Oxford Business Group
Turkey : Banking Consolidation  

06/2007  
Unrivalled among the large-cap companies on the Istanbul Stock Exchange, Akbank draws both enthusiasm and scrutiny from investors. Can the bank's already impressive profits keep up with its break-neck growth? Amid a competitive field of mixed results and low profits after a tough year, Akbank's 2006 net income of TL1.6bn ($7.5m) and return on equity of 24.4% indicate that the company is more than up to the challenge.

Taking into account its vast size, Akbank had to carefully weigh a partnership strategy to supercharge growth and keep up with the industry, which has seen hectic buying by foreign investors over the past three years. Nearing the end of this merger and acquisition (M) phase, Akbank completed an agreement whereby Citigroup would acquire a 20% equity stake in the company for $3.1bn in January 2007.

The bank's market capitalisation exceeded $15bn in 2006 and should continue to top the market as a result of capital increases. The best known of these came through Citigroup's investment, of which 11.67% was in shares purchased from Sabanci Holding and Sabanci family members, and 8.33% was a capital increase that brought total equity to about TL9bn ($6.7bn).

Analysts were surprised at the TL9.5bn ($7.1bn) Citigroup paid for its Akbank shares at a price-to-book value ratio of 3.59, an unusually high amount. While the M environment may be responsible for inflating prices, management believes the price was a sign of the uniqueness of the partnership opportunity.

"Considering Citigroup's size and prestige going into the Turkish market, as well as Akbank's presence, the price is well justified," said Suzan Sabanci Dinçer, managing director of Akbank.

It is very difficult for banks in Turkey to grow organically. Banking is exceptionally competitive in terms of technology, human resources and distribution networks. Akbank was the right partner, given its extensive distribution network.

It is unlikely in the short term that Citigroup will increase its stake. The partnership agreement limits Citigroup to purchasing shares solely from Sabanci Holding and not Sabanci family members, who still control approximately 14% of the company's shares. With strong deposit growth and new capital from Citigroup, Akbank must now decide how to reinvest.

Analysts believe a logical path would be for the bank to compete on price to expand its loan-to-asset ratio, up from 43% in 2005 to 50% in 2006. The market has anticipated that the bank will move to acquire a smaller peer, consolidating the domestic industry along the lines of the Koç Bank and Yapi Kredi Bank merger.

Swift and aggressive acquisitions by foreign banks in 2005 and 2006 have left very few attractive targets for such a large bank.

"For us to go ahead and buy an entity that does not have the same organic growth does not make a lot of sense," Sabanci said. "It has to really give us an additional market share. Acquisitions take a lot of time in terms of IT and human resources. They take a lot of management attention."

It is this calculated attitude that has put Akbank at the forefront of banks rumoured to be interested in buying Halkbank, which is nearing the end of a tortuous privatisation process with a 25% initial public offering (IPO) planned for the second half of 2007, to be followed by a sale of the remaining 75% at a later date.

Unlike critics of privatisation, Sabanci concentrates on the positive impact of the IPO, which she said could forecast a rational price for the controlling balance of the company. She remains uncertain that the benefit of Halkbank's significant market share actually outweigh its institutional legacy as a state-owned bank.

"50% of the bank's assets are government bonds and the remainder are loans. We are after a banking business, not a government bond business," Sabanci said. "Halkbank has nearly 11,000 employees. That is a great social responsibility for the taker. Taking on Halkbank is very complicated and could be potentially damaging."

As for the rest of the sector, the best focus going forward may simply be to increase the number of branches to boost client contact in the retail segment, which promises the best margins in the medium term.

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Conference
4th Turkey, Caspian and Black Sea Banking Finance and Investment Summit, Banktech Showcase  

11/2006
Oxford Business Group is delighted to announce our media partnership with the 4th Turkey, Caspian and Black Sea Banking Finance and Investment Summit, Banktech Showcase on November 15-16, 2006 at the Marmara Hotel, Istanbul.

Through the process of economic reform, numerous banks in the region are transforming by merging and welcoming foreign investment. With the rise in financial activity and a fast growing industrial and economic base, the Caspian and Black Sea countries have attracted the attention of many foreign leading instutions as they go through critical change.

To catch up with regional trends and improvements in services, while gaining exposure to vital market information, and meeting regional country ministries and key contacts, industry insiders are going to attend the unique Turkey, Caspian and Black Sea Banking Finance and Investment Summit, Banktech Showcase on November 15-16, 2006 at the Marmara Hotel, Istanbul.

The dramatic change that these countries are experiencing will be the basis for topics of discussion at the conference. The economy and finance ministries of countries in the region and leading institutions such as the IMF, EBRD, World Bank and BSEC together with professionals from all over the world will participate in the summit.

At this two day conference, along side finance and economic subjects, participants will be able to learn about investment opportunies and the capacity of the market directly from the ministries. Participants will aslo be able to discuss or meet with them at round table meetings.

Take this opportunity to be at this productive platform or go one step further and present the goals of your company as a sponsor.

At the same time, the only Banking Technologies and Equipment Banktech Showcase will be held to get technology and equipment companies together to discuss and exchange ideas while representing their products and/or services to participants and leading international media.

Due to limited space we kindly suggest that you reserve your space soon.
 
In order to register or to receive more information, please contact:
Ms.Gunay Arslan -  ITE Group Plc./ Turkey
Tel: +90 212 291 83 10 (ext165)
banking@ite-turkey.com

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The World Bank approved today a Euro 150 Million (approximately US$190 million) Access to Finance for Small and Medium Enterprises Project for Turkey

06/2006
Project - US$190 million to increase opportunities for Small and Medium Enterprises in Turkey to obtain credit, while contributing to their growth. By providing these enterprises with access to credit, the project will help increase their sales and productivity. The project will also provide credit to regions in the east, southeast, and center of the country, where credit is less developed. This will help ensure that these areas are not left behind and that the credit and productivity gaps between more and less advanced regions are closed.

