Commonwealth Bank of Australia plans to start offering reverse convertibles to clients by year-end. The move is part of the firm's plans to increase its product range as it focuses on premium clients. "We're looking to expand the sweep of products we offer our clients," said Stephen Richards, head of equity trading and risk at CBA in Sydney. Richards estimated it could sell AUD50-100 (USD26.4-52.9 million) within 12 months of launching the product.
"Reverse CBs are tax-effective, provide a leveraged equity-linked return and are cost-effective," said Richards. In a reverse convertible structure, the client in effect sells a put option linked to an underlying equity, gaining an enhanced coupon. Typical maturities will range from three to six months, noted Richards.
