Akbank dropped as much as 5.2 percent to 6.88 liras, the biggest fall since Oct. 20. The shares declined 3.3 percent to 7.02 liras at the close in Istanbul, the most since Feb. 23, valuing the company at 28.1 billion liras ($15.7 billion) The banking index rose 1.4 percent to 121,540.24.
Citigroup is cutting its ownership in Akbank as it sheds assets around the world, including India and China, to meet capital requirements. The New York-based bank will reduce its shareholding in Akbank to less than 10 percent subject to market conditions and approvals, it said March 23. Haci Omer Sabanci Holding AS (SAHOL) of Turkey sold the stake to Citigroup in 2007 for $3.1 billion.
“Sabanci has the first right to purchase the shares Citigroup sells as part of an agreement,” Tera Brokers in Istanbul said in an e-mailed report to clients today. “Should Citigroup sell the shares on the Istanbul Stock Exchange (OZDBJ), Akbank’s stock performance would be significantly pressured.”
Of 32 analysts covering Akbank, two rate it “buy,” 14 are “neutral” and 16 say “sell,” according to data compiled by Bloomberg. The average price estimate is 6.65 liras per share, 3.4 percent below the current share price.
Akbank jumped 21 percent in the year to March 23, exceeding gains of 20 percent for the main ISE National 100 (XU100) index and matching the banking gauge’s 21 percent rise.
Sabanci, Turkey’s second-biggest group of companies, owns 49 percent of Akbank. The remaining 31 percent is traded on the exchange. Sabanci probably won’t buy any shares of Akbank from Citigroup at the current market price, mirroring similar deals recently, Isik Okte, strategist at Turkiye Halk Bankasi AS (HALKB) in Istanbul, said in an e-mailed response to questions.
“They will look to position themselves where they will pay much less,” Okte said. “There is always a discount to these sales and Sabanci will not touch Citi’s stake unless the price is very favorable.”
Citigroup sold its 9.9 percent stake in Housing Development Finance Corp. (HDFC), India’ largest mortgage lender, last month for $1.95 billion, a reduction of 6.2 percent to the stock price. It sold a 2.71 percent shareholding in Shanghai Pudong Development Bank (600000) last week for $668 million, or about 10 percent less than its share price at the time.
Citigroup is selling shares in Akbank for “technical reasons” related to Basel III banking rules, Akbank told the exchange after the markets closed on March 23. The decision won’t affect Akbank’s financial strength, management or growth strategy, Akbank said in the filing to the Istanbul Stock Exchange.
The Turkish banking regulator, which must approve any share sale, said today it opposes investment funds and short-term investors holding stakes in banks of more than 10 percent of their equity, Bloomberg HT television reported.
An impairment charge of $700 million is expected in the first quarter from cutting the investment in Akbank because of currency losses and marking down the current carrying value of the stake to market prices, Citigroup said on March 23.
A lower contribution from Akbank was one reason for the 2 percent drop in revenue for Citigroup’s European regional banking unit last year, the firm said in an annual filing last month.
Akbank reported a profit of 551 million liras in the fourth quarter, a 20 percent decline from a year earlier and lagging the 635.8 million-liras estimate in a Bloomberg survey, due to a fall in interest income and losses from trading. Akbank is expected to perform better in the first quarter, Credit Suisse Group AG (CSGN) analyst Ates Buldur said by e-mail from Istanbul today.
Sabanci gained 0.5 percent to 7.62 liras.
To contact the reporter on this story: Benjamin Harvey in Istanbul at email@example.com
To contact the editor responsible for this story: Gavin Serkin at firstname.lastname@example.org