Equity-linked products tied to US stocks drove most of the sales throughout 2024.
United Overseas Bank (UOB) Singapore recorded a significant growth in its structured products business with traded notional soaring almost twice in the mass affluent segment in 2024 compared to the prior year, buoyed by the robust performance of equity markets.
Given rates are still high, we continue to see good funding trades - John Lau
The surging volumes stemmed from products sold across the board, roughly equally divided between equity flows and principal-protected structured notes, according to John Lau (pictured), head of treasury, Singapore and region at UOB.
“We do start to see quite a meaningful shift into almost a 50-50 [split]. This resulted in a very balanced portfolio, which we’re quite happy with,” Lau told SRP.
“Given rates are still high, we continue to see good funding trades and I think a lot of banks, the sell side, are actually using this opportunity to also lock in liquidity and funding. We do see a good variety of hybrid structures that are principal protected in nature, which I thought do offer very decent value to clients, especially those with relatively short callability and a fairly decent amount of big coupons,” he said.
The executive highlighted that among non-equity flows, interest rate products comprised around a quarter of sales, while the remaining trading volumes stemmed from hybrid products including combinations of equity and FX underlyings. The remaining half of the volume was racked up by household structures such as fixed-coupon notes (FCNs) and notes with a step-down feature.
On the underlying front, Lau noted that the underlying exposure of most of the equity-linked products was driven by US-centric stocks rather than Chinese stocks over the past year, as investors stayed in a wait-and-see mode for more stimulus measures by Chinese authorities.
The bank increased equity allocation to 55% of the flow recorded in 2024 from 40% in 2023, with the US market continuing to be the most popular investment choice, he added. The bank’s overall wealth management income – consisting of wealth management fees and customer-related treasury income – also grew by 32% year-on-year by the third quarter of 2024.
Barclays partnership
On the issuer side, UOB expanded its distribution agreement with Barclays across flow, solution offerings and advisory solutions in 2024 following the launch of the partnership in 2023, according to Lau.
Under the UOB-Barclays’ advisory solution partnerships, UOB can work with American economist Professor Robert Shiller, who is known for popularising the cyclically adjusted price-to-earnings (CAPE) ratio aimed at capturing long-term trends and detecting under and overvaluation in markets, he said.
“By leveraging Professor Shiller’s market insights, UOB aims to facilitate more insightful discussions with end clients,“ the bank stated.
The British bank is currently one of UOB’s top three trading and structuring counterparties for its consumer banking business, which covers equity flow trades as well as more complex payoffs across all asset classes.
The latest development at Barclays also came after the UK bank debuted its first batch of Shiller Barclays CAPE US Sector strategy-linked structured notes in Asia Pacific at the beginning of last year, as reported by SRP.
The Shiller indices have been successfully deployed in structured products and fixed-indexed annuities issued in the US and European markets since 2016, SRP database shows.
UOB also completed the acquisition of Citigroup's banking franchise at SG$5 billion (US$3.6 billion) – consisting of unsecured and secured lending portfolios, wealth management and retail deposit businesses in Indonesia, Malaysia, Thailand and Vietnam in late 2022 and early 2023.
Coupled with “organic growth,” the UOB executive also noted that the bank’s expanded regional presence had brought a retail customer base of over eight million across the Association of Southeast Asian Nations (Asean).
In Thailand, the bank introduced the country’s first US dollar-denominated structured fund last September in response to a growing trend among investors converting the US dollar from the Thai baht and buying US dollar-denominated funds.
Besides the continuous growth of UOB’s structured product business, Lau pointed out that the bank is also looking to boost the automation platform for structured products’ pricing, execution, and lifecycle management to simplify the delivery of the bank’s solutions to its clients.
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