BBVA has launched a €2.25bn bid that will give it full ownership of Turkish lender Garanti, as the Spanish bank deepens its long-term bet on an economy that has sunk in recent years.
The Spanish lender said on Monday that it had offered to buy the 50.15 per cent it does not already own of Garanti, Turkey’s biggest bank by market capitalisation. The TL25.7bn price represents a 34 per cent premium to the average price of Garanti’s shares over the past six months.
The move is the most recent example of BBVA deploying some of the $11.6bn it netted from selling its US assets to PNC this year.
“The sale of the US subsidiary provides us with strategic optionality to, among other things, invest the excess capital in our main markets,” said BBVA’s chief executive Onur Genc, who came originally from Garanti.
The bank also said it was carrying out a €3.5bn share buyback, one of the largest in Europe.
The Garanti purchase takes place against a steep slide in value of the Turkish lira, whose purchasing power in euros has tumbled to around a quarter of what it was in November 2014, when BBVA agreed to pay €2bn for a 14.89 stake in Garanti, a transaction that was completed in 2015.
“The price is very attractive for Garanti BBVA minority shareholders,” said Carlos Torres, BBVA’s executive chair. “Turkey is a strategic market for us and despite the short-term volatility that it experiences . . . has great potential.”
Garanti, which has more than 21,000 employees and 1,000 branches, says that it is the most profitable bank in the country, with return on equity of 19.3 per cent and a non-performing loan ratio of 4 per cent.
BBVA has held control of Garanti’s board since the 2015 transaction. It subsequently agreed to increase its stake to 49.85 per cent in 2017.
Capturing the rest of Garanti, which BBVA expects to be completed in the first quarter of next year, would boost the Spanish lender’s profits by fully consolidating those of Garanti.