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SCMP Reporter

The interim results posted by  banks in the past three weeks have been highlighted by a slowdown in fee and commission income growth.

This is  in stark contrast to  past reporting seasons when rapidly falling interest income forced  lenders to diversify,  producing  some stunning  figures under non-interest income.

Bank of China (Hong Kong)  has been one of the biggest victims  of falling fee income growth.

Chief executive He Guangbei blamed the drop on both the stagnant stock market and a shift in investor appetite from low-risk structured products to more aggressive investment vehicles such as open-ended funds.

So does that mean the end for guaranteed funds and other  principal protected products?

Not so, say fund sales professionals, who have  commented that as long as they keep adjusting the tenure and returns accordingly, investors would still find room in their portfolio for such products.

They said that under the current rising interest-rate environment, investors were simply looking for something with higher potential returns and shorter tenures.

A  structured note launched by ABN Amro this week typifies how fund houses adjust to higher investor risk tolerance.

Termed Double-Up Protect Notes, the product carries a short maturity of just one year with no  principal guarantee.

Investors are given the choice of linking their notes to the performances of two combinations: HSBC and Sun Hung Kai Properties for A notes or HSBC and PetroChina for B notes.

Echoing the  high-risk, high-return trend, the A-note tranche offers a 92 per cent  principal protection and a maximum potential return of 20 per cent. The B notes, on the other hand, have a combination of a 79 per cent  principal protection and potential return of 26 per cent.

sun hung kai carries on

Not all fund houses share the same view.

Sun Hung Kai Financial Group this week launched the 21st series of the Minibond, a product that has proven hugely popular among conservative investors  because of its low-risk and long-tenure features.

The bond, which is arranged by Lehman Brothers and issued by Pacific International Finance, carries a 5?-year tenure and offers a choice between a US dollar tranche and two Hong Kong dollar tranches.

The US dollar bond offers a 5.2 per cent fixed coupon rate for the first four years, and 6.1 per cent for the subsequent period. The first Hong Kong dollar bond carries 4.8 per cent coupon rates for year one to four and 5.6 per cent thereafter. The second Hong Kong dollar tranche pays a fixed rate of 4.45 per cent for the whole period with bonus coupon tied to the performance of HSBC shares at maturity.

french firms join party

French fund houses SG Securities and  Calyon have also joined the party in launching  new structured products.

SG's Four Treasures Guaranteed Fund is linked to a multi-set of investment strategies while  Calyon's Fortune Notes Series 1 is linked solely to HSBC's share price performance.

heavyweight weighs in

The South China Morning Post  reported that HSBC had now set its sights on the local stock brokerage market.

With its extensive customer base, it is not hard to understand why many small brokerages fear that the 800-pound gorilla of the financial service sector could eventually drive them out of business.

One of the moves  that prompted the outcry was  HSBC's offer to  select customers who open  stock trading accounts with its brokerage unit of a rate of just $1 per stock transaction.

The financial world is hardly a place for charity.

The lender this week has continued  to step up its assault on the market with several upgrades to its online share trading services. HSBC brokerage customers can now make more than one pre-set selling or buying order in one single instruction.

The service will be available online free of charge or for a fee if the orders are placed through  phone banking or at any of HSBC's branches.

The bank is also offering preferential brokerage rates for its existing investment service and securities account holders  who have conducted share  transactions  worth more than $500,000.

Qualified customers will enjoy a fee as low as 0.1 per cent for   securities transactions through the bank's internet banking service during October.



Lenders tweak their funds as income falls and demand changes