Iran defies market jitters to float bank

The planned sale this week of a 5 percent stake in Bank Mellat to private investors is the first step in a process to gradually reduce government ownership in Iran's second-largest bank, its head said on Tuesday. In the Islamic Republic's first part-privatisation of a state-owned bank, Bank Mellat managing director Ali Divandari told Reuters he expected strong buyer interest when its shares are floated on the Tehran Stock Exchange on Wednesday.
It takes place despite the stock market in Iran, the world's fourth-largest crude producer, declining by more than 30 percent since August in line with tumbling oil prices. In addition, Bank Mellat is among Iranian firms and other bodies that are subject to US sanctions, imposed because of what the West says is a bid to build nuclear weapons. Iran says its atomic programme is peaceful.
Divandari played down the impact of such measures and said he expected Bank Mellat's track record to help it lure investors. He expected it to show a profit of $200 million in the 2008-09 year and estimated its assets at $40 billion. The flotation of an initial 5 percent in Iran's leading bank after state-owned Bank Melli was to "test the waters" and help determine a price and demand for its shares.
Divandari gave no details on what price the shares would be offered on Wednesday. "Considering the history, the performance and the reputation of the bank ... we expect that there is going to be high interest tomorrow for the first block offered to the public," Divandari added in an interview.
This would be followed by the transfer of 55 percent of Bank Mellat, which he said has millions of clients, to Iranian pension funds and provincial investment vehicles holding so-called "justice shares" to promote industrial projects. An additional 5 percent would be allocated to the bank's 25,000 employees and a further 15 percent would be sold on the Tehran Stock Exchange when market conditions permit.
Iran's oil-dependent economy is dominated by the state but the government has been seeking to speed up privatisation's after an article in the constitution, which decreed that core assets should remain state-owned, was overturned. With especially Western investors wary of Iran because of the nuclear row, some analysts say firms to be sold off may simply end up being transferred within a vast public sector.