Expanding our horizons Annual Report 2009 Vision, Mission and Values 01 Financial Highlights 02 Chairman’s Statement 05 Annual Review of Operations 06 Independent Auditors’ Report 13 Financial Statements 2009 17 Board of Directors’ Report 37
Bank of Baghdad PO Box 3192, Alwiya, Baghdad, Iraq Telephone: +964 717 5007 Fax: +964 717 5006 www.bankofbaghdad.org Our Vision To be the leading financial services provider in Iraq, and to consistently meet or exceed customer expectations. Our Mission To provide leading financial service solutions that contribute to and support the long-term well being and success of all our customers, our country and our worldwide partners. Our Values guide everything we do: Trust and Integrity; Mutual Respect; Teamwork and Commitment; Excellence and Innovation.
Bank of Baghdad Annual Report 2009 I 1 802.2 661.6 22.4 109.1 19.9 21.9 19.1 18.7 93.3 18.6
76.1 542.9 404.2
363.7
255.5 Billions (IQD) Billions (IQD) Billions (IQD) Billions (IQD) Billions (IQD) 09 08 07 09 08 07 09 08 07 09 08 07 09 08 07 Total Assets Customer Net Operating Shareholders’ Banking Operations Deposits Profit Equity Revenue
Bank of Baghdad continued to strengthen its position during 2009. The Bank’s total assets increased to IQD 802.2 billion compared to IQD 542.9 billion in 2008 and Shareholders’ Equity rose to over IQD 109 billion. Operating profit reflects significant reinvestment in core banking operations and IT. The Bank’s operations revenue grew to 19.9 billion with a solid increase in customer deposits recorded through new service initiatives.
2 I Bank of Baghdad Annual Report 2009 Bank of Baghdad is a member of the KIPCO Group Over 28 years in the financial services industry The KIPCO Company is one of the biggest diversified holding companies in the Middle East and North Africa, with consolidated assets of US$18.6 billion. The Company has substantial ownership interests in a portfolio of over 60 companies operating across 26 countries. The company’s main business sectors are financial services and media. Through the subsidiaries and affiliates of its core companies, KIPCO also has interests in the real estate, manufacturing, airline, education and management advisory sectors. KIPCO’s financial services interests include holdings in commercial and investment banking, asset management and insurance companies. The Group’s core operating companies in this sector include United Gulf Bank, Gulf Insurance Company and Burgan Bank.
an old door in the back streets of baghdad contrasts with the ultra modern interior of the bank’s erbil branch customer areas
bank of baghdad enjoys deep roots in the infrastructure of iraq, of its culture and its people, yet it looks beyond - to a future where the country is also in close partnership with the global community
Bank of Baghdad Annual Report 2009 I 3 Bank of Baghdad has implemented a number of improvements to its retail and wholesale banking services and has completed many initiatives across all our fields of activity, in order to consolidate our capabilities and to be better positioned for the future
combined with an ongoing branch refreshment programme, In 2009 bank of baghdad also opened the door to increased levels of international partnerships through both its kipco connections and a growing correspondent banking network
4 I Bank of Baghdad Annual Report 2009 Chairman’s Statement
On behalf of the Board of Directors, it is our pleasure to present the annual results of Bank of Baghdad for the year ending 2009.
Bank of Baghdad enjoyed significant growth It should be mentioned that the progress in 2009. The financial position of the Bank achieved by the Bank, is attributed to the increased as at the end of 2009 by 48% devotion of all our staff. I would like to take compared to the previous year, due to a 64% this opportunity to personally express sincere increase in deposits. The increase in the thanks and appreciation to our employees for Bank’s net income was re-invested in order their outstanding efforts which contribute to capitalize on future opportunities, thus to the Bank’s success in the face of these building a strong capital base of IQD 100 transition period challenges. billion for the Bank. Left: The Abu Hanifah Mosque, in I would also like to express my gratitude and the city of Baghdad, Iraq, is one The growth in the Bank’s expenses included appreciation to my fellow Directors and our of the most prominent mosques continued investment in our activities Management for their continued commitment in BaghdAd. It is built around the tomb of Abu Hanifah an-Numan with employment of new staff, increased and persistence to ensure the Bank’s success (often called “the Great Imam”). spending on information technology in achieving its objectives. Their wise thousands of years of tradition infrastructure, renovation of branches and the leadership and valuable contributions have are witnessed in its Ornately implementation of various strategic support been major contributing factors in the Bank’s decorated Interior. initiatives by United Gulf Bank. achievements. insets: symbol of bank of baghdad, an old key unlocks During the year, Bank of Baghdad has We must also express our appreciation for the a bright future. new branch implemented a number of improvements guidance of the Central Bank of Iraq, which interior at erbil. to its retail and wholesale banking services, has effectively ensured the good and proper and has embarked on developing the performance of the Bank. We would also like technological foundations of its infrastructure, to thank the Companies Registrar Department thus achieving increased performance and for their good efforts for the welfare of Iraq in productivity through its Iraq-wide branch general and the banking sector in particular. network. Above all, I once again thank our customers for their confidence and continued support of Over the past year, we have carried out many Bank of Baghdad. initiatives in all our fields of activity, in order to consolidate our capabilities and to be better 2010 lies ahead of us, bringing new challenges positioned for the future. We still have a long and opportunity. Our organization is stronger way to go, and will continue to contribute to now than ever before - and we are well able to reconstruction in the various regions of Iraq. capitalise on the massive investments that we have made to date. While total credit growth possibilities remain promising for 2010, the Bank continues to be well positioned to achieve outstanding growth by focusing on the expansion of its activities Emad Ismail Shareef and providing international quality of services Chairman of the Board to its clients in spite of the difficulties the country continues to face.
Bank of Baghdad Annual Report 2009 I 5 Annual Review of Operations
This year has seen Bank of Baghdad consolidate its leading position in Iraq further still, with strong gains in both our financial and operational position, allowing the Bank to embrace further opportunities of growth.
This has been a strong year for Bank of The Bank’s retail services generated Baghdad in many areas of our operations, increased revenue and our international with recorded growth of over 9.7 billion Iraqi transfer services, through MoneyLink and Dinars in fees and commissions resulted from Western Union, grew commensurately. Trade Finance Operations and Retail Services. Risk & Audit / Increasingly, Bank of Baghdad Early in 2009 the Central Bank of Iraq has sought to embrace international standards reduced interest rates in the country, as part of throughout its operations and during the various national reforms to promote growth year we assumed the International Audit and stimulate the economy. This affected Standards (IAS). This has been a massive Treasury Bills income and income from loans exercise requiring deep-rooted changes to our but Bank of Baghdad had already taken steps organizational structures, our policies and to diversify its income base and was well able our procedures. The introduction of Basel right: One of the Gates of Imam Husain Shrine in the city of to face such interest rate variations. reporting standards remains a voluntary KarbalA, Iraq. The shrine stands commitment in Iraq, but our adoption of We had already built the foundations for on the site of the grave of Husain these best practice compliance procedures has ibn ‘ALI, the second grandson of diversification in income and services through enabled us to leverage our capabilities further Muhammad, near the place where establishing clear policies and procedures at he was killed during the Battle of than ever and attract international business the core of our business – providing packaged KarbalA in 680 C.E The shrine is a that would, before now, have been elusive. source of inspiration to millions solutions for corporate and retail sectors of iraqis. which generated solid commission-based The attainment of International Audit income streams – reducing our reliance on Standards during the year has added further Insets: New york and london treasury bill income. transparency and provides an additional boost to our international standard. However, the Bank was still able to increase its volumes of treasury bill transactions and Bank of Baghdad has completed the processes achieved 2008 levels of associated income, that provide the Bank’s management with despite the Central Bank of Iraq reductions in results that are in compliance with IFRS. policy rates. The result of this has seen international understanding of our structure and our During 2009, the Bank continued its strategy financial strength, and a higher degree of of attracting corporate business and thus also transparency. derived additional asset and liability business from the employees of those corporations, We have reinforced our international presence through salary transfer accounts and linked greatly, leveraging on our status as a part of loans. the KIPCO Banking Group to become the first bank in Iraq to enjoy international banking The ability to provide bundled services and partnerships throughout the Middle East, to meet the needs of both international North Africa and further afield to Europe and and local corporate clients created a steady the United States of America. These synergies growth in commission based income streams have allowed us to expand our international throughout the year. Payroll services and business through LC and trade business. resulting transactional volumes also increased significantly, helped by growth in the Bank’s nationwide ATM network.
6 I Bank of Baghdad Annual Report 2009 We have reinforced our international presence greatly, leveraging on our status as a part of the KIPCO Banking Group to become the first bank in Iraq to enjoy international banking partnerships throughout the Middle East, North Africa and further afield to Europe and the United States of America.
International partnerships now allow the bank to reach as far as the United States of America and Europe to provide new and more convenient banking services for our corporate and retail customers
Bank of Baghdad Annual Report 2009 I 7 During 2009, Bank of Baghdad became the first and only bank in Iraq to secure principal licenses for both MasterCard and Visa. Our card volumes grew by a significant 400% by year end and card services are now available to both corporate and retail customers.
Closer to home, our Kipco group Connection allows us to provide better regional banking services through partner banks in Kuwait, Bahrain, Jordan, syria, Algeria and Tunis.
8 I Bank of Baghdad Annual Report 2009 Annual Review of Operations
Helped by our strong compliance control Human Resources / Alongside increases in culture, network capability and foreign our employee numbers, we have increased management experience, we have successfully the scope of our training systems, expanding attracted several international corporations, our group-wide initiatives through KIPCO providing a financial focus for their local Banking Group knowledge share programmes operations, also fulfilling an advisory role due where staff of Bank of Baghdad are able to to our long-standing involvement in local take sabbaticals in Kuwait, Syria and Jordan business. for on-the-ground training in international banking practices. This has proved invaluable IT Operations / Bank of Baghdad increased in increasing the collective skill base of our its ATM network to 17 with 15 more planned organization. for 2010. We launched our internet banking service mid-year with great success. The As part of a new Human Resource operational platform is geared to allow corporate users structure, the Bank has also created a fully access to local transfer services, balance automated system for internal payroll. enquiries, statement requests and payroll as Staff confidence within the Bank continues a first phase and plans are now in place to to grow and this in turn has seen a growing expand the service during 2010 to further volume in customer focused results. automate processes and include international transfers, loan requests, Letters of Credit and Network / 2009 witnessed continued growth more. with the opening of seven new branches. Left: One of the Gates of Bank of Baghdad is now present in all 18 Mustansiriya Madrasah in the city To further add to the Bank’s electronic provinces of Iraq, with a total of 31 branches of Baghdad, Iraq. a beautiful 13th banking capabilities, we commenced the century Abbasid structure on the - all linked electronically and all operating introduction of mobile banking / SMS left bank of the Tigris River, it has with a common strategy. We continued our technologies, to be completed and launched been restored and remains one of programme of branch layout refurbishments Baghdad’s greatest attractions. during 2010. with another 6 branches expected to be Insets: bahrain’s ultra-modern IT systems training continued from last year completed during 2010. world trade center and and we have completed the implementation Liberation tower, one of the In order to add further efficiencies and landmarks of Kuwait. of our Advanced Management Information serve our customers better we changed Systems, with further increases in back office our organizational structure to set up new efficiencies. departments. Our new Electronic Services Card Services / Building on the success of its Department has a mandate to oversee ATM MasterCard launch, Bank of Baghdad became cards and internet banking, for example. We the first and only bank in Iraq to secure have also created Network Support Units principal licenses for both MasterCard and to provide a direct reporting link between Visa. Our card volumes grew by a significant branch operations and Head Office. The result 400% by year end. Bank of Baghdad card is an increased efficiency through improved services are now available to both corporate communication and dedicated responsibility. and retail customers, through every branch of the Bank of Baghdad network.
