Only his penchant for trendy suits provides a clue that Ersin Ozince, the chief executive of Isbank, Turkey's biggest retail bank, is something of an unusual banker.

But since he was brought in as a new broom in late 1998 after his predecessor resigned over problem loans, Mr Ozince, 47, has transformed Isbank's once bland image with some startling moves.

Isbank's master coup, in partnership with Telecom Italia, was to bid $2.5bn for Turkey's third GSM licence. This was twice as much as its rivals at an April auction bringing together some of the biggest names in Turkish business and the international telecommunications industry.

"The other Turkish conglomerates had done all their net present value calculations and they got totally destroyed. They looked like hapless ," says one observer. "Isbank struck a blow for open societies and open markets by showing the public that the conglomerates are not invincible."

The knock-out bid not only secured the licence. It ensured the failure of the government's plan to have a total of five operators on the market, therefore reducing the competition Isbank's cellular telephone operation would face.

The defeated consortia declined to match the $2.5bn starting price, set by the Isbank-Telecom Italia bid, for another licence offered for auction immediately afterwards.

Instead, a fourth and final licence is to be sold to Türk Telekom, the national telecommunications giant slated for partial privatisation later this year.

Before that, Isbank, together with Dogan, Turkey's dominant media conglomerate, paid $1.2bn for a 51 per cent stake in Petrol Ofisi, the country's biggest chain of petrol stations, privatised in March. It was the second time Petrol Ofisi was sold to Isbank, which, together with different consortium partners, had bid for the group in a first botched sale in 1998.

r Ozince denies that the GSM bid was anything other than an attempt to ensure that the Turco-Italian consortium was not outbid by any of the other four bidding consortia. Nor does he gloat over the defeat of the conglomerates. He says they were built up partly thanks to Isbank, which was established to help develop a modern economy in 1924, when the Turkish republic was just a year old. But although Isbank, too, is a conglomerate, with a big portfolio of industrial assets ranging from tyre manufacturing to a 75 per cent stake in Sisecam, a glass manufacturer, Isbank is different in one important respect.

It is not controlled by an oligarchic family as most Turkish groups are. Instead, it has the biggest free float on the Istanbul stock exchange and its single biggest shareholder is Isbank's pension fund, which owns 45.2 per cent.

The bank's second largest shareholder, with 28 per cent, is the Republican People's party of Mustafa Kemal Ataturk, who founded the Turkish republic.

r Ozince stresses that the group's philosophy is orientated toward public ownership and that every single one of the group's subsidiaries - including its new GSM operation - will be floated if they are not already on the stock market.

He also defends his buying spree of non-banking assets as offering synergies with financial services. "We are simply trying to reach our customers in all possible ways," he says, whether through the installation of ATM machines at petrol stations or the possibility in future of conducting capital market operations on mobile telephones. He also notes that Isbank, one of Turkey's most over-capitalised entities with a capital adequacy ratio of 24.7 per cent compared to the 8 per cent minimum required by law, has considerable scope for leverage to finance the purchases.

At a time when corporate divestitures are all the rage, Mr Ozince argues that it is not necessary for a bank to focus exclusively on its core business. He does, however, look forward to a low-inflation era in which real banking will thrive and a lot of Isbank's competitors "will vanish".

In such an environment, "margins will shrink but volumes will increase dramatically", allowing Isbank to capitalise on an unrivalled nationwide branch network and Turkish banking's "highest proportion of low-cost demand deposits", he says.

any analysts still remain uncomfortable about the idea of a bank being so heavily involved in businesses which have little to do with banking. While applauding the GSM purchase as offering "exciting" synergies with banking, Tulga Cordan, analyst at ABN-Amro, says Isbank should move faster to trim its portfolio of industrial assets.

Haluk Akdogan, analyst at Salomon Smith Barney, argues that if Isbank is to retain such a wide array of interests, it must transform itself into a proper holding company in which banking would be just another entity with separate management.


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Isbank (in Turkish only)