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NMBZ Holdings Ld Half-year Report

29/08/2018 7:00am

UK Regulatory (RNS & others)


Nmbz Holdings (NEX:ZW0009011389-USD)
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1 Year : From Jun 2018 to Jun 2019

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TIDMNMB

RNS Number : 0281Z

NMBZ Holdings Ld

29 August 2018

NMBZ HOLDINGS LIMITED

NMB BANK LIMITED (Registered Commercial Bank)

CONDENSED UNAUDITED RESULTS

FOR THE SIX MONTHSED 30 JUNE 2018

FINANCIAL SUMMARY

 
                                                  30 June               30 June       31 December 
                                                   2018                  2017          2017 
                                                                US$        US$                   US$ 
                                               --------------------  --------------  --------------------- 
                                                     Unaudited            Unaudited                Audited 
                                               --------------------  --------------  --------------------- 
 Total income (US$)                                      33 934 191      23 907 254             53 606 281 
                                               --------------------  --------------  --------------------- 
 Net operating profit before impairment 
  charge (US$)                                           13 178 672       5 716 478             16 870 839 
                                               --------------------  --------------  --------------------- 
 Total comprehensive income (US$)                         9 086 483       3 556 915             10 029 136 
                                               --------------------  --------------  --------------------- 
 Basic earnings per share (US cents)                       2.34               0.93                 2.58 
                                               --------------------  --------------  --------------------- 
                                                            364 580   273 478 
 Total deposits (US$)                                           517    790                     348 956 385 
                                               --------------------  --------------  --------------------- 
                                                            236 393         201 607 
 Total gross loans and advances (US$)                           815             913            211 005 418 
                                               --------------------  --------------  --------------------- 
 Total shareholders' funds and shareholders' 
  liabilities (US$)                                      67 691 347      59 178 793             65 651 843 
                                               --------------------  --------------  --------------------- 
 

Enquiries:

NMBZ HOLDINGS LIMITED

Benefit P Washaya, Chief Executive Officer, NMBZ Holdings Limited benefitw@nmbz.co.zw

Benson Ndachena, Chief Finance Officer, NMBZ Holdings Limited bensonn@nmbz.co.zw

Website: http://www.nmbz.co.zw

Email: enquiries@nmbz.co.zw

Telephone: (+263-4) 759 651/9

CHAIRMAN'S STATEMENT

INTRODUCTION

The operating environment in 2018 continued to be challenging largely due to nostro funding challenges, cash shortages, job losses and inflationary pressures. The period under review was characterised by the build-up to the country's harmonised elections held on 30 July 2018. The government continued with the various re-engaging efforts with the international community ushering in renewed hope and optimism for the economic prospects of the country. However, free, fair and credible elections remain the key yardstick that will determine the full acceptance of the country by the international community.

The Group has however continued to make considerable progress towards attaining its short and medium term goals. The financial results were largely driven by the banking subsidiary's continued expansion into the broader market segment, enhanced use of the bank's digital platforms, stricter credit underwriting standards and concerted efforts to contain non-performing loans and operating costs.

The key financial highlights of the Group as at 30 June 2018, which are commendable in the current difficult operating environment are as shown below:

- Shareholders' funds stood at US$67.7 million (2017 - US$65.7 million).

- Total assets stood at US$441.6 million (2017 - US$422.6 million).

- Total comprehensive income of US$9.1 million (2017 - US$3.6 million).

- Basic earnings per share (US cents) of 2.34 (2017 - 0.93).

GROUP RESULTS

Financial performance

The profit before taxation was US$11 757 594 during the period under review and this gave rise to total comprehensive income of US$9 086 483. The Group achieved an earnings per share of 2.34 cents (2017 - 0.93 cents).

Operating expenses amounted to US$16 820 851 and these were up 23% from a prior year amount of US$13 627 312. This was due to increased transaction processing and operational costs arising from the bank's digital drive and continued expansion into the broader market segments.

Impairment losses on loans and advances amounted to US$1 421 078 for the current period from a prior year amount of US$878 304 and the increase was mainly due to the adoption of IFRS 9 with effect from 1 January 2018. The bank has continued with its drive to reduce non-performing loans (NPLs) and this saw the NPL ratio reduce from 10.71% as at 30 June 2017 to 6.12% as at 30 June 2018. This is largely due to aggressive collections and stricter credit underwriting standards.

Financial position

The Group's total assets increased by 4% from US$422 564 352 as at 31 December 2017 to US$441 567 591 as at 30 June 2018 mainly due to a 33% increase in property and equipment together with an 8% increase in both investment securities and loans, advances and other accounts. These increases were partly offset by a decrease in cash and cash equivalents of 10%.

Gross loans and advances increased by 12% from US$211 005 418 as at 31 December 2017 to US$236 393 815 as at 30 June 2018 mainly due to increased uptake of the Bank's mortgage facilities, corporates and individuals loan facilities.

Gross investment securities (Treasury Bills and Bonds) increased from US$92 245 425 as at 31 December 2017 to US$100 137 224 as at 30 June 2018 in line with the Bank's exposure limits and risk appetite.

Total deposits increased by 4% from US$348 956 385 as at 31 December 2017 to US$364 580 517 as at 30 June 2018 as a result of increased current account balances due to the broadening of the bank's market segments.

The Bank maintained a sound liquidity position with a liquidity ratio of 42.09% and this was above the statutory minimum of 30%.

Capital

The banking subsidiary maintained adequate capital levels to cover all risks as reflected by a capital adequacy ratio of 22.21% as at 30 June 2018 (31 December 2017 - 24.26%). The ratio was well above the regulatory minimum of 12%.

The Group's shareholders' funds and shareholders' liabilities increased by 3% from US$65 651 843 as at 31 December 2017 to US$67 691 347 as at 30 June 2018 as a result of the current period's total comprehensive income, which was partly offset by the increase in IFRS 9 provisions adjusted through equity on 1 January 2018.

The Bank's regulatory capital as at 30 June 2018 was US$65 917 125 and was above the minimum regulatory capital of US$25 million. The bank remains on course to achieve the revised capital levels by 2020.

DIVID

The Board has resolved not to declare an interim dividend in order to fund the growth initiatives being pursued by the Group as well as to strengthen the regulatory capital position of the Group's banking subsidiary.

DIRECTORATE

There were no changes to the directorate during the period under review. The directors of both NMBZ Holdings Limited and NMB Bank Limited boards remain as follows: Mr Benedict A. Chikwanha (Board Chairman), Mr Benefit P. Washaya (Chief Executive Officer), Mr Benson Ndachena (Chief Finance Officer), Mr Charles Chikaura (Independent Non-Executive Director), Mr Erik Sandersen (Non-Executive Director), Mr James de la Fargue (Non-Executive Director), Ms Jean Maguranyanga (Independent Non-Executive Director), Mr Julius Tichelaar (Non-Executive Director) and Ms Sabinah Chitehwe (Independent Non-Executive Director).

CORPORATE SOCIAL INVESTMENTS

During the six months under review, the Group continued with its drive to invest into the country's educational system, the enhancement of youth entrepreneurial skills through partnering stakeholders with similar interests, the disadvantaged, vulnerable groups, supporting environmental protection and conservation initiatives, the arts and various sporting disciplines. The activities and charities supported during this period included Enactus programme for Universities' students run by BOOST Fellowship, several schools events, Birdlife Zimbabwe, Friends of Hwange, Friends of Dzikwa Society, Albino Trust of Zimbabwe, Salvation Army Annual Fundraising Pro-AM golf day and many other charitable initiatives.

CORPORATE DEVELOPMENTS

The Bank continued on its financial inclusion drive and this has seen the opening of a number of low cost accounts via our NMBLite product. We continue to invest in digital channels to support a cashless society and in this regard, we have intensified our drive to roll out our low-cost Point of Sale devices, mPOS, aimed at supporting SMEs and sole traders. I am happy to advise that the bank managed to open a USD & EURO correspondent banking relationship with a German Bank, ODDO BHF to facilitate foreign currency receipts and payments by our customers. Furthermore, we have taken on board a number of money transfer agents to facilitate remittances by Zimbabweans living in the diaspora.

OUTLOOK AND STRATEGY

The Bank will continue to accelerate the deployment of POS machines throughout the country and enhance all the e-channels for the convenience of our transacting customers. The Group will continue to broaden its target market by widening its catchment area to include segments of the mass market previously not catered for, thereby contributing to the financial inclusion agenda.

APPRECIATION

I remain sincerely grateful to our valued clients, depositors, shareholders and regulatory authorities who have continued to render their unwavering support to the Group. To my fellow board members, management and staff, I extend my heartfelt gratitude for their diligence, dedication and steadfast commitment which have culminated in the Group's remarkable results.

B. A. CHIKWANHA

CHAIRMAN

22 August 2018

CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME

for the six months ended 30 June 2018

 
                                               Note             30 June            30 June 
                                                                   2018               2017 
                                                                    US$                US$ 
                                             -------  -----------------  ----------------- 
                                                              Unaudited          Unaudited 
                                             -------  -----------------  ----------------- 
 
                                                                 18 562             15 251 
 Interest income                                4                   906                859 
                                             -------  -----------------  ----------------- 
                                                                 (3 934             (4 563 
 Interest expense                                                  668)               464) 
                                             -------  -----------------  ----------------- 
                                                        ---------------     -------------- 
                                             -------  -----------------  ----------------- 
                                                                 14 628             10 668 
 Net interest income                                                238                395 
                                             -------  -----------------  ----------------- 
 
 Net foreign exchange gains                                   1 109 447            571 892 
                                             -------  -----------------  ----------------- 
                                                                 12 773 
 Fee and commission income                     5.1                  587          7 892 196 
                                             -------  -----------------  ----------------- 
                                                        ---------------     -------------- 
                                             -------  -----------------  ----------------- 
                                                                 28 511             19 152 
 Revenue                                                            272                483 
                                             -------  -----------------  ----------------- 
 
 Other income                                  5.2            1 488 251            191 307 
                                             -------  -----------------  ----------------- 
                                                         --------------     -------------- 
                                             -------  -----------------  ----------------- 
                                                                 29 999             19 343 
 Operating income                                                   523                790 
                                             -------  -----------------  ----------------- 
 
                                                           (16 820            (13 627 
 Operating expenditure                          6            851)               312) 
                                             -------  -----------------  ----------------- 
 Net operating income before impairment                          13 178 
  charge                                                            672          5 716 478 
                                             -------  -----------------  ----------------- 
 Impairment losses on financial assets                           (1 421 
  measured at amortised cost                                       078)          (878 304) 
                                             -------  -----------------  ----------------- 
                                                         --------------     -------------- 
                                             -------  -----------------  ----------------- 
                                                                 11 757 
 Profit before taxation                                             594          4 838 174 
                                             -------  -----------------  ----------------- 
                                                                 (2 671             (1 281 
 Taxation charge                                7                  111)               259) 
                                             -------  -----------------  ----------------- 
                                                          -------------      ------------- 
                                             -------  -----------------  ----------------- 
 Profit for the period                                        9 086 483          3 556 915 
                                             -------  -----------------  ----------------- 
 Other comprehensive income, net of tax                               -                  - 
                                             -------  -----------------  ----------------- 
                                                          -------------      ------------- 
                                             -------  -----------------  ----------------- 
 Total comprehensive income for the period                    9 086 483          3 556 915 
                                             -------  -----------------  ----------------- 
                                                         ========           ======== 
                                             -------  -----------------  ----------------- 
 Earnings per share (US cents) 
                                             -------  -----------------  ----------------- 
     -Basic                                      9.3               2.34               0.93 
                                             -------  -----------------  ----------------- 
     -Diluted                                    9.3               2.18          0.87 
                                             -------  -----------------  ----------------- 
 

CONSOLIDATED STATEMENT OF FINANCIAL POSITION

As at 30 June 2018

 
                                                                    30 June           31 December 
                                                                       2018                  2017 
                                                                        US$                   US$ 
                                                 Note 
                                               -------  -------------------  -------------------- 
                                                                  Unaudited               Audited 
                                               -------  -------------------  -------------------- 
 SHAREHOLDERS' FUNDS 
                                               -------  -------------------  -------------------- 
 Share capital                                    10                 80 975                78 751 
                                               -------  -------------------  -------------------- 
                                                                     16 526 
 Capital reserves                                                       297            18 119 337 
                                               -------  -------------------  -------------------- 
 Revaluation reserves                                                90 310                90 310 
                                               -------  -------------------  -------------------- 
                                                                     35 242 
 Retained earnings                                                      682            31 612 288 
                                               -------  -------------------  -------------------- 
                                                             --------------        -------------- 
                                               -------  -------------------  -------------------- 
                                                                     51 940 
 Total equity                                                           264            49 900 686 
                                               -------  -------------------  -------------------- 
 
                                                                     14 335 
 Redeemable ordinary shares                       11                    253            14 335 253 
                                               -------  -------------------  -------------------- 
 Subordinated term loan                           12              1 415 830             1 415 904 
                                               -------  -------------------  -------------------- 
                                                              -------------        -------------- 
                                               -------  -------------------  -------------------- 
 Total shareholders' funds and shareholders'                         67 691 
  liabilities                                                           347            65 651 843 
                                               -------  -------------------  -------------------- 
                                                                   ========              ======== 
                                               -------  -------------------  -------------------- 
 OTHER LIABILITIES 
                                               -------  -------------------  -------------------- 
 Current tax liabilities                                             22 664                     - 
                                               -------  -------------------  -------------------- 
                                                                    373 853               356 912 
 Deposits and other liabilities                   13                    580                   509 
                                               -------  -------------------  -------------------- 
                                                            ---------------       --------------- 
                                               -------  -------------------  -------------------- 
                                                                    441 567               422 564 
 Total shareholders' funds and liabilities                              591                   352 
                                               -------  -------------------  -------------------- 
                                                                  =========             ========= 
                                               -------  -------------------  -------------------- 
 ASSETS 
                                               -------  -------------------  -------------------- 
                                                                     80 212 
 Cash and cash equivalents                        15                    924            89 553 202 
                                               -------  -------------------  -------------------- 
 Current tax assets                                                       -               231 007 
                                               -------  -------------------  -------------------- 
                                                                    228 201               210 483 
 Loans, advances and other assets               16.1.1                  058                   221 
                                               -------  -------------------  -------------------- 
                                                                     99 747 
 Investment securities                           14.1                   175            92 245 425 
                                               -------  -------------------  -------------------- 
 Non - current assets held for sale                                  36 000                36 000 
                                               -------  -------------------  -------------------- 
 Quoted and other investments                   14.4.1              102 347               117 880 
                                               -------  -------------------  -------------------- 
                                                                     18 728 
 Investment properties                                                  363            18 977 000 
                                               -------  -------------------  -------------------- 
 Intangible assets                                17              2 298 416             2 380 180 
                                               -------  -------------------  -------------------- 
 Property and equipment                           18              9 741 740             7 335 988 
                                               -------  -------------------  -------------------- 
 Deferred tax assets                                              2 499 568             1 204 449 
                                               -------  -------------------  -------------------- 
                                                            ---------------       --------------- 
                                               -------  -------------------  -------------------- 
                                                                    441 567               422 564 
 Total assets                                                           591                   352 
                                               -------  -------------------  -------------------- 
                                                                  =========             ========= 
                                               -------  -------------------  -------------------- 
 

