IFIs participate in 1.0 billion Turkish lira capital increase
The International Finance Corporation (IFC), a member of the World Bank Group; the IFC Financial Institutions Growth Fund (FIG Fund), a private equity fund managed by IFC Asset Management Company (AMC); and the European Bank for Reconstruction and Development (EBRD) will become shareholders of Odea Bank, a subsidiary of Lebanon's Bank Audi Group, through a subscription to a TL 1.0 billion (Turkish lira) capital increase of the lender.
This capital increase will provide Odea Bank with additional financial flexibility which will allow it to expand its financing in the real sector in Turkey, fund large scale infrastructure projects and increase access to finance for small and medium-sized enterprises (SMEs). Odea Bank is also planning to invest in new technologies to strengthen its digital banking network and reach one million unbanked people in Turkey.
As part of the capital increase, IFC and the EBRD are investing the Turkish lira equivalent of US$ 110 million and US$ 90 million respectively. IFC financing of US$ 38.5 million is provided by the FIG Fund. The remaining balance will be covered by Middle Eastern investors and Bank Audi itself. Following the capital increase, Bank Audi Group will remain a majority shareholder of Odea Bank with a stake of more than 75 per cent.
Completion of the transaction is subject to regulatory approvals including approval by the Banking Regulation and Supervision Agency (BRSA) and other customary closing conditions.
Odea Bank started its operations in Turkey in late 2012 as a subsidiary of Bank Audi Group, the largest Lebanese lender and one of the leading international financial institutions with a presence in both the MENA region and Europe. Within only three and a half years of operations, Odea Bank has established itself as one of the key players in the attractive Turkish banking sector reaching eighth position by customer deposits and ninth position by loans as of March 2016, excluding state-owned banks and based on BRSA unconsolidated financial statements of Turkish banks. Odea Bank operates 56 branches in 16 cities and employs over 1,500 staff as of June 2016.
Samir Hanna, Group Chief Executive Officer of Bank Audi Group and Chairman of Odea Bank, stated: “We welcome the EBRD and IFC, as well as other investors, as our new partners in Odea Bank. We are looking forward to a new phase of growth for Odea Bank in the highly promising Turkish banking market. This capital increase represents the largest capital increase in the Turkish banking sector over recent years and is a testimony to Bank Audi’s successful greenfield investment in Turkey. Odea Bank is a key pillar of Bank Audi’s future growth and we continue to be committed to its future development.”
Huseyin Ozkaya, General Manager and Board Member of Odea Bank, said: “It is vital and extremely encouraging that two reputable and prestigious institutions such as IFC and the EBRD, alongside other investors, demonstrate their confidence in Odea Bank. With this capital increase, we will be able to expand our lending support to infrastructure investments and projects contributing to the development of the Turkish economy.
The equity investment will also allow us to support SMEs which account for 70 per cent of Turkey's employment but receive less than 30 per cent of loans. We expect to make investments in our branch network, digital banking channels and technology in order to continue providing our corporate, commercial, SME and retail customers with the best quality service as the youngest top 10 bank in the competitive Turkish banking market.”
Both IFC and the EBRD have previously provided Odea Bank with credit lines for SME finance and trade facilities. Manuel Reyes-Retana, IFC Regional Head of Financial Institutions Group in Europe, Middle East, and North Africa, said: “Giving smaller businesses access to capital allows them to unlock their potential and create much-needed jobs. SMEs form the backbone of the Turkish economy but often struggle to reach their potential. We are further deepening our partnership with Odea Bank to support the bank’s efforts in expanding banking services across Turkey with innovative and technological solutions.”
Nick Tesseyman, EBRD Managing Director for Financial Institutions, added: “The EBRD is proud to take its cooperation with Odea Bank to the next level and acquire a stake in this young and dynamic Turkish bank. As a shareholder, the EBRD will assist Odea Bank in expanding lending where financing is needed most – to SMEs and women-led businesses, particularly outside the large metropolitan areas. The acquisition of a stake in Odea Bank is the second joint investment we have made with IFC in the Turkish banking sector following the acquisition of a minority shareholding in Fibabanka.”
Bank Audi is advised by J.P. Morgan as its exclusive financial advisor and by Dechert as its legal counsel for English law and by Bilgiç Attorney Partnership as its legal counsel for Turkish law, while IFC and the EBRD are jointly advised by Clifford Chance as legal counsel for English law and by Yegin Çiftçi Attorney Partnership as their legal counsel for Turkish law.