Delta Lloyd Bank has launched Delta Lloyd CODEIS Securities SA (LU) Europe Best Sector, a 10-year fully capital-protected EMTN which offers 100% participation in the Finvex Sector Efficient Europe 30 index. The note is the only the second product linked to the index in Belgium – last month, Crelan launched SG Issuer (LU) Finvex Sector 90, although this product only protected 90% of capital.
It is not the first time Delta Lloyd Bank has used a Finvex index as an underlying for its structured products over the past year and a half, according to Laurent Joly, product manager, savings and investments, at the bank. “First and foremost, [Finvex indices] are popular within our network because they have a good track record,” said Joly. “They tell a good story, either going for sustainable companies or for certain sectors, and, due to the low volatility of the index, we are able to offer a good participation.”
Delta Lloyd Bank has employed Codeis Securities, the special purpose vehicle (SPV) of Societe Generale, to issue its structured products since July 2013. Prior to that, the bank used SG Acceptance as an issuing company. “Codeis Securities is a vehicle we use to make sure the funding stays with us,” said Joly. “Other distributors in Belgium, such as Argenta and Crelan, use SecurAsset, the BNP Paribas vehicle.”
These days, the majority of Delta Lloyd Bank’s products are linked to equities, even though in the past the bank has launched products linked to other asset classes, such as interest, said Joly. “Today, equities are the only asset class for which we can find conditions interesting enough to offer products. Interest rates are currently just too low.” he said. “This does not mean that we will never offer any products related to interest rates again, but for the moment we simply cannot offer attractive conditions on those products.”
Capital protection is pretty much a must for Delta Lloyd Bank’s clients, although every now and then the bank does try to offer products protecting less than 100%, said Joly. That was the case in October 2014 when the bank launched two similar products, Delta Lloyd CODEIS Securities SA (LU) Finvex Dynamic and Delta Lloyd CODEIS Securities S.A. (LU) Finvex Smooth, which offered 90% and 100% capital protection, respectively. “In those cases, we see in our network that the product with the 100% protection sells better,” said Joly.
When it comes to its position in the Belgian market, Delta Lloyd Bank compares itself to the Crelans and Argentas of this world, according to Joly. “We try and come with new products regularly, but we cannot compete with KBC, AG Insurance or BNP Paribas Fortis, which issue three to four products simultaneously,” he said. Despite its smaller issuance, Joly does think that structured products have an important place in the portfolio of the bank’s clients. “Why? Because they offer 100% capital protection and in the long term offer the possibility to achieve higher returns than for example a deposit account or Tak21. As long as interest rates remain low, I guess structured products have good prospects,” he said.
From 2016, investors in Belgian must hold on to their equities for at least six months to be able to avoid the speculation tax which was recently implemented by the Belgian government. However, Joly does not expect that the new tax will have a huge impact on structured products. “No, I don’t think so,” said Joly. “In that case, a product needs to be sold within six months and I don’t know any of our clients who do so.”
SRPs Belgian database lists 47 structured notes from Delta Lloyd Bank which collected combined sales of €1.4bn between October 2005 and May 2015.
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