UniCredito enters covered market
Yuri Bender reports on the activities of UniCredito’s TradingLab outside Italy.
Following hard on the heels of Commerzbank and SG, UniCredito Italiano has entered the burgeoning UK retail market for complex investment banking products. UniCredito’s new investment bank, TradingLab, will act both as issuer and market maker for call and put warrants on 12 underlying securities traded on the newly-created UK covered warrants market from 28 October. The UK was chosen as the newest target because “Germany and Italy are not in a position to receive more issues,” according to Leonardo De Benedetti, deputy managing director of TradingLab. “In those countries, the issue is complete. The UK investor has the financial culture to use warrants in a complex portfolio allocation to look for yield pick-up.” He added that the prevalence of retail brokerages such as TD Waterhouse was “another reason why the UK market will be more attractive.” Products have long been distributed through intermediaries in the UK, he said. Mr De Benedetti said covered warrants were often the simplest method to achieve international diversification. “For the Italian investor, it is cheaper to buy a ‘deep-in-the-money’ warrant for Microsoft on Nasdaq rather than instructing a broker to buy shares directly.” The pan-European retail drive is the result of the re-organisation of UniCredito’s investment banking division two years ago. “Our management realised that some of our clients, particularly those on the retail side, were not being adequately served by the investment bank,” explained Mr De Benedetti. He said clients highlighted were self-directed investors not involved in asset management activity. “The asset management industry has grown phenomenally in Italy between 1994 and 2000 as the exclusive focus of the banking system,” said Mr De Benedetti. “Unfortunately, the rest of the investment world was forgotten. This new focus on small brokers and other intermediaries will change this situation.” He claimed the move is a huge departure for investment banks, used to dealing with institutions rather than wealthy retail investors. “I am sure Commerzbank and others will catch up with this approach,” he said, in a side-swipe at competitors. TradingLab is currently the leading player in Italy, where it enjoys 40 per cent of the covered warrants market. Its share in Europe is 22 per cent, second to Citibank, where Mr De Benedetti served his investment banking apprenticeship. The next step will be to step up distribution of branded products including ‘Dynamo’, a certificate that replicates the performance of 10 stocks chosen by technical analysis. TradingLab has already sold E200m of these products in Italy, where it has also created structured products for the post office.
