Opting for a single underlyings rather than following the popular worst-of payoff profile has worked well for Banca IMI, which has raised an estimated €337m from six knockout products issued this year. "In the last 12-18 months, we have found a special interest from Italian retail investors in products linked to single shares, especially from our largest target market, which is investors with major financial skills," said Carlo Bertolotti, head of sales at Banca IMI.
The bank's Express Plus Certificates - ENI - 03/03/2021 captured €98.80m, making it one of the best-selling products in Italy this year. The four-year income product linked to the performance of ENI shares is a knockout product with annual observations that offers an annualised coupon of 5.8% following the first observation, if the medium level of the underlying is at or above its initial level.
This year, the Italian bank has offered an average coupon of 5% for its four-year knockout products, which have also included downside protection in the from of barriers that range between 55% and 60% of the initial level. "The coupon level is in line with our expectations, in spite of our funding [being] quite low," said Bertolotti. In January, the bank offered the structure linked to the shares of BMW with a 5% fixed coupon; and this month a new offering based on Assicurazioni Generali shares offers a 6.75% coupon.
Products linked to the Eni have proved appealing to Italian investors following the bull run in oil this year. "It's a blue chip of the Italian market, and [it is in the] European elite too: solid revenues and good judgement by market analysts and by our Research Dep," said Bertolotti. "A company well known and appreciated by our investors and one of the best stories in Italian privatisation."
In 2016, knockouts accounted for 38% of the volume of structured products sold in Italy. In the first quarter of this year, Banca IMI has issued only 25 products, or 11% of local issuance, while generating an estimated €952m in sales, or almost 28% of the market.
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