Facing election, Turkey drops Halkbank sale plan for an IPO

ANKARA – Turkey will hold an initial public offering (IPO) of state-owned Halkbank this year, the Privatization Administration said, reversing an earlier plan to sell a controlling stake in the bank during an election year. The government, which had told the International Monetary Fund it would sell the bank by May, faces a general election and has already called off the politically sensitive privatization of three electricity grids. The government’s change of plan yesterday hurt Turkish bank Garanti’s shares and weighed on the sector as analysts said the Halkbank IPO could draw funds away from other banking stocks. Shares in Garanti, which analysts said had been seen as a front-runner in the block sale, fell almost 2 percent. The head of the Privatization Administration, Metin Kilci, said Turkey aimed to complete the sale of 25 percent of Halkbank via an IPO by May, in line with its pledge to the IMF. Analysts said the government’s IPO decision looked like a compromise, in part to avoid job losses which could have been imposed by a buyer of a large stake. One London-based analyst said, «In an election year… the IPO option makes a lot of sense so they do some kind of privatization without jeopardizing the structure at the bank.» Small businesses, which benefit from soft loans from the so-called «people’s bank,» welcomed the move, while economists said it was bad news for Turkey’s foreign direct investment flows, as a large stake could have gone to a foreign buyer. Abdulkadir Akgul, chairman of the small businesses’ association TESKOMB, said: «We objected to a block sale. An IPO is a very good decision for us. Offering the people’s bank to the people is a correct decision.» He said small businesses borrowed nearly 4 billion Turkish lira (-2.2 billion) from Halkbank last year. Turkey said last year it would sell a majority stake in the bank, but after a court blocked the privatization, parliament had to pass a new law to enable it to go ahead. Garanti hit Shares in Turkish bank Garanti, whose expressions of interest in Halkbank had been welcomed by investors, fell almost 2 percent. They later trimmed some losses and stood 0.9 percent lower at 1320 GMT, still underperforming the wider market. «The market was viewing that Garanti was likely to be in the front-runners… so some of this had been reflected in the share price,» Morgan Stanley analyst Maciej Szczesny said. The first analyst said other banking stocks could also suffer, as an initial public offering would likely draw funds from other banking shares. «It’s going to be a $1 billion IPO and some of the proceeds will come from existing holdings in other banks, because that’s usually what happens,» he said. Istanbul’s banking index underperformed the wider market, falling 0.4 percent. Halkbank, with assets of about -18 billion, was seen as one of the last sizeable banks available in the fast-growing European Union candidate country, and its privatization by a block sale had attracted strong interest from abroad. Bankers had said that interested buyers included BBVA, National Bank of Kuwait, Fortis and Akbank.