UniCredit Starts Third Retail-Bond Buyback Program in Year

UniCredit SpA offered to buy back bonds from retail customers for the third time in a year amid regulatory changes and increasing nervousness among Italian savers about such investments.

The lender intends to repurchase 1.8 billion euros ($2 billion) of bonds maturing in 2019 to 2022, at par or just above, according to a statement on Thursday. The 10 issues are predominately held by retail customers, said a spokesman for the Milan-based bank.

UniCredit joins UBS Group AG and Royal Bank of Scotland Plc in seeking to buy back junior bonds amid new rules that will disqualify some debt from counting toward regulatory capital requirements. The lender may also be flexing its financial strength to allay customer concerns after savers at four small Italian banks suffered losses on similar bonds in November.

“This buyback may be sending a reassuring message to retail investors indicating that they are able to fully recover their investment,” said Jakub Lichwa, a credit analyst at Daiwa Capital Markets in London.

UniCredit can probably retire some so-called Tier 2 notes because it has more than enough to meet the new capital rules, he said.

Italians are become increasingly reluctant to hold bank bonds because of growing risk-awareness. Nationwide holdings fell by 75 billion euros in the year ended September, even before the November losses.

UniCredit’s offer period will run from Jan. 25 until Feb. 16. The largest issue in the buyback is 431 million euros of notes maturing in December 2019, according to the statement. The notes rose 5 cents on the euro to about par after the announcement, Bloomberg data show.

Before it's here, it's on the Bloomberg Terminal.