Japan: structured bonds boost SBI Securities profit, Shinsei sales come flat

SBI Securities is enhancing its distribution of structured bonds, which has added up to JPY127.5 billion (US$1.22 billion) by self-origination and distribution from December 2015 to September 2020, according to the company’s interim report for the period ended 30 September.

Structured bond and foreign bond transactions with regional financial institutions are ‘steadily increasing’ while structured bonds made up 35% of customer deposit assets at the firm’s 10 co-managed outlets with various banks as of 30 September.

The Japanese securities house, which claims to have the largest retail investor base in the country, is the third most active distributor by issuance after MUFJ Morgan Stanley Securities and Tokai Tokyo Securities with 72 structured notes issued year-to-date. This translates to a market share of 1.15% on the back of a JPY25.57 billion sales volume, SRP data shows.

The volumes increased by three compared with that in the whole 2019, which brought in JPY23.21 billion – a one percent market share.

HSBC and Municipality Finance remain the top partners for SBI Securities having issued 18 and 13 of the notes, respectively, year-to-date. The securities house has used Morgan Stanley for the first time as the issuer of eight products with derivatives manufactured by Bank of New York Mellon, and also used Barclays as the issuer of one reverse convertible note (RCN) linked to the shares of Murata Manufacturing distributed by SBI Securities at the beginning of the year.   

In terms of underlyings, SBI has deployed a wider variety of equity assets – from 24 to 40, although the Next Funds Nikkei 225 Leveraged Index ETF remains the favourite after being featured across 11 autocallable RCNs with a tenor of two years.  The top 10 underlyings used by SBI include new addition such as CyberAgent, Yaskawa Electric, Fuji Film, Keyence, Z Holdings.  

The subsidiary of SBI Holdings also announced it will act as underwriter of public offerings of digital corporate bonds as well as manage security token offerings (STOs) for other assets like fine arts, intellectual property rights and real estate, after its parent company announced ‘Japan's first STO business’ on 9 October.

SBI Securities reported a net profit of JPY18.99 billion during the period from April to September, up 61.8% year-on-year (YoY). It accounted for over half of the net profit at the parent though the revenue of JPY74.03 billion, a 27.9% increase YoY, only made up for one-third of that at the parent.

Shinsei Bank

The bank led by Hideyuki Kudo (pictured) reported that assets under management (AuM) from retail banking product sales stood at JPY5.86 trillion as of 30 September - this includes structured bonds, structured deposits, mutual funds and insurance products.

The AUM balance of structured bonds rose to JPY204.6 billion, up from JPY195.5 billion as of 30 June despite a drop from JPY207.9 billion registered in the first quarter.

The bank’s corporate business reported a fall in fees and derivative income by about 30% as of 30 September but ‘are expected to rebound’ YoY.

According to SRP data, Shinsei Bank is the fourth most active distributor with 55 notes issued year-to-date worth an estimated JPY124.3 billion and a market share of 5.57%. By sales, the bank is the third largest distributor with all products issued in-house after MUFJ Morgan Stanley Securities and Mizuho Bank.

Since 2015, Shinsei Bank has kept a stable annual issuance of around 60 products but has seen a slight increase in sales from JPY130 billion to JPY140 billion. The bank’s preferred underlyings includes Japan, US and Australia FX and interest rates.

Shinsei Bank posted a net profit of JPY13.3 billion in the first half of FY20/21 ended on 30 September, down 53% YoY, despite a recovery in the second quarter. Revenue dropped nine percent to JPY110.2 billion while expenses grew one percent to JPY72.7 billion.

Click to view the 1H FY20/21 presentation of SBI Securities and Shinsei Bank.