Merged Banks Will Have 10% Less Branches

EghtesadOnline: The CEO of Bank Sepah -- the state-owned lender with which five military banks are merging -- says the number of branches of merged banks will be cut by 10%.

News ID: ۷۴۸۴۱۴

14 September 2019

Considering the number of Bank Sepah branches after the merger, Mohammad Kazem Choqazardi referred to programs to optimize the bank’s performance by downsizing.

The move to merge five banks and credit institutions -- affiliated to military organizations – with Sepah started in March, as part of the Central Bank of Iran’s broader plan to reform the dysfunctional banking sector, improve efficiency and eject loss-making banks.

The merged entities include Ansar Bank, Bank Hekmat Iranian, Mehr Eqtesad Bank, Ghavamin Bank and Kosar Credit Institution, according to Financial Tribune.

The five banks have 2,800 branches that are being added to Sepah’s 1,800 branches.

The figure is startling in that the total number of branches after the merger will be 1,000 over and above Bank Melli Iran branches, the country’s largest lender.

“By the time the merging process is over the number of Bank Sepah branches will rise to 4,600 branches,” ISNA quoted Choqazardi as saying.

He spoke about a three-year plan of action to close more than 1,000 branches of Sepah branches after the merger.

“We hope to cut the number of branches to 3,200-3,500 within three years,” he said, adding that branches with close physical proximity would go first.

In many cases the five merged banks have a branch in small rural regions and henceforth operate under Sepah’s name come March 2020.

“This would not be economically viable,” the CEO said.

The Iranian banking system has come under increasing criticism from many quarters for its tsunami of bad loans poor performance, troubled credits and reports of corruption.

Based on a Word Bank report there were 12.5 bank branches in the world for every 100, 000 adults in 2016. The number for Iran in that year was 31.3.

Iran’s average is also more than double the MENA average at 14.7 branches for every 100,000 adults.

To reach the global average, Tehran should cut the number of branches to 8,868, which means letting 11,730 branches go.

By the same token, to reach the MENA average, 10,169 branches must be shut down. To reach the average among countries in the higher income bracket, Iran should slash the number of its bank branches to 10,713, which means doing away with 9,885 branches.

No Layoffs

After the merging process ends, the number of Bank Sepah staff will rise from present 15,000 to 43,000 people.

On the subject of staff layoff after branch closures, Choqazardi said closing branches does not mean layoff of employees.

In the notice announcing the merger plan in March, the CBI assured employees working for the merged entities that the merger will not cause any disruption in their career and their rights would be fully guaranteed.

The regulator said comprehensive studies have been undertaken to ensure full protection of rights of clients, depositors, shareholders, employees and beneficiaries.