The foreign presence in the Turkish banking market is currently undergoing a shake up, with new entrants arriving looking to expand their presence in a large and dynamic emerging market, while others are looking to pull out due to external pressures.

Raising the Stakes

In 2011 Spain’s Banco Bilbao Vizcaya Argentaria (BBVA) bought 24.9% of Garanti Bank for €4.4bn. In November 2014 it raised this stake to 40% for an additional €2bn, giving it control of the bank’s board (with seven of 10 members) and reflecting its confidence in the Turkish market’s outlook, despite the economic slowdown and a dip in profitability, as well as political tensions.

“We believe that Turkey is a very exciting market where we can achieve strong long-term growth,” Jaime Saénz de Tejada, BBVA’s chief financial officer, told the press. “We are maximising economic exposure to Garanti at a very good price.”

BBVA bought the 14.89% stake from Turkey’s Doğuş Holding, which will retain a 10% share in Garanti. The deal allowed BBVA to take control of the board and increase its holding in Garanti before the March 2016 date stipulated in its investment deal, reflecting its keenness to expand its Turkish presence even at a time when the banking sector faces a degree of uncertainty. BBVA is under no obligation to buy out the bank’s remaining shareholders.

BBVA asserts that Garanti benefits from the mother bank’s experience in mortgage and small and medium-sized enterprise (SME) lending in particular. Both segments are gaining traction as new customers engage with banking services, and have been underserved by developed economy standards.


Another of the biggest deals in recent years was the €2.92bn acquisition of a 99.85% stake in DenizBank by Russia’s state-owned Sberbank from Belgium’s Dexia in June 2012. Sberbank also acquired Austrain and Russian units of DenizBank in the deal.

German Gref, Sberbank’s CEO and chairman, said that banking penetration was low in Turkey, giving “great potential for growth”, and that it had the most attractive market outlook in Europe over the next 15 years. Sberbank has also been expanding in Central and Eastern Europe as Western lenders have backed away following the global financial crisis. Dexia’s sale of DenizBank is indicative of this process, with the Belgian bank selling its Turkish subsidiary for 1.3 times its book value, having acquired it for 4.6 times its book value in 2006. It withdrew from Turkey under obligation from the French and Belgian governments under a state-led restructuring plan.

Sberbank’s strategy for expansion in Turkey is organic growth, and it has invested strongly in marketing to support this. However, DenizBank has not been unaffected by sanctions imposed by the US and the EU. In October 2014, international press reported that DenizBank was seeing routine transactions with Western counterparts blocked due to sanctions. While the US waived sanctions on DenizBank itself, software has been unable to distinguish some legal transactions from the Turkish bank from sanctioned movements by the mother company.

New Oppourtunities

In April 2015, Italian bank Intesa Sanpaolo announced plans to expand in Turkey, having opened a branch in Istanbul in June 2014. Intesa is the second Italian bank in the country, following UniCredit, Italy’s largest bank and a big player in Central and Eastern Europe. In partnership with Koç Holding, a major Turkish company, UniCredit is a major shareholder in YapıKredi.

Intesa’s Istanbul branch opened with initial share capital of €226m, the minimum required for opening a bank in Turkey. Intesa’s executive vice-chairman, Marcello Sala, said that it would probably focus on corporate lending in Turkey, particularly for the 1200-plus Italian-owned companies present in the country. This is a common model for banks launching in emerging markets with a corporate focus, supporting clients from the home country. The bank aims to support Italian firms in sectors including infrastructure, textiles, energy and manufacturing, which are looking to enter the Turkish market and take advantage of investment incentives. However, Sala also said that the bank saw potential in the SME segment, comparing Turkey’s thriving but under-banked SMEs to those of Italy, where they account for nearly 70% of all companies.

Intesa had previously expressed interest in acquiring a stake in Garanti and Finansbank, but in the end opted to acquire its own banking licence in 2012. For the time being, Intesa’s strategy remains organic growth, rather than acquisitions. Expansion in Turkey fits with Intesa’s international policy of expansion in emerging markets; the bank already has a presence in Brazil, China, Russia and Poland. Sala said he was aware of the risks to the Turkish banking system, including levels of private debt, the current account deficit, inflation, and the lira’s depreciation.

In April 2014 Göksenin Karagöz, a banking analyst at Standard and Poor’s, said that Turkey’s banking sector was likely to attract more investments from foreign institutions, particularly Gulf banks seeking to tap into high profits and excellent growth potential. Most Gulf markets, while affluent, are rather small and fairly heavily banked, and thus the large and relatively low-penetration Turkish market represents an interesting opportunity. Karagöz cited Commercial Bank of Qatar, Kuwait’s Burgan and Saudi National Commercial Bank as institutions which have entered Turkey in recent years.

Leaving the Scene

While international players are entering Turkey, and more may join in the coming years, others have decided that the increasingly competitive market is not for them. In April 2015 HSBC, Europe’s largest bank, announced that it was accelerating plans to pull out of emerging markets, with a withdrawal from retail banking in Turkey topping the list. The bank has come under pressure, partly due to losses in some of its emerging market operations. In Turkey, the bank earned revenue of €596m in 2014 but still posted a net loss of €117m. The bank is reportedly already scoping out potential buyers for its 300-branch Turkish network.

In April 2015 it was reported that HSBC had started the process of selling its branches in Turkey. However, interest in buying its branch network could be muted in the current banking environment, given the weakening growth outlook and softening investor sentiment. The bank’s Turkish network – the 13thlargest on the market – is an awkward size, not big enough to provide a potential new entrant with the scale to gain a strong foothold in the market, yet extensive enough to prove costly for smaller local players looking to step up.

Larger players present on the market already have extensive branch networks, making the acquisition less appealing for them. Nonetheless, Citibank analysts said that HSBC’s retail business in Turkey, with approximately €3bn of assets, could be sold for around book value, allowing the British institution to exit without a loss, though also without a profit.

Reports suggest that HSBC may be encouraged to sell its Turkish investment and corporate banking divisions with its retail business to secure a sale, with potential buyers coming from China or the Gulf, where banks are more cash-rich and enthusiastic about expansion than in the West. Yet the size and growth potential of the Turkish market will make HSBC reluctant to offload these valuable assets.

Equity Exit

In March 2015 Citigroup announced that it had sold its remaining 9.9% stake in Akbank, the second-largest bank by market value, for €866m, with a €603m loss. Citi acquired a 20% stake in Akbank 2007 and exited via sales to Sabancı Holding, Akbank’s main shareholder. The US-based bank will continue to service corporate clients, it said.

The bank’s operations have been hit by the international financial crisis, bringing down its capital values, and analysts said that the sale reflected concerns relating to the outlook of Turkish banks’ future equity values in the context of the declining lira.