Nordea, the biggest Nordic bank, has dominated the Danish structured products market over the last decade with a market share reaching 79% at its highest in 2011 and 41% at its lowest in 2007. Although the bank remains the most consistent and long-term active distributor in Norway, it has seen its market share challenged most recently by Swedish front-runner Garantum Fondkommssion and in the past by Commerzbank (using small local distributors), DNB and Acta.
The Danish market increased overall 82% in terms of issuance and nearly 70% in sales in 2017 compared to 2016 although sales levels are still 123% lower than 2015, and the number of distributors has halved compared to 2015. Nordea sold a total of DKK930.7m (€125m), up 27% more compared with 2016 and equating a 46% market share in 2017 (down from 63% in 2016), despite quiet hiatus on Q4 2017. The bank's Danish best seller was the five-year Aktiebevis Global Kupon 2022 linked to three indices which raised DKK320m.
"It took some time for us to find out how to use structured products in our offering in a low yield environment," said expert product manager, Morten Melander. "We realized that we needed to re-launch non-capital protected structured bonds, and it was important for us, that capital protected structured bonds and non-capital protected structured bonds were clearly separated as they have completely different attributes and meet different customer needs."
In Norway the overall market went up by 11.5% in 2017 in terms of sales volume (NOK1,875m), while issuance decreased by 7% (92 products) compared with 2016. The bank's sales increased 24.7% more compared to 2016 (NOK856m) and claimed 46% of the market (up from 39% in 2016). Nordea's Norwegian tranches had an average size of NOK41m while the market's average tranche size was NOK14.8m. The Norwegian best-seller was Nordea Kredittbevis Nord-Amerika High Yield VI which raised NOK107m.
Nordea attributes this year's growth to its range of risky products which found their worth with stakeholders and investors after a period of adjusting the product terms to the difficult market conditions that have caused havoc to the traditionally preferred capital protected products.
"After the re-launch the value proposition for non-capital protected structured bonds became much more clear for our stakeholders and customers, and that was the key to our growth," said Melander.
In the Danish market Nordea outperformed the other nine distributors averaging 115.8% (2.35% pa) returns compared to the market average of 114% (2.16% pa). The bank's best performer was the five-year USA 2017 linked to the S&P 500 which returned 168.26% (10.96% pa), followed by the five-year NBF 30-2 Kurvestejler II 2017 (151.63% / 8.57% pa) linked to swap rates. The top ten best performing products delivered an average of 143% (7.6% pa) including six products linked to the interest rates, three to equity and one to credit which had an average term of 4.9 years. Contrary, the worst ten performers had an average of 93% (-3.6% pa) and an average term of 2.4-years.
According to Melander, there is a fine balance between the innovative complexity and desired simplicity. "On the structuring side we have been focusing on simplifying our products," said Melander, adding that the bank has found "the right balance" with its range of structured products. "We love to work on the details and be innovative when we put together our products, but sometimes innovation causes complexity, which makes the value proposition blurry seen from a customer perspective."
According to SRP data, Nordea's main market remains Denmark although closely followed by Sweden in terms of sales.
As reported, 2017 was a turbulent year for Nordea, starting with an internal reorganisation after the legal merger of the bank's Danish, Finnish and Norwegian subsidiaries, which became branches of Nordea Bank AB, the Swedish parent company and the establishment of a new Nordic Investment Solutions & Advisory Centre (ISAC). The ISAC unit is responsible for the distribution of all public and private banking structured products, while structuring and issuance are still under Markets. Both units operate as "a cross-border team located in Copenhagen, Helsinki, Oslo and Stockholm," according to an official at the bank.
Distribution and production is conducted from the Danish branch under the lead of Stine Bøgh Carlsen, deputy head of investment product management, Peter Jensen, head of structuring, product managers Melander and Soeren Hvid, and Sara Bergmark, senior sales manager.
For this year's European awards, in which Nordea has been awarded both Best Distributor in Denmark and Norway, as well as Best Performance in Denmark, SRP has considered 74 tranche (subscription-based) products from the bank, consisting of six products issued and 28 matured in Denmark with strike dates between October 1, 2016 and September 30, 2017, and 21 products issued and 19 matured in Norway during the same period.
SRP's 15th European Structured Products & Derivatives Conference 2018 will take place on 7-9 February at the etc.venues, County Hall, London.
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