VZCZCXRO7678
RR RUEHDA
DE RUEHAK #1069 1271456
ZNR UUUUU ZZH
R 071456Z MAY 07
FM AMEMBASSY ANKARA
TO RUEHC/SECSTATE WASHDC 1984
INFO RUEATRS/DEPT OF TREASURY WASHDC
RHEHAAA/NSC WASHDC
RUEHIT/AMCONSUL ISTANBUL 2641
RUEHDA/AMCONSUL ADANA 1924
RUEHBS/USEU BRUSSELS
RUEHKU/AMEMBASSY KUWAIT 0875

UNCLAS ANKARA 001069 
 
SIPDIS 
 
TREASURY FOR INTERNATIONAL AFFAIRS - JROSE 
 
SENSITIVE 
SIPDIS 
 
REF: ANKARA 1015 
 
E.O. 12958: N/A 
TAGS: EFIN TU
SUBJECT: Investors Ignore Politics, Snap up State Bank Shares 
 
 
¶1.  (SBU) Summary: The Privatization Authority sold 24.98% of 
state-owned Halkbank through an Initial Public Offering (IPO) and 
raised a total of %1.8 billion.  Foreign institutional investors, 
mostly from the Middle East, reported purchased 69.5% of the shares. 
Privatized shares will start to be traded on the Istanbul Stock 
Exchange May 10. The Halk Bank IPO was a required prior action for 
the IMF's 6th review which will go to the IMF Board May 18.  At a 
press conference, Minister of Finance Unakitan said political 
stability was important for economic stability, and that the strong 
foreign participation in the IPO in an election year showed that 
foreign investor confidence in Turkey continued.  The 
politically-sensitive partial privatization of Halk Bank despite 
election-year politics, underlines the Government's commitment to 
the privatization program.  End Summary 
 
¶2.  (SBU) The Privatization Authority (PA) had announced on February 
6 that the GOT would opt for an IPO for a 25 percent stake instead 
of a block sale of a majority stake in Halkbank, Turkey's 
second-largest state-owned bank.  This controversial decision, which 
ran counter to IMF and World Bank preferences, was attributed to 
election year politics.  Government officials argued that it would 
be easier to explain an ultimate block sale to the public if a 
market price were established first by means of a minority share 
IPO.  Business groups were critical of the block sale, fearing a new 
private owner -- especially a foreign one -- might not act in the 
interests of small businesses. 
 
¶3.  (SBU)  The Halk Bank IPO was priced at the top of the permitted 
range at YTL 8($6) per share.  Finance Minister Kemal Unakitan, 
Privatization President Metin Kilci and Halkbank General Manager 
Huseyin Aydin jointly announced the results of the IPO at a press 
conference on May 7, 2007.  Unakitan announced receiving a total bid 
of $12.9 billion of which only 14.6% could be met.  The price gave 
the whole bank a market value of 10 billion lira. Turkey raised a 
total of $1.846 billion.  Foreign institutional investors purchased 
69.5% of the shares.  Unakitan claimed that 230 institutional 
investors from 20 different countries placed bids; including 
investors from the UK, U.S., Europe and Middle East.  The Minister 
also announced that the Kuwait Investment Authority bought 10 
percent of the shares. 
 
¶4.  (SBU) Halk Bank is Turkey's second-largest State-owned bank.  It 
was established to lend to medium and small sized enterprises.  The 
bank earned a YTL 863 million profit in 2006, a 56 percent increase 
from a year earlier. Completion of the IPO is a required prior 
action under Turkey's IMF program.  In the press Conference Finance 
Minister Unakitan said that during the AKP government's period in 
office, privatization proceeds would exceed USD 23 billion and 
despite the elections the privatization program would continue.  The 
Minister noted that it took a long time to establish an environment 
in which investors had confidence in Turkey, and the Government 
would not deviate from prudent economic policies. Unakitan noted 
that the strong demand for Halk Bank shares underlined investor 
confidence in Turkey's democracy and post-election economic 
stability. 
 
¶5.  (SBU) Comment: The successful IPO was encouraging both for local 
and foreign investors and showed that despite the recent political 
tension, investors attach importance to Turkey's improved economic 
fundamentals.  Banking assets have been particularly attractive, 
given the room for growth in Turkey's underbanked economy.  This 
IPO, coming on the heels of the Izmir port privatization announced a 
few days earlier, also demonstrates the Government's commitment to 
continuing the privatization program, despite election-related 
postponements of other privatizations.  The IPO represents the first 
step in the long-awaited privatizations of state banks, which have 
suffered from several false starts and problems, and have been more 
politically-sensitive than state sales of industrial assets.  End 
Comment. 
Wilson