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Western EuropeDecember 23 2010

Acquisition drives regional ambition

BBVA's acquisition of almost 25% of Garanti Bankasi will give the Turkish bank a huge boost in its efforts to become a major player in eastern Europe, the Middle East and north frica, according to Garanti's chairman. Writer Metin Demirsar
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Acquisition drives regional ambitionFerit Sahenk, chairman, Garanti Banksi, Dogus Group

BBVA's agreement to acquire 24.89% of Garanti Bankasi from GE Money and the Turkish Dogus Group for $5.76bn has implications that will be felt beyond Turkey, according to Ferit Sahenk, chairman of both Garanti and Dogus Group. He says the deal has been worked out carefully among the three parties concerned and will enhance the regional ambitions of the Turkish bank.

Under the sale agreement signed in November, BBVA will acquire GE Money's 18.6% share in Garanti Bankasi for $3.7bn and a 6.29% stake in the bank from Dogus Group, one of Turkey's biggest conglomerates, for $2.06bn. The accord will give Dogus Group and BBVA, Spain's second biggest banking group, each a 24.89% share in the Turkish bank. GE Money will retain a share of about 2%. The remaining shares are publicly owned and traded on the Istanbul and New York stock exchanges. The share transfers are pending the approval of Spanish and Turkish banking authorities, but are expected to be concluded early in 2011. The deal will make BBVA the biggest foreign investor in Turkish banking.

"When GE's sale of its interest in Garanti Bankasi began to be discussed, we decided to seek a partner with which we could work together for the regional expansion of Garanti Bankasi," says Mr Sahenk. "What was important for us was that the two sides have parallel mentalities. We saw in BBVA an international financial institution that, like Garanti Bankasi, was involved in banking mainly in the developing countries."

Growing concern
The Swiss and US-educated Mr Sahenk has been chairman of Garanti Bankasi and its main shareholder, Dogus Group, since the death of his father, Ayhan Sahenk, in 2001. With his American and European-trained managers, he has overseen Garanti Bankasi's merger in 2001 with the Ottoman Bank, Dogus Group's sale of a 25.5% share in Garanti Bankasi to GE Money in 2005 and a 4.5% repurchase of shares. This period has also been one of phenomenal growth of the bank, both in terms of assets, loans and net income, making it the country's second biggest private financial institution.

Mr Sahenk's Dogus Group has also mushroomed from a small family-owned enterprise into an aggressive holding group of 124 companies in banking and finance, contracting, tourism, motor vehicle distribution, publishing and broadcasting, real estate development and energy, and has more than 28,000 employees.

Garanti Bankasi has banking operations in Romania, Russia and the Netherlands. Its Garanti Bank NV, with assets of $2.8bn, operates 51 branches in Romania.

"We entered Romania when everyone else was pulling out. This allowed us to achieve our 10-year targets in only one and a half years," says Mr Sahenk.

Joint venture

Garanti Bankasi would like to carry out new investments in areas surrounding Turkey, and Mr Sahenk believes BBVA's expertise in international banking combined with Garanti's strong technological capability and knowledge in consumer lending and credit cards will help achieve that.

"Eastern Europe, Russia, the Turkic Republics, the Caucasus, the Middle East and north Africa are just the right areas where Garanti Bankasi can expand with its new partner," says Mr Sahenk. He adds that Garanti Bankasi's regional investment plans would be put forward at the first meetings of the new board of directors.

"Everyone talks about opportunities [in the region]. But we know opportunities have costs. You have to make investments in only solid and healthy projects that have fast returns and high growth potential if you want them to be long-lived," says Mr Sahenk.
He is also confident BBVA will not stumble over the economic troubles battering Madrid because of its limited exposure in Europe, and is almost certain Spain will be one of the first countries to emerge strongly from the financial crisis in the eurozone because of its diverse industry and exports.

"BBVA's banking operations in Spain account for only 30% of its business. It has developed assets where everyone expects growth to be and has invested in Latin America and China. BBVA's decision to become a shareholder of Garanti Bankasi under these conditions is an indication of its long-term intentions. Both Dogus and BBVA will work shoulder to shoulder to advance Garanti Bankasi further," says Mr Sahenk.

He adds there is no duplication of interests as BBVA and Garanti have investments in different parts of the world. Mr Sahenk also believes that the BBVA partnership in Garanti Bankasi will help forge joint ventures between Turkish and Spanish companies in a wide range of areas in Turkey and abroad.

"Turkish and Spanish firms have much business to carry out together," he says, and his banking is certainly leading by example.

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