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Bank Asya Trading Halted Indefinitely After Takeover Talk

Turkey’s stock exchange extended indefinitely a week-old suspension on trade in the Islamic lender known as Bank Asya, a rare move targeting a bank caught in the crossfire of a government feud.

The Istanbul bourse struck Asya Katilim Bankasi AS from its indexes altogether and said the bank will remain suspended until there is more clarity about possible changes in ownership and management. Shares of the company have been off limits to investors since early Aug. 7, just after wide swings on contradictory reports of the government’s interest in nationalizing the bank.

“I cannot recall trading of a BIST-100 company having been suspended such an extended time like this in the last decade,” Cagdas Dogan, an Istanbul-based analyst with the New York-based BGC Partners Inc., said by email. He said Bank Asya had made announcements about its situation, and that rumors creating ambiguity “seem to be beyond their control.”

The bank, founded in 1996 by followers of a Muslim cleric who lives in Pennsylvania, is one of two listed Islamic lenders in Turkey. Shareholders own 52.7 percent of Bank Asya, the only Turkish lender where they have a controlling interest.

The bank benefited from the boom in what has been one of the world’s fastest-growing economies in the last decade. In the last few years it has racked up losses on loans and more recently came under attack from the government for its alleged ties to Gulen, a former ally of the ruling Justice and Development party.

Sour Loans

The bank has a non-performing loan ratio of 9.83 percent which compares with 2.7 percent in the sector as a whole, it said on a second-quarter earnings conference call. Its stock has plunged 14.5 percent this year, compared with a 20.2 percent gain in the banking index as a whole.

In March, Bank Asya announced that it was in exclusive talks for a takeover with Qatar Islamic Bank SAQ - an arrangement that ended last week. Bank Asya said the talks were terminated to allow it to meet with other potential local partners. On an earnings call this week, chief executive officer Ahmet Beyaz confirmed that state-owned TC Ziraat Bankasi AS was interested in acquiring the lender.

Earlier this year, companies including Turkish Airlines, which is 49 percent state-owned, withdrew deposits amid government criticism of the company. Prime Minister Recep Tayyip Erdogan accuses of Gulen instigating a corruption investigation that implicated members of his government late last year.

Rare Suspension

Erdogan, who moves to the presidency at the end of the month after winning a majority in elections last weekend, has said that he is determined to “purge” Gulen’s followers from positions of public influence. The trading halt follows a spate of regulatory action against the bank, including the suspension of its right to collect tax on behalf of the state.

Deputy Prime Minister Ali Babacan, responsible for banking and the Treasury, said Aug. 6 that the government would welcome the purchase of Asya by Ziraat. His comments, made while Asya was still in the exclusive arrangement with QIB, were later contradicted by Yigit Bulut, the prime minister’s chief economic adviser, who spoke on the Sky360 news channel.

The shares surged 8.3 percent on Babacan’s comments, before falling as much as as 9.2 percent the next day on Bulut’s and last traded at 1.24 lira.

Borsa Istanbul’s statement said that changes related to partnership and management were not being announced “clearly and openly.” Calls to Bank Asya were not immediately returned.

“In recent history, typically once a company said that they had no undisclosed information to the public, trading resumed without a long break,” said BGC’s Dogan. “I feel like Bank Asya made the necessary announcements.”

Deutsche Bank AG’s Hilal Varol suspended coverage of the bank today, joining eight analysts surveyed by Bloomberg who have halted their coverage since May. Nine other rate it ’hold,’ while two analysts say buy.

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