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.