Structured products performed well in Q2 2020, especially in Japan where sales volumes increased almost tenfold, according to SRP data.
BNP Paribas has reported a very strong growth in derivatives activity, particularly in structured products, in the second quarter of 2021.
Although global markets revenues of €1.9 billion (US$2.2 billion) decreased by 17.4% compared to ‘an exceptional’ Q2 2020, they rose by 35.2% compared to the second quarter of 2019. Primary market activity was driven by a good level of global bond volumes – up 15% from the 2019-2020 quarterly average – and a normalising of rates, forex and commodities activities.
Fixed income, currencies, and commodities (FICC) performed well in all its business lines, with revenues of €1.1 billion while equity and prime services revenues rose to €757m, a 2.6-fold increase compared to the second quarter 2020, driven by record client activity and a rebound effect in comparison to a second quarter 2020 that continued to be affected by the crisis environment.
During the quarter, the group completed the first wave of client transfers from Deutsche Bank’s prime brokerage business while it raised its stake in Exane to 100% as part of a plan to widen the range of cash equity and derivatives services offered to clients.
In the past, counterparties used Exane for cash, BNP Paribas for derivatives, and Deutsche Bank for prime brokerage, according to Lars Machenil (pictured), chief financial officer, speaking at the group’s second quarter 2021 results webcast. ‘Having all that in one organisation means that instead of three times KYC [know your customer] every transaction, it only needs to be done once now,’ he said.
BNP Paribas issued 334 public offers across 16 different jurisdictions in Q2 2021, according to SRP data (Q2 2020: 419 public offers).
It was particularly active in its home market France, where it raised an estimated US$1.2 billion from 172 products (Q2 2020: US$875m from 179 products). More than 92% of its French offering, which was solely linked to equity underlyings, featured the knockout payoff.
The Eurostoxx 50 was the preferred underlying of the French investor (16 products) but there was also demand for decrement indices including the Solactive Europe & US Top Pharmaceuticals 2020 AR 5% Index (12), S&P Euro 50 Equal Weight 50 Point Decrement Index (10) and Euronext Transatlantic ESG Leaders 60 EW Decrement 5% (seven).
Italy was another market were the bank fared well, collecting US$340m from 43 products (Q2 2020: US$325m from 55 products), while outside of Europe its performance in Japan stood out. There, it accumulated a sales volume of US$763m from 41 products, an 990% increase year-on-year (Q2 2020: US$70.4m from 14 products).
Like France, products in the Japanese market were exclusively linked to equities, with the majority of products tied to a basket comprised of the Nikkei 225 and S&P 500. All products were reverse convertibles with an autocall feature.
BNPP was also active in the listed products segment, mainly in Germany, where it issued some 67,914 turbo certificates and 12,744 discount-, bonus-, and capped bonus certificates in the quarter.
BNPPs 2021 medium to long-term (MLT) wholesale funding programme of €36 billion includes an MLT regulatory issuance plan of approximately €17 billion. The second part of the programme, at €19 billion, is to be completed in structured products and, to a lesser extent, with securitisation and local funding. Over 88% of the regulatory issuance plan, and over 88% of the overall wholesale programme were realised as of 22 July 2021.
The group’s immediately available liquidity reserve amounted to €488 billion, which is equivalent to over one year of ‘room to manoeuvre’ in terms of wholesale funding, according to BNPP.
Click the link to read the full BNP Paribas second quarter 2021 results, presentation and consolidated financial statement.