CONSOLIDATED STATEMENT OF CHANGES IN EQUITY

for the six months ended 30 June 2018

 
                                                                                Capital Reserves 
                          Share           Share      Share Option        Regulatory       Revaluation          Retained 
                        Capital         Premium           Reserve           Reserve           Reserve          Earnings            Total 
                 --------------  --------------  ----------------  ----------------  ----------------  ----------------  --------------- 
                            US$             US$               US$               US$               US$               US$              US$ 
                 --------------  --------------  ----------------  ----------------  ----------------  ----------------  --------------- 
 Balances at 1                           15 737                                                                                   39 849 
  January 2017           78 598             548            62 563         1 785 136                 -        22 185 818              663 
                 --------------  --------------  ----------------  ----------------  ----------------  ----------------  --------------- 
 Share based 
  payments 
  - share 
  options 
  exercised                 153          21 734                 -                 -                 -                 -           21 887 
                 --------------  --------------  ----------------  ----------------  ----------------  ----------------  --------------- 
 Profit for the 
  six months                  -               -                 -                 -                 -         3 556 915        3 556 915 
                 --------------  --------------  ----------------  ----------------  ----------------  ----------------  --------------- 
 Transfer to 
  regulatory 
  reserve                     -               -                 -           815 833                 -         (815 833)                - 
                 --------------  --------------  ----------------  ----------------  ----------------  ----------------  --------------- 
                     ----------   -------------         ---------      ------------      ------------     -------------    ------------- 
                 --------------  --------------  ----------------  ----------------  ----------------  ----------------  --------------- 
 Balances at                             15 759                                                                                   43 428 
  30 June 2017           78 751             282            62 563         2 600 969                 -        24 926 900              465 
                 --------------  --------------  ----------------  ----------------  ----------------  ----------------  --------------- 
 Profit for the 
  six 
  months                      -               -                 -                 -                 -         6 381 911        6 381 911 
                 --------------  --------------  ----------------  ----------------  ----------------  ----------------  --------------- 
 Other 
  comprehensive 
  income for 
  the 
  six months                  -               -                 -                 -            90 310                 -           90 310 
                 --------------  --------------  ----------------  ----------------  ----------------  ----------------  --------------- 
 Transfer from 
  regulatory 
  reserve                     -               -                 -         (303 477)                 -           303 477                - 
                 --------------  --------------  ----------------  ----------------  ----------------  ----------------  --------------- 
                     ----------   -------------        ----------     -------------      ------------   ---------------    ------------- 
                 --------------  --------------  ----------------  ----------------  ----------------  ----------------  --------------- 
 Balances at 31                          15 759                                                                                   49 900 
  December 2017          78 751             282            62 563         2 297 492            90 310        31 612 288              686 
                 --------------  --------------  ----------------  ----------------  ----------------  ----------------  --------------- 
 IFRS 9 
 adjustments 
 - 1 January 
 2018 
                 --------------  --------------  ----------------  ----------------  ----------------  ----------------  --------------- 
 Transfer from 
  regulatory 
  reserve                     -               -                 -       (2 297 492)                 -         2 297 492                - 
                 --------------  --------------  ----------------  ----------------  ----------------  ----------------  --------------- 
 Expected 
  Credit 
  Loss (ECL) 
  adjustment 
  - 1 January                                                                                                                     (8 575 
  2018                        -               -                 -                 -                 -       (8 575 988)             988) 
                 --------------  --------------  ----------------  ----------------  ----------------  ----------------  --------------- 
 Deferred tax 
  on 
  ECL 
  adjustment 
  - 1 January 
  2018                        -               -                 -                 -                 -         2 208 317        2 208 317 
                 --------------  --------------  ----------------  ----------------  ----------------  ----------------  --------------- 
                  -------------   -------------   ---------------   ---------------   ---------------   ---------------   -------------- 
                 --------------  --------------  ----------------  ----------------  ----------------  ----------------  --------------- 
 Restated 
  balances 
  at 1 January                           15 759                                                                                   43 533 
  2018                   78 751             282            62 563                 -            90 310        27 542 109              015 
                 --------------  --------------  ----------------  ----------------  ----------------  ----------------  --------------- 
 Profit for the 
  six months                  -               -                 -                 -                 -         9 086 483        9 086 483 
                 --------------  --------------  ----------------  ----------------  ----------------  ----------------  --------------- 
 Share issue - 
  scrip 
  dividend                2 224         704 452                 -                 -                 -                 -          706 676 
                 --------------  --------------  ----------------  ----------------  ----------------  ----------------  --------------- 
                                                                                                                                  (1 385 
 Dividends paid               -               -                 -                 -                 -       (1 385 910)             910) 
                 --------------  --------------  ----------------  ----------------  ----------------  ----------------  --------------- 
                    -----------   -------------        ----------      ------------     -------------     -------------    ------------- 
                 --------------  --------------  ----------------  ----------------  ----------------  ----------------  --------------- 
 Balances at                             16 463                                                                                   51 940 
  30 June 2018           80 975             734            62 563                 -            90 310        35 242 682              264 
                 --------------  --------------  ----------------  ----------------  ----------------  ----------------  --------------- 
                        =======        ========            ======           =======          ========          ========         ======== 
                 --------------  --------------  ----------------  ----------------  ----------------  ----------------  --------------- 
 
 

CONSOLIDATED STATEMENT OF CASH FLOWS

for the six months ended 30 June 2018

 
                                                                   30 June            30 June 
                                                                      2018               2017 
                                                                       US$                US$ 
                                                        ------------------  ----------------- 
                                                                 Unaudited          Unaudited 
                                                        ------------------  ----------------- 
 CASH FLOWS FROM OPERATING ACTIVITIES 
                                                        ------------------  ----------------- 
 Profit before taxation                                         11 757 594          4 838 174 
                                                        ------------------  ----------------- 
 Non-cash items: 
                                                        ------------------  ----------------- 
 - Amortisation of intangible assets                               471 720            352 162 
                                                        ------------------  ----------------- 
  -Depreciation                                                    629 227            560 129 
                                                        ------------------  ----------------- 
  -Unrealised foreign exchange gains                              (16 352)           (23 602) 
                                                        ------------------  ----------------- 
  -Impairment losses on financial assets measured 
   at amortised cost                                             1 421 078            878 304 
                                                        ------------------  ----------------- 
  -Quoted and other investments fair value adjustment                    -           (31 590) 
                                                        ------------------  ----------------- 
  -Loss on disposal of property and equipment                            -             56 639 
                                                        ------------------  ----------------- 
  -Loss on disposal of non current asset held 
   for sale                                                              -             75 300 
                                                        ------------------  ----------------- 
  -Profit on disposal of investment properties                   (461 965)           (12 951) 
                                                        ------------------  ----------------- 
  -Interest capitalised on subordinated term 
   loan                                                             81 666             75 110 
                                                        ------------------  ----------------- 
  -Loss on disposal of quoted investments                           15 074                  - 
                                                        ------------------  ----------------- 
                                                             -------------     -------------- 
                                                        ------------------  ----------------- 
 Operating cash flows before changes in operating 
  assets and liabilities                                        13 898 042          6 767 674 
                                                        ------------------  ----------------- 
 
 Changes in operating assets and liabilities 
                                                        ------------------  ----------------- 
 Increase in deposits and other liabilities                     16 957 423         13 214 437 
                                                        ------------------  ----------------- 
 (Increase)/decrease in loans, advances and                        (27 710 
  other accounts                                                      645)             86 953 
                                                        ------------------  ----------------- 
                                                            --------------      ------------- 
                                                        ------------------  ----------------- 
 Net cash generated from operations                              3 144 820         20 069 065 
                                                        ------------------  ----------------- 
                                                           ---------------     -------------- 
                                                        ------------------  ----------------- 
 Taxation 
                                                        ------------------  ----------------- 
 Corporate tax paid                                            (1 330 459)          (453 139) 
                                                        ------------------  ----------------- 
 Capital gains tax paid                                                  -           (44 000) 
                                                        ------------------  ----------------- 
 Witholding tax on dividends paid                                 (97 294)                  - 
                                                        ------------------  ----------------- 
                                                         -----------------     -------------- 
                                                        ------------------  ----------------- 
 Net cash inflow from operating activities                       1 717 067         19 571 926 
                                                        ------------------  ----------------- 
                                                         -----------------      ------------- 
                                                        ------------------  ----------------- 
 CASH FLOWS FROM INVESTING ACTIVITIES 
                                                        ------------------  ----------------- 
 Acquisition of intangible assets                                (389 956)          (871 188) 
                                                        ------------------  ----------------- 
 Acquisition of investment properties                          (3 897 104)        (3 946 615) 
                                                        ------------------  ----------------- 
 Acquisition of property and equipment                         (3 034 981)          (820 030) 
                                                        ------------------  ----------------- 
 Proceeds on disposal of property and equipment                          -              1 073 
                                                        ------------------  ----------------- 
 (Acquisitions)/disposals of investment securities             (7 501 751)            174 613 
                                                        ------------------  ----------------- 
 Proceeds on disposal of non-current asset held 
  for sale                                                               -          2 150 000 
                                                        ------------------  ----------------- 
 Proceeds on disposal of investment properties                   4 430 127            332 951 
                                                        ------------------  ----------------- 
                                                           ---------------    --------------- 
                                                        ------------------  ----------------- 
                                                                   (10 393             (2 979 
 Net cash outflow from investing activities                           665)               196) 
                                                        ------------------  ----------------- 
                                                            --------------    --------------- 
                                                        ------------------  ----------------- 
 Net cash (outflow)/ inflow before financing 
  activities                                                   (8 676 598)         16 592 730 
                                                        ------------------  ----------------- 
                                                            --------------     -------------- 
                                                        ------------------  ----------------- 
 CASH FLOWS FROM FINANCING ACTIVITIES 
                                                        ------------------  ----------------- 
 Proceeds from share options exercised                                   -             21 887 
                                                        ------------------  ----------------- 
 Payment of interest on subordinated term loan                    (81 740)           (75 525) 
                                                        ------------------  ----------------- 
 Dividends paid                                                  (573 719)                  - 
                                                        ------------------  ----------------- 
 Share issue costs capitalised - scrip dividend                    (8 221)                  - 
                                                        ------------------  ----------------- 
                                                           ---------------    --------------- 
                                                        ------------------  ----------------- 
 Net cash outflow from financing activities                      (663 680)           (53 638) 
                                                        ------------------  ----------------- 
                                                           ---------------    --------------- 
                                                        ------------------  ----------------- 
 Net (decrease)/increase in cash and cash equivalents          (9 340 278)         16 539 092 
                                                        ------------------  ----------------- 
 Cash and cash equivalents at beginning of the 
  period                                                        89 553 202         69 421 257 
                                                        ------------------  ----------------- 
                                                           ---------------     -------------- 
                                                        ------------------  ----------------- 
 Cash and cash equivalents at the end of the 
  period                                                        80 212 924         85 960 349 
                                                        ------------------  ----------------- 
                                                                 =========           ======== 
                                                        ------------------  ----------------- 
 

NOTES TO THE CONDENSED FINANCIAL STATEMENTS

for the six months ended 30 June 2017

   1.      REPORTING ENTITY 

The Holding Company is incorporated and domiciled in Zimbabwe and is an investment holding company. Its registered office address is 64 Kwame Nkrumah Avenue, Harare. Its principal operating subsidiary is engaged in commercial and retail banking. NMB Bank Limited is a registered commercial bank and was incorporated in Zimbabwe on 16 October 1992 and commenced trading on 1 June 1993. The Bank operated as an Accepting House until 6 December 1999 when the licence was converted to that of a Commercial Bank. The Bank is exposed to the following risks in its operations: liquidity risk, credit risk, market risk, operational risk, foreign currency exchange rate risk and interest rate risk.

   2.      ACCOUNTING CONVENTION 

Statement of compliance

These condensed consolidated interim financial statements have been prepared in accordance with International Accounting Standard (IAS) 34, Interim Financial Reporting. Selected explanatory notes are included to explain events and transactions that are significant to an understanding of the changes in financial position of the Group since the last annual consolidated financial statements as at and for the year ended 31 December 2017. These condensed consolidated interim financial statements do not include all the information required for the full annual financial statements prepared in accordance with International Financial Reporting Standards. The financial statements show the impact of the first time adoption of IFRS 9 which was adopted by the Group effective 1 January 2018. The detailed impact of this adoption is disclosed on note 3.12 (Changes in accounting policy).

These condensed consolidated interim financial statements were approved by the Board of Directors on 22 August 2018.

   2.1    Basis of preparation 

The condensed consolidated interim financial statements have been prepared under the historical cost convention except for quoted and other investments, investment properties and financial instruments which are carried at fair value and land and buildings which are stated at revalued amount. These condensed consolidated interim financial statements are reported in United States of America dollars and rounded to the nearest dollar.

   2.2    Functional and presentation currency 

For the purpose of the consolidated financial statements, the results and financial position of the group are expressed in United States dollars which is the functional currency of the Bank, and the presentation currency for the consolidated financial statements.

   2.3    Basis of consolidation 

The Group financial results incorporate the financial results of the Company and its subsidiaries. Subsidiaries are investees controlled by the Group. The Group controls an investee if it is exposed to, or has rights to, variable returns from its involvement with the investee. The financial statements of subsidiaries are included in the consolidated financial statements from the date on which control commences until the date when control ceases. The financial results of the subsidiaries are prepared for the same reporting period as the parent company, using consistent accounting policies. All intra-group balances, transactions, income and expenses; profits and losses resulting from intra-group transactions that are recognised in assets and liabilities are eliminated in full. When the Group loses control over a subsidiary, it derecognises the assets and liabilities of the subsidiary, and any related non-controlling interest and other components of equity. Any resulting gain or loss is recognised in profit or loss. Any interest retained in the former subsidiary is measured at fair value when control is lost.

   2.4       Comparative financial information 

The interim financial statements comprise consolidated statements of financial position, comprehensive income, changes in equity and cash flows. The comparative information covers a period of six months.

   2.5       Use of estimates and judgements 

The preparation of the interim financial statements requires Directors to make judgements, estimates and assumptions that affect the application of accounting policies and the reported amounts of assets, liabilities, income and expenses. Actual results may differ from these estimates.

The significant judgements made by management in applying the Group's accounting policies and key sources of estimation and uncertainity were the same as those applied to the consolidated financial statements as at and for the year ended 31 December 2017.

Estimates and underlying assumptions are reviewed on an ongoing basis. Revisions to estimates are recognized prospectively.

In the process of applying the Group's accounting policies, management has made the following judgements which have the most significant effect on the amounts recognised in the consolidated financial statements:

   2.5.1    Deferred tax 

Provision for deferred taxation is recognised in respect of temporary differences between the carrying amounts of assets and liabilities for financial reporting purposes and the amounts used for taxation purposes. Temporary differences arising out of the initial recognition of assets or liabilities and temporary differences on initial recognition of business combinations that affect neither accounting nor taxable profit are not recognised. The amount of deferred tax provided is based on the expected manner of realisation or settlement of the carrying amount of assets and liabilities, using tax rates enacted or substantively enacted at the reporting date. Deferred income tax assets and liabilities are measured at the tax rates that are expected to apply in the year when the asset is realised or the liability is settled, based on tax rates (and tax laws) that have been enacted or substantively enacted at the reporting date.

   2.5.2          Land and buildings 

The properties were valued by directors. The determined fair value of land and buildings is most sensitive to significant unobservable inputs. In addition, the property market is currently not stable due to liquidity constraints and hence comparable values are also not readily available.

   2.5.3       Investment properties 

Investment properties were valued by directors. The directors considered comparable market evidence of recent sale transactions and those transactions where firm offers had been made but awaiting acceptance. In addition, the property market is currently not stable due to liquidity constraints and hence comparable values are also not readily available.

   2.5.4        Property and equipment 

The directors exercised their judgment in determining the residual values of the other property and equipment which have been determined as nil. If the residual value of an asset increases by an amount equal to or greater than the asset's carrying amount, then depreciation of the asset ceases. Depreciation will only resume when the residual value decreases to an amount below the asset's carrying amount.

   2.5.5        Investment securities 

The Group has treasury bills and government bonds for which there is currently no market information to facilitate the application of fair value principles, in determining fair value disclosures. Directors have made a significant judgement in determining that the carrying amount approximates fair value. Refer to Note 14.1.

   2.5.6        Intangible assets 

Intangible assets are initially recognised at cost. Subsequently the assets are measured at cost less accumulated amortisation and any impairment loss.

   2.5.7       Impairment losses on loan and advances 

The Bank adopted IFRS 9 with effect from 1 January 2018. As permitted by the IFRS 9 transitional provisions, the Bank elected not to restate comparative figures.

The Bank recognises loss allowances for Expected Credit Losses (ECLs) on the following financial

instruments that are not measured at Fair Value through Profit or Loss (FVTPL):

-- loans and advances to banks;

-- loans and advances to customers;

-- debt investment securities;

-- lease receivables;

-- loan commitments issued; and

-- financial guarantee contracts issued.

No impairment loss is recognised on equity investments.

With the exception of purchased or originated credit-impaired (POCI) financial assets (which are considered separately below), ECLs are measured through a loss allowance at an amount equal to:

-- 12-month ECL, i.e. lifetime ECL that result from those default events on the financial instrument that are

possible          within 12 months after the reporting date, (referred to as Stage 1); or 

-- Full lifetime ECL, i.e. lifetime ECL that result from all possible default events over the life of the financial instrument, (referred to as Stage 2 and Stage 3).

A loss allowance for full lifetime ECL is required for a financial instrument if the credit risk on that financial instrument has increased significantly since initial recognition. For all other financial instruments, ECLs are measured at an amount equal to the 12-month ECL.

   2.5.8    Non-current assets held for sale 

Non-current assets or disposal group are held for sale if its carrying amount will be recovered principally through a sale transaction rather than through continuing use. These are measured at the lower of carrying amount and fair value less costs to sell and they are not depreciated.

Non-current assets were valued by the directors who considered comparable market evidence of recent sale transactions and those transactions where firm offers had been made but waiting acceptance. The determined fair value of non - current assets held for sale is most sensitive to significant unobservable inputs. In addition, the property market is currently not stable due to liquidity constraints and hence comparable values are not stable.

   2.5.9   Determination of functional currency 

The Group operates in an economy which is experiencing a shortage of foreign currency and consequently has exchange control regulations that impact the timing of payment of foreign payables among other matters. Given the context of the environment, management has assessed if there has been a change in the functional currency used by the Group. The assessment included consideration of whether the various modes of settlement may represent different forms of currency. It is observed that whether cash, bond notes, electronic

money transfers or point of sale transactions, the unit of measure across all these payment modes remains United States Dollars. Management concluded that the United States dollar is still the functional currency as presented in the prior year financial statements. Please refer to note 15.1 for additional information on the foreign currency shortages.

   2.6.0     Going concern 

The directors have assessed the ability of the Group to continue operating as a going concern and believe that the preparation of these consolidated financial statements on a going concern basis is still appropriate.

   3.      ACCOUNTING POLICIES 

The selected principal accounting policies applied in the preparation of these condensed financial statements are set out below. These policies have been consistently applied unless otherwise stated.

   3.1      Fair value measurement principles 

The fair value of financial instruments is based on their quoted market price at the reporting date without any deduction for transaction costs. If a quoted market price is not available, the fair value of the instrument is estimated using pricing models or discounted cash flow techniques.

Where discounted cash flow techniques are used, estimated future cash flows are based on management's best estimates and the discount rate is a market related rate at the reporting date for an instrument with similar terms and conditions. Where pricing models are used, inputs are based on market related measures at the reporting date.

   3.2      Investment properties 

Investment properties are stated at fair value. Gains and losses arising from a change in fair value of investment properties are recognised in the statement of comprehensive income. The fair value is determined at the end of each reporting period by a professional valuer.

   3.3      Share - based payments 

The Group issues share options to certain employees in terms of the Employee Share Option Scheme. Share options are measured at fair value at the date of grant. The fair value determined at the date of grant of the options is expensed on a straight-line basis over the vesting period, based on the Group's estimate of shares that will eventually vest. Fair value is measured using the Black-Scholes option pricing model. The expected life used in the model has been adjusted, based on management's best estimate, for the effects of non-transferability, exercise restrictions and other behavioural considerations.

