Italy’s UniCredit won approval from Turkey’s banking regulator to sell its remaining stake in local bank Yapı Kredi to partner Koç Holding.
UniCredit and Koç Holding are continuing to work on getting permission for the transaction from other local and international regulators, according to a filing with the Istanbul Stock Exchange late on Monday.
Milan-based UniCredit is aiming to complete the sale of the 18 percent stake to Koç for 0.3 billion euros by March next year, it said in November. It said it expects to sell a remaining 2 percent of the company on the open market.
UniCredit is following U.S. banking giant Citigroup and top British insurer Aviva in exiting stakes in Turkish financial companies. HSBC is considering selling its banking business in Turkey if it can find a local buyer after closing about three-quarters of its branches, which now number less than 80, Reuters reported last year.
In 2018, UniCredit took a write-down of almost $1 billion on its investment in Yapı Kredi after a currency crisis sent the lira plummeting against the dollar and euro. Yapı Kredi is the biggest provider of credit card loans in the country.
The lira has slumped by about 45 percent against the dollar this year after the central bank slashed interest rates even as inflation accelerated to the highest levels in three years. The bank’s benchmark interest rate stands at 15 percent compared with annual consumer price inflation of 21.3 percent.
Ratings agencies including Standard & Poor’s and Moody’s have cut their ratings on Turkish sovereign debt and the country’s banks deeper into junk territory over the past five years, citing an overheating economy, worsening finances and extreme currency volatility.
Foreign financial firms operating in Turkey have also faced an unpredictable operating environment. At the height of the COVID-19 pandemic last year, the Turkish authorities introduced new rules forcing banks to lend to cash-strapped companies and buy more government bonds or face fines. At the same time, state-run banks began offering loans at below market interest rates, distorting the lending market and forcing other banks to cut their own lending rates.
UniCredit’s decision to exit Turkey comes as it implements a three-year plan to strengthen its finances, including improving asset quality and cutting costs. That involves speeding up the run-down of non-core businesses.