Author: Gordon Platt
Global Equity/DRs

Turkish bank Türkiye Vakiflar Bankasi, or Vakifbank, and ICICI Bank, based in India, had major successful stock offerings late in 2005, a year in which the finance sector was the most-active area for global initial public offerings.
Vakifbank’s $1.28 billion offering in November was the largest IPO on the Istanbul Stock Exchange in five years and one of the largest by an emerging-market bank in 2005.

ICICI, India’s largest private bank, which already was listed on the New York Stock Exchange, raised $1.73 billion in an offering that closed on December 7. The sale was the biggest by an Indian company since state-owned Oil and Natural Gas (ONGC) raised $2.3 billion in March 2004.

The ICICI stock offering included an issue of $433 million of American depositary shares that was priced at an 18% premium to the domestic issue price. About 25% of the ADS offering was sold in Japan.

Global IPO volume totaled $149 billion in the first 11 months of 2005, up 22% from the same period a year earlier, according to Dealogic. The finance sector was the leading industry by volume, at $33 billion, or 22% of the total through November 30, followed by utility and energy deals, which totaled nearly $18 billion.

The Vakifbank partial privatization marked the latest in a series of international investments in Turkish banks in the past 12 months. It was the largest IPO in Turkey since the listing of Turkcell, a mobile-phone service provider, in 2000.

Nearly three-quarters of the Vakifbank offering was sold to foreign institutional investors, while the remainder was sold to retail investors in Turkey. The offering gave the bank a market capitalization of more than $5 billion. JPMorgan and UBS Investment Bank were joint lead managers and global coordinators.

“The Turkish authorities have an agreement with the International Monetary Fund to privatize banks, which is why it was very important this deal was the success that it was,” says Francis Fitzherbert-Brockholes, London-based co-head of law firm White & Case’s European capital markets practice. The Vakifbank offering reflects the potential for significant domestic and international investment in the Turkish banking sector, he says. Vakifbank is the country’s fifth-largest bank in terms of assets.

ICICI Bank needed to raise capital to support fast growth in Indian bank lending and in its life insurance business. The bank owns 74% of ICICI Prudential Life Insurance, a joint venture with London-based Prudential. ICICI’s capital-adequacy ratio rose to about 16.5% after the sale of shares, from 11.5%.

ICICI has about 470 branches in India and 1,800 ATMs. The bank will focus its future growth on rural India, where it already has a strong foothold, says K.V. Kamath, ICICI’s chief executive.

The Japanese offering was part of the bank’s plan to diversify its investor base, Kamath says. The bank already is widely held by investors in the US, Europe and Southeast Asia.

ICICI opened its first branch in Hong Kong in November to help support the growing trade between India and China. It has a representative office in Shanghai.

ICICI also offered $500 million of debt securities through its Singapore branch in November. That sale represented the largest US dollar-denominated bond offering ever done by a private-sector Indian issuer.

Meanwhile, Telecom Egypt, the state-owned fixed-line monopoly provider of phone services, launched the largest-ever share issue on the Cairo & Alexandria Stock Exchanges (CASE) in late November. The $785 million sale of a 20% interest in the company was the largest privatization in Egypt since the government resumed the sale of shares in state-owned companies in 2004. Telecom Egypt holds a 25% stake in Vodafone Egypt, a mobile-phone service provider.

Gordon Platt