   3.4      Property and equipment 

The residual value and the useful life of property and equipment are reviewed at least each financial year-end. If the residual value of an asset increases by an amount equal to or greater than the asset's carrying amount, then the depreciation of the asset ceases. Depreciation will resume only when the residual value decreases to an amount below the asset's carrying amount.

   3.5      Intangible assets 

Intangible assets are initially recognised at cost. Subsequently, the assets are measured at cost less accumulated armotisation and any accumulated impairment losses.

   3.6      Shareholders' funds 

Shareholders' funds refer to the total investment made by the shareholders to the Group and it consists of share capital, share premium, share options reserve, retained earnings, redeemable ordinary shares and subordinated term loans.

    3.7    Taxation 

Income tax

Income tax expenses comprise current and deferred tax. It is recognised in profit or loss except to the extent that it relates to items recognised directly in equity or in other comprehensive income.

Current tax

Current tax comprises expected tax payable or receivable on the taxable income or loss for the year and any adjustment to the tax payable or receivable in respect of previous years. It is measured using rates enacted or substantively enacted at the reporting date in the country where the Bank operates and generates taxable income and any adjustment to tax payable in respect of previous years.

Current income tax assets and liabilities for the current period are measured at the amount expected to be recovered from or paid to the taxation authorities.

Deferred taxation

Deferred tax is recognised in respect of temporary differences between the carrying amounts of assets and liabilities for financial reporting purposes and the amounts used for taxation purposes. Deferred tax is not recognised for:

-- temporary differences on the initial recognition of assets or liabilities in a transaction that is not

a business combination and that affects neither accounting nor taxable profit or loss;

-- temporary differences related to investments in subsidiaries to the extent that it is probable that they will not reverse in the foreseeable future; and

   --      taxable temporary differences arising on the initial recognition of goodwill. 

Deferred tax assets are recognised for unused tax losses, unused tax credits and deductible temporary differences to the extent that it is probable that future taxable profits will be available against which they can be used. Deferred tax assets are reviewed at each reporting date and are reduced to the extent that it is no longer probable that the related tax benefit will be realised. Deferred tax is measured at the tax rates that are expected to be applied to temporary differences when they reverse, using tax rates enacted or substantively enacted at the reporting date.

The measurement of deferred tax reflects the tax consequences that would follow the manner in which the Bank expects, at the reporting date, to recover or settle the carrying amount of its assets and liabilities. For this purpose, the carrying amount of investment property measured at fair value is presumed to be recovered through sale, and the Bank has not rebutted this presumption.

Deferred tax assets and liabilities are offset if there is a legally enforceable right to offset current tax liabilities and assets, and they relate to taxes levied by the same tax authority on the same taxable entity, or on different tax entities, but they intend to settle current tax liabilities and assets on a net basis or their tax assets and liabilities will be realised simultaneously.

Additional taxes that arise from the distribution of dividends by the Bank are recognised at the same time as the liability to pay the related dividend is recognised. These amounts are generally recognised in profit or loss because they generally relate to income arising from transactions that were originally recognised in profit or loss.

   3.8    Cash and cash equivalents 

Cash and cash equivalents comprise cash and bank balances, and short term highly liquid investments with maturities of three months or less when purchased. Cash and cash equivalents are measured at amortised cost in the statement of financial position.

   3.9    Revenue recognition 

Revenue is recognised to the extent that it is probable that the economic benefits will flow to the Bank and the revenue can be reliably measured, regardless of when the payment is being made. Revenue is measured at the fair value of the consideration received or receivable, taking into account contractually defined terms of payment and excluding taxes or duty. The specific recognition criteria described below must also be met before revenue is recognised.

   3.10    Interest income 

For all financial instruments measured at amortised cost and financial instruments designated at fair value through profit or loss, interest income or expense is recorded using the effective interest rate (EIR), which is the rate that exactly discounts the estimated future cash payments or receipts through the expected life of the financial instrument or a shorter period, where appropriate, to the net carrying amount of the financial asset or liability.

Interest income includes income arising out of the banking activities of lending and investing.

   3.11     Interest expense 

Interest expense arises from deposit taking. The expense is recognised in profit or loss as it accrues, taking into account the effective interest cost of the liability.

   3.12    Changes in accounting policy 

The Bank has adopted IFRS 9 as issued by the International Accounting Standards Board (IASB) in July 2014 with a date of transition of 1 January 2018, which resulted in changes in accounting policies and adjustments to the amounts previously recognised in the financial statements.

As permitted by the transitional provisions of IFRS 9, the Bank elected not to restate comparative figures.

Any adjustments to the carrying amounts of financial assets and liabilities at the date of transition were recognised in the opening retained earnings and other reserves of the current period. Consequently, for notes disclosures, the consequential amendments to IFRS 7 disclosures have also only been applied to the current period. The comparative period notes disclosures repeat those disclosures made in the prior year.

The adoption of IFRS 9 has resulted in changes in the Bank's accounting policies for recognition, classification and measurement of financial assets and financial liabilities and impairment of financial assets. IFRS 9 also significantly amends other standards dealing with financial instruments such as IFRS 7 Financial Instruments: Disclosures.

Set out below are disclosures relating to the impact of the adoption of IFRS 9 on the Bank.

(a) Classification and measurement of financial instruments

The measurement category and the carrying amount of financial assets and liabilities in accordance with IAS 39 and IFRS 9 at 1 January 2018 are compared as follows:

                                                                                                                                                                                                                                                    IAS 39                                                            IFRS 9 
 
                          Measurement Category          Carrying   Measurement        Carrying 
                                                          Amount    Category            Amount 
                                                             US$                           US$ 
                         -------------------------  ------------  ------------  -------------- 
 Financial Assets 
 Cash and cash            Amortised cost (Loans                    Amortised 
  equivalents              and advances)              89,553,202    cost            89,526,431 
                         -------------------------  ------------  ------------  -------------- 
                          Amortised cost (Loans                    Amortised 
 Loans and advances        and advances)             210,483,221    cost           202,308,086 
                         -------------------------  ------------  ------------  -------------- 
                          Amortised cost (Loans                    Amortised 
 Investment securities     and advances)              92,245,425    cost            91,871,343 
                         -------------------------  ------------  ------------  -------------- 
 Unquoted and 
  other investments       FVPL (Held for trading)        117,880   FVPL                117,880 
                         -------------------------  ------------  ------------  -------------- 
                                                                                 383,823, 
 Total                                               392,399,728                  740 
                                                    ------------  ------------  -------------- 
 Financial Liabilities 
 Deposits and                                                      Amortised 
  other liabilities       Amortised cost             356,912,509    cost           356,912,509 
                         -------------------------  ------------  ------------  -------------- 
 

(b) Reconciliation of statement of financial position balances from IAS 39 to IFRS 9

The Bank performed a detailed analysis of its business models for managing financial assets and an analysis of their cash flow characteristics to determine how the instruments shall be measured.

The following table reconciles the carrying amounts of financial assets, from their previous measurement categories in accordance with IAS 39 to their new measurement categories upon transition to IFRS 9 on 1 January 2018:

 
                                                                 Carrying Amount 
                                                                  1 January 2018 
                                                                             US$ 
 Amortised cost 
                                                   ----------------------------- 
 
 Cash and cash equivalents 
                                                   ----------------------------- 
 Opening balance - IAS 39                                             89 553 202 
                                                   ----------------------------- 
 Additional IFRS 9 impairment allowance Expected 
  Credit Loss (ECL)                                                     (26 771) 
                                                   ----------------------------- 
                                                                  -------------- 
                                                   ----------------------------- 
 Closing balance - IFRS 9                                             89 526 431 
                                                   ----------------------------- 
                                                                        ======== 
                                                   ----------------------------- 
 
 Loans and advances 
                                                   ----------------------------- 
 Opening balance - IAS 39                                            210 483 221 
                                                   ----------------------------- 
 Additional IFRS 9 impairment allowance Expected 
  Credit Loss (ECL)                                                  (8 175 135) 
                                                   ----------------------------- 
 Less reclassifications                                                        - 
                                                   ----------------------------- 
                                                                 --------------- 
                                                   ----------------------------- 
 Closing balance - IFRS 9                                            202 308 086 
                                                   ----------------------------- 
                                                                       ========= 
                                                   ----------------------------- 
 
 Investment securities 
                                                   ----------------------------- 
 Opening balance - IAS 39                                             92 245 425 
                                                   ----------------------------- 
 Less reclassifications                                                        - 
                                                   ----------------------------- 
 Additional IFRS 9 impairment allowance Expected 
  Credit Loss (ECL)                                                    (374 082) 
                                                   ----------------------------- 
                                                                  -------------- 
                                                   ----------------------------- 
 Closing balance - IFRS 9                                             91 871 343 
                                                   ----------------------------- 
                                                                        ======== 
                                                   ----------------------------- 
 
 Total financial assets measured at amortised 
  cost                                                               383 705 860 
                                                   ----------------------------- 
 
 Fair value through profit or loss 
                                                   ----------------------------- 
 Unquoted investments                                                    117 880 
                                                   ----------------------------- 
                                                                 --------------- 
                                                   ----------------------------- 
 Total financial assets                                              383 823 740 
                                                   ----------------------------- 
                                                                       ========= 
                                                   ----------------------------- 
 

(c) Reconciliation of impairment allowance balance from IAS 39 to IFRS 9

The following table reconciles the prior period closing impairment allowance measured in accordance with the IAS 39 incurred loss model to the new expected credit loss allowance measured in accordance with the IFRS 9 expected loss model at 1 January 2018:

 
 Measurement Category              IAS 39   Remeasurement   IFRS 9 impairment 
                               Impairment             US$      loss allowance 
                           loss allowance                             balance 
                                  balance                                 US$ 
                                      US$ 
 Interbank placements                   -          26 771              26 771 
                         ----------------  --------------  ------------------ 
 Investment securities                  -         374 082             374 082 
                         ----------------  --------------  ------------------ 
                                5 445 968       8 175 135          13 621 103 
                         ----------------  --------------  ------------------ 
 Loans and advances             5 445 968       6 162 469          11 608 437 
                         ----------------  --------------  ------------------ 
 Loan commitments                       -       1 551 975           1 551 975 
                         ----------------  --------------  ------------------ 
 Financial guarantees                   -         460 691             460 691 
                         ----------------  --------------  ------------------ 
                            -------------   -------------       ------------- 
                         ----------------  --------------  ------------------ 
 Total                          5 445 968       8 575 988          14 021 956 
                         ----------------  --------------  ------------------ 
                                 ========        ========            ======== 
                         ----------------  --------------  ------------------ 
 
   3.12.1   Financial Instruments 

Measurement methods

Amortised cost and effective interest rates

The amortised cost is the amount at which the financial asset or financial liability is measured at initial recognition minus the principal repayments, plus or minus the cumulative amortisation using the effective interest method of any difference between that initial amount and the maturity amount and, for financial assets, an adjustment for any loss allowance.

The effective interest rate is the rate that exactly discounts estimated future cash payments or receipts through the expected life of the financial asset or financial liability to the gross carrying amount of a financial asset (i.e. its amortised cost before any impairment allowance) or to the amortised cost of a financial liability. The calculation does not consider expected credit losses and includes transaction costs, premiums or discounts and fees and points paid or received that are integral to the effective interest rate, such as origination fees. For purchased or originated credit-impaired ('POCI') financial assets - assets that are credit-impaired at initial recognition - the Bank calculates the credit-adjusted effective interest rate, which is calculated based on the amortised cost of the financial asset instead of its gross carrying amount and incorporates the impact of expected credit losses in estimated future cash flows.

When the Bank revises the estimates of future cash flows, the carrying amount of the respective financial assets or financial liability is adjusted to reflect the new estimate discounted using the original effective interest rate. Any changes are recognised in profit or loss.

Interest Income

Interest income is calculated by applying the effective interest rate to the gross carrying amount of financial assets, except for:

a) Purchased or originated credit-impaired (POCI) financial assets, for which the original credit-adjusted effective interest rate is applied to the amortised cost of the financial asset.

b) Financial assets that are not 'POCI' but have subsequently become credit-impaired (or 'stage 3'), for which interest revenue is calculated by applying the effective interest rate to their amortised cost (i.e net of the expected credit loss provision).

Initial recognition and measurement

Financial assets and financial liabilities are recognised when the entity becomes a party to the contractual provisions of the instrument. Regular way purchases and sales of financial assets are recognised on trade-date, the date on which the Bank commits to purchase or sell the asset.

At initial recognition, the Bank measures a financial asset or financial liability at its fair value plus or minus, in the case of a financial asset or financial liability not at fair value through profit or loss; transaction costs that are incremental and directly attributable to the acquisition or issuance of the financial asset or financial liability respectively, such as fees and commissions. Transaction costs of financial assets and financial liabilities carried at fair value through profit or loss are expensed in profit or loss. Immediately after initial recognition, an expected credit loss allowance (ECL) is recognised for financial assets measured at amortised cost and investments in debt instruments measured at FVOCI, which results in an accounting loss being recognised in profit or loss when an asset is newly originated.

When the fair value of financial assets and liabilities differs from the transaction price on initial recognition, the entity recognises the difference as follows:

(a) When the fair value is evidenced by a quoted price in an active market for an identical asset or liability (i.e. a Level 1 input) or based on a valuation technique that uses only data from observable markets, the difference is recognised as a gain or loss.

(b) In all other cases, the difference is deferred and the timing of recognition of deferred day one profit or loss is determined individually. It is either amortised over the life of the instrument, deferred until the instrument's fair value can be determined using market observable inputs, or realised through settlement.

3.12.1.1 Financial Assets

(i) Classification and subsequent measurement

From 1 January 2018, the Group has applied IFRS 9 and classifies its financial assets in the

following measurement categories:

   --     Fair value through profit or loss (FVPL); 
   --     Fair value through other comprehensive income (FVOCI); or 
   --     Amortised cost. 

The classification requirements for debt and equity instruments are described below:

Debt instruments

Debt instruments are those instruments that meet the definition of a financial liability from the issuer's perspective, such as loans, government and corporate bonds and trade receivables purchased from clients in factoring arrangements without recourse.

Classification and subsequent measurement of debt instruments depend on:

   --     the Bank's business model for managing the asset; and 
   --     the cash flow characteristics of the asset. 

Based on these factors, the Bank classifies its debt instruments into one of the following three measurement categories:

-- Amortised cost: Assets that are held for collection of contractual cash flows where those cash flows represent solely payments of principal and interest ('SPPI'), and that are not designated at FVPL, are measured at amortised cost. The carrying amount of these assets is adjusted by any expected credit loss allowance. Interest income from these financial assets is included in interest and similar income using the effective interest rate method.

-- Fair value through other comprehensive income (FVOCI): Financial assets that are held for collection of contractual cash flows and for selling the assets, where the assets' cash flows represent solely payments of principle and interest and that are not designated at FVPL, are measured at fair value through other comprehensive income (FVOCI). Movements in the carrying amount are taken through OCI, except for the recognition of impairment gains or losses, interest revenue and foreign exchange gains and losses on the instrument's amortised cost which are recognised in profit or loss. When the financial asset is derecognised, the cumulative gain or loss previously recognised in OCI is reclassified from equity to profit or loss and recognised in "Net Investment Income'. Interest income from these financial assets is included in 'Interest Income' using the effective interest rate method.

-- Fair value through profit or loss: Assets that do not meet the criteria for amortised cost or FVOCI are measured at fair value through profit or loss. A gain or loss on a debt investment that is subsequently measured at fair value through profit or loss and is not part of a hedging relationship is recognised in profit or loss and presented in the profit or loss statement within 'Net Trading Income" in the period in which it arises, unless it arises from debt instruments that were designated at fair value or which are not held for trading, in which case they are presented separately in 'Net Investment Income'. Interest income from these financial assets is included in "Interest income" using the effective interest rate method.

Business model: the business model reflects how the Bank manages the assets in order to generate cash flows. That is, whether the Bank's objective is solely to collect the contractual cash flows from the assets or is to collect both the contractual cash flows and cash flows arising from the sale of assets. If neither of these is applicable (e.g. financial assets are held for trading purposes), then the financial assets are classified as part of 'other' business model and measured at FVPL. Factors considered by the Bank in determining the business model for a group of assets include past experience on how the cash flows for these assets were collected, how the asset's performance is evaluated and reported to key management personnel, how risks are assessed and managed and how managers are compensated. Securities held for trading are held principally for the purpose of selling in the near term or are part of a portfolio of financial instruments that are managed together and for which there is evidence of a recent actual pattern of short-term profit-taking. These securities are classified in the 'other' business model and measured at FVPL.

Where the business model is to hold assets to collect contractual cash flows or to collect contractual cash flows and sell, the Bank assesses whether financial instruments' cash flows represent solely payments of principal and interest (the "SPPI" test). In making this assessment, the Bank considers whether the contractual cash flows are consistent with a basic lending arrangement i.e. interest includes only consideration for the time value of money, credit risk, other basic lending risks and a profit margin that is consistent with a basic lending arrangement. Where the contractual terms introduce exposure to risk or volatility that are inconsistent with a basic lending arrangement, the related financial asset is classified and measured at fair value through profit or loss.

The Bank reclassifies debt investments when and only when its business model for managing those assets changes. The reclassification takes place from the start of the first reporting period following the change. Such changes are expected to be very infrequent and none occurred during the period.

Equity instruments

Equity instruments are instruments that meet the definition of equity from the issuer's perspective; that is, instruments that do not contain a contractual obligation to pay and that evidence a residual interest in the issuer's net assets. Examples of equity instruments include basic ordinary shares.

