Tag Archive | "North Bank"

Bank Earnings Take a Hit


By Mark DeWeaver.

It’s been lackluster year for the ISX-listed banks. Total pre-tax profit for the 12 non-Islamic lenders that have reported so far fell 12% in the first half on a 3% decline in operating revenue, an 8% increase in operating expense, and a 21% increase in administrative expense.

Earnings dropped at 7 of the 12, with heavyweights Iraqi Middle East Bank (BIME), North Bank (BNOR), Qatar National Bank subsidiary Al Mansour Bank (BMNS), and Burgan Bank subsidiary Bank of Baghdad (BBOB) showing the steepest declines (see chart.)

Falling earnings are unsurprising given the deterioration in the security situation, the central government’s continuing failure to pass a 2014 budget, and, particularly for North Bank, the fiscal crisis in Kurdistan. Months before the fall of Mosul in early June, the banks’ trade finance businesses were already slowing as a result of disruptions to truck traffic from Jordan and Turkey.

At the same time, the budget delay has led to a slowdown in construction—another key sector for the banks—while in the Kurdish region the entire state sector appears to be running out of money.

The direct effect of lost business from branches in what are now ISIS controlled areas is probably quite small, however. For the 14 banks for which earnings breakdowns by province are available, Rabee Securities has calculated that the total contribution attributable to Mosul, Anbar, Kirkuk, Salah Ed Din, and Dyala came to just 2.2% of aggregate pre-tax profit. (Mosul Bank and Economy Bank, where the contributions were 30.9% and 29.6%, respectively, are important exceptions. So far neither has released first half results.)

This suggests that rolling back ISIS territorial gains is not necessarily a prerequisite for a recovery in bank earnings growth. Even with a continuation of the status quo, there could easily be a rebound next year if Parliament passes a budget, payments to the KRG are resumed, and progress can be made in reopening major highways and/or rerouting trade around danger zones.

The hit to bank earnings is likely to be only temporary.

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North Bank “in Good Position for Growth”


From Marcopolis. Any opinions expressed are those of the author, and do not necessarily reflect the views of Iraq Business News.

Iraq’s North Bank — the largest bank in Iraq (Private) — believes in active involvement in the market, and statics show the bank as the largest in the Republic in giving loans and three times the size of its nearest competitor in terms of capitalization.

Iraq Business News praised North Bank in a recent article “as one of Iraq’s best capitalized, being one of only three to have reached the CBI’s IQD 250 billion share capital target. It has also been one of the top performing names in the Iraqi market. Adjusted for capital increases, the shares have risen by over 250 percent since 2009.”

What ‘s not to like?” Principal at Quantrarian Capital Management, Mark DeWeaver asked rhetorically.

The Sansar report added that rising credit penetration is likely to further fuel banking sector growth. “Buoyed by strong economic growth and rising credit penetration, the five largest private Iraqi banks grew aggregate net income by 207 percent between 2010-2012.

Nozad Dawood Fattah Al Jaff (pictured), Chairman of North Bank, pointed out during an interview with Marcopolis the new state of the banking market and the regional room for growth. “This market is very new and it is an open market. The size of the economy in Iraq is so big that there is room for another hundred banks to enter the market.

He added, “Competition comes if you actually get involved in the daily market business, which is the policy that North Bank is following. North Bank is the largest bank in Iraq in terms of giving loans and we surpass the second closest bank in this area by at least three times.

Al Jaff asserted, “We welcome any other banks to do business in this area.” He noted “Every bank has its own specialty and a new variety of expertise would definitely help this important sector to grow, be it in Iraq or particularly in Kurdistan.

According to Singapore-based Sansar Capital, the Iraqi banking sector ” is poised for significant earnings and asset growth over the next decade driven by a strong macro environment, increasing credit penetration and an improving security situation.” Sansar reported that for 2013 the IMF was expecting Iraqi GDP to hit a nine percent growth, after posting a strong 8.4 percent GDP for 2012.

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Why I Still Like North Bank


By Mark DeWeaver.

