Spain’s BBVA in talks on Garanti stake buy

By Sonya Dowsett

MADRID (BestGrowthStock) – BBVA (BBVA.MC: ) said it was in talks to buy a stake in Turkish peer Garanti Bank (GARAN.IS: ), but analysts said on Thursday a controlling role for Spain’s second-biggest bank was fundamental to the success of any deal.

BBVA is prepared to pay $4.5-$5.0 billion for General Electric’s (GE) (GE.N: ) 21 percent stake in Garanti, but only if it could have a role in its management, Turkish media reported on Wednesday.

The Turkish conglomerate Dogus Group, which controls Garanti, was not keen on sharing control, Turkish media said.

“It is not clear if BBVA are considering investing into part of Garanti or if the transaction would bring full control. This is key,” said Goldman Sachs analyst Jernej Omahen.

The Spanish lender did not give any details about a potential deal.

A minority stake in the Turkish bank would have an unfavorable effect on BBVA’s capital under the Basel III banking rules which force banks to hold more and better quality capital, analysts said.

Shares in BBVA were 2.2 percent lower at 9.8 euros per share at 1312 GMT. Garanti shares were 1.2 percent higher.

GE first announced in February it wanted to sell its stake in Garanti, viewed as one of Turkey’s best-run banks, but it has had a hard time finding a buyer as banks struggled in the wake of the financial crisis.

Confirmation of talks will come as a relief to investors in Garanti who feared GE might sell its stake via a secondary public offering, diluting the value of the stock.

Garanti shares have risen about 41 percent since the start of the year amid huge inflows into Turkish assets, which have sent the main blue-chip stock index to an all-time high.

The bank is just under 50 percent publicly traded, while Dogus Group owns 30.5 percent.

Analysts questioned the logic behind a move into Turkey by BBVA, the bulk of whose investments outside Spain lie in Latin America and the United States.

Although the Turkish economy is growing fast, it is volatile, and may be viewed as risky by the market at a time when the bank is fighting a stagnant economy at home in Spain.

Analysts had mixed views on what a strategic investment by BBVA might mean for Garanti.

“I don’t think there is much that any bank can add to what Garanti already has in terms of synergies or technologies,” said analyst Selim Yazici at TEB. “Perhaps BBVA could offer Garanti prospects to help its foreign expansion plans.”

Turkey’s highly-regulated banks managed to post strong profit gains throughout the financial crisis, benefiting from cheaper funding from the central bank which cut the country’s interest rates to all-time lows. (Additional reporting by Alexandra Hudson and Ebru Tuncay in Istanbul; Editing by Sharon Lindores and David Cowell)

Spain’s BBVA in talks on Garanti stake buy