The Bank subsequently measures all equity investments at fair value through profit or loss, except where the Bank's management has elected, at initial recognition, to irrevocably designate an equity investment at fair value through other comprehensive income. The Bank policy is to designate equity investments as FVOCI when those investments are held for purposes other than to generate investment returns. When this election is used, fair value gains and losses are recognised in OCI and are not subsequently reclassified to profit or loss, including on disposal. Impairment losses (and reversal of impairment losses) are not reported separately from other changes in fair value. Dividends, when representing a return on such investments, continue to be recognised in profit or loss as other income when the Bank's right to receive payments is established.

Gains and losses on equity investments at FVPL are included in the 'Other Income' line in the statement of profit or loss.

(ii) Impairment

The Bank recognises loss allowances for Expected Credit Losses (ECLs) on the following financial instruments that are not measured at Fair Value through Profit or Loss (FVTPL):

-- loans and advances to banks;

-- loans and advances to customers;

-- debt investment securities;

-- lease receivables;

-- loan commitments issued; and

-- financial guarantee contracts issued.

No impairment loss is recognised on equity investments.

With the exception of POCI financial assets (which are considered separately below), ECLs are measured through a loss allowance at an amount equal to:

-- 12-month ECL, i.e. lifetime ECL that result from those default events on the financial instrument that are possible within 12 months after the reporting date, (referred to as Stage 1); or

-- Full lifetime ECL, i.e. lifetime ECL that result from all possible default events over the life of the financial instrument, (referred to as Stage 2 and Stage 3).

A loss allowance for full lifetime ECL is required for a financial instrument if the credit risk on that financial instrument has increased significantly since initial recognition. For all other financial instruments, ECLs are measured at an amount equal to the 12-month ECL.

Expected Credit Losses

ECLs are a probability-weighted estimate of the present value of credit losses. These are measured as the present value of the difference between the cash flows due to the Bank under the contract and the cash flows that the Bank expects to receive arising from the weighting of multiple future economic scenarios, discounted at the asset's EIR.

For undrawn loan commitments, the ECL is the difference between the present value of the difference between the contractual cash flows that are due to the Bank if the holder of the commitment draws down the loan and the cash flows that the Bank expects to receive if the loan is drawn down; and

For financial guarantee contracts, the ECL is the difference between the expected payments to reimburse the holder of the guaranteed debt instrument less any amounts that the Bank expects to receive from the holder, the debtor or any other party.

The Bank measures ECL on an individual basis, or on a collective basis for portfolios of loans that share similar economic risk characteristics. The measurement of the loss allowance is based on the present value of the asset's expected cash flows using the asset's original EIR, regardless of whether it is measured on an individual basis or a collective basis.

Credit-impaired financial assets

A financial asset is credit-impaired when one or more events that have a detrimental impact on the estimated future cash flows of that financial asset have occurred. Evidence that a financial asset is credit-impaired include observable data about the following events:

   (a)     significant financial difficulty of the issuer or the borrower; 
   (b)     a breach of contract, such as a default or past due event; 

(c) the lender(s) of the borrower, for economic or contractual reasons relating to the borrower's financial difficulty, having granted to the borrower a concession(s) that the lender(s) would not otherwise consider;

(d) it becoming probable that the borrower will enter bankruptcy or other financial reorganisation;

(e) the disappearance of an active market for that financial asset because of financial difficulties; or

(f) the purchase or origination of a financial asset at a deep discount that reflects the incurred credit losses.

It may not be possible to identify a single discrete event-instead, the combined effect of several events may have caused financial assets to become credit-impaired.

Purchased or originated credit-impaired (POCI) financial assets

For POCI the Bank only recognises the cumulative changes in lifetime expected credit losses since initial recognition. At each reporting date, the Bank recognises in profit or loss the amount of the change in lifetime expected credit losses as an impairment gain or loss. The Bank recognises favourable changes in lifetime expected credit losses as an impairment gain, even if the lifetime expected credit losses are less than the amount of expected credit losses that were included in the estimated cash flows on initial recognition.

The Bank assesses on a forward-looking basis the expected credit losses ('ECL') associated with its debt instrument assets carried at amortised cost and FVOCI and with the exposure arising from loan commitments and financial guarantee contracts. The Bank recognises a loss allowance for such losses at each reporting date. The measurement of ECL reflects:

-- An unbiased and probability-weighted amount that is determined by evaluating a range of possible outcomes;

   --     The time value of money; and 

-- Reasonable and supportable information that is available without undue cost or effort at the reporting date about past events, current conditions and forecasts of future economic conditions.

For loan commitments and financial guarantee contracts, the loss allowance is recognised as a provision. The Bank keeps track of the changes in the loss allowance for financial assets separately from those for loan commitments and financial guarantee contracts. However, if a financial instrument includes both a loan (i.e. financial asset) and an undrawn commitment (i.e. loan commitment) component and the Bank does not separately identify the expected credit losses on the loan commitment component from those on the financial asset component, the expected credit losses on the loan commitment is recognised together with the loss allowance for the financial asset. To the extent that the combined expected credit losses exceed the gross carrying amount of the financial asset, the expected credit losses is recognised as a provision.

Definition of default

Critical to the determination of ECL is the definition of default. The definition of default is used in measuring the amount of ECL and in the determination of whether the loss allowance is based on 12-month or lifetime ECL, as default is a component of the probability of default (PD) which affects both the measurement of ECLs and the identification of a significant increase in credit risk.

The Bank considers the following as constituting an event of default:

   --     The borrower is past due more than 90 days on any material credit obligation to the Bank or; 
   --     The borrower is unlikely to pay its credit obligations to the Bank in full. 

The definition of default is appropriately tailored to reflect different characteristics of different types of assets. Overdrafts are considered as being past due once the customer has breached an advised limit or has been advised of a limit smaller than the current amount outstanding.

When assessing if the borrower is unlikely to pay its credit obligation, the Bank takes into account both qualitative and quantitative indicators. The information assessed depends on the type of the asset, for example in corporate lending a qualitative indicator used is the breach of covenants, which is not relevant for retail lending. Quantitative indicators, such as overdue status and non-payment on another obligation of the same counterparty are key inputs in this analysis. The Bank uses a variety of sources of information to assess default which are either developed internally or obtained from external sources.

Significant increase in credit risk

The Bank monitors all financial assets, undrawn loan commitments and financial guarantee contracts that are subject to the impairment requirements to assess whether there has been a significant increase in credit risk since initial recognition. If there has been a significant increase in credit risk the Bank will measure the loss allowance based on lifetime rather than 12-month ECL. The Bank's accounting policy is not to use the practical expedient that financial assets with 'low' credit risk at the reporting date are deemed not to have had a significant increase in credit risk. As a result the Bank monitors all financial assets, undrawn loan commitments and financial guarantee contracts that are subject to impairment for significant increase in credit risk.

In assessing whether the credit risk on a financial instrument has increased significantly since initial recognition, the Bank compares the risk of a default occurring on the financial instrument at the reporting date based on the remaining maturity of the instrument with the risk of a default occurring that was anticipated for the remaining maturity at the current reporting date when the financial instrument was first recognised. In making this assessment, the Bank considers both quantitative and qualitative information that is reasonable and supportable, including historical experience and forward-looking information that is available without undue cost or effort, based on the Bank's historical experience and expert credit assessment including forward-looking information.

Multiple economic scenarios form the basis of determining the probability of default at initial recognition and at subsequent reporting dates. Different economic scenarios will lead to a different probability of default. It is the weighting of these different scenarios that forms the basis of a weighted average probability of default that is used to determine whether credit risk has significantly increased.

For corporate lending, forward-looking information includes the future prospects of the industries in which the Bank's lenders operate, obtained from economic expert reports, financial analysts, governmental bodies and other similar organisations, as well as consideration of various internal and external sources of actual and forecast economic information. For the retail portfolio, forward looking information includes the same economic forecasts as the corporate portfolio with additional forecasts of local economic indicators, particularly for regions with a concentration to certain industries, as well as internally generated information of customer payment behaviour. The Bank allocates its counterparties to a relevant internal credit risk grade depending on their credit quality. The quantitative information is a primary indicator of significant increase in credit risk and is based on the change in lifetime PD by comparing:

   --         The remaining lifetime PD at the reporting date; with 

-- the remaining lifetime PD for this point in time that was estimated based on facts and circumstances at the time of initial recognition of the exposure.

The PDs used are forward looking and the Bank uses the same methodologies and data used to measure the loss allowance for ECL.

The qualitative factors that indicate significant increase in credit risk are reflected in PD models on a timely basis. However, the Bank still considers separately additional qualitative factors to assess if credit risk has increased significantly. For corporate lending there is particular focus on assets that are included on the Bank's 'watch list' and for the retail portfolio the Bank considers the expectation of forbearance and payment holidays, credit scores and any other changes in the borrower's circumstances which are likely to adversely affect one's ability to meet contractual obligations.

Given that a significant increase in credit risk since initial recognition is a relative measure, a given change, in absolute terms, in the PD will be more significant for a financial instrument with a lower initial PD than compared to a financial instrument with a higher PD.

The Bank assumes that when an asset becomes 30 days past due, the Bank considers that a significant increase in credit risk has occurred and the asset is in stage 2 of the impairment model, i.e. the loss allowance is measured as the lifetime ECL.

(iii) Modification of loans

The Bank sometimes renegotiates or otherwise modifies the contractual cash flows of loans to customers. When this happens, the Bank assesses whether or not the new terms are substantially different to the original terms. The Bank does this by considering, among others, the following factors:

-- If the borrower is in financial difficulty, whether the modification merely reduces the contractual cash flows to amounts the borrower is expected to be able to pay.

-- Whether any substantial new terms are introduced, such as a profit share/equity-based return that substantially affects the risk profile of the loan.

-- Significant extension of the loan term when the borrower is not in financial difficulty. Significant change in the interest rate.

   --      Change in the currency the loan is denominated in. 

-- Insertion of collateral, other security or credit enhancements that significantly affect the credit risk associated with the loan.

If the terms are substantially different, the Bank derecognises the original financial asset and recognises a 'new' asset at fair value and recalculates the new effective interest rate for the asset. The date of renegotiation is consequently considered to be the date of initial recognition for impairment calculation purposes, including for the purpose of determining whether a significant increase in credit risk has occurred. However, the Bank also assesses whether the new financial asset recognised is deemed to be credit-impaired at initial recognition, especially in circumstances where the renegotiation was driven by the debtor being unable to make the originally agreed payments. Differences in the carrying amount are also recognised in profit or loss as a gain or loss on derecognition.

If the terms are not substantially different, the renegotiation or modification does not result in derecognition, and the Bank recalculates the gross carrying amount based on the revised cash flows of the financial asset and recognises a modification gain or loss in profit or loss. The new gross carrying amount is recalculated by discounting the modified cash flows at the original effective interest rate (or credit-adjusted effective interest rate for purchased or originated credit-impaired financial assets).

(iv) Derecognition other than on a modification

Financial assets, or a portion thereof, are derecognised when the contractual rights to receive the cash flows from the assets have expired, or when they have been transferred and either

-- the Bank transfers substantially all the risks and rewards of ownership, or

-- the Bank neither transfers nor retains substantially all the risks and rewards of ownership and the Bank has not retained control.

The Bank enters into transactions where it retains the contractual rights to receive cash flows to other entities and transfers substantially all of the risks and rewards. These transactions are accounted for as 'pass through' transfers that result in derecognition if the Bank:

(i) Has no obligation to make payments unless it collects equivalent amounts from the assets;

(ii) Is prohibited from selling or pledging the assets; and

(iii) Has an obligation to remit any cash it collects from the assets without material delay.

Collateral (shares and bonds) furnished by the Bank under standard repurchase agreements and securities lending and borrowing transactions are not derecognised because the Bank retains substantially all the risks and rewards on the basis of the predetermined repurchase price, and the criteria for derecognition are therefore not met. This also applies to certain securitisation transactions in which the Bank retains a subordinated residual interest.

3.12.1.2 Financial Liabilities

i) Classification and subsequent measurement

In both the current and prior period, financial liabilities are classified as subsequently measured at amortised cost, except for:

Financial liabilities at fair value through profit or loss: this classification is applied to financial liabilities held for trading (e.g. short positions in the trading booking) and other financial liabilities designated as such at initial recognition. Gains or losses on financial liabilities designated at fair value through profit or loss are presented partially in other comprehensive income (the amount of change in the fair value of the financial liability that is attributable to changes in the credit risk of that liability, which is determined as the amount that is not attributable to changes in market conditions that give rise to market risk) and partially profit or loss (the remaining amount of change in the fair value of the liability). This is unless such a presentation would create, or enlarge, an accounting mismatch, in which case the gains and losses attributable to changes in the credit risk of the liability are also presented in profit or loss;

Financial liabilities arising from the transfer of financial assets which did not qualify for derecognition, whereby a financial liability is recognised for the consideration received for the transfer. In subsequent periods, the Bank recognises any expense incurred on the financial liability.

(ii) Derecognition

Financial liabilities are derecognised when they are extinguished (i.e. when the obligation specified in the contract is discharged, cancelled or expires).

The exchange between the Bank and its original lenders of debt instruments with substantially different terms, as well as substantial modifications of the terms of existing financial liabilities, are accounted for as an extinguishment of the original financial liability and the recognition of a new financial liability. The terms are substantially different if the discounted present value of the cash flows under the new terms, including any fees paid net of any fees received and discounted using the original effective interest rate, is at least 10% different from the discounted present value of the remaining cash flows of the original financial liability. In addition, other qualitative factors, such as the currency that the instrument is denominated in, changes in the type of interest rate, new conversion features attached to the instrument and change in covenants are also taken into consideration. If an exchange of debt instruments or modification of terms is accounted for as an extinguishment, any costs or fees incurred are recognised as part of the gain or loss on the extinguishment. If the exchange or modification is not accounted for as an extinguishment, any costs or fees incurred adjust the carrying amount of the liability and are amortised over the remaining term of the modified liability.

3.12.1.3 Financial guarantee contracts and loan commitments

Financial guarantee contracts are contracts that require the issuer to make specified payments to reimburse the holder for a loss it incurs because a specified debtor fails to make payments when due, in accordance with the terms of a debt instrument. Such financial guarantees are given to banks, financial institutions and others on behalf of customers to secure loans, overdrafts and other banking facilities.

Financial guarantee contracts are initially measured at fair value and subsequently measured at the higher of:

   --     The amount of the loss allowance; and 

-- The premium received on initial recognition less income recognised in accordance with the principles of IFRS 15.

Loan commitments provided by the Bank are measured as the amount of the loss allowance. The Bank has not provided any commitment to provide loans at below-market interest rate, or that can be settled net in cash or by delivering or issuing another financial instrument.

For loan commitments and financial guarantee contracts, the loss allowance is recognised as a provision. However, for contracts that include both a loan and an undrawn commitment and the Bank cannot separately identify the expected credit losses on the undrawn commitment component from those on the loan component, the expected credit losses on the undrawn commitment are recognised together with the loss allowance for the loan. To the extent that the combined expected credit losses exceed the gross carrying amount of the loan, the expected credit losses are recognised as a provision.

   3.12.1.4   Critical Accounting Estimates and Judgements 

The preparation of financial statements requires the use of accounting estimates which, by definition, will seldom equal the actual results. Management also needs to exercise judgement in applying the Bank's accounting policies.

Note 2.5 (Use of estimates and judgements) provides an overview of the areas that involve a higher degree of judgement or complexity, and major sources of estimation uncertainty that have a significant risk of resulting in a material adjustment within the next financial year. Detailed information about each of these estimates and judgements is included in the related notes together with information about the basis of calculation for each affected line item in the financial statements.

   3.12.1.5   Measurement of the expected credit loss allowance 

The measurement of the expected credit loss allowance for financial assets measured at amortised cost and FVOCI is an area that requires the use of complex models and significant assumptions about future economic conditions and credit behaviour (e.g. the likelihood of customers defaulting and the resulting losses). A number of significant judgements are also required in applying the accounting requirements for measuring ECL, such as:

   --     Determining criteria for significant increase in credit risk; 
   --     Choosing appropriate models and assumptions for the measurement of ECL; 
   --   Establishing the number and relative weightings of forward-looking scenarios for each type of product/market and the associated ECL; and 
   --     Establishing groups of similar financial assets for the purposes of measuring ECL. 

The Bank evaluates ECLs for 7 portfolios of audited corporates with overdraft limits, audited corporates without overdraft limits, unaudited corporates with overdraft limits, unaudited corporates without overdraft limits, SMEs with limits, SMEs without limits and Retail loans.

The guiding principle of the Expected Credit Loss evaluation is to reflect the general pattern of deterioration or improvement in the credit quality of financial instruments and allocate commensurate loss provisions. Under the general approach, there are two measurement bases:

-- 12-month ECLs (Stage 1 ECLs) that is evaluated for all financial instruments with no significant deterioration in credit quality since initial recognition.

-- Lifetime ECLs (Stages 2 and 3 ECLs) that is evaluated for financial instruments for which significant increase in credit risk or default has occurred on an individual or collective basis.

Probability of Default (PD)

The Bank defines Probability of Default as the likelihood that a borrower will fail to meet their contractual obligations in the future. The Bank's PD models have been built using historical credit default experience, present credit information as well as forward looking factors which affect the capacity of borrowers to meet their contractual obligations. The Bank used the logistic regression approach to construct PD models for Corporate, SME, Retail and Treasury Bills portfolios while the Merton model was adopted for Interbank Placements. The PD models are used at entity level to evaluate 12-month PDs for Day 1 losses and for financial instruments with no significant deterioration in credit risk since initial recognition, whilst lifetime PD is used for financial instruments for which significant increase in credit risk or default has occurred. 12-month PDs are derived using borrower present risk characteristics while lifetime PDs are derived using a combination of 12-month PDs, present borrower behaviour and forward looking macroeconomic factors.

