Dubai’s biggest lender is considering whether to renegotiate its offer for Sberbank PJSC’s wholly-owned Turkish unit after the lira lost almost 30 per cent of its value since the deal was signed, according to people familiar with the negotiations.
Emirates NBD PJSC wants to complete its acquisition of Denizbank AS but is concerned that the price set in May is too high following the slump in the lira, the people said, asking not to be identified because the talks are private. Emirates NBD struck a deal to buy Denizbank for TRL 14.6 billion, which was worth more than $3 billion on May 22.
A renegotiation is one option being considered, but nothing has been decided, the people said. Representatives for Sberbank and Denizbank declined to comment. Emirates NBD is “closely monitoring” events, a spokesman said, declining to provide further details.
The terms of the purchase, which fixed the exchange rate in a corridor, meant that Emirates NBD agreed to pay a minimum of about $3.4 billion for Denizbank, according to Sberbank’s Chief Financial Officer Alexander Morozov. The value of the asset has fallen by about $800 million in dollar terms amid tensions with the US and an increasingly grim economic outlook, dropping below that floor price.
Turkey’s highly competitive banking sector, with more than 50 lenders, is struggling as a supply of government-backed credit starts to run out. President Recep Tayyip Erdogan is pressing banks to keep extending loans at interest rates that barely make up for inflation. They have also had to restructure $17 billion in loans.
Fitch Ratings on Monday downgraded 20 Turkish lenders, including Denizbank, saying their performance, asset quality, capitalization, liquidity and funding profiles are now more likely to come under pressure due to a further depreciation of the lira, the spike in interest rates and a weaker growth outlook.
Sberbank’s executives have said they expect to close the deal by the end of this year.