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Latest news updates: Covid contracts force Serco to upgrade full-year outlook

BBVA, the Spanish bank, has made a €2 billion bid for the 50.15 percent of Garanti, Turkey’s largest bank by market capitalization, which it does not yet own, using funds from its own recent sale of US assets.

The acquisition price of TL 25.7 billion (EUR 2.25 billion) represents a 34 percent premium to the average price of Garanti shares over the past six months and is BBVA’s most recent proposed spend of $11.6 billion that it earned from the sale of its US assets to PNC this year.

“The sale of the US subsidiary provides us with strategic options to, among other things, invest the excess capital in our key markets,” said Onur Genc, ​​CEO of BBVA, who is originally from Garanti.

BBVA is executing a €3.5 billion share buyback plan of up to 10 percent of its shares, one of the largest in Europe.

The purchase of Garanti comes against the depreciation of the Turkish lira, whose purchasing power in euros has fallen to about a quarter of what it was in November 2014, when BBVA agreed to pay €2 billion for a stake of 14.89 in Garanti, a transaction that was completed in 2015.

“The award is very attractive to the minority shareholders of Garanti BBVA,” said Carlos Torres, BBVA executive chairman. “Turkey is a strategic market for us and, despite its short-term volatility, has great potential.”

Garanti, which has more than 21,000 employees and 1,000 branches, says it is the country’s most profitable bank, with a return on equity of 19.3 percent and a non-performing loan ratio of 4 percent.

BBVA has been in control of Garanti’s board since 2015. It agreed to increase its stake to 49.85 percent in 2017.

The latest proposed transaction, which BBVA expects to close in the first quarter of next year after regulatory approval, would boost the Spanish lender’s profits by fully consolidating those of Garanti.

BBVA said the transaction would increase earnings per share by 13.7 percent in 2022.

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