Consolidated thread for Priority/Privilege Banking

[stiwipl]

Good write up @zirhk3355. The only thing to watch out with DBS Treasures is that promotion is applicable to SGD and USD deposits only. Therefore if you deposit EUR, you won't be eligible for KF miles.

I agree that there is nothing special about Citigold & OCBC Premier. Citi offers pretty much the same fees and features for non-gold customers. OCBC on the other side doesn't process online telegraphic transfers debiting from FCY accounts (only from SGD accounts...) and their Premier status hardly waive any fees.

SCB has been great in my experience and their "World Partner" status waive more fees than Priority for a fraction of requirements (e.g. foreign TT fees waived except cable charge; FCY cash deposits/withdrawal over the counter free)! This is also probably the only bank that offers a whopping 0.1% on FCY EUR saver account. One thing to note with their Priority KF promotion is that it is eligible for new to the bank customers only...

 

[neanea]

Guys can you explain how does ELN works?

 

[purpletoysmum]

Guys can you explain how does ELN works?

Get your banker to explain. If you still can't understand after that, you better not play with ELN!

 

[neanea]

Get your banker to explain. If you still can't understand after that, you better not play with ELN!

If you don't want to answer nobody force you to answer
Pls shut up

 

[purpletoysmum]

If you don't want to answer nobody force you to answer
Pls shut up

No seriously ELN are rather complicated. You should have a professional to explain to you how they work. Not random people of uncertain credentials in a public forum. You can suffer large losses quite quickly on this type of product.

 

[wondrdoggie]

No seriously ELN are rather complicated. You should have a professional to explain to you how they work. Not random people of uncertain credentials in a public forum. You can suffer large losses quite quickly on this type of product.

The vanilla ELNs (equity linked notes) I do regularly are pretty straightforward actually. They are basically options you can do yourself, but when it's packaged by a bank, they call it an eln. I used to think they are risky but I have since changed my mind, now I always have a couple of ELNs running at any one time to boost my overall return. Over the last 2.5 years, only 2 have striked and both were for Apple (I only do US ELNs). Luckily, I held on to them and they have increased almost 50%.

Here is an example of an eln I am considering:

Base equity - yahoo
Period - 30 days
Spot price - 39.33 (last night close)
Strike - 90% of spot which is around 35.397
Yield - 17% pa

Say I buy 100k worth. At observation date (around 30 days from purchase), if yahoo price is above strike of 35.397, i will get (17% x 100k)/12= 1416.67
However, if price is 35.396 or below, i will be required to buy 100k worth of yahoo stocks

Here is what I personally look out for when I buy:
The stock must be one I am willing to buy in the first place
The strike price is a price I am willing to buy at (and it should at least be at or near it's 6 mth low)
At maturity date (30 days or whatever), what kind of stock news are expected (earnings? Product launch? Central bank announcements)
I must have holding power if it strikes
Last yield must be above 12-14%

So basically, if you want to play with ELNs, please understand how the note works fully and all it's implications. It's not necessarily a bad thing if you know what you are doing, as with all investments. There are risks for everything but don't go in blind or with blinkers on.

 

[seebo]

From the other side of the table, it is essentially a put option. If the price rises, they pay a certain % to you. If the price falls, they exercise the rights to sell it to you.

Every tool has its use.

 

[cybercom8]

Guys can you explain how does ELN works?

from what i was told, its similar to options...depending on the strike price, you might end up picking up shares at a huge paper loss (potentially) but for less volatile share prices, you can get a decent yield on your money

 

[icicic]

The vanilla ELNs (equity linked notes) I do regularly are pretty straightforward actually. They are basically options you can do yourself, but when it's packaged by a bank, they call it an eln. I used to think they are risky but I have since changed my mind, now I always have a couple of ELNs running at any one time to boost my overall return. Over the last 2.5 years, only 2 have striked and both were for Apple (I only do US ELNs). Luckily, I held on to them and they have increased almost 50%.

