NH-2016-q2

COUNTRY FOCUS
NEWHORIZON Shawaal 1437 to Rabi al awwal 1438
The Top Five Iranian Banks
Bank Saderat
Bank Saderat was formed in 1952 and
claims to have the largest banking
network in Iran with around 2,600
branches. It employs 32,000 people. In
recent years it has been reducing the
number of branches as part of an effort
to control operational costs. It also has
22 foreign branches and three regional
offices.
It was nationalised in 1979 and reprivatised
in 2010. The latest share
ownership information is as follows:
Provincial Investment
Companies 30.3%
Government of Iran 18.3%
Mehr 78 Group 3.4%
Iran Health Insurance
Organisation 3.5%
The largest shareholder category is
provincial investment companies, which
are part of the system set up by the
Iranian government to distribute shares
(justice shares) in previously state-owned
companies to the poorest groups in
society. There have been criticisms
levelled at this scheme suggesting that
the ultimate recipients of these shares
are not receiving dividends and have no
part in the running of the organisations
concerned, e.g. electing board members.
Instead they are being managed by an
‘economic mafia’, with little government
supervision.
Bank Saderat was badly affected by
sanctions as a major component of
their business is letters of credit. The
total value of this line of business fell
from around $7 billion to $0.5 billion
during the period of sanctions, although
since the lifting of sanctions the figure
has climbed back to $3 billion. It has
also been adversely affected by nonperforming
loans, which stood at 26% in
2015, the highest level of any bank.
In 2011 Bank Saderat’s then CEO,
Mohammad Jahromi resigned when the
Bank became involved in the banking
38 IIBI
fraud apparently perpetrated by a
billionaire businessman, Mahafarid
Amir Khoslavi. He used forged Bank
Saderat documents to obtain loans to
purchase businesses including stateowned
companies such as Khuzestan
Steel, costing the Iranian banking
system in the region of $2.6 billion.
Bank Saderat’s shares were suspended
on the Tehran Stock Exchange in
July 2016. At the time of writing
they were still suspended. Shortly
afterwards the managing director
resigned in a scandal relating to the
high salaries paid to directors.
Bank Mellat
Bank Mellat was formed in 1979 as
the result of a merger of 10 prerevolutionary
banks. It is the third
largest bank in Iran in terms of
revenues and the largest in terms
of assets. It has around 25,000
employees and 11 branches in 11
different countries. It is the only
commercial bank to have established
its own investment bank.
Bank Mellat was one of the 11 banks
suspended on the Tehran Stock
Exchange in July 2013 and they were
the first to be allowed to resume trade
on January 24 2017. The immediate
result was a fall in share prices of
37.5%. This meant that shares values
were just 50% of the value at the time
of suspension. This had a knock on
effect on the Tehran Stock Exchange,
which fell by 1.28%. (Clearly,
investors are now worried about the
other 10 banks coming back to the
Exchange. It is understood that Bank
Saderat and Bank Tejarat are close
to relisting.) Prior to the suspension
Bank Mellat was regarded as one of
the most liquid stocks on the Tehran
Stock Exchange.
In July 2016, managing director, Ali
Rastegar Sorkhei, resigned in the
corruption scandal relating to the high
salaries paid to directors.
The latest share ownership information is
as follows:
Provincial Investment
Companies 17.4%
Government of Iran 17.0%
Saba Tamin Investment 8.7%
Employees Pension Fund 5.0%
Civil Servants Pension Fund 3.8%
As with Bank Saderat, the shares of
Bank Mellat are still largely controlled
by government and quasi government
organisations.
Bank Melli
Bank Melli was founded as and remains a
state-controlled bank. It was founded in
1927 and until 1960 acted as Iran’s central
bank. It has 575 branches in Tehran,
2,577 in other parts of Iran and 18
international branches in 11 countries and
around 57,000 employees.
In 2011 the Bank’s CEO, Mahmoud Reza
Khavari resigned. He was implicated
in the fraud perpetrated by Mahafarid
Amir Khoslavi. Before he could be
arrested he fled to Canada. Attempts by
the Iranian government to extradite Mr
Khavari to face charges have so far been
unsuccessful.
Early in 2017 the Iranian government
agreed to increase the capital of Bank
Melli by $2.4 billion. With this cash
injection the capital adequacy of the
bank will stand at 6%, which is still below
Basel III requirements, but is a significant
improvement.
Bank Maskan
Maskan Bank also known as the Housing
Bank is state owned. It was formed
in 1979 through a merger of various
organisations specialising in mortgages
and building investment. In 2008 the
CBI banned all other financial institutions
from offering housing finance, although
this changed in 2015, when this monopoly
was ended. As a domestic operator they
have not been affected by sanctions. It
has the lowest non-performing loan ratio
of any bank at just 2%.
www.islamic-banking.com