Bank of Baghdad Annual Report 2009 I 9 Annual Review of Operations
Marketing / 2009 saw Bank of Baghdad Information System) was fully implemented. launch a number of marketing initiatives This has helped to allow detailed reporting of that have proved highly successful. We performance and increased dissemination of have concentrated our efforts to focus on information, to allow more efficient decision- SMEs, running a campaign promoting the making and control by Management. ‘Building of Iraq’. The message was well Looking ahead / Our vision for Bank of received and resulted in significant volumes Baghdad has always been to be the leading of new business. Another initiative during the financial service provider in Iraq. We gave year saw Bank of Baghdad introduce loans particular attention in 2009 to developing against salary domiciliation as part of our better systems; to establishing better internal commitment to the growth of Iraq, supporting processes and greater efficiencies; to creating SMEs and consumers to improve living better internal foundations for future growth standards. and to expanding our horizons through our Linking with our sister bank, Syria Gulf Bank, international partners. we conducted a money transfer promotion Bank of Baghdad is currently developing between Syria and Iraq accounts which raised right: stone carving at the The concepts for a new Beirut Branch to be our international profile and generated a main entrance of Mustansiriya launched in 2010 – an initiative that will Madrasah (Mustansiriya school), growth in retail accounts. provide stronger links to Iraq for international Baghdad, one of the oldest Islamic universities in the world Our initiatives continue to be accepted very business operations and act as a regional hub was established in 1227 by the favorably by the community and we continue for our continued capability expansion. Abbasid Caliph al-Mustansir. It to enter into ever more productive dialogue is located near the Saray souq; We remain committed to our continued with key business, corporate and retail the Baghdadi Museum and the leadership role in the provision of global Abbasid Palace and Caliph’s Street. customers. standards for the banking industry across In 1235, an early water-powered alarm clock that announced Operations / Because of the expansion of our Iraq. The bank’s ability to deliver the strong the appointed hours of prayer network, branches and operations, Bank of performance we have seen over the past and the time, both by day and Baghdad has had to gain greater efficiencies year would not have been possible without by night, was completed in the in the handling of banking request volumes. the dedication and commitment of our Mustansiriya Madrasah entrance hall. We introduced a new reconciliation system employees. The challenges of change, and of to meet these demands by improving lines moving into more intensive systems-driven Insets: Roman structures at Baalbek old city, lebanon and the of communication within the bank and by operations are not to be under-estimated, and landmark al omoayad mosque in introducing complementary banking modules we recognise the tremendous amount of effort damascus. to our core banking system. We purchased that each and every one of our employees has new core banking modules and now enjoy contributed over the last years. centralised loans, in/out transfer modules, LC modules and a dedicated card management system. All of these have helped increase efficiency and enabled higher degrees of automation. During the year we introduced a new Dr. Younes Brouche NOSTRO reconciliation process within the Executive Vice Chairman bank. In addition, an MIS (Management
10 I Bank of Baghdad Annual Report 2009 Bank of Baghdad is developing concepts for a new Beirut Branch in 2010 – an initiative that will provide stronger links to Iraq for international business operations and act as a regional hub for our continued capability expansion.
looking towards the levant, bank of baghdad is developing a new regional branch in Beirut, Lebanon, and already enjoys a close working partnership with Syria Gulf Bank
Bank of Baghdad Annual Report 2009 I 11 2009 saw particular attention given to building better systems; to creating better internal processes and greater efficiencies - and to building stronger internal foundations for future growth.
The bank has excellent working relationships with Financial organizations within Jordan and Tunis, providing customers with pan-arab banking facilities
12 I Bank of Baghdad Annual Report 2009 Independent Auditor’s Report
Left: The ornately We examined the Balance Sheet of Bank of Baghdad (Private Joint Stock Company), Baghdad, as at 31st December, decorated 2009, as well as the Profit, Loss and Distributions Account for the year ended on the said date and the Bank’s Annual interior of the abu Hanifah mosque in Report prepared according to the provisions of the Banking Law No. 94 of 2004 and the Companies Law No. 21 of baghdad. 1997 and the Regulations and instructions issued in accordance therewith. insets: tunis fort and roman We obtained the information and clarifications, which we felt necessary for carrying out our duties in accordance with ampitheatre in the applicable legislation and in compliance with recognized auditing procedures, which included the necessary tests ammam, jordan. of the Bank’s business which are part of our duties. We would like to note the following comments:
First: Capital The paid up capital of the Bank was increased from IQD 70 billion (Seventy Billion Iraqi Dinars) to IQD 85 billion (Eighty Five Billion Iraqi Dinars), in accordance with the Registrar of Companies’ letter No. 16535 dated June 17th, 2009.
Second: Banks’ Business Activities: The surplus of the Bank’s business activities for the year subject to the audit amounts to IQD 18,617,517,106 as compared to IQD 21,948,977,331 in the previous year, a decline of 15% or IQD 3,331,460,225, detailed as follows:
a) Increase in the Revenues of Current Business: During the year ended on 31st December, 2009, there was a decrease in the “revenues of current business” in an amount of IQD 3,308,311,875, arising as follows: IQD Percentage (%) Increase in Banking Operations Revenues 1,262,559,239 38 Decrease in Investment Revenues (4,518,832,323) (136) Decrease in Service Business Revenues (52,038,791) (2) (3,308,311,875) (100) b) Increase in Expenses of Current Business: For the year ended on 31st December, 2009, there was an increase in the “expenses of current business” in an amount of IQD 3,235,172,121, arising as follows: IQD Percentage (%) Decrease in Banking Operations Expenses 2,221,882,277 68 Increase in Depreciation (298,703,971) (9) Increase in Administrative Expenses (5,158,350,437) (159) (3,235,172,121) (100)
Bank of Baghdad Annual Report 2009 I 13 Independent Auditor’s Report
c) “Miscellaneous Revenues” and “Other Transfer Expenses: The increase in miscellaneous revenues amounted to IQD 378,588,774, while the decrease in the transfer and other expenses amounted to IQD 2,842,738,718.
As stated above, the decline in the surplus of the Bank’s business activities amounted to IQD 3,331,460,225 arising as follows: IQD Decrease in Current Business Revenues 3,308,311,875 Add: Increase in Current Business Revenues 3,235,172,121 6,543,483,996 Less: Increase in Miscellaneous Revenues 378,588,774 Less: Decrease in the Transfer and Other Expenses 2,842,738,718 3,212,023,771 3,331,460,225
Third: Financial Position: The asset balance increased as at 31/12/2009 compared with the balance as at 31/12/2008 by an amount of IQD 259,282,672,513, as follows: IQD Percentage (%) Current Assets Cash 272,957,950,698 105 Investments (53,951,158,316) (20) Cash Credits 32,137,741,743 12 Receivables 5,473,344,410 2 256,635,878,535 Net Fixed Assets 2,646,793,978 1 259,282,672,513 100
14 I Bank of Baghdad Annual Report 2009 Sources of Finance The aforesaid increase being IQD 259,282,672,513 represents the increase arising from the “sources of finance” as shown hereunder: IQD Percentage (%) Short Term Sources of Finance 243,455,038,465 94 Long Term Sources of Finance 15,827,634,048 6 259,282,672,513 100 Short Term Sources of Finance Current Liabilities Current Accounts and Deposits 25,7441,431,059 105 Provisions (459,488,037) Payables (13,526,913,557) (5) 243,455,038,465 100 Long Term Sources of Finance Shareholders’ Equity Paid-up Capital 15,000,000,000 95 Reserves 827,634,048 5 15,827,634,048 100
Fourth: Financial Investments: 1. The market value of the short term financial investments / private equity (shares) according to the Price Bulletin of the Iraq Stock Exchange at the last session of the Exchange in 2009, amounted to more than the cost of the investment portfolio. Hence no provision was made for the decline in the value of investments in the year subject to the audit.
2. We did not receive approval for the Bank’s acquisition of short term investments in private equity and investments/ overseas.
Fifth: Provision for Doubtful Debts: No provision was made for doubtful debts, and the balance of IQD 14 billion (Fourteen Billion Iraqi Dinars) carried forward from the previous year was maintained.
Sixth: Accounting Policies: Foreign Exchange Rate Each of the assets, liabilities, expenses and revenues were priced in foreign currency using the foreign exchange rate of IQD 1,170 equal to US $ 1 prevailing as at 31st December 2009.
Bank of Baghdad Annual Report 2009 I 15 Independent Auditor’s Report
Seventh: Money Laundering and Terrorism Financing: Through our examination of the accounting records and our review of the nature of banking operations undertaken by the Bank during the year subject to the audit, we did not find any activities indicating that there were banking transactions related to money laundering or those that contributed to financing terrorist activities.
Eighth: Capital Adequacy: Through our examination of the accounting records and statements prepared for the purpose of calculating the capital adequacy, we found that the capital adequacy ratio was 49% according to Article 16 of the Banking Law No. 94 of 2004.
In our opinion and according to the results of our examination as indicated in the Bank’s records and the information and clarifications given to us:
1) The books of accounts maintained by the Bank fully comply with the book-keeping requirements and in our opinion they contain full records of all the assets, liabilities, expenditure and revenues of the Bank. The internal audit system has consisted of the necessary procedures which ensure the accuracy of the financial statements, in a proportionate manner commensurate with the volume of the Bank’s activities.
2) The inventory of fixed assets and cash was carried out properly under our supervision. Inventory results were in conformity with the subsidiary records. These assets were valued in accordance with the same generally accepted principles and standards as applied in the previous year.
3) The annual report and its contents reflect in a comprehensive manner the Bank’s progress during the year subject to the audit and do not include anything that violates the provisions of the applicable laws and statutes.
4) The final statements and accounts have been prepared in compliance with the applicable legislation and accounting standards which conform with the data shown in records and are drawn up according to the Companies Law, regulations and instructions, and the Iraq Central Bank Law.
In compliance with the above, and in view of their effect on the financial statements, the attached Balance Sheet reflects the financial position of the Bank as at 31st December, 2009. The final accounts show the business profits for the year ended on the said date and as shown by the books and records.
