The management of optimal loan portfolio in banking sector: the case study of the Bank–e Saman

This study aims to examine the optimal loan portfolio policy for Bank-e Saman, using the Markovitz modern portfolio model (2591). 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 59percent 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 2832to 2839(corresponding to 1001to 1005) 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.