VZCZCXRO1782
RR RUEHDA
DE RUEHIT #0498/01 0941345
ZNR UUUUU ZZH
R 041345Z APR 06
FM AMCONSUL ISTANBUL
TO RUEATRS/DEPT OF TREASURY WASHDC
RUEHC/SECSTATE WASHDC 4570
INFO RUEHAK/AMEMBASSY ANKARA 4937
RUEHTH/AMEMBASSY ATHENS 0685
RUEHDA/AMCONSUL ADANA 2212

UNCLAS SECTION 01 OF 02 ISTANBUL 000498 
 
SIPDIS 
 
SENSITIVE 
SIPDIS 
 
STATE FOR EUR/SE AND EB/IFD 
TREASURY FOR INTERNATIONAL AFFAIRS - CPLANTIER 
 
E.O. 12958: N/A 
TAGS: EFIN ECON EINV TU
SUBJECT: TURKISH BANKS ATTRACT MORE FDI -- FINANSBANK SALE 
TO NATIONAL BANK OF GREECE 
 
Sensitive but unclassified.  Not for internet distribution. 
This message was coordinated with Embassy Ankara. 
 
¶1.  (SBU)  Summary: Turkish bank values hit a new peak on 
April 3 with the announcement in Athens that the National 
Bank of Greece (NBG) will purchase a near controlling stake 
in Finansbank, Turkey's ninth largest bank, for 2.8 billion 
USD.  The sale price values the bank at 5.05 billion USD, 3.6 
times its book value, a multiple that eclipses the previous 
record: the 2.6 times book value that GE Capital paid for 
Garanti Bank last year.  NBG emerged victorious in a contest 
that pitted it against Citibank, which again fell short in 
its effort to strengthen its position in Turkey.  The news 
fueled a rally in the Turkish stock market and augurs well 
for other banks that are on the block, including Denizbank 
and Sekerbank. This deal, along with the OMV purchase of 
Petrol Ofisi, means that FDI inflows will continue to be 
strong in 2006.  The transaction also demonstrates the extent 
of Turkish-Greek normalization in recent years.  End Summary. 
 
---------------------------- 
NBG Buys Share in Finansbank 
---------------------------- 
 
¶2. (U) The flood of rumors surrounding the sale of Finansbank 
came to an end on Monday, April 3, with the announcement in 
Athens that the National Bank of Greece would purchase 46 
percent of the bank's ordinary shares and 100 percent of its 
founding shares from owner Husnu Ozyegin.  Total value of the 
deal was 2.8 billion, 2.32 billion for the ordinary shares 
and 451 million for the founding shares.  NBG will issue a 
tender call for holdings of other investors later in the 
year, with a goal of accumulating at least 50.1 percent of 
the bank's shares.  If it does not reach that level, Ozyegin 
gave an option on his remaining shares after the deal (some 
9.68 percent of the total) to ensure that NBG will reach 
majority control.  The deal does not include the bank's 
international operations: Ozyegin's FIBA holding will 
purchase bank-owned shares in Finansbank Romania, as well as 
all the shares in Finans International Holding, the bank's 
international umbrella.  Local brokerages estimate the price 
at 3.62 times book value, well above the previous record-- 
the 2.6 times book value that GE Capital paid for Garanti 
Bank last year.  Commentators note that the bank's value has 
increased 72 times in 5 years, given that it was valued at 
only 84 million USD after the 2001 crisis. 
 
¶3. (SBU) The announcement represents the latest coup in 
Ozyegin's storied business career.  Business journals are 
fond of pointing out that he started the bank in 1987 with 
one million USD in seed capital, after selling two homes in 
Istanbul.  Previously a successful general manager at several 
other Turkish banks, including Yapi Kredi (which was 
purchased by Turkey's Koc Group earlier this year), his 
personal assets were already estimated at 1.5 billion USD 
before the sale.  NBG announced that the bank's management 
will not change, and that Ozyegin will remain as Chairman for 
at least two years. 
 
----------------------- 
Citibank Comes Up Short 
----------------------- 
 
¶4. (SBU) The announcement again left Citibank, the other 
contender for Finansbank, standing at the altar.  The bank 
has long been rumored to be interested in augmenting its 
profile in the Turkish market, and local manager Steve 
Bideshi spoke publicly about Citibank's desire to expand 
earlier this year.  Indeed, a recent article in the "Wall 
Street Journal" intimated that sale of Finans to Citibank was 
all but a done deal.  In the end, however, leading brokers 
tell us that the purchase foundered on Citibank's insistence 
on purchasing outright control, rather than accepting 
purchase of a lesser portion of the shares and seeking 
control through a tender offer. 
 
----------------- 
FDI Keeps Flowing 
----------------- 
 
¶5. (U) The NBG-Finans deal, coming a few weeks after 
Austria's OMV announced it would purchase a stake in 
petroleum distributor Petrol Ofisi, means that 2006 foreign 
direct investment is likely to be as strong as 2005, when FDI 
jumped to USD 9.6 billion.  Given that many of the 2005 
 
ISTANBUL 00000498  002 OF 002 
 
 
transactions were structured to be paid in installments, FDI 
arising from these earlier transactions will continue to show 
up in the balance of payments in 2006 and 2007. 
 
------------------------------ 
Increasing Greek Economic Ties 
------------------------------ 
 
¶6. (SBU) NBG is the second Greek financial institution to 
make a purchase in Turkey: EFG Securities bought a small 
Istanbul brokerage a year ago.  Though the NBG deal should be 
viewed primarily as a business deal, the fact that a Greek 
bank felt comfortable buying a major stake in a Turkish bank 
demonstrates the extent of the normalization in bilateral 
relations in recent years, as well as the confidence-building 
impact of Turkey's beginning EU accession negotiations in 
¶2005.  According to the some international observers, the 
purchase is the largest foreign investment ever by a Greek 
company. 
 
------- 
Comment 
------- 
 
¶7. (SBU) With the sale, Turkish bank valuations continue to 
hit new levels, reflecting and leading the overall rise in 
company values here.  Price-book value multiples have 
increased from the 1.9 times book value Fortisbank paid for 
Disbank in 2005, to the 2.6 times book value GE Capital paid 
for Garanti, to this deal's 3.6 multiple.  Local analysts 
note that any price in this range is expensive, but are not 
surprised, given the current focus on securing franchises 
that offer strong growth potential.  What has surprised 
market watchers and analysts is the fact that 20 years after 
it first attempted to purchase a Turkish bank, Citibank again 
was not successful.  Local media speculate that Citibank will 
turn its attention to market leader Akbank, which is 
interested in securing an international investor, and has 
made clear its preference for an "Anglo-Saxon" partner. 
Akbank executives have stressed that they do not intend to 
yield control of the bank, however, so it is not clear that 
such a partnership would interest Citi.  Local brokers note 
that few attractive banks remain on the market: Denizbank and 
Sekerbank are much smaller than Finans.  Halkbank will be 
privatized, but has a very statist culture and in the view of 
many has little franchise value except for its extensive 
branch network.  Effectively deploying those resources would 
be a "huge task," one banker told us.  Analysts also note 
that with an increasing share of the Turkish banking sector 
passing into foreign hands, nationalist pressure for a cap on 
foreign ownership may increase, creating further difficulties 
for foreign banks that are late getting into the game.  End 
Comment. 
 
 
JONES