Demands imposed on banks, tough procedural mechanisms plus the worsening economic climate are impeding the sale of excess bank assets rendering the task almost impossible, an economic analyst says.
“Selling excess assets imposes a heavy burden on banks and hurls them at the forefront of investigative bodies that should determine whether everything was done in framework of law and transparently,” Hossein Mahmoudi Asl was quoted by IBENA as saying.
Banks own companies and real estate and have set up special managerial boards to manage their assets, and when assets are to be sold the boards will have to be dissolved, Mahmoudi Asl noted.
“I would propose creating a special office for this purpose to ensure that the task is undertaken by lenders per relevant procedures and mechanisms.
It is a good idea for banks to offer their unwanted assets at Iran Mercantile Exchange (IME) which would take care of the [key] transparency issue. We had had a similar experience in the case of municipalities and was successful.”
He concurred that banks are reluctant in getting rid of the excess assets because when they do they must sell to the production sectors that are not making a profit in the present dire economic conditions.
“Our manufacturing margins are thin while middlemen and dealers make fat profits with very little risk, if any. As such, banks prefer to hold on to their property and engage in intermediary activities or invest in the housing sector.”
Profit in the Iranian production sector, said Mahmoudi Asl, was around 32% in fiscal 2019-20, 25% last year (2020-21) and this year it has plunged below 15%.
“This decline profitmaking comes while global prices have jumped. Among the reasons pulling back profits are government-imposed prices, problems associated with raw material and gas supplies to factories.”
Banks, he noted, normally are averse to give loans to production units simply because they are unable to repay on time. Traders, however, have easy access to loans because they repay within a year.
“To see real change in the attitude of banks the economy needs a positive transformation. Profits from dealerships have to be reduced to the minimum via taxes and the risk tied with such activities should be raised with stringent regulations. One way forward is levying capital gain tax that should be soon ratified by the government and Majlis,” the analyst said.
Economy Minister Ehsan Khandouzi said last week that private and state-owned banks sold 670 trillion rials ($1.8 billion) in surplus assets since 2015.
“Shares in non-bank businesses accounted for almost half the assets and the rest was overextended real estate,” he said.
Bank Saderat accounted for 22% or 145 trillion rials ($408.45 million) of the sold assets, followed by Bank Melli 21% or 143 trillion rials ($402.8m), Bank Tejarat 110 trillion rials ($309.8m) and Bank Mellat 96 trillion rials ($270.4m).
Refah Bank with 48 trillion rials ($135.2m), Bank Sepah 47 trillion rials ($132.3m) and Bank Keshavarzi with 40 trillion rials ($112.6m) were the other lenders who sold their excess assets.
The minister said progress in ending non-banking business will be the main criteria for assessing the performance of bank CEOs. “We met all CEOs to explain what needs to be done about selling the excess assets.”
He said, “We required them to focus on selling large and appreciated assets rather than small holdings. For example, Bank Melli should free up 300 trillion rials ($850m) of its shares in Shazand Petrochemical Company and Bank Sepah needs to sell property to the tune of 30 trillion rials.”
