Qatar's CBQ kicks off expected Gulf rush into Turkish banking

By bne IntelliNews March 19, 2013

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Commercial Bank of Qatar (CBQ) announced on March 18 that it has agreed a deal to buy a 70.8% stake in Turkey's Alternatifbank from Anadolu Holding. The deal is the first in what analysts say could be a wave of investment from the Gulf into Turkish banks this year.

Qatar's third-largest bank by market value, CBQ began talks with Alternatif's parent over the lender in December, according to Reuters. The deal is initially valued at $460m (TRY836m), based on a book value of $328m at the end of last year. The final price will be two-times the Turkish lender's book value on June 30, 2013, CBQ said in its statement. That's higher than the 1.3x book value that Russia's Sberbank paid for Denizbank last year.

"As of 2012, Alternatifbank had a book value of TRY585.08m," reports Erste Bank, "with a [return on equity] of 13%. The bank ranked the 17th largest in Turkey, with a market share of 0.6% in loans and 0.5% in deposits. The bank has 63 branches and 1,230 employees and is mainly involved in corporate and commercial retail lending activities."

The acquisition is expected to be completed in the second half of this year after regulatory approvals, CBQ said in the statement. Alternatif is almost 96% owned by Anadolu Group, with 4.2% of shares publicly traded in Istanbul. The shares jumped 6% on the news, to leave the lender with a market capitalization of TRY1.1bn, according to Bloomberg.

Anadolu Endustri Holding, which holds a 77.7% stake in Alternatif, will retain 25% following the sale. No other group companies will retain a stake, Anadolu Group said in a statement to the Istanbul Stock Exchange. "The transaction is in line with Anadolu's strategy to focus its resources on its core businesses of food and beverages, power and automotive," Chairman Tuncay Ozilhan said.

New arrivals

With the Turkish banking market one of the most attractive in the world thanks to its rapid growth, lenders from across the world would like to grab a slice of the action. However, reflecting the shift of global economic might and the parlous state of the developed world's banks right now, it is those from emerging markets doing the running.

Russia's state-owned Sberbank bought Denizbank last year, and is now in talks to buy out the retail arm of Citigroup's Turkish unit as US giant retreats in a cost-cutting exercise. The Russian lender is reported to have beaten out local banks Garanti and Fibabanka, as well as potential bidders from the Middle East.

Arab states especially are now pushing hard to find a route into Turkey, with the government-led rise in Islamic finance, and Anakara's need to diversify its financing dependence away from Europe's shaky banks, helping promote their cause. Fitch Ratings said in a report released in January that it expects to see an upturn in M&A among mid-sized Turkish banks this year, noting that Qatari banks in particular are likely suspects to make acquisitions.

The country's biggest lender, the Qatar National Bank, expressed its interest in acquiring a Turkish bank early this year, Fitch analysts point out, suggesting that the interest from the Gulf "is likely to stem from the desire to diversify out of their home country's narrow economy, coupled with the lack of potential acquisitions in the Gulf region. They can make relatively large acquisitions abroad backed by supportive shareholders, including sovereign wealth funds."

The growth potential in a region that shares strong cultural values is also a clear enticement. CBQ already owns around 35% in National Bank of Oman and 40% in United Arab Bank. Chairman Abdullah Bin Khalifa al-Attiyah said: "Qatar and Turkey continue to strengthen their relationship, which will benefit the new partnership between Commercialbank and ABank, enabling both banks to continue to grow and thrive."

Meanwhile, managing director Hussain Al Fardan said in the statement: "ABank operates in a dynamic economy with good long-term growth prospects, in a country that is strategically and culturally aligned. We believe this represents the logical next step in the execution of our international expansion strategy."

While the Turkish regulator remains somewhat unwilling to hand out licences - Lebanon's Audi Bank became the first lender to obtain a Turkish banking license in more than a decade when it received regulatory approval last year, claims Reuters - acquisition remains the preferred avenue into the country. Hence the pricing on the deal, which at 2x the bank's book value is significantly above the 1.3x BV Sberbank paid Belgium's Dexia for Denizbank.

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