Beobank has launched its first auto-switchable structure in Belgium. The bank’s eight-year Autoswitchable Note, which is linked to the Stoxx 600 Europe Health Care index, automatically switches to a fixed income product paying 4% pa, as long as the underlying index is at or above 128% of its initial level on the annual observation date.

Beobank has opted for an automatic structure instead of a switchable structure because of the bank’s experience with autocall products, according Alexander Declerck, product manager investments and wealth management.

“Contrary to an auto-switchable structure, a switchable structure at the issuer’s discretion is less transparent for the investor as the switch depends on the issuer,” he told SRP.

The Stoxx 600 Europe Health Care index was chosen as the underlying index after positive feedback from the banks research team about the healthcare sector.

“For structured notes [Beobank] select the underlying value based on fundamental research and perspectives,” Declerck said.

Belgian market
The Belgian market for structured products, which is one of the largest in Europe with sales of outstanding products currently at around €72bn, has recovered remarkably well from the crisis and the Lehman collapse despite a regulatory moratorium on the sale of complex products.

Large local providers such as KBC and Belfius introduce more products each month compared with a year ago, while a number of small distributors, including Optima Bank, Fortuneo and VDK Bank, have entered the market.

Declerck said that since the dip in 2011, which coincided with the launch of the moratorium, the market has picked up. “Structured products can provide added value as part of a portfolio, since they tend to be less volatile” he said. “That aside, there will always be investors who are more cautious and want capital protection.”

Beobank
Beobank is a relatively new provider in Belgium. The bank has been part of French group Crédit Mutuel Nord Europe (CMNE) since April 2012, when it was acquired from Citigroup.

Prior to the takeover Beobank was known as Citibank Belgium, an active distributor of structured products for many years. Although the structured notes which were sold via Citibank Belgium are not on CMNE’s books, Beobank does have a duty of care on live structures, Declerck said.

SRP’s Belgian database lists 82 structured notes from Citibank Belgium – with strike dates between August 2005 and March 2013 – which sold €545m at inception. Of these, Beobank provides the after-sales service for a portfolio of 20 structured notes (€133m) which are currently still live.

Click here to view all switchable and auto-switchable structures on SRP’s Belgian database.

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