Farquad Hasan Ahmed Al Salman Fellow Member of the Association of Chartered Certified Accountants, United Kingdom Farqad Al Salman & Associates Company, Auditors (Partnership)
Baghdad, 18th February 2010
16 I Bank of Baghdad Annual Report 2009 Expanding our horizons Financial Statements 2009
Bank of Baghdad Annual Report 2009 I 17 Financial Statements 2009
Balance Sheet (As at 31st December 2009) Statement A
Statement Accounting 31/12/2009 31/12/2008 No. Manual No. Iraqi Dinars Iraqi Dinars Assets Current Assets 1 18 Cash in hand 477,684,630,609 204,708,679,911 2 15 Investments 163,198,369,406 217,149,527,722 14 Cash Credits 3 144 Discounted Commercial Papers 1,882,882,311 1,791,021,852 4 14 except 144 Loans and advances 77,621,977,994 45,576,096,710 79,504,860,305 47,367,118,562 5 16 Receivables 67,297,691,589 61,824,347,179 787,685,551,909 531,049,673,374 Fixed Assets 6 11&12 Inventory – at Book value 14,508,561,424 11,861,767,446 (after depreciation & amortization) Total Assets 802,194,113,333 542,911,440,820 Contra Accounts 12 19 Contra customers’ obligations for banking transactions (after deducting deposits) 263,539,226,745 203,181,392,923 Sources of Finance Short term Sources of Finance 7 25 Current Accounts & Deposits 661,618,526,998 404,177,095,939 11 22 Provisions 18,031,060,047 18,490,548,084 8 26 Payables 13,374,945,242 26,901,858,799 693,024,541,287 449,569,502,822 Long Term Sources of Finance 9 211 Paid-up Capital 85,000,000,000 70,000,000,000 10 22 Reserves 24,169,572,046 23,341,937,998 Shareholders’ Equity 109,169,572,046 93,341,937,998 Total Sources of Finance 802,194,113,333 542,911,440,820 Contra Accounts 12 29 Contra Bank’s Obligations for Banking Transactions (after deducting deposits) 263,539,226,745 203,181,392,923
For Bank of Baghdad (Private Joint Stock Company) - Baghdad, Iraq
Emad Ismail Shareef Adnan Kanan Al-Chalabi Ali Muhsin Al-Asadi Board Chairman Managing Director Accounts Manager
18 I Bank of Baghdad Annual Report 2009 Profit and Loss Account (For the year ended on 31st December 2009) Statement B
Statement Accounting 31/12/2009 31/12/2008 No. Manual No. Iraqi Dinars Iraqi Dinars Current Business Revenues 13 43 Service Business Revenue 126,283,631 178,322,422 14 44 Banking Operation Revenue 19,961,780,814 18,699,221,575 15 46 Investment Revenue 20,403,021,904 24,921,854,227 40,491,086,349 43,799,398,224 Less: Current Business Expenses 16 34 Banking Operations Expenses 7,823,741,795 10,045,624,082 6 37 Depreciation 718,139,921 419,435,950 17 31-33 Overheads 12,762,178,922 7,603,828,485 21,304,060,638 18,068,888,517 Current Operations Surplus 19,187,025,711 25,730,509,707 Add: Transferred and Other Revenues 18 49 Other Revenues 614,430,548 235,841,774 Less: Transferred and Other Expenses 19 38 Transferred Expenses 206,129,694 196,825,973 20 39 Other Expenses 977,809,459 3,820,548,177 1,183,939,153 4,017,374,150 Distributable Surplus: 18,617,517,106 21,948,977,331
Distributed as follows: Doubtful Debts Tax Provisions 2,815,497,163 Statutory Reserve according to the Iraqi Central Bank Law 790,100,997 Undistributed Profits (Accumulated Surplus) 15,011,918,946 18,617,517,106
Bank of Baghdad Annual Report 2009 I 19 Financial Statements 2009 continued
Cash Flow Statement (For the year ended on 31st December 2009) Statement C
Iraqi Dinars Iraqi Dinars Net profit , before taxation 18,617,517,106 Cash flows from operating activities Depreciation and amortization 718,139,920 Increase in debtors and debit balances (5,473,344,410) Increase in current and deposit accounts 257,441,431,059 Decrease in creditors and credit balances (13,526,904,557) Net cash flow from operating activities 239,159,322,012
Cash flow from investment activities Increase in investments (53,951,158,316) Increase in loans and advances to customers 32,137,741,743 Net increase in fixed assets 10,416,187,501 Decrease in projects under construction (7,051,253,603) Net cash flow from investment activities 18,448,482,675
Cash flow from financing activities Increase in capital 15,000,000,000 Decrease in reserves (14,974,385,895) Income taxes (3,274,985,200) Net cash flow from financing activities (3,249,371,095) Net cash flow 272,975,950,698
Add: Cash balance at beginning of the year 204,708,679,911 Cash balance as of 31st December 2009 477,684,630,609
20 I Bank of Baghdad Annual Report 2009 Cash Statement (As at 31st December 2009) Statement No. 1
Accounting 31/12/2009 31/12/2008 Manual No. Iraqi Dinars Iraqi Dinars 181 Cash in hand 37,166,137,530 21,921,128,653 182 Standing advance - 5,000 183 Cash funds in local banks 192,681,428,337 34,080,387,566 184 Statutory Deposits with Central Bank 136,015,587,000 63,189,315,000 186 Foreign Currency Notes 52,401,548,031 31,138,051,811 187 Cash Funds with Overseas Banks 59,419,929,711 54,379,791,881 477,684,630,609 204,708,679,911
Investment Statement (As at 31st December 2009) Statement No. 2
Accounting 31/12/2009 31/12/2008 Manual No. Iraqi Dinars Iraqi Dinars 153 Short-term Financial Investments 1531 Short-term Financial Investments / Government Sector 149,020,000,000 203,180,000,000 1536 Short-term Investments / Private Sector 2,478,369,406 2,249,527,722 1538 Short-term Investments / Overseas World 11,700,000,000 11,720,000,000 163,198,369,406 217,149,527,722
Statement of Discounted and Purchased Commercial Papers (As at 31st December 2009) Statement No. 3
Accounting 31/12/2009 31/12/2008 Manual No. Iraqi Dinars Iraqi Dinars 144 Discounted and Purchased Commercial Papers 1441 Discounted bills of exchange 23,000,000 34,000,000 1445 Purchased local drafts 1,859,882,311 1,757,021,852 1,882,882,311 1.791,021,852
Bank of Baghdad Annual Report 2009 I 21 Financial Statements 2009 continued
Statement of Loans and Advances (As at 31st December 2009) Statement No. 4
Accounting 31/12/2009 31/12/2008 Manual No. Iraqi Dinars Iraqi Dinars 142 Short Term Loans 14271 Short Term Loans / Individuals-Iraqi Dinar 33,316,429,134 5,550,594,332 14272 Short Term Loans / Individuals-Foreign Currencies 24,398,911,134 25,087,493,110 57,715,340,268 30,638,087,442 143 Receivables Current Account 1436 Receivables Current Accounts / Private Sector / Companies 9,710,584,049 6,085,778,888 1437 Receivables Current Accounts / Private Sector / Individuals 3,813,101,573 6,099,622,387 13,523,685,622 12,185,401,275 1484 Advances Against Gold Jewellery Mortgage 5,874,359,015 2,746,578,581 1491 Staff Advances 508,593,089 6,029,412 77,621,977,994 45,576,096,710
Statement of Receivables (As at 31st December 2009) Statement No. 5
Accounting 31/12/2009 31/12/2008 Manual No. Iraqi Dinars Iraqi Dinars 161 Current Business Receivables 2,233,392,469 1,879,120,603 165 Non-current Business Receivables 167,433,703 4,591,271 166 Miscellaneous Receivables Accounts 1661 Deposits with Third Parties 409,402,015 54,480,039 1662 Accrued earnings 6,299,905,246 5,121,601,529 1663 Prepaid Expenses 1,835,828,216 991,307,875 1664 Compensation Claims 2,346,974,203 2,408,406,641 1665 Currency Differentials - - 1666 Legal Costs 388,401,057 166,987,920 11,280,510,737 8,742,784,004 167 Advances 1671 Advances for Business Purposes 2,179,970,021 905,303,927 16722 Advances for Currency Differentials (Counterfeit) 143,310,901 107,652,401 2,323,280,922 1,012,956,328 169 Miscellaneous Receivables Accounts 1691 Overdue Receivables Accounts 21,489,048,625 25,906,661,675 1693 Letter of Guarantee Debtors - 110,718,000 21,489,048,625 26,017,379,675 37,493,666,456 37,656,831,881
22 I Bank of Baghdad Annual Report 2009 Statement of Fixed Assets and their Depreciation (As at 31st December 2009) Statement No. 6
Office Deferred Buildings & Plant & Vehicles & Furniture & Revenue Investment Fixed Assets Land Facilities Equipment Transport Equipment Expenses Expenses Total
Accounting 111 112 113 114 116 118 12 Manual No. Iraqi Dinars Iraqi Dinars Iraqi Dinars Iraqi Dinars Iraqi Dinars Iraqi Dinars Iraqi Dinars Iraqi Dinars Movement During the Year Cost Balance as at 1/1/2009 838,792,450 1,935,231,533 504,434,865 152,371,700 1,450,920,432 359,458,997 - 5,241,209,977 Net Movement during the Year 2,000,000,000 3,241,416,924 188,582,329 35,208,500 866,371,581 4,006,263,756 - 10,337,843,090 Amortization - - - - - (223,904,287) - (223,904,287) Balance as at 31/12/2009 2,838,792,450 5,176,648,457 693,017,194 187,580,200 2,317,292,013 4,141,818,466 - 15,355,148,780 Provision of Accumulated Depreciation Balance as at 1/1/2009 - 361,653,797 285,975,117 95,029,651 994,786,136 - - 1,737,444,701 Settlements during the Year - 79,613 (20,599,310) 3,544,332 (61,369,046) - - (78,344,411) Add: Depreciation of Current Year - 111,734,747 119,877,490 12,280,866 250,342,530 - - 494,235,633 Balance as at 31/12/2009 - 473,468,157 385,253,297 110,854,849 1,183,759,620 - - 2,153,335,923 Book Value at 31/12/2009 2,838,792,450 4,703,180,300 307,763,797 76,725,351 1,133,532,393 4,141,818,466 - 13,201,812,757 Projects in Progress ------1,306,748,567 1,306,748,567 14,508,561,424
Bank of Baghdad Annual Report 2009 I 23 Financial Statements 2009 continued
Statement of Current Accounts & Deposits (As at 31st December 2009) Statement No. 7
Accounting 31/12/2009 31/12/2008 Manual No. Iraqi Dinars Iraqi Dinars 251 Payable Current Accounts 2513 Payable Current Accounts / Financial Sector 58,700,000 - 2516 Payable Current Accounts / Private Sector / Companies 31,553,511,932 15,703,706,645 2517 Payable Current Accounts / Private Sector / Individuals 86,279,003,902 67,562,527,098 25191 Crossed Cheques 5,718,020,857 4,160,020,881 25192 Amounts booked by phone 5,877,400 123,281,981 123,615,114,091 87,549,536,605 252 Savings Accounts 2521 Savings Accounts 87,970,101,457 68,147,829,515 253 Term and Demand Deposit Accounts 2531 Fixed and Call Deposits 46,176,414,319 61,584,931,745 25331 Foreign Currency Savings Accounts 63,838,021,934 24,006,232,228 25332 Foreign Currency Fixed Deposits 16,375,128,752 35,367,915,694 2534 Foreign Currency Current Deposits 303,510,197,847 103,607,915,854 429,899,762,852 224,566,995,521 255 Deposits Received for Banking Transactions: 2551 Deposits for issued letters of Credit - 3,448,273,015 2552 Deposits for Letters of Guarantee 12,646,108,204 14,385,340,328 2555 Deposits for Leased Safe Deposit Boxes 1,017,300 997,300 12,647,125,504 17,834,610,643 256 Internal Drafts and Cheques 2561 Branches’ drafts drawn against the Bank 551,170,515 - 2562 Bills of Exchange drawn against the Bank 2,768,745,227 4,858,202,109 2563 Cheques drawn against the Bank 339,235,656 175,542,461 2571 Overseas drafts drawn against the Bank 3,727,271,696 1,044,379,085 7,486,423,094 6,078,123,655 661,618,526,998 404,177,095,939
24 I Bank of Baghdad Annual Report 2009 Payables Statement (As at 31st December 2009) Statement No. 8
Accounting 31/12/2009 31/12/2008 Manual No. Iraqi Dinars Iraqi Dinars 261 Current Business Payables 2613 Financial Sector Payables 3,112,264 90,660,000 2617 Private Sector / Individuals Payables 914,483,723 747,650,101 917,595,987 838,310,101 262 Insurance Premium Receipts - 100,420,478 265 Non-current Business Payables 147,996,776 1,103,868,808 266 Miscellaneous Payable Accounts 2661 Received Deposits 1,084,717,132 15,359,970 2662 Prepaid Earnings 2,637,700,005 7,914,935,731 26631 Accrued Interest 3,252,716,768 2,873,750,465 26632 Accrued Interest / US Dollars 2,563,798,407 1,191,960,220 26633 Payable Overheads 1,019,754,660 1,506,671,815 2664 Payable Salaries and Wages - 21,500,440 26663 Financial Stamps Fees 27,610,397 172,122,107 2668 Increase in the Fund 16,850,861 24,748,279 26695 Amounts Received for Registration of Companies 595,145,249 6,190,174,815 26696 Subscription Deposits 1,202,828 3,571,343,764 26698 Payables to valuation committee 1,626,828 - 26699 Accounts under Settlement 901,444,335 934,457,811 12,102,567,172 24,417,025,417 267 Deductions for the Account of Third Parties 2671 Staff Deductions for the Account of Third Parties 57,318,604 46,146,886 2672 Non-staff Deductions for the Account of Third Parties - 64,443 57,318,604 46,211,329 268 Profit Distribution Payables 11,507,315 11,507,315 269 Other Payable Accounts 2695 Balances and Compensations of Deceased Customers 129,838,983 383,941,491 2696 Amounts Retained at Authorities’ Request 1,629,405 573,860 131,468,388 384,515,351 13,368,454,242 26,901,858,799
Bank of Baghdad Annual Report 2009 I 25 Financial Statements 2009 continued
Statement of Capital (As at 31st December 2009) Statement No. 9
Accounting Manual No. Iraqi Dinars Nominal Capital Nominal and Authorised Capital: Number of Shares Share Value Shares IQD 211 Paid up Capital 1/1/2009 70,000,000,000 1 70,000,000,000 Increase during the year 15,000,000,000 1 15,000,000,000 Paid up Capital 31/12/2009 85,000,000,000 85,000,000,000
