The governor of the Central Bank of Iran on Monday urged lenders to tap into the stock market to divest shares and get rid of their non-financial assets.
In a directive to CEO of banks and credit institutions, Abdolnasser Hemmati instructed them to use the opportunity created by the growing tendency among the public to invest in stocks, CBI’s website reported.
Lenders are under mounting government pressure to end their controversial non-banking activities by getting rid of expensive real estate and surplus holdings.
Authorities in Tehran estimate that non-financial assets of lenders to be worth 1,000 trillion rials ($6.3 billion). The assets have piled up mainly due to impaired loans, bad debts, settlement of government debts to banks, closure of branches and disastrous investments.
“Assets of banks and credit institutions should be liquidated and used for underpinning production units and productive sectors”, Hemmati said, recalling that there are laws that oblige lenders to purge their institutions of non-productive holdings.
Phenomenal growth in stock market indicators in recent months has attracted a flood of new investors to the bourse and the trend is expected to continue.
The benchmark of Tehran Stock Exchange grew threefold in the last fiscal year and has gained close to 40% since the beginning of the new fiscal year in March. More than 900,000 new investors have entered the expanding market over a course of one year.
Cognizant of the fervent rush of investors, the government is trying to grow the market for apparently valid reasons.
The stock market allows government to raise funds for plugging its chronic budget deficits while providing a rare opportunity to get rid of its stakes in state-run companies.
Rewriting Liquidity
Another key point driving the move is the government’s intention to channel the ballooning liquidity into the stock market and diminish the lure of the currency market, making it easier for CBI to regulate the often chaotic forex market filled with avaricious middlemen.
In the coming days, the government is to launch an exchange-trade fund to offer its stakes in Bank Mellat, Tejarat Bank and Bank Saderat Iran, as part of a broader divestiture scheme to sell shares in 18 government-affiliated companies.
Regarding orders to banks to shed non-financial assets, many lenders often complain that they have trouble finding customers for their property, especially in expensive upmarket areas in big cities.
To help expedite the divestures, the Ministry of Economy recently launched an online auction mechanism to facilitate the sale of banks’ properties. It logs data on lenders’ property valued at 170 trillion rials ($1 billion). This, however, does not cover the surplus assets of all banks.
The mechanism, dubbed ‘Fam’ is posted at www.sam-ba.ir and www.fam-bank.ir. It allows buyers easy access to data on banks’ assets and facilitates online auction.
Assets on offer include 1,246 factories and 277 animal husbandry companies. The ministry says “revenues from divestitures will go to banks and not the treasury”.
Four banks, namely Bank Melli Iran, Mellat Bank, Agricultural Bank of Iran and Bank Saderat Iran, own almost 50% of the surplus assets with the state-owned BMI topping the list with 14%.
Iran Mercantile Exchange has expressed readiness to host trade of the extra properties on the bourse. IME is of the opinion that it has adequate infrastructure to enable lenders to put up their assets on an electronic auction.
