Oyak marches to the profit drumbeat
Marriages of convenience to decline?
Turning an 11-branch operation into the eighth-largest bank in Turkey cannot be considered a failure. In spite of this, and the fact that it is one of the few pieces of the Oyak puzzle that bears the group’s name, Oyak Bank is unwanted by the fund’s key decision makers. As a consequence, Merrill Lynch has been awarded the mandate to sell the bank, which at year-end 2005 had assets of TL 8.38 billion ($5.71 billion).
This might seem strange, as Turkish banks are proving a popular investment. FDI in the Turkish banking sector has been strong, as the country is picking up on the trend evident in the whole region. After acquisitions such as Disbank by Fortis and Yapi Kredi Bank this year by UniCredit and its Turkish partner Koc Group, the share of foreign ownership has risen at the end of the first half of 2006 to 13% of total assets, compared with 5% in 2004.
At the core of this reasoning is Oyak’s president and CEO Serif Coskun Ulusoy’s sound understanding of the Turkish banking sector. He knows that competition is intense, and bound to grow more so with the arrival of foreign players. Margins are under pressure, and Oyak would have to invest significantly to make up for this in market share. “There is a lot of competition in the Turkish banking sector with foreigners coming in; it’s difficult being a mid-size bank,” agrees Öner.
Low rates of return and long-term investments are anathema to Oyak’s business strategy. But at least the market conditions that make the bank unsuited to the pension fund should ensure that Oyak makes nice earnings out of the sale.
According to Ulusoy, the bank had always been incompatible with the strategy of Oyak’s new management. “We did not want that bank,” he says, looking back to 2000 when he became CEO as part of the new management, shortly before the onset of the Turkish crisis that wreaked havoc on the value of equity holdings. “It was an 11-branch bank, and it was not doing well. We got rid of the other companies because we saw the crisis coming. But how can you get rid of a bank? So what we did instead was go down the other route, and turn it into a nice, valuable bank.”
Oyak Bank merged with Sümerbank in 2002, and grew further organically. However, because of an arrangement with the government, Oyak was unable to sell off the bank until August this year. Ulusoy’s attitude towards the bank had not changed. “Running a bank is the most difficult thing in the world,” he says. “I don’t think a retirement fund should have a bank.”
