Spanish bank BBVA is now the leading shareholder in Garanti, Turkey’s largest bank in terms of market capitalization. After completing the transaction announced last November to acquire an additional 14.89% holding, the BBVA Group now owns to 39.90% of Garanti. Francisco González is in Istanbul due to the closing of the transaction and the appointment of the new Garanti CEO.
The total price paid by BBVA of the 14.89% stake amounts to 8.765 Turkish liras per share, amounting to approximately 5.481 billion Turkish liras (€1.854 billion). The sellers have already received the dividend disclosed by Garanti Bank on April 9, 2015 amounting to 0.135 Turkish liras per share. Therefore, as disclosed to the markets on November 19th, 2014, the total consideration received by the sellers amounts to 8.90 Turkish liras per share.
BBVA chairman Francisco González said, “This is an important day in BBVA’s history. After four years of excellent relations between the partners BBVA has become the leading shareholder in Garanti, Turkey’s best bank.”
“During our collaboration, we have closely witnessed the enthusiasm of a world banking giant like BBVA for Garanti , as well as its trust in our values, our corporate culture and our team who is passionately committed to its work,” added Ferit Sahenk, chairman of Garanti and the Dogus Group. This operation confirms the excellent relationship between the partners as well as the commitment of Dogus, which is one of the main Turkish business groups and the founder of Garanti. Dogus will retain the chairmanship of Garanti’s board of directors and still owns a 10 percent stake in Garanti.
Francisco González is in Istanbul due to the closing of the transaction and the appointment of the new Garanti CEO, Fuat Erbil. His appointment, which was ratified today by Garanti’s board, confirms the continuity of the company’s management and support for local talent. Until now Mr. Erbil was part of Garanti’s management team.
The new CEO is one of the seven directors to be appointed by BBVA in a board of ten members. Dogus remains as a shareholder and a principal partner – as established in last November’s agreement. Ergun Özen, chief executive officer until now, will continue as board director. The change of chief executive officer will be effective from September.
Closing of the operation
In accordance with the applicable accounting rules and as a consequence of the agreements reached, the BBVA Group shall measure at fair value its previously acquired stake in Garanti Bank (which amounts to 25.01% of its share capital). Such accounting impact does not translate into any additional cash outflow from BBVA. It will result in a one-off negative impact on the net attributable profit of the BBVA Group in the third quarter of 2015 of about €1.8 billion. Most of this impact is generated by the exchange rate differences due to the depreciation of the Turkish lira against the euro since the initial acquisition by BBVA of the 25.01% stake in Garanti Bank in 2011. These exchange rate differences are already registered as Other Comprehensive Income, deducting the stock shareholder’s equity of the BBVA Group.
In terms of capital, the acquisition will mean an estimated reduction of approximately 50 basis points in the Common Equity Tier 1 (fully loaded) ratio.
From here on BBVA will fully consolidate Garanti Bank in the financial statements of the Group. So far it has accounted for this business using the equity method.
Garanti is the top bank in Turkey by market capitalization (€11.1 billion) with about $100.9 billion in assets at the end of March. With consolidated data, it serves more than 13 million customers through an extensive retail network of more than 1,100 branches and over 4,400 ATMs. It is the top institution among private banks in Turkey in terms of mortgages, consumer finance, vehicle finance and credit card customers. Staff number over 22,700.
Leadership in technology is part of Garanti’s competitive edge. Its investment in technology, in-house developments, personalized customer solutions and the management’s driving emphasis on innovation have made it a pioneer in digital banking. At Garanti 91% of transactions are handled through digital channels. Garanti is the Turkish leader in mobile banking with a 30% market share and it holds a solid position in online banking with a 23% market share by volume of transactions.
Turkey’s population is more than 75 million and over half are less than 30 years old. BBVA Research puts the average annual growth of Turkey’s GDP at 4% for 2014-2024.
For Funds Society, Madrid