Citigroup's decision to reduce its stake in Akbank from 20 percent to 10 percent was part of a move to prepare for Basel III rules and technical reasons related to Citibank, the Turkish lender said in a statement late on Friday.
"Citigroup made the decision to reduce its stake in our bank as a preparation for the Basel III rules. Citigroup's decision is only due to Basel III rules and based on technical reasons of concern to Citigroup," it said in a statement to the Istanbul Stock Exchange.
"The changes that our bank's partnership structure will go through have no effect on our bank's financial strength or management and will cause no changes on the profitable growth strategies of our bank," Akbank said. The US Federal Reserve announced in December that it would implement virtually all of the Basel III capital rules, a global accord on banking that discourages large holdings by banks in other financial institutions.
Announcing plans to trim its stake, first purchased in January 2007, Citigroup said the current carrying value of equity method investment n Akban is $3,4 billion. Citigroup said it expects to record an impairment charge related to the total investment in Akbank amounting to about $1.1 billion pre-tax. It also said hedging costs and translation losses reflected in other comprehensive income would total approximately $1.0 billion. The impairment charge of $1.1 billion will be recorded in first quarter 2012, Citigroup said.
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