Dubai’s Emirates NBD seals biggest acquisition with purchase of Turkish lender Denizbank

Denizbank has assets of 169.4 billion lira and operates 751 branches, including 43 outside Turkey. (Reuters)
Updated 22 May 2018
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Dubai’s Emirates NBD seals biggest acquisition with purchase of Turkish lender Denizbank

  • The deal is the biggest ever acquisition by Emirates NBD
  • The transaction is expected to be accretive to shareholders in the first year, said Emirates NBD Chief Executive Officer Shayne Nelson

Emirates NBD is set to buy Turkey’s Denizbank from Sberbank in Russia as part of efforts to expand its operations away from the Gulf region. 

Sberbank has decided to sell Denizbank — which is the fifth largest private bank in Turkey — as it refocuses its attention on Russia’s domestic market.

ENBD agreed to pay 14.6 billion Turkish lira ($3.14 billion) for the stake, according to a filing on the Dubai Financial Market. It is the Dubai bank’s biggest acquisition to-date. 

“Through this transaction, Emirates NBD will establish itself as a leading bank in the Middle East, North Africa and Turkey region and achieve meaningful diversification of its operations, both in new countries and in a broad range of business segments,” said Hesham Abdulla Al-Qassim, vice chairman and managing director of Emirates NBD, in the filing. 

The Dubai-based bank acquired French bank BNP Paribas’ Egyptian operations in 2013 as part of its regional expansion effort. 

“ENBD’s earnings are primarily from its domestic market and Egypt, and this deal would offer diversification to its earnings,” said Chiradeep Ghosh, banking analyst at Sico Bank in Bahrain.

“In addition, Turkey has favorable demographics and Denizbank is a well-managed bank, aggressively growing its balance sheet,” he said. 

Aarthi Chandrasekaran, vice president, investment management at Shuaa Capital in Dubai told Arab News that the deal was “not a surprise.”

“ENBD has always been keen on inorganic growth, rather than returning capital to shareholders via dividend payments,” she said. 

Analysts agreed that further acquisitions by the bank outside of the GCC region would be unlikely without ENBD first raising fresh capital to ensure it kept within regulatory capital requirements. 

The acquisition also comes as relations between Turkey and the Gulf states.

Chandrasekaran added that the Turkish market is “not an easy market” to operate in. 

“It is very challenging to break into the market, as it has tight domestic competition, the local lenders in Turkey gets support from government and the return ratio is less appealing for an outsider. To top it, you have to face the brunt of the weakening Turkish lira,” she said. 

She added: “The only comforting angle to the acquisition is that Denizbank is a better quality bank in Turkey compared to some of its mid-sized peers.”


Dubai regulators move against Abraaj Capital

Updated 17 August 2018
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Dubai regulators move against Abraaj Capital

  • Dubai regulators have implemented a winding up order against Abraaj Capital stopping it from doing any new business in the emirate’s financial center
  • The DFSA said it has also stopped Abraaj Capital from moving funds to other parts of the group

DUBAI: Dubai regulators have moved against Abraaj Capital, the UAE arm of the beleaguered private equity group, implementing a winding up order against it and stopping it doing any new business in the emirate’s financial center.

The Dubai Financial Services Authority, the regulatory arm of the Dubai International Financial Center (DIFC), announced the moves after the DIFC Courts earlier this month received a petition to wind up the troubled firm under UAE insolvency laws.

The court has appointed two liquidators from the accounting firm Deloitte to oversee the winding up order.

“The DFSA will continue to take all necessary actions within its remit to protect the interests of investors and the DIFC,” the regulator said in a statement.

 

The DFSA also said it has stopped Abraaj Capital from moving funds to other parts of the group.


The DFSA has been monitoring events at the company since the scandal at Abraaj broke in February, involving redirection of investment funds to purposes for which they were not intended.

Only a relatively small part of Abraaj’s operations fall under the remit of the DFSA. Most of its business and assets are located in the Cayman Islands, the domicile for its ultimate holding company Abraaj Holdings Limited (AHL) and its main operation business Abraaj Investment Management. The Cayman entities are also going through liquidation procedures.

The DFSA said: “Given the onset of financial difficulties of the wider Abraaj Group, the DFSA has been closely monitoring the activities of its regulated entity ACL. The DFSA has taken regulatory actions over the past few months in order to safeguard the interests of investors and the DIFC.

“Given such actions and the current matters surrounding the Abraaj Group, the DFSA continues to monitor the limited financial services activities currently being undertaken by ACL,” it added.

ACL was authorized to conduct various financial services from DIFC, including managing assets and fund administration, but restricted to funds established by the firm or members of its group.

It could also advise on financial products, arranging deals in investments, and arranging and advising on credit.

It is unprecedented for the DFSA to comment on a case while it is still under investigation, but the application in the DIFC Courts on Aug. 1 presented an opportunity to address investors and DIFC members who were concerned about the scandal, which some observers believe has been damaging for Dubai’s reputation as a regional financial hub.

FACTOID

The Dubai Financial Services Authority has been monitoring events at Abraaj since a scandal emerged involving redirection of investment funds to purposes for which they were not intended.