Top-performing Akbank mulls joint venture

Akbank, emerging on top of Turkey's banking crisis, has embarked on a plan to professionalize its management. As it outgrows its family origins, Atbank prepares itself for a joint venture.

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Erol Sabanci

JPMorgan calls Akbank "The Rock" and "our top pick". Merrill Lynch praises "its solid outperformance of the market" and its "sizeable liquidity and strong liability structure". Rating agency Fitch reports that among the five major Turkish banks it is the only one that "is fully reserved for non-performing loans".
As Turkey's banking crisis continues unabated, Akbank, the crown jewel of the ultra-rich Sabanci family, emerges on top. Now it has embarked on a bold plan to professionalize its management.
First-half results showed that Akbank's net profit was the highest among the companies listed on the Istanbul Stock Exchange and higher than the combined profits of the four closest rival banks.
Most of the credit belongs to chairman Erol Sabanci, who at 62 completes his 40th year with Akbank this year. He has been on the board since 1963 and chairman or managing director since 1970.

The Sabanci family has interests in more than 40 companies, many of which are market leaders in their sectors. The family wealth was established by Haci Omer, who in the 1920s walked 250km to the rich agricultural plains in the south and there made a fortune in cotton. Akbank was founded in 1948 together with a group of other local families. Before his death in 1966, Haci Omer assigned each of his six sons one aspect of the business. Erol Sabanci got the bank. "I had a reputation for being fastidious and being good with figures," says Sabanci. "I guess that's why."
"Erol Sabanci used to fly in from Adana once every two weeks and spend a bit of time with us," recalls Hamit Belli, an ex-general manager. "For seven years he commuted. Then he moved to Istanbul. He would come to the bank at 8.30. He leaves at 6.00. He still does. He has devoted his entire life to the bank."
Back in the 1960s Erol Sabanci was elected to the board to represent what was then Sabanci minority shares. Three years later the Sabancis acquired majority control. "Previously the bank was like a coalition government with each partner pulling it in a different direction," says Sabanci. "After this we were the undisputed captains and the bank started to grow in leaps and bounds."
During this time the government encouraged banks to invest in industry. Few matched the Sabancis' success. In the past two years nearly 20 stricken banks have been taken into government administration chiefly because shareholders illegally appropriated or unwisely invested their funds. Many other banks got saddled with cumbersome and unprofitable investments and find themselves as quasi-holding companies.
By contrast, Akbank funded many winners. In the 1990s all non-financial participation assets were sold and the profits ploughed into the capital. Today Akbank is the only pure bank play among the top five banks. "Akbank grew because Erol Sabanci always ploughed the profits back into the family-owned bank," says Belli. "He could have distributed it to the shareholders. He didn't."
Tanju Ozyol, an ex-Akbank branch manager who now owns his own bank, adds: "Another reason was that early on Akbank pioneered an excellent internal audit system. We virtually created a reign of terror."
Ozyol says that when Erol Sabanci first showed up at the bank many people thought that he would not make the grade. "He was a rich boy parachuted to the top of the bank. Many people would have flunked it. He became gloriously successful. Sabanci could be harsh and pitiless but for 40 years he never deviated from or compromised his principles, never failed in his duties. He cared about profits but never got mixed up in dirty business."
US consultancy firm AT Kearney has been contracted to restructure the bank. A major goal is to embed a professional managerial culture in the family business. "The aim is to make Akbank by far the biggest in the sector by market share and asset size," says Ulvi Sami, Kearney's Turkey representative. "Shareholder value enhancement will be the most important outcome."
Sabanci is a man of regular habits who rarely goes out. After work he spends 45 minutes on the treadmill and half an hour or so in the Jacuzzi and sauna. Then he has a few drinks - he likes Scotch - listening to tracks from such singers as Nat King Cole, Frank Sinatra, Shirley Bassey and Diana Ross. "My favourite is Paul Anka," he says. "I've known him for 15 years. He and I meet once every six months or so." He spends all his holidays abroad, always going to the same cities. London, Monte Carlo, Chicago, Dallas and Geneva are favourites but he loves New York the most.
"He is definitely not adventurous," says Suzan Sabanci Dincer, one of Erol's two daughters, an Akbank board member and a managing director. "Don't go looking for him tangoing in Argentina. He does not like surprises at work or in his leisure time. He loves places that he knows, always stays in the same hotels and eats in the same restaurants.. He is very regular and very, very private."
Sabanci's private life and business life are guided by the same rules and habit. "My father does not like clutter and uncertainty," she says. "He is neat and excessively organized. He does not like things to be pending. If there is a problem it should be solved and shelved."
It's generally agreed Akbank has outgrown its family origins. "The time for joint ventures for banks is here," says Sabanci. "I have prepared Akbank for this. I believe we are the most attractive for any foreign bank that wants to invest in Turkey." Erol Sabanci, the first Sabanci at the bank's helm, seems likely to be the last.

Akbank
Total assets	$958mn
Net loans ($mn)	$340 mn
Net profits	$213mn
Market capitalization (as of 19.10.2001)	$1.42bn
No. of offices:	608
Staff:	8,277
Moody's rating	A3 Prime-2, C Financial Strength
Fitch rating	B local currency long term rating
	C individual bank rating
	AA+ national rating
Headquarters	Istanbul
Customers	3.8 million
Shareholdings
H.O Sabanc¦ Holding and subsidiaries	43.30%
Sabanc¦ family	27.30%
Sabanc¦ Foundation	2.40%
Free float	27.00%

Source: Akbank

Bank deleveraging has barely started

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Top-performing Akbank mulls joint venture

Akbank, emerging on top of Turkey's banking crisis, has embarked on a plan to professionalize its management. As it outgrows its family origins, Atbank prepares itself for a joint venture.

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