U.S. News

ING Expands in Turkey With $2.7 Billion Oyak Bank Buy


Dutch banking and insurance company ING Group is buying Turkey's Oyak Bank for $2.67 billion, joining a rush of overseas financial groups buying into the fast-growing Turkish market.

ING said on Tuesday the planned purchase was in line with its aim of expanding in emerging markets and would not affect its 5 billion euro ($6.7 billion) share buy-back program. It said it expects the acquisition to boost earnings per share from 2008.

"In addition to funding organic growth we also seek opportunities to get bolt-on acquisitions in fast developing markets. This is precisely what we do today," ING Chief Executive Michel Tilmant told reporters.

Oyak, a mid-sized Turkish bank owned by Oyak Group, is viewed as one of the last opportunities to get into Turkey's fast-growing banking sector after a series of foreign acquisitions. Franco-Belgian Dexia for instance last year bought DenizBank.

ING -- which won the bid against competition from Italy's Intesa Sanpaolo among others -- said it is paying 3.26 times Oyak's book value as of March 31 and 26.6 times its 2006 normalized earnings. Some analysts said the price looked expensive.

Growth Prospects

Analyst Funda Afacan at brokerage Raymond James said the price was above current market valuations of Turkish banks -- Vakifbank for instance trades at 2 times book value and Halkbank at 2.7 times, based on figures at the end of the first quarter of 2007.

At Sanford C. Bernstein analyst Bruno Paulson said the price looked more expensive than paid by Dexia and Greece's National Bank (NBG) for Turkish acquisitions. "The 26.6 times (earnings) multiple does look higher than the 17 to 18 times multiple in the Dexia and NBG deals," he said in a note.

However some analysts were positive about an entry into the Turkish banking market because of its good growth prospects.

"Although pricing looks expensive at first sight, one should consider the double-digit growth figures that are observed in the Turkish market," KBC Securities analyst Dirk Peeters said in a note.

Shares in ING were up 0.1% to 33.39 euros against a 0.1% rise in the DJ Stoxx European banking sector index.

European banks are engaged in a spate of takeovers as they seek cross-border growth and economies of scale. ING's Dutch peer ABN Amro Holding for instance is the subject of a takeover tussle between Britain's Barclays and a group led by Royal Bank of Scotland.

ING said it will finance the Oyak takeover from existing internal resources.

The deal, which would cut ING Bank's Tier 1 capital ratio by approximately 0.5 percentage points, is expected to complete in the second half of the year.