Hang Seng Bank's structured products income nose dives

Hang Seng Bank has reported that the structured product income from the wealth management business in the six months to June stood at HK$186m (US$23.8m), down 40% from last year’s same period (HK$315m). 

Fee income for retail investment funds increased by 20% and insurance service results was up 16% - Diana Cesar, Hang Seng Bank

Income from the sales of the structured products in issue accounted for around six percent of the Hong Kong-based bank’s entire wealth management business segment in H1 2024, down from 10% seen in H1 2023, according to its interim results released this Wednesday (31 July).

The latest income figure also reflected the lowest six-month level since the second half of 2021.

Hang Seng Bank: structured product income from wealth management (HK$ million)

_{Source: Hang Seng Bank}

Despite the drop in income from structured products in issue, the wealth management business segment saw the income edge up two percent year-on-year (YoY) to nearly HK$3.2 billion, buoyed by robust retail investment funds income and life issuance income.

‘Fee income for retail investment funds increased by 20% and insurance service results was up 16%,’ Diana Cesar (pictured), executive director and chief executive at Hang Seng Bank, said in the earnings report.

Meanwhile, Hang Seng Bank’s securities broking and related services income, which includes sales of third-party structured products, was up around 1.6% year-on-year (YoY) to HK$668m in H1 2024.

Groupwide, the Hong Kong bank recorded financial liabilities designated at fair value on structured deposits of HK$34.9 billion in H1 2024, up 27% compared with H2 2023. The latest liability figure accounted for three percent of the current, savings and other deposit accounts, up from 2.3% from end-2023.

Hang Seng Bank: structured deposits' financial liabilities designated at fair value (HK$ in billion)

_{Source: Hang Seng Bank} 

Liabilities in other structured debt securities in issue decreased by 40% YoY to HK$1.89 billion during the January-June period, according to the results report.

Leading position

Hang Seng Bank remains one of the largest equity-linked investments (ELI) issuers in its home market. In October 2021, the Hong Kong bank became the first one in the market introducing ELI linked to US stocks for retail investors.

SRP data shows that in H1 2024, the Hong Kong-based bank issued 2,596 ELI that targeted retail investors with an estimated sales volume of HK$90.6 billion, down 17% YoY by sales volume.

These ELI’s asset classes are dominated by single stock and a basket of stock formats, which saw 1,170 and 1,147 product issuances, respectively.

Among single stock-linked ELI, US tech and AI-themed stocks are the most-used underlyings in the first half of the year, led by Tesla (138 products), AMD (110), and Nvidia (98). Chinese tech stocks, including Tencent, Baidu, and BYD, came after, with 75, 75, and 74 product issuances, respectively.

Hang Seng Bank: single stock-linked ELI’s top 10 underlyings by product issuance in H1 2024

_{Source: SRP} 

The use of US tech stocks as underlying in single stock-linked ELI was heavier in H1 2024 than in the same period last year (H1 2023: the top five underlying were Tesla (117), Alibaba (102), AMD (66), Lululemon (41), and Meituan (34)).

Hang Seng Bank also issued 129 ETF-linked ELI referenced to the Tracker Fund of Hong Kong, as well as 129 hybrid ELI in H1 2024.

The bank also marketed over 4,826 structured deposits worth HK$72 billion in estimated sales during the first six months of the year, down eight percent YoY by sales volume.

Wealth, personal banking edge up

In H1 2024, Hang Seng Bank’s groupwide profit before tax recorded at HK$11.3 billion, up three percent compared with last year’s same period.

By segment, its wealth and personal banking’s profit before tax edged up 1.6% YoY to HK$7.16 billion, amounting to over 63% of the groupwide profit before tax.

In the segmental analysis, the Hong Kong-based bank highlighted its digitalisation efforts in investment account opening and products like structured notes and capital-protected investment deposits in H1 2024.

‘These initiatives contributed to a 172% year-on-year increase in investment accounts opening through mobile and significant growth of our mobile active customer base by 13% year-on-year,’ the bank stated.

Meanwhile, the bank’s global markets segment’s profit before tax also rose by 16% YoY to HK$1.2 billion.

Click the link to read the full interim 2024 earnings result by Hang Seng Bank.

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