Here is an example of an eln I am considering:

Base equity - yahoo
Period - 30 days
Spot price - 39.33 (last night close)
Strike - 90% of spot which is around 35.397
Yield - 17% pa

Say I buy 100k worth. At observation date (around 30 days from purchase), if yahoo price is above strike of 35.397, i will get (17% x 100k)/12= 1416.67
However, if price is 35.396 or below, i will be required to buy 100k worth of yahoo stocks

Here is what I personally look out for when I buy:
The stock must be one I am willing to buy in the first place
The strike price is a price I am willing to buy at (and it should at least be at or near it's 6 mth low)
At maturity date (30 days or whatever), what kind of stock news are expected (earnings? Product launch? Central bank announcements)
I must have holding power if it strikes
Last yield must be above 12-14%

So basically, if you want to play with ELNs, please understand how the note works fully and all it's implications. It's not necessarily a bad thing if you know what you are doing, as with all investments. There are risks for everything but don't go in blind or with blinkers on.

Don't forget dividend is usually not adjusted for in your strike (under event to look out for)

 

[neanea]

from what i was told, its similar to options...depending on the strike price, you might end up picking up shares at a huge paper loss (potentially) but for less volatile share prices, you can get a decent yield on your money

Why do you say may end up picking up shares at a huge paper loss?

 

[cybercom8]

Why do you say may end up picking up shares at a huge paper loss?

from what i was told, you agreed to buy the underlying shares at the strike price...which could be a lot higher than the market price at maturity..think there is no free lunch in the world.

 

[zirhk3355]

Great that people are discussing about ELN here, although it should be in a new thread...

I have two issues with ELN:
1. If the price goes down below strike price during the tenor, you will still be forced to exercise the ELN at strike price. That is a paper loss.
2. The interest gain if the ELN is not exercised is a token sum, compared to the paper loss that you will make if actual stock price is lower than strike price.

Don't forget also some banks has a knock-out policy; if the stock price increases to the knock-out price, the deal is off and they return you the principal and prorated interest gain.

Thus IMO the bank is protected in terms of how much the interest you will get, but you are not protected on how much paper loss you may incur.

I just learnt this and above is my thinking for discussion. Anyone can comment on this please?

 

[wondrdoggie]

Great that people are discussing about ELN here, although it should be in a new thread...

I have two issues with ELN:
1. If the price goes down below strike price during the tenor, you will still be forced to exercise the ELN at strike price. That is a paper loss.
2. The interest gain if the ELN is not exercised is a token sum, compared to the paper loss that you will make if actual stock price is lower than strike price.

Don't forget also some banks has a knock-out policy; if the stock price increases to the knock-out price, the deal is off and they return you the principal and prorated interest gain.

Thus IMO the bank is protected in terms of how much the interest you will get, but you are not protected on how much paper loss you may incur.

I just learnt this and above is my thinking for discussion. Anyone can comment on this please?

Yes, the risk is there. Which is why I would only do this with yields above 12-14%. And holding power is very important.

 

[invisible999]

please share why you think so...thanks

Simple - IRS.

 

[cybercom8]

Simple - IRS.

oh...this only applies to us citizens right? no issue for us singaporeans?

 

[zirhk3355]

Yes, the risk is there. Which is why I would only do this with yields above 12-14%. And holding power is very important.

I am not referring to the risks - but it seemed that I am getting the shorter end of the stick, where the banker (literally) always wins! Yes ELN sounds like gambling to me.

How does a higher yield help mitigate your position? Even at 14%, you are just getting 1.17% of your principal for the tenor of 1 month, which is $116 for every 10k invested. But for every 10 cents below the strike price, your paper loss is 1k, right?

This is what I meant by getting the shorter end of the stick - the potential loss vs potential gain is too far apart, not forgetting the knock-out price that will protect the bank from more losses in terms of paying you interest yields.

I am curious what do you mean by holding power? The tenor is only 1 month, why do you need holding power?

Thanks...

 

[purpletoysmum]

Holding power to hang on to those stocks you had to pick up at a paper loss.....and yes....the odds are in the favour of the bank....these products are priced to be in the bank's favour.

 

[wondrdoggie]

I am not referring to the risks - but it seemed that I am getting the shorter end of the stick, where the banker (literally) always wins! Yes ELN sounds like gambling to me.

How does a higher yield help mitigate your position? Even at 14%, you are just getting 1.17% of your principal for the tenor of 1 month, which is $116 for every 10k invested. But for every 10 cents below the strike price, your paper loss is 1k, right?

