Is HSBC coming to Romania?

HSBC Holdings, the leading banking group worldwide in terms of market capitalisation won the tender for the sale of the Turkey-based Demirbank, one of the 18 private banks taken over by the Turkish State following the financial crisis last year. HSBC thus became the first foreign investor to have bought a bank taken over by the Turkish Government due to insolvency.

The supervision authority of the banking sector in Turkey specified HSBC would merge Demirbank with its local division HSBC Bank AS. The new institution will have $250 million in capital and $2.35bn in total assets.

The closing price of tender was not released, but the dailies in Turkey quoted banking sources as saying the price ranged somewhere between $300 million and $350 million.

Apart from HSBC, the bidders were Italy-based UniCredito Bank, a Turkish consortium run by businessman Aydin Dogan, as well as the Armed Forces Pension Fund in Turkey, Oyak.

Prior to its take-over by the State in December 2000, Demirbank was the ninth largest bank in Turkey, in terms of assets.

Due to Demirbank’s extensive branch network, the supervision authority of the banking sector in Turkey felt that of all the 18 banks taken over by the State, it stood most chances of being sold. The rehabilitation of these banks has cost the State billions of dollars so far.

The analysts appreciated the choice of a foreign investor as Demirbank’s owner, feeling this option will be able to stimulate the entire banking sector in Turkey.

The Turkish authorities have endorsed the sale of Garanti Bank to Intesa-BCI, as well as an agreement between France-based BNP Paribas and Finansbank lately.

Demirbank TAS Istanbul holds 62.5% in Demirbank Romania, which was registering more than $13 million in equity capital at the end of Q1. In late last year, the assets of the bank reached $65.5 million.

Although Demirbank has registered a visible expansion on the Romanian banking market, it is yet unknown whether the new owner of Demirbank Turkey – HSBC, would decide to maintain its stake in the Bucharest-based bank or not.

A decision in this regard is to be made some time over the next few months. HSBC has carried out very few financial operations with Romania so far.