Turkey banking shares weaker, regulator dismisses Iran sanctions report

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Updated 24 October 2017
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Turkey banking shares weaker, regulator dismisses Iran sanctions report

ISTANBUL: Shares of Turkey’s banks and the lira currency fell on Monday as comments from the national banking regulator failed to erase investor concerns over a report that lenders could face substantial US fines for evasion of Iran sanctions.
The Haberturk newspaper on Saturday reported six banks potentially face substantial fines, citing senior banking sources. It did not name the banks. One bank faces a penalty in excess of $5 billion, but other fines will be lower, it said.
“It has been brought to the public’s attention that stories, that are rumors in nature, about our banks are not based on documents or facts, and should not be heeded,” the BDDK banking regulator said in a statement at the weekend, adding that Turkey’s banks were functioning well.
A spokesman for the US Treasury, which is responsible for US sanctions regimes, said: “Treasury doesn’t telegraph intentions or prospective actions.”
Two senior Turkish economy officials told Reuters Turkey had not received any notice from Washington about such penalties, adding that US regulators would normally inform the finance ministry’s financial crimes investigation board.
The report comes as relations between NATO allies Washington and Ankara have been strained by a series of diplomatic rows, prompting both countries to cut back on issuing visas to each other’s citizens.
“Given the level of tensions with the US, the market is still skeptical about this denial and they would want to hear a denial from the US to really calm down,” said Inan Demir, a senior emerging market economist at Nomura.
“The numbers mentioned are large ... the largest fine mentioned was $5 billion and that would be a very large fine in comparison to any bank’s equity in Turkey,” Demir added.
The Istanbul stock exchange’s index of banking shares declined 3.2 percent on Monday, underperforming the main share index, which fell 1.09 percent. The lira weakened nearly 1 percent to 3.7050 against the dollar during the day, while the cost of insuring Turkish debt against default spiked to its highest in 12 days.
US authorities have hit global banks with billions of dollars in fines over violations of sanctions with Iran and other countries in recent years.
US prosecutors last month charged a former Turkish economy minister and the ex-head of state-owned Halkbank with conspiring to violate Iran sanctions by illegally moving hundreds of millions of dollars through the US financial system on Tehran’s behalf.
Halkbank has said all its transactions have fully complied with national and international regulations.
President Tayyip Erdogan has said he told Washington that Turkey had never agreed to comply with its sanctions on Iran, and has called on the United States to review the indictment.
The US prosecutors’ charges stem from the case against Reza Zarrab, a wealthy Turkish-Iranian gold trader who was arrested in the United States over sanctions evasion last year. Erdogan has said US authorities had “ulterior motives” in charging Zarrab, who has pleaded not guilty.
Simon Quijano-Evans, emerging market strategist at Legal & General Investment Management, said US-Turkish relations were at the top of the list of issues investors were focused on. “Any negative or positive noise on that front can cause stronger market reaction in either direction.”


NMC Health stock jumps as earnings rise and group looks to Saudi Arabia

Updated 51 min 30 sec ago
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NMC Health stock jumps as earnings rise and group looks to Saudi Arabia

  • Shares gain as profits rise
  • Analysts upbeat on prospects

LONDON: The UAE-based private health care operator NMC Health is looking to further expand into Saudi Arabia, buoyed by strong revenue growth and strategic acquisitions made in the first half of the year.

The company reported on Monday a 20.2 percent increase in revenue in the first six months of the year, to reach $932 million. Healthcare revenues alone rose by 25.8 percent to $706 million. Net profit also rose to $116.7 million, a 19.3 percent increase on the same time period the year before.

The stock was up more than 3 percent in early afternoon trade in London.

The results met with analysts’ expectations, who continue to be upbeat about the company’s prospects.

“These are good results from NMC Health and the positive outlook has clearly been well received by the market. The shares are up 5 percent in early trading following a strong run already this year,” said analyst Ian Forrest at the UK-based The Share Center.

“NMC’s impressive H1 results demonstrated that it continues to deliver its operational and strategic targets,” said Charles Weston, senior equity research analyst at Berenberg, in a note on Monday.

“We had projected 20 percent revenue growth and a 32 percent rise in EBITDA (earnings before interest, tax, depreciation and amortization), and both were met.”

Acquiring new assets and growth in existing home markets helped drive the increase in revenue, said Prasanth Manghat, chief executive officer, in a statement on Monday.

“The first half of 2018 saw NMC continue to demonstrate strong organic growth alongside complementary acquisitions, resulting in the realization of improved financial results,” he said.

The health care operator has made a number of acquisitions in the UAE and Saudi Arabia over the last year as it looks to capitalize on Kingdom’s health sector privatization plans.

Earlier this year, it completed the acquisition of the Chronic Care Specialist Medical Center in Jeddah. It also obtained an 80 percent stake in the Riyadh-based Al Salam Medical Group in April 2018.

The company took its first steps into the cosmetics market this year, acquiring a 70 percent stake in the Dubai-based CosmeSurge, which has an expanding network of clinics throughout the UAE.

In June, NMC signed a joint-venture agreement with the Saudi Arabian Hassana Investment Company — the investment arm of the the state-backed pension fund, General Organization for Social Insurance.

It is a move which is expected to “substantially” increase the company’s expansion in the Kingdom.

“Our previously announced agreement with Hassana Investment Company to form a joint venture, good macro-economic conditions in the health care sector in Saudi Arabia, and a strong country management team provides an exciting platform from which our Saudi Arabian business will be grown further,” said Manghat.

The JV is anticipated to become the second largest health care operator in Saudi Arabia in terms of the number of beds, according to a company statement. It is due to be completed in the fourth quarter this year, and a management team are in place in the Kingdom.

NMC’s planned expansion into Saudi Arabia will be further supported by the $450 million convertible bond it issued in April.

The bond forms part of the company’s strategy to retain its recently-won place on London’s FTSE 100 index. It was one of the first Middle Eastern companies to join the index when it qualified last September. It first listed on the London Stock Exchange in 2012.

The company’s growth this year has been also attributed to organic growth in the UAE with the increase in the number of operational beds at the NMC Royal
Hospital in Abu Dhabi as well as the introduction of mandatory health insurance in Dubai last year.

Health care is seen as a lucrative sector in the Gulf due to its relatively wealthy population becoming increasingly at risk of problems related to obesity and diseases such as type 2 diabetes.