IslamicFinance.de

The planned merger of three Iranian lenders will take place in the coming days. The three banks are: Mehr Eqtesad Bank, Samen Credit Institution, and Ansar Bank. Samen and Mehr Eqtesad are currently branded by the Central Bank of Iran (CBI) as "awaiting license". Farshad Heydari, CBI’s deputy for supervision, had already announced in March that Mehr Eqtesad and Samen would be acquired by Ansar Bank. The planned consolidation would be a watershed event in reducing the influence of shadow banks and making the Iranian banking system more efficient.

Transparency can serve as a powerful disinfecting driver of development and accountable governance. It can also promote responsible practices that support a broad range of policy objectives. These include exposing government corruption, reducing the scope for government revenues to be siphoned offshore, increasing the collection of domestic tax revenues, increasing the accountability and effectiveness of government spending, and reducing dependency on foreign aid.

The Iranian government issued 30 trillion rials (about $670 million) worth of Manfa’ah sukuk at the over-the-counter exchange Iran Fara Bourse. The 42-month bonds, bearing a maximum of 20.1% annual interest, will be backed by 51 trillion rials ($1.13 billion) of government revenues. Each Manfa’ah sukuk is priced at 1 million rials ($22.2).

Several major Iranian private lenders have recently established correspondent relations with Qatar National Bank (QNB). Kourosh Parvizian, CEO of Parsian Bank, said these banks opened accounts with QNB and are prepared to offer financial services to Iranian and Qatari businesses. QNB governor Sheikh Abdullah Saoud Al-Thani said Qatari lenders will make efforts to remove trade obstacles quickly. The Iranian delegation in Doha held a meeting with officials from QNB, Al Rayan Bank and Al Khaliji Bank. They discussed using local currencies in bilateral trade and taking speedy measures to ease trade between the two countries. Bank Melli Iran is also holding talks with one of the largest banks in Qatar for establishing correspondent ties.

The Irani government will issue 260 trillion rials ($6 billion) worth of sukuk in the next fiscal year, starting March 21, 2018. Proceeds will be used to fund the government's incomplete projects. Managing Director of Central Securities Depository, Gholamreza Aboutorabi, said the projected debt issuance was 30% higher compared to what was forecast for the current year.

The total projected income of eight Iranian state-owned banks has been put at 845.2 trillion rials ($20.09 billion) for the fiscal 2018-19. These banks include Bank Melli Iran, Bank Sepah, Bank Keshavarzi (AgriBank), Bank of Industry and Mine, Export Development Bank of Iran, Post Bank of Iran, Tose'e Ta'avon Bank (Cooperatives Development Bank) and Bank Maskan. The expenses of these banks have been predicted to match their incomes at 820.2 trillion rials ($19.49 billion). President Rouhani submitted the budget on Sunday for the next fiscal year that begins on March 21, 2018. The bill also cements the authority held by the Ministry of Economic Affairs and Finance to issue official guarantees. All projects belonging to the private sector, cooperatives and non-government public entities that meet the criteria will be able to employ foreign funds.

According to Mohammad Reza Hosseinzadeh, CEO of Bank Melli Iran (BMI), the European Union has made its decision to work with Iran. The banker noted that BMI has managed to establish correspondent banking relations with 135 banks of 30 countries, half of them European. What is more, Bank Melli and its branches in Hamburg and Paris have connected to TARGET 2, the Eurozone's real-time transfer system. In terms of expansion, Hosseinzadeh said negotiations are well underway with one of the biggest banks of the Persian Gulf state for BMI to establish a branch there, but refused to name the bank. BMI is also on course to open a branch in Pakistan, most likely during the next fiscal year, starting March 21, 2018.

Banks, fintechs, financial solution vendors and startups were present in full force at the Third Iran Transaction Exhibition (ITE). The exhibition was inaugurated by Mohammad Morad Bayat, chief executive of FABA, a government-owned center for promotion of electronic banking. He said that 56 startup companies have taken part in this year’s event and that fintechs are not banks' enemies, as the future will be one of cooperation between the two. The Iranian Parliament also had a representative in the exhibition, who said the government has assigned a whole chapter specifically to electronic banking. Various payment systems, banking solutions, real-estate financial services and insurance facilitators were showcased at the exhibition.

The Central Bank of Iran has stepped in and put a stop to the trading of the so-called Sakhab bonds. Sakhab is one of the many types of debt securities issued by the Irani government meant to clear its debts to contractors. It matures in a year and is priced at 1 million rials ($26.1) per bond. It could only be traded in certain branches of Bank Melli Iran. The new Minister of Economic Affairs and Finance, Masoud Karbasian, vowed to stand against the issuance of any bond issued by the government outside the capital market. The government issued 120 trillion rials ($3.13 billion) of Sakhab bonds late March and handed over the secondary trading to the banks. The opaque condition of secondary trading prompted the growth of a black market. Market experts have long raised concerns about a deepening gap between the equity and debt markets and further channeling capital toward low-risk, high-return bonds.

