Sberbank and Dexia signed the sale agreement today in Istanbul, where Denizbank is based, Dexia said in a filing with the Istanbul Stock Exchange. The sale is expected to be completed in the fourth quarter after regulatory approvals and the price may increase to as much as 7.09 billion liras, or 3.09 billion euros ($3.85 billion) at an exchange rate of 2.293, depending on changes to asset value, it said.
Sberbank is the first Russian lender to buy a bank in Turkey, joining HSBC Holdings Plc (HSBA), UniCredit SpA (UCG) and Citigroup Inc. (C) in a country where the economy expanded 8.5 percent last year. The deal would be the largest in eastern Europe, the Middle East and Africa this year and the biggest in Turkey since Banco Bilbao Vizcaya Argentaria SA (BBVA) bought 24.9 percent of Turkiye Garanti Bankasi AS (GARAN) for $5.8 billion in March last year.
“Penetration level in the Turkish banking sector is relatively low and the market has great potential for growth,” German Gref, Sberbank’s chief executive officer and chairman of the management board, told reporters at a news conference in Istanbul today. Turkey will be the most attractive market in Europe over the next 15 years, he said.
Sberbank is seeking growth outside of the former Soviet Union as some western European lenders sell their subsidiaries in Eastern Europe to comply with capital rules or state aid conditions. It bought most of Oesterreichische Volksbanken AG’s (VBPS) eastern European business for 505 million euros in February as a platform for expansion in the region.
“Turkey’s lending growth was above 30 percent last year and loans/GDP was around 50 percent versus Russia’s 39 percent but we see this as still underpenetrated with further room for growth,” Leonid Slipchenko, senior analyst at UralSib Financial Corp. in Moscow, said in an e-mailed report today.
The sale includes Denizbank’s Austrian and Russian units, Dexia said in the statement.
The sale price is 1.33 times Denizbank’s book value of 4.86 billion liras at the end of the first quarter, according to data compiled by Bloomberg. Denizbank’s shares traded at 1.85 times book value today.
Denizbank jumped 5.5 percent to 12.4 liras at 4:00 p.m. in Istanbul. Sberbank dropped 2.8 percent to 81.1 rubles ($2.5) in Moscow. Dexia gained 6.7 percent to 16 euro cents in Brussels.
Sberbank will retain the existing Denizbank staff, including the chief executive Hakan Ates, and improve their remuneration terms, Gref said.
Net income at Denizbank more than tripled to 423.1 million liras in the first quarter from a year ago, the bank said on May 8. The lender had 47.6 billion liras of assets at the end of May, 32.5 billion liras of loans and 30 billion liras of deposits on a consolidated basis, Ates said at the news conference.
Profit in Turkey’s banking industry climbed 11 percent to 7.66 billion liras in the first four months from the same period of last year, the banking regulator in Ankara said on June 6.
Sberbank has stopped acquisitions “for now” after the Denizbank purchase, which was the biggest for the Moscow-based bank in recent years, Gref said. “We now want to focus on integrating our operations.‘‘
Sberbank will grow organically and turn Denizbank into an innovation center for Europe, he said.
Dexia, based in Brussels and Paris, may have a loss of as much as 700 million euros on a consolidated basis on the sale of Denizbank, depending on how much the lira appreciates against the euro from 2.37 used in the calculation of the loss, Dexia chief executive Pierre Mariani said at same the news conference. The lira strengthened 0.5 percent to 2.2843 per euro at 2:38 p.m. in Istanbul.
‘‘On a solo basis Denizbank’s value is 2.8 billion euros in our books and we are neutral,’’ Mariani said.
Dexia bought Denizbank in 2006 at a price to book multiple of 4.62 compared with 1.33 in its sale, Mariani said in an interview after the news conference. Dexia then paid $3.25 billion to Turkish businessman Ahmet Nazif Zorlu and minority shareholders for a total 96 percent stake in the Istanbul-based lender.
Turkiye Garanti, the biggest listed bank by market value in Turkey, trades at 1.39 times book value. Akbank TAS (AKBNK), part-owned by Citigroup Inc., has a price-to-book ratio of 1.24. Turkiye Is Bankasi (ISATR) AS, the country’s biggest bank by assets, trades at 0.99 times book.
Dexia put Denizbank up for sale as part of a rescue plan imposed by the French and Belgian governments when the debt crisis eroded its ability to obtain funding. The Denizbank sale would have a positive impact on Dexia’s creditworthiness, Moody’s Investors Service said May 28.
Dexia will improve its capital adequacy ratio, or Tier 1 ratio, by four percentage points to five percentage points after the Denizbank sale, Mariani said.
Sberbank entered into exclusive negotiations with Dexia on Denizbank on May 24. Sberbank’s advisers were Deutsche Bank AG, Rothschild and Troika Dialog, while Dexia’s adviser was Bank of America Corp.
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