Sept. 19 (Bloomberg) -- National Bank of Kuwait, the Arab lender with the highest credit rating, agreed to buy the Credit Bank of Iraq in what may be the first foreign purchase of an Iraqi lender in at least four decades.

National Bank will hold 75 percent of the Iraqi bank and the World Bank's International Finance Corp. 10 percent, said Ibrahim Dabdoub, National Bank's chief executive. He declined to say in the interview how much National Bank is paying for its stake.

``Iraq's medium-term prospects are very good, because in the end, this insurgency has to end,'' Dabdoub said on the edge of a Middle East Economic Digest banking conference in the United Arab Emirates. National Bank will take over managing Credit Bank, ``hopefully before the end of the year,'' Dabdoub said.

International banks, among them HSBC Holdings Plc and Standard Chartered Plc, are competing to gain a foothold in Iraq, where the country's oil reserves and population may help drive economic growth after more than two decades of decline because of war, sanctions and government mismanagement.

Iraq, the world's No. 3 holder of oil reserves and the most populous Arab country in the Persian Gulf, nationalized its banking industry in 1964 and expelled foreign lenders.

The International Finance Corp. is a unit of the World Bank that lends to private projects to help spur economic development. National Bank of Kuwait is the fifth biggest lender by assets within the Persian Gulf monarchies of Saudi Arabia, the United Arab Emirates, Kuwait, Oman, Qatar and Bahrain.

HSBC, Standard Chartered and National Bank were in April the first international lenders to secure licenses in Iraq in 40 years. Standard Chartered won't be able to meet its license condition of opening a branch in Iraq before the end of the year, in part because of the security situation, the bank's spokeswoman has said.

The rest of Credit Bank of Iraq will be owned by a local family.

To contact the reporter on this story: James Cordahi, in Dubai on at cherifcord@bloomberg.net

Last Updated: September 19, 2004 05:35 EDT