The Central Bank of Iran has released the names of 40 registered banks and credit institutions active in the country, which include the names of five foreign banks. The only five foreign lenders licensed to operate in Iran are the Hamburg-based Iranian-European Bank, Standard Chartered, Iran-Venezuela Bi-National Bank, Islamic Cooperation Investment Bank and Future Bank. The Iranian-European Bank has a German license, but is owned by the Iranian state. Standard Chartered is a British multinational banking company headquartered in London. It operates a network of more than 1,200 branches across more than 70 countries. Iran-Venezuela Bank a joint venture between Banco Industrial de Venezuela and the Export Development Bank of Iran. However, Iran is planning to sell some of its shares in IVBB, as the two countries currently have no commercial relations. The Islamic Cooperation Investment Bank is an Iraqi private lender, which currently has 11 branches in Iran. Future Bank is a fully commercial lender approved by the Central Bank of Bahrain, its branch in Iran is located in the Kish Free Trade Zone.

A delegation from the Central Bank of Turkey will soon meet their Iranian counterparts in Tehran to remove hurdles in the way of bilateral banking relations. Particular difficulties include Iranian citizens' bank accounts in the Turkish Halkbank. The banking ties were overshadowed by the detention of a senior Halkbank official in the US in March for allegedly violating Iran sanctions. Mehmet Hakan Atilla was accused of conspiring with Reza Zarrab, an Iranian-Turkish gold trader, to channel hundreds of millions of dollars through the US financial system on behalf of Iranian companies. Turkish Minister of Economy Nihat Zeybekci is also scheduled to visit Iran on June 21 to negotiate a preferential trade agreement between the two sides.

Bank Melli Iran (BMI) is planning to overhaul its European branches after clearing the procedures both inside the country and abroad. BMI's director for Foreign Exchange, Gholamreza Panahi, said the bank held negotiations with European officials to enhance its presence in the continent. He added that the bank's Najaf branch in Iraq is also ready to launch and expand the bank's network in East Asia. Panahi said BMI established correspondent relations with 25 foreign banks, which means connecting to a banking network that makes it possible to benefit from their wide range of services. The official also said BMI was the first Iranian bank to be reconnected to Swift, the international interbank messaging network, after the sanctions were lifted in January last year.

The Iranian Ministry of Economy has published the details of letters of credit (L/Cs) that Iranian banks allocated over the past few years. The country’s international trade picked up considerable pace when the sanctions against Iran were lifted. According to the ministry’s report, Bank Melli Iran allocated 154 letters of credit worth $42.71 million over a four-year period (2013-16). During 2013-16, Bank Keshavarzi opened 19,253 L/Cs worth over $10.5 billion. It also played an important role in issuing 21 bank guarantees valued at $15 million. Bank Mellat also issued 32 export guarantees worth $15.4 million and four import guarantees worth $13.5 million. Export Development Bank of Iran opened 550 L/Cs and issued more than 1,750 bank guarantees during 2013-15 to emerge as one of the main forces in the Iranian economy.

The National Development Fund of Iran (NDFI) plans to make investments in international money and financial markets. According to the fund's director, Ahmad Doust-Hosseini, the fund is also ready to support foreign investors as well as Iranian exporters by extending loans. Doust-Hosseini said from the next Iranian year (March 21, 2017), 30% of revenues from the sale of oil, gas and their related products will be deposited with the NDFI. He added that the fund belongs to the private sector and non-government enterprises, so state-owned entities will not receive any loans. Ali Salehabadi, CEO of the Export Development Bank of Iran (EBDI), said his bank will allocate working capital to export projects in the form of foreign exchange and rial loans in partnership with NDFI.

For Islamic banking, the opening up of Iran is a huge development, as Iranian banks make up the world’s largest financial system based on Islamic law. A large number of sukuk and other Islamic securities from Iran are expected over the next few years. Estimations are that there are over 150 Iranian companies considering Islamic sukuk sales. Iran also requires funds for its infrastructure development programs estimated at around $1 trillion over the next decade, according to a report published by Forbes. Islamic banks in the region are building their activities in key sectors of the economy. Retail banking has traditionally been the mainstay of Islamic banking in the region. Here, investment in digital and smartphone banking will be crucial in future.

Iranian insurance firms generated 21.7 trillion rials ($525.9 million at market exchange rate) from selling life policies during the eight months to November 20, marking a 37.19% growth compared with the same period of last year. Central Insurance of Iran’s database also shows that life insurance accounted for 12.15% of insurers’ total premium income during the period. The share was recorded at 10.66% during the same period of last year and 11.98% in the month ending October 21.

Insurers paid 7.4 trillion rials ($179.3 million) to 240,000 life policyholders as indemnity. The payout ratio of the category stood at 34.2% for the eight months to November 21.
According to Sanhab data, insurance firms collectively earned 179 trillion rials ($4.33 billion) from selling 34 million insurance policies in all categories during the eight-month period. A year-on-year comparison of data indicates a 20.4% growth in premium income and 9.8% increase in the total number of sold policies. The total paid claims amounted to 101 trillion rials ($2.44 billion) during the period, marking a 25.6% growth YOY.