UniCredit SpA will sell a direct stake of 9% in Yapi ve Kredi Bankasi AS to Koc Holding AS, unwinding their joint venture in the Turkish lender and leading to €1bn ($1.1bn) of losses for the Italian bank.
UniCredit will exit the special purpose vehicle through which it and Turkish industrial group Koc hold a combined stake of over 80% stake in the bank, it said in a statement yesterday. Under the accord, UniCredit will transfer 9% of the Turkish lender to Koc, which will then own 49.99% of Yapi Kredi. UniCredit will hold about 32% of Yapi after the transactions.
The consolidated earnings impact of about a negative €400mn will be reflected when the deal is signed this quarter, and a negative impact of an additional €600mn will be booked when the deal is completed, UniCredit said. The Milan-based bank will get a positive impact of about 5 basis points on its CET1 ratio, and is in talks with the European Central Bank to change the way the direct stake is accounted for, to deconsolidate it and reduce risk-weighted assets.
The reduction of UniCredit’s exposure to Turkey is part of chief executive officer Jean Pierre Mustier’s strategy to simplify the Italian bank’s shareholdings and to optimize capital allocation. The transaction wrapped up months of discussion between the parties that first came to light in August.
UniCredit has taken steps to put itself in a stronger financial position ahead of a planned presentation next week to set out a fresh set of targets. Earlier this year, it raised about €2.1bn by selling its holding in Banca Fineco SpA.
Yapi Kredi is among a number of Turkish lenders that face a large-scale loan restructuring after a falling lira made it difficult for companies to repay their dollar debt with earnings in the Turkish currency. Last year, UniCredit surprised investors with an €850mn charge to write down the value of its stake in the bank. It also spent more than €600mn to subscribe to the bank’s rights issue and buy additional Tier 1 bonds.
In Turkey, high levels of borrowings in the corporate sector, where foreign liabilities exceeded assets by about $183bn, are increasing risks in the Turkish financial system, as more than half of those debts are owed by domestic banks, Moody’s Investors Service said in May.
The remaining shares of Yapi Kredi of about 18% will continue to trade on Borsa Istanbul stock exchange, and UniCredit won’t sell its remaining stake without a written approval of Koc until November 15, 2021, except through an accelerated book-building, according to a separate statement by Koc.