Exposure at Default (EAD)

The Bank defines Exposure at Default as an estimation of the extent to which the Bank will be exposed to a counterparty in the event of a default. The Bank's EAD models have been built using historical experience of debt instruments that defaulted. The Bank used the linear regression approach to construct EAD models for Corporate, SME and Retail portfolios. For TBs and Interbank Placements, the Bank took a conservative approach of considering the full outstanding balance as the EAD at any given point in the lifetime of an instrument. The Bank's EAD models that use Credit Conversion Factors (CCFs) are applied on fully drawn down instruments while models that use Loan Equivalents (LEQs) are applied on partly drawn instruments. The EAD models are used at entity level to evaluate the proportion of the exposure that will be outstanding at the point of default.

Loss Given Default (LGD)

The Bank defines Loss Given Default as an estimate of the ultimate credit loss in the event of a default. The Bank's LGD models were built using historical experience of defaulted debt instruments and observed recoveries. The Bank used the linear regression approach to construct LGD models for Corporate, SME and Retail portfolios. For Treasury Bills and Interbank Placements, the Bank took a conservative approach of taking a fixed 100% as the LGD at any given point in the lifetime of an instrument. The LGD models are used at portfolio level to evaluate 12-month LGDs for financial instruments with no significant increase in credit risk since initial recognition and lifetime is applied LGDs for financial instruments for which significant increase in credit risk has occurred. 12-month LGDs were derived as historical loss rates while lifetime LGDs were derived using a combination of 12-month LGDs and forward looking macroeconomic factors such as GDP and Inflation.

TheB Bank's ECL model combines the output of the PD, EAD and LGD and computes an Expected Credit Loss that takes into account time value of money using the Effective Interest Rates (EIR) and time to maturity of the debt instruments.

The final ECL is a probability-weighted amount that is determined by evaluating three (3) possible outcomes of Best Case ECL, Baseline Case ECL, and Worst Case ECL. The Bank has modelled these three cases in such a way that the Best Case represents scenario of lower than market average default rates, the Base Case represents scenarios of comparable market average default rates and the Worst Case represent scenarios of higher than market average default rates.

3.12.2 Regulatory guidelines and International Financial Reporting Standards requirements in respect of the Bank's activities

Renegotiated loans and advances

Where possible, the Bank seeks to restructure loans rather than to take possession of collateral. This may involve extending the payment arrangements and the agreement of new loan conditions. Once the terms have been re-negotiated, any impairment is measured using the original effective interest rate (EIR) as calculated before the modification of terms and the loan is no longer considered past due. Management continuously renews re-negotiated loans to ensure that all criteria are met and that future payments are likely to occur. The loans continue to be subject to an individual or collective impairment assessment, calculated using the loans original EIR.

Collateral valuation

The Bank seeks to use collateral, where possible, to mitigate its risks on financial assets. The collateral comes in various forms such as cash, securities, letters of credit/guarantees, real estate, receivables, inventories, other non-financial assets and credit enhancements such as netting agreements. The fair value of collateral is generally assessed, at a minimum, at inception and based on the Bank's quarterly reporting schedule, however, some collateral, for example, cash or securities relating to margining requirements, is valued daily. To the extent possible, the Bank uses active market data for valuing financial assets, held as collateral. Other financial assets which do not have a readily determinable market value are valued using models. Non-financial collateral, such as real estate, is valued based on data provided by third parties such as mortgage brokers, housing price indices, audited financial statements, and other independent sources.

Collateral repossessed

The Bank's policy is to determine whether a repossessed asset is best used for its internal operations or should be sold. Assets determined to be useful for the internal operations are transferred to their relevant asset category at the lower of their repossessed value or the carrying value of the original secured asset. Assets that are determined better to be sold are immediately transferred to assets held for sale at their fair value at the repossession date in line with the Bank's policy.

   4.      INTEREST INCOME 
 
                                          30 June         30 June 
                                             2018            2017 
                                              US$             US$ 
 Loans and advances to banks              239 723         699 288 
                                   --------------  -------------- 
 Loans and advances to customers       13 689 900      12 518 050 
                                   --------------  -------------- 
 Investment securities                  4 633 283       2 034 521 
                                   --------------  -------------- 
                                    -------------   ------------- 
                                   --------------  -------------- 
                                       18 562 906      15 251 859 
                                   --------------  -------------- 
                                         ========        ======== 
                                   --------------  -------------- 
 

non-interest income

   5.1    FEE AND COMMISSION INCOME 
 
                                       30 June 2018     30 June 2017 
                                                US$              US$ 
                                     --------------  --------------- 
 
 Retail banking customer fees            11 080 346        6 870 362 
                                     --------------  --------------- 
 Corporate banking credit related 
  fees                                    1 332 111          642 446 
                                     --------------  --------------- 
 Financial guarantee income                 128 889          101 215 
                                     --------------  --------------- 
 International banking commissions          232 241          278 173 
                                     --------------  --------------- 
                                      -------------   -------------- 
                                     --------------  --------------- 
                                         12 773 587        7 892 196 
                                     --------------  --------------- 
                                           ========         ======== 
                                     --------------  --------------- 
 
   5.2    OTHER INCOME 
 
                                            30 June 2018   30 June 2017 
                                                     US$            US$ 
                                          --------------  ------------- 
 Loss on disposal of quoted investments         (15 074)              - 
                                          --------------  ------------- 
 Net gain from quoted and other 
  investments                                          -         31 590 
                                          --------------  ------------- 
 Loss on disposal of property and 
  equipment                                            -       (56 639) 
                                          --------------  ------------- 
 Profit on disposal of investment 
  properties                                     461 965         12 951 
                                          --------------  ------------- 
 Loss on disposal of non-current 
  asset held for sale                                  -       (75 300) 
                                          --------------  ------------- 
 Insurance claims and recoveries                       -         12 740 
                                          --------------  ------------- 
 Rental income                                   192 820         68 954 
                                          --------------  ------------- 
 Bad debts recovered                             505 756        187 377 
                                          --------------  ------------- 
 Other net operating income                      342 784          9 634 
                                          --------------  ------------- 
                                           -------------    ----------- 
                                          --------------  ------------- 
                                               1 488 251        191 307 
                                          --------------  ------------- 
                                                 =======         ====== 
                                          --------------  ------------- 
 
   6.      Operating EXPITURE 
 
                                             30 June 2018     30 June 2017 
                                                      US$              US$ 
                                          ---------------  --------------- 
 The operating profit is after charging 
  the following: 
                                          ---------------  --------------- 
 Administration costs                           7 553 600        5 949 243 
                                          ---------------  --------------- 
 Staff costs -salaries, allowances 
  and related costs                             7 754 281        6 404 149 
                                          ---------------  --------------- 
 Directors' remuneration:                         412 023          361 629 
                                          ---------------  --------------- 
     -Fees                                        111 446          134 854 
                                          ---------------  --------------- 
     -Expenses                                     14 586            7 455 
                                          ---------------  --------------- 
     -Services rendered                           285 991          219 320 
                                          ---------------  --------------- 
 Amortisation of intangible assets                471 720          352 162 
                                          ---------------  --------------- 
 Depreciation                                     629 227          560 129 
                                          ---------------  --------------- 
                                           --------------   -------------- 
                                          ---------------  --------------- 
                                               16 820 851       13 627 312 
                                          ---------------  --------------- 
                                                 ========         ======== 
                                          ---------------  --------------- 
 
   7.      taxation 
 
                        30 June 2018    30 June 2017 
                                 US$             US$ 
                      --------------  -------------- 
 Income tax expense 
                      --------------  -------------- 
 Current tax               1 757 913         464 472 
                      --------------  -------------- 
 Deferred tax                913 198         701 637 
                      --------------  -------------- 
 Capital gains tax                 -         115 150 
                      --------------  -------------- 
                       -------------   ------------- 
                      --------------  -------------- 
                           2 671 111       1 281 259 
                      --------------  -------------- 
                            ========        ======== 
                      --------------  -------------- 
 
   8.   IMPAIRMENT LOSSES ON LOANS AND ADVANCES 

Impairment losses are calculated by estimating the expected credit losses for all financial assets (including loan commitments and guarantees) measured at amortised cost or fair value through OCI (FVOCI). ECLs arising from financial assets measured at armotised cost and at FVOCI are recognized in profit or loss. However, the loss allowance in respect of assets measured at FVOCI shall not reduce the carrying amount of the financial asset in the Statement of Financial Position but will be accumulated in a reserve through OCI. The aggregate impairment losses which are made during the year are dealt with as per paragraph 8.3.

8.1 Lifetime expected credit losses

Lifetime ECLs are recognized where the Bank's counterparty to a financial asset has been classified as default as defined in the Bank's accounting and credit policies. Financial assets are written off against lifetime ECL provisions once the probability of recovering any significant amounts becomes remote.

8.2 Twelve Month Expected credit losses

The 12-Month ECL relates to the day 1 impairment provisions on financial assets as well as financial assets which are considered not to have had a significant increase in credit risk as defined in the Bank's accounting and credit policies.

8.3 Regulatory Guidelines and International Financial Reporting Standards Requirements

The Banking Regulations 2000 gives guidance on provisioning for doubtful debts and stipulates certain minimum percentages to be applied to the respective categories of the loan book.

IFRS 9, Financial Instruments IFRS 9, prescribes the provisioning for impairment losses based on the expected credit losses from the expected cash flows from financial assets held by the bank, including guarantees and loan commitments.

The two prescriptions are likely to give different results. The Group has taken the view that where the IFRS 9 charge is less than the amount provided for in the Banking Regulations, the difference is recognised directly in equity as a transfer from retained earnings to a regulatory reserve and where it is more, the full amount will be charged to the profit or loss.

8.4 Suspended interest

Interest on loans and advances is accrued to income until such time as reasonable doubt exists about its collectability, thereafter and until all or part of the loan is written off, interest continues to accrue on customers' accounts, but is not included in income. Such suspended interest is deducted from loans and advances in the statement of financial position. This policy meets the requirements of the Banking Regulations 2000 issued by the RBZ.

   9.   EARNINGS PER SHARE 

Basic earnings per share is calculated by dividing the profit for the period attributable to ordinary equity holders of NMBZ Holdings Limited by the weighted average number of ordinary shares outstanding during the period.

Diluted earnings per share is calculated by dividing the profit attributable to ordinary equity holders of NMBZ Holdings Limited adjusted for the after tax effect of: (a) any dividends or other items related to dilutive potential ordinary shares deducted in arriving at profit or loss attributable to ordinary equity holders of the parent entity; (b) any interest recognised in the period related to dilute potential ordinary shares; (c) any other changes in income or expense that would result from the conversion of the dilutive potential ordinary shares, by the weighted average number of ordinary shares outstanding during the year plus the weighted average number of ordinary shares; that would be issued on the conversion of all the dilutive potential ordinary shares into ordinary shares.

9.1 Earnings

 
                          30 June 2018   30 June 2017 
                                   US$            US$ 
                         -------------  ------------- 
 Profit for the period       9 086 483      3 556 915 
                         -------------  ------------- 
 

9.2 Number of shares

 
                                                        30 June 2018       30 June 2017 
                                                                 US$                US$ 
                                                   -----------------  ----------------- 
 9.2.1 Basic earnings per share 
                                                   -----------------  ----------------- 
        Weighted average number of ordinary 
         shares for 
                                                   -----------------  ----------------- 
         basic earnings per share                        388 946 301        384 518 549 
                                                   -----------------  ----------------- 
 
 9.2.2 Diluted earnings per share 
                                                   -----------------  ----------------- 
      Number of shares at beginning of 
       period                                            384 974 542        384 427 351 
                                                   -----------------  ----------------- 
         Shares issued - share options exercised                   -            547 191 
                                                   -----------------  ----------------- 
         Shares issued - scrip dividend                    7 943 318                  - 
                                                   -----------------  ----------------- 
         Effect of dilution: 
                                                   -----------------  ----------------- 
         Share options granted but not exercised                   -                  - 
                                                   -----------------  ----------------- 
         Share options approved but not 
          yet granted                                     23 942 639         23 942 639 
                                                   -----------------  ----------------- 
                                                    ----------------   ---------------- 
                                                   -----------------  ----------------- 
                                                         416 860 499        408 917 181 
                                                   -----------------  ----------------- 
                                                           =========          ========= 
                                                   -----------------  ----------------- 
 

9.3 Earnings per share (US cents)

 
                  30 June 2018   30 June 2017 
 Basic                    2.34           0.93 
                 -------------  ------------- 
 Diluted basic            2.18           0.87 
                 -------------  ------------- 
 
   10.      SHARE CAPITAL 
   10.1    Authorised 
 
                        30 June 2018        31 December   30 June 2018   31 December 
                                                   2017                         2017 
                    Shares (million)   Shares (million)           US$$           US$ 
                   -----------------  -----------------  -------------  ------------ 
 
 Ordinary shares 
  of US$0.00028 
  each                           600                600        168 000       168 000 
                   -----------------  -----------------  -------------  ------------ 
                                ====               ====         ======        ====== 
                   -----------------  -----------------  -------------  ------------ 
 
   10.2   Issued and fully paid 
   10.2.1   Ordinary shares 
 
                        30 June 2018        31 December   30 June 2018   31 December 
                                                   2017                         2017 
                    Shares (million)   Shares (million)           US$$           US$ 
                   -----------------  -----------------  -------------  ------------ 
 
 Ordinary shares                 289                282         80 975        78 751 
                   -----------------  -----------------  -------------  ------------ 
                                ====                ===         ======        ====== 
                   -----------------  -----------------  -------------  ------------ 
 
   10.2.2   Redeemable ordinary shares 
 
                   30 June 2018        31 December   30 June 2018   31 December 
                                              2017                         2017 
               Shares (million)   Shares (million)           US$$           US$ 
              -----------------  -----------------  -------------  ------------ 
 
 Redeemable 
  ordinary 
  shares                    104                104         29 040        29 040 
              -----------------  -----------------  -------------  ------------ 
                           ====                ===         ======        ====== 
              -----------------  -----------------  -------------  ------------ 
 

A total of 7 943 318 ordinary shares were issued to existing shareholders in March 2018 as scrip dividend. Of the unissued ordinary shares of 207 million shares (2017 - 214 million), options which may be granted in terms of the 2012 ESOS amount to 23 942 639. No share options were exercised from the scheme as at 30 June 2018.

Subject to the provisions of section 183 of the Companies Act (Chapter 24:03), the unissued shares are under the control of the directors.

   11.      REDEEMABLE ORDINARY SHARES 
 
                                  30 June 2018   31 December 2017 
                                           US$                US$ 
                               ---------------  ----------------- 
 
 Nominal value (note 10.2.2)            29 040             29 040 
                               ---------------  ----------------- 
 Share premium                      14 306 213         14 306 213 
                               ---------------  ----------------- 
                                --------------    --------------- 
                               ---------------  ----------------- 
                                    14 335 253         14 335 253 
                               ---------------  ----------------- 
                                      ========           ======== 
                               ---------------  ----------------- 
 

On 30 June 2013 the Company received US$14 831 145 capital from Nederlandse Financierings-Maatschappij Voor Ontiwikkelingslanden N.V. (FMO), Norwegian Investment Fund for Developing Countries (Norfund) and AfricInvest Financial Sector Holdings (AfricInvest) who were allocated 34 571 429 shares each (total of 103 714 287) for individually investing US$4 943 715. This amount, net of share issue expenses, was used to recapitalise the Bank in order to contribute towards the minimum capital requirements set by the Reserve Bank of Zimbabwe of US$100 million by 31 December 2020. FMO and Norfund combined together with Rabobank to form ARISE which is a development finance institution primarily focusing on investing in African financial institutions to support and enhance financial service delivery in Africa.

NMBZ Holdings Limited (NMBZ) entered into a share buy-back agreement with Norfund, FMO and AfricInvest, where these three strategic investors have a right on their own discretion at any time after the 5(th) anniversary (30 June 2018) but before the 9(th) anniversary (30 June 2022) of its first subscription date, to request NMBZ to buy back all or part of its NMBZ shares at a price to be determined using the agreed terms as detailed in the share buy-back agreement. The 5(th) anniversary, which is the initial exercisable date of the share buy-back agreement was reached on 30 June 2018. However, the financial liability referred to below did not arise as the Bank has not yet reached the US$100 million minimum capital threshold. It is a condition precedent that at any point when the share buy-back is being considered, the proceeds used to finance the buy-back should come from the distributable reserves which are over and above the minimum regulatory capital requirements. Further, no buy-back option can be exercised by any investor after the 9(th) anniversary (30 June 2022) of the effective date.

The share buy-back agreement creates a potential obligation for NMBZ Holdings Limited to purchase its own instruments. Thus shares issued gave rise to a potential financial liability and are classified as redeemable ordinary shares as shareholders' liabilities.

   12.    SUBORDINATED TERM LOAN 
 
                           30 June 2018    31 December 2017 
                                    US$                 US$ 
                        ---------------  ------------------ 
 
 At 1 January                 1 415 904           1 415 490 
                        ---------------  ------------------ 
 Interest capitalised            81 666             165 345 
                        ---------------  ------------------ 
 Interest paid                 (81 740)           (164 931) 
                        ---------------  ------------------ 
                         --------------   ----------------- 
                        ---------------  ------------------ 
                              1 415 075           1 415 490 
                        ---------------  ------------------ 
                              =========          ========== 
                        ---------------  ------------------ 
 

In 2013, the Bank received a subordinated term loan amounting to US$1.4 million from a Development Financial Institution which attracts an interest rate of LIBOR plus 10% and has a seven year maturity date (13 June 2020) from the first disbursement date.

