Iraq’s banking sector expected to grow

Iraq’s largest financial institution North Bank has plans to grow into an ever bigger institution and contribute further to the economic development of the country. The bank is already one of Iraq’s best capitalized institutions and reached the CBI’s IQD 250 billion share capital target. The share prices of the bank have increased by over 250% since 2009.

The North Bank, which is the largest private sector bank in Iraq, has new plans to be more active in the financial market. It has 18 branches across Iraq at the moment. The management has plans to open new branches soon in others governorates. The management of the bank also thinks that there are still avenues for new banks to enter the market and operate successfully.

Nozad Dawood Fattah Al Jaff, Chairman of North Bank, recently said in an interview that the new state of the financial market has rooms for growth as it is still a very open market. He also said that the size of the Iraq’s economy is big enough to accommodate many more banks. The new banks however need to have own specialty and diversity in order to grow, he added.

International Energy Administration mentioned in its ‘World Energy Outlook’ that Iraq is anticipated to supply 45% of the global incremental oil in the current decade. The growth in the oil sector will supplement the banks in a positive way. Aggregate net income of five largest private banks of Iraq grew by 207% between 2010-2012. The rate is predicted to increase even higher in the next few years.

Sansar Capital, a Singapore based financial analysis company, said that the banking sector of Iraq is in a position to ensure significant earnings and asset growth over the next decade due to the strong macro environment, growing credit penetration and an improving security condition. Sansar Capital further said that the rising credit saturation will enhance the banking sector growth by a good margin. Sansar Capital said that to ensure maximum growth, banks should focus on quality deposits, quality lending and improve transparency.

At the present, the government of Iraq contributes about $5 billion dollars in loan every year to the economy for business growth. Rest of the activity is being taken care of the private sector. The private sector does most of the activities as there is still no access to international banking systems. With growth in many sectors, requirement of banks will increase even more.

The bad loans however are a concern in the banking sector. But as the economy is on the growing path and right policies have been implemented, the amount and percentage of bad loans are expected to drop in the coming years.