Iraqi banking sector's total assets recorded a 15.1% year-on-year growth to reach USD156.7 billion at the end of 2023, mainly fueled by the deposit growth of 15.3% to USD101.9 billion. Current deposits contributed the most to total deposit growth, recording a 17.2% increase to reach USD82.1 billion, while also constituting 80.5% share in total banking sector deposits.

Saving deposits and term deposits constituted 12.2% and 7.2% shares of total Iraqi banking sector deposits, respectively. In 2023, private sector total deposits recorded a 14.7% growth to reach USD43.2 billion, Central Government deposits went up by 22.7% to USD36.1 billion, and public institutions deposits increased by 6.1% to USD22.6 billion.

Aysegul Ozge Ozgur, Head of Research at Rabee Securities said “As a measure to control the FX flow into the banking system, the CBI now allows a limited number of banks to participate in the CBI foreign currency window and engage in USD transactions. National Bank of Iraq, Bank of Baghdad, and Al-Mansour Bank are among these banks that have been permitted to engage in such activities, thus, they are benefiting from an expanded market share in USD transactions.”

In Iraq, there are 61 commercial banks, comprising 7 state banks (1 Islamic and 6 Non-Islamic), and 54 private banks (29 Islamic and 25 Non-Islamic). On the Iraq Stock Exchange (ISX), 42 private banks are listed, of which 22 are Islamic and the remaining are non-Islamic private banks. Among the most profitable ISX-listed banks based on Return on Average Assets (ROAA) and Return on Average Equity (ROAE), the National Bank of Iraq, Bank of Baghdad, and Al-Mansour Bank recorded an outstanding balance sheet and income statement growth in 2023.

On the credits side, the Iraqi banking sector exhibited outstanding growth in 2023, with total cash credits extended by Iraqi commercial banks experiencing a remarkable increase of 27.4% year-on-year, reaching USD52.9 billion. This surge was attributed to the rise in cash credits granted to both the private sector and the Central Government. Private sector cash credits notably increased by 25.9% year-on-year, amounting to USD30.2 billion, while Central Government cash credits saw a considerable uptick of 39.2% year-on-year, reaching USD21.0 billion.

The National Bank of Iraq (BNOI) recorded an 84% year-on-year growth in assets, reaching USD 3.0 billion, and a 93% year-on-year growth in deposits, reaching USD 2.5 billion. The bank’s total net direct credit facilities increased considerably by 54% year-on-year to USD 1.0 billion by the end of 2023. Net profit also experienced a rapid increase of 660% year-on-year to USD 143.3 million, mainly fueled by growth in net commission and net interest income. Consequently, the bank’s ROAE reached a notable level of 45.9% in 2023, the highest among the ISX-listed banks, and ROAA jumped to 5.9%.

The Bank of Baghdad (BBOB) significantly increased its assets by 78% year-on-year to USD 2.1 billion and deposits by 85% year-on-year to USD 1.7 billion. Total net direct credit facilities decreased by 23% year-on-year to USD 47 million due to a conservative approach in lending, while cash and balances experienced remarkable growth by 151% year-on-year to USD 1.5 billion. Net profit recorded outstanding growth of 223% year-on-year to USD 117.5 million in 2023, mainly supported by the growth in net commission and net foreign currencies income. The bank’s ROAE reached a significant level of 37.8% in 2023 and ROAA surged to 7.0%, the highest among the ISX-listed banks.

Iraq's banking sector has been showing outstanding developments recently, within the scope of the Central Bank of Iraq’s (CBI) strategies focusing on bolstering financial and banking policies, digital infrastructure, and financial inclusion. Among the recent advancements in digital payments, in April 2021, Mastercard forged a partnership with the CBI, marking a significant milestone. Subsequently, in June 2021, the Trade Bank of Iraq (TBI) launched its online banking system and app, enhancing accessibility to financial services. Moreover, the CBI embarked on the implementation of Cabinet Resolution No. (23044) of 2023 in June 2023, facilitating the provision of electronic payment services (POS) across government and private sectors. In November 2023, the introduction of Visa Direct services in Baghdad aimed to combat money laundering, illicit funding, and the illicit outflow of dollars. In December 2023, the CBI's decision to establish the "National Company for Electronic Payment Systems in Iraq" further underscored its commitment to advancing digital payment infrastructure. The Iraq banking sector is expected to witness ongoing developments with the ongoing steps taken by the CBI.