Mohammad Pour: The entrepreneur bank takes the first word in transparency
Company news; According to the public relations report Entrepreneur BankFarshad Mohammadpour, Deputy Managing Director for Finance and Public Affairs, in a conversation with the reporter of the Communications Department, explained the reasons for receiving this valuable title and the financial analysis of the various periods of activity of the Entrepreneur Bank. You can read the result of this conversation below:
In general, how do you evaluate the achievements of the last 23 years of the Entrepreneur Bank?
A look at the 23-year history of Entrepreneur Bank shows that this bank has been operating in a specific direction and framework with a clear strategy (of course, more than 23 years have passed since it started as “Karabeeran Non-Banking Credit Company”). Carrying out banking activities is the goal and avoiding non-banking activities has been the framework that has been followed since its establishment. Failure to enter non-banking areas, especially in inflationary conditions, although it has caused the bank to stay away from the profitable capacities in the mentioned activities, but this issue has always preserved the integrity of the bank in unstable economic conditions.
Does it seem that there have been significant changes in the bank’s financial indicators in recent years?
In my opinion, the entrepreneur bank can be divided into 3 periods from a historical point of view. The first period from the time of establishment until the early 90s when the bank was established and the initial formation of the structures took place and we witnessed a stable period in terms of financial, management, etc. The second period, from the early 90s to 2018, during which we witnessed frequent management changes in the bank during this period of about 8 years; In this 8-year period, Shahid Bank had 6 CEOs (or supervisors), and the effect of this period of managerial instability can be clearly seen in Shahid Bank’s financial statements. The beginning of the third period, which was from 2018, the bank experienced a significant growth in financial, operational, etc. indicators, which can be called the beginning of a new era in the Entrepreneur Bank.
Can you explain more about the financial indicators in these courses?
About the bank’s financial indicators; In the first period, which started from 1980 and lasted until 1990, we saw a steady growth of the bank’s financial indicators. The analysis of the bank’s net profit in this 10-year period shows that every year we saw a growth of about 50% of the net profit. The average net profit earned in these 10 years was about 60 billion Tomans per year. The above growth has happened in the same proportion in the assets and liabilities of the bank.
In the second historical period of the bank, we saw the stop of the growth of the financial indicators and sometimes the decline of the indicators. The average net profit of the bank in the 9-year period from 1990 to 1998 was about 230 billion tomans, and in the last years of this period (from 1994 to 1998), we generally saw an annual decrease in profitability, so that the bank’s profit in 1996 was below 100 billion tomans (63 billion Tomans) decreased.
The analysis of common revenues and expenses shows that the expenses were more than the common revenues of the bank. For example, in 2016, the growth of Sha’a Bank’s income compared to the previous period was about 109%, while the growth of Shaa’a Bank’s expenses was 118%.
In the case of non-shared (fee) incomes, in this period we saw an average growth of about 15% every year compared to the previous year.
It seems that the third period is the springboard for the bank’s financial indicators. Please explain in this regard.
Yes, in the third period that started in 2019, we saw a significant growth in the financial and operational indicators of the bank. In such a way that an important part of the last 10 years behind the bank’s competitors and the loss of market share in these years (1400-1399) was compensated. The net profit of the bank in 2019 was almost 4 times the previous year and also the average of the last 10 years, and for the first time in the history of the entrepreneur bank, the profit of the bank reached one thousand billion tomans, which continued in 1400.
The net facilities granted by the bank (as the most important profitable asset of the bank) which in the last 10 years (from 2009 to 2018) despite the average inflation of over 20% (according to the statistics of the Central Bank) and the growth of liquidity over a thousand percent ( In the last 10 years), the bank’s net facilities grew by about 15% on average every year compared to the previous year, which was much lower than the growth of the country’s liquidity.
In 2019, we saw a 120% growth in granted facilities compared to the previous year, as well as a 240% increase compared to the average of the last 10 years. This was one of the profitable factors of the bank in 2019. This issue continued in 1400 as well, so that in this year we saw a 40% increase in facilities compared to 2019.
Did this growth of indicators happen while maintaining the quality of the financial structure?
