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

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

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.”