If one word could be used to sum up Refah Bank's strategy, that word would be 'distinction'. The main priority for the bank is the development of internet banking solutions and electronic services, Dr. Peyman Noori, Chairman and Chief Executive Officer told Robin Amlot.
After half a century of banking in Iran, Refah Bank has some 12,000 employees in more than 1150 branches and special units. The bank was privatised in 2008 by a declaration of the Money and Credit Council. Refah Bank is currently the largest non-governmental Iranian bank, offering all common banking services within the country with a total of about 14 million customers.
Dr. Peyman Noori, Chairman and Chief Executive Officer of Refah Bank holds a PhD in Financial Management, while being a member of the Board of Trustees of the Iran College of Banking. A qualified accountant, he has been a member of the senior management of Refah Bank since 2006. Prior to joining Refah Bank he was a member of the board of Maskan Bank for eight years.
Dr. Noori is a firm believer in implementing current global quality models and is himself an assessor for the European Foundation of Quality Management (EFQM) and a member of the Panel of Judges in BID Institution as well.
What is the process by which the bank's products are created and reviewed?
"It is obvious that businesses in service industries, such as banking will undoubtedly lose their market share quickly and be replaced by their competitors, if they ignore their customers' needs and the way to meet them. On the other hand, the range of services has been widely expanded; so that we have to care about creating value in addition to satisfying our customers' needs.
"If banking products are not created systematically, they will not be adequately effective and efficient. One of Refah Bank's methods in creating innovative services is through customers' surveys, continuously conducted by our Public Relations Department and Research and Marketing Department. In fact, market needs are examined carefully in the bank and the time effects of any proposed product as well as its compliance with the bank's capabilities will be approved or rejected, upon conducting cost effective analysis. Meantime, existing products are constantly examined and reviewed."
In August 2009, the Money and Credit Council voted to change the status of Refah Bank to turn it into a private bank. What does this change mean for the bank?
"As you have mentioned, Refah Bank was named as a non-governmental, private bank by the Money and Credit Council. If the bank's Articles of Association are also approved by the Council, it means that as a large private bank - as the fifth bank in the country - Refah Bank can play a more active role in the country's economy, while enjoying various capacities in presenting services and competing with other Iranian banks."
Refah Bank has great achievements in the field of quality and implementing excellence models. Do you think it will pave the way to expand the bank's presence in foreign trades?
"In recent years, Refah Bank has been a leader in implementing quality systems. Winning different certificates and international awards, whilst implementing standard systems, such as ISO in the bank are the manifestations of the bank's attempts in this regard. The main goal of Refah Bank in implementing quality systems is to increase its efficiency and effectiveness. In tandem with its attempts, Refah Bank has won the "Quality Gold Star" from the BID Institution, while it has been nominated for the platinum award. Two years before, it also received a "Commitment to Excellence Certificate" from the European Foundation of Quality Management (EFQM) and we expect to receive a "Recognised for Excellence Certificate" in the coming year. I, as a Chairman of the Board and Chief Executive Officer of Refah Bank, have been appointed as the assessor of European Foundation of Quality Management (EFQM) and as a member of Panel of Judges in BID Institution. An ISO standard system has been implemented in the bank's operations; hence Refah Bank has been nominated to receive a Quality Award from the BIZZ Institution. Generally speaking, Refah Bank has been changed to an international bank, operating in the international market successfully."
Do you have any plans to raise capital for the bank through the issue of Sukuk?
"Capital increase is one of the possibilities for Refah Bank. The bank's paid-up capital is not comparable with those of the other banks and had been neglected by the bank's main shareholder. However, we have managed it successfully through implementing a model and effective financial prizes and other debt financing instruments, so we could decrease liquidity management risk and provide our shareholders with acceptable returns. Last year our ROE in Refah Bank was 1.4 or 140 per cent, which has been unique in the field. I should say that if Refah Bank is going to operate actively in the present competitive market, it should plan to renew the structure and increase its capital. We hope to increase Refah Bank's capital and the equity of its shareholders for IRR 10,000 billion (about $1 billion) in the coming year."
Refah Bank is a shareholder in the free trade zones' special bank who are your partners and how is this business performing?
Refah Bank was the initiator of "International Free-zone Bank" (IFB) and the Organisation of Trade Free Zones is the bank's main partner. Refah Bank is its main shareholder, holding 55 per cent. At the first phase, we intend to present IFB's shares in the local and international markets, and both Refah Bank and Organization will sell their shares. As Refah Bank is a commercial bank, backed by strong supports, we expect a brilliant horizon for IFB. It should also be noted that IFB's activities are defined in the form of other international banks.
What is the current shareholding structure of the bank and would you ever consider an initial public offering and when might this happen?
