Turkish IROs: Masters of crisis management

At a glance

Crisis-heavy
The last few years have seen Turkey hit by numerous crises. But even before this, Turkey was a ‘crisis-heavy country,’ says Handan Saygin, senior vice president of IR at Garanti Bank. ‘Given its geopolitical positioning, Turkey is affected by regional crises.’ This has led many companies to operate in preparation for the unknown.

Hitting the numbers
With a suicide bomb hitting Istanbul’s Atatürk Airport in June 2016 and the airport becoming a focal point during an attempted coup two weeks later, TAV Airports Holding was directly affected and visitor numbers were hit hard, says TAV’s head of investor relations Nursel Ilgen. But even Garanti Bank found investors no longer wanted to visit.

Staying close to investors
How do you communicate crises like these? Stay close to investors, advises Saygin. Ilgen agrees, explaining that you might not have all the answers but you still need to be there. ‘No email or phone call went unanswered,’ explains the winner of the best crisis management award at the IR Magazine Awards – Europe 2017.

‘What a Turkish IRO deals with in a year, IROs working in the developed markets might not face in their entire career,’ says Nursel Ilgen, head of investor relations at TAV Airports Holding.

It’s a statement that’s certainly true of recent times: over three years, the country saw a presidential election, two general elections and a constitutional referendum. It’s been the target of numerous terrorist attacks, an attempted coup followed by a wide crackdown on suspected supporters of US-based preacher Fethullah Gülen – and, at the time of writing, continues to be in a state of emergency. All this with the backdrop of Syria’s six-year civil war continuing along around 500 miles of Turkey’s southern border.

Turkey does, however, have a history with crises and IR professionals in general are well prepared. The industry Ilgen works in, operating 17 airports across three continents, means the share price has been hit by everything from earthquakes to ash clouds, various conflicts – Ilgen mentions Afghanistan, Iraq and the Russia-Georgia wars, as well as the Turkish military’s shooting down of a Russian jet in 2015 – and pandemics such as Sars and avian flu.

But 2016 was different. On June 28, suicide bombers attacked Istanbul’s Atatürk Airport – which is also TAV’s head office and the IR team’s base – killing 45 people. A little over two weeks later, the airport was the focus for thousands of people who came out in support of president Recep Tayyip Erdoğan as an ultimately failed coup unfolded across the city.

A cool head

Events like these require crisis communications in the extreme. Sani Şener, TAV’s CEO, joined the team working through the night following the terrorist attack, with TAV eventually setting a benchmark by reopening the airport just eight hours later. Compare this with the 12 days it took to reopen Brussels airport just a couple of months earlier and you get an idea of the work that went into achieving that.

‘Leadership is key during times of crisis and hands-on leadership is a must,’ says Ilgen. ‘Our CEO was at the airport until the morning, when flights restarted. He dealt with all stakeholders, with Turkish Airlines [TAV’s major customer], with the security forces.’

Having the CEO on hand also helped people put the focus on the business at a time when it would be easy to become overwhelmed. ‘You can become very emotional, of course, and it was very sad – but we were aware that we had our jobs to do,’ Ilgen adds.

The attack also hit TAV with a 6.5 percent drop in the share price. Then came the coup attempt, with more than 100,000 people descending on the airport to protest. ‘There wasn’t any loss of life that night,’ says Ilgen. ‘But managing the crisis was very tough because you had to try to calm the protesters – and they were ready to die at the airport. Tanks were on the road, planes were bombing the Turkish parliament and, of course, flights were cancelled and diverted.’ The IR team’s own offices were also damaged.

TAV took a far harder hit on the share price after that event. ‘The market was down by 7 percent,’ recalls Ilgen, ‘but our share price was down by 17 percent because the [attempted] coup also affected the image of Turkey.’

Reputation management

Prior to these events, Atatürk Airport had been the 11th busiest in the world and the third busiest in Europe, with more than 61 mn passengers passing through in 2015. In 2016, however, tourist numbers to Turkey dropped by 30 percent, to 25.4 mn – the lowest level since 2007 – and the story became much more about reputation management, not just for TAV but also for Turkey as an investment destination, says Ilgen.

‘The market reaction was severe but we tried to be calm, we tried not to be emotional and we tried to be open and available to all investors,’ she says, adding that TAV has long taken a proactive approach to IR, putting it in a better position during bad times. ‘We tried to prioritize corporate reputation, rather than looking at the share price.’ 

As well as the everyday contact with investors, which included being available on WhatsApp as well as many difficult calls with retail investors, Hamdi Akın, TAV’s chairman, wrote a letter to investors detailing his faith in the Turkish economy and the country’s ability to bounce back after numerous crises faced during his tenure at TAV – including a successful coup. 

‘We pointed out that we thought the Turkish economy would be resilient to these kinds of shocks, as has been proven many times in the past,’ explains Ilgen. ‘We went beyond our company’s situation and invited investors to keep their investment in Turkey, to come and invest in the country.’ 

