Turkey Lender Breaks Off Takeover Talks With Bank Asya

Turkey’s largest state lender said nearly two weeks of informal talks to acquire Bank Asya (ASYAB) collapsed, depriving the bank of an avenue of support.

The development, the first public acknowledgement by Ziraat Bank that it was in talks with Bank Asya, leaves the Islamic lender facing a collapse in deposits and net income. Bank Asya’s profit plummeted 81 percent to 10.6 million liras in the second quarter, it said on Aug. 11. Deposits melted 25 percent to 13.6 billion liras.

Ziraat said in a regulatory filing that it is working to establish its own Islamic practice and purchasing Istanbul-based Bank Asya is not in line with its priorities, Bank Asya responded, saying a formal offer from Ziraat would have been a prerequisite for the start of official talks for an acquisition.

“Today’s statement makes it clear there won’t be one,” the bank said in a statement.

The bank said the talks with Ziraat, officially known as TC Ziraat Bankasi AS, began on Aug. 8, the same day the Istanbul-based lender announced an end to exclusive partnership negotiations with Qatar Islamic Bank SAQ.

Earlier this month, Yigit Bulut, chief economic adviser to Prime Minister Recep Tayyip Erdogan, contradicted Ali Babacan, deputy prime minister with responsibility for banking and the Treasury, who said that it would be “desirable” for Ziraat to buy Bank Asya.

A bank that has 2.8 billion liras of non-performing loans shouldn’t be acquired by the government, Bulut said in comments published by Sabah newspaper.

The conflicting official statements whipsawed the bank’s shares, and it was suspended from trading the following day, a situation that will remain until clarity over its ownership and management resumes, the banking regulator said.

Bank Asya was founded by followers of Fethullah Gulen, the U.S.-based Islamic cleric blamed by Prime Minister Recep Tayyip Erdogan for a corruption probe that implicated members of his cabinet and triggered resignation of four ministers. The bank’s shares have plummeted 14 percent this year, compared with a 21 percent gain in the 15-member banks index.

After the shares were put on hold, Borsa Istanbul withdrew the Islamic lender from its indexes, while the Capital Markets Board in Ankara has barred a planned sale of 140 million liras Islamic debt. Bank Asya shares fell 5.3 percent to 1.24 liras on Aug. 7, the final day of trading before suspension.

Government bodies, including the Social Security Institution and the Revenue Administration, have canceled contracts with the bank that allowed it to act as an intermediary in the collection of taxes or social security premiums.

To contact the reporter on this story: Isobel Finkel in Istanbul at ifinkel1@bloomberg.net

To contact the editors responsible for this story: Dale Crofts at dcrofts@bloomberg.net Cindy Roberts, Benjamin Harvey

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