State-owned Bank Melli Iran wants to sell 500 trillion rials ($1.22 billion) in assets by the end of the current fiscal year in March 2023.
"Shares of Shazand Arak Refining Company are to be offered in the stock market…The company is worth almost 340 trillion rials ($837.4 million)," unidentified BMI officials said, IBENA reported.
It was not clear what other assets would be offered.
The BMI stressed that it is committed to do away with its excess assets and non-banking businesses to improve lending power. However, "Selling assets is not easy because of the stringent regulations."
There are a litany of constraints when it comes to selling government-owned assets, which should be addressed by the Central Bank of Iran to let banks convert part of their assets into bonds, the unidentified officials said without elaboration.
Bank Melli says the government owes it 850 trillion rials ($2.09 billion).
Banks and credit institutions own huge volumes of non-financial assets that have piled up over the years mainly due to impaired loans, bad debts, settlement of government debts to banks, branch closures and distressed investments.
Non-banking activities of lenders have long been censured by prominent economists, analysts and senior government figures on the premise that it is a major hindrance to healthy and transparent banking that have resulted in mountains of bad debts and non-performing loans.
Experts believe that 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.
They say that banks are reluctant in getting rid of the assets including companies and real estate because when they do they must sell to production sectors that are already saddled with big financial problems and are unable to make a profit in the worsening economic conditions.
“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 the framework of law and transparently,” Hossein Mahmoudi Asl, an economist, was quoted by IBENA as saying.
Economy Minister Ehsan Khandouzi said earlier 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 excess 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 surplus assets.
The minister said progress in ending non-banking business is the main criteria for assessing the performance of bank CEOs.
The Cabinet last week approved a proposal calling for state-owned banks to raise capital and enhance capital adequacy ratio by allocating an estimated 350 trillion rials ($863 million).
Bank Melli is set to receive 35 trillion rials ($86.3 million) to boost capital as part of the 2023-24 budget bill.
By increasing the capital of banks the government seeks to boost lending capacity and underpin support for cash-strapped production units. The measure would also help improve the capital adequacy ratio of banks.
The capital adequacy ratio (CAR) of Bank Melli was 8.7 based on its last financial statement – the year before it was 11.29.
