Citi sells 10% stake in Turkish bank for $1.15bn

Mar 05, 2015, 1:24 PM EST
Citibank in Sea Cliff NY, Jan 30, 2015
Steve Eichner/Getty Images

Citibank has sold its nearly 10% stake in Turkey’s Akbank for $1.15 billion. Bloomberg reports that Citigroup Inc. is ending its investment in Akbank TAS, Turkey’s second-largest bank by market value, at a loss of $800 million on the value of its 2007 purchase. The U.S.-based lender sold all of its remaining 9.9 percent holding in the Istanbul-based bank for $1.15 billion, it said in a statement on Thursday. The bank negotiated an early exit from a three-year lockup agreement it signed with Akbank’s main owner, Sabanci Holding, when it sold an almost equivalent stake for the same amount in 2012.

Reuters writes that the sale is Citi’s latest disposal of overseas assets to cut costs and boost capital. New York-based Citi has pared back internationally in recent years, pulling out of retail banking in Turkey and in long-established markets such as Japan. The U.S. bank did not disclose the buyer. Akbank's top shareholder, industrial conglomerate Sabanci Holdings, said it had waived its right of refusal to the stake, adding Citi's offer had been to a "large number" of potential buyers. Citi said it remained committed to Turkey, where it aims to increase corporate and commercial lending and employs more than 500 people.

Still, the sale comes at an inopportune time for Turkish banking, as overseas investors worry about increased political interference in the industry. Turkey has also been a tough market for foreign lenders, particularly in retail banking, where competition is stiff and local lenders already offer sophisticated services such as biometric ATMs and instant access to foreign currency accounts. HSBC said last month Turkey was one of four "problem" businesses that it was giving as little as a year to improve before considering more drastic turnaround measures.

“Timing is everything,” Isik Okte, investment strategist at TEB Invest in Istanbul, said in e-mailed comments on Thursday, according to Bloomberg. “It’s very unfortunate that Citi bought the Akbank stake in 2007, just before the worst global financial crisis since the Great Depression.” While Akbank’s shares have advanced almost 50 percent since the beginning of 2007, in dollar terms their value has fallen. Citigroup’s disposal came on a day the lira dropped to a record against the dollar -- a low breached again on Thursday. The lira has weakened almost 10 percent this year amid sustained criticism of the central bank by members of President Recep Tayyip Erdogan’s government.