UniCredit, Koc Said to Weigh Capital Raise for Turkish Unit

Updated on
  • Italian bank said willing to contribute up to $500 million
  • Yapi Kredi says no board decision made on capital increase

UniCredit SpA and Koc Holding AS are weighing a capital increase of about $1 billion for their Turkish venture Yapi & Kredi Bankasi AS to strengthen its buffers, according to people with knowledge of the matter.

UniCredit, which together with Koc owns 82 percent of the Turkish bank, wants to carry out the fundraising by the end of the year and is willing to contribute as much as $500 million, the people said, asking not to be identified discussing private talks. The Italian bank is still seeking support from the Koc family and no final decision has been made, they said.

Fresh funding “would improve the bank’s relatively tight capital position and also prove Unicredit’s commitment,” Cagdas Dogan, a banking analyst at BGC Partners Inc. in Istanbul wrote in a note Wednesday. These factors “should be perceived as positive for the stock.”

European banks including Credit Suisse Group AG and Deutsche Bank AG have raised about $45 billion from investors in stock sales this year, making it the busiest first half since 2011, according to data compiled by Bloomberg. UniCredit itself raised about $14 billion earlier this year to bolster its own reserves after booking writedowns on loans.

Manageable Move

UniCredit could manage the capital increase, according to Fabrizio Bernardi, an analyst at Fidentiis Equities who has a hold recommendation on the stock. Its capital position is solid and the injection would not hurt its ratios, wrote Benjie Creelan-Sandford, an analyst at Jefferies International Limited.

Yapi Kredi’s board of directors has not made any decision on a capital increase, the company said in a statement on Wednesday. UniCredit and Koc declined to comment.

Yapi Kredi, Turkey’s fifth-largest bank by assets, had a capital adequacy ratio of 13.2 percent at the end of 2016, according to data compiled by Bloomberg. That compares with an average of 16 percent for the Turkish banking industry. The bank raised $500 million of subordinated Tier 2 debt in March ahead of expected stricter rules under Basel III from 2018.

UniCredit bought into Yapi Kredi with Koc in 2005 when the Milan-based lender was expanding in eastern and southern Europe. While UniCredit Chief Executive Officer Jean Pierre Mustier has scaled back some international operations, he said in a Bloomberg Television interview last week that Turkey remains a good opportunity despite the political turmoil.

Yapi Kredi has gained 34 percent this year, valuing the bank at about 20.6 billion lira ($5.7 billion). The stock rose as much as 1.8 percent to 4.66 liras in Istanbul trading Wednesday, while Koc Holding rose as much as 1 percent to 16.49 liras. UniCredit was up 1.4 percent to 17.43 euros.

“On the business side, the bank in Turkey is doing quite well,” Mustier said in the TV interview. “Turkey is a country that has a young, educated population and so we do believe in the country from an economic point of view.”

— With assistance by Chiara Remondini

(Updates with analyst comments starting in third paragraph.)
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