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Turkish Treasury to Buy Majority Stake in Vakifbank; Shares Fall

Turkey’s Treasury will buy a majority stake in Turkiye Vakiflar Bankasi TAO, in a move that the bank’s chief executive said will remove uncertainties over ownership.

The sale of a 58.5 percent stake to the Treasury “won’t be below market value,” chief executive Suleyman Kalkan said today at a press conference in Istanbul. Treasury ownership “will support our strategic growth targets,” he said, without giving more details. The bank’s pension fund will also have the option to sell its 16 percent stake to the Treasury, he said.

The Treasury is buying the majority stake from an autonomous state-run body called the Directorate of Foundations, Kalkan said. Legislation is being planned to allow the sale and the process should be clear by year-end, he said. The purchase is not part of a privatization process, he said.

“The possible sale of 16 percent pension-fund stake to the Treasury may create overhang in the short run,” Cihan Saraoglu, a banks analyst at the Ekspres Invest brokerage in Istanbul, wrote today in e-mailed comments to clients. “If the Treasury owns 75 percent of the bank, the chances of a rights offering will always be there in the future.”

Vakifbank fell 4 percent to 3.80 liras at 5:34 p.m. in Istanbul. It has gained 55 percent this year, compared with a 31 percent increase on the Istanbul Stock Exchange National 100. The shares are rated buy by six analysts on Bloomberg, compared with 15 hold recommendations and 5 sell.

The sale to the Treasury may benefit Vakifbank by giving it a “financially strong shareholder who knows the business really well,” according to Muge Dagistan, a banks analyst at BGC Partners in Istanbul. “The foundation did not have the means to financially support the bank if needed.”

Vakifbank is Turkey’s sixth-largest publicly-traded bank by market capitalization, according to Bloomberg data. The lender’s second-quarter profit was 284.4 million liras, according to a statement to the Istanbul Stock Exchange on Aug. 9.

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