Baghdad/Dubai: JPMorgan Chase and Co. is the latest international bank after Citigroup Inc. and Standard Chartered Plc to expand business in Iraq as OPEC’s second largest producer boosts crude oil output and rebuilds its economy.
JPMorgan signed a one-year agreement on Saturday to help the Trade Bank of Iraq finance imports of goods and services, John Gibbons, managing director and EMEA regional executive for the New York-based bank, said in an interview in Baghdad.
“Our focus is to open more letters of credit through the Trade Bank of Iraq on behalf of the government and its ministries,” he said.
Iraq, with the world’s fifth-largest proven oil reserves, is modernizing its infrastructure and energy industry after decades of sanctions, war and neglect. It produced 3.2 million barrels a day of crude in June, according to data compiled by Bloomberg, and targets output of 3.5 million barrels by the end of the year. The government is boosting spending by 185 in 2013 to $118 billion, and the International Monetary Fund forecasts an annual economic growth rate of 9%, the fastest after Libya among 18 countries in the region.
Iraqi officials are in talks with international banks about the opening of offices and branches in the country, Abdul-Basit Turki, acting governor of Iraq’s central bank, said on Sunday in an interview in Baghdad. “It is a rich market and the investment opportunities are huge,” Turki said.
Foreign banks were barred from the country until after the 2003 US-led invasion ousted the government of Saddam Hussein. Today, 15 international banks operate in Iraq, competing with seven state banks, 23 private lenders and nine banks operating under Islamic rules, according to the central bank’s website.
Citigroup plans to open representative offices and branches in Baghdad and the cities of Basra and Erbil to benefit from an estimated $1 trillion of infrastructure spending, Mayank Malik, the US bank’s chief executive officer for Jordan, Iraq, Syria and the Palestinian territories, said in a 27 June interview. The lender is among international banks seeking to finance a pipeline to export Iraqi oil and natural gas through Jordan, Nateq Balasem Khalaf, deputy director general of Iraq’s State Company for Oil Projects, said on 4 July.
Standard Chartered has said it will open branches this year in Baghdad and Erbil, followed by a third office next year in Basra, a southern oil hub.
The agreement with JPMorgan will help the Trade Bank of Iraq “open more letters of credit that we’re in need of,” TBI chairman and president Hamdiyah Al Jaff said in an interview in Baghdad on Saturday. JPMorgan helped set up TBI, the country’s largest bank for trade finance, to facilitate imports needed for Iraq’s postwar reconstruction.
Banks in the country are set for growth in earnings and assets as a surge in lending in Iraq outpaces much of the Middle East, according to Singapore-based Sansar Capital Management Llc, which runs a fund with $30 million invested in Iraqi equities.
Iraq’s rising oil exports and a drop in the prime lending rate to 6% from 17% in 2008 are feeding the expansion. The five largest privately owned banks boosted their combined net income by 207% from 2010 to 2012 and more than doubled earnings per share.
Iraq’s stock exchange drew investors in February when mobile operator Asiacell Communications PJSC listed after a $1.3 billion share sale, in the Middle East’s biggest initial public offering since 2008. The country’s two other mobile operators, Zain Iraq and Korek Telecom, plan to sell shares in IPOs to comply with their license requirements.
Iraq is the biggest oil producer, after Saudi Arabia, in the Organization of Petroleum Exporting Countries.