Blom Bank opened last week its first branch in Baghdad to be the eighth Lebanese bank to enter the Iraqi market.

“Blom Bank’s expansion strategy is to serve the Diaspora as well as the economies of both Lebanon and the hosting countries,” said Fahim Mo’dad, Advisor to the Chairman at Blom Bank. “Lebanon has historical economic relationships with Iraq and the economic openness especially in Kurdistan is really encouraging to enhance our presence there,” he said. Blom Bank got its license by the Central Bank of Iraq in 2013.

“We will be opening a second branch in Erbil this year,” said Jocelyne Chahwan, Assistant General Manager at Blom Bank. The bank’s two branches will be fully fledged with retail and corporate services.

Two more banks are following in the footsteps of Blom Bank by eying new branches in Iraq. Bank Audi was granted a license by the Central Bank of Iraq valid until the beginning of 2016. It is preparing to open seven branches and launch banking operations in Baghdad and each of Irbil, Basra, Najaf, Suleymanieh, Salaheddine, and Mosul.

“If the turmoil didn’t take place in Iraq recently, we would have been operational now,” said Freddie Baz, General Manager, Group Chief Financial Officer and Strategy Director at Bank Audi. “Developments taking place in that country are not detrimental and we see great potential for growth there,” he said. The bank will be offering retail and corporate services. “Iraq is similar now to Saudi Arabia in 1970s and will witness an economic boom once stable. We cannot avoid it in our regional expansion plan,” said Baz.

“We are encouraged to enter Iraq due to its strong trade relationships with Turkey, where we own Odeabank, the fully owned Turkish subsidiary of Bank Audi,” said Baz. According to him, the size of trade between Turkey and Arab countries is estimated at $50 billion per year, $12.5 billion of which takes place with Iraq.

The Middle East and Africa Bank (MEAB) is the second bank, and the first from the Beta Group of banks, that got a license by the Central Bank of Iraq in 2014 (earlier this month). It will be opening two branches in Baghdad and Basra in September.

“We will target the market first through retail services for selected clients and focus on the corporate side later on the trade finance business, mainly the letters of credits to finance imports to Iraq for selected clients too,” said Adnan Youssef, General Manager at MEAB Bank. “One the situation is stable in Iraq, we see great potential for growth in different sectors, including infrastructure, housing, oil and gas, among others,” he said.

New banks entering Iraq do not fear competition. “The market is big enough to fit us all. According to its own targets and capabilities, each bank will take its market share,” said Mo’dad.

“Iraq is still underserved in the banking sector and opening seven branches is not a big number for us, especially that they will be distributed in Northern and Southern Iraq,” said Baz. 

Iraq has one branch for every 45,000 citizens, while the average should be one branch for every 10,000, according to the Iraqi Private Banks League. 48 local and foreign banks operate in Iraq today including seven state banks.
 
The entry of new foreign banks, including Lebanese banks, will depend on the Central Bank of Iraq policy. “Procedures are not difficult but it’s up to the Central Bank of Iraq to decide to open the market for completion or not,” said Blom Bank’s Mo'dad. “Getting a banking license is taking less than two years now compared to previous years,” he said.

Blom Bank's expansion comes after similar moves by several number of local peers, including Byblos Bank, Crédit Libanais, BankMed, Bank of Beirut and the Arab Countries (BBAC), Banque Libano-Française (BLF), IBL Bank, and Fransabank.