August 13, 2014

Ziraat, other likely suitors for Bank Asya

State-run Ziraat Bankası and other lenders are interested in acquiring Bank Asya, the bank's CEO Ahmet Beyaz said on Wednesday, without giving further details.

Beyaz's statement follows a dispute last week that centered on a possible state purchase of the participation bank Bank Asya by Ziraat. Deputy Prime Minister Ali Babacan said last Wednesday that Ziraat, which is looking to launch its own Islamic banking unit, might buy Bank Asya. The two banks have not officially begun talks, Beyaz told reporters on Wednesday in İstanbul. “We have been informed that Ziraat is interested in this deal [to buy Bank Asya] and we have also learned from Goldman Sachs that there are others possibly looking for a similar deal,” Beyaz said.

Observers said the bank is more likely to agree to merge with or sell its stakes to a state-run bank. If so, the Banking Regulation and Supervision Agency (BDDK) will be key, as Bank Asya has to secure the watchdog's approval before a purchase deal can happen. Other than Ziraat, the general manager declined to cite the names of the additional possible suitors.

In June, Bank Asya said it had mandated Goldman Sachs as its financial advisor for a strategic partnership. Earlier this year, the bank attempted to form a strategic partnership with Qatar Islamic Bank (QIB), but the deal never materialized, opening the way for other suitors. Some market experts had speculated that the BDDK took a political stance and blocked or slowed down the proceedings of Bank Asya's partnership deal with the QIB. Others said Prime Minister Recep Tayyip Erdoğan's strong opposition to Bank Asya gaining an international partner was what encouraged a politically motivated BDDK board to act as such.

Erdoğan's targeting of Bank Asya has been interpreted as a form of revenge on the Hizmet movement, with which Bank Asya is affiliated. Erdoğan accuses Hizmet of undermining his power, an allegation that lacks sound evidence. Three state-run Turkish banks -- Ziraat Bankası, VakıfBank and Halkbank -- have also been looking into setting up Islamic banks over the past year, as the secular republic has opened up to Islamic finance to tap into a pool of rich investors.

Political pressure

The largest of four Islamic lenders in Turkey, Bank Asya has come under intense pressure from Erdoğan's government. Erdoğan has openly targeted Bank Asya in statements that reportedly led to a number of state-owned companies and institutional depositors loyal to Erdoğan withdrawing $1.8 billion from Bank Asya accounts earlier this year.

Despite pressure, the bank posted a net profit of TL 51.4 million in the January-June period of this year. Opposition groups have accused Erdoğan of a “clear violation of the law regulating and protecting financial institutions” and called on the BDDK and the Capital Markets Board (SPK) to act and protect the lender. Bank Asya said on Monday that its loans had contracted by 11 percent in the second quarter, while deposits shrank 3 percent. Net fees and commissions declined 33 percent to TL 55.1 million, while loans and receivables dropped 28 percent from the end of 2013 to TL 14.99 billion, it said.

Bank Asya shares have been suspended from trading since Aug. 7, when Turkish authorities canceled key contracts with the bank, including a tax collection deal. Bank Asya said at the time that the loss of the tax deal would "not have a significant impact" on its activities. The stock exchange has not said when the suspension will be lifted.

Published on Today's Zaman, 13 August 2014, Wednesday