MADRID/ISTANBUL: Spanish bank BBVA is in advanced talks to raise its stake in Garanti , one of Turkey’s biggest lenders, in a deal that would give it control of the board as it pursues its strategy of overseas expansion.
The deal would see BBVA, which currently owns 25 percent of Garanti, acquire a 14.89 percent stake from Turkish conglomerate Dogus Holding, to raise its total holding to almost 40 percent.
The acquisition, valued at around ¤2bn ($2.50bn) at Garanti’s current share price, would further bolster the Spanish bank’s international footprint, which has helped it weather the worst economic crisis in decades in its home country over the past five years.
Spanish banks are seeing the first signs of a recovery — but tepid lending levels and ongoing efforts to clean up their balance sheets after a real estate crash left them crippled with bad debt is leading them to seek new pockets of growth abroad.
In Turkey, though government measures to cut the current account deficit and cool the economy have hit banks’ margins, most have continued to post profits. And there is room for growth as there are millions of people without bank accounts.
BBVA, which makes most of its profit outside its home market, said in March it would continue to bet strongly on Turkey even amid political uncertainty in the country at the time.
Garanti has been a bright spot for Spain’s second-biggest bank this year. BBVA’s net profit for the first nine months fell 37 percent to ¤1.93bn — but Garanti’s contribution of ¤235m represented a rise of 20 percent.
Dogus, whose interests range from media and restaurants to ports, has been expanding in sectors including hospitality in recent years but has so far not commented on why it would want to reduce its stake in Garanti.
BBVA said that under Turkish law it would not be forced to make a full takeover offer for Garanti, which has a market value of around $16.6bn.
However, increasing its stake would trigger a clause in its shareholders pact with Dogus, giving it control over the 10-strong board. Each currently appoints four representatives and must agree on naming a chief executive, but the clause would allow BBVA to name seven board members.
The deal would leave BBVA with a 39.9 percent stake. Dogus’ stake would remain above 10 percent, sources close to the matter said. They added that Garanti’s Chairman Ferit Sahenk — who is also Dogus chairman — and Chief Executive Ergun Ozen would stay on.
BBVA, which acquired 24.9 percent of Garanti in 2010 with funding from a ¤5.1 bn rights issue, did not say how it plans to finance the purchase but several analysts said they expected the lender to carry out a capital increase.
“In this case, we expect a negative impact on the stock, given that at first glance the deal is expensive in terms of capital,” Sabadell said in an investor note.
Credit Suisse analysts calculated a negative impact of around 40 basis points for BBVA’s fully-loaded core tier one capital ratio — a measure of a bank’s financial strength. They also said the acquisition would boost earnings by ¤200m a year.
“Financially, earnings are boosted at the expense of capital consumption, with the bank’s solvency position post Garanti/Catalunya Banc’s deals likely to raise some question marks,” they said in a note to clients.
BBVA, which earlier this year bought bailed-out lender Catalunya Banc for up to¤1.2bn, reported an excess of capital of over ¤13bn under an adverse stress test scenario in a health check of European banks.
Shares in Garanti were up 1.81 percent at 1331 GMT, while BBVA was down 0.07 percent.
Reuters
