An Iraqi bank controlled by Jordanian interests plans to open five more branches in Iraq by the end of this year, a sign that there is still money to be made in much of the country despite civil war and low oil prices.
Iraq's economy shrank an estimated 2.4 percent in 2014 and the International Monetary Fund expects it to grow only marginally if at all this year. Baghdad has started running down its international reserves as cheap oil slashes state revenues.
But enough of the economy remains relatively untouched by the conflict, particularly in the southern oil-producing areas where Islamic State has not penetrated, for banks to keep functioning, and the long-term potential of Iraq's oil reserves is still drawing some fresh investment.
National Bank of Iraq will open five branches this year in Baghdad and southern areas, including two in the capital and one near the big Rumaila oilfield, vice-chairman Ayman Abu-Dhaim said.
The bank, in which Jordan's Capital Bank owns 62 percent after initially investing in 2004, currently has nine branches in Iraq, including two in the Kurdistan region.
"Iraq is a strategic investment for us...If one can achieve this in the current conditions, imagine what one could do when the problems are solved,” Abu-Dhaim, who is Capital Bank's chief financial officer, told Reuters.
Business in Iraq's overall banking sector has dropped some 20 percent because of the conflict and the fall in oil prices since last June, he estimated.
This has tightened liquidity in the banking system; bad debt is rising, partly because some payments by the government are being delayed. Attracting deposits has become harder since many people tend to go to government banks in unstable times; Abu-Dhaim estimated state banks, including the two giants Rafidain and Rashid, held about 80-85 percent of roughly $60 billion of deposits, leaving about 50 private banks competing for the rest.
Private banks have met with the central bank which has promised support for them, such as providing them with state deposits. But this hasn’t happened so far, said Abu-Dhaim, who worked as CFO for Jordan’s Social Security Investment Fund before joining Capital Bank in 2011.
Despite the tough conditions, enough of National Bank of Iraq's customers remain healthy - many are in consumer goods trading and pharmaceutical distribution, which have been relatively undisturbed - for the bank to keep making money.
National Bank of Iraq’s net income before tax in the first quarter of 2015 jumped 51 percent year-on-year to 2.94 billion Iraqi dinars ($2.5 million); operating income rose 9 percent. Total assets expanded 26 percent to 646.71 billion dinars.
To attract deposits, the bank launched this year a zero-interest rate deposit which gives depositors a chance to win a car every three months.
Abu-Dhaim said Capital Bank was focusing on training staff at its subsidiary and building an infrastructure in Iraq. “We are preparing ourselves for the good times to come.”
National Bank of Iraq, which accounts for 15 to 20 percent of Capital Bank’s business, obtained approval from the Lebanese and Iraqi central banks this year to open a branch in Beirut.
This ties in with Capital Bank’s overall business strategy, which is to develop as a regional bank with commercial and investment operations.
In Jordan, Capital Bank’s business is growing moderately - Abu-Dhaim said he expected the Jordanian economy to continue expanding modestly in the next couple of years with no major improvement or deterioration, as international aid helped the country cope with a huge Syrian refugee burden.
By making a play for the business of Iraqi and Jordanian companies operating around the region, Capital Bank can hope for faster growth. Last November it said it was establishing a subsidiary in the Dubai International Financial Centre to provide financial and investment services.