State-owned Bank Sepah has sold 17% of its shares in Omid Investment Management Group, the bank’s investment arm, in the stock market.
The move comes after the Central Bank of Iran called on lenders to sell their shares in businesses unrelated to their mandate i.e. providing services to customers.
According to Sepah’s CEO, Ayatollah Ebrahimi, the bank will uphold regulatory requirements and end its non-banking operations – controversial practices for which most banks have come under strong criticism over the years.
"Real estate worth an estimated 150 trillion rials ($424.9 million) are planned to be sold in an auction in the near future," Ebrahimi said.
He did not provide details about the share sale of Omid Investment Management Group.
Sepah earlier tried to offer its shares in blocks but failed to find buyers. The group has investments in major projects including petrochemicals, cement, steel, power plants and stock brokerages.
Banks and credit institutions own an estimated 1,000 trillion rials ($2.8 billion) in non-financial assets, which 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 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.
Earlier Economy Minister Ehsan Khandouzi reiterated the role and significance of supporting feasible business plans and singled out banks for pouring billions into opaque projects in past.
"Transparency in the banking sector is a must," he stressed, adding that "banks need to embrace innovation in their investments and put a [permanent] end to non-banking businesses."
Elaborating the point, he added, "Henceforth the premise for assessing the performance of state-owned banks will be their verified progress in ending business operations" that have no correlation with banking per se.
