Bank Divestiture to Reach $3 Billion by Yearend

EghtesadOnline: Banks have plans to divest 400 trillion rials ($3 billion) of their surplus property before the current fiscal is out in March 2020, said the deputy economy minister for banking, insurance and state companies.

News ID: ۷۴۷۵۵۷

15 June 2019

“Banks have surplus assets worth an estimated 700-1,000 trillion rials,” Abbas Memarnezhad told state radio, Tasnim News Agency reported.

Banks divested 20 trillion rials ($800 million) in surplus prime holdings in the last fiscal (March 2018-19), the official said.

The divested companies belonged mainly to three big lenders, namely Bank Saderat, Tejarat Bank, and Bank Mellat, according to Financial Tribune.

Excess properties of banks have piled up largely due to impaired loans, bad debts, settlement of government debt to banks and bad investments by lenders over the past several years.

Regarding the reason why lenders often refuse to give a precise assessment of their assets, Memarnezhad said the share prices of banks constantly change in the stock market which makes accurate estimation difficult.

Economy Minister Farhad Dejpasand has given an ultimatum to the struggling banks to divest their excess properties by the yearend.

Dejpasand asked CEOs of state-owned banks to send their plans, schedules and mechanism of divestures to the ministry.

On the divestiture methods, he suggested that banks can directly sell their assets or offer shares in the stock market.

In February he spoke about a one-year program based on which 10 government-owned banks (including the major lenders) are required to relinquish excess assets – mostly real estate – and increase their cash reserves.

According to rules guiding the privatization of government assets, the government is obliged to transfer 80% of the shares of state-owned and affiliated companies to nongovernment bodies.

Non-banking activities of banks have long been condemned by independent economic experts and senior government officials on the grounds that such activities are a major hurdle to healthy and transparent lending and have long deprived small and medium-sized enterprises from borrowing money.

The financial plight of SMEs and the poor performance of most banks have been among subjects of debate in academic circles and the media.