UniCredit has reportedly struck a deal to greatly cut its exposure to major Turkish bank Yapi Kredi, a transaction seen as clearing the way for the Italian global banking and financial services company to fully exit Turkey in a move that has been seen as likely since the country descended into economic turmoil last year.

UniCredit is set to sell its 50% stake in the Koc Financial Services joint venture to its JV partner Koc Holding, Reuters reported three sources as saying on November 22. Koc Financial Services owns almost 82% of Yapi Kredi and is equally invested by UniCredit and Koc Holding.

UniCredit kicked off talks with conglomerate Koc Holding earlier this year with the aim of dismantling the joint venture and laying the groundwork to fully cash out of Yapi Kredi, the sources were cited as saying. The deal will give Koc Holding a majority stake in Yapi, Turkey’s fourth biggest bank. UniCredit is expected to retain a small interest in the lender with a view to selling it at a later stage without having to consult Koc, one of the sources reportedly said. Italy’s largest bank by assets, Unicredit, would no longer be invested in the joint venture as of December, according to one source.

Yapi Kredi, founded in 1944, is Turkey’s fourth largest lender by assets, according to data from the Banks’ Association of Turkey. It has nearly 900 branches and some 18,000 employees.

Koc Holding is Turkey’s largest industrial group with a combined revenue equal to some 8% of Turkey’s GDP.

UniCredit could unveil details of the transaction at a strategy presentation in London on December 3, according to one cited source.

A first

The Milan-based bank has been invested in Yapi Kredi since 2002 when it entered the joint venture with Koc Holding in what became the first foreign partnership in Turkey’s financial services industry.

CEO of Unicredit since 2016 Jean-Pierre Mustier has been working to bolster the bank’s balance sheet. He appears to be pressing ahead with plans to dispose of non-core assets and reduce UniCredit’s exposure to weak economies such as Turkey and Italy.

Turkey’s economic travails are taking a toll on the country’s banking industry.

The combined net income of Turkish banks collapsed 12.5% on an annual basis to Turkish lira (TRY) 36.15bn in the first nine months of the year, marking the lowest 9-month profit for the local banking industry in the past three years.

Yapı Kredi reported its net income sank nearly 17% y/y to TRY976mn in the third quarter of 2019. The lender’s net profit, however, increased around 11% on an annual basis to TRY3.3bn in the first nine months of the year.

UniCredit and Koc Holding initially bought a 57.4% stake in Yapi Kredi in 2005 for €1.16bn, but the market value of the Turkish lender has tumbled in recent years.