Banca Popolare dell’Alto Adige (Volksbank) attracted €775m of demand to a €300m seven year debut covered bond on Thursday, with strong demand for the OBG helping it tighten pricing 12bp, after the issuer had during a roadshow emphasized its position rather than its size, according to its CFO.

The issuer is the first from North Eastern Italy to issue covered bonds and one of the smallest in the OBG market, with a balance sheet size of €10.28bn at end-2018. Martin Schweitzer, CFO of Volksbank, said the issuer’s entry into the covered bond market is in keeping with its “innovative profile”.

Volksbank began a three-day roadshow last Friday (18 October), taking in Vienna, Munich, Frankfurt and Milan and ending on Tuesday.

“We focused not so much on our size, but our position,” said Schweitzer, “because we are in the North East, bordering Austria and Switzerland, with South Tyrol being one of the wealthiest provinces in Italy,” he said. “It is maybe well known for skiing and not so well known for banking, but we have a strong story to tell.”

The roadshow generated extensive positive feedback, according to one of Volksbank’s leads, and they therefore decided to exploit the strong momentum by launching the deal two days after it finished.

Erste, SG and UniCredit yesterday went out with initial price thoughts of the mid-swaps plus 60bp area for the €300m no-grow seven year deal on Thursday morning. After around an hour and 20 minutes, books were reported as being over €400m, excluding joint lead manager interest, and after around an hour and 40 minutes, the spread was revised to plus 53bp on the back of orders over €650m, excluding JLM interest. The deal was ultimately priced at plus 48bp on the back of orders totaling €775m.

A syndicate banker away from the leads said that, considering the size of the bank’s balance sheet and its domicile in one of Italy’s smaller regions, for an inaugural trade the transaction was a success.

“€750m is good for a €300m trade and I think it was fairly priced,” he said.

He saw fair value for the trade around 40bp, based on outstanding Banca Desio July 2026 paper at 27bp-28bp and BPER April 2026 paper at 36bp-37bp.

“I’d say it’s somewhere in between these two, Desio in terms of the northern region and BPER in terms of quality, so around 35bp,” he said, “but then there is a penalization for the size of around 5bp, so around 40bp.”

He said that the unusually large tightening by 12bp suggested the leads had been cautious about how the deal would be received.

“But then they tightened quite aggressively and landed at 40bp,” he added, “so this sentiment was short-lived.”

The OBG was priced with a yield of 0.318% and another market participant said the search for yield likely lured investors into the deal.

Banks were allocated 53% of the paper, fund managers 35%, central banks and official institutions 11%, and insurance companies 1%. Italy took 35%, Germany and Austria 22%, the Nordics 20%, Iberia 6%, Ireland 6%, the Benelux 3%, the UK 2%, and others 3%.

“The result is very pleasing both in terms of the pricing and the quality of the order book,” said Schweitzer. “More than 60 investors subscribed, almost two-thirds of them from abroad.”

The lead described the transaction as a blow-out.

“The deal underlines that the new covered bond issuer appeals well to a wide international investor base and paves the way for further successful transactions of Volksbank Alto Adige,” he said.

According to Schweitzer, Volksbank plans to access the covered bond market roughly every 18 months, while it will also remain similarly active with SME securitisations and optimize its capital structure with appropriate Tier 2 and Additional Tier 1 issuance.

“We are not the biggest Italian issuer,” he said, “but we will be a frequent name that you will see on the screens on a regular basis.”