After a long wait for the debut of new Italian covered bonds (Obbligazioni Bancarie Garantite) in the Jumbo market, it has finally come true. Banca Popolare di Milano (BPM) started its road show and is planning to launch its first issue as part of a 10 billion ($15.7 billion) issuance program in early July.
According to market reports, Fitch Ratings and Moodys Investors Service have assigned a preliminary triple-A rating to the issue.
"Generally, the larger Italian banks have proved very robust despite the financial market crisis, thanks to their relatively low dependence on investment banking and trading activities and a pronounced focus on the domestic retail market," Dresdner Kleinwort analysts said.
UBI Banca has also published more details on its issuance plans and named Barclays Capital, Deutsche Bank, Natixis, and Societe Generale as lead managers for its debut issue. The bank is expected to begin showing its deal next week.
Banca Carige, Intesa Sanpaolo, UniCredito and Montedei Paschi di Siena are also expected to issue.
"As regards issuance potential, Italy is a promising country both for public-sector and mortgage backed covered bonds," Dresdner Kleinwort analysts said. "Low interest rates and a continual rise in house prices have triggered a strong increase in lending to private households in the past ten years but it has not resulted in a construction sector boom, meaning the risk of a real-estate bubble has remained slim."
Lending conditions are also conservative, when compared to Spain and the U.K., and in most cases, LTVs do not exceed 80%.