The Canadian bank has seen its issuance of structured products returning to pre-pandemic levels.

National Bank of Canada (NBC) has issued a total of 334 structured products in the Canadian market during the third quarter (May-July) of 2021, representing a 77% increase from its Q3 20 figure of 189 products, SRP data shows.

The bank ranks as the third most prolific issuer group in the Canadian structured products market in Q3 21, trailing behind CIBC with 387 products and Bank of Montreal (BMO) with 384 products.

NBC’s total issued has steadily increased over the past year reaching 212 products in the final quarter (August-October) of 2020. This figure soared to 253 products in the first quarter (November-January) of 2021, which again improved during the following quarter to stand at 292.

During the third quarter, NBC issued a large volume of structured products to Solactive underlyings worth a collective US$243m accounting for almost 160 products. Most of the products are linked to the banking sector with the Solactive Canada Bank 30 AR index and Solactive United States Big Banks AR index dominating sales.

This can be compared with Q3 20 in which several NBC products were tied to individual banks such as Bank of Montreal, Royal Bank of Canada, Bank of Nova Scotia, CIBC, and Toronto Dominion Bank, all of which had 80 products each.

NBC has also diverted from issuing guaranteed investment certificate wrappers as seen in Q3 21 where just 29 products were issued, compared to 183 products in Q3 20. Currently, notes account for the majority of the bank’s sales which stand at US$530m.

By type of underlying, NBC’s offer has also been diversified over the past year from just exchange-traded funds (ETFs) and baskets of shares in Q3 20 to also include single share and single index assets, the latter of which accounts for US$258m in sales.

Single share asset structures accounted for just US$30m in sales (10 products) during the third quarter. The best-selling single-share product for the period was the NBC Auto Callable Contingent Income Note, common shares of Tesla Inc.

Selling for CAD 5.3m, the income note tracks a single share of Tesla and will reach maturity in three years. The product will pay a fixed coupon of 14.52% pa if the underlying is above 55% of its initial level at any observation date, otherwise no coupon is paid.

Business lines

During the third quarter of 2021, the bank led by Louis Vachon (pictured) reported a net income of CAD839m (US$663m) compared to CAD602m in the third quarter of 2020. Growth was driven by increases in total revenues across all the business segments and by lower provisions for credit losses in third-quarter 2021.

Income before provisions for credit losses and income taxes totalled CAD1 billion in Q3 2, a 16% increase from CAD894m in Q3 20.

Wealth management recorded a net income of CAD165m in Q3 21, representing a 30% increase from CAD127m in the Q3 20. Total revenues amounted to CAD547m compared to CAD451m in the previous year.

Financial markets’ net income reached CAD227m, a 21% increase from CAD188m in Q3 20. Income before provisions for credit losses and income taxes on a taxable equivalent basis totalled CAD299m, remaining steady from CAD296m in the prior year.

Click to view the third quarter earnings release.