Amid political uncertainty and fluctuation in markets, Netherlands-based ING Group's acquisition process of British HSBC's Turkey operation has been prolonged.
According to an article published in the U.S. based economy website Bloomberg, several undisclosed sources stated that ING "may need one or two more months to reach an agreement", while others stated that talks may end unfruitful and HSBC is still conducting talks with other potential buyers.
Both HSBC and ING officials have declined to comment over the issue.
The article emphasized that Turkish lira has lost 21 percent value this year – along with many other currencies – and banking stocks have also lost 40 percent value in dollar terms amid ongoing domestic and foreign political instability. A European Court of Human Rights decision which ruled that Turkey should compensate former shareholders of Demirbank, which was seized by the government in 2001 and sold to HSBC, was also noted as an obstacle in the way of the sale. The article quoted Turkish daily Milliyet's report which stated that ING asked for a guarantee from the Turkish Treasury for future problems over this matter, however, as obviously stated by banking circles, it was not given. Both Demirbank's seizure and its sale to HSBC, which was worth $1.1 billion but sold for $250 million at the time, has long been an issue of debate in Turkish finance circles.
HSBC had earlier sold its Brazil unit for $5.2 in August.
In late July, a deal among two parties was reported 'very close' in a deal around $700-$750 million.
ING, which already has a presence in Turkey, was one of three banks to submit a non-binding bid in May, sources previously told Reuters. The others were Bahrain's Arab Banking Corp and France's BNP Paribas. HSBC declined to comment.
As of today, it takes $300 million to obtain permits and a banking license to enter Turkey's highly competitive banking market, therefore if sealed; the deal will be highly lucrative for ING.
ING Turkey currently has 319 branches throughout Turkey and employs more than 6,250 people, whereas HSBC Turkey employs 5,536 people in 291 branches. The two banks total assets are $15 billion and $12 billion respectively. When combined, the two banks could outperform Turkish affiliate of French BNP Paribas, Türkiye Ekonomi Bankası (TEB), and Denizbank, Turkish affiliate of Russian Sberbank.
Still, even if the two banks were combined, their total assets would be three times smaller than Yapı Kredi Bank ($75 billion) which is Turkey's fourth largest private bank. Yapı Kredi, along with İş Bank, Garanti Bank and Akbank are among Turkey's "Big Four".
HSBC announced the sale of its Turkey and Brazil operations in May, which also included 25,000 job cuts worldwide, and reduce its global network of retail banks by 12 percent because the bank cannot keep up with the competitive system. The move had come days after the company had been hit with a $53 million fine over tax evasion.
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