXN65 billion, reflecting a 7.2% increase from H1 20.

Total operating expenses grew by 32% in Q2 21 to MXN37 billion, compared the bank’s H1 21 figure of MXN67 billion.

Administrative expenses grew by 7.2%, explained by higher personnel, administrative and operating expenses, as well as expenses that were not incurred in 2020 that have been resumed this year, and a greater contribution to the IPAB fund due to the bank’s increase in deposits.

Risk-weighted assets (RWAs) totalled MXN1.6 trillion at the end of June 2021, compared with MXN1.7 trillion in June 2020.

Click to view the bank’s second quarter earnings.