Iraqi banking sector maintains positive growth and huge profits over the next decade

Iraqi banking sector maintains positive growth and huge profits over the next decade 

SUNDAY, JULY 14, 2013 12:59   
Twilight News / expected "Sansar Capital", which specializes in asset management in developing countries, to achieve the Iraqi banking sector significant growth in assets and profits over the next decade, based on many factors, come in the forefront and economic environment is huge and powerful, and the proliferation of credit, and improved the security situation in the country.



The new report on the banking sector in Iraq issued by the company reported in the statement Alamartyh and seen by "Twilight News", that with the IMF forecast growth of GDP in Iraq, a rate of 9% during the current year, it is expected to keep the banking sector, in particular , at the level of steady growth over the next few years.

The report also pointed to the role of the further spread of credit in promoting the growth of the banking sector.

In this regard, the report highlighted what came in the World Bank study, which he explained that domestic credit Iraqi linked to GDP has remained constant at about 9% of GDP by the end of 2011, compared to 55% of the average GDP in the Middle East and North Africa.

Also saw domestic credit associated with GDP growth of almost 89%, according to a compound annual growth rate in the period from 2009 to 2011.

According to data released by the Central Bank of Iraq, the cash credit, such as loans and overdrafts rose significantly by a compound annual growth rate to reach 50% in the period between 2006 and 2011.

The report analyzes in detail the development of the private banking sector in Iraq, by highlighting the five largest private banks in terms of deposits.

The report shows that as a result of support resulting from strong economic growth and higher credit spread, these five banks witnessed a growth in total net income by 207% during the years 2010 - 2012.

The policy lack of militancy impact in the increase of capital, resulting in the reduction of earnings per share growth, although it still has a strong position, along with the growth of dividends collected to 111% during the period from 2010 to 2012.

The polls report property unusual characteristic of the Iraqi market, clear image in the banks with the highest rates of returns for equity and growth rates, since you are buying goods with the lowest multiples of evaluation, and that's what makes Sansar Capital believes that this indicates a lack of market efficiency, which provides an opportunity for interested persons .

It also sheds light on the financial situation of the Iraqi banks, and shows high profits equity earnings ratios in Iraqi banks significantly, according to figures provided, which approached some banks in the ratio of 60%.

According to the report, the growth of the Iraqi banking sector profits and gross domestic product (GDP) will grow by 151% in the period from 2011 to 2020 as expected and the International Energy Agency. And promotes increased oil revenues, which coincides with the improved security situation in the country, as violence has decreased by 80% during 2006 and 2012.

In spite of significant growth, but it will have to Iraqi banks to overcome some significant challenges, if she wanted to continue on the path of growth distinct pace, as happened during the past five years.

On the other hand, access is one of the biggest challenges facing the banking sector in the country, as the access to bank branches or automated teller machines are still largely limited to the general public in Iraq. There are now about 900 bank branch serves 33 million Iraqis, in the sense that each branch serves 36 thousand people.

Among other challenges abnormal environment dealing with government banks, and overall loss of confidence in the banking system.

The problem is exacerbated by the absence of private insurance institutions deposits, which ensures customers their deposits in the event of bankruptcy of the bank.

The report also cast a shadow of doubt in part on corporate governance and the degree of transparency in some banks.

The report cited the North Bank as an example, where the leading auditing and financial concerns raised by accountants in reports, as pointed to the absence of reports submitted by the bank has been translated from English.

Said Sanji موتواني, president of Sansar Capital "despite the fact that the banking sector in Iraq is undoubtedly on the path of growth, but that this path is not without some challenges. Important thing that you should pay attention to is that it is possible to pass all of these challenges and obstacles, especially If the combined efforts of the government and private sectors.

The private sector banks, in particular, can contribute to improving the ease of access to the networks of bank branches and offer services, while the banking sector can government help to moderate scales of justice between the government-owned banks and private sector banks. There is no doubt that earn the trust of the general customer requires work and effort on the part of both parties.

Iraqi banks receives the majority of its revenues and profits from financing activities and trade.

The proportion ranged commissions earned from the financial and commercial activities in 2011 (wire transfers, letters of credit, via fax transfers) between 28% to 83% of net revenue for the four largest traditional banks.

Came the traditional lending activities such as net interest income on loans as the second largest contributor to the revenue for the four largest banks, may get through that rotate deposits from 13% to 49% of net revenues from these activities.

Has improved Alodaan economic and security situation in Iraq, the two components of an attractive investment in Iraq, despite the fact that there are many challenges still exist in front of people who are looking to participate in the public markets, where it takes investors caution when doing investment in Iraq, particularly the actual existence in the state.




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