Bloomberg News

BNP Paribas Sells Record Amount of Stock-Tied Uridashi Notes

March 08, 2013

BNP Paribas SA (BNP), France’s biggest bank, has issued more uridashi notes tied to stocks this year than all of its previous sales, as it expands its equity business in Japan to capitalize on recovering demand.

The lender has issued $63 million of reverse-convertible uridashi notes tied to individual stocks this year as of March 7, more than double its combined volume through 2012, to become the third-largest seller of the securities, according to data compiled by Bloomberg. For all of last year, it ranked ninth in the market for the products denominated in currencies other than the yen and sold to individual investors in Japan.

Japan’s Nikkei 225 Stock Average (NKY) erased losses from the collapse of Lehman Brothers Holdings Inc. after the yen slid to a 3 1/2-year low against the dollar. It gained 2.6 percent to close at 12,283.62 today in Tokyo, the highest since before Lehman Brothers filed for bankruptcy on Sept. 15, 2008, as Prime Minister Shinzo Abe’s stimulus pledges have lured back investors.

Paris-based BNP Paribas this month hired two stock-sales staff in Japan, with plans to recruit more, as it embarks on a three-year project to add more than 1,300 staff in Asia.

Issuance of structured products tied to Japanese stocks has been rising since the fourth quarter, “driven by the general rise in the equity market over the last months and renewed confidence in the Japanese market in particular,” Majdi Jemel, head of financial product development and sales for Japan at BNP Paribas Securities (Japan) Ltd., wrote in an e-mail.

Sales of structured notes through private placements have also increased, with demand extending to investments tied to U.S. and European equities, according to Jemel. Uridashi securities are issued based on requirements from local brokerages that distribute them to individual investors.

Hitachi Notes

The largest uridashi reverse-convertible notes BNP Paribas issued this year are the $18.5 million, six-month securities tied to shares of Hitachi Ltd. (6501), which gained 6.8 percent this year through yesterday. In return for paying coupons, the products convert into their underlying stocks at maturity if the shares plummet, potentially eroding the buyers’ principal.

Apart from Kommunalbanken AS and Svensk Exportkredit, government agencies that together account for 87 percent of sales of the securities this year, Barclays Plc and Deutsche Bank AG are the only other issuers of the notes in 2013. Nomura Holdings Inc. and three other banks that had a combined 18 percent share last year haven’t sold any yet, according to Bloomberg data.

Shares of Canon Inc. (7751), Nissan Motor Co. and Hitachi are the most-used assets for the single-stock securities this year, accounting for 23 percent of offerings, according to Bloomberg data.

To contact the reporter on this story: Jun Yang in Hong Kong at jyang180@bloomberg.net

To contact the editor responsible for this story: Shelley Smith at ssmith118@bloomberg.net


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