Notenstein Private Bank Ltd has entered the Swiss structured products market, with Raiffeisen Switzerland Cooperative as guarantor and EFG Financial Products Ltd as services provider, following the purchase of an equity stake of 20.25% in EFG Financial Products Holding for CHF70.2m (€56.2m).
With this strategic step, Notenstein has raised its stake from 2.5% to 22.75% and is aiming to position itself as a leading provider in the field of structured products know-how while growing its market share in Switzerland.
"We have been in the structured products market for 20 years but as a private bank we organised this business line as a pure buy-side model ," Patrik Rüthemann (pictured), head of products & trading at Notenstein, told SRP. "This position changed after the Raiffeisen transaction because our parent company has a very strong balance sheet and is interested in additional funding. That's why we reviewed our business model and we moved into becoming an active issuer of structured products."
Rüthemann said that as part of the move the bank decided to outsource part of the value chain to EFG Financial Products, which will be responsible for managing the market risk and the derivative components, as well as for the market making of Notenstein's products.
"We believe that the resources, capabilities and strong balance sheets of Raiffeisen in the field of structured products, combined with the service quality of EFG, will make a very strong proposition for the Swiss investor," said Rüthemann.
"We think that an important trend in the market at the moment is the focus on credit quality of issuers, and as the credit quality of investment banks has decreased over the last couple of years, this makes us a strong player in the market. We think that our AA [rating] will help to build a sustainable and successful business."
In mid-March, the bank launched its public distribution platform, and its direct B2B sales for banks, independent asset managers, and for institutional investors in Switzerland.
"We want to be a frequent issuer, so that investors have a broad range to choose from," said Rüthemann. "The retail channel is going to be pivotal in our strategy to build our market share, alongside the private banking and the institutional business."
To build its position in the market, Notenstein is currently hiring a number of equity derivative professionals, although Rüthemann said future developments on headcount will be in line with the growth of the business.
According to SRP data, the bank has issued 35 structured certificates through its public distribution platform, combining payoff types such as reverse convertibles (23), worst-of (20), knock-outs (22), enhanced trackers (6), protected trackers (5) and capped calls (1).