Spain's BBVA says Turkish currency slide cuts price of stake in lender Garanti
Published: Dec 02, 2021 07:43 PM
A customer in a cafe in Barcelona, Spain. Photo: VCG

A customer in a cafe in Barcelona, Spain. Photo: VCG

The chief executive officer of Spain's BBVA said on Monday that the weaker Turkish lira has reduced the price of its deal to buy 50.15 percent of Turkish lender Garanti by more than 400 million euros ($453 million) at current exchange rates.

BBVA, which already owns part of Garanti, recently offered to buy the remaining stake in the lender in a deal that at the time was worth up to 2.25 billion euros. 

On Monday, CEO Onur Genc said that the deal would now cost about 1.8 billion euros and capital consumption would be about 1.1 billion euros, down from the 1.4 billion euros initially estimated, as the deal had been structured in liras.

"The currency devaluation actually helps us, so we are going to buy 50 percent of the bank if we can for 1.8 billion euros in cash after 10 days (of a slide in the Turkish lira)," Genc said.

The deal, which is expected to close in the first quarter of 2022, was announced on November 19. It established a maximum price of 25.697 billion Turkish lira ($2.03 billion) or 12.20 lira per share, should all Garanti BBVA shareholders sell their shares.

"That entry price has improved, and has been improving every single day," Genc said.

Capital consumption is lower than the price of the acquisition as the bank already consolidates all of Garanti's risk-weighted assets but not all of its equity. 

Still, Genc said he was aware of the short-term risks and macroeconomic uncertainty in Turkey.

On Monday, the Turkish lira slid as much as 4.6 percent against the dollar, nearing record lows touched last week after President Recep Tayyip Erdogan defended his low-rates policy despite widespread criticism.

Though analysts mostly agree that the deal makes sense from a financial point of view, many highlight the macroeconomic risks. They were expecting BBVA to increase its presence in Spain to counter-balance its exposure to emerging markets 

Asked about resuming merger talks with Spanish lender Sabadell, Genc said that Spain was obviously BBVA's "home market" where the bank wanted to grow organically.

"There is nothing new to add," he said, regarding Sabadell, but reiterated the bank, as in other jurisdictions, would analyze opportunities if they added shareholder value.