Yapi Kredi Surges on UniCredit Bonds, Fed Policy: Istanbul Mover

Yapi & Kredi Bankasi AS, the worst- performing Turkish bank share last year, surged on bets that capital concerns at parent UniCredit SpA (UCG) will ease and extra liquidity from the Federal Reserve will boost demand for lenders in emerging markets.

Yapi Kredi, the fourth-biggest listed bank in Turkey, jumped as much as 9 percent on the Istanbul Stock Exchange. The share rose 6.5 percent to 3.30 liras at the close in Istanbul. The main ISE National 100 index climbed 3.7 percent, the biggest gain since Nov. 30, and the banking index advanced 5.2 percent.

UniCredit, which owns Yapi Kredi along with Koc Holding AS, Turkey’s biggest industrial group, offered yesterday to buy back as much as 3 billion euros ($3.9 billion) of Tier 1 and Tier 2 bonds as part of a plan to increase capital. Meanwhile, the Federal Reserve signaled that it may keep interest rates low through 2014, making a case for a new round of asset purchases to increase liquidity and aid economic recovery. Previous purchases have spurred demand for emerging market stocks such as Yapi Kredi. (YKBNK)

Yapi Kredi is rising due to “news flow” over the bond sale, which will help strengthen UniCredit’s capital base, Mine Yoruk, a trader at Erste Securities in Istanbul, said in e- mailed comments. UniCredit rose 2 percent in Milan trading today. Yapi Kredi’s ratings, which impact its cost of raising capital, are based on those of UniCredit, Fitch Ratings said in a statement on Jan. 16.

Worst Performer

Yapi Kredi plunged 45 percent last year, the biggest drop on a banking index that fell 32 percent. Yapi Kredi has one of the lowest capital adequacy ratios in the Turkish banking industry, at 13.6 percent as of September, according to data compiled by Bloomberg. That compares with an average of more than 16 percent, according to figures from the banking regulator in Ankara.

Fifteen of 36 analysts say investors should buy Yapi Kredi’s shares and 17 say they should hold them, according to data compiled by Bloomberg. The average price estimate is 3.58 liras per share.

An improved outlook for global liquidity helps Yapi Kredi and other Turkish banks because it also eases concerns about funding the country’s record current-account deficit, Bugra Bilgi, a hedge fund manager at Garanti Asset Management in Istanbul, said in e-mailed comments.

Costs Decline

The central bank in Ankara has also boosted demand among investors for Turkish banks by lending them more cash at its annual 5.75 percent benchmark rate, lowering banks’ funding costs, according to Muge Dagistan, a banking analyst at BGC Partners in Istanbul. The central bank had lent at rates as high as 12.5 percent to slow a lending boom and support the lira. The average borrowing cost for banks has dropped to around 7.4 percent from 12 percent at the start of the year, Dagistan said.

“Banks like Yapi Kredi were most affected by tighter liquidity because of their relatively uncomfortable funding structures, with higher loan-to-deposit ratios and lower securities exposure so they have less room to generate liquidity by disposing of securities,” Dagistan said by telephone. “They were also the worst-hit banks as far as valuations, so an increase in liquidity comes as a relief.”

To contact the reporter on this story: Benjamin Harvey in Istanbul at bharvey11@bloomberg.net

To contact the editor responsible for this story: Gavin Serkin at gserkin@bloomberg.net

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