UniCredit, sale of Yapi and merger with blitz: market bets

<! – -> Unicredit bubbly in Piazza Affari, after the decision "taken by our Board of Directors unanimously" as the managing director required to specify Jean-Pierre Mustier, of quit altogether from Mediobanca, selling 8.4% still held in the capital of Piazzetta Cuccia for 785 million, equal to 10.53 euros per share (against a carrying amount of 9.89 euros). The sale comes after those of Pioneer, Bank Pekao and FinecoBank and further redesigns the perimeter of activity of a bank that Mustier wants to equip with holding to which they will report foreign operations but which will be based in Italy and will not be listed.

After the announcement among Italian analysts, a question immediately arose, which in fact was put to the same Mustier in the conference call commenting on the results for the first nine months: will the same fate touch the 40.95% stake in the capital of the Turkish institute Yapi Kredi? The hypothesis is not so remote, given that a few weeks ago Unicredit had made it known that it had started discussions with the Koch family aimed at review terms of the syndicate agreement that today binds 80% of Yapi Kredi.

Mustier did not respond directly, merely reiterating that the group is currently present in 14 countries and “for different aspects we consider all those in which we work to be strategic. We are happy to be there ”(in Turkey) the manager concluded, but he does not seem to have convinced the analysts, still convinced that the group can announce even before the presentation of the new strategic plan "Team23" (expected December 3) not only the dissolution of the agreements on which the governance of the Turkish bank is based, but also the total sale of the participation.

If in the case of the supplies so far realized Mustier has on one side made cash by strengthening the capital requirements of Unicredit to allow the bank to continue the derisking and put hay in the farmhouse in the face of any new system shocks, on the other hand renounced the positive contribution to revenues and profits given by still interesting activities. But in the case of an exit from Turkey the advantages could be higher than the waivers.

When in 2005 an agreement was reached between the Italian group and Koc Group (the largest Turkish holding that belongs to the family of the same name that operates from cars to energy, from construction to financial services) for joint control of Yapi Kredi, at the head of the Italian bank there was still Alessandro Profumo, the acquisition of the German HVB and Austrian waterfall Bank Austria Creditanstalt was yet to be completed (it was concluded on November 24th of that year) and i negotiations between Ankara and Brussels for Turkey's accession to the EU were at the starting blocks (they started on October 3rd).

Acquired on the basis of a 100% valuation of 2.05 billion (to which must be added the 656 million of last year's recapitalization), Yapi Kredi's book value was around 2.5 billion euros in mid-2018 in front of one capitalization of only 1.5 billion, while today it capitalizes on the stock exchange the equivalent of over 3.3 billion euros. The release of Unicredit could therefore take place without damage to the accounts, eliminating at the same time exposure to risk linked to the very volatile performance of the Turkish lira (which last year led to a devaluation of 846 million euros in the Italian bank's balance sheet).

Getting rid of Yapi Kredi would also allow Unicredit to raise Cet1 (12.6% at the end of September) by about 30 basis points, releasing the institution from an economy that according to the International Monetary Fund could see GDP fall by 2.5% this year in front of uinflation of 17.5% and one unemployment that at the end of 2018 was officially still 12.7%. Not to mention that 2020 promises to be equally problematic for Ankara, which will see expiring 170 billion dollars of foreign debt, which will have to be renewed to prevent the country from falling into recession even more than it is at the moment.

Redefined industrial perimeter and thoroughly cleaned the Mustier balance sheet in addition to trying to further strengthen profitability in Italy could finally find the space to look at that "cross-border" merger towards France (suggestion remains an integration with Societe Generale, 24.25 billion of capitalization) or of Germany (perhaps returning to do advances to Commerzbank, 7.25 billion in capitalization). Hypothesis that Mustier continues to deny, even today in call: although Europe has "need bigger banks" the manager does not see acquisitions "at this time" among other things because of the low institutional ratings and gods capital requirements that would be required in the event of mergers.

Thus takes the alternative hypothesis of a share buyback: "We are open to the possibility" – admitted Mustier in the conference call underlining how "what works very, very well is to buy back shares at a discount on the tangible equity", especially given that contact with the European Central Bank has emerged, he added the banker, who the regulator would be willing to authorize buyback when a bank has sufficient capital.

As it happens, Unicredit's tangible equity at the end of June was equal to 43.9 billion, against the 28.5 billion that Unicredit capitalizes on the stock exchange, while the CET1 (the best quality capital) was already 12.6% at the end of September, with a Npe ratio (ratio between non-performing loans and loans) now down to 5.7%, the best among Italian banks, compared to 15% that Mustier had found at his arrival at the top of the group.

Despite the address announced by the banker, the market, some analysts note, continues to bet on the announcement of a merger scored after having polished and prepared the bank to play the role of predator. With a blitz, just like done with Mediobanca or Fineco, in which it seems that the French banker before saying goodbye to the bank of Foti selling the last 18.3% did not even notify the Ceo.