Iran: No Need for so Many Bank Branches

EghtesadOnline: The unusually high number of bank branches has long been a source of concern for both economic experts and government officials, giving rise to calls for cutting the number of barely used and costly branches.

News ID: ۷۴۸۴۹۶

21 September 2019

Mehdi Farshadan, an MP, says banks should avoid setting up branches and instead focus on improving and expanding online banking.

“With new technologies there is no need to open new branches,” he was quoted as saying by IBENA.

“To enhance their agility, banks should get rid of their surplus assets,” the lawmaker said, echoing the views of experts across the spectrum that the country simply does not need so many banks and branches, especially when the economy is in dire straits, Financial Tribune reported.

In the same vein, Abbas Memarnejad, the deputy economy minister for banking, insurance, and state-owned companies’ affairs called for accelerating the process of reducing the number of bank branches.

“The number of bank branches should be reduced with due consideration of all aspects,” he was quoted as saying by IRNA. He did not elaborate.

Based on available data for the month to April 21, there were 23,395 branches of banks and credit institutions in Iran.

State-owned banks had 9,930 branches in the second month of the current fiscal -- Bank Melli Iran with 3,315 branches was in first place followed by the Agriculture Bank of Iran with 1,966 branches, Bank Sepah 1,818 and Bank Maskan 1,272.

Although the numbers indicate a subtle decline compared to the 23,549 branches reported for February, it is far above world standards.

According to a World Bank report, there were 12.5 bank branches in the world for every 100,000 adults in 2016 while the same 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.

In comparison, figures for Turkey show it had 18.1 bank branches for the same number of people while the number for China was 8.8.

If it wants to come near the global average, Iran should bring down the number of bank branches to 8,868, which means closing 11,730 branches.

To reach the MENA average, a total of 10,169 branches should have been reduced to bring the total to 10,429 in 2016.

Getting close to the average among countries with upper medium incomes, demands Iran slash the number of bank branches to 10,713, which means doing away with 9,885 of the offices most of which are in the upmarket areas of major cities.

Acceptable Number

Citing studies conducted by the ministry, Memarnejad said the number of bank branches should not exceed 12,000 based on indicators such as net domestic product, population and demographics.

With a major bank merger in progress, more cuts in the number of bank branches is highly likely in the coming months.

Earlier in the month, the CEO of Bank Sepah -- the state-owned lender with which five military banks are merging -- said the number of branches of merged banks will be cut by 10%.

Mohammad Kazem Choqazardi estimated that more than 1,000 branches of Bank Sepah will close within three years.

In March the Central Bank of Iran said five military-associated banks and credit institutions, namely Ansar Bank, Bank Hekmat Iranian, Mehr Eqtesad Bank, Ghavamin Bank, and Kosar Credit Institution, are to be merged with the state-owned lender, Bank Sepah.

Highlight: If it wants to come near the global average, Iran should cut the number of bank branches to 8,868, which means closing 11,730 branches. To reach the MENA average, a total of 10,169 branches should have been reduced to bring the total to 10,429 in 2016.