"At the present time, 94 per cent of the bank's shares are held by the Social Security Organisation, which is one of the Iranian public, non-governmental organisations and the remaining six per cent is held by the government. The Government has instructed the Social Security Organisation to present its shares in the stock market to settle all its liabilities; therefore, the whole structure of Refah Bank is non-governmental. The listing is also required in order to abide by the 'Rule of individual beneficiary' and the instruction of the Central Bank of the Islamic Republic of Iran.
"Accordingly, the Social Security Organisation as the main shareholder of the bank can hold 10 per cent of the bank's share at most. The remaining shares can be presented in the stock market as a whole or in different parts, based on Article 44 of the Constitution. A successful offer of the bank's shares in the stock market depends on different factors, including the economic conditions of the country and its stock exchange, suitable financial structure of the seller (and I believe the financial structure of Refah Bank is one of the best structures, to be presented in the stock exchange), high qualifications of its employees (having high capabilities), successful presence in the international markets, especially in the field of quality, etc.
"To sum up, it is better to say that this question should be answered by the Social Security Organisation, as the bank's main owner, but, I believe that Refah Bank will enjoy many advantages in the stock exchange, if its shares are presented in an effective and scientific manner."
Do you have any plans either to expand the branch network or to restructure it?
"Restructuring and optimising the bank's branch network is constantly happening. Those branches, being inefficient previously, can be efficient through applying some changes, while efficient branches may become inefficient due to several reasons. We do not intend to expand our branch network in the future, since we are serious in developing electronic banking in Refah Bank. Today, establishing physical branches at the micro and macro levels is not economical."
What is the bank's current product range and what plans do you have for new products?
"Refah Bank has led Iranian banks in its customer satisfaction approach for the past five consecutive years. This assessment, having been executed scientifically and precisely by an independent organisation throughout different institutions in the country indicates that Refah Bank has performed appropriately with regard to the existing possibilities and restrictions, so it has won first place in applying a customer-satisfaction approach. But, it should be asserted that in the current competitive situation, those organisations, which can identify their customers' current needs and respond to their needs effectively, will be successful.
"One of the most important plans of Refah Bank for the next five years is to develop electronic banking. I believe that any financial event in the bank will be recorded in the electronic, online banking, so their effects will be reflected. Some of the bank's other services to its customers include: establishing units of special services for pensioners - which can be strongly considered as a unique banking service locally and internationally, opening round-the-clock branches (724), designing a unique plan for distinguished customers and presenting other modern banking services."
Are electronic banking services 'a necessity'?
"Of course they are, not only from Refah Bank's perspective, but from a macroeconomic point of view. In fact, IT and ICT technologies are instruments to promote people's lives and welfare. So if we can plan for overall, dependable, integrated banking system, we will be benefited by its micro and macro positive effects. Today, customers may not be required to come into banks' branches, so it leads to a decrease in traffic and air pollution, whilst saving time and money and Refah Bank has performed appropriately in this regard. We have a five-year plan for informatics movement. Upon my arrival at the bank, the number of Refah electronic cards was less than 10, 000, but now we have more than 1.8 million Refah electronic cards and we expect there will be over 2.5 million cards by the end of 2010. The number of the bank's ATMs was 500 and now, it has been doubled, so most of the bank's active branches have been equipped with ATMs. The last and the most important electronic step of Refah Bank within the existing phases was testing the connection of cards to bank accounts, including current accounts at the end of the year. Developing POSs and PINPads on a logical, profitable basis is among the bank's priorities for the next year. Furthermore, issuing various types of credit cards, designed in accordance with non-usury banking law has been tested and will be publicly distributed by the end of March 2010."
Refah Bank has chosen the strategy of "Distinction" as its main strategy and has presented all its services on the basis of this strategy. What does it mean for the bank?
"Our 'vision' will be achieved in the long term, but I strongly believe what is important for an organisation in a competitive situation is to be distinctive. If the market is more competitive, distinctive features will be manifested better. For example, we have serviced more than 1.4 million pensioners of the Social Security Organisation in our special banking units, equipped with medical services in the presence of physicians. This has increased their loyalty to Refah Bank despite the possibility of receiving banking services from other Iranian banks; they prefer to receive their banking products from this bank, except for some special cases. This is because of the bank's "Distinction" strategy.
What are your longer term plans for the bank - how would you expect the business to develop over the next five to 10 years?
Refah Bank will be actively present in the Iran banking system, due to its capable, educated employees, provided that it is supported by its main shareholder and its shares are presented in the stock exchange accordingly. As the bank is privatised, we will look to a new horizon. For the next five to 10 years, developing electronic banking is the key objective for Refah Bank. While, implementing excellence models for distinction will continue, we will focus on increasing ROE and creating value for the shareholders. We will also pay attention to our customers' needs and maintain our social responsibilities to be the bank of choice among all people.
© Islamic Business and Finance 2010
