Mellat to Sell Asia Insurance Stake

Bank Mellat is planning to sell its 20% stake in Asia Insurance Company as part of plans to shed excess assets and streamline operations.

“Mellat Financial Group, as the handler of the shares, has implemented preliminary measures for selling them and I hope the divestiture process goes as well as possible,” Bank Mellat’s CEO was quoted as saying by IBENA.  

Mohammad Bigdeli added that the insurance share divestiture is currently the top priority for the semi-private lender.

"Bank Mellat has sold and ceded 350 surplus properties and projects in the first eight months of the current Iranian fiscal to November 2017," he said.

The move is in line with the guidelines of President Hassan Rouhani and the strict order of Economy Minister Masoud Karbasian, as well as the directive of the Central Bank of Iran, which urges lenders to reduce their non-banking activities and reclaim their original roles as financial intermediaries.

“Bank Mellat started to rid its excess assets last year, but the process picked up pace at the beginning of the new Iranian year [started March 21], especially after the economy minister’s order,” Bigdeli said.  

In the past decade, Iran’s biggest banks invested heavily in commercial entities beyond their traditional turf which, following the housing crash of 2013, increased their woes. CBI issued a decree in 2014, warning that the banking system’s investment in non-banking sectors should not exceed 40% of their total capital.

Bigdeli noted that the bank has floated10% of the shares of its affiliated company, Beh Pardakht Mellat, in the capital market and is planning to sell another portion of its shares in the foreseeable future.

“We have established a specialized working group to sell the excess assets of the bank and through their persistent follow-ups managed to achieve great results that had a good effect on our future performance,” he said.

According to Bank Mellat’s CEO, shedding excess assets prevents the high costs of maintenance, as it increases the bank’s liquidity and enables it to allocate loans to various economic sectors and gain more benefits.

He also described the process of recovering bad loans by his bank as relatively acceptable, as the bank is pursuing the issue with utmost diligence to turn its non-performing loans into productive resources.

“Bank Mellat’s NPL ratio has notably improved and now stands at an appropriate level, which is significantly lower than the banking system’s average in the country,” he added.

Foreign Exchange Activities

During the first eight months of the current Iranian year, the volume of Bank Mellat’s foreign exchange transactions such as letters of credit and remittances reached $8 billion which, according to Bigdeli, indicate an annual growth of 106% and 20% in terms of number and volume, respectively.

He further said the bank’s correspondent relations have registered a 20% increase, as the bank is now connected to 167 foreign banks.

The banker anticipated that as planned, Bank Mellat’s forex transactions would significantly increase by the end of the current fiscal in March 2018.

“Assets have marked an increase of 12% and costs also went up by 11% during the first eight month of the current fiscal while the volume of foreign exchange accounts experienced a 17% growth compared with the same period of last year,” he said.

Bigdeli noted that the current performance is a result of CBI's move to enforce deposit rate cuts, which has been completely adhered to by the bank.

As per the directive, banks and credit institutions are obligated to refrain from paying high interests–that went up to 23%–after Sept. 2 and cap their interests on one-year deposits at the previous 15% while paying a maximum interest of 10% to short-term deposits.