The coup attempt happened on Friday, July 15, 2016; by Monday, the company had also taken out an ad – in a simpler form but a similar vein to Akın’s investor letter – in the Financial Times

TAV ad in the FT
Click for a larger image

From crisis to opportunity 

This focus on reputation and perception management is something Handan Saygin, senior vice president of IR at Garanti Bank, also brings up. ‘The perception of the country was definitely affected,’ she notes, and even though Garanti certainly wasn’t hit in the same way TAV was, investors, like tourists, simply didn’t want to go to Turkey. Saygin says that in an average year, around a quarter of Garanti’s investor meetings are held at its head office. In the second half of last year the IR team saw a 59 percent drop in the number of investors coming to Istanbul.

But the team managed to keep up its meeting numbers and simply traveled more, often emphasizing the same points TAV was making to its investors: Turkey has been through worse and come out stronger. ‘Unfortunately, Turkey has been a crisis-heavy country,’ says Saygin. ‘In the past we have succeeded in transforming crisis into opportunity and come out stronger so we just alluded to our track record and how agile and dynamic we can be. 

‘Last year there was so much uncertainty around the political situation; we didn’t know what had happened right after the coup attempt but we stayed close to the investors, sharing our personal views and experiences very openly. We continued communicating in a more proactive manner, and that is the key. We always answer the phones; we are always available. I remember investors emailing me and calling me on the night of the coup attempt, for instance.’ 

Confusion reigned for a short time but, by the Monday, Saygin says things were largely under control again, ‘and the message was sent out: We are back at work. Things are back to normal and the bank is strong. We tried very hard to deliver that message very loudly to all of our shareholders.’

Part of operating in a crisis-heavy emerging market country like Turkey means making space for the unpredictable, and Garanti Bank could send this message in part because of the precautions it takes. The bank runs ‘well above required levels of capital – something that probably has a negative impact on our profitability,’ notes Saygin. But it’s better to err on the side of safety.

‘After the coup attempt, we talked about how prepared we are, how dynamically we can run the balance sheet and how strong we are in terms of capital and liquidity. All this helped to give investors the confidence that we will remain strong.’

This obviously worked for Garanti Bank. Crisis or no crisis, the team is constantly targeting new investors, says Saygin, with a focus on long-term SRI or DR investors, though in 2016 it also worked to retain investors, adding new tools such as C-suite interviews to its Garanti TV platform. ‘We interviewed executives, including the CEO, from across the bank, and they answered the most frequently asked questions in their area of expertise.’ 

And despite the drop in investor visits to Turkey, the team managed to maintain meeting numbers, and levels of foreign ownership. ‘It was short-term hedge funds and domestic traders that affected us the most,’ notes Saygin, ‘but we didn’t see a big amount exiting the stock. Our international foreign ownership remains at pretty high levels – more than 90 percent of our 50.07 percent free float – despite all the volatility in Turkey.’ 

Falling figures 

That hasn’t been the case for Turkey as a whole, however. Looking at Q1 data from Ipreo over the last six years, foreign investment into Turkey hit a high of $42.8 bn in Q1 2013. But by Q1 2017 that figure had almost halved to just $23.7 bn (see Foreign investment into Turkey, below). 

A similar picture is seen across investor types: in Q1 2013, growth investors poured $16.2 bn into the country, with around $13.4 bn coming from value investors. Those figures have been falling ever since, with value investors marginally overtaking growth by 2016 and each group investing less than $8 bn in Q1 2017 – a far cry from the peaks of 2013 (see Foreign investment: growth vs value, below). 

Foreign investment into Turkey

Foreign investment into Turkey: growth vs value
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This move from growth to value was something TAV tapped into after 2016, however. The company had taken such a hit that Ilgen and her team pushed for an emergency guidance review. This revision predicted a 20 percent cut to ‘origin and destination’ passengers (those not taking connecting flights) – with the actual figure coming in at pretty close to predictions, at 16 percent. 

Recognizing its discount status, TAV began more aggressively targeting value investors; between June 28 and the end of 2016, the IR team met with more than 300 investors. 

‘Our focus switched from growth to value investors,’ says Ilgen. And while the share price continued to drop for a while, ‘long-term investor confidence in the company was bolstered because we made ourselves very available during the crises. [We] showed investors they could get to the bottom of even unthinkably bearish exogenous events with our company. From the lows after the event, the share price has recovered close to 60 percent and we gained many new investors as a result of the whole process.’

Looking to the future

Of course, the unpredictable isn’t just about terrorist attacks and coup attempts. For example, the country’s recent run of elections – culminating in a controversial referendum that some saw as the sanctioning of a ‘democratic dictatorship’ – also created a period of uncertainty. ‘It’s very unfortunate that we’ve had so many elections since 2015,’ concedes Saygin. ‘That period caused lots of volatility and we often found we were talking more about politics and macroeconomics than company specifics.’

But that’s starting to change. Companies are looking forward to a period of political stability – and economic reforms. ‘With more than 50 percent of the vote needed for a win, the current government is more incentivized to perform on economic reforms,’ says Saygin. ‘In anticipation of that, there’s more stabilization in the market and more focus on growth and economic performance.’ As a result, investors that feared a possible dictatorship six months ago are now asking questions about growth again.

This article appeared in the fall 2017 issue of IR Magazine

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