BBVA bank takes big step into Turkish banking
Spain's second largest bank BBVA took an aggressive step into new territory Tuesday, snapping up a quarter of a top Turkish lender to gain a big foothold in a fast-expanding market.
BBVA said it agreed to pay 5.8 billion dollars (4.2 billion euros) for 24.89 percent of Garanti Bankasi, the biggest Turkish bank in terms of market value.
The move into Turkey follows a push abroad that initially focused on Latin America but which has since 2000 included forays into the United States and China.
"BBVA wants to be in markets with the best potential for growth and Turkey, through a leader bank like Garanti, is undoubtedly one of those," BBVA chairman Francisco Gonzalez said in a statement.
The Turkish economy posted spectacular growths of 11.7 and 10.3 percent in the first and second quarters respectively, putting the EU-hopeful country's recovery pace on a par with China and atop the Group of 20.
The Turkish banking sector weathered the global financial crisis largely unscathed, owing much to a drastic overhaul in the early 2000s under tight IMF-sponsored reforms.
Garanti Bankasi is the biggest Turkish bank in terms of market value and one of the country's three major banking groups. It is the second-biggest private bank in Turkey in terms of assets.
The bank, which employs 20,000 people, has activities in Turkey and Romania. On October 29, it was capitalised at 19 billion euros.
BBVA generated nearly half of its net attributable profit, 44.8 percent, during the first half in South America, Mexico and the United States, where it is mostly present in southern states with a large Latino population, up from 37.7 percent in 2004.
Spain could account for less than 10 percent of its total net profits within five years, down from roughly 30 percent currently, Gonzalez said.
"We will take advantage of the opportunities for growth that meet our goals. We don't know if we are going to carry out more operations because right now they are not on the table," he told reporters.
BBVA said it would raise capital of up to 5.06 billion euros to finance the investment in the Turkish bank.
Shares in BBVA opened down nearly 4.0 percent amid market concerns over the financing of the deal but the stock rebounded to close up 1.13 percent at 9.21 euros, in line with a gain of 1.06 percent of the Ibex-35 stock index.
"The deal is dilutive in terms of earnings per share and value. In the short term, it's going to have a negative impact. Strategically it makes sense, or it may make sense," Caja Madrid analyst Javier Bernat told Dow Jones Newswires.
BBVA is to acquire 6.3 percent of the capital in the Turkish bank from Dogus Holding for 2.06 billion dollars and a stake of 18.6 percent from US conglomerate General Electric (GE) for 3.78 billion dollars.
The deal, signed Monday, makes BBVA and Dogus, a large Turkish conglomerate with interests stretching from energy to carmaking, equal shareholders in the bank, which they will run jointly for five years.
BBVA and Dogus Holdings will each have 24.89 percent while 50.22 percent will be owned by other shareholders.
The stake held by GE, which now owns 20.85 percent, will fall to 2.25 percent.
Under the agreement, BBVA and Dogus Holding will have joint responsibility for managing the bank and have the same number of voting rights and seats on management boards, in the first instance.
In a second stage, BBVA could decide to increase its holding and would then have increased representation on the board.
The deal is subject to approval by competition authorities in Turkey and Spain and for the European Union. Spain is a member of the EU, Turkey is not.
© 2010 AFP