Iraq, a perennially sanctioned and war-torn country, is opening up for business. JPMorgan Chase (NYSE:JPM) is the latest U.S. bank to start expanding its presence in the country. With the UN’s Chapter 7 sanctions lifted, JPMorgan has signed a deal with the Trade Bank of Iraq in order to assist in importing goods and services to the country, Bloomberg reports. The bank’s decision follows the announcement that Citigroup (NYSE:C) will be opening several branches and offices throughout Iraq.
Iraq is the second-largest oil producer in OPEC (trailing only Saudi Arabia), and the country’s central bank is looking for ways to help businesses grow following the devastating period following the ousting of Saddam Hussein in 2003. JPMorgan’s deal with the Trade Bank of Iraq is to “open more letters of credit… on behalf of the government and its ministries,” said a spokesperson for Morgan. The IMF estimates the Iraq economy will grow by 9 percent, which is second only to Libya’s rate among countries in the region.
The recent lifting of Chapter 7 sanctions returned approximately $82 billion to the Iraq central bank, and the government is expected to increase its spending by more than 18 percent this year, creating a wealth of opportunity for foreign investors. Citigroup has already announced it will begin opening branches to capitalize on the estimated $1 trillion in infrastructure spending slated for the coming years.
Citigroup has plans for Baghdad, Basra, and Erbil at the moment, while the bank’s lending arm is set to finance an oil pipeline that will go through Jordan. The largest U.S. banks are hoping to become the latest companies capitalizing on the reconstruction of the country as a whole. JPMorgan’s role will be tied to government and central banking activities to start.
Between 2010 and 2012, the five largest banks in Iraq saw their combined net income rise over 200 percent. Their earnings per share doubled during that period as well. Clearly, it is a wide-open market. JPMorgan is positioning itself to be the next bank winning big in a rapidly rebuilding economy.