CC-BY-SA-2.0, Flickr. Adrien Pichoud Appointed New Chief Economist at SYZ Asset Management
SYZ Asset Management has announced the appointment of Adrien Pichoud as Chief Economist. Adrien Pichoud is also a member of the Strategy Committee, which defines the Group’s investment policy. Under the direction of Fabrizio Quirighetti, Chief Investment Officer of SYZ Asset Management, Adrien Pichoud also assumes the function of co-manager of the OYSTER European Fixed Income and OYSTER USD Bonds funds.
Adrien Pichoud joined the SYZ Group in 2010 as an economist. Prior to that, he spent seven years as an economist in a brokerage firm in Paris. He holds a master’s degree in finance from the University of Grenoble (France) and a BA in Economics from the University of Sussex (UK). Adrien Pichoud is a well-known commentator in the Swiss investment media to which he frequently contributes.
“Adrien Pichoud’s skills as an economist greatly contribute to the quality of our investment strategy and the performance of our bond and multi-asset funds. This promotion demonstrates a strong internal progression confirmed by results,” commented Katia Coudray, CEO of SYZ Asset Management.
In addition, Adrien Pichoud is a member of the management team of the OYSTER Multi-Asset Absolute Return EUR and OYSTER Absolute Return GBP funds as well as other multi-asset funds and institutional mandates in absolute return strategies.
Ken Hsia, Manager of European Equity Strategy at Investec. Great Britain and the Franco-German Axis make up the Bulk of European Equity Strategy at Investec
Ken Hsia, manager of European Equity Strategy at Investec recently visited Miami. His strategy invests in companies listed on the European stock exchanges, including the UK, as well as in those that, while trading in other markets, carry out most of their operations on the continent.
It is precisely the British market which Hsia mostly favors, concentrating more than one third of the positions of the strategy which he manages. France, Switzerland, Germany, and Norway, complete the group of the five markets which he perceives most positive, whilst Spain is in sixth position. This strategy has a class which hedges all currencies in the portfolio – not only the Euro – ,ensuring a real exposure to the behavior of the underlying companies.
“Overall, there have been very few changes since November, but there has been a recovery of corporate earnings, often due to a reduction in costs through corporate reforms,” says the manager. “In the past nine months, both the Euro, in respect to the dollar, as well as oil prices, since June, have weakened, favoring a continent which, on the one hand, is almost twice as sensitive as the United States to exports, because much of its production is exported all over the world, and, on the other hand, is a net consumer of oil, which, with the low prices, the value is transferred from the producers to the consumers. Eight of the 10 Star ideas have exposure to Europe, “he says.
Hsia supports his positive view of the consumer, industrial, and technological sectors stating that “money is in the hands of consumers.” According to him, the relative value of European markets to the United States is unbalanced downward. “The European stock market is still down and there is a 45% gap between the European and US stock markets, which has to close,” he adds. “Indeed, my job is to find companies that have less than 10x EPS, with further growth in profits,” he says.
The average tenure of companies in the portfolio is two years, “despite market speculation, I have not had to change my portfolio more than normally,” says Hsia. It is an actively managed fund which concentrates its positions on three ideas: global winners, the assets with European exposure but which benefit from reduced competition, and a third group in sectors which are in question, but which are beginning to turnaround.
Among the first, which from about a year ago, account for between 50% and 60% of the portfolio, are Bayer, Novartis or Teleperfomance. The weight of shares of companies in the second group, TUI, DS Smith or Dixons Carphone, is growing as a result of improved profits, which are based on achieving better contracts due to reduced competition. A couple of examples: in TUI’s case, it’s margin has risen from 4% to 6% by negotiating major global contracts, and benefits are expected to grow in the coming years, resulting in a positive impact on the distribution of dividends; and with regard to Dixons Carphone, it will clearly benefit from the disappearance of its biggest competitor because the private equity which bought it out loaded it with debt.
