Banks Need to Shed 10,000 Branches

EghtesadOnline: There are more than 22,000 bank branches in Iran, about half of which are not needed, a deputy minister of economy said on Sunday.

News ID: ۷۸۵۰۰۸

11 November 2019

Abbas Memarnejad, the deputy economy minister for banking, insurance and state-owned companies' affairs said 10,000 branches are extra, IRNA reported.

Majority of the unwanted offices belong to state-owned banks. Based on data for the month to April 21, state-run banks and credit institutions had 9,930 branches by the end of second month of the current fiscal year that ends next March.

Bank Melli Iran with 3,315 branches is the largest lender, followed by the Agriculture Bank of Iran with 1,966, Bank Sepah 1,818 and Bank Maskan 1,272 branches, Financial Tribune reported.

According to Memarnejad, the number of bank branches need not exceed 12,000 based on indicators such as net domestic product, population and demographics.

“Given that many people use internet-based and online banking services, there is no need for so many physical bank branches” he told a meeting in Qazvin.

With a major bank merger underway, more branch closures is highly likely in the coming months.

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

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

Global Norms

The unusually high number of bank branches in Iran has came under mounting criticism by economists and government officials alike, giving rise to calls for cutting the number of less used and costly branches.

Given the status of most distressed lenders, which have piled up soured loans and choked off credit to companies, experts and market observers say banks must avoid adding branches and instead focus on improving online banking and lending to manufacturers.

Based on a Word Bank report there were 12.5 bank branches in the world for every100, 000 adults in 2016. The number for Iran in that year was 31.3. Iran’s average is also more than double in the MENA region’s average 14.7 bank branches for every 100,000 adults.

To reach the global average, Iran needs to cut the number of its bank branches to 8,868, which means getting rid of 11,730 branches that have popped up in some of the upscale districts in all metropolises.

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 needs to slash the number of its bank branches to 10,713, which means doing away with 9,885 branches.