Emirates NBD to buy Sberbank’s Turkey unit for RM12.7b

Dubai • Dubai’s biggest bank agreed to buy a Sberbank PJSC unit in Turkey’s biggest takeover deal since 2012. Emirates NBD PJSC shares climbed in Dubai.

Emirates NBD will buy 99.9% of Denizbank AS for 14.6 billion lira (RM12.7 billion) and take on subordinated debt, according to a statement yesterday. The Dubai state-controlled lender will also pay interest on the deal amount from Oct 31 and receive all of Denizbank’s profit from that date in a so-called locked-box agreement.

Gulf lenders are expanding in markets like Turkey with acquisitions and licence applications as they face limited expansion opportunities at home. Qatar National Bank bought National Bank of Greece SA’s Turkish unit in 2016, paying slightly below book value. Commercial Bank of Qatar took full ownership of Alternatif bank AS the same year.

“Although the Turkish economy outlook is entering into a challenging phase, the timing of the acquisition is in favour of Emirates NBD due to a drop of Turkish lira,” said Tariq Qaqish, MD of the asset-management division at Mena Corp Financial Services LLC in Dubai.

Emirates NBD shares climbed as much as 8.4%, the most in more than two months, to 10.70 dirhams (RM11.56) in Dubai. The shares have advanced 29% this year compared to a 12% decline for the benchmark index.

A slowdown in Turkey’s US$851 billion (RM3.38 trillion) economy, a weakening lira and a series of debt restructurings are clouding the outlook for the country’s banking sector. Banks have also come under pressure from President Recep Tayyip Erdogan who is pushing lenders to give up some of their profits, cut loan rates and boost lending.

For Sberbank, the acquisition of Denizbank for 6.9 billion lira in 2012 was its largest ever. The sale marks a further retreat of the lender’s international ambitions after it was hit with US and European Union sanctions in 2014, in response to Russia’s role in the Ukraine crisis.

The acquisition, the biggest for Emirates NBD, will add about US$37 billion to its assets. It is Emirates NBD’s second major overseas acquisition. In 2013, it bought BNP Paribas SA’s Egyptian unit for US$500 million.

The deal was agreed at 1.17 times book value at the end of October, although that multiple is expected to decline to about 1.05 to 1.06 times book value after including profit since then and subtracting interest payments, Emirates NBD said in response to questions from Bloomberg News. Approvals for the deal, which will be funded from internal cash, are expected over the next five to six months. — Bloomberg