It is a fact that; Any growth is always attractive. When this growth is higher than the industry average, its attractiveness multiplies. One of the concerns that exists after any increasing growth is maintaining different standards after the growth period. Usually, if the growth is without operational support, it will have very negative consequences in the following periods. In fact, any growth will be valuable if it is continuous. In the financial literature, the term “Earning Quality” is very important. Profit quality with criteria such as earnings persistence, predictability, earnings smoothness, benchmarking and liquidity. In fact, we can claim that a benefit, especially in high growth conditions, is of high quality when it has the above characteristics.
It is safe to say that, in terms of various indicators, the bank has one of the highest quality profits in the country’s banking industry in the last 2 years. The ratio of deposits taken in the bank in order to avoid showing unrealistic profit shows that in order to maintain the stability and strength of financial statements in a careful and realistic approach, the bank has adopted the highest ratio of deposits regarding facilities. This is very necessary and important to maintain the stability and stability of profit.
Capital increase also happened in this period, how effective was this in reaching the financial indicators obtained?
One of the important measures to maintain the stability of profitability in any economic enterprise and especially in the banking industry is to maintain a proper balance between profit distribution and transfer of profit to capital. If this balance is established well and at the same time that it benefits the shareholder and the depositor from the year’s profit, it will make this profitability continuous and continuous. The capital increase that happened in the last 2 years was exactly in line with this strategy and this strategy will continue. The capital of the bank increased 4.5 times in the last 2 years, and the major part of the capital increase was of the quality capital type (cash proceeds from the shareholders and from the accumulated profit), which led to the important indicators of the bank, such as the capital adequacy ratio, being in very good condition. . This index reached 10.5% at the end of 1400, which is one of the highest capital adequacy ratios in the banking industry. This will help the bank’s operations to continue in a safe framework in the coming years.
We also saw this strategy in the case of subsidiaries. Please also explain about the financial performance of the bank’s subsidiaries.
Paying attention to operational indicators as well as the development of subsidiaries (of course within the framework of Central Bank regulations) has also been one of the specific strategies in recent years. In fact, we tried to use the profits of the companies for the development of the companies, and in this regard, we saw an increase in quality capital in all subsidiaries from 50% to 1000%. The strategy of effective monitoring of companies along with the development of its activities in recent years and in the coming year has been the most important goal of the bank. In fact, in the coming years, we expect companies to shoulder part of the bank’s profitability burden
Explain the most significant event that happened after the growth of the bank’s financial indicators.
Obtaining an acceptable audit report after 17 years, as you have mentioned, the audit report is considered as one of the important and key indicators for measuring the quality of financial statements. The existence of an audit report with multiple clauses indicates the low quality of financial statements, and in such reports, independent auditors generally draw the attention of shareholders to the clauses of the audit report in the distribution of profits. In the last 3 years, with a specific and defined strategy, we at the Bank of Entrepreneurs were able to receive the audit reports of all the bank’s subsidiaries in an acceptable manner from the esteemed auditor.
And in the next place, during a 3-year process and the application of different terminology in the past years, which led to the annual reduction of audit clauses, this year we managed to receive an acceptable report at the Entrepreneur Bank. This is an important event in the Bank of Entrepreneurs and even Sanat: As you may recall, in the Bank of Entrepreneurs, we have not been able to receive an accepted report for the past 17 years (since 2003). And in the banking industry, in the past 10-12 years, I don’t think any bank has received an acceptable report from an independent auditor, except for one bank (about 8-9 years ago).
This important event, along with increasing capital and adopting appropriate reserves, shows that the growth of profitability along with its quality is important for the bank. Maintaining the quality of profit and moving the bank on a safe path in this unstable economic environment is always one of the main goals of the bank.
In the end, if you have any special comments or questions, please state them.
In the end, I feel it necessary to emphasize that these events could not have been achieved without the support of the respected CEO and members of the board of directors and the executive board, as well as the great efforts of my colleagues in the bank’s subsidiaries, especially my colleagues in the financial field and the affairs of the bank’s assemblies. I hope that in the continuation of this path, with the support and cooperation of each and every colleague in all ranks and headquarters, we will make the name of Karafrin Bank shine in the country’s banking industry.
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