Emirates NBD's Turkish deal riskier than it looks | ZAWYA MENA Edition

Emirates NBD's Turkish deal riskier than it looks | ZAWYA MENA Edition:

" Emirates NBD is making a virtue out of Turkish turbulence. The United Arab Emirates lender has agreed to pay Russia’s Sberbank 14.6 billion lira ($3.2 billion) for Istanbul-based Denizbank. In the long term, NBD should benefit from diversification and increased trade between Turkey and the Arab world. Right now, erratic politics and economic decline mean it is by no means a bargain.

Sberbank, Russia’s largest bank by assets, bought Turkey’s fifth-largest bank by assets in 2012 signaling intentions to expand abroad. Western sanctions have halted all that. Morgan Stanley reckons Sberbank breaks even, but can also reallocate capital to Russia, where it makes a return on equity exceeding 20 percent.

NBD is paying a small premium to Denizbank’s 2017 book value. That looks cheap given Denizbank made a 15 percent and 13 percent return on equity over the last two years respectively, and acquisitions of fast-growing emerging markets lenders are often done at multiples of book. NBD also advances its strategy – roughly 30 percent of group revenue will now be overseas – and can link local clients doing business in Turkey into a network stretching via Dubai into Saudi Arabia, Egypt and India."



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