Italian banking giant enters Turkish market

Intesa Sanpaolo's entry into Turkey comes at a time when HSBC announced that it is selling its Turkish unit and Citigroup Inc. has sold its Turkish banking stake at a loss. Why did Intesa Sanpaolo decide to establish a corporate branch in Turkey at this time?

Italy and Turkey have been trading for centuries and present trade flows between Italy and Turkey are very high. In fact, Italy is currently the second largest OECD country in terms of trade flows with Turkey, after Germany.

So it was natural to open a branch in Turkey when the bank decided to expand its international network.

In fact, we think that Turkey will be a major accelerator of growth for the bank because it’s a big country with a large population and an expanding economy, so we wanted to enter the market with a corporate approach.

Although we were the very first international bank to open in Turkey and have been present here since 1907, we had only one representative office, which we thought was too little for the potential of the country.

We decided to step up our presence and become a fully-fledged corporate branch.

Turkey was seen as a global success story for much of this century, but in recent years growth has slowed, the value of the lira has plummeted, and FDI has tailed off a little. What does your decision to set up here say about your confidence in the investment climate and growth potential of the country?

Well, certainly we would like to focus on the areas where we think we can add value, which are traditionally the activities related to trade flows.

This is one of the features of our bank. We are confident that, despite a little bit of a slowdown in economic growth, there are still excellent opportunities for business and supporting activities related to trade flows.

There are areas where we can contribute to increasing the share of the FDI in the country, especially from countries like Italy, which, despite being the second largest trading partner at the European level, is perhaps 12^th or 13^th in terms of FDI, so we see potential in bringing new investment into the country.

On the other side of the coin, we also see possibilities to support the activities of Turkish companies that are increasingly willing to invest abroad. We have seen many cases of Turkish companies investing directly in Europe.

We’ve seen investments in Italy, and we’ve even seen major Turkish investments in the UK. I think there are many Turkish champions emerging that we would like to support in their investments abroad.

There are 1,207 Italian-owned businesses in Turkey and Italian firms such as Ferrero, Astaldi and Recordati have recently made huge investments here. What makes Turkey an appealing place for Italian investment and where do you see the most potential for further Italian and European investment in Turkey?

You mentioned the most visible ones. Clearly, the areas of machinery, food and beverages, and fashion are the areas where Italians are most active.

I think there is a natural synergy between Turkey and Italy in many sectors. Turkey is primarily an exporter of basic agricultural and textiles goods, whilst Italy is primarily a country involved in value-added production.

So I think Italy can add value to Turkey’s production, especially in the food sector, and we’ll be seeing a lot more investments in future.

How does the Istanbul branch fit into Intesa Sanpaolo’s wider regional and global ambitions?

We have built up a branch that is exactly identical to what we have in New York, London, Paris, and in other global financial centers, so there’s no difference in that regard.

The vast majority of our staff are Turkish, so we have a very strong Turkish angle. Having a direct corporate branch is the ideal way of covering the corporate market, which is the bank’s strategy in selected countries where we are present.

Is the intention to just stay with one branch here?

Yes. Although the license that we received from the local regulator allows us to open as many branches as we want, our strategy is to focus on wholesale corporate, basically.

We would like to serve our clients through this office.

Why should corporate clients operating in Turkey choose Intesa Sanpaolo as their banking partner?

I think if I may say it like this: I think we have a very strong competitive advantage, being a direct branch, which gives us the possibility to serve our clients directly without lag times.

We generally help our international clients operate in Turkey on the basis of a global platform concept. Therefore, we are a branch that can immediately allocate credit capacity for their projects in Turkey.

This gives us the flexibility to serve clients as soon as they have needs.

How will your presence here help the growth of SMEs, which are a big priority for the Turkish G20 presidency?

Obviously we have a single office. We wouldn’t be able to serve all of the SMEs present in Turkey, because in order to do that you have to be a retail bank, which we aren’t.

Having said that, we are rolling out a series of products which are specifically meant to support the needs of Turkish SMEs, especially in reference to their foreign trade.

For instance, we are rolling out what we call Working Capital Solutions, which are products aimed at helping them to have better access to their suppliers or to their clients, and this is a product that we already have in this branch.

Plus, we provide direct advisory services to those clients who want to invest abroad.

We support the needs of Turkish companies whenever they want to find a target company in Italy, France, or in Central or Eastern Europe, because we can match their request with our unique coverage of the corporate world in Europe. We tend to do matchmaking between demand and supply, especially in M&A related requests.

In addition, we effectively help SMEs by funding Turkish banks – this is quite a unique feature that we have in Istanbul as an international bank. We effectively support Turkish banks to on-lend and help their clients become more international. In doing that we both supported the activities of the SMEs and the growth of the Turkish banking system, which I think is quite important.

You’ve been very active in project finance in Italy for infrastructure investments, which is another G20 priority. Do you intend to be active in project finance in Turkey also?

Definitely. One of the clearly defined business units that is operating at the branch is fully dedicated to support the activities in the infrastructure sector.

We are very keen to play a major role in the projects that are going on. There are a number of projects that we are already working on actively.

We have a number of counter parties both private and public, and I think this is indeed one area where we will see Turkey becoming an important player overall – the need for infrastructure is huge in a country such as Turkey.

I think they have chosen the right approach recently, because there have been a series of legislative changes which supported the activities of international investors.

Therefore, the market is becoming more open for international players to become more and more active in this field.

You are a private bank, but do you feel some responsibility for enhancing trade relations between Turkey and Italy?

Yes. I think I can speak on the basis of being an international investor in the country.

I guess the process that led to the opening of the branch here is a testimony to the fact that an international investor can successfully operate here.

The business climate is good, there’s a sound legal system which efficiently protects international investors.

There are areas for improvement, especially in licenses and concessions, where the approach is still a little too bureaucratic.

We are constantly talking with our institutional counterparts, be they trade associations or even the consulates and the Turkish business community, in order to enhance the business climate, which, even compared to other countries, is already very high.

You have lived and worked all over the world – in London, Canada, and Milan. What would be your message to people reading this about the potential of Istanbul as a place to live, to work, and do business?

Istanbul is, in my opinion, one of the most beautiful cities in the world. No doubt about it. As an Italian, I feel particularly associated to Istanbul, as this was our second Rome.

It was founded by a Roman. So we feel a lot of history, a lot of Italian elements here. I think this city has the uniqueness of really being a bridge between two cultures.

It’s a place where you have a lot of fun and enlarge your vision, compared to other places. So I would strongly recommend anybody to come here.