Reserves Statement (As at 31st December 2009) Statement No. 10
Type of Reserve Capital Reserve Reserve for Accumulated Surplus (According to Replacement of (Undistributed Profits) Central Bank Law) Fixed Assets Accounting 2141 2144 217 Total Manual No. Iraqi Dinars Iraqi Dinars Iraqi Dinars Iraqi Dinars Balance as at 1.1.2009 3,981,251,064 56,820,497 19,303,866,437 23,341,937,998 Additions 790,100,997 - 15,011,918,946 15,802,019,943 Transferred to capital - - (15,000,000,000) (15,000,000,000) Write-offs - (228,000) 25,842,105 25,614,105 Balance as at 31.12.2009 4,771,352,061 56,592,497 19,341,627,488 24,169,572,046
Statement of Provisions (As at 31st December 2009) Statement No. 11
1 of 2 Balance as at Additions Depreciation Balance as at Accounting 1.1.2009 During the Year During the Year 31.12.2009 Manual No. Iraqi Dinars Iraqi Dinars Iraqi Dinars Iraqi Dinars 222 Provision for Doubtful Debts 14,000,000,000 - - 14,000,000,000 224 Tax Provisions 3,274,985,200 2,815,497,163 3,274,985,200 2,815,497,163
225 Other Provisions 2251 Provision for Decline in Investment Value 9,222,884 - - 9,222,884 2252 Provision for Stolen Cash 1,206,340,000 - - 1,206,340,000 18,490,548,084 2,815,497,163 3,274,985,200 18,031,060,047
26 I Bank of Baghdad Annual Report 2009 Statement of Provisions (As at 31st December 2009) Statement No. 11
2 of 2 - Calculation of Tax Provisions Iraqi Dinars Iraqi Dinars Business Surplus according to the attached Profit & Loss Statement (B) 18,617,517,106 Add: Unacceptable Expenses for Tax Purposes Donations to Others 300,000 Compensations and Fines 22,349,633 Special Service Costs 215,750 Employees’ Income Tax 173,896,000 Aid Provided to Employees Aid Provided to Others 196,761,383 18,814,278,489 Less: Non-Taxable Revenues: Earnings from Property Rents 44,297,400 44,297,400 Business Surplus Subject to Tax Provisions 18,769,981,089 Tax Provisions 15% x Taxable Business Surplus 15% x IQD (18,769,981,089) 2,815,497,163
Statement of Contra Obligations for Banking Transactions (As at 31st December 2009) Statement No. 12
Accounting 31/12/2009 31/12/2008 Manual No. Iraqi Dinars Iraqi Dinars 192/292 Issued Letters of Guarantee 1921/2921 Letters of Guarantee (after deducting deposits) 44,510,524,696 34,496,122,910 193/293 Issued LC Accounts 1931/2931 Issued LCs (after deducting deposits) 6,656,036,400 908,428,217 196/296 Accounts of Transactions under Collection 1967/2967 Cheques for Collection in Branches 518,393,900 3,060,000 1969/2969 Cheques for Clearing 11,083,332 254,012,000 529,477,232 257,072,000 198/298 Contra Receivable Guarantee Accounts 1983/2983 Mortgages for Banking Facilities 211,843,177,720 167,519,764,662 199/299 Contra Debit Accounts at Nominal Value 10,697 5,134 263,539,226,745 203,181,392,923
Bank of Baghdad Annual Report 2009 I 27 Financial Statements 2009 continued
Service Business Revenues Statement (As at 31st December 2009) Statement No. 13
Accounting 31/12/2009 31/12/2008 Manual No. Iraqi Dinars Iraqi Dinars 437 Miscellaneous Service Revenues 81,986,231 52,307,622 438 Rents of Fixed Assets 44,297,400 126,014,800 126,283,631 178,322,422
Statement of Banking Operations Income (As at 31st December 2009) Statement No. 14
1 of 2 Accounting 31/12/2009 31/12/2008 Manual No. Iraqi Dinars Iraqi Dinars 441 Foreign Exchange Income 4413 Foreign currency selling and buying income 2,235,879,011 1,507,433,880 442 Internal Advances and Loans Income 4421 Loan interest 44211 Loan Interest / Iraqi Dinar 5,825,746,471 6,668,933,332 4422 Receivable Current Accounts Interest 2,030,614,585 2,378,434,643 44231 Discounted bills of exchange and drafts interest 100,391,189 400,841,993 44233 Commissions of bills for collection 559,000 764,270 44243 Interest of advances against securities pledge - 89,708,402 44245 Interest of advances against jewellery mortgage 552,321,091 148,216,842 44246 Personal Loans interest 6,000,821 311,635 8,515,633,157 9,687,211,117 443 Drafts Commissions 4432 Commission of Overseas Drafts 3,042,202,154 3,938,780,008 444 Income of Drafts and Letters of Credit 4441 Commission of LCs 146,266,868 2,391,195 445 Letter of Guarantee Income 4451 Commission of Internal Letters of Guarantee/Iraqi Dinar 1,218,417,505 972,462,812 Carried Forward 15,158,398,695 16,108,279,012
28 I Bank of Baghdad Annual Report 2009 Statement of Banking Operations Income (As at 31st December 2009) Statement No. 14
2 of 2 Accounting 31/12/2009 31/12/2008 Manual No. Iraqi Dinars Iraqi Dinars Brought Forward 15,158,398,695 16,108,279,012 447 Miscellaneous Bank Commissions 4471 Commission for Issue of Promissory Notes and Cheques 231,438,557 210,369,181 4473 Commission for Stock and Bond Sales - - 4479 Other Bank Commissions 4,502,169,534 2,338,693,771 4,733,608,091 2,549,062,952 448 Recovered Expenses 4482 Recovered communication expenses 15,754,652 22,170,816 4485 Sales of Banking Stationery 53,689,376 19,468,795 69,444,028 41,639,611 449 Other Banking Operations Revenues 4492 Safe Deposit Box Rents 330,000 240,000 19,961,780,814 18,699,221,575
Statement of Investment Earnings (As at 31st December 2009) Statement No. 15
Accounting 31/12/2009 31/12/2008 Manual No. Iraqi Dinars Iraqi Dinars 462 Earnings of Domestic Financial Investments 4621 Interest on Treasury Bills 15,489,088,067 18,313,041,833 4622 Interest on Cash Deposits with Third Parties 4,715,331,435 6,569,897,532 4624 Earnings on Domestic Participations 198,602,402 38,914,862 20,403,021,904 24,921,854,227
Bank of Baghdad Annual Report 2009 I 29 Financial Statements 2009 continued
Statement of Banking Operations Expenses (As at 31st December 2009) Statement No. 16
Accounting 31/12/2009 31/12/2008 Manual No. Iraqi Dinars Iraqi Dinars 342 Paid Bank Interest 3421 Savings Accounts Interest 3,926,799,984 4,851,690,282 3422 Fixed Deposit Interest 3,635,630,464 5,107,544,841 3423 Internal Borrowing Interest 14,739,150 - 3425 Credit Current Account Interest 158,000,739 38,259,951 7,735,170,337 9,997,495,074 343 Paid Banking Commissions 82,646,458 48,129,008 344 Foreign Exchange Differentials 5,925,000 - 7,823,741,795 10,045,624,082
Statement of Overheads (As at 31st December 2009) Statement No. 17 1 of 3 Accounting 31/12/2009 31/12/2008 Manual No. Iraqi Dinars Iraqi Dinars 31 Salaries and Wages 312 Cash Salaries 3121 Salaries 1,355,230,310 762,141,843 3123 Overtime Wages 121,524,797 75,880,016 3124 Staff Bonus 214,008,000 14,948,000 3125 Professional and Technical Provisions 380,000 511,914 3126 Compensation Provisions 1,000,000 4,525 3129 Other Provisions 3,668,225,446 2,254,863,786 5,360,368,553 3,108,350,084 315 Contribution to Employees’ Social Security 3151 Bank’s Share to Social Security 312,816,573 168,062,003 Total Salaries and Wages 5,673,185,126 3,276,412,087 32 Goods and Supplies 322 Fuel and Oils 211,556,290 178,092,732 323 Standby Items 1,144,060 2,158,230 325 Miscellaneous Items 3251 Supplies and Requirements 33,798,350 31,906,103 3252 Stationery Items 60,694,019 37,958,198 94,492,369 69,864,301 326 Staff Facilities 23,395,000 717,000 327 Water and Electricity 78,270,145 29,784,978 Total Goods and Supplies 408,857,864 280,617,241
30 I Bank of Baghdad Annual Report 2009 Statement of Overheads (As at 31st December 2009) Statement No. 17 2 of 3
Accounting 31/12/2009 31/12/2008 Manual No. Iraqi Dinars Iraqi Dinars 33 Service Requirements 331 Maintenance Services 3312 Buildings and Facilities Maintenance 117,701,599 45,274,661 3313 Machinery and Equipment Maintenance 67,039,617 30,010,690 3314 Transport Facilities & Vehicle Maintenance 12,509,000 10,980,690 3316 Office Furniture and Equipment Maintenance 685,106,455 11,982,200 882,356,671 98,248,241 332 Research and Consultancy Services 2,226,527,281 1,921,377,156 333 Publicity, Printing and Entertainment 3331 Publicity and Advertising 70,754,400 189,191,618 3332 Publishing and Printing 27,459,356 109,419,749 3333 Entertainment 9,377,750 6,687,300 3334 Exhibitions - - 3335 Ceremonies - 30,000 3336 Conferences and Seminars 5,155,000 2,879,000 112,746,506 308,207,667 334 Transport, Trips & Communications 3341 Staff Transport 249,983,200 165,657,300 3342 Goods and Items Transport 338,278,436 140,149,925 3343 Travel and Business Trips 941,127,420 640,071,127 3344 Corporate Communications 129,287,876 134,624,873 1,658,676,932 1,080,503,225 335 Fixed Assets Leasing 3352 Lease of Buildings and Facilities 368,903,390 243,080,254
Carried Forward 5,249,210,780 3,651,416,543
Bank of Baghdad Annual Report 2009 I 31 Financial Statements 2009 continued
Statement of Overheads (As at 31st December 2009) Statement No. 17 3 of 3
Accounting 31/12/2009 31/12/2008 Manual No. Iraqi Dinars Iraqi Dinars Brought Forward 5,249,210,780 3,651,416,543 336 Miscellaneous Service Expenses 3361 Subscriptions 659,993,007 26,812,550 3362 Insurance Premiums 140,887,041 92,367,437 3363 Non-Staff Bonuses 14,867,920 8,397,570 3364 Taxes and Fees for Foreign Parties - - 3365 Legal Services 43,212,800 9,267,207 3366 Banking Services 166,585,676 121,385,679 3367 Training and Qualification 76,135,868 14,824,172 3368 Accounting Services 336822 Audit Fees / Auditor 31,500,000 25,000,000 3369 Other Service Expenses 297,742,840 97,327,999 1,430,925,152 395,382,614 Total Service Requirements 6,680,135,932 4,046,799,157 Total Overheads 12,762,178,922 7,603,828,485
Statement of Other Revenues (As at 31st December 2009) Statement No. 18
Accounting 31/12/2009 31/12/2008 Manual No. Iraqi Dinars Iraqi Dinars 483 Miscellaneous Transferred Revenue 309,260 - 491 Previous Years’ Revenues 523,388,622 232,555,904 492 Incidental Revenues 90,732,666 3,285,870 614,121,288 235,841,774 614,430,548 235,841,774
32 I Bank of Baghdad Annual Report 2009 Statement of Transferred Expenses (As at 31st December 2009) Statement No. 19
Accounting 31/12/2009 31/12/2008 Manual No. Iraqi Dinars Iraqi Dinars 383 Miscellaneous Transferred Expenses 3831 Donations to Third Parties 300,000 1,400,000 3832 Compensations and Fines 22,349,633 1,305,737 3833 Doubtful Debts - 1,097,341,924 3834 Special Services Expenses 215,750 894,007 22,865,383 1,100,941,668 384 Taxes and Fees 3843 Financial Stamps Fees - 77,071,145 3846 Miscellaneous Taxes and Fees 174,113,311 113,505,084 174,113,311 190,576,229 385 Aid 3851 Staff Aid 9,151,000 2,650,000 Total Transferred Expenses 206,129,694 1,294,167,797
Statement of Other Expenses (As at 31st December 2009) Statement No. 20
Accounting 31/12/2009 31/12/2008 Manual No. Iraqi Dinars Iraqi Dinars 391 Previous Years’ Expenses 965,314,114 3,807,673,058 392 Incidental Expenses 12,495,345 12,875,119 977,809,459 3,820,548,177
Bank of Baghdad Annual Report 2009 I 33 Financial Statements 2009 continued
Statement of Added Value at the Production Elements Cost Prices (As at 31st December 2009) Statement A
Statement Accounting 31/12/2009 31/12/2008 No. Manual No. Iraqi Dinars Iraqi Dinars (1) Value of Total Production at Product’s Price 1 Commissions 9,141,053,618 7,463,461,237 2 Charged Service Fee 779,903,820 (311,048,227) 3 Other Revenues 2,416,182,018 1,705,465,097 12,337,139,456 8,857,878,107 (2) Value of Production Requirements 4 32 Goods Requirements 385,462,864 279,900,241 5 33 Service Requirements 6,457,501,232 3,905,448,354 6 34 Banking Operations Expenses 5,925,000 48,129,008 6,848,889,096 4,233,477,603 (3) Total Added Value at Product Price (1)-(2) 5,488,250,360 4,624,400,504 384 Less: (Indirect) Fees and Taxes 174,113,311 190,576,229 Total Added Value at Production Elements Cost Price 5,314,137,049 4,433,824,275
Statement of Added Value at the Production Elements Cost Prices (As at 31st December 2009) Statement B
Accounting 31/12/2009 31/12/2008 Manual No. Iraqi Dinars Iraqi Dinars (1) Staff Compensations 31 (a) Salaries and Wages 5,673,185,205 3,276,412,087 326 (b) Benefits in-kind – Staff Facilities 23,395,000 717,000 5,696,580,205 3,277,129,087 (2) Operations Surplus Net Losses (1,100,583,077) 737,259,238 37 (3) Depreciation and Amortization 718,139,921 419,435,950 5,314,137,049 4,433,824,275
34 I Bank of Baghdad Annual Report 2009 Statement of Received Commissions (As at 31st December 2009) Statement No. 1
Statement B
Accounting 31/12/2009 31/12/2008 Manual No. Iraqi Dinars Iraqi Dinars 442 Revenues of Domestic Loans and Advances 4423 Revenues of Discounting and Collection of Commercial Papers 44233 Commissions of bills for Collection 559,000 764,270 443 Drafts Commissions 4431 Commission of Domestic Drafts 3,042,202,154 - 4432 Commission of Overseas Drafts - 3,938,780,008 444 Revenues of LCs and Drafts 4441 Commission of Opening of Outgoing LCs 146,266,868 2,391,195 445 Letter of Guarantee Revenues 4451 Commission of Domestic Letters of Guarantee 1,218,417,505 972,462,812 447 Miscellaneous Bank Commissions 4,733,608,091 2,549,062,952 Total Commissions Received 9,141,053,618 7,463,461,237
