Denizbank closing in on Citi's Turkish retail arm

By bne IntelliNews March 12, 2013

bne -

Reflecting the ongoing shift of balance between developed and emerging markets, Denizbank, the Turkish lender bought by Russian state giant Sberbank last year, confirmed on March 11 recent reports that it is in exclusive talks to buy Citigroup's Turkish retail banking unit.

Denizbank, which Sberbank bought in a TRY6.5bn deal in June from Belgium's struggling Dexia, made the statement to the Istanbul Stock Exchange, without giving further details, reports Dow Jones.

Both Citi and Denizbank declined to comment on reports on March 8 that a deal is close. "They are firstly going to sign an exclusivity agreement with Denizbank and the final agreement is expected to be announced within a month," an unnamed source told Reuters at the time.

As part of a global cost cutting programme, the US bank announced in December that it planned to sell or scale back consumer operations in Turkey, Pakistan, Romania, Uruguay and Paraguay. Commercial and corporate-banking services in Turkey will continue, Citigroup said.

Sberbank's purchase of Denizbank was a long-winded affair, despite the fact that the Russian giant had identified Turkey as one of its two prime target markets for international expansion. It's now looking to expand its footprint in what is seen as Europe's - and one of the world's - most promising banking markets.

Although the economy cooled to grow around 3% last year after 8.5% growth in 2011, Turkish consumer loan growth is already growing by leaps and bounds again, despite the government and Central Bank of Turkey doing their best to rein it in, due to worries over the current account deficit. The central bank has repeatedly voiced its commitment to keep loan growth to around 15% in 2013, but is expected to need to extend recent policy moves to try to keep a lid on retail borrowing.

A deal for the Citibank asset would offer Denizbank a leg up in taking advantage, according to analysts at VTB Capital, who note that an acquisition "is likely to be supportive for the development of Denizbank's retail business and its NIM. In particular, they write that "the purchase would allow Denizbank to grow its credit card business by more than 50%."

The exit of the US bank from the retail segment, and probable expansion by the Russian bank, illustrates the differing state of the banking sectors in the developed and developing world, as does the list of potential suitors for the Citibank unit. The absence of the Eurozone's large CEE specialists in a chase that's essentially on their doorstep is also telling. Instead, Sberbank is reported to have been racing against both large Turkish lenders such as Garanti and Fibabanka, as well as potential bidders from the Middle East and Arab countries.

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