The Spanish bank BBVA has submitted an offer of 2 billion euros for the 50.15 percent of Garanti, Turkey’s largest bank by market capitalization, which it does not yet own.
The purchase price of TL 25.7 billion (€ 2.25 billion) represents a premium of 34 percent on the average price of Garanti shares over the last six months and is the latest proposed use of funds by BBVA of 11.6 billion PNC in this year.
“The sale of the US subsidiary gives us the strategic opportunity to invest the excess capital in our main markets, among other things,” said Onur Genc, BBVA boss, who originally came from Garanti.
BBVA is carrying out a EUR 3.5 billion share buyback plan for up to 10 percent of its shares, one of the largest in Europe.
The purchase of Garanti takes place against the depreciation of the Turkish lira, whose purchasing power in euros has fallen to around a quarter of the level in November 2014, when BBVA agreed to pay 2 billion euros for a portion of 14.89 euros to Garanti, a transaction that was completed in 2015.
“The price is very attractive to the minority shareholders of Garanti BBVA,” said Carlos Torres, CEO of BBVA. “Turkey is a strategic market for us and has great potential despite the short-term volatility.”
Garanti, with more than 21,000 employees and 1,000 branches, claims to be the most profitable bank in the country with a return on equity of 19.3 percent and a non-performing loan rate of 4 percent.
BBVA has been in control of the Garanti board since 2015. She agreed to increase her stake to 49.85 percent in 2017.
The latest planned transaction, which BBVA is expected to close in the first quarter of next year after regulatory approval, would boost the Spanish lender’s profits through the full consolidation of Garanti.
BBVA said the deal would increase earnings per share by 13.7 percent in 2022.