Banks continue reporting latest results, which show a mixed bag of trends and emotions.

HSBC has posted profit after tax of US$4.6 billion in the first quarter of 2020 – an increase of 82% from the prior year quarter. Reported revenue of US$13 billion was five percent lower than in 1Q 2020 with the reduction primarily reflecting a fall in net interest income because of the impact of lower global interest rates. In the global private banking unit, revenue decreased by eight percent to US$42m. In investment distribution, revenue, at US$100m, was 14% higher, reflecting strong equity market conditions in Hong Kong SAR, which resulted in growth in brokerage fees as transaction volumes increased by 75% and higher mutual fund sales.

With absolute rates at low levels, the structuring of funded solutions does not work anymore - Jennifer Wong, Citi

For its part, Wells Fargo has reported net revenues of US$18 billion in Q1 21, compared with US$17.7 billion in the first quarter of 2021, despite a significant fall in structured products activity. The bank distributed a total of 78 structured products during the first quarter of 2021 with sales volume of US$300m, compared with 162 products in Q1 20 worth US$440m, SRP data shows. The bank’s issuance as a distributor group initially tumbled in the second quarter of 2020 to 85 products valued at US$230m amid the height of the Covid-19 pandemic. The bank led by Charlie Scharf has remained at the bottom of the SRP league tables in terms of distribution issuance and sales while Morgan Stanley leads the ranks with 1,046 products worth US$6 billion in Q1 21.

The pre-tax income from Nomura’s wholesale segment has dropped 30% to JPY64.3 billion (US$591m) in the FY20/21 ended in March year-on-year (YoY) after the Japanese bank booked a loss of US$2.3 billion arising from Archegos Capital Management, which it referred to as a ‘US client’ in its financial statements. The largest brokerage in Japan has also estimated an additional loss of US$570 million from the family office collapse as of 23 April, which will be recorded in its consolidated results for the FY21/22. In related news, Nomura Holdings has announced that Christopher Willcox will join as CEO & president, Nomura Securities International, Nomura Global Financial Products. He will also be appointed as co-CEO, Nomura Holding America, and senior managing director for his respective US capacities. His appointment is effective 3 May.

BNP Paribas Fortis Funding, the Luxembourg issuance vehicle owned by BNP Paribas Fortis, issued 22 securities worth €124.5m (US$150.8m) during 2020, a decrease of almost 50% by sales volume from the €240.1m raised from 33 securities sold in 2019, according to the company’s latest audited annual accounts.

‘In the face of increased volatility on the financial markets, we noticed a decline in investor’s appetite for structured notes and as a consequence a decline in the volumes of issues placed among retail investors,’ the company stated in its annual report.

Another dark spot on the structured product map comes from South Korea, with latest figures showing that sales of equity-linked securities (ELS) fell to KRW15.2 trillion in the first quarter of 2021 from a yearly high of KRW26 trillion at the end of 2020. The number of ELS issued in Q1 21 increased 27.4% to 4,240 quarter-on-quarter, or up 3.9% year-on-year despite decreasing sales. This shift is related to tightened rules on ‘highly complex investment products introduced by the SFC ‘strengthen investor protection’ in light of the mis-selling crisis in 2019, which came into effect on 2 February.

ESG is always a topic that garners a fair amount of attention, and this latest headline from Mexico is no exception. The Mexican arm of Scotiabank has rolled out its first MXN-denominated structured note tied to the IndexAmericas, an corporate sustainability index developed by the Inter-American Development Bank and commercialised by BNP Paribas. IndexAmericas is the first of its kind to be built by a multilateral development bank as well as the first in the LAC markets to be fully aligned with the United Nations’ Sustainable Development Goals.

In other innovation news, Citi’s multi-asset active allocation solution, developed in partnership with BlackRock as allocation provider and distributed so far in Asia via a third party private bank and retail aggregator, is gaining traction as demand for QIS and active management increases. Citi has entered a new phase in its cooperation with BlackRock with the launch of a call option certificate (warrant) linked to the Citi Multi Asset Active Allocation VT 4.5 Index (CIXBMAB5 index or MA3 index).

With absolute rates at low levels, the structuring of funded solutions does not work anymore, says Jennifer Wong, Citi’s head of private banking sales Apac.

“[…] more retail investors in the region are beginning to accept the idea of trading warrant certificates for different investment needs, for example upside participation, hedging and outperformance/dispersion. As long as the warrant’s premium remains below [2-3]% pa, they're happy to pay,” she said.

Staff moves in Asia Pacific have increased in the past few months, with the latest coming from UBS, which has seen Bilal Al-Ali, head of Apac structured sales leave the Swiss bank after 12 years. The structured products banker will join Morgan Stanley as head of the US bank’s structured sales team for Apac. No reporting lines have been disclosed. Al-Ali declined to comment. Chuan Ji Lim, former strategy director of Hashstacs (aka Stacs), a Singaporean fintech company, joined UBS as Asean business manager on 8 March based in Singapore.

Over in the US, InspereX, the new tech-driven fixed income market distribution and trading firm formed by the merger of Incapital Holdings and 280 CapMarkets, has announced two appointments in its wealth management solutions division. The US firm has hired Nicholas Whiteley as managing director, market-linked products origination, and alternative distribution, while Bob McDermott has been promoted to managing director, national sales manager.

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