StanChart Is Expanding in Iraq as Safety Improves
(Bloomberg) -- Standard Chartered Plc is reviving stalled plans to open a third branch in Iraq amid what the bank sees as a dramatic improvement in security in the OPEC nation.
The U.K.-based lender expects to open the branch for corporate customers in the southern oil hub of Basra in the first half of 2020. It wants to finance projects to upgrade electricity, oil and other vital infrastructure and plans to sign about $500 million in deals by early next year.
Iraq’s defeat of Islamic State militants has enabled Standard Chartered to move ahead with the planned opening, six years after freezing the expansion due to concerns about safety, said Mohammed Jawad Al-Delaimy, chief executive officer of the bank’s Iraq business.
“Security in Iraq has improved dramatically,” he said in an interview. “We have witnessed international companies decreasing their security requirements and risk levels.” The number of civilian deaths resulting from violence in the country plunged to 123 in March from 1,918 two years earlier, according to the unofficial Iraq Body Count website.
Iraq is the second-biggest producer in the Organization of Petroleum Exporting Countries, able to pump about 5 million barrels a day and with plans to reach 7.5 million barrels per day in 2025. Oil, which has more than doubled since 2016, is fueling the country’s recovery from decades of wars and sanctions, but Iraq still struggles with power outages and most economic indicators outside of energy still show little promise.
The bank’s planned Basra branch may be an incipient sign of a broader economic recovery, said Sanjay Motwani, president of New-York-based Sansar Capital Management LLC. Standard Chartered, which has focused traditionally on emerging markets, opened a branch in Baghdad in November 2013, and another in March 2014 in Erbil, capital of the semi-autonomous Kurdish region in northern Iraq.
Its profits from Iraqi operations have been on the rise since 2014, Al-Delaimy said. The bank plans to sign financing deals worth about $500 million for power projects with two international companies by the end of this year or early in 2020, he said, declining to identify the firms.
The lender cooperated with JPMorgan Chase & Co. to secure a deal late last year with General Electric Co. to finance power projects in Iraq worth $620 million, Al-Delaimy said. Standard Chartered doesn’t offer retail banking services in Iraq, and the Basra branch will cater to businesses.
“The decision to postpone the opening in 2014 made sense given ISIS and the oil price crash,” said Grant Felgenhauer, a Washington-based managing partner for the Euphrates Iraq Fund. “But now Iraq has survived its two existential crises and is coming out of them on a much stronger footing.”
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