The third group, the one in sectors in question, is composed of companies which, within the telecom and utilities sectors, for example, are expected to perform better than their competitors, and in the future become part of one of the other two groups. This could be the case withEndesa, which will benefit from the sale of its Latin American operations, with greater exposure to the Spanish recovery and therefore higher dividends predicted.
By sector, the manager is positive in discretionary consumer and technology (software and hardware) and negative in utilities and energy, as the fall in energy prices will decrease the sector’s corporate profits, and especially in banks, due to the efficiency problems they suffer. “There are not many cheap banks according to their results. In the UK, banks which are too-big-to-fail are being penalized. It currently makes no sense to have large banks,” although he admits havingKBC (Belgium) and ING (Netherlands).
Photo: Adriano Makoto Suzuki. Will Brazil's Sovereign Debt Lose Investment Grade Rating?
Standard & Poor’s said it may cut Brazil’s credit rating to junk, citing the country’s political and economic challenges amid an ongoing corruption probe. The ratings company revised the outlook on Brazil’s rating to negative from stable. The country’s rating from S&P is already at BBB-, the lowest investment grade.
The ratings move adds to challenges for President Dilma Rousseff and her economic team led by Finance Minister Joaquim Levy as they duel with Congress to shore up fiscal accounts at the same time the country slips into recession. Expanding corruption investigations of politicians and companies jeopardize the government’s efforts to adopt policies that could help Brazil preserve its investment-grade rating, S&P said.
S&P believes there is a “greater than one-in-three likelihood that the policy correction will face further slippage given fluid political dynamics and that the return to a firmer growth trajectory will take longer than expected,” according to their statement.
The portfolio management team of the Aberdeen Global Brazil Bond commented that Brazilian sovereigns were looking on the cheap side since Standard &Poor’s made its announcement. “We note that Brazil is now trading flat to the likes of Serbia & Croatia, two countries with higher Debt/GDP, a lack of willingness to commit to fiscal consolidation and poor growth prospects, which makes their debt dynamics even worse than Brazil’s”
Edwin Gutierrez, lead portfolio manager of the Aberdeen’s fixed income strategy in Brazil, commented that they do not believe that the downgrade from investment grade will happen this year. They believe that all three ratings agencies will have Brazil´s sovereign debt at the equivalent of BBB- and negative outlook by year end. However, they foresee a fairly highly risk of a downgrade from one or more of the agencies in 2016.
Gutierrez added that by the time the downgrade to junk bond happens, the event will be fully priced in, so the impact will be fairly minimal. “Brazilian Credit Default Swaps have actually tightened in, which reflects Aberdeen´s perception that Brazil sovereign debt is already trading at BB levels”.
Standard & Poor’s now expects the contraction in real GDP to be deeper and longer. Their projections are for a 2% contraction this year followed by no growth in 2016, before returning to modest growth in 2017. Brazil’s growth prospects are believed to be below that of its peers.
For Franklin Templeton Fixed Income’s team, it became clear that some action from Standard & Poor’s would be taken, once the government announced that the target for the fiscal primary surplus was being lowered for the next three years. The fact that the change in the outlook happened sooner than expected, has bought Brazil some time in order to try to avoid the downgrade to junk bond.
Although Brazilian CDS are already pricing Brazilian sovereign debt below investment grade rating, Franklin Templeton believes that Brazil is very far from a systemic crisis, which makes some Brazilian assets very attractive at the moment, such as nominal or real rates local currency denominated government bonds.
Franklin Templeton believes that a downgrade before year end is not likely. “The agency stressed that further deterioration in the political environment could jeopardize the approval of the needed measures to keep the fiscal adjustment on track. The sharp depreciation of the Brazilian real, together with the fear of higher inflation and economic chaos will probably trigger politicians well known sense of survival”.
Brazilian Financial Services companies
Standard & Poor’s Ratings Services revised the global scale outlook on eleven Brazilian financial services companies (Banco Bradesco S.A., Itau Unibanco Holding S.A., Itau Unibanco S.A., Banco Citibank S.A., Banco do Brasil S.A, Banco do Estado do Rio Grande do Sul S.A., Banco Santander Brasil S.A., Banco do Nordeste do Brasil S.A., BM&FBOVESPA S.A-Bolsa de Valores, Mercadorias e Futuros, Banco Nacional de Desenvolvimento Economico e Social, and Caixa Economica Federal) to negative from stable following the same rating action on the Federative Republic of Brazil.