I thought Sansar Capital’s recent report on the Iraqi banks was excellent. But I was surprised by its somewhat negative take on North Bank (BNOR). In particular, I found myself not entirely convinced by the following three points, which form the basis for their bearish case:

  1. Insufficient collateral for overdraft lending is a significant risk. Actually, this is only true if the bank has no ability to assess the cashflow situation of its customers. This is unlikely to be true of BNOR’s corporate overdraft clients, which include large cash-rich companies such as Asiacell.
  2. The new Central Bank of Iraq (CBI) auction rules threaten the growth of BNOR’s forex business. This will only be true if the bank’s customers are unable to find a way around the rules. But in fact they have in the past displayed considerable ingenuity in adapting to the CBI’s ever-changing forex policies. It’s not clear why this time should be different.
  3. The absence of auditors’ qualifications in the English translation of the 2011 annual report implies an effort to mislead foreign investors. Maybe. But in the bank’s favor, it’s worth pointing out that (1) these qualifications did not appear in the Arabic version of the 2012 annual report, (2) unlike most of the other banks, BNOR has at least gone to the trouble of having its annual report translated, and (3) when meeting with the bank’s management in person I have always found them to be extraordinarily candid.

In addition to this, the bank is one of Iraq’s best capitalized, being one of only three to have reached the CBI’s IQD 250 bn share capital target. It has also been one of the top performing names in the Iraqi market. Adjusted for capital increases, the shares have risen by over 250% since 2009.

What’s not to like?

Posted in Banking & Finance, Investment, Mark DeWeaver on Investments and FinanceComments (2)

Major New Report on the Iraqi Banking Sector


Singapore-based Sansar Capital Management has issued a comprehensive new report on the Iraqi banking sector.

The report finds that while the mix of an improving macro environment and security situation offer attractive investment ingredients, many challenges remain for those interested in participating through public markets.

Nevertheless, Iraq remains one of the most under-banked countries in the Middle East North Africa (MENA) region, while most Iraqi banks are overcapitalised, sitting on large sums of underutilised cash; this gives significant scope for expansion, and opportunities for investors.

In addition to providing a detailed analysis of the industry, the report examines the Iraqi private bank sector through the lens of the five largest private banks, ranked by deposit size:

  • North Bank (BNOR);
  • Bank of Baghdad (BBOB);
  • Iraqi Middle East Investment Bank (BIME);
  • Kurdistan International Bank (BKUI); and,
  • Dar Es Salaam Investment Bank (BDSI).

Please click here to download the full 64-page report free of charge.

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Asiacell to be Top Holding in Invest AD’s Iraq Fund


By John Lee.

Abu Dhabi’s Invest AD plans to buy into the Asiacell IPO (initial public offering), making it the top holding in its Iraq fund.

Sherif Salem (pictured), the manager of the Invest AD Iraq Opportunity Fund, and one of our Expert Bloggers on Iraq Business News, said:

Asiacell is going to be one of those stocks, that regardless of the price or valuations it sells at, will perform well. We plan to participate. The telecom sector is one of Iraq’s biggest stories and our Iraq fund is based on that.

“Though penetration levels have reached 80 per cent, internet reach is still not like other places in the region, which means each user is not generating as much as he potentially would be in the future.

North Bank, which had a very profitable first nine months, is currently the top holding in the $19.5-million fund, with an 11 per cent allocation.

Geoffrey Batt, who manages the $39 million Euphrates Iraq Fund, commented:

It would demonstrates that the ISX is a viable capital market … It would also be a catalyst for more attractive companies that are private to list.

(Source: The National)

Posted in Banking & Finance, Investment, Telecoms/CommsComments (2)

Private Bank Earnings Jump 90%


By John Lee.

Twenty-two of Iraq’s 30 private banks made a combined profit of $366 million (427 billion Iraqi dinars) during the first nine months of the year, according to a study released by the Association of Private Banks in Iraq.

Al-Hayat newspaper says this is a 90 percent increase in profits over the same period in 2011.

