Iran Banking Sector needs almost 50% of GDP to revive!
– After admitting “fundamental reform” as a must-have factor in the Iranian economy, now experts speculating on how much resources it takes to revive Iran Banking Sector. As the CEO of one the best performing banks in Iran with regards to international standards, aka Middle East Bank, Parviz Aghili Kermani stated in an interview that based on the latest figures up to September 2018, it takes USD 101 bn (@ USD/IRR 88,000) to perform proper restructuring of Iranian Banks. This is almost equal to 50% of the nation’s GDP and 54% of banks’ current deposits. According to Aghili, 40% of banks assets are actually fictitious assets that need to be taken out for a proper valuation. He also added that these reforms must take no longer than 4 years to execute.
– An analysis of Iran Debt Market latest status shows that the outstanding Islamic Treasury Bills issues which are now 25, have an average YTM of 22.05% with DTM of 15 to 757 days. After the CBI’s directive obliging private banks to lower their interest rates to below 20%, rates of ITBs fall to more reasonable levels. The below picture has the details:
Moreover, on the corporate bonds front, the yield of one of the oldest outstanding issues, Rightel Sukuk Ijarah, reached to lower than 20% after almost 6 months.
– Unconfirmed sources claimed that the Russian oil giant, Rosneft, is willing to let go of its Iran deal in wake of US sanctions snapback. Last November (2017), a deal of USD 30 bn has been signed between NICO and Rosneft for development of Iranian oil and gas fields which now is in doubt as rge Russian side claims that Tehran has nothing intresting to offer considering the risk of US sanction.
In the Market
Equities extended their losses further today in a thin session on the Iranian Capital Market as investors held their buying in check in hope for positive news, both domestic and international. TEDPIX (-1.69%) lost almost 2,800 points and closed below the 162K level while IFEX (-0.86%) did not perform better and settled at 1,826.63.
Many analysts believe that the falling USD/IRR rate, which is good news for the economy in general, caused investors to lower their expectations while others are solid that at these prices the market is far undervalued. The FX rates continued to plummet today as USD/IRR reached below 100,000 level (circa 98,000 @ the report time) and the number of buyers reduced magnificently contrary to the last months.
Moreover, the trading value of both Tehran Stock Exchange and Iran Fara Bourse was on a declining trend since nearly 3 months ago until today. The below picture shows the value of only equity trades on TSE and IFB which shows a surprising +80% reduction in volume since 1-10-2018!
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