UPDATE 1-BBVA eyes Garanti stake, wants management role-paper

* GE has been trying to sell stake since Feb

* Garanti shares fall 1.7 pct, underperform market

* Huge share gains have driven up cost of stake

(Adds shares, analyst comment, background)

ISTANBUL, Oct 20 (BestGrowthStock) – Spanish lender BBVA (BBVA.MC: )
is prepared to pay between $4.5 billion and $5 billion for
General Electric’s (GE.N: ) 21 percent stake in Turkey’s Garanti
Bank (GARAN.IS: ), but only if it can have a role in its
management, Turkish daily Milliyet reported on Wednesday.

Turkish conglomerate Dogus Group, which owns a controlling
stake in the bank, is “not warm” to the idea, Milliyet added,
citing sources close to Garanti Bank.

Neither Garanti nor BBVA were immediately available for

GE first announced in February it wanted to sell its stake
in Garanti but it has had difficulty in finding a buyer,
particularly with so many Western banks struggling in the wake
of the financial crisis.

Although Garanti is viewed by many analysts as one of
Turkey’s best-run banks and its shares are favoured by foreign
investors, the fact that only a costly minority stake was on
offer was also a deterrent.

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

Milliyet said HSBC (HSBA.L: ) was no longer interested in the
bank and talks had stopped, leaving General Electric with only
one other option if no agreement can be reached between BBVA and
Dogus — which would be to sell the stake on the market.

Garanti shares (GARAN.IS: ) fell 1.7 percent, underperforming
a 0.4 percent drop in Istanbul stocks (.XU100: ).

“If the report is true, then General Electric’s stake sale
in Garanti is in a deadlock again, which further increases the
uncertainty and woes over a possible secondary public offering,”
analysts at Is Invest wrote in a note.

Analysts say a secondary public offering could create an
oversupply in the stock, reducing appetite for the shares in the
short term.

However one analyst who declined to be named said Turkey’s
banking regulator may oppose a secondary public offering.

“I think it is unlikely that the banking regulator would
allow the stake to float in the market because that could create
problems with ownership,” he said.

Garanti shares have risen some 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.

Turkey’s highly-regulated banks managed to post strong
profit gains throughout the financial crisis, benefitting from
cheaper funding from the central bank which cut Turkish interest
rates to all-time lows.

The economy is forecast to grow 6.8 percent this year and
banks are experiencing double-digit loan growth. With a young,
increasingly affluent population of 73 million, Turkey is seen
as a huge developing market for banking services.
(Editing by David Holmes)

UPDATE 1-BBVA eyes Garanti stake, wants management role-paper