Turkey - Capital Injection to the State Banks
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A potential capital increase for Turkish state-owned banks was in banking sector’s agenda for a quite long time. According to the latest statements shared by the banks, Turkish Sovereign Wealth Fund (TVF) will inject TRY7.bn for each bank. We believe that these capital increases will strenghten those banks’ capital adequacy as well as liquidity. Recall that VAKBN and HALKB are trading at 1yr fwd PBV of 0.19x and 0.30x respectively. The capital adequacy ratio (CAR) of VAKBN is 14.73% while HALKB is 13.90%, below the sector average of 18% and we expect around 200 bps of improvement in CAR for each bank after the capital increase.
Here are the details of the transactions for the two publicly traded state-owned banks, VAKBN and HALKB:
VakifBank (VAKBN TI):
According to the announcement made by VAKBN on Friday, the bank will issue 1.406bn lots shares, sell Turkey Sovereign Wealth Fund (TVF) with TRY4.98 price per share and increase its capital by TRY7.0bn. Recall, the last closing of VAKBN share on Friday was TRY4.59. Thus, TVF will be buying the shares with 8.50% premium. The wholesale transaction is aimed to be completed by May 20, 2020.
The shareholder structure of the bank before-after the transaction is exhibited in table below:
Exhibit: The change in shareholder structure of VAKBN before and after the capital increase
(TL,Mn) Before Transaction After Transaction
Shareholders Share in Capital Ratio in Capital Share in Capital Ratio in Capital
Ministry of Treasury and Finance (Group A) 1,075 43.00% 1,075 27.53%
Vakifbank Pension Fund (Group C) 403 16.10% 403 10.31%
Ministry of Treasury and Finance (Group B) 388 15.51% 388 9.93%
Other Foundations (Group B) 3 0.10% 3 0.07%
Other Real Persons and Corporates (Group C) 2 0.06% 2 0.04%
Free Float (Group D) 631 25.23% 631 16.15%
Turkey Sovereign Wealth Fund (Group D) - - 1,406 35.99%
Total 2,500 100% 3,906 100.00%
Halkbankasi (HALKB TI):
As for Halkbankasi, according to the announcement made on Friday, the bank will issue 1.224bn lots of shares, sell Turkey Sovereign Wealth Fund (TVF) with TRY5.72 price per share and increase its capital by TRY7.0bn. Recall, the last closing of HALKB share on Friday was TRY5.37. Thus, TVF will be buying the shares with 6.52% premium. The wholesale transaction is aimed to be completed by May 20, 2020 as well. The shareholder structure of the bank is exhibited in table below:
Exhibit: The change in shareholder structure of HALKB before and after the capital increase
(TL,Mn) Before Transaction After Transaction
Shareholders Share in Capital Ratio in Capital Share in Capital Ratio in Capital
Turkey Sovereign Wealth Fund 639 51.11% 1,863 75.29%
Free Float 611 48.89% 611 24.70%
Other 0.08 0.01% 0.08 0.003%
Total 1,250 100% 2,474 100.00%
Turkiye Halk Bankasi (Halkbank) is a banking and financial services company based in Turkey. Co. offers corporate and commercial banking products and services to a range of customers, from individuals to large corporations. Co.'s operations include: consumer and retail banking, consumer loans, credit and debit cards, deposit and overdraft accounts, payroll services, corporate and commercial banking, budget loans, credit line facilities, cash management, investment banking, brokerage, factoring, leasing and insurance services, and tradesmen/SME banking. As of Dec 31 2011, Co. operates 771 branches and had total assets of TL92,160,657,000.
Turkiye Vakiflar Bankasi (Vakifbank) is a banking and financial services company based in Turkey. Co. offers products and services that cover corporate, commercial, investment and small-scale enterprise banking as well as the retail and private banking sectors. Co. also provides financial leasing, portfolio management, real estate, insurance and factoring services through its financial participations. Co.'s deposit products include time and demand deposits, as well as loans comprise spot loans, foreign currency indexed loans, consumer loans, automobile and housing loans, working capital loans, gold loans, foreign currency loans, eximbank loans, and pre-export loans.
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