Bloomberg News

Dexia, NBG’s Turkish Banks Surge on Bets Owners Will Sell

October 11, 2011

(Closes share prices in second paragraph.)

Oct. 11 (Bloomberg) -- The Turkish units of crisis-hit Dexia SA and National Bank of Greece SA surged in Istanbul amid speculation the banks will be sold under plans to rescue their European parents.

Denizbank AS, bought by Dexia in 2006, climbed 8.7 percent to 11 liras at 5:30 p.m. in Istanbul, valuing the bank at more than twice that of its owner. Finansbank AS, controlled by National Bank of Greece, jumped 7.7 percent to 3.66 liras. The gains helped Turkey’s banking index rise 0.9 percent.

A decision to dismantle Dexia at the weekend coincides with a vow by Nicolas Sarkozy and Angela Merkel to outline a plan this month to recapitalize European banks as investors hesitate to extend short-term funding to banks. Meanwhile Turkish banks are among the most valuable of emerging market assets owned by European lenders as loan growth in the country surges almost 40 percent annually amid an economic boom. OAO Sberbank of Russia is among banks that have expressed an interest.

“Both of them will be sold,” said Bali Ekin, head of equity trading at Credit Europe Bank NV in Amsterdam. “Denizbank may go quicker than Finansbank.”

‘Rock Solid’

The banks could be sold for as much as 2.5 times book value, and possibly higher if the macro environment stabilizes, as “Turkish banks are rock solid,” Ekin said.

Denizbank was trading at 1.95 times book value and Finansbank 1.64 times book value, according to Bloomberg data. Dexia owns more than 99.8 percent of Denizbank, with the rest traded on the Istanbul Stock Exchange. Similarly, National Bank of Greece owns 99.8 percent of Finansbank, according to shareholder data on Finansbank’s website.

European owners’ need to raise capital makes a sale conceivable even though National Bank of Greece and Dexia would be getting rid of some of their most profitable assets, said Claude Tiramani, head of the emerging markets fund at Lucretia Capital, a Paris-based asset manager.

“Historically when a bank needs to be recapitalized it tends to focus its activity in its home market,” Tiramani said. “That means it sells its non-domestic assets as part of its strategy. From the seller’s point of view, it is a situation of sell what you can and not what you want.”

OAO Sberbank, Russia’s largest bank, is studying the possibility of acquiring Denizbank, Sberbank Chief Executive Officer German Gref told reporters in Moscow today. The Russian lender hired Deutsche Bank AG and Troika Dialog Group Ltd. to advise on a possible offer, Kommersant newspaper reported on Oct. 8.

Denizbank’s three-day advance of 34 percent values the lender at 7.8 billion liras ($4.3 billion) compared with Dexia’s market capitalization of 1.6 billion euros ($2.1 billion). Dexia rose 0.8 percent to 81 cents in Brussels trading today. Finansbank’s share price values the company at 8.5 billion liras ($4.6 billion), about $2.5 billion more than its parent.

Dexia’s board met two days ago to review a plan under which the lender would set up a bad bank for its troubled assets, hive off its French municipal loan book and seek buyers for remaining units.

The bank is the “crown jewel,” among Dexia’s assets, Denizbank Chief Executive Officer Hakan Ates said in an interview in Istanbul today. He said there were currently no plans to sell the bank, and he would be flying to Belgium tomorrow to discuss Dexia’s restructuring with management there.

“The key thing in this business, especially at this time, is profitable growth, and we have it,” he said.

National Bank of Greece will wait to evaluate developments before assessing any opportunities for mergers and acquisitions, Deputy Chief Executive Anthimos Thomopoulos said Aug. 30.

--Editor: Mark Bentley, Aydan Eksin

To contact the reporter on this story: Benjamin Harvey in Istanbul at bharvey11@bloomberg.net

To contact the editor responsible for this story: Gavin Serkin at gserkin@bloomberg.net


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