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(€1.101bn) for UniCredit’s 50% stake in KSF.
It is expected the share transfers will be finalised within the first half of 2020.
Yapi Kredi, founded in 1944, is Turkey’s fourth largest lender by assets, according to data from the Banks’ Association of Turkey. It has nearly 900 branches and some 18,000 employees.
Koc Holding is Turkey’s largest industrial group with a combined revenue equal to some 8% of Turkey’s GDP.
In 2002, UniCredit entered the joint venture with Koc Holding in what became the first foreign partnership in Turkey’s financial services industry.
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.
Yapi Kredi’s net income sank nearly 17% y/y to TRY976mn in the third quarter of 2019. The lender’s net profit, however, increased around 11% on an annual basis to TRY3.3bn in the first nine months of the year.
Unicredit only has one foot out of door if it wants to ‘Turxit’​. Picking apart the unwinding of the 50:50 Koc Financial Services (KFS) joint venture between Unicredit and Turkey’s Koc Group that controls third biggest Turkish lender by assets Yapi Kredi Bank, it’s clear the Italian financial group is not home and dry yet if it wants to entirely exit the Turkish market, or ‘Turxit’.
An agreement, announced on December 1, sees Koc Group take sole control of KFS, which controlled 82% of Yapi Kredi. But in selling out of the JV, Unicredit also cedes just under a quarter of the 41% it held in the $3.5bn bank, leaving it with just 32%. Unicredit has not only sold at a 12% discount to the previous closing price, it has agreed to pay €260mn euros in break fees and local taxes. All in all, that results in a loss of €400mn. Koc, on the other hand, takes its Yapi Kredi stake to nearly 50%. It gains control of the lender without having to pay a premium.
Yet, as noted by a Reuters analysis, the deal still makes sense for Unicredit chief executive Jean Pierre Mustier. He finds himself weighed by a bank stake in a country plagued by what many analysts see as years of economic mismanagement. Cutting the stake enables him to offload five billion euros in risk-weighted assets, boosting UniCredit’s common equity Tier 1 capital ratio by around 5 bp, even after the loss is factored in. The new ownership structure also frees his hand to sell down the rest. The hope is that investors will reward UniCredit with a richer valuation now that it is less exposed to the risky Turkish economy.
Mustier will be hoping the European Central Bank allows him to use a different accounting treatment for Yapi Kredi now that it is no longer controlled by a joint venture, and treat the stake as an equity investment, rather than consolidating a share of its assets, reported Reuters. Credit Suisse analysts reckon that would crank up UniCredit’s CET1 ratio by 65 bp from its current 12.6%.
To pull off a successful Turxit, Mustier will be hoping Turkey’s fragile economic recovery does not go into reverse. Under the terms of the deal with Koc, he is limited to just one public sale over the next two years. The sale limits could leave the €28bn UniCredit group exposed to a downturn or another Turkish currency crisis.
Hong Kong-based Kerry Logistics has acquired a majority interest in Turkish logistics company ASAV​. ASAV has five offices in Istanbul, one in Izmir and another in the industrial province of Bursa, as well as one in the
43​ TURKEY Country Report​ December 2019 ​ ​www.intellinews.com