Mediobanca will be testing investor appetite for what will be its debut benchmark covered bond, after the Italian bank mandated Barclays, Société Générale and UniCredit to work with it on a roadshow of its obbligazioni bancarie garantite (OBG) programme.

Mediobanca headquarters in Milan

The issuer set up the mortgage backed covered bond programme two years ago, but has only launched one issue off it, a Eu1.5bn four year OBG, and that was retained.

An official at the bank told The Covered Bond Report that the issuer decided to approach investors because it considers that market conditions are accommodative for Italian covered bond issuance.

“The market is favourable at the moment,” he said. “Noise around Syria has come down, the macro-economic situation is difficult but there are signs of improvement.”

The roadshow will run from 30 September to 4 October, not long after Italian peer Banca Popolare dell’ Emilia Romagna will have been on the road presenting its OBG programme to investors for the first time.

Mediobanca’s OBG programme is for Eu5bn and is said by the leads to be expected to be rated A by Standard & Poor’s. This represents a three notch uplift from an issuer rating of BBB.

When Mediobanca launched its retained issue in December 2011 the issuer was understood to have become the first issuer to obtain a covered bond rating from S&P that matched the issuer rating despite a higher rating being achievable. Its OBGs remain rated at the same level as the issuer by S&P, but the Mediobanca official told The CBR that the issuer has been working with the rating agency to amend the programme to obtain a higher rating. (See here for previous coverage).

He said that the issuer plans to unwind the retained issuance and, depending on feedback from the roadshow and market conditions, replace it with a public benchmark, although it does not yet have a view on a target size for a deal.

Meanwhile, UBI Banca has also been mentioned as exploring issuance opportunities (see separate article here for UBI Banca and other rating activity).

Italian newspaper Repubblica last week reported that Credito Emiliano (Credem) was studying a Eu500m three to five year covered bond issue of Eu500m before the end of the year, partly to replace ECB funding. However, an investor relations official at the Italian bank told The Covered Bond Report that although such an issue is an option and that Credem intends to be a regular issuer, the group has seen strong inflows from retail funding and it is more likely that the bank will hold off on any return to the market until next year.

Credem last tapped the covered bond market with a Eu500m seven year OBG priced at 180bp over mid-swaps on 2 July.