Grupo Santander's retail bank network may be the largest in Spain but the banking group does not rely on sheer market presence to lead the Spanish market. Rather, the bank has focused on constant innovation in its product range, distributing products across every major asset class. Santander is a distributor that rivals the best banks anywhere in Europe for product variety and innovation. And it's for this reason that it has picked up our Spanish house of the year award for the second year running.
Jose Maria Farres, Santander's Madrid-based head of derivatives marketing for Europe, says the bank now structures all of its own products.
It certainly seems to be a winning strategy. In fact, Santander's Double Opportunity Note could be viewed as one of the most successful retail products across Europe. The product's success even caught the Spanish bank off guard. Originally EUR100 million was planned for the product but it was quickly apparent demand would exceed that expectation. In the first two months alone the note sold more than EUR650 million and it is currently being snapped up by investors in its second tranche, with sales expected to top EUR1 billion by the end of the year.
The Double Opportunity Note aims to provide a higher yield than comparable fixed-income instruments and guarantees a minimum payoff equal to Spanish inflation levels. Meanwhile, indexation to the Ibex-35 equity index allows investors to benefit from the potential long-term growth versus fixed-income investments. The investor gets the best of performance of the two underlyings at maturity. It has a relatively long maturity of 10 years, but this has not deterred Spanish investors, who are attracted to the best-of option.
For investors seeking shorter maturities, Santander has created another hybrid product that incorporates Spanish inflation and an equity underlying. With the three-year Dual Deposit, investors receive 100% participation in Spanish inflation on 50% of the capital and 100% participation in Ibex performance on the other half. The bank has placed more than EUR150 million of this product with retail and private bank clients.
Santander has successfully adapted its offerings in line with regulatory change. It has, for example, brought the country's most successful hedge fund-linked product to market, following the opening up of hedge funds for retail earlier this year. Impressively, the Optimal Fund of Hedge Funds sold EUR300 million in the second quarter of 2006. The product was linked to a basket of five hedge funds with a 41-month maturity, providing investors with 200% participation in the basket of hedge funds and 40% capital protection.
The Spanish powerhouse has also increased its commodity-linked offerings in the past 12 months, particularly for its private bank clientele. "For the first time this year, we are offering structured products for private bank clients with underlyings such as oil and metal," Farres says.
Naturally, Santander often uses Ibex-35 as an underlying, but the range of payouts and structures it offers makes the bank a force to be reckoned with globally. Its products include plain vanilla structures, rainbow options, himalayas, cliquets, callables, coupon options and equity default swaps.
Meanwhile, Santander Global Connect (an online trading portal connecting the retail network to Santander's team of structurers) is still unique in Spain for delivering derivatives to its network branch clients, who usually have limited access to that level of product. "The success of this initiative is in the clarity of the products proposed, along with a platform that allows the printing of the trade confirmation once the trade has been closed," Farres says.
Santander's market share in Spain keeps growing not only through its huge network presence, but also by continual improvement in its products and structuring capabilities. This is what has kept it ahead of the competition in 2006.
WHY GRUPO SANTANDER WON
This year, Santander became the first bank in Spain to sell large volumes of structured products linked to hybrids and hedge fund underlyings. With an ability to sell innovative new products to retail customers that is almost unparalleled anywhere in Europe, its brand appeal makes it the distributor of choice in Spain.
The week on Risk.net, October 6-12, 2017Receive this by email