At the same time, the national scale outlooks on fourteen entities was revised to negative from stable (Banco Volkswagen S.A., Banco Bradesco S.A., Bradesco Capitalizacao S.A., Itau Unibanco Holding S.A, Itau Unibanco S.A., Banco BNP Paribas Brasil S.A., Banco Citibank S.A., Banco de Tokyo-Mitsubishi UFJ Brasil S.A., Ativos S.A. Securitizadora de Creditos Financeiros, Banco do Estado do Rio Grande do Sul S.A., Banco Morgan Stanley S.A., Banco Santander Brasil S.A., Banco Toyota do Brasil S.A., and Banco do Nordeste do Brasil S.A.). Standard & Poor’s also affirmed the long-term and short-term ratings for all the entities.
The agency rarely rate financial services companies above the sovereign long-term rating because, during sovereign stress, the sovereign’s regulatory and supervisory powers may restrict a bank’s or financial system’s flexibility, and because banks are affected by many of the same economic factors that cause sovereign stress.
Fitch and Moody’sare maintaining their Brazil’s sovereing debt rating at BBB and Baa2 respectively, two notches above the speculative debt level. Back in April, Fitch also revised Brazil’s sovereign debt outlook, due to the poor performance of the economy, the growing macroeconomic imbalances, the fiscal budget deterioration, and the increase in government debt.
Aurora Garza - Foto cedida. Bancomer Transfer Services nombra CEO a Aurora Garza Hagan
Bancomer Transfer Services, the global money transfer services unit that is a part of BBVA‘s U.S. operations, announced this week that Aurora Garza Hagan has been named its new chief executive officer.
Garza Hagan rose up through the ranks at BTS, which currently handles $10 billion out of the $60 billion in funds sent each year to Latin America, the largest remittances corridor in the world. She started in 2001 as a senior accounting analyst and has held various leadership positions, most recently as chief financial officer overseeing all aspects of finance, accounting, treasury management, legal and risk. Before joining BTS, Garza Hagan held senior auditor positions at Ernst & Young and Continental Airlines.
“Aurora brings years of experience to this position,” said BBVA U.S. Country Manager and BBVA Compass Chairman and CEO Manolo Sanchez, who oversees all of BBVA’s U.S. operations, including BTS. “She has a broad view of how to drive our organization, and an excellent command of the level of risk and control required to run this type of business.”
Garza Hagan is taking over as CEO following the departure of Moises Jaimes. She will report to new BTS Chairman Gabriel Palafox. Her appointment is effective immediately and she will be based in Houston.
A graduate of The University of Texas at Austin, Garza Hagan earned a bachelor’s degree in business administration and is also a certified public accountant in the state of Texas
Foto: Ines Hegedus-Garcia
. El antiguo Espírito Santo Bank se llamará Brickell Bank
G. Frederick Reinhardt, Chairman and CEO, introduces Brickell Bank, formerly Espírito Santo Bank. “We are excited to be rebranding following the Stock Purchase Agreement recently signed between the bank’s principal shareholder, and members of the Benacerraf family, Cohen family, and other investors,” says Reinhardt.
“We chose Brickell Bank as our new name as it represents the vital and exciting history of Miami and the location where development first took place, where homes, offices and towers rose from raw land to become the banking center of this multi-cultural city,” says Reinhardt. “Miami is recognized as the most important financial center for Latin America and is growing in importance for investors from Europe and Asia. We are proud to bear the mantel of such a prestigious and established moniker,” continued Reinhardt.
“The Share Purchase agreement, while still subject to regulatory approval, brings an extraordinary level of expertise from well-established banking families to Brickell Bank and is a superb catalyst for our growth and continuing dedication to serve our clients,” says Reinhardt.
