Raiffeisen Centrobank (RCB), one of the fastest growing structured products issuers in Austria, Central- and Eastern Europe, has expanded its footprint in Hungary's retail structured products market via a distribution agreement with local bank MKB and a new structured certificates 'finder' tool.
Hungary is a young and dynamic market in terms of structured products, although the current penetration is still low, as high local interest rate market (government bonds) and international funds obtain the major part of the investment instruments market in retail, according to Stefan Neubauer (pictured), head of sales CEE at RCB.
"However, as customers are increasingly seeking for alternatives and especially diversification, [this] product class is growing in demand and penetration mainly in the upper retail segments, affluent and private banking," said Neubauer. "The idea is to provide customers with a fixed income like structured products solution which works out well for guarantee-, bonus- and express certificates."
The partnership with MKB Bank, which started in late 2017, has helped RCB to strengthen its market position within the retail market, according to Neubauer.
"We started last year and will provide tailor made structured products solutions on demand," said Neubauer. "RCB's product offer for our main cooperation partner Raiffeisen Hungary remains unique and is exclusively offered solely within the Raiffeisen group. The products distributed via the MKB Bank are targeting at the private banking investors, whereas the product available on RCB's site used by self-directed investors."
Last year five soft-protected structures with two bonus certificates and three reverse convertibles linked to share and index baskets with an overall sales volume of HUF2.9bn ($10.2m) were sold in Hungary via MKB Bank, according to SRP data.
So far this year there were four autocallables on baskets offered to private banking investors via MKB Bank, with an overall sales volume of HUF2.52bn, have been brought to market. Most products are denominated in Hungarian forints, euros and US dollars.
"In terms of currencies, EUR, USD and HUF are attractive investment currencies for structured products," said Neubauer, adding that from a payoff perspective "bonus and autocallable certificates with extremely low barriers linked to broadly diversified indices anticipating potential future steep drops on international markets," are sought after.
Year to date, private banking products linked to share baskets dominate whereas last year indices such as Stoxx Europe 600 Technology, Stoxx Europe 600 Telecommunications and Eurostoxx Banks took the lion's share, according to SRP data. However, the most popular underlying is the Eurostoxx 50 index.
"The Eurostoxx 50 index remains the top underlying in 2017 and 2018 on primary market issuance across all RCB jurisdictions," said Neubauer. "The leading European index is followed by the increasing use of strategy indices such as the Stoxx Global Select Dividend 100, and Stoxx Europe Select Dividend 30."
The latest products issued via RCB's certificates platform are the Europe/Global Express HUF (AT0000A21A22); Royal Dutch Shell Express 2 (AT0000A21PC5); and the capital protected certificates Kapitalschutz-Zertifikat USD Europa Bond 110 (AT0000A21KJ1).
RCB is also seeking to increase its presence and market share in the Romanian structured products market where its products are distributed via its private banking arm and the Bucharest stock exchange - where mostly leverage and tracker certificates are listed.
Structured products in Romania are still underrepresented as the market is dominated by local government bonds and local funds, according to Neubauer. "Private banking and self-directed customers are shaping the structured products market," Neubauer said.
RCB also started successully distributing structured products via Tatra banka affluent banking in Slovakia in 2017.
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