UniCredit will retain its 50 percent share of Turkey's Yapı Kredi among its core assets, the Italian banking giant said Monday, despite its recent decision to boost its capital and lower costs in the face of challenges in the EU banking sector.
After the bank announced last week that it would cut 11 percent of its workforce across its businesses in Europe and shutter 1,000 branches in Italy, the fate of its shares in Yapı Kredi, Turkey's fourth-largest lender, had come into question.
"Workforce redundancy is mainly affecting Western Europe while not affecting [the Central and Eastern Europe] CEE region, nor Turkey. No workforce reduction is mentioned in the CEE plans," said Gianni Papa, UniCredit's general manager, pointing to the plans in the bank's last strategic presentation.
Banks across Italy are struggling with expectations of low economic growth and pressure from European regulators to meet stricter capital standards.
Against that backdrop, UniCredit's €17.7 billion in bad loans is drawing scrutiny.
Despite its woes and efforts to shore up its reserves and boost profits by 2019, UniCredit excluded Turkey from its saving plans, indicating the country as a core part of the group.
Yapı Kredi, where UniCredit entered the Turkish banking sector in 2001 with equal shares as Turkey's Koc Financial Services, is the nation's fourth-largest private bank, with a 10 percent market share in terms of asset size as of March 2015.
UniCredit says now it is focused on profitability via efficiency gains and risk containment and is eager to develop digital banking in Turkey.
According to Koç Holding reports, in the first nine months of the year, Yapı Kredi continued to perform well in terms of profitability and maintained its capital, liquidity, and market share positions. In addition, its consolidated profit reached 2.36 billion liras ($800 million approximately), up 86 percent year-on-year, and the current market value of the bank is around $4.4 billion.
Uzeyir Doğan, research director for Gedik Investment, said that Yapı Kredi is among UniCredit's most valuable assets in terms of growth performance, profitability, and Turkey's economic outlook and so shedding its shares is not in the cards.