Brickell Bank will continue to expand its core strategy of providing wealth management, personal and corporate banking services, residential and commercial real estate lending and trade finance services to domestic and international individuals, institutions and corporations.
The existing management team has led the Share Purchase negotiations and the rebranding efforts, and will continue in place.
Brickell Bank will continue to offer Wealth Management services to its Private Banking clients through its broker/dealer, Brickell Global Markets, and investment advisory services through Brickell Global Advisory, a Florida registered investment advisor. (These subsidiaries were formerly known as E.S. Financial Services, Inc. and Espírito Santo Investment Advisors, Inc., respectively).
The transition is taking place now in the offices, the branch and online to reflect the new names, logos, icon and navy and white coloration. According to Mr. Reinhardt, “the vibrant new look reflects a new beginning, but more importantly reaffirms our commitment as a customer-centric institution providing an unparalleled, enhanced and comprehensive range of products, exemplary service and expertise.”
Brickell Bank, Florida-chartered since 1973, will maintain its headquarters and branch both located at 1395 Brickell Avenue, Miami, FL 33131. Service to clients will continue uninterrupted during the transition period.
BlackRock celebró su primer ETF Investment Seminar en Miami el pasado día 16 de julio . BlackRock celebra en Miami su primer Seminario de Inversión sobre ETFs
In today’s investment landscape, portfolio construction is evolving, and with it, the combination of passive and active vehicles. ETFs are amongst the fastest growing instruments within the asset management industry and are becoming a crucial part of investors’ portfolios.
To further educate clients on trends, uses and implementation of ETFs in conjunction with active funds within portfolios, BlackRock hosted its first ever ETF Investment Seminar with 50 financial advisors in attendance on July 16th, 2015.
The event featured three sessions covering: Building portfolios with active and passive tools, Trends in the use of ETFs in the wealth management segment, concluding with a special session on Offshore ETFs (domiciled outside the United States).
“The trend in recent years is the migration towards portfolios which blend active and passive management tools,” said Joshua Rogers in his presentation. Rogers, VP, is a Product Consultant within the US iShares Product Group. He provided some interesting data: in the period running from 2011-2014, the United States has produced net outflows of US $370 billion from traditional active management products (especially US equity funds). However, outcome oriented actively managed funds have enjoyed net inflows of US $750 billion (these include alternative funds, income funds, flexible fixed income, sectoral, and multi asset funds), showing that the investor who pays for an active management product, really wants active management. In addition, net inflows in index strategies (index funds and ETFs) during the same period are still much higher, reaching US $1.17 trillion, with a clear acceleration of this trend during 2014.
Thus, investors favor passive management products for exposure to the core portion of their portfolios (e.g. US equities), as well as for implementing asset allocation decisions reached internally, or for tactical short-term investments. However, for strategies aimed at obtaining outcome, illiquid strategies such as alternatives, or in case of wishing to outsource investment decisions within an asset class, as in the case of fixed income, investors continue investing in active strategies. In any case, the trend is clear: increasingly blending both products.
Other relevant details presented by Rogers referred to the need for maintaining even the best active management strategies in the portfolio for long periods to obtain their best results. According to a study by DiMeo Schneider & Associates, in a 10 year period, 90% of funds in the top quartile of their Morningstar category had at least a period of three years in which they did worse than their peers; 63% experienced at least a five-year period of relatively worse performance. In fact, the average holding period for an active fund among US investors is 3-4 years, given they are not being as “patient”, it would be better for them to be “passive”.
On the second session, Ivan Pascual, Managing Director and Head of Wealth Sales for Latam and Iberia at BlackRock (active management products and ETFs), stressed that financial advisors are becoming more akin to the use of ETFs in client portfolios. 65% of financial advisors in the United States already use them, and more than half expect to increase their exposure to these products next year. Moreover, according to a Greenwich Associates survey, 49% of institutional investors surveyed in 2014 maintain ETFs for periods of more than two years, a percentage that is rising compared to previous years. “The inflows come mainly from replacing baskets of stocks and bonds for ETFs, and not so much from substituting actively managed funds for ETFs,” says Pascual.
