TBY talks to Dr. Majid Reza Davari, Chairman and Managing Director of Bank Tejarat.

Majid Reza Davari
Dr. Majid Reza Davari is currently Chairman and Managing Director of Bank Tejarat.

What was the vision behind Bank Tejarat's establishment?

Bank Tejarat was formed 31 years ago after the merger of 12 banks following the Revolution. Most of these banks had a bi-national nature and were merged with other foreign banks. Iran-Netherlands, Iran-Japan, Iran-Russia and the like could be regarded as some of them. Thus, it benefits from a very strong potential in terms of international banking. Three years ago, Bank Tejarat was ranked fifth in Iran in the area of deposits, and now it is the fourth. Regarding bank guarantees, we are the leader in the Iranian market with a 39% market share. Regarding letters of credit (LCs), we are considered to be the second largest provider in Iran. In terms of deposits as well as credits we hold a 17% market share amongst the five largest commercial banks of Iran. Since the privatization of Bank Tejarat we have improved these ratios remarkably. Furthermore, the bank also possesses a very good status among the public.

Who are your main clients? Businessmen, exporters…

As you know Tejarat means “commerce" in Farsi. Thus, the main area of our work is commerce and trade. This doesn't mean that we're not working in the field of industry. For example, last year about 35% of our credit facilities were dedicated to the industrial sector. About 20% of the rest was dedicated to agriculture. However, the capabilities of this bank for trade cooperation are very high.

When did the privatization of Bank Tejarat occur and what was the effect on the bank's vision and policies?

It happened more than a year ago. Privatization has been of great benefit to this bank, allowing us to carry out our business and responsibilities with greater profitability. Naturally, in this process our customers and the public, as well as our shareholders, will benefit. This will consequently lead to economic growth and the empowerment of the country. There is a rule in economics that if an action is based on logic, then profitability will increase such that it will increase wealth in the country. For example, during the last year more than 70% of government shares were sold to the public, and this year another 10% or so will be sold. In our understanding, the income of the government has increased from different dimensions.

How did the effects of privatization on Bank Tejarat differ from its effects on other banks?

I believe that in every private bank we should change our attitudes toward privatization before distributing and selling shares. The attitude that we hold here is more privatized. The support behind this claim is that we have the best situation in terms of the stock exchange. We are the first and only bank whose shares were sold in less than seven minutes on the stock exchange. For the time being, the price of our shares is among the highest. Compared to 2009, when Bank Tejarat first distributed and sold its shares to customers, we recorded a 115% return for investors. For example, if a shareholder bought a share for $100, he or she would have $215 this year.

Did privatization change anything in terms of management style?

Some of the rules and laws that were unnecessary were set aside and decision-making became faster, so that we decide within our board. Of course, every bank has to work under the supervision of the central bank of its own country, such as is the case in the US, the UK, and in Germany. And we have to act on the same basis. However, our first obligation is to provide profits to our shareholders. I believe that since the bank has been privatized, nothing is more important than the profit we must distribute to our shareholders.

More banks are being privatized, and more private banks are entering the industry. How does this increase in competition affect Bank Tejarat?

I believe that with more competition among the banks, especially the private ones, customer satisfaction will increase as better services are provided. As you know, the most important factor for our bank is the satisfaction of our customers as well as dedicating more profit to the shareholders. Our motto is “viva competitors".

Which area will you focus on more?

Our main focus is on bank guarantees, international banking, and other profitable sectors.

Foreign banks are now allowed to purchase up to 40% of Iranian banks. How do you think this will affect the Iranian banking system?

At present, based on the rules and regulations, the maximum of 40% of the Iranian banks' shares can be purchased for the purpose of investment, which could provide a suitable atmosphere to exchange banking experiences. In case the laws are amended to increase the mentioned percentage, this could help promote the existing interactions and provide more professional competition in the area of banking.

How many branches do you have throughout Iran and how many people do you employ?

When I first began working as the managing director, we had 2,020 branches. Now, we have 1,950. We are planning to decrease the number of branches that have proved to be not so effective. Since privatization, we have done our best to reduce the number of non-profitable branches. In line with the law, five years after privatization we are allowed to decrease our personnel numbers, but within our bank we are just trying to appoint them to different positions. For example, we are transferring our surplus manpower to the holding as well as to an insurance company that is currently under establishment.

For the purpose of establishing such an insurance company, do you collaborate with any other insurance companies in Iran?

No, it's a new insurance company—Tejarat Insurance. We are now looking for the required licenses and permissions from Bimeh Markazi Iran. We have delivered our business plan and currently await the regulator's response.