BULLISH BANKING NEWS

by **TLF** Tue May 14, 2013 9:57 pm

Being Bullish on Iraqi Banking

Posted on 09 May 2013. Tags: banking, Sansar Capital

With so much gloomy news around, it is good to find some analysis that shows the other side of the story: A report just issued by Sansar Capital suggests that shares in Iraq’s banking sector may be ripe for a re-rating.

Key to the report’s findings is the argument that Iraq’s banks are
exceptionally well capitalised, having been forced to raise significant
funding to comply with the “arbitrary” rules set by the Central Bank of Iraq (CBI).

To put it another way, they are sitting on a huge pile of cash that is not working for them, or more accurately, not yet
working for them. This should enable to the banks to grow rapidly in an
underbanked economy, while adjusting the return on equity (RoE) to
allow for this gives some rather attractive numbers.

The report also finds that some of the most efficient banks are
trading on the most attractive valuations, which may be caused by
unsophisticated investors focusing on the nominal share price, while
ignoring the capital and future earnings per share.

Taken together, this could represent a buying opportunity for
investors, but they should, of course, form their own opinions on these
metrics. The full report can be read here, as part of Iraq Business News reports service.