Statement of Components of Service Fees Charged (As at 31st December 2009) Statement No. 2
Accounting 31/12/2009 31/12/2008 Manual No. Iraqi Dinars Iraqi Dinars (1) Interest Received 442 Revenues of Domestic Loans and Advances 4421 Loan Interest 5,825,746,471 6,668,933,332 4422 Interest of Debit Current Accounts 2,030,614,585 2,378,434,643 4423 Interest of Discounted Bills of Exchange and Drafts 100,391,189 400,841,993 44243 Interest of Advances against Pledged Securities - 89,708,402 44245 Interest of Advances against Mortgaged Gold Jewellery 552,321,091 148,216,842 44246 Interest of Personal Advances 6,000,821 311,635 8,515,074,157 9,686,446,747 (2) Paid Interest 342 Bank Interest Paid 3421 Interest of Savings Accounts 3,926,799,984 4,851,690,282 3422 Interest of Fixed Deposits 3,635,630,464 5,107,544,841 3423 Interest of Domestic Borrowing 14,739,150 - 3425 Interest of Credit Current Accounts 158,000,739 38,259,951 7,735,170,337 9,997,495,074 Service Fees Charged (1 – 2) 779,903,820 (311,048,227)
Bank of Baghdad Annual Report 2009 I 35 Financial Statements 2009 continued
Statement of Other Revenues (As at 31st December 2009) Statement No. 3
Accounting 31/12/2009 31/12/2008 Manual No. Iraqi Dinars Iraqi Dinars 43 Revenues of Service Business 437 Miscellaneous Service Revenues 81,986,231 52,307,622 438 Rents of Fixed Assets 44,297,400 126,014,800 126,283,631 178,322,422 441 Foreign Exchange Revenues 4413 Revenues of Foreign Exchange Selling and Buying 2,235,879,011 1,507,433,880 448 Recovered Expenses 4485 Sales of Banking Stationery 53,689,376 19,468,795 449 Revenues of Other Banking Operations 4492 Rents of Safe Deposit Boxes 330,000 240,000 2,416,182,018 1,705,465,097
Statement of Goods Requirements for National Accounts Statements (As at 31st December 2009) Statement No. 4
Accounting 31/12/2009 31/12/2008 Manual No. Iraqi Dinars Iraqi Dinars 32 Goods Requirements 408,857,864 280,617,241 326 Less: Staff Facilities 23,395,000 717,000 385,462,864 279,900,241
Statement of Goods Requirements for National Accounts Statements (As at 31st December 2009) Statement No. 5
Accounting 31/12/2009 31/12/2008 Manual No. Iraqi Dinars Iraqi Dinars 33 Service Requirements 6,680,135,932 4,046,799,157 3361 Less: Subscriptions 65,993,007 26,812,550 3362 Insurance Premiums 140,887,041 92,367,437 206,880,048 119,179,987 6,473,255,884 3,927,619,170 448 Less: Recovered Expenses 4482 Recovered Communications Expenses 15,754,652 22,170,816 6,457,501,232 3,905,448,354
Statement of Banking Operations Expenses for National Accounts Statements (As at 31st December 2009) Statement No. 6
Accounting 31/12/2009 31/12/2008 Manual No. Iraqi Dinars Iraqi Dinars 343 Paid Bank Commissions 5,925,000 48,129,008
36 I Bank of Baghdad Annual Report 2009 Board of Directors’ Report regarding the Bank’s Operations For the year ended on 31st December 2009
We are pleased to present to you the report of the Board of Directors of your Bank (Bank of Baghdad) with respect to the audited final accounts for the financial year ended on 31.12.2009 including details and information about the Bank’s activities and operations, which was prepared according to the provisions of Articles 117 and 134 of the Companies Law No. 21 of 1997 (amended), Instructions Concerning the Companies’ Accounting Regulation No. 1 of 1998, Accounting Rule No. 10 issued by the Board of Accounting and Control Standards in the Republic of Iraq and provisions of the Banking Law No. 94 for 2004.
First: Overview
1. Activities of the Bank The Bank was established as a Joint Stock Company with a nominal capital of Iraqi Dinars 100 million pursuant to the Certificate of Incorporation No. M.SH/4512 dated 18.2.1992 and it was the first privately owned Iraqi Bank allowed to be established pursuant to the Law Amending the Central Bank of Iraq Law No. 12 of 1991. Bank of Baghdad commenced its activities on 12.9.1992. On 25.10.1997, the Bank amended its Memorandum of Association to propose allowing full banking services, with the amendment taking force on 25.9.1998, according to the resolution of its General Meeting. Therafter, the Bank continued to expand rapidly, increasing its capital from 1997 to reach Iraqi Dinars 160 million. Increases continued, amounted to Iraqi Dinars 2,640 million in 2003, and then Iraqi Dinars 5,280 million at the end of 2004. Following the entry of United Gulf Bank and Iraq Holding Company as significant shareholders in 2005, the capital grew considerably, reaching Iraqi Dinars 52,973.3 million and allowing the organization to expand its international banking operations inside and outside Iraq. The Bank receives considerable confidence and credibility in carrying on its business with its customers and corporations efficiently and at the highest levels of confidentiality and privacy.
2. Strategic Objectives of the Bank The Bank’s principal and strategic objectives in 2009 were as follows: 1. Customer relations. 2. Expansion of the branch network. 3. Sales culture. 4. Technical and Operational excellence. Our achievements in 2008 were consolidated in 2009 with positive effects in all the domains and at all the levels of our activities. Bank of Baghdad focused on many fields of activity. However, utmost importance was given to the development of our activities and our customer services. Our main focus was on the implementation of our sales culture in each of our branches. We have launched telephone sales programs, arranged visits to customers, and regularly followed up to ensure better response to customer requirements. In addition, we have focused on improving our communications with all sectors, in particular small and medium size enterprises. In this area, we act as a consultant with our customers and partners to achieve great progress in salary transfers and provision of financial solutions to manage salaries and wages. Among other services, Bank of Baghdad currently provides loans to employees of companies and organizations against transfer of their salaries. This is a leading service which adds considerable value to human resource management. Our initiatives are widely accepted by businesses and organisations, and we continue to support constructive and useful dialogue to the benefit of our clients. Marketing: Over the last 12 months, Bank of Baghdad has put considerable effort into marketing products and services to reach and appeal to all segments of society, providing them with services across all main activities, as well as promoting the services and products of the Bank. The Bank also successfully organized a number of publicity campaigns to introduce the Bank’s activities, which coincided with the launch of the new regional branch at Erbil. Other significant activities over the year include provided new debit cards, which can be used throughout the world, and promoting the Bank’s unrivalled capabilities in electronic banking and money transfer. The Bank also became an agent of Western Union during the year and now provides Moneylink transfer services.
Bank of Baghdad Annual Report 2009 I 37 Board of Directors’ Report about the Bank’s Operations For the year ended on 31st December 2009
As our branch-based customer service improves, the Bank can begin to focus more on developing and providing new products and services, including credit card facilities and online banking operations. Information Technology: Bank of Baghdad has conducted analytical studies to develop a program aimed at minimizing information technology gaps. We have implemented significant information technology systems training, and in 2009 started to implement advanced new information technology systems. We also commenced screening data in our records to improve our operational efficiency. The Bank has also improved the overall infrastructure of its back offices to support these new systems. We have seen significant growth in our information technology capabilities through our ATM network. This capacity was further expanded with the installation of offsite ATMs at the head offices of companies that employ large numbers of manpower. Internet and SMS banking service initiatives also continued to be developed in 2009. Risk and Auditing: In line with the publishing of information in compliance with local standards, the Bank succeeded in developing a structure to provide Bank Management with financial information in accordance with international standards. Subsequently, we will witness a wide scope of international comprehension of our organizational structure and financial strength, with the highest levels of transparency. This change will place Bank of Baghdad in a better position to benefit from business opportunities and the inflow of international investment into the country. The Bank also benefits from its close affiliation with the KIPCO Group, and KIPCO’s unique relations and expertise in corporate governance standards, risk culture and infrastructure. This will help consolidate effective standards in the development of policies and procedures. International auditing standards have provided the Bank of Baghdad with more transparency and increased international recognition of the Bank. Expansion of the Bank’s Network: Bank of Baghdad continued to implement its strategic vision by expanding its network throughout Iraq and opening new branches in several regions to enhance its access to a wider public. The Bank’s ATM network also increased significantly through the branch network expansion. All branches are interconnected with an advanced IT infrastructure, optimizing operations and allowing for information sharing over a wider network. Future Outlook: Our vision for Bank of Baghdad has always been to become the leading financial services institution in Iraq, and to meet or exceed our clients’ expectations. In addition to the expansion of our branch network, we place special emphasis on strengthening customer relations, enhancing products and services and improving the Bank’s image in the market.
3. Developments of the Paid-up Capital: On incorporation in 1992, the Bank’s capital was Iraqi Dinars 100 million, with the Bank expanding to Iraqi Dinars 160 million by 1997. In 2003, capital had reached Iraqi Dinars 2,640 million and climed to 5,280 million by the end of 2004. Following the entry of United Gulf Bank and Iraq Holding Company as significant shareholders in 2005, capital grew considerably to Iraqi Dinars 52,973.3 million. In 2008, the paid-up capital increased to Iraqi Dinars 70 billion and in 2009 to Iraqi Dinars 85 billion. The following chart shows year- on-year development of the paid-up capital:
AUTHORISED AND PAID UP CAPITAL 90,000
80,000
70,000
60,000
50,000
40,000
30,000
20,000
10,000 0
1992 1995 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009
100 100 160 320564051,28051,750 1,990 2,640 5,280 2,973 2,973 2,973 70,000 85,000 (Value in Millions)
38 I Bank of Baghdad Annual Report 2009 Second: Financial and General Indicators for Bank of Baghdad in 2009
1. Certain Features of the Iraqi Economy The economy of Iraq is central to the total national reform project currently underway, based on a strategy that takes the particularity of the society into consideration, while keeping up with developments through individual initiatives and economic freedoms that aim to encourage the private sector, attract foreign investment, consolidate economic growth and diversify the sources of national income. In addition to adherence to the principles of social justice, laws, disclosure, transparency and investment in human resources, the Iraqi authorities have started to invest in diverse, state-of-the-art infrastructure to strengthen Iraq’s position as a financial, commercial and tourism center with a solid banking and financial base. The aim is to foster greater world confidence in the country and transform the financial and banking sector into a more effective contributor to Gross National Product (GDP). Central Bank of Iraq is highly committed to further development of positive policies and legislations for the many financial and banking institutions, insurance companies and Islamic banking institutions in the country, to create a stable economic system; foster the interests of investors; provide a secure and convenient investment climate for business; effectively contribute to increased growth by controlling inflation; and implement foreign exchange and interest rate policies which rely on a modern, transparent, efficient and flexible banking sector, with a solid capital base and suitable legal framework and environment.
