It’s been a week of product firsts, crypto launches and KID reviews.
Société Générale has issued the first structured product as a security token directly registered on the Tezos public blockchain. The new four-year €5m (US$5.9m) autocall euro medium-term notes (EMTN) is linked to an undisclosed custom index and follows in the footsteps of the first SG covered bond security token worth €100m on the Ethereum blockchain, settled in euros in April 2019, and a second covered bond security token worth €40m issued by Banque de France in May 2020. The transaction is a new step in the development of Société Générale Forge, a regulated subsidiary of Société Générale Group, aimed at offering by 2022 crypto asset structuring, issuing, exchange and custody services to the group’s professional clients.
Our immediate focus has been on building out our ESG fund range - Gidon Kessel, Citibank Korea
Staying in the crypto space, four Swiss banks, Vontobel, Swissquote and digital banks Sygnum and Seba Bank have joined forces with Swisscom to work on a feasibility study on bankable reference prices in the digital world and jointly launched the Swiss Institutional Digital Asset Reference Rate (Sidar). Daily fixings for bitcoin and ether were carried out during a two-week test period. The banks acted as data providers and Swisscom as the calculation agent.
South Korean securities house Shinhan will issue at least one equity-linked securities (ELS) with ESG underlyings every week after rolling out its first structure linked to the S&P 500 ESG. The first Shinhan ESG play aimed at retail investors is a three-year non-principal protected note with a knockout and stepdown payoff – the product, which struck on 9 April and sold KRW368m (US$330,287), will pay a 112% return at maturity if the underlying is at or above 65% of its initial level, SRP data shows.
Citi’s branch in South Korea is also banking on the ESG theme, and is aiming to issue and distribute its first structured notes linked to ESG-related funds, exchange-traded funds or stock baskets by June. The notes, which will offer at least 80% principal protection, are part of Citibank Korea’s inaugural ESG-related investment suite designed for retail investors as the bank identifies ESG investing as an ‘unstoppable trend’ and a key investment theme for this year.
“Our immediate focus has been on building out our ESG fund range since the Q3 2020 as well as educational and advisory output, which has yielded positive results with 10.6% of our total asset under management of mutual funds,” Gidon Kessel, wealth management product division head at Citibank Korea, told SRP.
Esma has published its annual statistical report on the cost and performance of EU retail investment products. Its third annual statistical report, which includes data provided by SRP, shows that the total value of SRPs held by EU retail investors decreased slightly in 2019 while volumes and types of structured products sold to retail investors in national markets within the EU showed ‘much heterogeneity’. In addition, the Single Risk Indicator (SRI) required by the Priips rules to be produced for retail structured products appears ‘to correlate significantly to the simulated returns in more pessimistic performance scenarios - the higher the SRI, the lower the simulated returns in both the unfavourable and stress scenarios’.
According to the regulator, this provides evidence that the SRI calculation methodology in the Priips KID Delegated Regulation is ‘functioning as intended from an investor protection perspective’.
Turning our attention to quarterly results, Goldman Sachs posted record revenues in Q1 2021 as sales of structured products prospered in its domestic market. It saw record net revenues of US$17.70 billion in the first quarter of 2021, more than double the amount in the first quarter of 2020.
Bank of America structured products sales have been on a steady decline since 2019 after a 25% fall year on year at the end of 2020. Its sales of structured products remained subdued during the first quarter of 2021 at US$857m (187 products) despite almost doubling its structured product issuance compared with the same period a year prior (US$764m/92 products). SRP data shows that the bank’s structured product sales varied throughout the entire year of 2020 hitting a record low during the second quarter with a mere 37 products valued at US$514m.
China Merchants Bank’s balance of structured deposits dropped 48.2% to CNY267 billion (US$40.9 billion) as at the end of 2020 year-on-year (YoY) as the commercial bank scaled-down its issuance. Accordingly, the proportion of structured deposits for the total deposits from 11.2% to five percent during the same period. The impact was limited due to a 16.8% increase of deposits at CNY5.4 trillion at China Merchants Bank (CMB), according to the bank’s annual report ended in December 2020.
The ‘historical’ rise at the bank led by Tian Huiyu was attributed to the rapid growth of M2 and the bank’s wider adoption of digital banking in 2020. The momentum is expected to slow down in 2021 due to a drop of the M2 rate.