The top Japanese providers of structured products have reported sizable increases in activity which has resulted in an overall increase in total net estimated sales of over 105% on a quarterly basis and by 41% on an annual basis, according to SRP data. In the second quarter of 2017, Mitsubishi UFJ saw its net sales increase by 523% compared to the previous quarter and by 48% compared to the same period last year. The net sales of Shensei Bank and of Daiwa Securities increased by 221% and 66% quarter-on-quarter, respectively. Tokai Tokyo Financial Holdings faced a decline of 37% in net sales compared to the previous period.
Tokai Tokyo Financial Holdings issued 32 structured products worth JPY31bn (US$285m) in the second quarter of 2017, up from 36 products with a sales volume of JPY30bn in the same period last year, according to SRP data. The products, which were wrapped as registered notes, were all linked to equities and included 25 products linked to a single share. Seventeen of the company's products were issued via Svensk Exportkredit while the remaining products were issued in collaboration with Municipality Finance (12), Kommunalbanken (two) and UBS (one).
The group posted a total operating revenue of JPY19bn in the second quarter of 2017, up 35% on an annual basis, and operating income of JPY3.2bn, up from JPY1.9bn in 2Q16. Income before tax for the second quarter was JPY15bn, up 650% year-on-year. Fees and commissions were up 16% year-on-year and 20% quarter-on-quarter.
Sales of foreign currency bonds and structured bonds, at JPY68bn, were down 11% quarter-on-quarter, but up 51% on an annual basis, according to the company. Structured bonds sales, at JPY55bn, increased by 62% on an annual basis, while foreign currency bonds sales were up 14% to JPY12.4bn. The retail segment generated 57% of revenues.
Total assets under custody climbed 13% year-on-year to JPY4.45trn, with stocks (JPY2.4trn), bonds (JPY1.06trn), and investment trusts (JPY932bn) adding 54%, 23%, and 20% of total AUM, respectively.
Shinsei Bank launched 30 structured products with combined sales of JPY62bn in 2Q17, significantly up from the 21 products with a sales volume of JPY39bn during the same period last year. The majority of the bank's products this quarter were linked to interest rates and FX and were issued, among other, via Credit Suisse, Credit Agricole and Societe Generale.
Shinsei Bank reported a net revenue of JPY57.8bn, up 4% year-on-year. Net profit increased by 35%, from JPY8.1bn in 2Q16 to JPY10.9bn for 2Q17 while non-interest income totaled JPY25.9bn, a JPY0.7bn increase compared to 2Q16. This reflected a gain on the sales of equities in the principal transactions business and fee income increase from the corporate business and structured finance, while gains on sales of bonds in asset and liability management (ALM) operations and revenues associated with asset management products sales related revenue in the retail banking business decreased, according to the bank.
Asset management products were down 13% while retail banking revenue, which houses the bank's structured deposits services, was down by JPY600m.
Mitsubishi UFJ Morgan Stanley Securities issued a total of 18 structured products worth JPY131bn in the second quarter of 2017 (2Q16: 20 products/ JPY88bn), according to SRP data. The company used nine different issuing parties for its products including Commonwealth Bank of Australia, Kfw Bankengruppe and Morgan Stanley.
Mitsubishi UFJ Morgan Stanley Securities reported that both net profit and revenue decreased in the second quarter of 2017 compared to the same period last year. Net profit, at JPY15.1bn, was down 29% year-on-year. Net operating revenue was JPY83.3bn, down 4% on the year due to a decrease in both commission received and net trading income, the bank said. Net trading income was JPY36.9bn, down from JPY56.1bn for the previous quarter and from JPY42.5bn for the same period last year, indicating a decrease of 34% quarter-on-quarter and of 13% year-on-year. Commission revenue was down 24% quarter-on-quarter and 7% year-on-year.
Notably, the company reported that foreign bonds for individual investors decreased 23%, from JPY598bn for 1Q17 to JPY460bn for 2Q17. However, compared to the same period last year, foreign bonds from individual investors increased 43%.
Investment trusts, mainly Australian and US stock-related ones, remained robust, at JPY6.5trn, the company said. Total assets under management stood at JPY36.7trn at the end of the second quarter of which 47.6% was invested in stocks; 32.9% in bonds; and 17.7% in investment trusts.
Daiwa Securities issued a total of six structured products worth JPY10bn in the second quarter of 2017 (2Q16: three products/ JPY13bn).
Daiwa Securities's ordinary income for 2Q17 was down 27% on an annual basis to JPY25.1bn. Net revenue decreased by 10.6% year-on year from JPY121.6bn last year to JPY108.5bn in the second quarter of 2017. Net profit, at JPY19.3bn, was down 13% on an annual basis (2Q16: JPY22.3bn), according to the firm.
Sales of domestic bonds dropped 8.6% compared to the same period last year and 54% compared to the previous quarter. Sales of foreign bonds went down by 17% on an annual basis and 18% on a quarterly basis. Stock investment trusts increased by 39% compared to 2Q16 and 11% compared to 1Q17.
The securities company reported assets under custody of JPY55.5trn, up 14% on an annual basis.
Equity revenue increased 14.4% on a quarterly basis due to expansion of foreign equity trading volume, Daiwa reported. However, fixed income revenue declined 29.7% as sales of JGBs for individual investors decreased by half.
Click in the links to access the quarterly reports: Mitsubishi UFJ, Shinsei Bank, Tokai Tokyo Financial Holdings, and Daiwa Securities.
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