2. Bank of Baghdad’s Financial Position The Bank’s financial position (total balance sheet footings without contra accounts) as of 31.12.2009 totalled Iraqi Dinars 802.2 billion, an increase of 47.8% as compared to Iraqi Dinars 542.9 billion in 2008. The asset items, which include cash, contributed to an increase of 133% over the same period. Cash credits contributed 67.7%, fixed assets 21.8%, while investment declined by 24.8% and receivables by 0.5%. Bank of Baghdad’s Financial Position at the End of 2009 and 2008:
31.12.2009 31.12.2008 Annual Rate of Account’s Name IQD (Billions) Percentage (%) IQD (Billions) Percentage (%) Growth or Change Assets Cash 477.7 59.5 204.6 37.7 133 Investments 163.2 20.3 217.1 40.0 (24.8) Cash Credits 79.5 9.9 47.4 8.7 67.7 Receivables 37.5 4.8 37.7 6.9 (0.5) Mutual Receivables Accounts 29.8 3.7 24.2 4.5 23 Fixed Assets 14.5 1.8 11.9 2.2 21.8 Total 802.2 100 542.9 100 47.8
Liabilities Current Accounts and Deposits 661.6 82.5 404.2 74.4 63.7 Provisions 18.0 2.2 18.5 3.4 (2.7) Payables 13.4 1.7 26.9 5.0 (50.2) Paid-up Capital 85.0 10.6 70.0 12.9 21.4 Reserves 24.2 3.0 23.3 4.3 3.9 Total 802.2 100 542.9 100 47.8
3.7% 1.8% 3.0% 4.8% 10.6% BANK’S ASSETS IN 2009 BANK’S LIABILITIES IN 2009 9.9% 1.7% Fixed Assets 2.2% Provisions
Mutual Receivables Accounts Reserves
Receivables Payables
Cash Credit Paid-up Capital
Cash Current Account & Deposits 20.3% Investments 59.5% 82.5%
Bank of Baghdad Annual Report 2009 I 39 Board of Directors’ Report about the Bank’s Operations For the year ended on 31st December 2009
Development of the Bank’s Financial Position as at the End of the Five Years 2005-2009:
Year 2005 2006 2007 2008 2009 IQD (Billions) 318.090 331.210 363.725 542.9 802.2
5-YEAR DEVELOPMENT OF THE BANK’S FINANCIAL POSITION (2005-2009) 900 800 700 600 500
400
300 200
100 0 2005 2006 2007 2008 2009 318.09 331.21 363.725 542.9 802.2 (IQD Billion) Banking Business a) Current Accounts and Deposits The amount held (current accounts and deposits) with the Bank totalled Iraqi Dinars 661.6 billion at the end of 2009, including Iraqi Dinars 240.2 billion held in local currency, representing 42.0%, while the amounts deposited in foreign currency with their equivalent in Iraqi Dinars totalled 383.7 billion, representing 58%. Current accounts and deposits constituted 82.5% of total liabilities, confirming the ability of the Bank to attract deposits during the period ended 31.12.2009, particularly low cost deposits (Credit Current Accounts + Other Accounts), which represented 67.6% of total deposits. This is a positive indicator, reflecting customers’ confidence in doing business with Bank of Baghdad and their satisfaction with its services. In addition, the steady increase in the balances of savings accounts and fixed deposits is evidence that savers and investors also trust Bank of Baghdad to look after their money. Breakdown of the Bank’s deposits as at the end of 2009 and 2008:
31.12.2009 31.12.2008 Rate of Account’s Name IQD (Billions) Percentage (%) IQD (Billions) Percentage (%) Change % Credit Current Accounts 421.4 63.7 191.2 47.3 120 Savings Accounts 151.7 22.9 92.2 22.8 65 Fixed Deposit Accounts 62.6 9.5 96.9 24.0 (35) Other Accounts 25.9 3.9 23.9 5.9 8 Total 661.6 100 404.2 100 64
3.9% 9.5%
BREAKDOWN OF THE BANK’S DEPOSITS IN 2009
22.9% Other Accounts
Savings Accounts
Fixed Deposit Account
Current Accounts Payable 63.7%
40 I Bank of Baghdad Annual Report 2009 Current Accounts and Deposits of All Types as at 31.12.2009:
Foreign Currency In Iraqi Currency its equivalent Total Type of Deposits IQD (Millions) Percentage (%) to IQD (Millions) Percentage (%) IQD (Millions) Percentage (%) Credit Current Accounts 123615.1 45.1 303510.2 78.3 427125.3 64.6 Savings Accounts 87970.1 32.1 63838.0 16.5 151808.1 22.9 Fixed Deposit Accounts 46176.4 16.8 16375.1 4.2 62551.5 9.4 Received Deposits 12647.1 4.6 - - 12647.1 1.9 Internal Drafts and Bonds 3659.2 1.4 - - 3659.2 0.6 Drawn Overseas Drafts - - 3827.3 1.0 3827.3 0.6 Total 27406.9 100 387550.6 100 661618.5 100 Percentage 41.5 58.5 100
0.6% 0.6% 1.9% CURRENT ACCOUNTS & DEPOSITS OF ALL TYPES 22.9% AS AT 31.12.2009 Drawn Overseas Drafts
Internal Drafts and Bonds
Received Deposits
9.4% Savings Accounts Fixed Deposit Account
Current Accounts Payable 64.6%
Development of Deposit Volumes at the end of the Five Years 2005-2009:
Year 2005 2006 2007 2008 2009 IQD Billions 246.127 242.317 255.474 404.2 661.6 b) Banking Facilities 1. Cash Credits At the end of 2009, the amount of cash credits used by the Bank’s customers as loans, advances and other credits totalled Iraqi Dinars 79.5 billion against Iraqi Dinars 47.4 billion at the end of 2008, representing an increase of 68%. The majority of this increase was due to extending loans to government and private sector employees and increased advances against mortgage of gold jewellery. Loans given constituted 72.6% of the total credit amounts, while the receivables represented 17% of total facilities. Banking facilities extended against gold accounted for 7.4%, followed by discounted or sold commercial papers with 2.4%. It should be noted that credit facilities extended against gold registered an increase of 114% since they were free of risks. Breakdown of the Cash Credits used as at the end of 2009 and 2008:
31.12.2009 31.12.2008 Annual Rate Account’s Name IQD (Millions) Percentage (%) IQD (Millions) Percentage (%) of Change % Overdraft Accounts 13524 17.0 12185 25.7 11 Loans Extended 57715 72.6 30638 64.7 88 Discounted and Sold Commercial Papers 1883 2.4 1791 3.8 5 Advances against Mortgage of Gold Jewellery 5874 7.4 2747 5.8 114 Staff Advances 509 0.6 6.00 - - Total 79505 100 47367 100 68 Development of Cash Credit used at the end of the Years from 2004-2009:
Year 2005 2006 2007 2008 2009 IQD Billions 68.642 48.517 58.81 47.36 79.5
Bank of Baghdad Annual Report 2009 I 41 Board of Directors’ Report about the Bank’s Operations For the year ended on 31st December 2009
2. Trade Business Facilities The trade business facilities registered a total sum of Iraqi Dinars 263.5 billion in 2009 against a sum of Iraqi Dinars 203.2 billion in 2008, or a growth rate of 30%, reflecting customer confidence and preference to do business with Bank of Baghdad. It is also noted that securities pledged against extended loans amounting to Iraqi Dinars 211.8 billion manifest the Bank Management’s cautious risk-free credit policy. The following is a breakdown of contra obligations against trade business facilities:
31.12.2009 31.12.2008 Sector Breakdown IQD (Millions) Percentage (%) IQD (Millions) Percentage (%) Issued Letters of Credit 6656 3 908 1 Issued Letters of Guarantee 44511 17 34496 17 Transactions Under Collection 518 - 257 0 Contra Guarantees Accounts 211843 80 167520 82 Total Trade Business Facilities (after deducting deposits) 263528 100 124229.2 100
3. Doubtful Debt Provision No provision was made for doubtful debts, and the previous years provision of Iraqi Dinars 14 billion was maintained due to repayments of overdue debts in 2009, which decreased by Iraqi Dinars 4,417 billion as shown in the receivables breakdown No. (5). c) Cash Liquidity The cash in hand and at local banks represents the Bank’s cash liquidity in local and foreign currencies. The management of cash liquidity held by commercial banks has become an activity only undertaken by highly experienced and qualified bankers, and is considered a measure of the efficiency of executive management. The cash account (in hand and at local banks) balance as at 31.12.2009 reached a sum of Iraqi Dinars 477.7 billion compared to Iraqi Dinars 204.7 billion as at 31.12.2008, an increase of 133%. The cash liquidity ratio (cash in hand/current accounts and deposits) constitutes a percentage of 72%. Breakdown of Cash Account as at the End of 2009 and 2008:
31.12.2009 31.12.2008 Rate of Account’s Name IQD (Millions) Percentage (%) IQD (Millions) Percentage (%) Change % Cash in Hand 37166 7.8 21921 10.7 69.5 Cash at Local Banks 192681 40.3 34080 16.6 465 Statutory Deposits held in the Central Bank of Iraq 136016 28.5 63189 30.9 115 Cash Held in Overseas Banks 59420 12.4 54380 26.6 9.3 Foreign Currency Notes 52402 11.0 31138 15.2 68 Total 477685 100 204708 100 133 Development of Cash Account at the End of the Five Years from 2005-2009:
Year 2005 2006 2007 2008 2009 IQD Billions 163.195 187.525 160.943 204.7 477.9
7.8%
28.5% 11% BREAKDOWN OF THE CASH ACCOUNT AS AT THE END OF 2008
Cash in Hand
Foreign Currency Notes
Cash at Local Banks
Cash held in Overseas Banks
12.4% Statutory Deposits held in the Central Bank of Iraq 40.3%
42 I Bank of Baghdad Annual Report 2009 d) Investment Activities Our Bank’s investment activities amounted to Iraqi Dinars 163.2 billion in 2009, after registering Iraqi Dinars 217.1 billion in 2008. The Bank generated revenues of Iraqi Dinars 20.4 billion in 2009, representing accrued interest on such deposits. The following table shows the details of such investments: Breakdown of Investments as at the End of 2009 and 2008:
2009 Investments 2008 Investments Change Types of Investments IQD (Billions) IQD (Billions) Percentage (%) Short-term Financial Investments / Government 149,020 203,180 (26.6) Short-term Financial Investments / Private Sector 2,478 2,250 10 Short-term Investments / Overseas 11,700 11,720 - 163,198 217,150 (25)
Third: Total Revenues, Expenses, Profits and Losses
1. Revenues Bank revenue for the financial year ended 31.12.2009 amounted to Iraqi Dinars 41.1 billion against 44.0 billion in 2008, a decrease of 6.5%. Earnings from domestic investment revenues amounted to Iraqi Dinars 20.4 billion or 50% of total revenues. Revenues from banking transactions represented 49%, followed by transferred revenues and other revenues representing 1% as shown in the following table. It should be noted that these revenues amounting to Iraqi Dinars 41.1 billion represented 48% of the paid-up capital at the end of 2009, which reflects the effectiveness of the banking business in generating such revenues as a result of the increase of capital and expansion of deposits of various kinds. Total Revenues in 2009:
2009 Amount 2008 Amount No. Types of Revenues IQD (Millions) Percentage (%) IQD (Millions) Percentage (%) 1 Investment Revenues (a+b) 20403 50 24922 57 a) Local Investments 20403 50 24922 b) Overseas Investments - 2 Banking Operations Revenues 19962 49 18699 42 3 Service Business Revenues 126 0 178 0 4 Transferred Revenues and Other Revenues 614 1 236 1 Total 41105 100 32690.3 100
2. Expenses Expenses in 2009 totalled Iraqi Dinars 22,488 million compared to 22,086 million in 2008. The total expenses represented 26% of the paid-up capital and such increases in expenses have been the result of the growth in sources of finance and revenues of the Bank. Expenses for banking operations in 2009 totalled Iraqi Dinars 7,824 million, representing 35% of the total expenses, followed by overheads at Iraqi Dinars 12,762 million representing 57%, followed by depreciation representing 3% and then the transferred expenses at a sum of Iraqi Dinars 206 million or 1%. Other expenses totalled a sum of Iraqi Dinars 978 million, representing 4%, as shown in the following table: Total Expenses in 2009:
