The process of merging five military banks and credit institutions with state-owned Bank Sepah will be complete in the current calendar month to May 20, CEO of Sepah said.
The megamerger includes Ansar Bank, Bank Hekamat Iranian, Mehr Eqtesad Bank, Ghavamin Bank, and Kosar Credit Institution.
In March 2019 the Central Bank of Iran announced the merger as part of the plan to reform the struggling banking sector and improve banking efficiency.
Officials from the CBI, Economy Ministry, General Staff of the Armed Forces, and Bank Sepah discussed the latest developments on the merging process on Saturday.
Mohammad Kazem Choqazardi, the CEO of Bank Sepah termed the long-awaited merger a “national mandate” that is in the final stage.
“Two of the five banks will officially merge this month,” he said, adding that the Bank Sepah is prepared to convene the final general assembly of the merging banks, according to the minutes posted on Bank Sepeh website.
Farhad Hanifi, the CBI deputy for supervisory affairs, said the merging process is in progress in conformity with the regulator’s rules.
“The regulator had announced 10 main objectives in keeping with transparency and upholding the rights of beneficiaries,” he said.
Moving Branches
Pointing to the potential upsurge in Bank Sepah branches after the merger is complete, Abbas Memarnejad, a deputy economy minister, said the bank should move “extra branches” from big cities to smaller urban areas.
Merging banks reportedly have 2,800 branches, which will be added to the existing 1,800 Sepah branches, putting the total number of branches 1,000 over and above branches of Bank Melli Iran -- the largest lender.
“The Ministry of Economy has prepared a list of cities with populations over 10,000 that lack banks. Bank Sepah can move its excess branches to those cities,” Memarnejad said.
He emphasized that the merging banks should soon modify their IT structures to offer integrated banking services to clients.
Determining the value of assets owned by Bank Sepah and the merging entities is crucial, he said, noting that the valuation process would ensure the interest of all beneficiaries.
According to Memarnejad, the military-affiliated lenders have 285 subsidiaries. He called for a clear framework guiding either the divestiture of the subsidiaries or their continuation in the present structure.
Sepah had earlier announced a three-year plan to close more than 1,000 branches of the combined lenders after the merger.
Iran’s banking sector has been under systematic criticism from diverse quarters for their inefficiency and large number of unwanted branches compared to its peers in the region and beyond.
To reach globally acceptable norms Iran needs to cut the number of bank branches to 8,868, which means eliminating 11,730 branches -- apparently a tall order.
Possible Layoffs
Hadi Feiz Akhalqi, a Bank Sepah deputy director, underscored efforts to address concerns of bank employees, depositors, shareholders and other beneficiaries.
The concerns would be addressed with the help of “fundamental reforms in the management structure of the Bank Sepah and the merging banks.”
According to reported surveys, the number of Bank Sepah employees will rise from the present 15,000 to 43,000 when the new single bank is established.
Given the size of the new bank, Feiz Akhalqi spoke of a three-year transitional phase before the new bank will emerge with a reformed and efficient structure.
Senior authorities have assured the banks’ staff that the merging process does not mean layoffs. The CBI has said that studies have been undertaken to ensure that the rights of all sides, including banks’ shareholders and employees are fully protected.
