ING Said to Drop Plan to Buy HSBC's Unprofitable Turkey Unit

Updated on
  • Regulatory hurdles said to have contributed to bank's decision
  • HSBC and ING said to have been close to deal during the summer

ING Groep NV, the Netherlands’ largest lender, has abandoned a plan to acquire HSBC Holdings Plc’s unprofitable Turkish unit, according to four people with knowledge of the matter.

Regulatory issues contributed to the decision, two of the people said, asking not to be identified as talks aren’t public. ING stepped away a few weeks ago, they said. ING and HSBC declined to comment.

HSBC was near to a sale agreement with Amsterdam-based ING in the summer, only for that process to stall, people familiar said in early September. The impasse prompted HSBC to re-approach Turkish banks including Garanti and Yapi Kredi to gauge their interest, the people said.

Fiba Holding, owned by billionaire Husnu Ozyegin, is considering a bid for the business, people with knowledge of the matter said last month. HSBC’s sale process, announced by Chief Executive Officer Stuart Gulliver in June, has been complicated by the fact that National Bank of Greece is simultaneously selling its Turkish unit Finansbank, an asset with a larger branch network and balance sheet than HSBC’s unit, two of the people said. 

U.S. Scrutiny

Finansbank made a profit of 169.1 million liras ($57 million) in the third quarter, according to public filings, while HSBC’s local unit made a 170.7 million-lira loss.

Turkey’s Milliyet newspaper reported that a compensation ruling against the Turkish state for the seizure of a lender that HSBC subsequently purchased from the government more than ten years ago was adding to the sale’s hurdles. The European Court of Human Rights ruled that Turkey should compensate former shareholders of Demirbank, a decision that prompted ING to reconsider, Milliyet said.

HSBC has been under enhanced scrutiny in the U.S. since 2012, when it reached a $1.9 billion deferred-prosecution deal to resolve claims it enabled Latin American drug cartels to launder money. As part of the settlement, the Justice Department installed an independent monitor for five years.

HSBC agreed to sell its Brazilian unit to Banco Bradesco SA for $5.2 billion in cash earlier this year, as part of its plan to cut costs.

— With assistance by David de Jong

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