UniCredit cuts further its stake in Turkey’s Yapi Kredi

Italy’s biggest bank by assets UniCredit took a further step on Wednesday in a strategy to streamline its structure, announcing the placement of a 12% stake in Turkish bank Yapi Kredi.

UniCredit, which reports full-year earnings on Thursday, has been shedding assets and mending its balance sheet under Chief Executive Jean Pierre Mustier, who arrived in 2016 to turn the bank around amid concerns over its capital base.

The latest move in the French banker’s strategy, which has led UniCredit out of Poland and shrunk its domestic footprint, was the decision in November to dissolve a joint venture with Turkish conglomerate Koc Holding.

The unwinding of the JV handed UniCredit a direct 31.9% stake in Yapi which would fall to 20% after the share placement.

Through the JV, UniCredit had indirectly held 40% of Yapi, the country’s third-largest bank. An economic recession in Turkey and the free fall of the lira currency forced UniCredit to write down the asset by 846 million euros back in 2018.

UniCredit said the sale had yielded around 440 million euros. It added the transaction would generate a negative 0.82 billion euro impact on first quarter earnings partly due to the difference between the market value of the stake and its book value.

“The transaction is part of UniCredit’s on-going strategy to simplify its shareholdings and to optimize its capital allocation,” the bank said in a statement.

UniCredit said in December it planned to book a 400 million euro ($440 million) charge in the fourth quarter of 2019 in relation to the unwinding of the accord with Koc.

This and other one-off hits, coupled with large writedowns of problem loans the bank has decided to bring forward, are behind the 1.1 billion euro net loss forecast by analysts for the quarter in a consensus provided by the company.

Morgan Stanley, Citi, JPMorgan, and UniCredit/Kepler Cheuvreux are managing the accelerated book-building process.

The sale was completed at a price of 2.88 Turkish liras for each Yapi share, equivalent to a 4% discount to Wednesday’s closing price of 3.00 liras.


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