Muscat: The Iraqi banking sector is set for significant earnings and asset growth over the next decade driven by a strong macro environment, increasing credit penetration and the improving security situation in the country, according to a new report on Iraq’s banking sector released by Sansar Capital Management.

With the International Monetary Fund (IMF) forecasting Iraq’s GDP to grow at a rate of 9 per cent in 2013, the banking sector in particular is expected to maintain steady growth over the next few years.

The Sansar Capital report points out that rising credit penetration is also expected to further fuel banking sector growth. The report cites a World Bank study which shows that Iraqi domestic credit to GDP stood at a mere 9 per cent of GDP at the end of 2011 as compared to a 55 per cent of GDP average for the Middle East and North Africa (Mena) region.

Domestic credit to GDP grew at a clip of 89 per cent Compound Annual Growth Rate (CAGR) between 2009-2011. Moreover, according to Central Bank of Iraq data, cash credit, such as loans and overdraft facilities, have grown at an impressive CAGR of 50 per cent from 2006-2011.

The detailed report analyses the Iraqi private banking sector through the perspective of five of the country’s largest private banks by deposit. The report reveals that buoyed by strong economic growth and rising credit penetration, these five banks saw their aggregate net income grow by 207 per cent between 2010-2012.

Dilution driven by increases in equity capital resulted in EPS growth to be lower.

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