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BNP Paribas, ING, Bahrain group in race for HSBC Turkey

ISTANBUL, May 30, 2015

ING Group NV, BNP Paribas and Bahrain-based Arab Banking Corporation (ABC) have submitted bids to buy HSBC's Turkish business, a source familiar with the process said.

The source said the bids are non-binding, suggesting that the process could still take some time to complete, but that one-to-one talks have begun.

The source also said ABC appeared the most keen.

"ING's Turkish unit and BNP's Turkish partner do not seem extremely excited about the acquisition. Although ABC is the smallest of the three, it seems very aggressive" the source said.

Four other sources said Dutch lender ING was interested in buying HSBC's Turkish business, comprising corporate and investment banking operations as well as a loss-making retail arm.

Two of the people said ABC was looking to buy the business, though they did not know if bids had been submitted.

Qatar National Bank was also interested but has not submitted a bid, the first source said.

HSBC, ING, BNP and QNB declined comment and ABC could not be reached for immediate comment.

In February HSBC chief executive Stuart Gulliver said that businesses in Turkey, Brazil, Mexico and the US needed to improve or be sold.

The bank has started auctions to sell operations in Turkey and Brazil and is expected to restructure in Mexico and the US, sources have said.

HSBC had $8.6 billion of loans in Turkey at the end of 2014, but it does not disclose their book value, which is the value at which assets are carried on the balance sheet.

The business could be sold at about book value, meaning HSBC would not see a gain or loss on the sale, sources said. One said the price would depend on the structure of the deal, such as whether HSBC provides financing.

An acquisition would mark a return to the takeover trail for ING, which expanded internationally with a series of deals over two decades before needing rescuing by the Dutch government in 2008.

EU rules on state aid meant it had to sell businesses and was not allowed to make acquisitions, but the block on purchases ended this week when it cut its holding in insurance arm NN Group to 42 per cent.

ING already runs a retail bank in Turkey, but it lacks scale and needs to expand to survive in the highly competitive Turkish banking system, local sources have said.

CEO and Chairman Ralph Hamers told analysts this month he would consider acquisitions to increase ING's presence in countries where it already has a foothold.

France's BNP also has a sizeable business in Turkey and may be keen to add scale.

BNP has made acquisitions before and after the financial crisis, but its appetite for deals has diminished since its capital strength was dented by a record $9 billion fine from US authorities last year for violating US sanctions. It has said its focus is on organic growth but would consider "bolt-on" acquisitions.

ABC has gone through significant management changes in the past 18 months and is growing quickly, but HSBC Turkey would represent a big deal for a bank of its size.

HSBC's Gulliver is trying to cut costs and reduce complexity and is due to provide a strategy update on June 9, when he will be keen to show some big disposals are well advanced.

HSBC lost $64 million in Turkey last year, dragged down by a $155 million loss at its retail business after regulatory changes capped interest rates on credit cards and overdrafts.

It is the 13th-largest branch network in Turkey with nearly 300 branches, well behind Isbank, Garanti Bank and some state-run lenders.-Reuters

Tags: Bahrain | BNP Paribas | ING | HSBC Turkey |

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