A megamerger involving five military-affiliated banks and credit institutions will be finalized in a month, the governor of the Central Bank of Iran said.
Ansar Bank, Bank Hekamat Iranian, Mehr Eqtesad Bank, Ghavamin Bank and Kosar Credit Institution are in the process of merging with the state-owned Bank Sepah.
Two of the banks have completed the process and are now officially operating under Bank Sepah. In a note posted on his social media account, Abdolnasser Hemmati outlined the outcome of a meeting headed by First Vice President Eshaq Jahangiri on Tuesday, saying that the three remaining banks will hold their last general assembly “in a month to finalize the merger”.
Bank Hekamat Iranian was the first to merge in May and a month later Mehr Eghtesad Bank completed the process.
The merger decision was announced in March 2019 as part of the central bank's policy to streamline the dysfunctional banking industry and improve efficiency.
Hemmati described the merger as "very complicated and huge" and "one of the most important plans for reforming the banking industry."
Eelier, Mohammad Kazem Choqazardi, CEO of Bank Sepah called the long-awaited merger a “national mandate”.
Relocating Branches
The five banks have 2,800 branches that will join Sepah’s 1,800 branches. The latter, however, is planning to cut the number of branches to 3,500 in three years, but insists that cutting branches does not necessarily translate into layoffs.
Pointing to the anticipated increase 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.
“The Ministry of Economy has prepared a list of cities with populations over 10,000 that lack banks. Bank Sepah can move its surplus branches to those cities,” Memarnejad said.
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 strong criticism from diverse quarters for their inefficiency and large numbers of unwanted branches compared to its peers in the region and beyond.
Reforms Planned
Hadi Feiz Akhalqi, a Bank Sepah deputy, underscored efforts to address concerns of bank employees, depositors, shareholders and other beneficiaries.
The concerns would be addressed with “fundamental reforms in the management structure of the Bank Sepah and the merging banks,”
According to published surveys, the number of Bank Sepah employees will rise from the present 15,000 to 43,000 when the “new bank” is established.
Given the size of the merged entity plus the scale and scope of the work involved, Feiz Akhalqi spoke of a “three-year transitional phase” before the new bank starts operations under a reformed and efficient structure.
Senior government authorities have tried to reassure the banks’ staff that the merger does not necessarily mean downsizing. If and to what extent the employees are convinced in not clear.
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.
