VLK: additional focus on external clients

2022

“The year started positive during Q1 with the traditional autocall business we do in the Netherlands,” said Pronk, adding that the second and third quarter were much slower.

“There was more uncertainty in the market and far less autocall products were redeemed early, offering less rollover opportunities.”

In Q4, the bank saw a revival of its business in Belgium, driven by the increase in interest rates. “It became possible again to structure capital protected products linked to interest rates, which proved the be very popular in the Belgium market,” said Pronk.

Although most of its public offers in the Netherlands were either Phoenix or Athena autocalls, a capital guaranteed note was one of VLKs highlights for last year.

The seven-year Positive Impact Finance Capped Index Garantie Note ESG Eurozone 22-29 offered 100% participation in the rise Euro Stoxx 50 ESG Index, capped at 40%. It was issued on the paper of Société Générale and sold €9m during the subscription period.

“This was the first product since a long time that could offer 100% minimum redemption in euro […] it combined a positive impact finance bond component with exposure to an ESG equity index. As sustainability preferences are becoming increasingly important for our clients this product fitted very well,” said Pronk.

Despite rising interest rates, autocallables remain popular in the Netherlands where there is still more demand for yield enhancement products compared to structures offering capital protection.

However, Pronk has seen a shift towards memory coupon notes in recent months.

“Due to the rates increase, the pickup in coupon on an autocallable became a bit less compared to a memory coupon note,” he said.

In Belgium, where capital protected products always have been the most popular, Pronk expects to see a continuation of this trend. “It would be interesting to see if demand for equitylinked products will start to increase again, as currently demand is almost exclusively on interest-linked products,” he said.

One of the main themes for VLK in 2023 is how it is going to classify its structured products in terms of sustainability preferences of its clients.

“With the new obligation introduced in 2022 to actively ask end clients on their sustainability preferences, it is going to be important how you label different type structured products in that respect.

“Unfortunately, there is no clear European regulation on this topic yet, so it will be interesting to see what approaches will be taken in different countries,” said Pronk.

Pronk expects 2023 to be a good year for the structured products market, with higher rates making it easier to structure attractive products while the recent increase of the equity markets has also had a positive impact.

“Traditionally we are mainly focused on our internal private banking clients, but this year we will try to put some additional focus on the coverage of Dutch external clients.

“We have already done some nice deals with external clients this year and we have some coming up any time soon as well,” Pronk concluded.