Investors Upbeat on Yapi Kredi With Turkish Giant in Control

(Bloomberg) -- Bets on Yapi Kredi stock are rising in a sign that money managers have increased confidence about the bank’s future now that control has moved to Turkey’s largest industrial group.

Koc Holding AS increased its ownership of Turkey’s fourth-largest listed bank by assets to 49.9% under a November deal that ended a partnership with UniCredit SpA. The Koc family’s business empire spans automakers to appliance makers, finance and the country’s largest oil refiner, and includes four of its 10 largest exporters.

“Starting with 2020, Yapi Kredi will be managed by Koc Group alone, without UniCredit,” said Mehmet Gerz, chief investment officer at Ata Portfoy in Istanbul. “With the new management, I expect Yapi Kredi to adapt to Turkey’s domestic conditions in a better and effective way and increase profitability.” Gerz has added the lender’s shares to his portfolio because of his optimistic view on its future.

Koc Holding and UniCredit late last year unwound a joint venture that controlled an 80% stake in Yapi ve Kredi Bankasi AS, with the Turkish conglomerate buying 9% of the bank from its partner. The Italian lender retained just under 32% in Yapi Kredi, more than a third of which it started selling Thursday under plans to divest non-strategic businesses.

“Koc Holding being a company that cares about dividends and return on equity, and now taking the helm of Yapi Kredi, gives us, the institutional investors, more comfort,” Gerz said. “And this is what good corporate governance is all about.”

Yapi Kredi shares have advanced 27% this year, outpacing the 12% gain in the Borsa Istanbul Banks Index. That has pared the stock’s relative underperformance to its peers since the idea of a UniCredit stake sale was first floated in late August.

UniCredit’s stake in the Turkish lender fell to 19.93% after the latest sale. Shares of Yapi Kredi added 5% on Thursday following the share placement by UniCredit and were up 0.3% in Istanbul on Friday at 12:13 p.m.

Like Gerz, Marmara Capital Managing Partner Haydar Acun bought shares in Yapi Kredi toward the end of last year and expects the end of the bank’s joint-control structure to sharpen performance. “The former management of Yapi Kredi made some mistakes over past years, including large-scale loans to the energy industry,” he said.

Having partner investors run a bank can pose risks as neither may want to assume full responsibility, said Acun. “It could be a better idea if Koc runs the lender on its own and UniCredit’s stake sale may prove a positive catalyst for stock performance,” he said, adding that he may buy more shares in Yapi Kredi this year.

Read more here: Yapi Kredi, Vakifbank Most Exposed to Turkey Problem Loans: JPM

Blackfriars Asset Management Fund Manager Anastasia Levashova estimates that the old control structure at Yapi Kredi caused a “built-in discount of 3%-7%.” She puts this down to uncertainty regarding co-management and a “soft conflict” between Yapi Kredi and Koc Group. “At times, it was more visible and talked about, and at other times, it wasn’t as much.”

Asked to comment, spokesmen for Koc Group and Yapi Kredi referred to a joint statement from November, which predicted strong growth for the lender. “We will continue our path in an even more ambitious way,” was the comment attributed to Koc Holding’s acting Chairman and Yapi Kredi Chairman Ali Koc at the time.

To contact the reporters on this story: Tugce Ozsoy in Istanbul at tozsoy1@bloomberg.net;Asli Kandemir in Istanbul at akandemir@bloomberg.net

To contact the editors responsible for this story: Blaise Robinson at brobinson58@bloomberg.net, ;Onur Ant at oant@bloomberg.net, John Viljoen, Jon Menon

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