North Bank for Finance and Investment topped the list with a profit of 105 billion dinars, followed by the United Bank for Investment with 75.1 billion dinars, and the Bank of Kurdistan with 52.2 billion dinars.

Munther Kaftan, the managing director of North Bank, said he experts to merge the weaker banks together in order to improve their capabilities and offerings, allowing them to develop into more modern institutions.

(Sources: Aswat al-Iraq, Nuqudy)

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North Bank Numbers give Hope to Iraqi Economy


By Sherif Salem.

The process of capital formation is underway in Iraq, and that is good news for the grass roots economy. At least that’s what stock market-listed North Bank’s latest earnings results indicate.

Iraq’s gross domestic product has been growing at a rapid pace, but that’s mostly due to rising oil production and robust oil prices. The big question is: will oil proceeds help the rest of the economy take off?

In an important development, it appears that people are now confident enough to take their money out from under mattresses and put them in banks. North Bank’s deposits grew a whopping 45 percent in the first half of 2012 to reach ID917 billion, attracting customers with a deposit rate of 7 percent.

This encouraged the bank to increase loans by 27 percent in the first six months of this year. Historically, about 80 percent of the new loans went to companies, with the remainder went to personal and car loans.

With the increase in deposits and reserves, cash also increased to ID612 billion from ID434 billion at the end of 2011, which gives the bank much room to lend more, and start investing in bigger projects.

This is a big deal. Small companies across Iraq are crying out for capital, and if they receive it, growth can be rapid. The country currently produces very little itself, so a raft of light manufacturing and basic services companies could easily spring up and become national champions.

But for now, borrowing is still very difficult. Even North Bank, which is more progressive than many Iraqi banks, is loath to lend for as long as even one year as risk assessment capabilities are underdeveloped.

Although its lending rate may be lower than competitors, comparing North Bank’s 5 percent margins with regional margins of about 4 percent shows that while it is not a long way off the average, it is getting there faster than other Iraqi banks – some of which have 7-8 percent margins or higher.

The hope is that North Bank will move further down the road of lower margins and higher business volumes, and take the rest of the banking sector with it.

Sherif Salem is portfolio manager at Abu Dhabi-based asset manager Invest AD. He manages the Invest AD Iraq Opportunity Fund, as well as helping to manage other equities funds investing in the Middle East and Africa.

Posted in Banking & Finance, Sherif SalemComments (1)

Iraqi Co. for Financing SMEs Tops $26m in Loans


This week the United States Government, through the U.S. Agency for International Development (USAID), will reach a significant milestone in its efforts to support Iraqi businesses. Loans extended by Iraqi Company for Financing Small and Medium Enterprises (ICF-SME) to develop or expand small businesses will reach a total of $26 million or ID 30.18 billion. These loans to small and medium-sized businesses have created over 1,200 new jobs for Iraqis.

Founded in May 2009 with an initial $6 million grant from the USAID-Tijara Provincial Economic Growth Program, the ICF-SME program is designed to help expand Iraq’s private sector, as called for in the U.S.-Iraq Strategic Framework agreement. Funds that borrowers repay to the banks are, in turn, used to grant new loans. This cycle of repayment and new lending, plus additional money contributed by the banks has allowed $7 million of USAID grants to produce 1,374 loans averaging $19,000 in size for a total sum of loans exceeding $26 million.

“Iraqi businesses need enormous amounts of money to allow them to buy new equipment and expand, and will someday begin to compete on an international level,” said Managing Director Wisam Noori. “ICF-SME helps finance these purchases through bank loans made increasingly from loans that have been paid back.” Banks appreciate the lending program because it is stable, long-term, and can be obtained by eligible Iraqis at a low fixed rate of 10 percent, a rate substantially below prevailing market interest of 12-14 percent.

The nine private Iraqi commercial banks participating in the ICF-SME program are Gulf Commercial Bank, Sumer Commercial Bank, Ashur International Bank, North Bank, Iraqi Middle East Bank for Investment, Baghdad Bank, National Bank of Iraq, Mosul Bank for Investment and Development, and Basra International Bank for Investment.

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