Bloomberg News

HSBC Said to Join Suitors for Dexia’s Denizbank in Turkey

October 19, 2011

(Updates with valuation in sixth paragraph.)

Oct. 19 (Bloomberg) -- HSBC Holdings Plc, Europe’s biggest bank, is interested in buying Turkey’s Denizbank from Dexia SA, the first lender to founder with the European debt crisis, two people with knowledge of the process said.

The global lender is vying with OAO Sberbank and Qatar National Bank SAQ, the Persian Gulf country’s biggest bank by assets, which said yesterday that it was negotiating to buy a controlling stake in Denizbank. QNB has retained Citigroup Inc. to advise on the purchase, two people familiar with the plan said, declining to be identified as the talks were private.

For London-based HSBC, the acquisition would expand its business in Europe’s fastest-growing economy, which the lender entered more than 20 years ago and where it operates more than 300 branches. Denizbank had 39 billion Turkish lira ($21 billion) in assets and 540 branches in the country as of June, according to its website.

Denizbank shares rose 6.3 percent to 16.05 lira at the close in Istanbul, giving it a market value of more than $6 billion. Brussels-based Dexia owns more than 99.8 percent of Denizbank, with the rest traded on the exchange, a small enough free float that Denizbank’s market capitalization may not reflect its actual value, one of the people said.

Spokesmen for HSBC, Dexia and Citigroup declined to comment.

Denizbank’s Value

With a book value of $2.5 billion, Denizbank has a price- to-book ratio of about 2.8, twice as much as the 16-member the Istanbul Stock Exchange National-Banks Index, according to data compiled by Bloomberg. The KBW Bank Index, representing 24 U.S. banks, has a price-to-book ratio of 0.71. Dexia agreed to pay about $2.4 billion for a 75 percent stake in the Turkish lender in May 2006.

Dexia, which is being rescued by Belgium and France, is putting its troubled assets into a bad bank and selling profitable units, like Denizbank, sparking interest from rivals seeking to expand in Turkey. The sale by Dexia, Belgium’s biggest lender, may herald a wave of divestments by European banks trying to shore up balance sheets to cope with the sovereign debt crisis.

The governments of Belgium, France and Luxembourg provided a 90 billion euro ($124 billion), 10-year guarantee to cover Dexia’s funding needs on Oct. 9. Dexia will sell assets, including its Luxembourg unit and its French municipal-lending arm, to give the bad bank capital to absorb future losses. The bank, which has said further asset sales are likely, hired Bank of America Corp. and White & Case LLP to assess options for its stake the Istanbul-based unit.

Rival Bidders

OAO Sberbank, Russia’s largest bank, is also studying the possibility of acquiring Denizbank, Sberbank Chief Executive Officer German Gref said in Moscow on Oct. 11.

The talks between Dexia and Qatar National Bank are still in “early stages” and hinge on agreeing on a price that “fairly reflects” its value, the Qatari lender said yesterday.

Founded in 1964, the Qatari bank has operations throughout the Middle East, and offices in Europe, Africa and Singapore.

HSBC opened its first office in Turkey in 1990, according to the bank’s website, and acquired Demirbank TAS, then Turkey’s fifth-largest lender, in late 2001.

The Turkish state founded Denizbank, which means “Sea Bank,” in 1938 to finance the country’s maritime development, and privatized it in 1997 with a sale to Zorlu Holding.

--With assistance from Zachary R. Mider in New York, Anne- Sylvaine Chassany, Fabio Benedetti-Valentini and Matthew Campbell in Paris and Howard Mustoe in London. Editors: Chris V. Nicholson, Julie Alnwick

To contact the reporters on this story: Ercan Ersoy in Istanbul at eersoy@bloomberg.net; Ambereen Choudhury in London at achoudhury@bloomberg.net

To contact the editor responsible for this story: Edward Evans at eevans3@bloomberg.net


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