This is what I meant by getting the shorter end of the stick - the potential loss vs potential gain is too far apart, not forgetting the knock-out price that will protect the bank from more losses in terms of paying you interest yields.

I am curious what do you mean by holding power? The tenor is only 1 month, why do you need holding power?

Thanks...

Yes the banker always wins, just like brokerage firms. You make or lose money, they will take their cut either way. That's just business. Anyway, you are gambling against someone who bought the right to sell you shares at the strike price. Not really the bank who just organizes them, repackage and sell to you.

So to me, the yield must be high enough to even consider doing this. But more importantly, the shares must be something I don't mind to buy and hold anyway. And by staying power, I mean that if I am really forced to buy at a loss, I can hold it till it goes back up. That way, I don't lose out as long as I don't have to hold too long.

Eg: my eln hit strike at 500 bucks for Apple, so my 100k got converted to 200 apple shares, even though the price has gone down to 495. So I suffered paper loss of 1000. And then the shares kept dropping till no tomorrow. So I held for about 2 years till now where I actually made quite a nice sum. I will continue to hold over the product launch. So for me, this eln was a blessing in disguise. But if due to liquidity issue and I had to sell at a loss, then it's not such a good story.

 

[invisible999]

oh...this only applies to us citizens right? no issue for us singaporeans?

Oh no, my friend, oh no....

If IRS decides for some reason, that you owe them taxes, you will pay them to the last cent.

My suggestion - talk to your lawyer and CPA.

 

[sebastgt]

Happen to be going around checking out priority banking services this weekend and saw this thread, so I thought I would share:

1. There is a recent article on MoneySmart about priority banking: The Best Priority Banking Accounts in Singapore | MoneySmart.sg

2. DBS Treasures: The free 40k KF miles was alittle confusing for me but I sorted it out. To start a new relationship, you need initial deposit of $350k, then you need to maintain $300k for 6 months to be entitled for the 40k KF miles. After that, you can drop down to $200k AUM.

Stocks bought thru DBS Vickers do not count towards AUM. However, they have DBS Trading (custodian account), which has almost the same brokerage fee as Vickers. You keep your money in your DBS/POSB savings account, then GIRO/EPS when you buy shares. There is no maintenance fee.

3. Citigold: I went to take a look at them because I was lured by their global fund transfer (to citibank overseas) and free ATM withdrawals, as I am staying overseas. However, I realised normal Citibanking accounts also can get these for free! I don't see anything else special about them; no unique privileges, investment products, etc. Or maybe cuz I was served on a busy Saturday by a bunch of youngsters at Holland V, so didn't a proper explanation...

4. OCBC Premier: OCBC is the only bank where their securities trading arm is ONE COMPANY with the bank, therefore stocks bought thru their brokerage is counted towards your priority banking AUM. They also have custodian account called Equity Plus Account, but once you put money / stocks inside, you will be charged maintenance fee (no fee if the account is empty).

5. SCB: I was totally enticed by SCB because of their 60k KF miles promo (+30k miles if you refer a friend!!), and heard their brokerage fee is one of the lowest. HOWEVER, I was very turn-off by the slow and messy service at Holland V.

When I finally managed to get seated with a staff, he told me he cannot open an account for me because SCB had classified me as a delinquent account! Nothing embarrassing, I will tell you all why: 8 years ago, I refused to pay a CC annual fee of $180, which ballooned into $400+ and I got a legal letter. I made a big fuss and told them to cancel the card and deal with all these nonsensical charges - little did I know they actually wrote it off as bad debt! The staff told me I can APPEAL to get the tagging off, so I laughed at his face, I am putting money into your bank for investments and I need to APPEAL to do it?? Thanks but no thanks!!

Summary: After thinking the whole weekend, in the end I went with Treasures because of (1) KF miles, (2) nice treasures centre at MBFC, (3) sweet RM. Hey, I am just being frank!

Now they are trying to sell me some mutual funds and ELN, so let's see how it goes for these 6 months!

If it is nice banking centre you are looking for, then you should also take a look at UOB's Privilege banking centre at the 20th storey of MBFC overlooking Marina Bay.