By most accounts, Dubai’s biggest bank got a good deal when it agreed to buy Turkey’s Denizbank AS for $3.2 billion.
Emirates NBD PJSC is buying the lender from Russia’s Sberbank at a time when the country is struggling with a plunging currency, a wave of debt restructurings, looming elections and political meddling in the finance industry. The purchase is both Turkey’s largest M&A deal since 2012 and the Dubai bank’s biggest acquisition.
Turkey’s highly-competitive banking sector, with 51 lenders and $737 billion of assets, is struggling as a supply of government-backed credit starts to run out. President Recep Tayyip Erdogan is pressing banks to keep extending loans at interest rates that barely make up for inflation. They’re also being squeezed by the lira that’s fallen to a record low against the dollar and have already had to restructure $17 billion in loans.
The deal’s saving grace may be its price, which seemed to please analysts and investors. The purchase was agreed at 1.17 times book value at the end of October, although that multiple is expected to decline to about 1.05 to 1.06 times book value after including profit since then and subtracting interest payments, according to the Dubai-based lender.
Emirates NBD closed up 8.4 percent to AED10.7 in Dubai. The lender has gained 30 percent this year and is the best performer among 37 members of the DFM General Index, which is down close to 12 percent in 2018. While the price broadly accounts for Turkey’s risks “any economic and political issues that put further pressure on the lira will be challenging,” said Monsef Morsy, head of financial analysis
at CI Capital in Cairo.
Denizbank, which mainly offers retail and corporate banking as well as loans to the agriculture and tourism industries, posted a first-quarter net profit of 603.6 million lira ($131 million).