Sale of Credit Europe Bank could be early bird of Turkish capital fleeing Russia

By bne IntelliNews February 9, 2016

The rapid deterioration of Russian-Turkish relations is forcing Turkish bank owners to cut their presence in Russia or even quit the market, Kommersant daily reported on February 9, adding that the country's largest lender with Turkish capital, Credit Europe Bank is up for sale.

Relations with Turkey – one of Russia's largest trading partners and a major buyer of Russian gas – "have hit their lowest point in decades", Kremlin press secretary Dmitry Peskov said on February 9, while adding that "it was not Russia's fault". Ankara's air force shot down a Russian bomber by the border with Syria last November, drawing an angry backlash by Moscow with economic sanctions, and prompting Turkish businesses to scale back their Russian presence.

According to Kommersant sources, Morgan Stanley has since mid-January been seeking a buyer for Credit Europe, the final beneficiary of which is Turkish businessman Husnu Mustafa Ozyegin.

The bank is reportedly due to be sold at a modest discount of about RUB20bn to its capital, the main reason being the breakdown of Russian-Turkish ties and stagnation of Russia's economy.

Credit Europe is the largest bank in Russia controlled by Turkish capital, operating in the country since 1994 when it was opened by Ozyegin's FIBA Holding.

The banking sector is not specifically affected by the sanctions Russia introduced against Turkey after the downing of the bomber incident, which Russian President Vladimir Putin called a "stab in the back".

Nevertheless, political risks are pressuring the bank and the corporate loan portfolio, which largely consists of Turkish clients operating in Russia.

Dmitry Vasiliev of Fitch Ratings told Kommersant that part of the corporate Turkish client portfolio was already transferred by Credit Europe to the mother bank in the Netherlands.

As the corporate loan portfolio is challenged, the bank's most attractive asset is its exclusive credit agreements with retail chains Auchan and Ikano Group, which operates Ikea furniture hypermarket chains, argues analyst Dmitry Zhizdyuk of Alfa Bank.

Other Turkish banks operating in Russia (Ishbank, Ziraat Bank, Yapi Credit Bank, Garanti Bank, and Prokommerz Bank) did not respond to inquiries by the Russian newspaper about a possible change to their ownership too.

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