Turkey’s Finance Minister said the government wants more foreign lenders to apply for operating licenses as the country’s pool of potential bank acquisition targets shrinks.
“We’re interested in encouraging new entrants,” Mehmet Simsek said at a conference in Istanbul yesterday. “We will look at new applications because the more competition and innovation, the better for the Turkish corporate sector.”
(For more coverage on M&A in Turkey, see 10 Emerging Markets to Watch: Turkey.)
The focus on licenses comes after Industrial & Commercial Bank of China Ltd. announced last month that it was buying Tekstilbank AS and Qatar Islamic Bank said on March 26 that was nearing the end of exclusive talks to buy a stake in Asya Katilim Bankasi AS.
While the acquisition field narrows, Turkey’s regulator said it will look favorably on applications for banking licenses as the government encourages foreign investment. Annual average credit growth of 28 percent in the four years through 2013 is attracting interest from “many” overseas banks, Mukim Oztekin, head of the Istanbul-based banking regulator, said in an April 24 interview.
“We know there are a couple waiting in line,” said Metin Esendal, vice president of research at Oyak Securities in Istanbul. “We could see an increase in new licenses soon.”
Lebanon’s Bank Audi was granted the first commercial banking license in more than a decade in 2012, and trades under the name Odea Bank AS. Applicants for a license must have at least $300 million of paid-in capital.
Oztekin said two unsuccessful applications by Iranian companies had lacked documentation.
While political instability has increased amid a corruption probe that embroiled Prime Minister Recep Tayyip Erdogan’s government, foreign investors are still being lured by the country’s growth potential.
ICBC said last month that it will buy all of GSD Holding AS’s 76% stake in Tekstilbank AS for $316 million, and make a tender offer for the remaining shares of the Istanbul-based lender. Commercial Bank of Qatar agreed to acquire 71 percent of Alternatifbank AS in March 2013.
The scope for further acquisitions is limited, according to Haydar Acun, an asset manager at Sardis Turkish equity fund, who cites Sekerbank and Finansbank as two possibilities.
Sekerbank, founded in the 1950s to extend loans to sugar beet producers, has a market value of about 1.94 billion liras ($924 million). The lender is 34 percent owned by an employee fund, with another 34 percent belonging Kazakhstan’s Samruk- Kazyna JSC and its BTA Bank JSC unit.
Sekerbank declined to comment on the possibility of a sale.
National Bank of Greece agreed with the European Commission to sell part of its controlling stake in Finansbank AS by the end of 2017, Athens-based Kathimerini newspaper reported in October. It acquired Turkey’s seventh-biggest bank by market value in 2006.
The Greek bank’s capital raising plans include “offerings of international core banking assets,” the lender said on March 20.
Turkey’s biggest banks are the most appealing to investors, said Ercan Uysal, a partner at Integras research firm in Istanbul.
“Why would you buy a medium sized bank in Turkey while scale has become the most important factor?” he said in an e- mail. “The next round of M&A action will be among the existing banks, as consolidation seems inevitable.”
Spain’s Banco Bilbao Vizcaya Argentaria SA, which acquired a 25 percent stake in Garanti Bank, Turkey’s biggest lender, in 2011, is upbeat about the outlook.
“Despite the political instability we’ve seen in Turkey in the first part of this year and in the end of 2013, the macro prospects are good,” BBVA President Angel Cano Fernandez said on April 30. “We’re talking about enormous potential, given the young population, the projected growth of the economy and the fact that there’s a long way to go with regard to banking the unbanked.”
The ICBC acquisition brings the value of deals targeting Turkish lenders to $315 million this year, compared with $457 million last year, according to data compiled by Bloomberg.
Total Turkish loans were equivalent to 55 percent of GDP in 2012, according to Bloomberg Industries analyst Tomasz Noetzel. That compares with 75 percent for the so-called BRIC economies of Brazil, Russia, India and China, “implying room for further expansion,” he said.