UniCredit, Italy’s biggest bank by assets, took a further step on Wednesday in a strategy to streamline its structure, announcing the placement of a 12 percent stake in Turkish bank Yapı Kredi, Reuters reported.
UniCredit, which reports full-year earnings on Thursday, has been shedding assets and mending its balance sheet under Chief Executive Jean Pierre Mustier, who arrived in 2016 to turn the bank around amid concerns over its capital base.
The latest move in the French banker’s strategy, which has led UniCredit out of Poland and shrunk its domestic footprint, was the decision in November to dissolve a joint venture with Turkish conglomerate Koç Holding.
The unwinding of the joint venture handed UniCredit a direct 31.9 percent stake in Yapı Kredi, which would fall to 20 percent after the share placement.
Through the joint venture, UniCredit had indirectly held 40 percent of Yapı Kredi, the country’s third-largest bank. An economic recession in Turkey and the free fall of the lira currency forced UniCredit to write down the asset by 846 million euros back in 2018.
UniCredit said the sale had yielded around 440 million euros. It added that 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 transaction is part of UniCredit’s on-going strategy to simplify its shareholdings and to optimize its capital allocation,” the bank said in a statement.
UniCredit said in December it planned to book a 400 million euro ($440 million) charge in the fourth quarter of 2019 in relation to the unwinding of the accord with Koç.
This and other one-off hits, coupled with large writedowns of problem loans the bank has decided to bring forward, are behind the 1.1 billion euro net loss forecast by analysts for the quarter in a consensus provided by the company.
Morgan Stanley, Citi, JPMorgan, and UniCredit/Kepler Cheuvreux are managing the accelerated book-building process.
The sale was completed at a price of 2.88 Turkish lira for each Yapı share, equivalent to a 4 percent discount to Wednesday’s closing price of 3.00 lira.