The above liability would, in the event of the winding up of the issuer, be subordinated to the claims of depositors and all other creditors of the issuer. The Group has not had any defaults of the principal and interest and other breaches with respect to this subordinated loan during the six months period ended 30 June 2018.

   13.     DepositS and other accounts 
   13.1   Deposits and other accounts 
 
                                                    30 June         31 December 
                                                       2018                2017 
                                                        US$                 US$ 
                                           ----------------  ------------------ 
 
 Deposits from banks and other financial 
  institutions**                                 40 108 144          17 213 617 
                                           ----------------  ------------------ 
                                                    324 472 
 Current and deposit accounts*                          373         331 742 768 
                                           ----------------  ------------------ 
                                            ---------------   ----------------- 
                                           ----------------  ------------------ 
                                                    364 580 
 Total deposits                                         517         348 956 385 
                                           ----------------  ------------------ 
 Trade and other payables*                        9 273 063           7 956 124 
                                           ----------------  ------------------ 
                                            ---------------   ----------------- 
                                           ----------------  ------------------ 
                                                    373 853 
                                                        580         356 912 509 
                                           ----------------  ------------------ 
                                                  =========          ========== 
                                           ----------------  ------------------ 
 

`

*The carrying amounts of current and deposit accounts and trade and other payables approximate the

related fair values due to their short term nature.

** Included in deposits from banks and other financial institutions are loan balances of US$5 103 666

(30 June 2017 - US$5 015 157), US$3 308 393 (30 June 2017 - Nil), US$1 642 642 214 (30 June 2017 - Nil) and US$2 014 799 (30 June 2017 - US$4 178 313) due to Norsad, Nederlandse Financierings-Maatschappij Voor Ontiwikkelingslanden (FMO), Swedfund and Societie de Promotion de Paticipation Pour la Cooperation Economique SA (Proparco) respectively. FMO and Swedfund facilities will mature on 16 October 2020, whilst the Proparco facility will mature on 15 April 2019. The Norsad facility matured on 18 April 2018. The Group defaulted on the Norsad principal amount due to Nostro funding challenges. However, the total outstanding amount due to Norsad was subsequently settled in full on the 20(th) of July 2018. The Group did not have any other defaults on the principal and interest with respect to the other loans during the period ended 30 June 2018.

There were breaches to the Proparco, Norsad and Norfund financial covenants regarding the following ratios as at 30 June 2018:

Aggregate large exposure ratio - 40.22% (instead of a maximum of 25%).

Loan loss reserve - 21.13% (instead of a minimum of 40%).

The Bank will apply for a waiver of the non - compliant ratios by 30 September 2018.

   13.2    Maturity analysis 
 
                             30 June 2018   31 December 2017 
                                      US$                US$ 
                       ------------------  ----------------- 
 
 Less than one month          289 309 149        279 698 410 
                       ------------------  ----------------- 
 1 to 3 months                 33 234 951         37 746 638 
                       ------------------  ----------------- 
 3 to 6 months                  8 546 582          2 472 911 
                       ------------------  ----------------- 
 6 months to 1 year             8 925 463         11 751 881 
                       ------------------  ----------------- 
 1 to 5 years                  24 372 542         17 094 715 
                       ------------------  ----------------- 
 Over 5 years                     191 830            191 830 
                       ------------------  ----------------- 
                        -----------------    --------------- 
                       ------------------  ----------------- 
                              364 580 517        348 956 385 
                       ------------------  ----------------- 
                               ==========          ========= 
                       ------------------  ----------------- 
 

13.3 Sectoral analysis of deposits

 
                                                   30 June                  31 December 
                                                      2018                         2017 
                                                       US$          %               US$      % 
                                          ----------------  ---------  ----------------  ----- 
 
 Agriculture                                     9 964 726          3        10 034 242      3 
                                          ----------------  ---------  ----------------  ----- 
 Banks and other financial institutions         40 108 144         11        17 213 617      5 
                                          ----------------  ---------  ----------------  ----- 
 Distribution                                   39 474 723         11        38 540 570     11 
                                          ----------------  ---------  ----------------  ----- 
 Individuals                                    28 201 344          8        29 133 379      8 
                                          ----------------  ---------  ----------------  ----- 
 Manufacturing                                  57 303 068         16        62 426 525     18 
                                          ----------------  ---------  ----------------  ----- 
 Mining companies                                7 953 095          2         8 086 319      2 
                                          ----------------  ---------  ----------------  ----- 
 Municipalities and parastatals                 23 343 897          6        25 633 695      7 
                                          ----------------  ---------  ----------------  ----- 
 Other deposits                                 59 672 117         16        57 598 053     17 
                                          ----------------  ---------  ----------------  ----- 
 Services                                       82 224 391         23        87 501 920     25 
                                          ----------------  ---------  ----------------  ----- 
 Transport and telecommunications 
  companies                                     16 335 012          4        12 788 065      4 
                                          ----------------  ---------  ----------------  ----- 
                                           ---------------   --------   ---------------   ---- 
                                          ----------------  ---------  ----------------  ----- 
                                                   364 580                      348 956 
                                                       517        100               385    100 
                                          ----------------  ---------  ----------------  ----- 
                                                 =========       ====         =========    === 
                                          ----------------  ---------  ----------------  ----- 
 
   14.     FINANCIAL INSTRUMENTS 
   14.1   Investment securities 
 
                                     30 June 2018   31 December 2017 
                                              US$                US$ 
                                   --------------  ----------------- 
 
 Held to maturity                               -         13 744 715 
                                   --------------  ----------------- 
 Loans and receivables                          -         78 500 710 
                                   --------------  ----------------- 
 Armotised cost - Gross               100 137 224                  - 
                                   --------------  ----------------- 
 Impairment loss allowance              (390 049)                  - 
                                   --------------  ----------------- 
     -ECL at 1 January 2018             (374 082)                  - 
                                   --------------  ----------------- 
     -ECL charged through profit         (15 967)                  - 
      or loss 
                                   --------------  ----------------- 
                                    -------------     -------------- 
                                   --------------  ----------------- 
                                       99 747 175         92 245 425 
                                   --------------  ----------------- 
                                         ========           ======== 
                                   --------------  ----------------- 
 
 

The Group holds treasury bills and government bonds totalling US$100 137 224 with interest rates ranging from 2% to 10%. The Treasury Bills are measured at amortised cost in line with the Bank's business model to collect contractual cashflows and the contractual terms are such that the financial assets give rise to cashflows that are solely payments of principal and interest. Of the total Treasury Bills balance of US$100 137 224, a total of US$52 152 776 had been pledged as security against interbank borrowings.

   14.2   Maturity analysis of investment securities held to maturity 
 
                          30 June 2018   31 December 2017 
                                   US$                US$ 
                      ----------------  ----------------- 
 
 Less than 1 month                   -                  - 
                      ----------------  ----------------- 
 1 to 3 months                       -                  - 
                      ----------------  ----------------- 
 3 to 6 months                       -                  - 
                      ----------------  ----------------- 
 6 months to 1 year                  -          2 424 461 
                      ----------------  ----------------- 
 1 to 5 years                        -                  - 
                      ----------------  ----------------- 
 Over 5 years                        -         11 320 254 
                      ----------------  ----------------- 
                        --------------     -------------- 
                      ----------------  ----------------- 
                                     -         13 744 715 
 -------------------------------------  ----------------- 
                              ========           ======== 
 -------------------------------------  ----------------- 
 

14.2.1 Maturity analysis of investment securities - amortised cost

 
                        30 June 2018   31 December 2017 
                                 US$                US$ 
                     ---------------  ----------------- 
 
 Less than 1 month         7 424 461                  - 
                     ---------------  ----------------- 
 1 to 3 months             1 138 890                  - 
                     ---------------  ----------------- 
 3 to 6 months                     -                  - 
                     ---------------  ----------------- 
 6 months to 1 year        3 776 223                  - 
                     ---------------  ----------------- 
 1 to 5 years             76 415 419                  - 
                     ---------------  ----------------- 
 Over 5 years             11 382 231                  - 
                     ---------------  ----------------- 
                      --------------     -------------- 
                     ---------------  ----------------- 
                         100 137 224                  - 
                     ---------------  ----------------- 
                            ========           ======== 
                     ---------------  ----------------- 
 
   14.3     Maturity analysis of investment securities available for sale 
 
                                               30 June 2018   31 December 2017 
                                                        US$                US$ 
                      -------------------------------------  ----------------- 
 
 Less than 1 month                                        -          6 150 000 
                      -------------------------------------  ----------------- 
 1 to 3 months                                            -            142 246 
                      -------------------------------------  ----------------- 
 3 to 6 months                                            -            722 972 
                      -------------------------------------  ----------------- 
 6 months to 1 year                                       -          6 138 889 
                      -------------------------------------  ----------------- 
 1 to 5 years                                             -         65 346 603 
                      -------------------------------------  ----------------- 
                                             --------------     -------------- 
                      -------------------------------------  ----------------- 
                                                          -         78 500 710 
 ----------------------------------------------------------  ----------------- 
                                                   ========           ======== 
 ----------------------------------------------------------  ----------------- 
 
 
   14.4    Fair values of financial instruments 
 
      The fair values of financial assets and financial liabilities that 
       are traded in active markets are based on quoted market prices or 
       dealer price quotations. For all other financial instruments, the 
       Group determines fair values using other valuation techniques. 
      For financial instruments that trade infrequently and have little 
       price transparency, fair value is less objective, and requires varying 
       degrees of judgement depending on liquidity, concentration, uncertainty 
       of market factors, pricing assumptions and other risks affecting 
       the specific instrument. 
         Valuation models 
         The Group measures fair values using the following fair value hierarchy, 
          which reflects the significance of the inputs used in making the 
          measurements. 
         --Level 1: inputs that are quoted market prices (unadjusted) in active 
          markets for identical instruments. 
          --Level 2: inputs other than quoted prices included within Level 
          1 that are observable either directly (i.e. as prices) or indirectly 
          (i.e. derived from prices). This category includes instruments valued 
          using: quoted market prices in active markets for similar instruments; 
          quoted prices for identical or similar instruments in markets that 
          are considered less than active; or other valuation techniques in 
          which all significant inputs are directly or indirectly observable 
          from market data. 
          --Level 3: inputs that are unobservable. This category includes all 
          instruments for which the valuation technique includes inputs not 
          based on observable data and the unobservable inputs have a significant 
          effect on the instrument's valuation. This category includes instruments 
          that are valued based on quoted prices for similar instruments for 
          which significant unobservable adjustments or assumptions are required 
          to reflect differences between the instruments. 
       The objective of valuation techniques is to arrive at a fair value 
        measurement that reflects the price that would be received to sell 
        the asset or paid to transfer the liability in an orderly transaction 
        between market participants at the measurement date. 
 

14.4.1 Financial instruments measured at fair value - fair value hierarchy

 
                       30 June 2018       Level 1         Level 2          Level 3 
                                US$          2013             US$              US$ 
                      -------------  ------------  --------------  --------------- 
 
 Trade investments          102 347             -               -          102 347 
                      -------------  ------------  --------------  --------------- 
 Quoted investments               -             -               -                - 
                      -------------  ------------  --------------  --------------- 
                       ------------   -----------   -------------   -------------- 
                      -------------  ------------  --------------  --------------- 
                            102 347             -               -          102 347 
                      -------------  ------------  --------------  --------------- 
                            =======       =======        ========         ======== 
                      -------------  ------------  --------------  --------------- 
 

During the reporting period ended 30 June 2018 and 31 December 2017, there were no transfers between Level 1 and Level 2 fair value measurements, and no transfers into and out of Level 3 fair value measurements. The trade investments were valued using the market value method.

 
                       31 December 
                              2017       Level 1         Level 2          Level 3 
                               US$          2013             US$              US$ 
                      ------------  ------------  --------------  --------------- 
 
 Trade investments         102 347             -               -          102 347 
                      ------------  ------------  --------------  --------------- 
 Quoted investments         15 533        15 533               -                - 
                      ------------  ------------  --------------  --------------- 
                       -----------   -----------   -------------   -------------- 
                      ------------  ------------  --------------  --------------- 
                           117 880        15 533               -          102 347 
                      ------------  ------------  --------------  --------------- 
                           =======       =======        ========         ======== 
                      ------------  ------------  --------------  --------------- 
 

Level 3 fair value measurements

Reconciliation of trade investments

 
                              30 June 2018   31 December 2017 
                                       US$                US$ 
                             -------------  ----------------- 
 
 Opening balance                   102 347             88 930 
                             -------------  ----------------- 
 Gain recognized in profit 
  or loss                                -             13 417 
                             -------------  ----------------- 
                                ----------         ---------- 
                             -------------  ----------------- 
 Closing balance                   102 347            102 347 
                             -------------  ----------------- 
                                    ======              ===== 
                             -------------  ----------------- 
 
   14.4.2        Financial instruments not measured at fair value 

The table below sets out the fair values of financial instruments not measured at fair value and analyses them by the level in the fair value hierarchy into which each fair value measurement is categorised.

 
                                             30 June                                              Total carrying 
                                                2018 
                                             Level 1            Level 2              Level 3              amount 
                                  ------------------  -----------------  -------------------  ------------------ 
                                                 US$                US$                  US$                 US$ 
                                  ------------------  -----------------  -------------------  ------------------ 
 Assets 
                                  ------------------  -----------------  -------------------  ------------------ 
 
 Cash and cash equivalents                         -         80 212 924                    -          80 212 924 
                                  ------------------  -----------------  -------------------  ------------------ 
 Loans, advances and other                                                                               228 201 
  accounts                                         -                  -          228 201 058                 058 
                                  ------------------  -----------------  -------------------  ------------------ 
 Investment securities                             -                  -           99 747 175          99 747 175 
                                  ------------------  -----------------  -------------------  ------------------ 
                                    ----------------   ----------------    -----------------   ----------------- 
                                  ------------------  -----------------  -------------------  ------------------ 
                                                                                                         408 161 
 Total                                             -         80 212 924          327 948 233                 157 
                                  ------------------  -----------------  -------------------  ------------------ 
                                          ==========         ==========          ===========          ========== 
                                  ------------------  -----------------  -------------------  ------------------ 
 Liabilities 
                                  ------------------  -----------------  -------------------  ------------------ 
                                                                                                         373 853 
 Deposits and other liabilities                    -        373 853 580                    -                 580 
                                  ------------------  -----------------  -------------------  ------------------ 
                                     ---------------   ----------------   ------------------     --------------- 
                                  ------------------  -----------------  -------------------  ------------------ 
                                                                                                         373 853 
                                                   -        373 853 580                    -                 580 
 ---------------------------------------------------  -----------------  -------------------  ------------------ 
                                            ========         ==========          ===========           ========= 
 ---------------------------------------------------  -----------------  -------------------  ------------------ 
 
 
                                         31 December                                         Total carrying 
                                                2017 
                                             Level 1           Level 2           Level 3             amount 
                                  ------------------  ----------------  ----------------  ----------------- 
                                                 US$               US$               US$                US$ 
                                  ------------------  ----------------  ----------------  ----------------- 
 Assets 
                                  ------------------  ----------------  ----------------  ----------------- 
 
                                                                89 553 
 Cash and cash equivalents                         -               202                 -         89 553 202 
                                  ------------------  ----------------  ----------------  ----------------- 
 Loans, advances and other                                                       210 483            210 483 
  accounts                                         -                 -               221                221 
                                  ------------------  ----------------  ----------------  ----------------- 
                                                                                  92 245 
 Investment securities                             -                 -               425         92 245 425 
                                  ------------------  ----------------  ----------------  ----------------- 
                                    ----------------   ---------------   ---------------   ---------------- 
                                  ------------------  ----------------  ----------------  ----------------- 
                                                                89 553           302 728            392 281 
 Total                                             -               202               646                848 
                                  ------------------  ----------------  ----------------  ----------------- 
                                          ==========         =========         =========         ========== 
                                  ------------------  ----------------  ----------------  ----------------- 
 Liabilities 
                                  ------------------  ----------------  ----------------  ----------------- 
                                                               356 912                              356 912 
 Deposits and other liabilities                    -               509                 -                509 
                                  ------------------  ----------------  ----------------  ----------------- 
                                     ---------------   ---------------   ---------------    --------------- 
                                  ------------------  ----------------  ----------------  ----------------- 
                                                               356 912                              356 912 
                                                   -               509                 -                509 
 ---------------------------------------------------  ----------------  ----------------  ----------------- 
                                           =========         =========         =========          ========= 
 ---------------------------------------------------  ----------------  ----------------  ----------------- 
 
   15.    CASH AND CASH EQUIVALENTS 
 
                                        30 June 2018   31 December 2017 
                                                 US$                US$ 
                                      --------------  ----------------- 
 
 Balances with Central Bank               47 967 665         79 876 937 
                                      --------------  ----------------- 
 Current, nostro accounts* and cash        4 432 659          6 676 265 
                                      --------------  ----------------- 
 Interbank placements (see 15.1 
  below )                                 28 000 000          3 000 000 
                                      --------------  ----------------- 
                                       -------------     -------------- 
                                      --------------  ----------------- 
                                          80 400 324         89 553 202 
                                      --------------  ----------------- 
 Expected Credit Loss allowance            (187 400)                  - 
  (see 15.1 below) 
                                      --------------  ----------------- 
                                       -------------      ------------- 
                                      --------------  ----------------- 
                                          80 212 924         89 553 202 
                                      --------------  ----------------- 
                                            ========           ======== 
                                      --------------  ----------------- 
 
   15.1   Interbank placements 
 
                                             30 June    31 December 
                                                2018           2017 
                                                 US$            US$ 
 Interbank placements                     28 000 000      3 000 000 
                                      --------------  ------------- 
 Expected Credit Loss allowance            (187 400)              - 
                                      --------------  ------------- 
     -ECL at 1 January 2018                 (26 771)              - 
                                      --------------  ------------- 
     -ECL charged through profit or        (160 629)              - 
      loss 
                                      --------------  ------------- 
                                       -------------   ------------ 
                                      --------------  ------------- 
                                          27 812 600      3 000 000 
                                      --------------  ------------- 
                                            ========        ======= 
                                      --------------  ------------- 
 

*Nostro accounts are foreign domiciled bank accounts operated by the Bank for the facilitation of offshore transactions on behalf of clients.

