July 2, 2015 / 11:54 AM / 2 years ago

Exclusive: ING on course to win auction for HSBC's Turkish bank - sources

The logo of ING bank is seen at the entrance of the group's main office in Brussels November 6, 2013.Francois Lenoir

ISTANBUL/LONDON (Reuters) - Dutch lender ING Group ING.AS is set to win the auction to buy HSBC's (HSBA.L) Turkish business, people familiar with the matter said on Thursday.

Four people familiar with the situation said HSBC had narrowed the field to one suitor, with two of the sources identifying ING as the preferred buyer, though a deal has yet to be finalised.

ING, which already has a presence in Turkey, was one of three banks to submit a non-binding bid in May, sources previously told Reuters. The other two were Bahrain's Arab Banking Corp (ABC) ABCB.BH and France's BNP Paribas (BNPP.PA).

Qatar National Bank (QNB) QNBK.QA also showed some early interest. Both QNB and Bahrain's ABC did not advance in the talks because they have become more interested in acquiring at least part of National Bank of Greece's (NBGr.AT) Turkish arm, Finansbank (FINBN.IS), two sources said.

"QNB always said it is interested to enter the Turkish market. Once the right opportunity is identified, QNB will look at it to ensure it fits with the Group's international expansion strategy. As of today, QNB is not part of any discussions in regard to opportunities in the Turkish market", a spokesman for QNB said.

HSBC is the twelfth-largest bank in Turkey and is selling the loss-making business as part of its attempt to cut costs and assets to improve profitability and reduce its complexity. The business comprises corporate and investment banking operations as well as a retail arm.

ING's existing Turkish bank has about $16 billion of assets, slightly larger than HSBC's, which has $15 billion in assets and about 300 branches.

Both businesses lack scale and need to expand to survive in the highly competitive Turkish banking sector that includes the likes of Isbank (ISCTR.IS), Garanti Bank (GARAN.IS) and some state-run lenders, local sources have said.

HSBC lost $64 million in Turkey last year, dragged down by a $155 million loss at its retail business after regulatory changes capped interest rates on credit cards and overdrafts.

FINANSBANK IN FOCUS

Despite HSBC's difficulties, Turkey remains an attractive market for some lenders by virtue of its young population and geographic position between Europe and Asia

For National Bank of Greece, Finansbank has been a relatively rare bright spot, though the Greek lender needs to reduce its stake for compliance reasons.

"We continue to explore the market for the sale of a minority stake in Finansbank, a 34 percent stake," an official of the Greek bank said when contacted by Reuters.

ABC declined to comment and no one was available at QNB to comment about interest in Finansbank.

For ING, meanwhile, a Turkish acquisition would mark a return to the takeover trail for a bank that expanded internationally with a series of deals over two decades before needing rescuing by the Dutch government at the height of the financial crisis in 2008.

EU rules on state aid meant it had to sell businesses and was not allowed to make acquisitions, but the block on purchases ended in May when it cut its holding in insurance arm NN Group (NN.AS)

CEO and Chairman Ralph Hamers has told analysts he would consider acquisitions to increase ING's presence in countries where it already has a foothold.

Additional reporting by David French, Leigh Thomas and Lefteris Papadimas; Writing by David Dolan; Editing by David Goodman and Christian Plumb

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