UniCredit, Italy’s largest bank in terms of assets, has decided to plan a strategy to streamline its structure and has announced to place a 12 percent stake in Yapi Kredi, a Turkish bank. The bank has reported its entire annual earnings this Thursday and has been cutting down some of its assets and mending its balance sheet. Jean Pierre Mustier, Chief Executive, who has been associated with the bank since 2016, has taken charge of the bank as there were certain concerns over its capital base. His strategy has made the bank reduce its domestic footprint and has to lead the bank out of Poland. This came in the wake of the decision in November to dissolve a joint venture held with Koc Holding, a Turkish conglomerate. This decision has given UniCredit a direct 31.9 percent stake in Yapi Kredi. This would, however, shrink to 20 percent post the share placement.
In the case of the Joint Venture, UniCredit had an almost 40 percent stake in Yapi, which is Turkey’s third-largest bank. Post the economic recession in the country and the drastic fall of the Italian currency, Lira, UniCredit, was almost compelled to write down its assets by 846 million euros 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 bank had announced in December that it has plans to book a 400 million euro charge in the last quarter of 2019, linked with the dissolution of the joint venture with Koc. However, the one-off hits along with writedowns of problem loans have still kept the net losses of the bank behind the forecast of 1.1 billion euros by analysts.
UniCredit has stated, “the transaction is part of UniCredit’s on-going strategy to simplify its shareholdings and to optimize its capital allocation.” Other banks like Morgan Stanley, Citi, JPMorgan along with UniCredit/Kepler Cheuvreux have been involved in the management of the ‘accelerated book-building process.’ Finally, the sale closed at a price of 2.88 Turkish Liras for each Yapi share which is equal to a discount of 4 percent of 3.00 Liras, the closing price on Wednesday.