Structured products lift income at firms as they benefit from fewer competitors and investor demand for higher-yielding securities amid near-zero interest rates.
Bloomberg News reports that Societe Generale cited structured products and equity derivatives among the main reasons for the surge in net income at its corporate and investment bank, which almost tripled to $499m in the second quarter from the same period in 2012.
The securities contributed to a 55% increase in equity sales and trading revenues at Deutsche Bank during the three months from the year earlier period, the bank said in a July 30 statement.
Structured note issuers profited after Royal Bank of Scotland and Rabobank Groep departed from the business this year, citing increased costs as regulators raise disclosure requirements for issuers. The push by U.S. and European central banks to stimulate growth by suppressing interest rates is also propelling investors toward riskier, higher-yielding securities.
'When Roger Federer retires Rafael Nadal will feel sad to see a great rival go, but he will also win a lot more,' Jean-Eric Pacini, European head of structured equity sales at BNP Paribas, said in a telephone interview. 'That is what it is like in the structured products business now.'
image: © Mark Howard Photography