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Two more counterparties - 06/03/2024

Re-enter Santander

Santander have re-entered the UK retail structured product market as a counterparty to structured deposits, offered by Walker Crips. The last plans that utilised Santander as counterparty were two issued back in 2018 via Investec, however these were capital at risk plans. We have to go back as far as 2013 to find the last time Santander were a deposit taker in the sector with those plans issued through the bank’s subsidiary, Cater Allen. Beyond the two Investec plans in 2018 Santander have been absent from the sector since 2015 having been behind over 170 new issues since 2003.

The re-introduction of Santander adds further diversification to the sector, allowing investors to spread counterparty exposure between an increasing number of Globally Systemically Important Banks (G-SIB).

In the initial range are two, three-year FTSE linked growth deposits and what looks like a very competitively priced step-down FTSE kick-out with a maximum term of five years, final reference level of 85% of initial FTSE level and potential coupon of 6.25% for each year held. We feel the potential for a 31.25% interest payment at the end of five years, provided the FTSE is no more than 15% below its starting level is more than a fair trade, in addition to the protection of capital at the end of term if the FTSE falls by more than 15%.

Santander UK plc are rated A by Standard & Poor’s indicating they have strong capacity to meet financial commitments.

Welcome to CIBC

A new counterparty has also entered the UK retail structured product sector, Canadian Imperial Bank of Commerce. CIBC is a North American leading financial institution, generally serving clients in Canada, the US and Asia but is now backing UK retail structured products released via a new provider, Hop Investing. Hop investing is an appointed representative of Meteor Asset Management and is set up in a similar way to MB Structured Investments. Where MB solely offer plans backed by Barclays, Hop will be offering CIBC backed plans.

Whilst CIBC is not classed as a G-SIB it is one of the highest rated banks by credit rating agencies participating in the UK retail structured product sector. The introduction of yet another provider and counterparty to the sector demonstrates continued growth and development for structured products in what we see as being the most active year on record for new issuance – continuing an upward trend since 2020.

Hop have launched with four CIBC capital at risk offers including at-the-money, defensive, and step-down autocalls with a range of underlyings. Their latest plan, UK Annual 100 Kick Out Plan April 2024 is a six-year maximum term FTSE linked autocall with at-the-money kick-outs from the second year onwards, offering 9.2% for each year held albeit with a 65% barrier observed at the end of six years if not matured sooner.

Whilst we see this as a good trade we still stand by our mantra of extended maximum terms for annual autocalls and would like to see greater issuance of such with terms of 7 years or greater.

Structured investments put capital at risk.

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