Spanish lender issues rights to fund stake in Turkish Garanti Bank

MADRID/ISTANBUL-Reuters

Ferit Şahenk, the head of Turkey's Doğuş Group, will continue to preside over the Garanti board.

Spanish bank BBVA said Nov. 20 it had priced a 2-billion-euro ($2.5 billion) rights issue to fund the raising of its stake in Turkey’s Garanti at 8.25 euros a share, as it pursues its strategy of overseas expansion.

Spain’s second-biggest lender said on Nov. 19 it was raising its stake in Garanti, one of Turkey’s biggest banks, in a deal that will give it control of the board.

The new shares represent 4.09 percent of BBVA’s capital before the issue and 3.93 percent after, the bank said in a statement to the stock market regulator.

Shares in BBVA fell 5 percent to their lowest level in nearly a year yesterday after they resumed trading following a market regulator suspension.

Turkish conglomerate Doğuş Holding has agreed to sell a 14.89 percent stake to BBVA, which already owns 25 percent of Garanti, for 5.5 billion lira ($2.5 billion), Garanti said on late Nov. 19. The deal cuts its stake to 10 percent.

BBVA said it would raise around 2 billion euros through the share sale to fund the deal and boost its solvency ratios.

The purchase will further bolster the Spanish bank’s global footprint, which has helped it weather the worst economic crisis in decades in its home country over the past five years.

Spanish banks are seeing the first signs of a recovery, but tepid lending levels and ongoing efforts to clean up their balance sheets after a real estate crash left them crippled with bad debt is leading them to seek new pockets of growth abroad.

In Turkey, though government measures to cut the current account deficit and cool the economy have hit banks’ margins, most have continued to post profits. And there is room for growth as there are millions of people without bank accounts.

Garanti has been a bright spot for the Spanish bank this year. BBVA’s net profit for the first nine months fell 37 percent to 1.93 billion euros, but Garanti’s contribution of 235 million euros represented a rise of 20 percent.

The deal should add about 250 million euros to annual net profit by 2016, BBVA said in a presentation filed with Spain’s exchange regulator.