Financial advisors use ETFs to meet three needs. The most obvious is cost saving. ETFs are a low-cost product for those investors who do not need advice. In this case, income for the broker comes from brokerage commissions. However, the industry is evolving towards a more fee-based model for advice or discretionary management, and less commission-based. Secondly, for the advisory business, ETFs represent a tool to create the core component of the clients’ portfolio, especially in fee-based business models. Lastly, in discretionary management solutions, ETFs are increasingly being used to build the firm’s centralized asset allocation view into the clients’ portfolio, efficiently, and at a lower cost. “We are seeing a ‘Revolution’ rather than an ‘Evolution’ toward ETFs in the wealth management business,” said Pascual. “Also, the importance of the adoption of technology by the end client to obtain financial information should not be overlooked. 45% of customers already use the internet for this purpose and the percentage is growing*. The words most used in search engines for this field are ‘investment, cost, liquidity’, terms which clearly point to ETFs in building portfolios” he says.
Finally, Justin Wheeler, VP, iShares UCITS ETFs Specialist, provided insight into the offshore ETF market, “primarily, those domiciled in European countries. While Ireland and Luxembourg account for almost 2/3rds of European ETF assets, these products are listed on various European stock exchanges such as London, Frankfurt, or Paris”. Offshore ETFs are used not only by European clients, but also for Latin American and Asian investors who increasingly understand the value of these products over their peers listed in the United States. With more than 40 ETF providers in Europe offering over 2,000 products there is extensive choice for investors. According to BlackRock’s monthly ETP Landscape Report, as of April, European ETFs have 500 billion dollars in AUM, and iShares leads this market with a 46% share and 270 different ETFs. The advantages of offshore ETFs for Latin American clients relates mainly to the lack of withholding tax (WHT) applied to ETF distributions, allowing investors to retain more of their returns. “However, investors should be mindful of additional factors, such as the liquidity and execution costs of offshore ETFs, the holding period of the investment, and the distribution yield as these factors impact the extent of the benefits,” adds Wheeler.
Gregory Filippone, BlackRock Offshore Wealth Investment Management Consultant, provided context to the sessions and introduced the BlackRock speakers. Isabel Vento, BlackRock Offshore Wealth Investment Management Consultant, and Eduardo Mora, Director Responsible for the LatAm Offshore Wealth Business, both based in Miami, opened and closed the event respectively.
*Source: BlackRock Global Strategy Heatmap, Survey of Consumer Finance, Towers Watson; 2014.
Manuel Díaz - Photo: Funds Society. Manuel Diaz Joins WE Family Offices as Senior Family Councelor
WE Family Offices, the independent, family-focused wealth management firm, in response to a growing demand for family office services from multi-jurisdictional, ultra-high net worth families, announces the hire of international private wealth executive Manuel Diaz. Mr. Diaz will be based in the Miami office and will use his extensive experience to help WE serve international families from the United States and Latin America.
“As the wealth industry continues to become more globalized, we have seen the growing need to hire individuals who can appropriately serve these cross-shore families,” said Maria Elena Lagomasino, managing partner and CEO of WE Family Offices.
When asked about this critical hire, managing partner Santiago Ulloa comments, “We are thrilled to welcome Manuel to our team. With his numerous years of experience serving wealthy families, he will add critical value for our clients who need a counselor with a sophisticated global perspective and deep international expertise.”
Mr. Diaz’s career in international wealth management spans more than four decades. Beginning his career as an assistant professor of Latin American studies, Mr. Diaz spent 30 years in international private banking at Republic International Bank of New York, where he served as president and CEO. He continued as president of HSBC Private BankingLatin America until he served in a senior position at Safra Bank. Mr. Diaz joined WE Family Offices in July of 2015 as a senior family counselor.
CC-BY-SA-2.0, FlickrFoto: Nicolo caranti, Flickr, Creative Commons. ESMA pone bajo consulta las guías de remuneración que traerá UCITS V, basadas en AIMFD
The European Securities and Markets Authority (ESMA) has launched a consultation on proposed Guidelines on sound remuneration policies under the UCITS V Directive and AIFMD. The Directive includes rules that UCITS must comply with when establishing and applying a remuneration policy for certain staff categories and the proposed UCITS Remuneration Guidelines further clarify the Directive’s provisions.
