LONDON, 4 August 2007 — Banks from the Gulf Cooperation Council (GCC) countries are increasingly investing in or acquiring controlling stakes in Turkish banks, following a trend recently set by global banking major Citigroup and European banks such as Dexia of Belgium.
The landslide victory two weeks ago of Prime Minister Recep Tayyip Erdogan’s ruling Justice and Development (AK) Party and the competent handling of the Turkish economy by Finance Minister Ali Babacan, who is also Ankara’s chief negotiator in the European Union (EU) accession talks, has boosted Turkish political stability and perception of country and market risk in the eyes of Western fund managers and investors.
The latest GCC bank to invest in the Turkish banking sector is National Bank of Kuwait (NBK), the largest and the highest-rated bank in the Middle East. NBK has acquired a 40 percent equity stake in Turkish Bank A.S., which is part of the Turkish Banking Group, a privately owned holding company. The acquisition has received preliminary approval from both the central bank of Kuwait and the Turkish Banking Regulation and Supervision Board.
Turkish Bank has 20 branches currently, but NBK believes that it offers a solid platform for future expansion into a medium-sized bank serving a country with a population nearing 75 million over the next few years.
Ibrahim Dabdoub, chief executive officer of NBK, confirmed that Turkish Bank investment is a significant milestone in NBK’s regional expansion strategy and also reflects the Kuwaiti bank’s increasing interest in the growing Turkish banking sector.
“NBK believes that the Turkish economy will continue its strong growth over the long-term on the back of continued economic reforms, political stability and favorable demographic trends; this will have a positive effect on the banking sector in the coming years,” he explained.
Not surprisingly, Tanju Ozyol, chairman of Turkish Bank Group, was bullish that “this acquisition brings significant added value to Turkish Bank particularly given NBK’s experience in regional and international markets. Turkish Bank will work closely with NBK in growing its franchise in retail banking across Turkey as well as enhancing its market share through an expanded branch network.”
The NBK acquisition follows the foray of Saudi Arabia’s National Commercial Bank (NCB), the Kingdom’s largest bank by total assets, into the Turkish market in July 200, through the acquisition of a 60 percent equity stake in Türkiye Finans Katılım Bankası (Türkiye Finans) for approximately $1.08 billion.
The two deals are the latest in a long line of foreign direct investment (FDI) in the Turkish banking sector — both conventional and Islamic. Kuwait Finance House, for instance, is the majority shareholder in Kuwait Turkish Evkaf Participation Bank. Albaraka Turk Participation Bank is a subsidiary of the Bahrain-based Albaraka Banking Group (ABG), headed by Saleh Kamel of Saudi Arabia.
In the conventional sector, Citigroup recently acquired a 20-percent stake in Akbank, the largest privately owned bank in the country, from Sabanci Holding for approximately $3.1 billion. Dexia, a key player in Belgian retail banking, similarly acquired a 75 percent equity stake in Denizbank for a purchase price of $2.4 billion. For NCB, nevertheless, the acquisition of Türkiye Finans gives it pole position in the Turkish interest-free banking sector and synergies with its own retail business in Saudi Arabia, which operates exclusively under Islamic banking principles.
