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IRAQ - TAPPING THE GREAT POTENTIAL British Iraqi Friendship Society

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IRAQ - TAPPING THE GREAT POTENTIAL British Iraqi Friendship Society

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    1. IRAQ - TAPPING THE GREAT POTENTIAL British Iraqi Friendship Society 7 June 2010

    2. Outline Snapshot view Dar Es Salaam Investment Bank Overview of Iraqi banking sector Issues and challenges Long-term perspective Future trends Opportunities

    3. Overview - Dar Es Salaam Investment Bank

    4. Iraqi banking industry summary history 1890 Entry of Ottoman Bank 1941 Rafidain Bank formed 1947 Central Bank of Iraq (CBI) established 1964 Nationalisation of banking system 1989 Rasheed Bank carved out from Rafidain Bank 1992 Formation of private sector banks approved 1992-2002 17 private sector commercial banks established but prohibited from international transactions 2003 Private sector banks permitted to process international payments and letters of credit

    5. Banking sector current composition 7 state-owned banks 22 private sector banks 7 Islamic banks 7 branches of foreign banks (more pending approval) Approximately 800 bank branches

    6. Banking sector numbers in context Total sector assets approximately USD 55 billion 90-95% sector assets held by state-owned enterprises 80% sector assets with Rafidain and Rasheed. Total deposits in banking system estimated at USD 40 billion 85-90% of deposits held by state-owned banks Advances : deposits ratio estimated at 30%

    7. Majority Shareholder Information Dar Es Salaam Investment Bank HSBC (70%) Bank of Baghdad KIPCO Group / Burgan Bank (55%) Credit Bank of Iraq National Bank of Kuwait (75%) Warka Investment Bank Al Bunniya Family (100%) * There are currently 36 banks in Iraq - ranking data is provided on publicly available information.

    8. Iraq perception challenge

    9. Security incidents significant improvement

    10. Banking sector - issues and challenges Too many banks Lack of trust in banking system High dependency on cash Iraq Payment Systems (IPS) improving but long way to go Reliability of financial / business data immature accountancy profession High use of US $ and lack of deployment options Collateral challenges

    11. HSBC in Iraq Dates back to 1891 - when the Imperial Bank of Persia attempted to set up a representative office in Baghdad Full banking branches in Baghdad and Basra in 1923 paved the way for further growth until 1964 Correspondent banking in 1980s - Midland Bank plc (now HSBC Bank plc) maintained a very close relationship with the Central Bank of Iraq, eg supported a large number of Export Credit Agency deals October 2005 - purchased 70.1% of Dar Es Salaam Investment Bank June 2010 - Iraq plays a vital part in HSBCs global strategy to focus on rapidly growing emerging markets

    12. Imperial Bank Of Persia Baghdad 1926

    13. Imperial Bank Of Persia Basra 1930

    14. Former colleague going to work 1925

    15. British Bank of the Middle East 1960

    18. Banking sector - future trends Minimum capital requirements will mean less banks Better supervision and self-regulation will inspire more trust More inter-bank activity (lending, FX, secondary trading of debts) Syndicated lending Telecommunications upgrades will mean more electronic banking

    19. Issues that impact wider business environment Role of state versus private sector Inconsistent legal and regulatory frameworks People - customer service and risk management cultures lacking Management style - lack of empowerment / delegation

    20. Personal challenges Language / communications Getting around takes time - needs careful planning Limited accommodation options Strain on family life

    21. Iraq third largest proven oil reserves

    22. Iraq - a diversity of business opportunities

    23. Longer-term opportunity is huge Over the next 10-20 years, bank profitability will increase 100-fold Stability will inspire confidence Abundance of resources USD 500 billion investment requirement

    24. Thank You!

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