UBS eyes Turkish expansion amidst massive global cuts

By bne IntelliNews March 26, 2013

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UBS says it's looking to expand in Turkey as consumer credit growth there accelerates. Despite cutting back elsewhere as uncertainty prevails, the Swiss lender is joining emerging market giants in targeting the seductive Turkish banking market.

Speaking to Bloomberg in a recent interview, Gonca Gursoy Artunkal - CEO of the Turkish unit of UBS - said that while the Swiss bank is cutting about 10,000 jobs globally, it's planning to expand in Turkey as the nation's economic growth boosts demand for assets.

Ankara and the Central Bank of Turkey may be sweating on just how to hold back domestic demand, and credit growth that is exploding once more despite policy moves designed to hold it back, but the banks are rubbing their hands with glee at the prospect. The likelihood of resumed rapid growth - the economy swelled 8.5% in 2011 before slowing to around 3% last year - also has investment bankers at UBS also anticipating continued demand for Turkish debt and equities.

"We're working on hiring more for our investment banking team in Turkey," Artunkal said in a March 21 interview, without giving more details on the expansion. "We're also waiting for the detailed capital markets regulations to be published to see whether to start asset management operations." Turkey's Capital Markets Board is considering draft regulation on the structure of asset management companies, including introducing TRY10m ($5.49m) as a minimum for capital.

UBS employs 30 people in Turkey currently, and offers investment banking services such as debt capital markets, equities trading and research, as well as having a corporate advisory team focusing on M&A work for smaller transactions.

UBS' Turkey expansion plans follow the Swiss bank's announcement in October that it will cut about 16% of its workforce in the next three years and slim down investment banking. Tougher regulation and slower markets have left investment banks worldwide jostling for market share in recent years, with companies looking to shrink unprofitable areas.

However, Turkey's financial sector continues to hold one of the greatest appeals in the world, with large investors from other emerging markets in the region, as well as Russia, leading a rush for acquisitions and market share.

Last week, Commercial Bank of Qatar announced it has sealed a deal to buy a 70.8% stake in Alternatifbank at two-times the book value. That high price reminded investors of a Fitch report released in January that suggested 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.

Russia's state-owned Sberbank bought Denizbank last year, and is now in talks to buy out the local retail arm of US giant Citigroup as it retreats in a cost-cutting exercise. The Russian lender is reported to have beaten off local banks Garanti and Fibabanka, as well as potential bidders from the Middle East and Arab countries. Ernst & Young said in January it expects overall M&A in Turkey to rise to $25bn in 2013 from $23.2bn last year.

The CBT meets on March 26 for its monthly monetary policy meeting, and is expected to extend efforts to dampen demand for consumer credit. Credit growth currently sits around 19% year on year, despite the central bank's raise of reserve requirements, provoking worry over that the current account deficit, which Ankara managed to quash to around 7% of GDP last year, could threaten to return to the double digit figures seen at the end of 2011. Due to Turkey's dependence on Eurozone banks to cover much of the gap, the deficit is the major factor holding back the sovereign's international debt ratings.

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