dogus garanti bank

DOGUS GROUP : WEIGHING PARTNERS FOR GARANTI’S BANK

Presented by• Musa Faal• Vinay Sawant• Manoj Kumar Sodhani

Business in Emerging Market

Dogus Group : Weighing Partners for Garanti Bank

• Overview of Turkey economy • Overview of Turkey Banking Industry• Overview of Dogus Group• Brief of Garanti Bank• Options available with Dogus wrt Garanti Bank– Compete Alone– Collaborate

• Decision Taken by Dogus Group for Garanti Bank• Dogus Group in Turkey : Responding to Institutional Voids

Geographical importance of Turkey

Demographic condition of Turkey

- Turkey was Founded in 1923.

-Population -72 million

- Currency - Lira

-80 % Turkish & 20% Kurdish

- 99.8 % Muslims & 0.2% Christian & Jews

Overview of economic condition of Turkey around 1999-2005

In Dec. 1999 Turkey became candidate to join EU In early 2001 Currency lira was depreciated by 40% & went into recession

In 2004 economy recovered. In 2005 government promote privatization and FDI increased by $5 billion (double as compared to 2004) Turkish lira was changed to Yuni Turk Lira(YTL) by dropping six zeros.

IMF approved $10 Billion to support economical & financial stabilization program. Support of IMF and possibility of accession in EU increased confidence of investors in Turkey

Overview of Turkey’s Banking industry In 1980 banking industry underwent legal, structural & institutional changes. Foreign banks allowed to enter. Additional services started such as trading securities and mutual fund

Banking Regulation and Supervision Agency(BRSA) was formed. In 2001 recession led to downfall of many small & medium banks. No. of banks reduced from 81 to 61 nos.. In 2001 support of IMF & closeness with EU changed situation of banking sector

Reduction in inflation & interest rates. Foreign banks share expected to increase to 15% in 2005 as compared to 1% in 1999. Many foreign banks entered into Turkey such as BNP paribas(France) , HSBC(London)

Overview of Dogus Group

In 1951 founded by Ayhan Sahenk (Construction)

Diversified group (Tourism, Food processing, Financial services)

Acquired Garanti Bank in 1980s and also entered into Automotive import & distribution In 1990 expanded into insurance, investment banking ,brokerage, television, supermarket

In 1999 Ferit become CEO, wanted to focus on core business to become strong regional player

In 2005 company had control in 77 companies , 6 business lines and 18000 employees. Second largest conglomerate in Turkey.

Overview of Garanti Bank

Established in 1946 at Ankara as privately owned commercial bank. Acquired by Dogus in 1983 Gone Public in 1990 on Istanbul Stock Exchange. Gone global in 1993 on London Stock

Exchange Acquired Osmanli an Korfez in 1994 and merged in Garanti Bank in August 2001.Hallmark of Garanti Bank in Turkey Dynamic human resources capable of making a difference State-of-the-art technology

Innovative customer oriented products and services

Best customer relationship management solutions

Exceptional data warehousing and management reporting

Centralized operations

Integrated financial services

Extensive branch network

Use of alternative delivery channels

Go alone or

With partner

FACTOR FAVOURING COMPETING ALONE• Deep local knowledge• Superior IT Infrastructure• Widespread distribution network• Well known and Reputed Brand• Healthy balance sheet with strong capital base• Experience gained during high inflationary pressure (2001)• Knowledge of emerging market thinking (Customer, Realities and Changes)• Achieved higher profitability (ROE 19.5% in 2005) without any partner

Garanti Bank- Compete Alone or Collaborate

Garanti Bank- Compete Alone or Collaborate

FACTORS FAVOURING NEED FOR FOREIGN PARTNER• Reduce the debt on Garanti’s balance sheet• Expand its business in the region & Grow business outside the country• Institutionalize Corporate Governance• Incorporation of best practices (Lean Management, Sig Sigma etc)• Potential driver in Turkey

– Mortgage lending– Inventory financing– Home equity line of credit– Fleet financing

• Strengthening of Corporate banking & Project Financing• Restructuring family business by bringing third party / new shareholder• Motivation of employees through training and career development

opportunity

Garanti Bank- Next Step• Appointed Morgan Stanley for exploring partnerships and share sale for

Garanti

• Guidelines given for Partner Search– Global Brand– Strong Financials– Worldwide experience– Commitment to Garanti’s regional expansion in terms of strategy and targets– Operational capabilities like better operation, cost advantage and know how to advise

the relationship– Corporate Culture similar to Garanti (Customer focus, efficiency focused, innovation, fast

decision making)– Dogus group will keep the control on Garanti’s bank– Keep the “Garanti” brand– No reorganization change in top management

Garanti Bank- Next Step

• Bidder 1 : European Bank



• Bidder 4 : Diversified US Institution

• Bidder 5 : Diversified Asian Institution

Why Diversified US Institution• Assets more than $500 billion

• Market capitalization more than $100 billion

• High on corporate governance

• Global visibility (US based)

• Industry leading returns

• Highly profitable credit card business

• Global consumer finance player

Factor favoured GEWhy Dogus choose GE• International banks that bid for stakes wanted to acquire majority holding

in Garanti an rebrand the bank• As GE was not a bank it would bring a different perspective to board

discussion and look at Garanti differently in comparison to multinational bank

• GE being a diversified multinational offers the possibility of further cooperation in other sectors

• Dogus has already partnered with GE’s CNBC TV network in Turkey (1998) and with GE real state in JV (2006)

• Partnership with GE provides Dogus the flexibility to partner with different companies in other financial services

• Regional growth in Romania• Culture of innovation, customer focus, efficiency similar to Dogus GroupDogus sold 25.5% stake in Garanti to GE

SPOTTING VOIDS QUESTION

Are consumers willing to try new products and services? Do they trust goods from local companies? How about foreign companies?

Underdeveloped consumer information providers (products market information analyzers and advisers

SPECIFIC VOID

Competed alone :kept valuable brand, even within foreign partnershipRESPONSE

Dogus Group in Turkey : Responding to Institutional Voids


How strong is the country’s education infrastructure, especially for technical and management training?

Underdeveloped educational and training intermediaries (labor market aggregators and distributors)

SPECIFIC VOID

Collaborated: Exploited opportunities for training exchanges with foreign partner

RESPONSE



How effective are corporate governance norms and standards in protecting shareholders interests?

Underdeveloped corporate governance standards (capital market credibility enhancers’)

SPECIFIC VOID

Collaborated” Used foreign partnership to bring institutional best practices to restructuring family-owned company

RESPONSE



Are corporate boards independent and empowered, and do they have independent directors?

Shallow pool of qualified independent directors (capital market information analyzers and advisers)

SPECIFIC VOID

Collaborated: Sought out foreign partner that could provide strategic advice through seats on board

RESPONSE


THANK YOU

dogus garanti bank

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