Nov 08 2018

NBD Bank of Dubai edges towards Denizbank purchase

NBD Bank of the United Arab Emirates is edging towards completing the purchase of Turkey’s Denizbank from Sberbank of Russia.

The Dubai-based firm applied to Turkey’s competition regulator as it began finalising the sale, according to a statement on the regulator’s website.

NBD, Dubai’s biggest bank, said in May that it would buy Denizbank, Turkey’s fifth-largest bank by assets, for 14.6 billion liras, equivalent to $3.2 billion at the time of signing, as it sought to become a major player in Turkey and the region. The potential deal was initially reported in January.

Sberbank and NBD are penning the agreement despite a currency crisis that started in Turkey earlier this year and that intensified in August. Economic developments in the country have led to a raft of downgrades of Turkish banks by leading ratings agencies, who cited concerns about mounting bad loans and their exposure to foreign currency debt.

The final sale of may be delayed until the start of next year, Dunya newspaper reported on Nov. 1, citing a statement by Sberbank. The transaction will be completed at the end of this year or beginning of 2019, the Moscow-based bank said in its third-quarter earnings statement. Sberbank had previously said it expected to wrap up the sale in 2018, pending regulatory approval.

Denizbank said in May that the agreement was completed under a "locked box mechanism" and was based on the consolidated equity capital of Denizbank as of October 31, 2017. In addition, Emirates NBD would pay interest on the consideration for the period between October 31, 2017 and the transaction closing date, Denizbank said.

The transaction price of 14.6 billion liras is now equivalent to $2.7 billion after the lira lost ground against the dollar.

Denizbank said on Sept. 18 that “the process of regulatory approvals is ongoing with relevant filings having been made to authorities in Turkey, Austria and UAE. Further material developments in the ongoing process will be disclosed when they are confirmed, it said.

The two banks have agreed the deal despite strained relations between Turkey and the United Arab Emirates over Turkey’s alliance with Qatar and accusations by the Turkish government that the UAE is meddling in the country’s internal affairs following a failed military coup in July 2016.

Sberbank is selling Denizbank as it seeks to focus on Russia by selling some of the assets that it owns overseas. Denizbank has over 700 branches across Turkey.