Intesa Sanpaolo, led by CEO Carlo Messina, placed a perpetual bond, or an At1 type subordinate, with an attractive yield of 6.375% after opening the book in the 6.625% area. The Bloomberg terminal reports it. At the end of the morning, requests from institutional investors totaled over $ 3 billion on a placement of $ 1 billion.
The coupon is expected to be semi-annual and variable. The issue has a denomination of 200 thousand euros and will be traded on the Luxembourg Stock Exchange. The operation is expected to end within the day with the definition of the price, and an issue that takes place at a difficult time for the markets, caught between the grip of inflation and the relentless war in Ukraine.
Today the Ftse Mib is traveling weak, it drops 0.2%, while the Intesa stock loses 1.3% to 2.07 euros for a capitalization of 40.26 billion. The bookrunners of the operation are Bnp Paribas, BofA, Citi, Deutsche Bank, IMI, Morgan Stanley and Ubs. The At1 is callable (callable) by the issuer starting from 30 March 2028 and thereafter at each coupon maturity. The coupon is fixed until the reset date (30 September 2028). According to the regulation, if the bank’s solvency ratio, the transitional Cet 1 ratio, were to fall below the 5.125% level, a trigger event would be triggered. At the end of 2021, this figure was well above, at 14.5%.
Intesa’s latest bond was issued on 25 August 2020 at 5.5%, the penultimate on 20 February 2020 at 3.75%, before the outbreak of the Covid pandemic in Italy. The August issue two years ago was in turn an AT1 perpetual bond in two tranches, worth 750 million euros each, with total orders exceeding 6.5 billion. The two tranches at the time were a callable bond starting from March 1, 2028 and a second callable bond starting from September 1, 2031. The yield of the first tranche, which had seen orders of over 3 billion, was set at 5.5 % and that of the second, with orders over 3.5 billion, at 5.875%.
How Additional Tier 1s work
These bonds have the characteristic of participating in the absorption of the bank’s losses in the event that the bank’s capital ratios fall below a certain level (hence the reference to Tier 1, one of the most important capital ratios for banks banking). The bonds in question are of the perpetual type because they are never repaid except, possibly, after a certain number of loanable years at the discretion of the issuer and do not pay any coupons in the event of a loss. Unlike other hybrid instruments, the bond is never converted into equity.
A few days ago, Kepler Cheuvreux and JP Morgan, in parallel notes dedicated to the impact of the sanctions in Russia on the banks present in the country, estimated in an adverse scenario that the solidity of Intesa (Cet 1 ratio) would drop by 140 basis points, going over the maximum 80 basis points that the bank can afford to sell “before approaching the minimum management target of 12%”. Given the uncertainties about potential losses, in this case the specialists predict that the bank could postpone the buyback operation of 3.4 billion euros, which is equivalent to 8.5% of the market capitalization, to 2023, but they believe that the ‘intention of the managers is instead to proceed with the repurchase. JP Morgan confirmed Intesa as the preferred bank in Italy especially in this period which trades at interesting values ​​(about 0.8 times the P / TE). Analysts confirmed the overweight rating and the target price of € 2.7 per share. (All rights reserved)

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