David O'Byrne in Istanbul -

Turkey's state-owned high street bank Turkiye Halk Bankasi is to sell its insurance subsidiary Halk Sigorta and its life insurance and pensions subsidiary Halk Hayat ve Emeklilik, the company announced late on July 22 in a disclosure to the Istanbul Stock Exchange BIST.

According to the disclosure, the board of Halkbank, as the lender is known, has taken the decision to sell the two subsidiaries either as a whole or in part through Turkey's Privatization Administration (OIB), however no timetable for the planned sale was suggested. The move has long been expected ahead of the long-planned yet much-postponed final privatization of Halkbank itself.

"For the insurance business this makes perfect sense – the market is saturated and the big listed banks have all disposed of their insurance arms," says Recep Demir, banking analyst at Turkish brokerage Garanti Yatirim.

According to data published by Turkey's insurance association Turkiye Sigorta Birligi, over the first six months of 2014 Halk Sigorta was in receipt of 2.26% of the TRY13.27bn ($6bn) in insurance premiums collected in Turkey, making the company the 14th biggest by premiums over the period, down from being the 13th biggest over the same period in 2013.

"However, for the pensions business it could perhaps be a bit early," says Demir, pointing out that since 2013 the government has been incentivizing personal pensions and that the market is still growing strongly.

Under a new pensions law that came into force in January 2013, the state matches 25% of pension contributions up to a maximum of TRY978, replacing a previous system of tax deductions for pensions contributions, and which is contributing to a rapid growth in the sector.

Gold for oil scandal

Long tipped as a prime candidate for privatization, Halkbank was transferred to the OIB in 2007 and 24.98% of the bank's equity was sold through a public offering.

However the effects of the 2008 crisis on global appetite for banking shares meant that it was not until 2012 that a second offering was made, with a further 20.8% being sold for $2.5bn, reducing the state's stake to 51%.

Although in theory the government still plans to transfer the bank to the private sector, recent events have raised questions as to whether efforts to fully privatise the bank will continue.

In December, the bank became embroiled in a corruption probe that resulted in the arrest of then CEO Suleyman Aslan and an Iranian-Azeri businessman Reza Zarrab, who is alleged to have masterminded the transfer of large volumes of gold bullion from Turkey to Iran as payment for crude oil and natural gas imported from Iran by Turkish oil refiner Tupras and state gas importer Botas, respectively.

The US and EU sanctions regime against Iran that was introduced in 2012 effectively isolated the Iranian banking system and made it impossible for Iran to repatriate revenues from oil and gas sales. The "gold for oil scheme" allegedly operated by Zarrab circumvented the sanctions by using revenue held by Iran at Halkbank to buy gold bullion, which was then shipped by plane to Tehran.

Although Zarrab and Aslan were arrested as part of the probe, both were subsequently released and no charges have been made against them. A parliamentary enquiry into the trade has yet to be concluded, but is not expected to result in further legal action.

More recently, Halkbank has again become the subject of international scrutiny following the confirmation that it is being used to handle revenue from the sale of crude oil from the Kurdistan Region of Iraq transited to Turkey's Mediterranean oil port of Ceyhan.

The trade is subject to legal challenges by the Iraqi central government in Baghdad, which maintains that only its marketing body SOMO has the right to handle sales of crude from Iraq.