Best in India: ICICI Bank

In a market characterised by volatility, ICICI Bank has been able to deliver fast-created structured products based on a varied range of asset classes, helping diversify investors' portfolios. The bank closely monitors the markets and comes up with sophisticated offerings that make it stand above its peers. A trend ICICI was quick to spot was related to volatile Brent crude prices, which it was quick to turn into a six-month autocallable note in March that was called in April.

"During the past year, the flavour of the market kept changing and we have been able to adapt quickly to the circumstances," says Shilpa Kumar, senior general manager of ICICI Bank in Mumbai. "We have kept products as simple as possible, with conservative returns to ensure that volatility was kept to a minimum to protect our clients' capital."

The bank has offered structured products based on asset classes such as interest rates, foreign exchange, credit, equity, commodities and fixed income and has responded to investor feedback and offered short tenors with the product based on Brent crude a prime example.

At the beginning of 2013, the price of Brent rocketed to $119 a barrel. By February, ICICI observed a correction in prices due to the rising supply and progress in the diplomatic negotiations between Iran and the West. As Brent corrected from $119 per barrel to $99, the bank suspected that supply would exceed demand over the year ahead, an opportunity to explore reverse convertibles structured on the commodity.

ICICI created a coupon-paying note where capital loss was triggered at a conservative level of $80 per barrel. The product, named April, was autocallable monthly and did so after its launch in March, returning a daily range accrual coupon, equivalent to more than 8% per annum.

"We realised this rally in prices would be shortlived, and we expected them to correct," says Kumar. "After some months, it turned out to be true. We were ready to offer a structure once the correction came into place, launching it with downside protection. We were also able to tap the market at the right time in terms of volatility, and given that our clients didn't want to take a long-term view due to global uncertainty, we designed the product with a short tenor. It was very successful."

ICICI is also proud of a product based on interest rates, which also provided good returns for its investors. Although rates are at record lows, the bank wanted to offer a product that would make its investors see interest rates as a good investment option, says Kumar.

The idea led to the creation of a Callable Inverse Floater Deposit, where the coupon is tied to the movement of the interest rate curve. Launched in mid-2012, the tenor was 9.75 years, callable annually, with a fixed coupon of 5% for the first two years and with a variable coupon of 5.5% thereafter. The structure was linked to three-month US dollar Libor fixed in arrears, as opposed to more conventional structures where the fixing happens in advance. The bank released 21 tranches of the product in the six months after launch.

As investor interest turned from emerging to developed markets, Kumar says ICICI is now looking for opportunities in equities from those markets. "Our clients want to switch the focus of their portfolios with the aim of underweighting fixed-income products and Asian underlyings and overweighting equities from developed markets," she says.

New ideas will be based around indexes in order to offer diversification to portfolios, says Kumar. With a basket of indexes the correlation in volatility inside the baskets decreases, making the pick-up higher than when it is based on a single index. Kumar is confident investors will be comfortable with those index structures, which ICICI plans to offer with products based on equities from the US, Japan and the UK.

The bank has already put this idea into practice over the past 12 months, with a product based on export-oriented Japanese companies. Based on the stocks of Toyota and Honda and with a short tenor of six months, it guaranteed a high coupon-paying note with capital protection until the underlyings fell 30% from initial levels. It was autocallable monthly and the fixed coupon ranged from 9% to 10%.

ICICI's investors show satisfaction at what the bank offers and the way it deals with their requests. "I work with several banks, but when it comes to my personal investments, I stick to ICICI," says an investor based in Perth, Australia. "Every product I have acquired from it has performed as promised. Moreover, it is good at customer service and tends to resolve any doubts diligently."

Another investor based in Singapore agrees. "Over the past years, I have acquired structured products from ICICI based on deposits - generally bonds related to Indian companies. They all have performed as the bank had promised they would do," the investor says. "When it comes to my personal investments, I usually deal with ICICI because I am happy with the product range it offers and the way it treats its customers."