ING has launched a rare public offer in the Netherlands. The bank's five-year Memory Coupon Note (MCN) Eurozone pays a fixed (memory) coupon of 4.91% if the Eurostoxx 50 is at or above 80% of its initial level on the annual reference date. The note, which is distributed via ABN Amro MeesPierson, protects 100% of the nominal invested as long as the Eurostoxx 50 does not close below 60% of its starting level on June 17, 2021
There is a strong demand for yield-enhancement products in the Netherlands, mainly because the interest rates on savings are so low, according to Marcel Pronk (pictured), director, sales structured products for private investors at ING wholesale banking, financial markets in Amsterdam.
"People are looking for products where they still have a chance to achieve a decent return," said Pronk. "The interest you get today on your savings account in the Netherlands is about 0.5 to 0.6% while at the same time the capital gains tax you have to pay is 1.2%. So to put your savings in a savings account actually costs money," he said. "That's why products which offer a somewhat higher coupon but still have a reasonable degree of protection are very popular."
ING is not the only provider offering MCNs to Dutch investors. BNP Paribas and Kempen have also marketed products with a memory feature on a regular basis. While the last two often target retail investors with their MCN's (BNPP 21 products; Kempen 11 products), ING mainly focuses on private placements, according to Pronk. "Every week we close at least one but often more deals [for MCN's] for private banking clients," he said.
"These private placements are mostly aimed at customers with larger portfolios in the upper segment and, from time to time, there are distributors such as ABN Amro who want something they can offer to a wider audience," said Pronk. "In this case ABN Amro came to us and said: 'We want to do a MCN and we want to offer it to a large group of investors'. And that's what we did," said Pronk who understands that at ABN a similar product is maturing and "they wanted to give their customers the option to reinvest".
During the subscription period, the MCN Eurozone is exclusively available to clients of ABN Amro MeesPierson, and afterwards, from Tuesday 21 June, the product gets a listing at Euronext Amsterdam and clients can buy it in principle at all banks, according to Pronk.
"There are various ways to put these products in the market, from very offensive - with high barriers and little protection - and therefore higher coupons, to a little bit more defensive, what we have just done with ABN Amro," said Pronk.
The note is linked to the Eurostoxx 50, an underlying which, together with the local AEX, dominates the structured products market in the Netherlands, although last year ING launched a capital protected note (ING Liric Duurzaam september 2023) on its own Sustainable Europe LR Equity index. "That product sold very well. We are already on our third tranche," he said. "One of the reasons why we list these products is that the demand is continuous, not just on the primary market."
In the retail market the Eurostoxx 50 is still one of the most popular indices, according to Pronk. "If you manufacture a product for a large group of customers you tend to introduce something to the market which appeals to a large group of people, and, in that case, European or Dutch equities capture the imagination of most investors," he said. "The shares in these indices are the shares people know and are familiar with that's why the Eurostoxx 50 or AEX are often used in public offers."
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