Iranian Banks Shedding Excess Property

The process of banks getting rid of their excess assets is gathering pace with Bank Refah Kargaran becoming the latest lender to auction its assets through the Company for Selling Banks' Excess Assets –aka Fam.

According to the chief executive of Bank Refah, the privatized bank will auction its excess assets on Wednesday.

"The bank has had good cooperation with Fam and in line with this, the company will sell a portion of its assets this week," Mohammad Ali Sahmani was also quoted as saying by IBENA.

The official said that since Fam was born out of an agreement between the banking system and the Ministry of Economic Affairs and Finance, it must be fully supported.

He added that his bank is more than willing to work with the company because "should any profit come out of this, we would like it to go to a company owned by the banking system".

The Company for Selling Banks’ Excess Assets was founded in 2008, following the approval of the Central Bank of Iran and the Ministry of Economy. Fam's shares are held by 10 banks.

Sahmani noted that Fam only auctions the excess properties of banks and does not process the sale of other businesses.

If the banks' excess businesses are related to the exchange market they would be sold through the equity market and if they are not, "they will be divested based on their specific workings", he added.

Hassan Yamani, the head of Fam, confirmed Refah's auction, saying that "on Wednesday, 220 properties belonging to the bank will be auctioned through Fam".

Auction Frenzy

Last Wednesday, a separate auction was held to sell the excess properties of Tejarat Bank, Bank of Industry and Mine and the Export Development Bank of Iran.

According to Yamani, a total of 250 properties belonging to these three banks were up for sale at the auction.

Last week's auction was the second such event held during the current fiscal year that began on March 21. The first one was held one week earlier, during which "the excess properties of Bank Sepah in the city of Tabriz were auctioned and eventually 15 properties were sold".

According to Yamani, the fourth auction to be held on Wednesday next week will again focus on properties held by the state-run Bank Sepah but will be on a much larger scale.

Another auction will be held when the fasting month of Ramadan ends on June 25 to sell the assets of Bank Melli Iran, the biggest Iranian bank.

As announced by the CEO of BMI, Mohammad Reza Hosssein-Zadeh, the bank will also divest its factories in Khuzestan Province to the private sector in early May "in line with promoting business growth in that region".

After the botched investments of the banks in the real-estate sector bubble caused them much pain in recent years, they have been urged to minimize their non-banking activities and get rid of excess assets to raise capital.

The Central Bank of Iran last week called on banks and credit institutions to cease any involvement in investment funds as well as the purchase of any kind of securities and bonds, which the regulator has deemed as "non-banking activity".

As per the CBI directive, the banking system's previous investments in areas now regarded prohibited should end by 2020.

CBI has noted that the measures are meant to limit the risks and increase supervision over credit institutions' investment practices, leading them toward their original task of functioning as "financial intermediaries".