General Electric Co (GE) will sell its $3.3 billion stake in Turkey's Garanti Bank, GE Money sources said on Thursday, a move which could offer a rare chance to buy into Turkey's resilient bank sector.
GE has a 20.85 percent stake in Garanti, the most actively traded stock on the Istanbul bourse and Turkey's largest listed lender by market value.
Foreign investors like the bank because it is around 50 percent publicly-owned in a country where other banks are either run by families or the state, so a stake could attract several suitors, possibly from the Middle East, analysts said.
GE Money is selling its stake in Garanti Bank in line with its global reduction strategy, a GE Money source said.
GE, the U.S.'s largest conglomerate, has been trying to stabilize itself after posting eight straight quarters of falling profit and has been scaling back its hefty GE Capital finance arm.
By 1415 GMT Garanti shares traded down 3.4 percent at 5.65 lira, underperforming a volatile Istanbul stock index which was 2.55 percent weaker.
GE's Turkish arm said in a statement it was evaluating strategic options regarding its stake.
Garanti has boomed in recent years to become one of the Turkish banking sector's greatest successes. Its shares rose 143 percent in 2009, outperforming both the index of banking stocks which rose 116 percent, and the Istanbul index as a whole, as it reported double-digit profits.
I think everyone understands GE's rationale, why wouldn't you lock in such sizeable gains, said a London-based emerging markets trader.
FIRST IN LINE
Some analysts speculated that Turkey's Dogus Group, which owns a 30.5 percent stake in Garanti, could increase its holding, otherwise suitors could come from the Middle East.
Dogus could not be reached for comment.
GE originally bought a 25.5 percent stake from Dogus Group for $1.6 billion in 2005, before selling part of its holding back to Dogus in 2007.
Dogus is first in line to buy this stake but I don't know if they have the money. They are non-listed so we can't see their position, said analyst Ayse Colak at Tera Securities.
Assuming they can raise the money I think they would be interested ... Dogus bought a tranche back from GE before, but if they do buy it would be below the current market value.
Newspaper Haberturk reported on Thursday Dogus was entitled to a first chance to buy the shares, but that it and GE had failed to agree a sale in talks last week. The newspaper said JP Morgan had been mandated to sell the shares.
We do not believe Dogus group is capable of purchasing GE shares worth $3.33 billion as they are already leveraged from the previous share transaction. Also, it is not easy to find a strategic investor who would want to pay such a sum without assuming control of the bank, Oyak Securities said in a note.
Colak said it was not an easy time to buy the Garanti stake.
Western banks don't have the money ... but a Middle East investor might be an option, she said.
The London-based trader said: There are plenty of potential suitors as far as I can see ... in fact anyone that wants a strategic asset in Turkey.
Prior to the global financial crisis foreign banks such as ING, Fortis, BNP Paribas and Citigroup had rushed to buy into Turkey's banking sector.
Thanks to regulation imposed after a 2001 domestic crisis Turkish banks avoided exposure to the toxic assets which toppled some of their peers, remaining well capitalized and profitable.
Last year in particular was highly profitable for Turkey's banks, despite economic contraction in the country of around 6 percent. A year-long rate-cutting cycle by the central bank sliced 10.25 percentage points from the borrowing rate and helped banks boost their net interest income.
(Writing by Alexandra Hudson; Editing by Jon Loades-Carter and David Holmes)