2009 Amount 2008 Amount No. Types of Expenses IQD (Millions) Percentage (%) IQD (Millions) Percentage (%) 1 Banking Operations Expenses 7824 35 10046 46 2 Depreciation 718 3 419 2 3 Overheads including Salaries 12762 57 7604 34 4 Transferred Expenses excluding Doubtful Debt Provision 206 1 197 1 5 Other Expenses 978 4 3820 17 Total 22488 100 22086 100
Bank of Baghdad Annual Report 2009 I 43 Board of Directors’ Report about the Bank’s Operations For the year ended on 31st December 2009
Overheads are shown in detail in the following table: (Breakdown of Overheads)
2009 2008 No. Types of Expenses IQD (Millions) Percentage (%) IQD (Millions) Percentage (%) 1 Salaries including Social Security Contributions 5673.2 44.5 3276.4 43.1 2 Supplied Goods 408.9 3.2 280.6 3.7 3 Supplied Services 6680.1 52.3 4046.0 53.2 Total 12762.2 100 7603.8 100
3. Net Profit The Bank made a net profit of Iraqi Dinars 18.6 billion, representing 21.9% of paid-up capital. Profits were distributed by setting aside a sum of Iraqi Dinars 2,816 billion as tax provisions and the remaining balance being Iraqi Dinars 15.8 billion was used for deducting a sum of Iraqi Dinars 790 million as statutory reserve according to the Companies Law. Thus, the distributable surplus amounted to Iraqi Dinars 15.0 billion representing 17.7% of the paid-up capital, which can be recommended to the shareholders for distribution or capitalization. 3.1 Shareholders’ Equity, Reserves and Provisions Following is a summary of the shareholders’ equity, reserves and provisions as at 31.12.2009 shown in the Bank’s balance sheet for boosting its financial position and ensuring compliance with the applicable laws and instructions. 3.1.1 Shareholders’ Equity At the end of 2009 the shareholders’ equity rose to Iraqi Dinars 109.2 billion against Iraqi Dinars 93.3 billion at the end of 2008, which is an increase of 17%. The following table shows the development of the capital and reserves:
2009 2008 Account’s Name IQD (Millions) IQD (Millions) Percentage (%) Paid-up Capital 85000 70000 21 Capital Reserve 4772 3981 20 Reserve for Replacement of Fixed Assets 57 57 0 Undistributed Profits 19341 19303 0.2 Total 109170 93341 17 3.1.2 Reserves As at 31.12.2009, the reserve balances totalled a sum of Iraqi Dinars 24.2 billion divided as follows:
Amount Account’s Name IQD (Millions) Percentage (%) Capital Reserve Balance (according to the Companies Law) 4771.6 20 Reserve for Replacement of Fixed Assets 56.6 0 Balance of Accumulated Surplus (Undistributed Profits) 19341.6 80 Total 24169.8 100 With regard to the value of reserves for the year 2009, they amounted to Iraqi Dinars 24.2 billion, while reserves for the previous years amounted to Iraqi Dinars 23.3 billion. Such reserves constituted 28% of the paid-up capital, which would enhance the Bank’s financial position in mitigating risks, especially liquidity risk as shown by Statement No.10 of the final accounts for the year ended on 31.12.2009. 3.1.3 Provisions Balances The provisions balances as at 31.12.2009 totalled Iraqi Dinars 18.0 billion representing 21.2% of the paid-up capital, as shown in the following table:
Amount Account’s Name IQD (Millions) Percentage (%) Provision for Doubtful Debt 14000 77.7 Tax Provisions 2816 15.6 Provision for Decline in the Investment Value 9 0 Provision for Stolen Cash 1206 6.7 Total 18031 100 It should be noted that such provisions have been determined according to the applicable laws and regulations and as shown in Statement No.11 of the Final Accounts for the Year ended on 31.12.2009.
44 I Bank of Baghdad Annual Report 2009 Fourth: Detailed and Analytical Statement:
1. Board of Directors and Managing Director and their Equity in the Capital: a) During 2009, the number of Board meetings totalled eight, and the Directors did not receive any remuneration in cash or in kind during 2009. Following are the names of the Board Chairman and Members and the shares owned by each as at the end of 2009:
Shares Owned Name Title by Each 1. Emad Ismail Sharif, Representative of Al Amin Financial Investment Co. Chairman 1,649,620,086 2. Dr. Younes Mohammed Brouche, Representative of United Gulf Bank Vice Chairman 115,370,891 3. Adel Mohammed Al Hassoon, Representative of Al Sawari Contracting Company Director 3,209,165 4. Mohamed Ali Jaber, Representative of Al Amin Insurance Company Director 1,374,744 5. Abdul Aziz Kamel Sharif, Representative of Al Manal Agricultural Company Director 1,572,844,401 6. Adnan Kanaan Al Chalabi, Managing Director Director 8,754,724 7. Saad Jaboori Hamza, Representative of Al Hamra Hotels Company Director 8,913,670 Total 3,360,087,881 b) Amounts Received by the Directors In pursuance of the resolution of the Bank’s Annual General Meeting held on 29.4.2009, fees were paid to the Chairman and Board members for the year 2008 in the sum of Iraqi Dinars 10 million for the Chairman, Iraqi Dinars 8 million for the Directors members of the Audit Committee, and Iraqi Dinars 5 million for each of the other Board members. Payments totaling Iraqi Dinars 14,040,000 were made to Mr. Mohammed Ali Jaber, representative of Al Amin Insurance Company (Board member), for providing consultancy services. c) Amounts Received by the Managing Director The salaries and benefits paid to the Managing Director during the year totaled Iraqi Dinars 75,000,000 (Iraqi Dinars Seventy Five Million).
2. Indicators of Banking Performance and Financial Analysis Ratios:
Pre-determined No. Banking Performance Indicators 2009 2008 Percentage (%) 1 Liquidity Ratio: Cash Account/Total Deposits and Current Accounts 72% 51% Funds Investment Policies (Operating Ratios) a) Investments / Total Deposits and Current Accounts 25% 54% 20% b) Cash credits / Total Deposits & Current Accounts 12% 8.3% 70% c) Investments + Cash credits / Total Deposits and Current Accounts 37% 62% d) Capital Adequacy Ratio 49% 73.5% 15% e) Cash Credit / Capital and Reserves Ratio 73% 35.5% 400% 2 Leverage Ratio a) Total Deposits & Current Accounts / Capital and Reserves 6% 4.3% b) Capital & Reserves / Total Liabilities 13.6% 17.8% 3 Business Costs Ratio a) Total Expenses of Banking Operations / Total Deposits 1.2% 2.5% b) Total Expenses / Total Revenues 55% 52.7% 4 Profitability Ratio a) Total Profits / Paid-up Capital 22% 29.7% b) Total Profits / Shareholders Equity 17% 22% c) Net Profits after distribution / Paid-up capital 18% 24% 5 a) Doubtful Debt Provision / Cash Credit 21% 42% b) Doubtful Debt Provision / Loans 18% 44%
Bank of Baghdad Annual Report 2009 I 45 Board of Directors’ Report about the Bank’s Operations For the year ended on 31st December 2009
3. Salaries, Wages and Manpower a) The cash salaries, wages and remuneration paid to our Bank’s employees from 1.1.2009 to 31.12.2009 totalled Iraqi Dinars 5.7 billion. b) Our Bank’s staff members enjoy transport facilities free of charge provided to them by the Bank’s management and also health insurance and security staff uniforms. c) As at the end of 2009, the employees of our Bank and all its branches totalled 631 people, who include 79 cashiers representing 12% and 139 security guards representing 22% of the total employees. d) The number of employees covered by social security totalled 550 employees. e) Names and titles of the five Bank employees who receive the highest annual income: Name Position 1. Laila Adnan Yehia Regional Manager 2. Saher Hameed Mahmood Regional Manager 3. Abdul Majeed Yehia Compliance Officer 4. Mohamed Shukr Khalifa Executive Director 5. Ali Mohsen Al-Asadi Executive Director
4. Management and Service Activities 4.1 Development of Human Resources The Bank provided a comprehensive series of training programs in collaboration with PIGIER, a French-Lebanese company specializing in vocational training. Training programs and courses are organized in various banking fields and disciplines, ranging from regulations and procedures to training in sales and direct interaction with customers. The highest level of transparency was achieved through regular management meetings held at all levels. During the year, The Bank reviewed its policies, procedures and job descriptions, consolidated its middle management, and implemented a job rotation planning system, and modified its salary scale applicable to all of the Bank’s divisions. Following is a summary of the courses held by the Bank and the number of participants during 2009: 1. Number of training courses held outside Iraq (6) courses with (32) participants. 2. Number of training courses held inside Iraq (47) courses with (307) participants. 4.2 Breakdown of the Bank’s Staff Members According to Qualifications and Jobs As at the end of 2009 the total number of employees in the Bank and its branches was 631 employees who included 162 people in the Bank’s Head Office and 469 employees in the branches. Following are the job titles and academic qualifications of all the Bank’s employees:
Below Inter- Inter- High Percentage Details mediate mediate Diploma Bachelor Diploma Masters Total (%) Employees 1 29 85 266 2 - 383 61 Cashiers - 15 36 28 - - 79 12 Guards 115 21 3 - - - 139 22 Workers 22 8 - - - - 30 5 Total 138 73 124 294 2 - 631 100
5. Total Amounts Spent on Publicity, Travel, Entertainment and Donations:
2009 Amount 2008 Amount No. Account’s Name IQD Million % IQD Million Percentage (%) 1 Advertising and Publicity 70.7 6.9 189.0 22.6 2 Travel and Assignments (including conferences and seminars) 941.1 92.2 640.0 76.3 3 Entertainment 9.4 0.9 6.7 0.8 4 Donations and Gifts (Assistance) for Employees - 0 2.7 0.3 Total 1021.2 100 838.4 100
46 I Bank of Baghdad Annual Report 2009 6. Equity in other Companies The Bank is a shareholder in the following companies and is represented on their boards:
Number of Bank’s Company’s Name Current Capital Shares/Million 1. Al Amin Insurance Company ID 1,000 Billion 100.0 2. Al Amin Real Estate Investment Company ID 6,960 Billion 200.2 3. Al Amin Financial Investment Company ID 750 Billion 37.5
7. Investment Portfolio Following is a table of the Bank’s investments in the shares of Iraqi joint stock companies worth Iraqi Dinars 2,478,369,408. Since their market value according to the most recent bulletin in the Iraq Stock Exchange trading session amounted to Iraqi Dinars 2,756,803,133, which is higher than the cost of the investment portfolio, no provision has been set aside for the decline in the investment’s value. Bank of Baghdad Investment Portfolio in the Shares of Iraqi Joint Stock Companies as at 31.12.2009:
Number of Cost of Shares Market Value No. Company’s Name Shares Iraqi Dinars Iraqi Dinars First: Long Term Investments 1 Al Amin Insurance Company 100,000,000 100,000,000 140,000,000 2 Al Amin Real Estate Investment Company 200,230,897 203,201,067 390,450,249 3 Al Amin Financial Investment Company 37,500,000 37,500,000 45,000,000 4 Al Rafidain Grains Company 766,420,355 766,420,355 766,420,355 5 Industrial Union Generation Manufacture 75,000,000 75,000,000 75,000,000 6 Iraq Banking Securities Company 498,275,000 498,275,000 498,275,000 7 Al Amwal Banking Services Company 30,100,000 30,100,000 30,100,000 8 Baghdad Brokerage Company 200,000,000 200,000,000 200,000,000 9 Iraqi Company for Financing SMEs 30,000,000 30,000,000 30,000,000 Total: Long Term Investments 1,937,526,252 1,940,496,422 2,175,245,604
