Home
16 May 2013
Iraqi banks are looking forward to expand their businesses to gain more revenues and to streamlining the banking process in the country, which is marked as the second largest oil producer in the list of OPEC. However, so far, the banking business in Iraq is not satisfying, especially for privately owned banks – it is a hard time to expand business in Iraq.
People of Iraq mostly depend on the state-owned bank for the security of their money and assets. Though, sniffing the growth in Iraqi economy, Stand Chartered Bank has made an effort to open its branches in Baghdad and Erbil, by this year. After opening these two outlets, the bank has further plan to open hub in Basra province, as revealed by a senior Standard Chartered official, who deline to disclose his identification in front of media. Total credit in Iraq amounts to nine per cent of gross domestic product, compared with an average of 55 per cent in the Middle East and North Africa, according to Singapore-based Sansar Capital Management, which runs a fund with $30 million invested in Iraqi equities.
Earning opportunities in Iraq are really soaring, despite of the different security issues in the country. In an interview, Sanjay Motwani, Sansar president, disclosed that Domestic credit growth in the last two years has been 89 per cent. The rising oil export, as well the oil production in Iraq is providing positive boosts for the country and the investors who are interested to invest in this region. The five largest privately owned banks boosted their combined net income by 207 percent from 2010 to 2012 and more than doubled earnings per share, according to a Sansar report on Iraqi banking. According to the forecast of the monetary funds, Iraqi economy will experience a boom in the coming years and this year the growth is expected by 9 percent.
Iraq holds the world's fifth-largest proven oil deposits and is budgeting $118 billion in spending this year, up 18 per cent from 2012. The central bank, supported by the IMF, has stabilized the Iraqi dinar at about 1,170 to the dollar and has curbed inflation to single digits from a peak of 80 per cent in 2006. The foreign reserves of the country stand around $70 billion, up from $50 billion in April 2010. The stock exchange of Iraq has been able to draw investors, including Asiacell Communications listed after a $1.3 billion share sale, in the Middle East's biggest initial public offering since 2008. Two other mobile operators of the country Kotek Telecom and Zain Iraq are planning to comply with their licenses for getting listed in the ISX.
Drop in Cost
The cost of insuring Iraqi debt against default for five years has fallen 154 basis points, or 1.54 percentage points, to a 14-month low of 367 on May 3 after reaching a six-year high on February 5, according to data provider CMA.
Abdul-Aziz Hassoun, executive director of the League of Private Banks, an Iraqi business group, said that lending by closely held banks increased 42 per cent last year compared with 2011.
Banks can charge a rate of 10 to 12 percent, in comparison to the rate of 20 percent which was the figure of the year of 2008. Iraq has one ATM for every 100,000 residents, compared with a regional average that's 32 times higher, according to Sansar's report. Jawad Mian, who is setting up a global macro hedge fund that's considering investing in Iraqi stocks, stated that many people of Iraq are still in unbanked situation.
Lenders from Overseas
It has to be noted that before US – led invasion in the country, foreign banks were barred in the country, under the regime of Saddam Hussein. In comparison to the 7 state owned banks, 15 international banks work in Iraq, which is definitely a positive sign. The plan of Standard Chartered for opening branches in Iraq will benefit both the Standard Chartered Bank and the banking sector of the region jointly.
[You must be registered and logged in to see this link.]
Updated 16 May 2013 | Soruce: Times of Oman | By S.Seal
