Bank Privatization in Iran Amid Accumulated Losses Worth Tens of Trillions of Tomans
The director of financial institutions supervision at Iran’s Securities and Exchange Organization has announced that the government intends to offer its shares in Bank Melli, Bank Tejarat, Bank Saderat, and two insurance companies, Alborz and Amin Takaya, to the public through investment funds with a 20 percent discount.
Beyond these banks and companies, the government also plans to divest other movable and immovable assets in refineries, metal sector companies, and automotive manufacturers, offering discounts of 20 to 30 percent.
It appears the government hopes citizens will actively participate in purchasing shares of these companies and banks.
The resources allocated in this year’s budget from the sale of government movable and immovable property have been set at approximately 49,500 billion tomans, representing an increase of more than tenfold compared to last year’s budget, equivalent to ten percent of the total government budget.
Privatization in Recent Years
The method of privatization in recent years has been constantly criticized by economic experts. A large portion of privatization has actually been the transfer of state assets to subsidiary companies of the Revolutionary Guards, subordinate bodies of the Supreme Leader, and others, with minimal actual participation of the private sector.
Even with the incorrect method of privatization, the failure to achieve planned targets for the volume of state asset sales is also significant.
Last September, the Parliamentary Research Center reported that in recent years, the actual implementation of government asset transfers (privatization) has consistently fallen far short of the approved budget.
For example, in 2018, approximately 2,550 billion tomans in government asset sales were planned, but in practice only 377 billion tomans were sold.
Similarly, in the previous year, 4,450 billion tomans in movable and immovable government asset sales were planned, but in the first seven months only 187 billion tomans were sold.
This is while the government intends to sell 49,500 billion tomans of its movable and immovable assets in the current year, which is ten times more than the privatization targets of the previous solar year.
Bank Losses
The government’s push to sell its shares in banks comes at a time when, according to official statistics released last September, nine Iranian banks are loss-making, with their accumulated losses reaching 56 trillion tomans—a figure that the Iranian News Agency (IRNA) reported is equivalent to more than “all the banknotes and coins in people’s hands.”
Bank Tejarat, in which the government holds a significant stake, faces accumulated losses of 11 trillion tomans and is Iran’s second largest loss-making bank.
Although Bank Tejarat is known as a semi-private bank, 17 percent of its shares are held by the government, and 40 percent of these shares belong to the Justice Shares program, which is also effectively under government ownership.
The investment company “Sabatamin,” which manages the Social Security Organization’s share portfolio, also manages approximately eight percent of Bank Tejarat’s shares. Additionally, five percent of Bank Tejarat’s shares are held in proxy by the country’s privatization organization. In effect, direct and indirect government control over 70 percent of Bank Tejarat’s shares is exercised.
Bank Saderat is also among the loss-making banks, and the government directly and indirectly controls over 58 percent of its shares.
This bank faces accumulated losses of 8.5 trillion tomans.
The Iranian News Agency reported last September that the performance of banks listed on the stock exchange with available information shows that among them, 11 banks have accumulated profits and 9 banks have accumulated losses; the total accumulated losses of these banks are more than five times their accumulated profits.
The report adds that banks unable to pay dividends to depositors see their accumulated losses increase every year.
Source: Radio Farda
