UniCredit Turkey Unit Plans to Raise $1 Billion

Updated on
  • Yapi Kredi said to be considering banks for rights-issue plan
  • Lender’s capital position is weaker than many local rivals

Yapi Kredi Bankasi AS, the Turkish lender controlled by UniCredit SpA and Koc Holding AS, is proceeding with plans to raise about $1 billion to bolster capital levels, according to people familiar with the matter.

The two largest shareholders would contribute a combined 80 percent of the funding in proportion to their ownership in the bank, with the sale of new shares covering the rest, the people said, asking not to be named because the plan isn’t public. The lender is in talks with Bank of America Merrill Lynch and Citigroup Inc. about managing the rights issue, the people said.

Yapi Kredi fell as much as 2.9 percent, the most since Nov. 28, and was down 1.6 percent as of and Koc Holding shares were down 1 percent in Istanbul trading as of 1:56 p.m. The 13-member Borsa Istanbul Banks Sector Index was up 0.9 percent.

“The news regarding a potential rights issue could reflect negatively on the stock performance,” Ovunc Gursoy, a TEB Investment banking analyst, said in emailed note. “But it is good for supporting capital adequacy ratio and further growth at Yapi Kredi.”

The Istanbul-based lender’s so-called Tier-1 capital, a key buffer against losses, fell to 10.2 percent at the end of September, compared with 15.6 percent at rival Turkiye Is Bankasi AS and 15 percent at Turkiye Garanti Bankasi AS, according to data compiled by Bloomberg. UniCredit Chief Executive Officer Jean Pierre Mustier said that month that the bank would consider injecting capital into Yapi Kredi, after Bloomberg had reported it was weighing plans.

Capital Needs

Yapi Kredi, Turkey’s sixth-largest bank by assets at end-September, 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 lender recently hired Gokhan Erun as chief executive officer from rival Garanti Bankasi after former CEO Faik Acikalin retired at end-December.

Yapi Kredi board of directors hasn’t made any decision on a capital increase, the lender said in a public filing to Borsa Istanbul on Friday. UniCredit and Citigroup declined to comment, while Koc said in a statement that no decision has been taken on the matter. Bank of America wasn’t immediately available to comment.

UniCredit bought into Yapi Kredi with local partner Koc in 2005 when the Milan-based lender was expanding in eastern and southern Europe.

“Yapi Kredi is growing, and so growth means that there is an organic capital generation,” Mustier told Bloomberg Television in September. “If growth means that we need to put more capital at one stage we’ll do it, but everything at the time and for the moment we are happy with what the bank is doing.”

— With assistance by Ruth David, and Asli Kandemir

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