Bank Asya Says Foreign Buyers Interested Amid Profit Slump

Aug 13, 2014 7:43 am ET

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Aug. 13 (Bloomberg) -- Foreign banks may be interested in acquiring Asya Katilim Bankasi AS, its chief executive officer said, after announcing that profits have plunged since the bank came under pressure from the government for its alleged links to a U.S.-based Islamic preacher.

CEO Ahmet Beyaz also said Bank Asya would hold off chasing up overtures from abroad until it spoke with TC Ziraat Bankasi AS, a state bank he said is also interested in acquiring the Istanbul-based Islamic lender. Earlier in August, Bank Asya announced an end to nearly four months of exclusive partnership talks with Qatar Islamic Bank SAQ. Beyaz said he knows of acquisition interest through Goldman Sachs Group Inc., which Asya hired in June as a financial advisor.

The comments yesterday came in a conference call in which Bank Asya said second-quarter profit plunged 81 percent to 10.6 million liras ($4.9 million) from 55.3 million liras a year earlier. The profit slump reflects a shrinking deposit base, down 3 percent this quarter or 25 percent compared with the same quarter last year, after the government criticized the bank for its alleged links to followers of U.S.-based Islamic preacher Fethullah Gulen.

Prime Minister Recep Tayyip Erdogan accuses Gulen of instigating a corruption investigation that implicated members of his government and has said that he is determined to purge Gulen’s followers from positions of public influence. Ruling party lawmaker Mustafa Sentop said in an interview on AHaber television today that the government would continue to expunge members of what it calls the “parallel structure,” a reference to Gulen’s followers, from the state.

Withdrawn Deposits

Hamdi Topcu, the CEO of Turkish Airlines, which is 49 percent state-owend, said in February that the company had withdrawn its deposits from Bank Asya. In July, the prime minister said that the bank had “deliberately misled” the market over QIB, in order to “gain psychological support,” according to comments reported by the Daily Sabah newspaper. Asya responded by lodging a complaint with Turkey’s market watchdog.

Regulators halted trading in Bank Asya shares on Aug. 7. In a statement after the markets closed yesterday, Borsa Istanbul said trading had been suspended to allay uncertainty surrounding “significant and continuous fluctuation” in the stock price “amid contradictory news reports about the bank’s partnership structure.”

Analyst Recommendations

Turkiye Ekonomi Bankasi AS, the Istanbul-based unit of BNP Paribas SA, said today that it suspended its coverage of Bank Asya, joining six of 19 analysts surveyed by Bloomberg News. Eleven of the remaining analysts rate it hold, while two say buy.

“We will consider resuming coverage once there is visibility on the bank’s operations and the political dispute is resolved,” TEB analyst Fatih Topac said in a report.

Gulen left Turkey in 1999, shortly before he was charged with forming a group seeking to undermine the secular state. He was acquitted by the top appeals court in 2008. For most of Erdogan’s 11 years in power, he received support from Gulen’s movement as they shared goals such as curbing the power of the secular army.

Erdogan won 52 percent of the vote in last Sunday’s elections, the first time that Turks have directly elected their president. He has vowed to pursue his purge of Gulen’s followers once he moves to the presidency at the end of August.

Bank Asya shares have declined 14 percent this year, compared with a 20 percent gain on the XBANK index of Turkish banking stocks. A higher proportion of the bank’s shares float on the Istanbul Stock Exchange than of any other lender.

--With assistance from Onur Ant in Ankara.