Spain’s BBVA raises bet on Turkey with $2.6 billion offer for Garanti

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MADRID (Businesshala) – Spain’s BBVA said on Monday it would offer to buy the rest of the guaranteed BBVA for up to 2.25 billion euros ($2.6 billion), taking advantage of a slide in the lira to take full control of the Turkish lender. Had been.

FILE PHOTO: A view of the headquarters of Spanish bank BBVA on November 17, 2020 in Madrid, Spain. Businesshala / Juan Medina

The offer price to buy the remaining 50.15% stake in the guarantee for 12.20 Turkish lira ($1.22) per share represents a premium of 15% over Friday’s market price, or a 34% premium over the volume-weighted average price of the previous six months. Spanish Bank said.

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BBVA, like its rival Santander, is struggling to make money from more mature markets in Europe and is expanding into emerging markets where it has more growth opportunities.

In contrast, other major foreign banks are withdrawing from Turkey. Last week, UniCredit sold its remaining stake in Yapi Credi to Coke Holding for €300 million.

Since BBVA first entered into a guarantee in 2011 with the first acquisition of a 25% stake, BBVA has invested a total of 7 billion euros in subsequent purchases to increase the stake to 49.85%.

Shares in BBVA fell 5.4% to €5.816, while shares in Guaranty rose nearly 10% on the news.

“While the deal is favorable and still comfortably capitalizes on BBVA, we believe the market may question the appropriateness of Turkey’s increased risk, given the political/macro uncertainty,” Jefferies said in a note. Is.”

Despite the current volatility in the Turkish market, BBVA has always defended its long-term commitment to the country, which generates around 14% of its net profit and can grow up to 25% after the deal.

The Turkish lira has weakened sharply in recent months, fueled by a steady stream of interest rate cuts due to unconventional monetary policy and rising inflation.

The dollar hit a new record low of 10 on Friday after the currency lost more than 25% of its value since the start of the year and has devalued more than 80% over the past decade.

BBVA is hedging in the forex market to protect its earnings and capital from adverse conditions in Turkey.

additional capital

To combat the pandemic and ultra-low interest rates, BBVA sold its US business last year, generating more than 8 billion euros in Spain to focus on cutting costs and bolstering shareholder returns.

The Spanish lender’s board also recently agreed to buy back 10% of its capital for up to 3.5 billion euros.

With share buy-backs, BBVA had a proforma capital ratio of 13.18 as of September and the bank still had about EUR 3.6 billion in excess capital after that.

“The sale of the US subsidiary gives us, among other things, a strategic option to invest additional capital in our core markets,” BBVA CEO Onur Genk said on Monday.

In the event that not all guaranteed BBVA shareholders accept the offer, although BBVA holds more than a 50% stake, BBVA may increase its stake without initiating a takeover bid.

BBVA forecasts a maximum negative impact of approximately 46 basis points to its core Tier-1 fully loaded capital ratio, and its 2022 earnings per share of approximately 13.7% accretion and its tangible book value per share of about 2.3%. The increase, assuming all guarantees, has been accepted by the shareholders, the BBVA said.

The deal is expected to close in the first quarter of 2022.

($ 1 = 10.0153 lira)

Reporting by Jess Aguado; Additional reporting by Karin I. Strohecker in Istanbul and Emma Pinedo in Madrid; Editing by Inti Landauro, Edmund Blair and Amelia Sithol-Mataris

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