Commerzbank leads overall in the turnover statistics for structured products across all German exchanges, with a 27% versus 20% market share for the month of September, according to the Deutsches Derivate Institut. More impressive is the number of products the bank has issued since 2005, with each year representing more than a 50% rise on the previous one. In 2006, the bank issued 18,000 products, a number that has risen to 45,000 in the year to date.
"We are very strong and way ahead of the pack in trading products and, though slightly behind in investment products, we are fully concentrated on that segment and are confident we can gain more market share," says Klaus Oppermann, global head of public distribution at Commerzbank Corporates and Markets in Frankfurt.
He adds that trading products are probably the area where there is more open and intense competition as they are distributed offline and many clients make their own decision as to where to invest. "If you are competitive in that segment, then I think you have the means to be successful in the other areas," he adds.
Commerzbank's strengths lie in the bank's commitment to market making, consistent pricing and providing a reliable service with trading hours that stretch from 8am to 10pm. Oppermann believes that the pricing quality of discount certificates - where the bank has an overall leading position in conservative, neutral and aggressive strategies, according to Finanztreff - is built around the bank's strength in the warrants business.
"On the one hand, we buy volatility; on the other, we sell volatility," he says. "We have internal matching, whereas other banks need an external hedging partner, so that makes a difference in the pricing quality."
The bank has an efficient product development and issuance process, with a strong focus on innovation and developing and launching new products. Oppermann says the bank has the widest product range in the market, and can offer strength in depth across flow products such as shares, indexes, commodities, foreign exchange, rates, mutual funds and credit derivatives, offering as many as 350 underlyings.
In terms of innovation this year, the bank has introduced Turbo certificates on mutual funds, has a Best Turbo with a variable strike and Smart Turbos that have a knockout barrier that is only active during a certain times of the day. Though the bank was not the first to introduce Turbos to the market, it does have the best variety of products on offer and could extend the product range to even more underlyings.
Another new strategy for the bank is to undertake tap issues of Bonus, Discount and Express certificates. This alleviates the problem of popular transactions selling out and having to wait for an issuer to return to the market, if at all. "We do not undertake subscription periods anymore, which is unique and a big step ahead for the market," says Oppermann.
Commerzbank has also exploited a change in investors' investment mentality and launched a number of reverse strategies on its range of Bonus and Discount certificates. Clients seemed more conservative and the banks witnessed a marked turnaround in payoffs as people wanted to take advantage of falling markets. "What is remarkable is that for the first time we saw people buying products that are designed for bear markets, ones that previously had been difficult to sell in Germany," he says.
The bank has also introduced a range of All Star certificates that invest in the five best mutual funds rated by Standard & Poor's in sectors such as sustainability, China, India and biotechnology. This allows clients who like more exotic sectors but who are not confident investing them, or find it difficult to review single stocks to utilise an active management strategy.
Autocallable structures on underlyings such as oil, commodities, the Eurostoxx index, single stocks and the oil price have also sold well. These provide an annual interest of 6% or above, depending on the risk, and redeem early if the underlying shows a moderate increase in price. If this does not occur in the first year, the client has another chance in the second year and is able to get a return of 12%. The products have been popular due to low interest rates and appeals to those investors betting on slight fluctuations in the value of the underlying.
The bank's distribution includes the whole array of channels on offer, from its own network of 850 branches to external resellers, such as the Landesbanks, savings banks, exchanges and discount and e-brokers. On average, Commerzbank receives seven million quote requests per month, undertakes up to 500,000 trades per month, hitting a peak of 45,000 trades in one day in August this year.
The week on Risk.net, December 9–15 2017Receive this by email