Ziraat Bank in bid to set up Islamic lender

ISTANBUL

Ziraat Bank had been in unofficial talks with Bank Asya as it worked to establish its own participation bank, as Islamic lenders are known in Turkey.

State-run Ziraat Bank has applied to the country’s banking watchdog (BDDK) to establish an Islamic lender, it said in a statement on Aug. 29.

Ziraat Bank scrapped talks to acquire Bank Asya last week, deepening concerns over the Islamic lender’s future and making it more likely it will be seized by the state. The Turkish government plans to establish three state-owned Islamic banks as a subsidiary of the current state-run conventional banks by the end of 2015, Ali Babacan, deputy prime minister responsible for the economy, said earlier this month, adding that they want three state-owned banks, Ziraat Bank, Halkbank and Vakıfbank, to each have an Islamic bank. There are currently four Islamic banks operating in Turkey: Albaraka Türk, Bank Asya, Kuveyt Türk and Türkiye Finans.

“We made our decision politically on the issue and wish the public sector to take part in the Islamic banking sector,” Babacan said at that time. “I believe at the end of 2015, three state-owned Islamic banks will be established,” Babacan said.

Profits, capital base collapsed

Bank Asya’s profits and capital base have collapsed since December, when it found itself at the center of a power struggle between then Prime Minister Recep Tayyip Erdoğan and Fethullah Gülen, an Islamic cleric whose sympathizers founded the bank.

With Erdogan’s victory in the presidential election earlier this month, the dispute between him and Gülen took a further twist, with Erdoğan repeatedly saying the campaign against Gülen’s Hizmet movement would intensify. The government cancelled tax collection and social security contracts with Bank Asya

earlier this month, seen by observers as a move to wind down the lender. However, Bank Asya said those actions would not have a significant impact on its activities.

Ziraat had been in unofficial talks with Bank Asya as it worked to establish its own participation bank, as Islamic lenders are known in Turkey. Bank Asya said its activities were continuing as usual and denied any uncertainty regarding its management or ownership structure. The bank also said it understood that an official offer for its stake would not be made.

Bank Asya shares have been suspended in Istanbul due to uncertainty about its future and were temporarily removed from the exchange in a fresh blow to the bank. This month, top government officials appeared to be at odds over a possible state purchase of Bank Asya. Ali Babacan
said that Ziraat could buy it, but an adviser to Erdoğan, Yiğit Bulut, subsequently denied such a plan. Bank Asya attempted earlier this year to form a strategic partnership with Qatar Islamic Bank (QIB) but the deal never materialized, opening the way for alternative suitors.