Turkey's banks, BBVA and Garanti Banks

BBVA launches a takeover bid to buy 100% of the Turkish bank Garanti

The Spanish bank BBVA maintains its commitment to the Turkish market, and announces an offer for the remaining shares of Garanti Bank.

The Spanish bank BBVA announced today the launch of a takeover bid for 2,25 billion euros to acquire 50.15% of the shares that it did not yet control of the Turkish bank Garanti Bank: a move that consolidates BBVA’s commitment to emerging markets like Turkey, despite the volatility suffered by the Turkish lira.

The price offered by BBVA per share, of 12.2 liras (1.07 euros), represents a premium of 15% with respect to the market price of the share of the Garanti registered last Friday, or 34% if we take into account the volume-weighted average price of the last six months, according to the Spanish bank.

As soon as the news was known, the shares of the Garanti on the stock market rose by 10%. The announcement, although it has caught many analysts by surprise, is actually one more step in BBVA’s policy of betting on emerging markets in the European region – as it is the case of Turkey – to expand and increase profits, given the saturation of its Spanish market of origin.

BBVA is strongly (and riskily) committed with Turkey

However, BBVA’s commitment is not without risks, and many have questioned the strategy of the entity chaired by Carlos Torres Vila – and which since 2018 has the Turkish Onur Genç as executive director – for keep its investments in Turkey, just the opposite of other banks are doing: this is the case, for example, of UniCredit, the most important bank in Italy by number of clients, which last week sold its remaining shares in the Yapı Kredi bank to the Turkish holding Kök, for an amount of 300 million of euros.

However, despite the volatility of the Turkish market and the instability of the lira (which so far this year has lost more than 25% of its value against the dollar, and has devalued more than 80% in the last decade), BBVA has always defended its presence in the Eurasian country as a long-term strategy: a vision that it supported with the election of Genç in 2018, and that now seems to be definitively ratifying. Not surprisingly, BBVA’s investments in Turkey already account for 14% of its net profits.

The operation, which has the backing of the Bank of America, has nevertheless meant a 3% drop for BBVA in the Spain’s IBEX 35. As explained by BBVA when announcing its takeover bid, its offer is not subject to conditions and the entity would be satisfied by obtaining a majority of the shares; in the event that not all the shareholders of the Turkish bank Garanti agree to sell their shares to the Spanish bank, BBVA could increase its participation by other means.