Balances with the Central Bank, other banks and cash are used to facilitate customer transactions which include payments and cash withdrawals. During the year, the Central Bank through Exchange Control Operational Guide 8 (ECOGAD 8) introduced prioritisation criteria which have to be followed when making foreign payments on behalf of customers. After prioritisation, foreign payments are then made subject to availability of bank balances with foreign correspondent banks, resulting in possible delay of payment of telegraphic transfers. However, no delay is expected in the settlement of local transactions through the Real Time Gross Settlement (RTGS) system.

Of the cash and cash equivalents balance, an amount of US$526 316 was pledged to Proparco as collateral for offshore lines of credit.

   16.      LOANS, ADVANCES AND OTHER ASSETS 
   16. 1   Total loans, advances and other assets 
 
                           30 June 2018       31 December 
                                                     2017 
 16.1.1 Advances                    US$               US$ 
                        ---------------  ---------------- 
 
 Fixed term loans            23 902 358        20 026 342 
                        ---------------  ---------------- 
 Mortgages                   55 823 132        37 295 987 
                        ---------------  ---------------- 
 Loans and overdrafts       141 547 262       147 011 597 
                        ---------------  ---------------- 
                         --------------   --------------- 
                        ---------------  ---------------- 
                            221 272 752       204 333 927 
                        ---------------  ---------------- 
 Other assets                 6 928 306         6 149 294 
                        ---------------  ---------------- 
                         --------------   --------------- 
                        ---------------  ---------------- 
                            228 201 058       210 483 221 
                        ---------------  ---------------- 
                              =========         ========= 
                        ---------------  ---------------- 
 
 
 16.1.2 Maturity analysis 
                                                                          30 June         31 December 
                                                                             2018                2017 
                                                                -----------------  ------------------ 
                                                                              US$                 US$ 
                                                                -----------------  ------------------ 
 
 Less than one month                                                   77 348 152          71 137 746 
                                                                -----------------  ------------------ 
 1 to three months                                                      9 204 580          10 680 845 
                                                                -----------------  ------------------ 
 3 to 6 months                                                          3 111 437           2 954 340 
                                                                -----------------  ------------------ 
 6 months to 1 year                                                    10 939 739          11 024 220 
                                                                -----------------  ------------------ 
                                                                          100 085 
 1 to 5 years                                                                 752          80 804 577 
                                                                -----------------  ------------------ 
 Over 5 years                                                          35 704 155          34 403 690 
                                                                -----------------  ------------------ 
                                                                  ---------------     --------------- 
                                                                -----------------  ------------------ 
                                                                          236 393 
 Total advances                                                               815         211 005 418 
                                                                -----------------  ------------------ 
 
  Allowance for impairment losses on                                      (14 446 
   loans and advances                                                        564)         (5 445 968) 
                                                                -----------------  ------------------ 
                                                                      (5 445 968)                   - 
      *    IAS 39 impairment loss allowance at 1 January 2018 
                                                                -----------------  ------------------ 
                                                                      (8 175 135)                   - 
      *    ECL recognized through retained earnings 
                                                                -----------------  ------------------ 
                                                                      (1 244 482)                   - 
      *    ECL charged through profit or loss 
                                                                -----------------  ------------------ 
 Bad debts written off                                                    419 021                   - 
                                                                -----------------  ------------------ 
 Suspended interest on credit-impaired 
  financial assets                                                      (674 499)         (1 225 523) 
                                                                -----------------  ------------------ 
                                                                  ---------------     --------------- 
                                                                -----------------  ------------------ 
                                                                          221 272 
                                                                              752         204 333 927 
                                                                -----------------  ------------------ 
 Other assets                                                           6 928 306           6 149 294 
                                                                -----------------  ------------------ 
                                                                 ----------------    ---------------- 
                                                                -----------------  ------------------ 
                                                                          228 201 
                                                                              058         210 483 221 
                                                                -----------------  ------------------ 
                                                                       ==========          ========== 
                                                                -----------------  ------------------ 
 

16.2 Sectoral analysis of utilizations

 
                             30 June                 31 December 
                                2018                        2017 
                                 US$         %               US$          % 
                    ----------------  --------  ----------------  --------- 
 Agriculture and 
  horticulture            32 049 091        14        28 531 460         14 
                    ----------------  --------  ----------------  --------- 
 Conglomerates             9 807 551         4         9 210 926          4 
                    ----------------  --------  ----------------  --------- 
 Distribution             29 278 993        12        28 737 726         14 
                    ----------------  --------  ----------------  --------- 
 Food & beverages          9 117 969         4        10 417 745          5 
                    ----------------  --------  ----------------  --------- 
 Individuals              86 679 204        37        82 589 355         39 
                    ----------------  --------  ----------------  --------- 
 Manufacturing            13 604 975         6         8 565 178          4 
                    ----------------  --------  ----------------  --------- 
 Mining                      729 841         0           736 466          - 
                    ----------------  --------  ----------------  --------- 
 Services                 55 126 191        23        42 216 562         20 
                    ----------------  --------  ----------------  --------- 
                     ---------------   -------   ---------------   -------- 
                    ----------------  --------  ----------------  --------- 
                             236 393 
                                 815       100       211 005 418        100 
                    ----------------  --------  ----------------  --------- 
                           =========      ====         =========      ===== 
                    ----------------  --------  ----------------  --------- 
 

The material concentration of loans and advances are to individuals at 37% (2017 - 39%) and the services sector at 23% (2017 - 20%).

   16.3      Allowance for impairment losses on financial assets 
 
                                                                   30 June 2018 
                                                  Lifetime                     12 Month            Total 
                                                     ECL                            ECL 
                                         -------------------------  -------------------  --------------- 
                                                               US$                  US$              US$ 
                                         -------------------------  -------------------  --------------- 
 
 At 1 January 2018 (IAS 39 provisions)                           -                    -        5 445 968 
                                         -------------------------  -------------------  --------------- 
 Adjustment on initial application 
  of IFRS 9                                                      -                    -        8 575 988 
                                         -------------------------  -------------------  --------------- 
 ECL Balance at 1 Jan 2018                          4 946 633                9 075 323      14 021 956 
                                         -------------------------  -------------------  --------------- 
 
      *    ECL - Loans and advances                 4 946 633                  8 64 470     13 621 103 
                                         -------------------------  -------------------  --------------- 
 
      *    ECL - Investment Securities                           -            374 082          374 082 
                                         -------------------------  -------------------  --------------- 
 
      *    ECL - Interbank Placements                          -               26 771            26 771 
                                         -------------------------  -------------------  --------------- 
 
 Total charge against profits                            9 522               1 411 556       1 421 078 
                                         -------------------------  -------------------  --------------- 
 
      *    ECL - Loans and advances                      9 522               1 234 960       1 244 482 
                                         -------------------------  -------------------  --------------- 
 
      *    ECL - Investment Securities                           -              15 967           15 967 
                                         -------------------------  -------------------  --------------- 
 
      *    ECL - Interbank Placements                          -              160 629          160 629 
                                         -------------------------  -------------------  --------------- 
 Bad debts written off                                   (419 021)                    -        (419 021) 
                                         -------------------------  -------------------  --------------- 
                                                     -------------        -------------    ------------- 
                                         -------------------------  -------------------  --------------- 
 Balance                                                 4 537 134           10 486 879       15 024 013 
                                         -------------------------  -------------------  --------------- 
                                                          ========             ========         ======== 
                                         -------------------------  -------------------  --------------- 
 

*The Bank adopted IFRS 9 effective 1 January 2018, the resultant increase in impairment provision on the effective date were recognized through retained earnings, as the Bank did not elect retrospective application of the standard.

 
                                                         31 December 2017 
                                ---------------- 
                                        Specific          Portfolio             Total 
                                             US$                US$               US$ 
                                ----------------  -----------------  ---------------- 
 At 1 January                          6 207 672          2 097 445         8 305 117 
                                ----------------  -----------------  ---------------- 
 Total charge against profits          3 334 133            519 016         3 853 149 
                                ----------------  -----------------  ---------------- 
 Bad debts written off               (6 712 298)                  -       (6 712 298) 
                                ----------------  -----------------  ---------------- 
                                 ---------------   ----------------   --------------- 
                                ----------------  -----------------  ---------------- 
 Balance                               2 829 507          2 616 461         5 445 968 
                                ----------------  -----------------  ---------------- 
                                       =========          =========         ========= 
                                ----------------  -----------------  ---------------- 
 
   16.4   Credit-impaired financial assets 
 
                                                     30 June 2018          31 December 
                                                                                  2017 
                                                              US$                  US$ 
                                             --------------------  ------------------- 
 
 Total credit-impaired financial assets                14 462 782           16 848 747 
                                             --------------------  ------------------- 
 Expected credit losses on credit-impaired 
  financial assets                                    (4 537 134)          (2 829 507) 
                                             --------------------  ------------------- 
 Retail loans insurance                               (1 499 057)          (1 457 059) 
                                             --------------------  ------------------- 
 Suspended interest on credit-impaired 
  financial assets                                      (674 499)          (1 225 523) 
                                             --------------------  ------------------- 
                                                  ---------------      --------------- 
                                             --------------------  ------------------- 
 Net credit-impaired financial assets                   7 752 092           11 336 658 
                                             --------------------  ------------------- 
                                                        =========            ========= 
                                             --------------------  ------------------- 
 

The net credit-impaired financial assets of these accounts represents recoverable portions covered by realisable security, which includes guarantees, cession of debtors, mortgages over properties, equities and promissory notes all fair valued at US$14 134 875 (2017 - US$15 483 847).

16.5 Loans to related parties (Included under loans, advances and other assets)

 
                             30 June 2018      31 December 
                                                      2017 
                                      US$              US$ 
                          ---------------  --------------- 
 
 Executive directors              142 330          201 084 
                          ---------------  --------------- 
 Officers                       8 372 130        7 566 669 
                          ---------------  --------------- 
 Officers' companies                    -                - 
                          ---------------  --------------- 
                           --------------   -------------- 
                          ---------------  --------------- 
                                8 514 460        7 767 753 
                          ---------------  --------------- 
 Fair value adjustments                 -        (276 695) 
                          ---------------  --------------- 
                            -------------   -------------- 
                          ---------------  --------------- 
                                8 514 460        7 491 058 
                          ---------------  --------------- 
                                 ========        ========= 
                          ---------------  --------------- 
 
 
   17.     INTANGIBLE ASSETS 
 
                             Work in progress*   Computer software            Total 
                                           US$                 US$              US$ 
                            ------------------  ------------------  --------------- 
 Cost 
                            ------------------  ------------------  --------------- 
 Balance at 1 January 
  2017                                 228 595           3 045 126        3 273 721 
                            ------------------  ------------------  --------------- 
 Acquisitions                                -           1 565 713        1 565 713 
                            ------------------  ------------------  --------------- 
                                    ----------        ------------     ------------ 
                            ------------------  ------------------  --------------- 
 Balance at 31 December 
  2017                                 228 595           4 610 839        4 839 434 
                            ------------------  ------------------  --------------- 
 Acquisitions                                -             389 956          389 956 
                            ------------------  ------------------  --------------- 
                                    ----------        ------------    ------------- 
                            ------------------  ------------------  --------------- 
 Balance at 30 June 
  2018                                 228 595           5 000 795        5 229 390 
                            ------------------  ------------------  --------------- 
                                        ======             =======         ======== 
                            ------------------  ------------------  --------------- 
 
 Accumulated amortisation 
                            ------------------  ------------------  --------------- 
 Balance at 1 January 
  2017                                       -           1 626 687        1 626 687 
                            ------------------  ------------------  --------------- 
 Amortisation for the 
  year                                       -             832 567          832 567 
                            ------------------  ------------------  --------------- 
                                     ---------       -------------      ----------- 
                            ------------------  ------------------  --------------- 
 Balance at 31 December 
  2017                                       -           2 459 254        2 459 254 
                            ------------------  ------------------  --------------- 
 Amortisation for the 
  period                                     -             471 720          471 720 
                            ------------------  ------------------  --------------- 
                                     ---------        ------------   -------------- 
                            ------------------  ------------------  --------------- 
 Balance at 30 June 
  2018                                       -           2 930 974        2 930 974 
                            ------------------  ------------------  --------------- 
                                         =====            ========         ======== 
                            ------------------  ------------------  --------------- 
 Carrying amount 
                            ------------------  ------------------  --------------- 
 At 30 June 2018                       228 595           2 069 821        2 298 416 
                            ------------------  ------------------  --------------- 
                                       =======            ========         ======== 
                            ------------------  ------------------  --------------- 
 At 31 December 2017                   228 595           2 151 585        2 380 180 
                            ------------------  ------------------  --------------- 
                                       =======            ========         ======== 
                            ------------------  ------------------  --------------- 
 

*The work in progress relates to a computer software whose development commenced in 2015 and is now expected to be fully deployed for its intended use in the second half of 2018. The Directors performed an impairment assessment on the intangible asset and were satisfied that the asset had no signs of impairment

as at 30 June 2018.

   18.    PROPERTY AND EQUIPMENT 
 
                      Capital work        Computers    Motor vehicles        Furniture and           Freehold           Total 
                       in progress                                               equipment          buildings 
                               US$              US$               US$                  US$                US$             US$ 
                   ---------------  ---------------  ----------------  -------------------  -----------------  -------------- 
 Cost 
                   ---------------  ---------------  ----------------  -------------------  -----------------  -------------- 
 Balance at 1                                                                                                          12 562 
  January 2017             188 947        3 677 901         1 283 448            3 913 914          3 498 454             664 
                   ---------------  ---------------  ----------------  -------------------  -----------------  -------------- 
 Additions                 268 310        1 598 813            52 454              115 296              4 060       2 038 933 
                   ---------------  ---------------  ----------------  -------------------  -----------------  -------------- 
 Capitalisations         (163 541)          163 541                 -                    -                  -               - 
                   ---------------  ---------------  ----------------  -------------------  -----------------  -------------- 
 Revaluation gain                -                -                 -                    -            121 630         121 630 
                   ---------------  ---------------  ----------------  -------------------  -----------------  -------------- 
 Reversal of 
  impairment                     -                -                 -                    -             89 660          89 660 
                   ---------------  ---------------  ----------------  -------------------  -----------------  -------------- 
 Disposals                       -          (4 930)          (80 000)                    -                  -        (84 930) 
                   ---------------  ---------------  ----------------  -------------------  -----------------  -------------- 
                     -------------     ------------      ------------        -------------     --------------   ------------- 
                   ---------------  ---------------  ----------------  -------------------  -----------------  -------------- 
 At 31 December                                                                                                        14 727 
  2017                     293 716        5 435 325         1 255 902            4 029 210          3 713 804             957 
                   ---------------  ---------------  ----------------  -------------------  -----------------  -------------- 
 
 Additions               2 422 645          367 378            95 317              149 641                  -       3 034 981 
                   ---------------  ---------------  ----------------  -------------------  -----------------  -------------- 
 Capitalisations                 -                -                 -                    -                  -               - 
                   ---------------  ---------------  ----------------  -------------------  -----------------  -------------- 
                     -------------     ------------      ------------         ------------       ------------   ------------- 
                   ---------------  ---------------  ----------------  -------------------  -----------------  -------------- 
 Balance at 30                                                                                                         17 762 
  June 2018              2 716 361        5 802 703         1 351 219            4 178 851          3 713 804             938 
                   ---------------  ---------------  ----------------  -------------------  -----------------  -------------- 
                     -------------     ------------      ------------         ------------       ------------        ======== 
                   ---------------  ---------------  ----------------  -------------------  -----------------  -------------- 
 Accumulated 
 depreciation 
                   ---------------  ---------------  ----------------  -------------------  -----------------  -------------- 
 At 1 January 
  2017                           -        2 203 125           772 200            3 044 870            262 183       6 282 378 
                   ---------------  ---------------  ----------------  -------------------  -----------------  -------------- 
 Charge for the 
  year                           -          563 658           191 574              316 222             65 357       1 136 811 
                   ---------------  ---------------  ----------------  -------------------  -----------------  -------------- 
 Disposals                       -          (2 219)          (25 000)                    -                  -        (27 219) 
                   ---------------  ---------------  ----------------  -------------------  -----------------  -------------- 
                    --------------   --------------    --------------         ------------      -------------    ------------ 
                   ---------------  ---------------  ----------------  -------------------  -----------------  -------------- 
 Balance at 
  31 December 
  2017                           -        2 764 564           938 774            3 361 092            327 540       7 391 970 
                   ---------------  ---------------  ----------------  -------------------  -----------------  -------------- 
 Charge for 
  period                         -          365 490            83 752              145 671             34 314         629 227 
                   ---------------  ---------------  ----------------  -------------------  -----------------  -------------- 
 Disposals                       -                -                 -                    -                  -               - 
                   ---------------  ---------------  ----------------  -------------------  -----------------  -------------- 
                       -----------     ------------      ------------        -------------       ------------    ------------ 
                   ---------------  ---------------  ----------------  -------------------  -----------------  -------------- 
 Balance at 30 
  June 2018                      -        3 130 054         1 022 526            3 506 763            361 854       8 021 197 
                   ---------------  ---------------  ----------------  -------------------  -----------------  -------------- 
                           =======          =======          ========              =======            =======         ======= 
                   ---------------  ---------------  ----------------  -------------------  -----------------  -------------- 
 Carrying amount 
  at 
  30 June 2018           2 716 361        2 672 649           328 692              672 088          3 351 950       9 741 740 
                   ---------------  ---------------  ----------------  -------------------  -----------------  -------------- 
                           =======          =======           =======              =======           ========         ======= 
                   ---------------  ---------------  ----------------  -------------------  -----------------  -------------- 
 Carrying amount 
  at 31 
  December 2017            293 716        2 670 762           317 128              668 118          3 386 264       7 335 988 
                   ---------------  ---------------  ----------------  -------------------  -----------------  -------------- 
                           =======          =======           =======              =======            =======         ======= 
                   ---------------  ---------------  ----------------  -------------------  -----------------  -------------- 
 
   19.    CAPITAL COMMITMENTS 
 
                                                     30 June       31 December 
                                                        2018              2017 
                                                         US$               US$ 
                                              --------------  ---------------- 
 
 Capital expenditure contracted for                4 227 911           607 736 
                                              --------------  ---------------- 
 Capital expenditure authorised but not yet 
  contracted for                                   7 796 473        10 502 287 
                                              --------------  ---------------- 
                                               -------------   --------------- 
                                              --------------  ---------------- 
                                                  12 024 384        11 110 023 
                                              --------------  ---------------- 
                                                    ========         ========= 
                                              --------------  ---------------- 
 

The capital expenditure will be funded from the Group's own resources.

