A new report on Iraq's banking sector released by Sansar Capital Management has highlighted the earnings potential for the country's banks writing letter of credit (L/C) business.

The asset management firm also reckons the Iraqi banking sector is set for significant earnings and asset growth over the next decade.

Trade finance strength

The report pointed out that Iraq's banks generate large proportions of revenue and profits from trade finance-related activities.

For the year 2011, commissions driven by trade-finance-related activities, including L/Cs as well as wire transfers and foreign exchange activities, accounted for a range of 28 per cent to 83 per cent of net revenues for four of Iraq's largest banks.

Growth prospects

With the International Monetary Fund forecasting Iraqi GDP growth 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 report said.

Sansar Capital also reckons that rising credit penetration will further fuel banking sector growth.

Significant earnings and asset growth over the next decade will be driven by a strong macro environment, increasing credit penetration and an improving security situation in the country, the report said.

This article represents the views of the author and not necessarily those of the ICC or any of the other partners in DC-PRO.