By Dinesh Nair / Reuters
DUBAI: EFG Eurobank will sell its Turkish arm to Kuwait’s Burgan Bank in a $355 million deal which will help shore up the struggling Greek lender’s capital base.
Burgan, the commercial banking arm of Kuwait Projects Co (KIPCO), will also absorb $280 million of loans issued by EFG to the Turkish unit as part of the deal, it said in a bourse filing on Monday.
Its shares rose 2.4 percent on the Kuwaiti bourse by 1025 GMT.
Banking sources had told Reuters last week that the sale was imminent and Burgan was likely to offer Eurobank Tekfen’s book value of $350 million.
Eurobank Tekfen, a partnership between EFG Eurobank and Turkey’s Tekfen Holding, was put up for sale last July by Greece’s second-largest bank.
The sale comes as Greek banks, hit by the country’s sovereign debt crisis, look to boost their capital base to cope with a protracted recession and a rise in non-performing loans.
Other possible deal targets include the Egyptian arm of Greece’s Piraeus Bank, valued at over $200 million, and which has attracted five suitors from the Middle East and North Africa (MENA) region, two sources told Reuters last week.
While Greek banks seek to shore themselves up in the face of protracted recession, Gulf investors have been looking at Turkey as a natural target in the face of unrest in the Middle East and debt crises in Europe and North America.
Qatar National Bank for example was in talks to buy Dexia’s Turkish arm Denizbank in a deal said to be worth as much as $6 billion, though the deal stalled over valuation, people familiar with the matter said.
Positive outlook
Bankers are also awaiting the announcement of a mandate for the sale of National Bank of Greece’s Turkish arm Finansbank, despite the Greek lender saying it is no rush to sell the stake.
The outlook for Turkey’s banking sector is seen as positive on the back of strong economic growth and increased spending by the large population, half of which is under the age of 30.
Turkish banks are also well capitalized and have limited exposure to the euro zone.
The deal — which also involves Tekfen Holding agreeing to sell its 29.26 percent stake in Eurobank Tekfen to Eurobank Holding — will raise EFG Eurobank’s Core Tier 1 capital ratio by about 60 basis points or about 300 million euros, the bank said.
The Kuwaiti lender will use internal funds for the deal, which rests on final approval from the central bank in Kuwait and the Banking Regulation and Supervision Agency in Turkey.
Barclays and Goldman Sachs advised EFG Eurobank on the deal, which is expected to close in the third quarter of 2012 after regulatory approvals. Citigroup Inc advised Burgan.
Eurobank Tekfen runs a network of 60 branches and ranks among the top 20 banks in Turkey by loans. Its loan portfolio stands at 1.5 billion euros ($2 billion).
EFG bought a 70 percent stake in Eurobank Tekfen in 2007.
The latter made a net profit of 20.3 million lira ($11.4 million) in the first nine months of last year. Its balance sheet was 5.1 billion lira with deposits at 2.2 billion lira.
