OREANDA-NEWS. October 20, 2015. Following previous publications on Iran by Renaissance Capital’s economics and equity strategy teams, the Firm introduces the Iranian banking sector.

In an inaugural in-depth report issued today by Armen Gasparyan, Banking and Financials Analyst, Renaissance Capital examines the sector top-down, placing it in a broader regional context and screening its current structure and financials.

The report’s findings indicate that while the banking sector has operated in isolation for many years, many of its characteristics resemble emerging market rather than frontier market financial systems, including in terms of the penetration of banking services.

According to World Bank data for 2014, referenced in the report, among Iranians (age 15+):

  • 92% have a bank account
  • 75% have a debit card
  • 32% have borrowed from a financial institution
  • 4% have a mobile money account

Iran has some of the largest Islamic banks globally, according to the report. The sector consists of 20 private and eight state-owned banks with an outstanding credit portfolio of \\$224bn, similar in size to that of South Africa. Most banks are locally listed; the sector accounts for about 13% of total Iranian market capitalisation (well below the MSCI FM average of 47%), the report says.

Importantly, the report states that credit penetration, at 67% of GDP, is higher than in the CEE and BRIC countries (ex. China) and just below the level in neighbouring Turkey. Deposit penetration, at 71% of GDP, is one of the highest in the EMEA space. While Iran’s population is similar to that of Turkey, Iranian banks have 40% more branches than their Turkish peers, Renaissance Capital says. With the 10 largest banks comprising just 30% of the sector’s assets, Iran is one of the most fragmented banking markets in the GEM banks universe.