UniCredit ‘in talks to pave way for sale of stake in Turkey’s Yapi Kredi Bank’

UniCredit ‘in talks to pave way for sale of stake in Turkey’s Yapi Kredi Bank’
By Akin Nazli in Belgrade August 28, 2019

Italian global banking and financial services company UniCredit is in talks to take direct control of its indirect stake in Turkish private lender Yapi Kredi Bank, unnamed people with knowledge of the matter told Bloomberg on August 28.

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 may also be thinking of arranging a secondary public offering (SPO), according to one of the cited sources.

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.

Stake bought in 2005
UniCredit bought the Yapi Kredi stake with Koc Holding in 2005 for €2.5bn, but the market value of the shares 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.

UniCredit and Koc are in discussions about reorganising Koc Financial Services while UniCredit is interested in exiting the venture and taking direct control of its 41% stake, according to Bloomberg’s sources.

Both parties are reportedly targeting the concluding of the reorganisation process by the end of the year, but attaining that result is not certain.

From the news report, it would appear that the sources are on the UniCredit side, with Koc Holding yet to comment.

Yapi Kredi Bank told BloombergHT that the matter is an issue between shareholders.

Shares fall on the day
Shares in Yapi Kredi Bank (YKBNK) were down 2.79% d/d at Turkish lira (TRY) 2.43, and up 47% y/y, as of 15:00 Istanbul time. Shares in Koc Holding (KCHOL) were down 1.03% d/d to TRY17.24, but up 18% y/y.

Borsa Istanbul’s benchmark BIST-100 (XU100) index was down 0.42% d/d to 95,621 while the USD/TRY rate was at just below 5.80, down 0.44% d/d.

Yapi Kredi was the third largest private bank in Turkey as of the end of 2018, with TRY373.4bn worth of assetsIt is Turkey’s fifth largest bank by assets.

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%.

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.

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.

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