The proposed Guidelines aim to ensure a convergent application of the remuneration provisions and will provide guidance on issues such as proportionality, governance of remuneration, requirements on risk alignment and disclosure. The final Guidelines will apply to UCITS management companies and national competent authorities.
Steven Maijoor, ESMA Chair, said: “The consistent, common and uniform application of the UCITS Directive’s remuneration provisions will contribute to convergent supervisory approaches leading to a level-playing field in the fund sector and result in increased investor protection across the EU.These guidelines will encourage the implementation of sound and prudent remuneration policies and organisational requirements for UCITS, which will help in avoiding potential conflicts of interest and promote prudent risk-taking by fund managers.”
Proposals
The draft Guidelines are based on those already issued on remuneration under the AIFMD, with certain differences that take into account those differences between the two Directives, as the UCITS V remuneration principles broadly reflect those under the AIFMD. In developing these guidelines, ESMA co-operated with the European Banking Authority with the objective of aligning guidance on remuneration policies across financial sectors.
The key elements of the guidelines include:
-Management companies as part of a group – the guidelines clarify that in a group context, non-UCITS sectoral prudential supervisors of group entities may deem certain staff of the UCITS management company which is part of that group to be identified staff for the purpose of their sectoral remuneration rules;
-Definition of performance fees – sets out a common definition of performance fees based on the IOSCO Final report on elements of international regulatory standards on fees and expenses of investment funds;
-Application of different sectoral rules – includes proposals on how different rules, such as those set out in the AIFMD and in the CRD IV, should apply where employees or other categories of personnel perform services subject to different sectoral remuneration principles;
-Application of the rules to delegates – sets out proposals to prevent management companies circumventing the remuneration rules through the delegation of activities to external service providers; and
-Payment in instruments – provides guidance on how to comply with the rules on the payment of variable remuneration in instruments under the UCITS Directive.
In addition the Consultation Paper also examines the issue of proportionality in the application of the UCITS remuneration policies including the possibility to disapply certain of the provisions in exceptional circumstances, in line with the AIFMD approach.
AIFMD Remuneration Guidelines Revision
The Consultation Paper also proposes a revision of the AIFMD Remuneration Guidelines by clarifying that in a group context, non-AIFM sectoral prudential supervisors of group entities may deem certain staff of an AIFM in that group to be identified staff for the purpose of their sectoral remuneration rules.
Next Steps
ESMA will consider the feedback received to the consultation and will aim to finalise and publish the UCITS Remuneration Guidelines and a final report by Q1 2016 ahead of the transposition deadline for UCITS V Directive (18 March 2016). The final report is expected to also include the revision of the AIFMD Remuneration Guidelines as proposed in the consultation paper.
Photo: Jimmy Baikovicius. Picton to Act as Distribution Intermediary for Barings in the Chilean Pension Funds Industry
Baring Asset Management (Barings), the international investment management firm, and Picton announced that they have entered into a distribution agreement, effective June 2015. Picton will promote Barings to position the firm’s investment products and services within the pension funds industry in Chile.
Angus Woolhouse, global head of distribution at Barings said: “We are excited to work with Picton to promote our global investment capabilities in the Chilean pension fundsindustry. Barings manages money for some of the world’s largest global pension plans, and working with pension plans in Chile is a natural extension of our business.”
“Picton is proud to partner with Barings, a firm with a long and successful history in the global asset management industry,” said Matias Eguiguren, founding partner, Picton.”We look forward to a strong relationship driven by Barings’ investment capabilities and our broad and deep knowledge of the pension funds industry in Chile.”
Picton will provide due diligence, product information and analysis to pension funds and serve as a liaison point between them and Barings’ sales team. Barings has a strong track record of doing business in Latin America stretching back to the 19th century and has US$39.7 billion in assets under management as at 30 June 2015.
