THE MANAGEMENT OF OPTIMAL LOAN PORTFOLIO IN BANKING SECTOR: THE CASE STUDY OF THE BANK–E SAMAN

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MEHRARA MOHSEN; SADEGHIAN SOGHRA

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Journal: Financial Economics Year:2009 | Volume:2 | Issue:5 Page(s): 81-102

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Title

THE MANAGEMENT OF OPTIMAL LOAN PORTFOLIO IN BANKING SECTOR: THE CASE STUDY OF THE BANK–E SAMAN

Author(s)

MEHRARA MOHSEN | SADEGHIAN SOGHRA | Issue Writer Certificate

Keywords

BANK SAMANQ3

MARKOVTZ MODELQ2

BANK LOANSQ2

Abstract

This study aims to examine the optimal loan portfolio policy for Bank-e Saman, using the Markovitz modern portfolio model (1952). Generally, in Iran the Banks are allowed to offer loans to four economic sectors including services, manufacturing and mining, construction and agriculture. Loans offered to production sectors are treated the most risky venture for the banking sectors. However, the results of this study indicate that the Bank-e Saman has pursued a desired diversification policy to maintain its optimal loan portfolio as advocated in Markovitz model. In its optimal loan portfolio policy, service sector has enjoyed the lion's share of 65 percent of bank's total loans portfolio, followed by manufacturing and mines, housing and construction, and agriculture respectively. The distribution of loan portfolio by economic sectors over the period of 1381 to 1385 (corresponding to 2002 to 2006) is proved to be inclined towards the optimal pattern. Yet, due to certain restriction inherited in MARKOVTZ MODEL, some of discrepancies or deviations in optimal loan performance can not be explained. Thus in order to be able to address such shortcomings, the model requires to include some factors such as the real need of credit market, based on the accommodation principle, into model. Besides some factors such as formal and informal regulations have a strong bearing on bank loan portfolios which should be taken into account as well.

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APA: Copy

MEHRARA, MOHSEN, & SADEGHIAN, SOGHRA. (2009). THE MANAGEMENT OF OPTIMAL LOAN PORTFOLIO IN BANKING SECTOR: THE CASE STUDY OF THE BANK–E SAMAN. JOURNAL OF FINANCIAL ECONOMICS (FINANCIAL ECONOMICS AND DEVELOPMENT), 2(5), 81-102. SID. https://sid.ir/paper/229245/en

Vancouver: Copy

MEHRARA MOHSEN, SADEGHIAN SOGHRA. THE MANAGEMENT OF OPTIMAL LOAN PORTFOLIO IN BANKING SECTOR: THE CASE STUDY OF THE BANK–E SAMAN. JOURNAL OF FINANCIAL ECONOMICS (FINANCIAL ECONOMICS AND DEVELOPMENT)[Internet]. 2009;2(5):81-102. Available from: https://sid.ir/paper/229245/en

IEEE: Copy

MOHSEN MEHRARA, and SOGHRA SADEGHIAN, “THE MANAGEMENT OF OPTIMAL LOAN PORTFOLIO IN BANKING SECTOR: THE CASE STUDY OF THE BANK–E SAMAN,” JOURNAL OF FINANCIAL ECONOMICS (FINANCIAL ECONOMICS AND DEVELOPMENT), vol. 2, no. 5, pp. 81–102, 2009, [Online]. Available: https://sid.ir/paper/229245/en

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