France Q1 2023: capital protection, interest-linked products prosper

The first quarter of 2023 was marked by strong appetite for capital-protected and interest-linked products which increased their market share by 38 and 25 percentage points YoY, respectively

An estimated €7.3 billion (US$7.8 billion) was collected from 750 structured products with strike dates in Q1 2023 – down six percent by sales volume year-on-year (YoY) but an increase of 9.3% from the previous quarter. Issuance was down almost 50% YoY, leading to a rise in the average ticket size to just under €10m (Q1 2022: €5.4m).

Fourteen different payoffs were utilised during the quarter, with autocall the preferred option for the French investor. The 536 products that had a knockout feature were responsible for 65% of total sales in Q1 2023, much lower compared to the prior year quarter when autocalls claimed 85% of all sales.

The average maturity was 6.4-years compared to 5.5-years in Q1 2022. Twelve issuer groups were active in the quarter (Q1 2022: 13). Of these, Crédit Agricole was the number one provider, collecting €1.5 billion from 51 products. This is equal to a 21% share of the French market.

The group’s products, which were distributed, among others via LCL, Crédit Agricole Banque Privée and Irbis Finance, included 20 products linked to a single index that were worth approximately €200m. Its highest sales, however, were gathered from seven products linked to the interest rates that sold a combined €1.1 billion while nine products tied to a basket of shares accumulated €275m.

Société Générale claimed an 18% market share in Q1 2023 –down seven percentage points YoY. The group achieved sales of €1.3 billion from 115 products that were mostly issued on the paper of its Luxembourg domiciled SG Issuer vehicle (Q1 2022: €2 billion from 366 products).

Its preferred asset class was the single equity index (€550m from 52 products), ahead of interest rates (aged funds (€500m from 13 products) and managed funds (€415m from 16 products). The latter category included six products that were linked to Solys LFDE International Selection Fund, which is actively managed by its subsidiary SG 29 Haussmann. The fund aims to outperform its benchmark, the Solactive GBS Global Markets Investible Universe EUR Index TR, over a long-term horizon by exploiting investment opportunities on the equity markets.

Natixis (14% market share) completed the top three. It issued 88 products worth an estimated €1 billion (Q1 2022: €580m from 74 products). More than half of its issuance was linked to a single index – mostly proprietary or custom indices with a decrement feature, including iEdge Europe Climate EW 40 Decrement 50 Points GTR Index, iEdge ESG Transatlantic SDG 50 EW Decrement 5% NTR Index, and iEdge Credit Agricole SA Decrement 0.8 EUR GTR Series 1 Index, which were published, administered, and calculated via SGX Indices.

The top 10 also featured three US investment banks: Citi, Goldman Sachs, and Morgan Stanley.

Single equity indices remained the dominant asset class, despite seeing their market share shrink from 73% in Q1 2022 to 47% this year. The Eurostoxx 50 and Eurostoxx Banks Index continued to be firm favourites. The former was used as the underlying in 121 products that sold around €650m – a significant drop in sales volume YoY (Q1 2022: €1.2 billion from 141 products) while volumes invested in structures on the Eurostoxx Banks, at an estimated €230m (from 47 products) remained relatively stable (Q1 2022: €220m from 83 products).

There were also 155 products linked to a decrement index available to French investors in the quarter, down from 281 products in Q1 2022. The 62 products linked to the interest rates collected around €1.9 billion, thereby increasing their market share from just one percent in Q1 2022 to 26% this time around. Underlyings included the three-month Euribor, secured overnight financing rate, and various versions of the various EUR constant maturity swap (CMS) rate. Popular payoffs for this asset class were callable, target return and steepener.

At 10%, market share for products linked to a basket of shares was stable (Q1 2022: 11%). Some 86 products were issued on this asset class, well down from the 375 products in the same quarter last year, although volumes, at €755m and €850m, respectively, were less far apart.

A product that stood out in this segment was an autocall from Credit Agricole CIB Financial Solutions, which was linked to a basket of 20 stocks from the basic materials, consumer goods, energy, financials, health care, technology, telecommunications, and utilities sectors. It was listed on the Luxembourg Stock

Exchange for an issuance amount of €340m. Capital-at-risk products, which totally dominated the French market in Q1 2022, saw their market share drop from 94.3% to 55.3% - a decrease of 39 percentage points YoY.

The main beneficiary were capital-protected products. Boosted by the increased appetite for interest-linked structures, which, without exception, offered to return at least the nominal invested, products with 100% capital return increased their market share from 1.1% to 38% while products with a minimum capital return of above 100% reached 6.2% market share in the quarter (Q1 2022: nil).