Citigroup Inc. got Iraqi approval to open an office in Baghdad, as it seeks to become the first U.S. bank to enter a country where fewer than one in five people have an account.
Iraq’s central bank gave preliminary consent to set up the representative office, Citigroup, the third-largest U.S. lender, said in an e-mailed statement today. Former diplomat Dennis Flannery, who has run the bank’s Iraqi desk from Amman, Jordan, for two years, will manage the operation. Branches are also planned for Erbil and Basra, it said.
“Iraq is an important market, with an economy that has substantial potential over time,” said James Cowles, chief executive officer for Europe, the Middle East and Africa. “Having a presence in Iraq will position us to better attune our services to the banking needs of our clients as they grow and develop their businesses in the country.”
Banks in Iraq are set for growth in earnings and assets as a surge in lending in OPEC’s second-biggest producer outpaces the region. Iraq’s rising oil exports and a drop in the prime lending rate to 6 percent from 17 percent in 2008 are feeding the expansion. Standard Chartered Plc has said it will open branches this year in Baghdad and the city of Erbil, followed by a third office next year in the oil hub of Basra.
Foreign banks were barred from the country until after the U.S.-led invasion that ousted the regime of Saddam Hussein. Today, 15 international banks operate there, competing with seven state banks, 23 private lenders and nine banks operating under Islamic rules, according to the central bank’s website.
Total credit in the country amounts to 9 percent of gross domestic product compared with an average of 55 percent in the Middle East and North Africa, according to Singapore-based Sansar Capital Management LLC, which runs a fund with $30 million invested in Iraqi equities.
Iraq holds the world’s fifth-largest proven oil deposits and is budgeting $118 billion in spending this year, up 18 percent from 2012. The International Monetary Fund forecasts that the economy will grow 9 percent this year, the fastest pace after Libya among 18 countries in the region.
Flannery was the financial attache at the U.S. embassy in Baghdad for a year before joining New York-based Citigroup in March 2011. He has worked at the Inter-American Development Bank, the U.S. Treasury and the World Bank.