Fernando González Urbaneja | Turkey consolidates BBVA’s internationalisation as the third leg of a bank based on Mexican, Spanish and Turkish business. Three different markets, three currencies, three economic areas. Diversification with risks, perceived as an opportunity. The Turkish bet is not new. It dates back to 2011 when the bank led by Francisco González surprised the market with the purchase of an almost majority stake in Garanti (49%), one of the large Turkish banks. At first it was an alliance with Turkish shareholders to which it would provide financial technology; then (2019) an integration by adding the BBVA surname to the original brand. Now they are consolidating the operation with the public offer to take control and ownership. For some it is a flight forward to avoid acknowledging a mistake, for others a bold operation to make good a previous decision that did not go as well as planned. All pending authorisations from Turkish, European and Spanish regulators.
BBVA sold its position in the US, which it had been working on as strategic for decades and which had been paid off with losses due to the difficulty and low profitability of a mature and competitive market such as the US. Almost simultaneously it gave up the takeover of Banco Sabadell, which would have increased its market share in Spain.
During the last few months, the lender’s bosses have studied the alternative of an investment in the US. Almost ten billion euros that reinforced the bank’s solvency and liquidity, but which need a profitable placement to be able to return equity. First they chose to buy back shares for their amortisation, then they increased the remuneration to the satisfaction of shareholders, and then they had to invest in growth, and the option chosen was Turkey.
All’s well that ends well; so far the Turkish bet has gone badly, but the bank’s management has decided to make a virtue out of necessity: they are investing in a business they know, in a country where they are already present, and they are betting on the future of a regional power in a conflict zone. It can be assumed that the Turkish authorities will bless the investor who bets on their economy and that the European and Spanish authorities will accept the bet because BBVA is a solvent bank that does not suffer from mistrust.
The Spanish bank is doing well in Mexico, its main market in terms of profitability; it also has a good franchise in Spain. It is betting on Turkey and not on the US; time will show whether it is right.