Intesa Wants to Issue More Debt in Asia to Diversify Funding

By Sonia Sirletti and Tom Beardsworth

With assistance by Finbarr Flynn, and John Glover

Source: Bloomberg.com

• Intesa to use funds to help replace ECB loans, boost lending
• CFO rules out sale of non-preferred senior bonds this year

Intesa Sanpaolo Spa will offer more debt in Asia to diversify its funding sources, after becoming the first Italian company to issue syndicated bonds in Japanese yen this week, according to its chief financial officer.

Intesa, which is planning to boost its lending by over next four years through a 250 billion-euro ($308 billion) program for households and businesses is looking to refinance almost 60 billion euros that it borrowed through European Central Bank stimulus program. The debt must be repaid starting in 2020 and Intesa may sell Asian-currency bonds for up to 15 percent of its funding needs, CFO Stefano Del Punta said by phone on Thursday.

“We are preparing all our weapons to be effective when our bond sales start to increase,” Del Punta said. “We aim to become a regular issuer in Asia. Having three different independent markets, U.S., Europe and Asia can allow Intesa to increase sale amounts and have better conditions.”

Intesa sold 46.6 billion yen ($440 million) of senior bonds this week across four tranches due between 2021 and 2033. The bank agreed to pay 0.38 percent annually for the 30.6 billion yen of short-dated notes and 1.089 percent for the longest-dated bonds, according to data compiled by Bloomberg.

Greater Visibility

“The placement increases the bank’s visibility abroad and gives it an additional funding source for the future,” said Stefano Girola, a portfolio manager at Fiduciaria Orefici Sim SpA. “Increasing funding sources will help the bank to keep the promise of higher lending to economy, even without borrowings from ECB.”

“We are very satisfied with our first placement in Japan,” Del Punta said. “On the back of strong demand, the sale was done despite uncertainty about the upcoming Italian election and shows positive change in Italian risk perception by Japanese investors.”

Investors have warmed to Italian banks in the last year as lenders including UniCredit SpA and Banca Monte dei Paschi di Siena SpA bolstered their financial reserves. Monte Paschi, which had to write down creditors before a recapitalization last year, returned to capital markets in January and received orders for more than triple the subordinated debt it offered. Demand for Intesa’s bonds is also buoyant, with its 1.25 billion euros of 7.75 percent junior notes rising to 24 percent above their face value since they were issued one year ago, according to data compiled by Bloomberg.

Short Bet

Still, Intesa is among Italian companies being shorted by Bridgewater Associates, the world’s largest hedge-fund firm, ahead of national elections scheduled for March 4.

Speaking about Intesa’s future bond sales, Del Punta ruled out any issue of non-preferred senior bonds this year, as he expects the bank will be compliant with EU bank capital rules.

“Intesa may consider non-preferred senior bonds sale in coming years to optimize funding or catch market opportunities, depending on the market spreads,” he said. “The bank’s credit has a high confidence-level worldwide.”

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