 
The Access to Finance for Small and Medium Enterprises Project’s main development objective is to increase opportunities for Small and Medium Enterprises (SMEs) in Turkey to obtain credit, while contributing to their growth. By providing SMEs with access to credit, the project will help increase the sales and productivity of Turkish SMEs. The project will also provide credit to regions in the east, southeast, and center of the country, where credit is less developed. This will help ensure that these areas are not left behind and that the credit and productivity gaps between more and less advanced regions are closed.
 
The project will finance SMEs under two credit lines:

•  A credit line of Euro 100 million to be intermediated by Türkiye Sınai Kalkınma Bankası (TSKB) through retail banks and leasing companies, which will in turn on-lend to SMEs; and
• a credit line of Euro 50 million to be intermediated by Halkbank, which will provide credit directly to SMEs.

On the occasion of the loan approval of the Project, Andrew Vorkink, Country Director for Turkey stated: “SME development is one the most important parts of the Turkish economy with the objective to improve the productivity of the private sector and enhance the country’s competitiveness.
 
“Turkish SMEs can be a powerful engine for sustaining Turkey’s growth, creating employment, maintaining social stability and integrating the Turkish productive sector into the EU and the global economy. SMEs have, however, been underserved by credit and thus have been held back from reaching their potential. Through this loan this situation should be improved, including in the east and southeast of the country.”
 
The lending instrument for the Access for Small and Medium Enterprises Project is a Fixed Spread Loan (FSL) with a 15-year maturity and a 5-year grace period, in Euro with an innovative embedded option to convert into New Turkish Liras if requested by the borrowers.
 
For more information about the World Bank’s work in Turkey, visit: www.worldbank.org.tr.  
For more information about this project, visit: /www.worldbank.org/projects

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Turkey: a book about Economic Reform and Accession to the European Union

07/2005
What requirements must Turkey—the largest country among the candidate and accession countries—meet to join the European Union? What progress has been made toward meeting them?

This timely volume analyzes the economic challenges confronting Turkey in its quest to accede to the European Union (EU). It focuses on the extent to which Turkey is ready to join the Single Market, comply with the EU’s body of economic regulations and directives, the Acquis Communautaire, and meet the Maastricht criteria for fiscal, monetary, and exchange rate policies.

This book also provides an assessment of Turkey’s national program to meet the accession requirements. It describes briefly what Turkey needs to achieve on the economic policy front to satisfy the conditions for accession, the progress to date, and the likely consequences of implementing the full body of EU requirements.

The book is divided into four parts :

• An analysis of the macroeconomic policies for EU accession
• An analysis of the effects of integration on key sectors: agriculture; manufacturing; services industries, including banking, telecommunications, transportation, and natural gas; and network industries
• An exploration of key economic policy challenges, including labor market regulation, foreign direct investment challenges, and the costs and benefits of meeting the EU environmental Acquis
• The quantification of the impact of EU accession and consideration of the welfare effects of integration

While the focus is on the specific situation of Turkey, the subject will be of value to all researchers with an interest in the challenges of deeper integration through regional agreements.

Edited by Bernard M. Hoekman , Subidey Togan
Price: $ 35.00
English Paperback 400 pages 7.75 x 10.75
Published June 2005

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Finance & banques en Turquie (2003)

Le secteur bancaire est caractérisé par sa taille relativement modeste eu égard au poids de l’économie nationale, le total des actifs ne représentent que 65 % du PNB en 2002 (Soit un quart de la moyenne européenne. Source DREE), par une forte présence des établissements publics (33 % des actifs), et par la très faible part des sociétés étrangères (3 % des actifs). 55 banques étaient recensées en 2002 dans le pays. La première d’entre elles est la banque publique de l’agriculture, la Ziraat Bankasi (22 milliards de dollars d’actifs), devant trois banques privées.
Après la crise bancaire de l’an 2000 et le programme de restructurations mené en 2001, le paysage bancaire turc demeure en mutation. Après des audits sur l’état de leurs comptes, 20 établissements sont sortis du système. D’autres banques ont été placées sous le contrôle du Saving and Development Insurance Fund (SDIF ou Fonds de garantie de l’épargne et des dépôts) à l’instar de Pamuk Bank. D’autres doivent être en partie cédées (40 % de Yapi Kredit) ou recapitalisée, avec ou sans l’arrivée d’investisseurs étrangers comme ce fut le cas dans le passé avec les opérations de HSBC (rachat de Demirbank) et de Novabank (rachat de Sitebank). Au final, l’objectif de la réforme est de doter la Turquie d’un système bancaire plus fort dans lequel une dizaine d’établissements puissants, transparents et répondant aux standards internationaux pourront remplir leur rôle dans l’économie nationale.
A côté du SDIF, le secteur bancaire turc est placé sous le contrôle d’une autorité indépendante de régulation nommée l’Agence de régulation et de supervision bancaire (BBDK en turc). C’est elle a priori qui devrait superviser le programme de privatisations des grandes banques publiques. Pour soutenir ces opérations, les autorités turques peuvent s’appuyer sur une place financière moderne. La bourse d’Istanbul est en effet l’une des bourses les plus importantes des pays émergents et elle se verrait bien accueillir quelques fleurons bancaires du pays.

Jean-François Eyraud

Information transmise gracieusement par le Réseau ANIMA. www.animaweb.org

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