CC-BY-SA-2.0, FlickrBBVA chairman, Francisco González . BBVA is Now the Leading Shareholder in Turkey's Garanti Bank
Spanish bank BBVA is now the leading shareholder in Garanti, Turkey’s largest bank in terms of market capitalization. After completing the transaction announced last November to acquire an additional 14.89% holding, the BBVA Group now owns to 39.90% of Garanti. Francisco González is in Istanbul due to the closing of the transaction and the appointment of the new Garanti CEO.
The total price paid by BBVA of the 14.89% stake amounts to 8.765 Turkish liras per share, amounting to approximately 5.481 billion Turkish liras (€1.854 billion). The sellers have already received the dividend disclosed by Garanti Bank on April 9, 2015 amounting to 0.135 Turkish liras per share. Therefore, as disclosed to the markets on November 19th, 2014, the total consideration received by the sellers amounts to 8.90 Turkish liras per share.
BBVA chairman Francisco González said, “This is an important day in BBVA’s history. After four years of excellent relations between the partners BBVA has become the leading shareholder in Garanti, Turkey’s best bank.”
“During our collaboration, we have closely witnessed the enthusiasm of a world banking giant like BBVA for Garanti , as well as its trust in our values, our corporate culture and our team who is passionately committed to its work,” added Ferit Sahenk, chairman of Garanti and the Dogus Group. This operation confirms the excellent relationship between the partners as well as the commitment of Dogus, which is one of the main Turkish business groups and the founder of Garanti. Dogus will retain the chairmanship of Garanti’s board of directors and still owns a 10 percent stake in Garanti.
Francisco González is in Istanbul due to the closing of the transaction and the appointment of the new Garanti CEO, Fuat Erbil. His appointment, which was ratified today by Garanti’s board, confirms the continuity of the company’s management and support for local talent. Until now Mr. Erbil was part of Garanti’s management team.
The new CEO is one of the seven directors to be appointed by BBVA in a board of ten members. Dogus remains as a shareholder and a principal partner – as established in last November’s agreement. Ergun Özen, chief executive officer until now, will continue as board director. The change of chief executive officer will be effective from September.
Closing of the operation
In accordance with the applicable accounting rules and as a consequence of the agreements reached, the BBVA Group shall measure at fair value its previously acquired stake in Garanti Bank (which amounts to 25.01% of its share capital). Such accounting impact does not translate into any additional cash outflow from BBVA. It will result in a one-off negative impact on the net attributable profit of the BBVA Group in the third quarter of 2015 of about €1.8 billion. Most of this impact is generated by the exchange rate differences due to the depreciation of the Turkish lira against the euro since the initial acquisition by BBVA of the 25.01% stake in Garanti Bank in 2011. These exchange rate differences are already registered as Other Comprehensive Income, deducting the stock shareholder’s equity of the BBVA Group.
In terms of capital, the acquisition will mean an estimated reduction of approximately 50 basis points in the Common Equity Tier 1 (fully loaded) ratio.
From here on BBVA will fully consolidate Garanti Bank in the financial statements of the Group. So far it has accounted for this business using the equity method.
Garanti is the top bank in Turkey by market capitalization (€11.1 billion) with about $100.9 billion in assets at the end of March. With consolidated data, it serves more than 13 million customers through an extensive retail network of more than 1,100 branches and over 4,400 ATMs. It is the top institution among private banks in Turkey in terms of mortgages, consumer finance, vehicle finance and credit card customers. Staff number over 22,700.
Leadership in technology is part of Garanti’s competitive edge. Its investment in technology, in-house developments, personalized customer solutions and the management’s driving emphasis on innovation have made it a pioneer in digital banking. At Garanti 91% of transactions are handled through digital channels. Garanti is the Turkish leader in mobile banking with a 30% market share and it holds a solid position in online banking with a 23% market share by volume of transactions.
Turkey’s population is more than 75 million and over half are less than 30 years old. BBVA Research puts the average annual growth of Turkey’s GDP at 4% for 2014-2024.
