Italy’s bond powerhouse:
Intesa Sanpaolo pilots World Bank deals

$1.5bn raised cements international relationship

Sophy Buckley

10/01/2017

Businesses have been claiming to do good with their corporate social-responsibility programmes for years.

But rarely can they say that their work supports sustainable development around the world, particularly when those businesses are banks.

Intesa Sanpaolo can claim that and more thanks to three recent projects with the World Bank.

Italians are among the world’s biggest savers and notoriously risk averse. Furthermore, depressed European interest rates mean that more volatile investments do not adequately compensate investors for the risks they are taking – especially when it comes to credit risk.

“We have such amazing placing power”

– Luigi Ruggerone, resident representative of Intesa Sanpaolo in Washington DC



In these market conditions, partnering with the World Bank looked like a unique opportunity, according to Luigi Ruggerone, resident representative of Intesa Sanpaolo in Washington DC. The World Bank is a strong triple-A issuer – a safe investment with a compelling history and a track record of fighting poverty and fostering sustainable economic and social development around the developing world.

“The World Bank is one of the main institutions helping developing economies grow sustainably while respecting the environment. To support its activities and noble mandate, it raises funding around the world offering highly-rated bonds with good interest rates. This is exactly what our Italian customers were looking for, a safe credit, a return and a good story” he says.

It had been more than 20 years since any part of Intesa Sanpaolo was involved in distributing World Bank bonds.

In the autumn of 2015, the Italian financial institution recruited Ruggerone to help foster relationships with the IMF and World Bank with a view to increasing involvement in co-financing big infrastructure projects around the globe and assist its clients to participate in sustainable financing.

“Very few banks were working with the World Bank in Italy, and I saw that the World Bank was issuing again, in Italy, after more than two decades. I thought we could do something big. We have such amazing placing power,” he says.

Within seven months Intesa Sanpaolo managed to distribute $667m worth of World Bank bonds to its private banking clients. “For us the opportunity was excellent. We could offer a great investment to our clients, meanwhile feeling good about safety, return and the social use of their money,” Ruggerone explains.

Within weeks, another distribution deal had been arranged. This time the bank extended the opportunity to include its retail network as well as private clients, raising just under $400m. This bond was issued in US dollars, giving investors the bonus of benefitting from the appreciating currency.

 

The final bond was worth about $450m and closed in October. In a further development, Intesa Sanpaolo distributed it not only through its own retail and private banking clients, but via third-party banks – taking the total to $1.5bn. It also helped structure the bond for the Italian market.
In all three cases, the bonds were structured by the Debt Capital Markets Department of Banca IMI in Milan and distributed with the support of Banca IMI salesforces.

“The audience widened each time,” points out Ruggerone. “There’s definitively good appetite for the name.”

“We’re proud to have arranged the three transactions for the World Bank. Italian retail was given the opportunity to invest in such a high-quality issuer demonstrating a strong interest for World Bank sustainable projects. World Bank bonds enjoy the highest rating and also benefit from special tax treatment for Italian investors, the same as government bonds, with interest subject to a reduced 12.5 per cent withholding tax,”

says Pantaleo Cucinotta, head of debt capital markets, Banca IMI.



“The structuring and distribution of these three World Bank bonds have also been a clear example of exceptional teamwork within ISP Group,” add Ruggerone.

“Following these deals, the World Bank Treasury gave us the opportunity to become lead managers and underwriters of other bonds,” says Ruggerone, “which means that we can sell and place its global bonds across the world.”

He hopes to be progressively involved in many more issuances and landmark transactions – even of the benchmark bonds, which are usually multi-billion dollar notes sold globally to institutional investors. But importantly, the World Bank collaboration has sent an important signal about how quickly the relationship has flourished – and how well. He also hopes that the two organisations can develop new products together, including one for asset managers.

The World Bank welcomes the extremely strong reception from Italian investors for the World Bank’s sustainable development bonds.

“The success of these transactions shows that investors are very interested in high-quality investment opportunities that also have a positive impact on society. I applaud the Italian investors who have invested in World Bank bonds, thereby funding our sustainable development programs. With these investments, investors can do well financially and do good at the same time. They are indeed working with us to end extreme poverty and boost shared prosperity.”

– said Arunma Oteh, the World Bank’s Vice President and Treasurer



Working with the World Bank and the speed at which the relationship has developed is certainly a feather in the cap for Intesa Sanpaolo. But vanity aside, it’s also excellent business. Its clients have access to low-risk, attractive investments. It receives income without risk thanks to its role as distributor. And it can take heart from helping the global economy to develop in a sustainable way.

 

But perhaps most importantly when it comes to creating a virtuous circle, this relationship has consolidated its standing as one of Europe’s most innovative and strongest banks.