By Jeannette Neumann in Madrid And Yeliz Candemir in Istanbul
Banco Bilbao Vizcaya Argentaria SA said Wednesday it will pay
EUR1.99 billion ($2.49 billion) to acquire additional shares in
Turkey's largest lender by market value, in a bid to bolster growth
beyond its stronghold in Latin America and home country of
Spain.
BBVA, Spain's second largest bank by market value, said it will
acquire an additional 14.89% stake in Turkiye Garanti Bankasi AS,
raising its stake in the Turkish lender to 39.9%. BBVA will buy the
shares from Turkish conglomerate Dogus Holding AS, the bank said in
a regulatory filing on Wednesday. Dogus will be left with a 10%
stake in the bank.
The purchase won't trigger a full takeover offer for Garanti,
BBVA executives said Wednesday, since the Spanish lender still
holds less than 50% of the company's shares. The heightened control
of Garanti means BBVA can appoint seven of the Turkish lender's 10
board members, up from four.
"We are now allowed to change the chairman and CEO," BBVA Chief
Financial Officer Jaime Sáenz de Tejada said. "But we are not
expecting any changes."
BBVA purchased its initial 24.9% stake in Garanti in November
2010 for $5.8 billion. That included a 6.3% share sale by Dogus
Holding.
In a separate regulatory filing Wednesday, BBVA said it will
issue up to 310.48 million shares to finance the stake
increase.
That would raise about EUR2.5 billion, Mr. Sáenz de Tejada told
analysts during a presentation later Wednesday. But he said BBVA
would likely only raise EUR2 billion in the accelerated
bookbuilding offer to cover the cost of the Garanti deal.
While Turkey's economic growth has eased recently, analysts
still said they had expected BBVA to try to increase its investment
in Garanti given the Turkish lender's solid performance in recent
quarters.
The move is also a way for BBVA to further diversify its
presence beyond Latin America. While the region is the biggest
contributor to BBVA's net profit, weaker currencies in South
American countries such as Venezuela and Argentina have chipped
away at earnings this year.
"Garanti continues to show strength, although growth is slower
than in 2013," BBVA said in its third-quarter earnings report.
Turkey's economic growth slowed to 2.1% in the second quarter of
the year from 4.7% in the first quarter due to weak domestic
demand. The economy is facing a number of challenges, including a
rising current account deficit, low domestic savings rates and
stubbornly high inflation.
Mr. Sáenz de Tejada told analysts that he expects Turkey's
economy to grow by around 4% next year and around 4.5% in 2016.
"Turkey offers good growth prospects given the low banking
penetration, young population, need for infrastructure and focus on
exports," analysts with Madrid-based investment bank N+1 said in a
research note Wednesday. "However, this growth will come with a
higher risk and volatility," the analysts said, including high
inflation and currency volatility.
BBVA has gotten its deal mojo back in recent months as its home
market of Spain starts to show signs of recovery amid modest
economic growth.
In July, BBVA purchased bailed-out lender Catalunya Banc SA from
Spain's government. The country spent EUR12 billion of public funds
to clean up Catalunya Banc after property developers defaulted on
loans issued during the country's real-estate boom.
BBVA looks at "every single transaction," Mr. Sáenz de Tejada
said in an interview Wednesday. But the Garanti stake increase,
just months after the Catalunya Banc acquisition, "minimizes
opportunities that we will close in the future," he said. "Unless
there is something so clear, so cheap, that we cannot avoid doing
it."
Write to Jeannette Neumann at jeannette.neumann@wsj.com and
Yeliz Candemir at yeliz.candemir@wsj.com
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