First: Short Term Investments 1 Northern Gas Company 3,650,877 6,377,550 3,468,333 2 Al Rasafa Games Company 37,651 903,774 297,443 3 Sindbad Tourism Company 1,663,777 1,663,777 1,663,777 4 Dar Al Salam Insurance Company 67 67 154 5 Ahlia Insurance Company 524,240 524,240 760,148 6 Baghdad Al Salam Food Industries 2,125,977 4,480,477 2,997,628 7 National Food Industries Company 24,261 270,377 24,261 8 Al Ta’amim Construction Company 3,477 14,107 12,169 9 Readymade Garments Industry Company 672,460 7,831,295 3,530,415 10 Modern Building Materials Manufacture Co. 3,329,411 5,469,452 11,453,174 11 Iraq Seed Production Company 1,232,142 5,589,956 1,601,785 12 Carton Manufacture Company 29,899 494,947 61,592 13 Al Hilal Industrial Company 197,301 3,540,243 341,331 14 Gulf Commercial Bank 462,787,766 500,712,724 555,345,319 Total: Short Term Investments 476,279,306 537,872,986 581,557,525 Grand Total 2,413,805,558 2,478,369,408 2,756,803,133
Bank of Baghdad Annual Report 2009 I 47 Board of Directors’ Report about the Bank’s Operations For the year ended on 31st December 2009
8. Information about the Bank’s Owned and Leased Branch Premises
a) Number of Branches: 24 Branches throughout Baghdad and a number of Iraqi Governorates:
No. Branch’s Name Address Date of Opening 1 Al Siba’a Branch Baghdad, Beirut Square 20.2.1992 2 Al Mansoor Branch Baghdad, Al Mansoor District Square 20.3.1992 3 Main Branch Baghdad, Karrada Kharij M903, Street 17, Building 150/65 12.9.1992 4 Al Hilla Branch Al Hilla, Imam Ali Street 29.12.1992 5 Al Zahra Street Branch, Baghdad, Al Kadhemeya, Al Qattala Area, M 419, Z 79, Building 25 20.1.1996 Al Kadhemeya 6 Al Rabie’e / Mosul Mosul, Khalid Ibn Al Walid Street, Shaikh Abulala’a, Property 4/17 1.9.1996 7 Babil Mall / Sinak Baghdad, Babel Mall, Al Rasheed District, 155 Property M 104, 8.10.1997 Z 41, Building 16 8 Al Jadereya Al Jadereya, District 913, Z 10 Building 33 Al Hamra Hotel 23.6.1999 9 Karbla’a Karbla’a, Qiblat Al Husain Road 1.12.1999 10 Kirkuk Kirkuk, Al Jomohoureya Steet, Shukr Al Najar Building, 7.12.1999 Near Central Markets 11 Al Hamra Baghdad, Police Tunnel 1.4.2000 12 Jamila Baghdad, Al Rasafa Jamila, M 514, Z 26 Building 2.9.2000 13 Basra Basra, Mookam Ali, Main Road corner of Kuwait Street, 25.4.2001 14 Baaqooba Dialli Governorate, Al Tikiya near Al Farouk Mosque 6.5.2001 15 Falooja Al Jubail Al Kharab, Al Jadid Street, Z 51, M 202 Al Risala District 19.6.2001 16 Palestine Baghdad, Beirut Square 17.11.2001 17 Al Mahmoodeya Al Mahmoodeya City 20.8.2002 18 Najaf Najaf City 2.1.2003 19 Al Baya’a Baghdad, Al Baya’a 1.12.2004 20 Al Sulaymaneya Al Sulaymaneya City 1.9.2005 21 Erbil Erbil City End of 2008 22 Dahook Dahook City Early 2009 23 Al Koot Al Koot City Early 2009 24 Al Diwaneya Al Diwaneya City Early 2009 25 Nishtiman Erbil City 1.9.2007 26 Tikrit Salhuddin Governorate - Takrit, (40) Street 27.9.2009 27 Om Qasr Basra, Om Qasr, 24 Street 20.10.2009 28 Al-Amarah Al-Amarah, Old Al Hussain District, Near the Fire Station 23.11.2009 29 Al-Nasiriya Zi Qar Governorate, Al Nasiriya, Near the Investment Authority 28.12.2009 30 Al-Harithiya Baghdad, Al-Harithiya M211 29.12.2009 31 Al-Ramadi Anbar Governorate, Ramadi, Teachers’ District To be opened in 2010 32 Erbil / City Mall Erbil, Erbil Mall To be opened in 2010
48 I Bank of Baghdad Annual Report 2009 b) Table of the Bank of Baghdad Freehold Properties:
Area Cost in Estimated value No. Branch Name Location Branch Serial No. in Sq. Metres Iraqi Dinars Land & Buildings 1 Al Baya’a Al Baya’a 19/3748M/Al Khur 261.61 225,757,453 527,352,000 2 Jamila Al Thawra 1/2979M/4/Al Wazireya 600 458,058,267 2,480,380,000 3 New Baghdad Al Rasafa 7/7390M/14/Al Wazireya 480 Plot of Land 102,033,750 537,600,000 4 Main Branch Al Rasafa 150/76/Al Batawin 915.8 41,648,474 4,954,670,000 5 Al Zahra Al kadhemia 1108/33/Qutana 265.8 52,427,475 1,400,000,000 6 Al Mansoor Al Karkh 7/4517M/20/Al Dawood 967.6 777,861,231 3,206,840,000 7 Al Saba’a Al Rasafa 180/175 251.75 453,513,836 720,650,000 8 Al Mahmoodia Baghdad / Al Mahmoodia 426/36 203.79 100,396,487 478,583,000 9 Karbala Karbala 1664/41 158 175,223,675 2,331,000,000 10 Falooja Falooja 9/1816 258.75 64,464,990 104,930,000 11 Ba’aqooba Dialli 371/76 Tikiya 264 121,777,401 350,000,000 12 Basra Basra 668/47 122.87 233,433,755 1,032,234,000 13 Mosul Mosul 4/17 Shiha Bu’ali 165.54 64,247,239 918,512,000 14 Mosul Mosul 6/14/M/41 3,330 84,067,941 343,350,000 15 Erbil Erbil 17/51 M46 Warish 724.54 3,962,418,750 5,547,386,250 16 Dahuk Dahuk 1/6M/81 Dahuk North 301 1,215,000,000 1,701,000,000 17 Kirkuk Kirkuk 108/9/M66 Sari Kihya 602 850,000,000 850,000,,000 Total in Iraqi Dinars 8,982,330,724 26,634,487,250
c) Table of the Branch Premises Leased by the Bank:
No. Branch’s Name Annual Rent Lease Term Landlord’s Name 1 Al Jadreya Office / ID 1,000,000 One year to be renewed automatically Al Hamra Hotels Baghdad 2 Palestine Branch / 77 weights of 10 years from 22.2.2001 to 22.2.2011 Heirs of Ahmed Abd Baghdad 24 carat gold Radhi Kamal 3 Al Hamra Branch / 198,863 grams 10 years from 15.9.1999 to 16.9.2009 Ali Al Aameri Baghdad of 24 carat gold 4 Al Sulaymaneya $ 20,400 Four Years Wali Othman Hamah Najm $ 20,000 Eight Years 5 Regional Administration ID 37,000,000 10 years from 22.9.2008, prepaid for 5 years Mona Mohammed Abdulredha of Southern Province / Hilla 6 Nishtiman, Erbil $100,000 2 years and 3 months from 1.5.2007 Middle East Construction & Investment Co. 7 Al Koot Branch ID 42,000,000 10 years from 22.9.2008, prepaid for 3 years Zahra Mohsin Jassim Al Azzawi 8 Al Diwaneya Branch ID 24,000,000 10 years from 22.9.2008, prepaid for 5 years Haider Noor Ali, Amir Kadhem 9 Om Qasr Branch ID 30,000,000 5 years from 23.3.2009, prepaid for 5 years Ramzi Sadeq Abdulmajeed 10 Al-Amarah Branch ID 24,000,000 5 years from 1.4.2009, prepaid for 5 years Wajdi Abdulzahra Raheema 11 Sinak Branch / Baghdad $ 30,000 5 years from 1.5.2009 to 30.4.2014 Heirs of Ismail Shareef 12 Najaf Branch ID 26,000,000 10 years from 1.8.2009, prepaid for 5 years Ali Abdulaziz Abdulsaheh 13 Tikrit Branch ID 540,000,000 Land Development Lease Contract Hassan Mohammed (Musataha) from 30.5.2009 to 30.7.2022 Omar Touqan 14 Al-Harithiya Branch ID 50,000,000 10 years from 1.6.2009, prepaid for 6 years Raed Mohammed Saleh 15 Al-Ramadi Branch ID 24,000,000 10 years from 1.11.2009, prepaid for 5 years Mohamed Eid Otairi Alolwan 16 Al-Nasiriya Branch ID 33,000,000 From 3.11.2009 to 3.11.2016, Mahmood Shaker Sabbar prepaid for 5 years
Bank of Baghdad Annual Report 2009 I 49 Board of Directors’ Report about the Bank’s Operations For the year ended on 31st December 2009
9. Capital Adequacy As at the end of 2009 the Bank’s capital adequacy ratio according to the risk weighted exposure in the Balance Sheet amounted to 49%. It should be noted that the minimum ratio required by the instructions of the Central Bank of Iraq is 15%, and according to the Banking Law No.94 of 2004 is 12%, and according to the decisions of the Basel Conference is 8%.
10. Bank’s Overseas Operations The Bank continued its total banking business which included the issue of overseas letters of guarantee, issuing letters of credit, receiving a large number of foreign currency transfers, with 4252 incoming transfers for the year totalling US $ 343,735,017, as well as issuing of transfers for overseas remittances according to the guidelines of the Central Bank and the anti-money laundering instructions, a total of 4644 transfers for the year totalling US $ 2,944,618,416.
11. Research, Development and Expansion Policy The Bank continued during the year its development and expansion policy. In addition to the progress and expansion achieved by the Bank in total banking business during 2009, it embarked upon the expansion of its banking services. During the year, the Bank opened Erbil provincial branch and Hilla provincial branch. In 2009, the Bank also commenced operations at the following branches: Tikrit, Om Qasr, Al-Nasiriya, Al-Harithiya (Baghdad), with the Ramadi and Erbil (City Mall) branches to be opened in 2010. In addition, the Bank’s investments grew by contributing to the incorporation of the Iraq Bank Guarantees Company, Amwal Banking Services Company, and Iraqi Company for Financing SMEs.
12. Accounting Policy The Bank adopted the recognized accounting policies and principles that are applied in the banking sector according to the requirements of the applicable Companies Law, Banking Law No.94 of 2004 and instructions of the Central Bank of Iraq in addition to applying the consolidated accounting standard for banks and insurance companies in maintaining accounts and preparation of financial statements. Since its inception, our Bank has recognized the historical cost convention in its accounting policy except for the outstanding debts and suspension of interest until actual repayment. The Bank sets aside a doubtful provision according to the rates prescribed in the guidelines issued by the Central Bank of Iraq. Accounts receivable and accounts payable are set-off between the Bank’s branches. As for the depreciation of the fixed assets, the Bank follows the straight line method and provides for depreciation at 20% annually of all the fixed assets except buildings for which depreciation are computed at the rate of 3% per year. Moreover, our Bank implements the Central Bank’s instruction that calculates the US dollar rate according to the auction rate on the last day of December, 2009, when it was ID1,170 per US dollar.
13. Material Changes and Events Since the date of the Balance Sheet The Central Bank of Iraq embarked upon reducing the Policy Rate more than once. The rate is currently 7%. This decision will be one of the fundamental factors that will affect the Bank’s revenues. However, efforts will be doubled to activate other banking operations and to attract more new customers to make up for the decline and to increase revenues.
Finally, the Bank’s Board of Directors would like to express on your behalf sincere thanks and appreciation to the management of the Central Bank of Iraq for its good management of the monetary and credit policy and boosting investment activities at home and abroad. We would also like to congratulate the shareholders for the excellent results of the Bank of Baghdad and all its branches which were the results of the efforts, sincerity and loyalty of the Bank’s employees and the outstanding role they played in providing excellent banking services. We would like to express our thanks and appreciation to the Bank’s customers for doing business with us. All the credit goes to the employees of our Bank as without their efforts the management could not have achieved such good results that contributed to enhancing the financial position of our Bank. It is imperative upon us to express our thanks and gratitude to the Companies Registrar Department and to the Auditors (Farqad Al Salman Office).
Emad Ismail Shareef Board Chairman
50 I Bank of Baghdad Annual Report 2009