The past week kicked off with positive earnings from Société Générale (SG), which has also completed its structured products repositioning.
The French lender posted record results for 2021 as its net banking income increased 16.7% to €25.8 billion year-on-year (YoY). Its revenues were up 13.4% to €6.6 billion in the fourth quarter, up 13.4% YoY, with a positive contribution from all the businesses. In the meantime, the reduction in the risk profile of structured products was completed in the first half of the year, ahead of schedule.
Our first batch of DLCs focus on HK underlying and soon we will also cover Singapore and overseas underlying - Vassili Reperant, UBS
Moreover, SG’s strategy has paid off as its CBK’s business has fitted perfectly with SG’s set up and needs. The bank has the highest market share by exchange turnover in Germany according to the German DDV, and was the number two provider of listed products (by issuance) in 2021 across Europe since completing the acquisition of the Commerzbank’s (CBK) Equity Markets and Commodities’ (EMC) business with the integration of the German bank’s exchange-traded investment solutions in Q2 20.
On Thursday, Citi became the latest structured products provider to make a strategic investment in Simon Markets, a US multi-issuer structured products fintech company owned by a consortium of seven financial institutions, including Goldman Sachs, Barclays, Credit Suisse, HSBC, J.P. Morgan, Prudential and Wells Fargo.
The US bank is already plugged into the Simon platform as an issuer of structured investments and through its wealth management division whose financial professionals use the platform.
Also in Americas, the MerQube US Tech+ Vol Advantage Index has amassed US$196m in structured product sales across 142 structures, SRP data shows. The volatility controlled proprietary underlying developed by US start-up index provider MerQube first appeared in the market in the summer of 2021 and has been exclusively licensed to J.P. Morgan.
On the regulation side, the European Commission’s Packaged Retail Investment & Insurance Products regulation (Priips) inched closer to resolution when the European Supervisory Associations (ESAs) held a public hearing on the ‘direction of travel’ of their level one advice to the Commission as it prepares its broad Retail Investment Strategy review.
The ESAs want the European Commission to loosen overly restrictive wording in the level one legislation and to firm up their intention in other areas
In Asia Pacific (Apac), ‘fake structures’ has grabbed attention in the Chinese structured deposit space as the market size further declines in 2021.
Following the landmark 2019 framework, China continues to see some state-owned banks issue structured deposits hedged by counterfeit counterparties or embedded with derivatives that implicitly lead to higher yield. For example, an issuer may set up a barrier, which is highly unlikely or likely to be reached based on the underlying’s historical performance. One of such products is the乐赢汇率挂钩20249期/Structured Deposit P21W60101 issued by China Citic Bank.
In Singapore, UBS has entered the listed daily leverage certificates (DLC) market as an issuer, which had been dominated by SG alone since 2017. The Swiss bank on Tuesday marketed a range of 10 DLCs available in long or short offering 7x the daily performance of the Hang Seng Index and 5x the daily performance of four single stocks - Tencent, Alibaba, Meituan and BYD.
"Our first batch of DLCs focus on HK underlying and soon we will also cover Singapore and overseas underlying including indices and stocks," Vassili Reperant, head of public distribution for APAC, global markets, told SRP. “We also see continuous flows in tech names, automobile names and also traditional names like banking, oils and telecoms, and these could be the potentially in our coverage soon."
Image: Dilok/AdobeStock.