Koc Holding evaluates the shareholder structures of companies in its portfolio and engages in discussions with relevant parties as necessary at all times, Turkey’s largest conglomerate said on August 29 in a stock exchange filing.

In the event that a concrete decision is reached as a result of such assessments, necessary disclosures are made in accordance with local capital market regulations, it added.

That might not seem to amount to a hill of beans but the filing it should quickly be pointed out was made in response to “news in the media regarding the talks between Koc Holding and UniCredit on the reorganization of the existing shareholder structures of their JVs Yapi Kredi Bank and Koc Finansal Hizmetler”.

“In this context, there is no development regarding the news in the media that requires us to make a public disclosure within the framework of the [Turkish Capital Markets Board’s] Communique [on material events disclosure]. And we are making this disclosure due to the questions we have received from our investors,” Koc also said.

On August 28, Bloomberg cited anonymous sources with knowledge of the matter in reporting that Italian global banking and financial services company UniCredit was in talks to take direct control of its indirect stake in Turkish private lender Yapi Kredi Bank.

The move would pave the way for a potential sale or reduction of the Italian group’s stake in Yapi Kredi Bank and UniCredit would be freed from the requirement that means it must receive approval from fellow stakeholder Koc Holding for considerations in relation to its stake.

UniCredit is reportedly interested in taking direct control of its 41% stake and subsequently exiting the venture.

It may also be thinking of arranging a secondary public offering (SPO), according to one of Bloomberg’s sources.

Both parties are reportedly targeting the concluding of the reorganisation process by the end of the year, but attaining that result was not certain, the news service also reported.

From the news report, it would appear that the sources were speaking from the UniCredit perspective.

Koc Financial Services, a 50:50 JV between Turkey’s Koc Holding and Italy’s UniCredit, controls an 81.9% stake in Yapi Kredi, with the remaining 18.1% publicly traded on the Borsa Istanbul.

Unicredit’s participation in Yapi Kredi has encountered turbulence since Turkey was hit by a currency crisis last summer, leading to a bitter recession.

UniCredit and Koc Holding initially bought a 57.4% stake in Yapi Kredi in 2005 for €1.16bn, but the market value of the Turkish lender has tumbled in recent years.

In January, Koc Holding and UniCredit each bought $200mn worth of Yapi Kredi’s subordinated bonds in order to support the Turkish lender’s capital.

In April last year, the Italian lender invested around €330mn in Yapi Kredi’s rights offer.

Yapi Kredi shares nosedive
Shares in Yapi Kredi Bank (YKBNK) tested TRY2.27 on August 29, pointing to a sharp decline from TRY2.53 seen the previous day during the morning trading hours prior to the Bloomberg report.

The bank’s shares were trading at Turkish lira (TRY) 2.31, up 33% y/y, as of 16:30 Istanbul time on August 29, suggesting a market cap of around TRY19.5bn.

Foreigners’ share in Yapi Kredi’s free-float fell to 50.27% on August 28 from 50.40% a day ago but still compared significantly higher than the 32.93% at end-2018, according to Is Invest’s daily foreigner share bulletin.

Shares in Koc Holding (KCHOL) were up 1.67% d/d and 15% y/y to TRY17.68.

Borsa Istanbul’s benchmark BIST-100 (XU100) index was also up 1.39% d/d to 97,219 while the USD/TRY rate stood at 5.84, up 0.48%.

Seker Invest said it believed a possible disposal of Unicredit’s shares in Yapi Kredi might weigh on share performance. The Istanbul-based brokerage made the observation on August 29 in its daily bulletin prior to the release of the statement by Koc Holding.

If the Bloomberg report is confirmed, a significant fall may be observed in the Yapi Kredi share price, Is Invest said in its daily bulletin, also prior to the statement by Koc.

Koc shares may also feel the pressure due to uncertainty, Is added, noting that UniCredit would initially head to Koc if it decided on a sale.

The suggestion that there could be a secondary public offering (SPO) by UniCredit, cited by one of the Bloomberg sources on August 28, seems like an attempt to raise the stakes in negotiations with Koc as the Turkish conglomerate was expected to move in to avoid an SPO that would hurt the market value and reputation of the local lender.

Yapi Kredi, founded in 1944, took over Garanti Bank’s place as the second largest private bank in Turkey as of the end of June, with its TRY385bn worth of assets versus Garanti’s TRY384bn, according to the latest data from the local banking association (TBB).

Yapi Kredi is currently Turkey’s fourth largest bank by assets, following state-owned Ziraat, private lender Isbank and state-run Halkbank.

Yapi Kredi’s loan volume stood at TRY238bn versus total deposits worth TRY218bn while the lender’s capital amounted to TRY41bn with TRY8.477bn worth of paid-in capital.

Yapi Kredi’s cash loans grew 5% y-t-d to TRY232bn at end-June, according to an investor presentation put out with its Q2 financials.

The lender’s loan growth is below the 10% target recently introduced by the central bank.

The lender had 854 branches and 17,191 employees at end-June.

The bank’s net profit declined by 9% y/y to TRY1.12bn in Q2 while its net interest income rose by 25% y/y to TRY3.9bn and its net fees & commissions income rose by 21% y/y to TRY1.2bn.

The market expected a net profit of TRY1bn in the quarter.

The lender’s H1 profit of TRY2.36bn was down 4.5% y/y with a ROAE of 12.2%.

In July, Fitch Ratings downgraded Yapi Kredi Bank to B+ from BB- with a negative outlook following a sovereign downgrade for Turkey.

In June, Moody’s Investors Service downgraded Yapi Kredi Bank to B3 from B2 following the sovereign downgrade.

In August last year, Standard and Poor’s cut the bank to B+ from BB- following the sovereign downgrade.