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Best Structured Products House: Société Générale CIB |
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Also nominated: HSBC and Citi |
The past 12 months have been challenging for structured products, with two market downturns divided by an equity and credit rally, against a backdrop of very low interest rates. Some banks chose to pull back under pressure from capital charges and the increased cost of having to offer tailored solutions rather than off-the-shelf products, yet Société Générale Corporate & Investment Banking deepened its commitment.
Over the year, the firm assisted retail and institutional clients across the globe manage the volatile equity markets, while expanding its products within foreign exchange, rates and credit.
There are few structured products houses that can claim a top-three place on every continent. SG CIB, however, expanded in every region.
One would have expected SG CIB to have been pulling back in the US, for example, because of the dollar funding required. However, the firm has continued to commit itself to and expand its products, distribution and footprint, earning itself again the title of best global structured products house.
“Investment solutions is part of our DNA and is an area we have no intention of pulling back from,” says Marc El Asmar, global head of sales in SG CIB’s cross-asset solutions department. Indeed, over the past 12 months SG CIB has raised several billion dollars in funding by collateralizing loans with assets. Over the period it has expanded its US client base by providing unique solutions to insurance companies and pension funds. Emmanuel Valette, head of cross-asset solutions in the US, says: “Insurance companies are concerned about capital treatment and have been struggling with low yields; we designed a way to effectively reinsure some of the blocks of their business.” The bank has enabled insurance companies to transform some of their NAIC 6 assets into those that require less capital.
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“Investment solutions is part of our DNA and is an area we have no intention of pulling back from”
Marc El Asmar, global head of sales in SG CIB’s cross-asset solutions department |
In Latin America, SG CIB has also expanded its offering. To trade with onshore asset managers in Brazil, the firm launched an offshore-onshore platform last year to be able to provide options linked to commodities, FX and equities to local capital-guaranteed funds. In Mexico, Valette says the biggest hurdle was being able to trade with local pension funds, which it recently achieved. The second challenge in Mexico was to have a local programme to issue structured notes. The bank now has this in place.
In Asia, the firm is the number-one player in variable annuity products in Japan serving institutional clients. The firm also has a large distribution into retail across the region. And in Islamic finance, SG CIB has added to its offerings recent innovations such as puttable sukuk, secured sukuk, Islamic repo and Islamic credit-linked certificates.
The final and deepest piece in its footprint is the domestic continent of Europe where this year it has been a leader in tailoring products such as loans backed by export credit agencies, and distributing them to asset managers and insurance companies that want assets for their secured funding business. Having roots in Europe, but with a global reach, has meant that the firm has also been able to arbitrage the opportunities that have resulted from challenges within Europe. For example, SG CIB has sourced asset-backed securities from European banks, placing them with US and some Asian investors.
Société Générale has always been known for its commitment to innovation in structured products and the past 12 months have been no different. Over the review period the bank sold €2 billion in enhanced collars to family offices, pension funds and asset managers, which allows for lower-cost equity hedging with higher returns than a traditional collar. “That product allows clients to take advantage of the equity rebounds and protects them from a market downturn. That was the right approach in March, April and more recently, and all the investors that took part have increased their exposure,” says El Asmar.
The bank has also become a leading provider of credit notes in Europe. SG CIB now partners with more than 20 banks and private banks on credit- and bond-based products.
More than 150 trades have been printed since the beginning of 2012, for an aggregated nominal of more than €700 million, making SG CIB a top-three provider. “Because of the capital charges, some players have exited, or have exited because they lack the distribution. We are one of the few remaining providers and have not only sustained the business on the credit side, but we have generated more,” says El Asmar.
