Turkish Banking Stocks Soar as BBVA’s Garanti Bid Fuels Optimism

(Bloomberg) -- Turkey’s banks are having their best day in six years as a bid by Banco Bilbao Vizcaya Argentaria SA for the rest of its Turkish unit was received positively by investors and analysts.

The Borsa Istanbul Banks Index, a gauge that tracks shares of Turkish lenders, was trading 9.5% higher as of 1:07 p.m. in Istanbul, the biggest intraday gain since November 2015, after BBVA said it’s seeking to take full control of Turkiye Garanti Bankasi AS. Shares of Garanti soared 9.9% to 11.63 liras, while gains for the lender and banking peers helped boost the country’s benchmark Borsa Istanbul 100 Index 4% higher to a fresh record.

The Spanish lender will offer 12.20 liras per share -- a 15% premium to Friday’s closing price -- for the 50.15% of Garanti it doesn’t already own, according to a statement. Turkish banking stocks have been trading near record-low price-to-estimated earnings valuations amid concerns over challenging macroeconomic conditions and monetary policy. 

BBVA’s decision shows the commitment of the controlling shareholder to its Turkey franchise and also highlighs the attractive valuation of Turkish banks, including Garanti, Credit Suisse analyst Ates Buldur wrote in a note.  

Shares in the Spanish bank, meanwhile, were trading 3.6% lower as of 11:07 a.m. in Madrid. RBC Capital Markets analyst Benjamin Toms says the economics of the deal are attractive, but notes that “some investors may have preferred the excess capital to have been spent in a less political geography.”

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