   20.    CONTINGENT LIABILITIES 
 
                                                           30 June        31 December 
                                                              2018               2017 
                                                               US$                US$ 
                                                 -----------------  ----------------- 
 
 Guarantees                                              7 877 009          8 195 056 
                                                 -----------------  ----------------- 
                                                            49 602 
 Facilities approved but not drawn down                        321         28 943 947 
                                                 -----------------  ----------------- 
 Irrevocable letters of credit                           1 750 000                  - 
                                                 -----------------  ----------------- 
 Expected credit losses on facilities approved              (1 904                  - 
  but not drawn down                                          931) 
                                                 -----------------  ----------------- 
 Expected credit losses on guarantees                    (498 782)                  - 
                                                 -----------------  ----------------- 
                                                  ----------------   ---------------- 
                                                 -----------------  ----------------- 
                                                            56 825 
                                                               617         37 139 003 
                                                 -----------------  ----------------- 
                                                         =========          ========= 
                                                 -----------------  ----------------- 
 
   21.    EXCHANGE RATES 

The following exchange rates have been used to translate the foreign currency balances to United States of America dollars (US$) at period end:-

 
                                      Mid-rate      Mid-rate 
                                  30 June 2018   31 December 
                                                        2017 
                          -----  -------------  ------------ 
                                           US$           US$ 
                          -----  -------------  ------------ 
 British Pound Sterling     GBP         1.3164        1.3525 
                          -----  -------------  ------------ 
 South African Rand         ZAR        13.8288       12.3250 
                          -----  -------------  ------------ 
 European Euro              EUR         1.1640        1.1994 
                          -----  -------------  ------------ 
 Botswana Pula              BWP        10.4384        9.8232 
                          -----  -------------  ------------ 
 

NMB BANK LIMITED

STATEMENT OF COMPREHENSIVE INCOME

for the six months ended 30 June 2018

 
                                                               30 June          30 June 
                                                                  2018             2017 
                                                                   US$              US$ 
                                             ------  -----------------  --------------- 
                                                             Unaudited        Unaudited 
                                             ------  -----------------  --------------- 
                                              Note 
                                             ------  -----------------  --------------- 
                                                                                 15 251 
 Interest income                                            18 562 906              859 
                                                     -----------------  --------------- 
                                                                                 (4 563 
 Interest expense                                          (3 934 668)             480) 
                                                     -----------------  --------------- 
                                                        --------------   -------------- 
                                             ------  -----------------  --------------- 
                                                                                 10 688 
 Net interest income                                        14 628 238              379 
                                                     -----------------  --------------- 
 Net foreign exchange gains                                  1 109 447          571 892 
                                                     -----------------  --------------- 
 Fee and commission income                                  12 773 587        7 892 196 
                                                     -----------------  --------------- 
                                                        --------------   -------------- 
                                             ------  -----------------  --------------- 
                                                                                 19 152 
 Revenue                                                    28 511 272              467 
                                                     -----------------  --------------- 
 Non-interest income                          a              1 503 325          172 349 
                                             ------  -----------------  --------------- 
                                                         -------------    ------------- 
                                             ------  -----------------  --------------- 
                                                                                 19 324 
 Operating income                                           30 014 597              816 
                                                     -----------------  --------------- 
                                                          (16 813        (13 627 
 Operating expenditure                        b             134)          312) 
                                             ------  -----------------  --------------- 
                                                       ---------------   -------------- 
                                             ------  -----------------  --------------- 
 Net operating income before impairment 
  charge                                                    13 201 463        5 697 504 
                                                     -----------------  --------------- 
 Impairment losses on financial assets 
  measured at amortised cost                               (1 421 078)        (878 304) 
                                                     -----------------  --------------- 
                                                        --------------     ------------ 
                                             ------  -----------------  --------------- 
 Profit before taxation                                     11 780 385        4 819 200 
                                                     -----------------  --------------- 
                                                                                 (1 280 
 Taxation charge                                           (2 672 422)             332) 
                                                     -----------------  --------------- 
                                                         -------------    ------------- 
                                             ------  -----------------  --------------- 
 Profit for the period                                       9 107 963        3 538 868 
                                                     -----------------  --------------- 
 Other comprehensive income net of tax                               -                - 
                                             ------  -----------------  --------------- 
                                                        --------------   -------------- 
                                             ------  -----------------  --------------- 
 Total comprehensive income for the period                   9 107 963        3 538 868 
                                                     -----------------  --------------- 
                                                               =======          ======= 
                                             ------  -----------------  --------------- 
 Earnings per share (US cents) 
                                             ------  -----------------  --------------- 
          -Basic                              c                  55.18            21.44 
                                             ------  -----------------  --------------- 
 

NMB BANK LIMITED

STATEMENT OF FINANCIAL POSITION

As at 30 June 2018

 
                                                    30 June 2018     31 December 2017 
                                                             US$                  US$ 
                                     --------  -----------------  ------------------- 
                                                       Unaudited              Audited 
                                     --------  -----------------  ------------------- 
 EQUITY                                 Note 
                                     --------  -----------------  ------------------- 
 
 Share capital                           d                16 506               16 506 
                                     --------  -----------------  ------------------- 
 Share premium                                        31 474 502           31 474 502 
                                               -----------------  ------------------- 
 Regulatory reserve                                            -            2 297 492 
                                               -----------------  ------------------- 
 Revaluation reserve                                      90 310               90 310 
                                               -----------------  ------------------- 
 Retained earnings                                    35 132 312           30 842 252 
                                               -----------------  ------------------- 
                                                ----------------       -------------- 
                                     --------  -----------------  ------------------- 
 Total shareholder's funds                            66 713 630           64 721 062 
                                               -----------------  ------------------- 
 
 LIABILITIES 
                                     --------  -----------------  ------------------- 
 
 Deposits and other accounts                         373 919 007          356 977 472 
                                               -----------------  ------------------- 
 Subordinated term loan                                1 415 830            1 415 904 
                                               -----------------  ------------------- 
 Current tax liabilities                                  98 183                    - 
                                     --------  -----------------  ------------------- 
                                                ----------------      --------------- 
                                     --------  -----------------  ------------------- 
 Total liabilities                                   375 433 020          358 393 376 
                                               -----------------  ------------------- 
                                                 ---------------       -------------- 
                                     --------  -----------------  ------------------- 
 Total shareholder's funds and 
  liabilities                                        442 146 650          423 114 438 
                                               -----------------  ------------------- 
                                                       =========            ========= 
                                     --------  -----------------  ------------------- 
 ASSETS 
                                     --------  -----------------  ------------------- 
 
 Cash and cash equivalents               e            80 212 924           89 553 202 
                                     --------  -----------------  ------------------- 
 Current tax assets                                            -              155 488 
                                               -----------------  ------------------- 
 Loans, advances and other assets                    228 193 673          210 475 836 
                                               -----------------  ------------------- 
 Investment securities                                99 747 175           92 245 425 
                                               -----------------  ------------------- 
 Amount owing from Holding Company                       590 791              651 564 
                                               -----------------  ------------------- 
 Non - current assets held for 
  sale                                   g                36 000               36 000 
                                     --------  -----------------  ------------------- 
 Unquoted investments                                    102 347              102 347 
                                               -----------------  ------------------- 
 Investment properties                   f            18 728 363           18 977 000 
                                     --------  -----------------  ------------------- 
 Intangible assets                                     2 298 416            2 380 180 
                                               -----------------  ------------------- 
 Property and equipment                                9 741 740            7 335 988 
                                               -----------------  ------------------- 
 Deferred tax assets                                   2 495 221            1 201 408 
                                               -----------------  ------------------- 
                                                ----------------    ----------------- 
                                     --------  -----------------  ------------------- 
 Total assets                                        442 146 650          423 114 438 
                                               -----------------  ------------------- 
                                                      ==========           ========== 
 --------------------------------------------  -----------------  ------------------- 
 

NMB BANK LIMITED

STATEMENT OF CHANGES IN EQUITY

for the six months ended 30 June 2018

 
 
                                                   Capital Reserves 
                  Share Capital    Share Premium      Revaluation       Regulatory          Retained             Total 
                                                          Reserve          Reserve          Earnings 
                 --------------  ---------------  ---------------  ---------------  ----------------  ---------------- 
                            US$              US$              US$              US$               US$               US$ 
                 --------------  ---------------  ---------------  ---------------  ----------------  ---------------- 
 Balances at 1 
  January                                                                                                       54 713 
  2017                   16 506       31 474 502                -        1 785 136        21 437 257               401 
                 --------------  ---------------  ---------------  ---------------  ----------------  ---------------- 
 Profit for the 
  six months                  -                -                -                -         3 538 868         3 538 868 
                 --------------  ---------------  ---------------  ---------------  ----------------  ---------------- 
 Transfer to 
  regulatory 
  reserve                     -                -                -          815 833         (815 833) 
                 --------------  ---------------  ---------------  ---------------  ----------------  ---------------- 
                     ----------    -------------   --------------   --------------   ---------------    -------------- 
                 --------------  ---------------  ---------------  ---------------  ----------------  ---------------- 
 Balances at 30                                                                                                 58 252 
  June 2017              16 506       31 474 502                -        2 600 969        24 160 292               269 
                 --------------  ---------------  ---------------  ---------------  ----------------  ---------------- 
 Profit for the 
  six months                  -                -                -                -         6 378 483         6 378 483 
                 --------------  ---------------  ---------------  ---------------  ----------------  ---------------- 
 Other 
  comprehensive 
  income                      -                -           90 310                -                 -            90 310 
                 --------------  ---------------  ---------------  ---------------  ----------------  ---------------- 
 Transfer from 
  regulatory 
  reserve                     -                -                -        (303 477)           303 477                 - 
                 --------------  ---------------  ---------------  ---------------  ----------------  ---------------- 
                      ---------    -------------      -----------    -------------    --------------     ------------- 
                 --------------  ---------------  ---------------  ---------------  ----------------  ---------------- 
 Balances at 31                                                                                                 64 721 
  December 2017          16 506       31 474 502           90 310        2 297 492        30 842 252               062 
                 --------------  ---------------  ---------------  ---------------  ----------------  ---------------- 
 IFRS 9 
 adjustments 
 - 1 January 
 2018 
                 --------------  ---------------  ---------------  ---------------  ----------------  ---------------- 
 Transfer from 
  regulatory 
  reserve                     -                -                -      (2 297 492)         2 297 492                 - 
                 --------------  ---------------  ---------------  ---------------  ----------------  ---------------- 
 Expected 
  Credit Loss 
  (ECL) 
  adjustment 
  - 1 January                                                                                                   (8 575 
  2018                        -                -                -                -       (8 575 988)              988) 
                 --------------  ---------------  ---------------  ---------------  ----------------  ---------------- 
 Deferred Tax 
  on ECL 
  adjustment - 
  1 January 
  2018                        -                -                -                -         2 208 317         2 208 317 
                 --------------  ---------------  ---------------  ---------------  ----------------  ---------------- 
                    -----------   --------------   --------------   --------------   ---------------    -------------- 
                 --------------  ---------------  ---------------  ---------------  ----------------  ---------------- 
 Restated 
  balances at 1                                                                                                 58 353 
  January 2018           16 506       31 474 502           90 310                -        26 772 073               391 
                 --------------  ---------------  ---------------  ---------------  ----------------  ---------------- 
 Profit for the 
  six months                  -                -                -                -         9 107 963         9 107 963 
                 --------------  ---------------  ---------------  ---------------  ----------------  ---------------- 
 Dividends paid               -                -                -                -         (747 724)         (747 724) 
                 --------------  ---------------  ---------------  ---------------  ----------------  ---------------- 
                      ---------    -------------      -----------    -------------     -------------    -------------- 
                 --------------  ---------------  ---------------  ---------------  ----------------  ---------------- 
 Balances at 30                                                                                                 66 713 
  June 2018              16 506       31 474 502           90 310                -        35 132 312               630 
                 --------------  ---------------  ---------------  ---------------  ----------------  ---------------- 
                         ======         ========          =======          =======          ========          ======== 
                 --------------  ---------------  ---------------  ---------------  ----------------  ---------------- 
 

NMB BANK LIMITED

STATEMENT OF CASH FLOWS

for the six months ended 30 June 2018

 
                                                              30 June      30 June 2017 
                                                                 2018 
                                                                  US$               US$ 
                                                     ----------------  ---------------- 
                                                            Unaudited         Unaudited 
                                                     ----------------  ---------------- 
 CASH FLOWS FROM OPERATING ACTIVITIES 
                                                     ----------------  ---------------- 
                                                               11 780 
 Profit before taxation                                           385         4 819 200 
                                                     ----------------  ---------------- 
 Non-cash items 
                                                     ----------------  ---------------- 
       -Impairment losses on financial assets 
        measured at amortised cost                          1 421 078           878 304 
                                                     ----------------  ---------------- 
       -Loss on disposal of property and equipment                  -            56 639 
                                                     ----------------  ---------------- 
       -Profit on disposal of investment property           (461 965)          (12 951) 
                                                     ----------------  ---------------- 
       -Loss on disposal of non-current assets 
        held for sale                                               -            75 300 
                                                     ----------------  ---------------- 
       -Amortisation of intangible assets                     471 720           352 162 
                                                     ----------------  ---------------- 
       -Depreciation                                          629 227           560 129 
                                                     ----------------  ---------------- 
       -Unrealised foreign exchange gains                    (16 352)          (23 602) 
                                                     ----------------  ---------------- 
       -Quoted and other investments fair value 
        adjustment                                                  -          (12 513) 
                                                     ----------------  ---------------- 
       -Interest capitalised on subordinated 
        loan                                                   81 666            75 110 
                                                     ----------------  ---------------- 
                                                       --------------   --------------- 
                                                     ----------------  ---------------- 
 Operating cash flows before changes in 
  operating                                                    13 905 
  assets and liabilities                                          759         6 767 778 
                                                     ----------------  ---------------- 
 
 Changes in operating assets and liabilities 
                                                     ----------------  ---------------- 
                                                               16 957 
 Increase in deposits and other liabilities                       887        13 214 333 
                                                     ----------------  ---------------- 
 (Increase)/decrease in loans, advances                       (27 711 
  and other accounts                                             110)            86 953 
                                                     ----------------  ---------------- 
                                                       --------------    -------------- 
                                                     ----------------  ---------------- 
 Net cash generated from operations                         3 152 536        20 069 064 
                                                     ----------------  ---------------- 
                                                       --------------    -------------- 
                                                     ----------------  ---------------- 
 Taxation 
                                                     ----------------  ---------------- 
                                                               (1 330 
 Corporate tax paid                                              459)         (453 139) 
                                                     ----------------  ---------------- 
 Capital gains tax paid                                             -          (44 000) 
                                                     ----------------  ---------------- 
                                                       --------------    -------------- 
                                                     ----------------  ---------------- 
 Net cash inflow from operating activities                  1 822 077        19 571 925 
                                                     ----------------  ---------------- 
                                                      ---------------   --------------- 
                                                     ----------------  ---------------- 
 CASH FLOWS FROM INVESTING ACTIVITIES 
                                                     ----------------  ---------------- 
 Proceeds on disposal of property and 
  equipment                                                         -             1 073 
                                                     ----------------  ---------------- 
 Acquisition of intangible assets                           (389 956)         (871 188) 
                                                     ----------------  ---------------- 
                                                               (3 034 
 Acquisition of property and equipment                           981)         (820 030) 
                                                     ----------------  ---------------- 
                                                               (3 897 
 Acquisition of investment properties                            104)       (3 946 615) 
                                                     ----------------  ---------------- 
 (Acquisition)/disposal of investment                          (7 501 
  securities                                                     751)           174 613 
                                                     ----------------  ---------------- 
 Proceeds on disposal of non-current asset 
  held for sale                                                     -         2 150 000 
                                                     ----------------  ---------------- 
 Proceeds on disposal of investment property                4 430 127           332 951 
                                                     ----------------  ---------------- 
 Decrease in amount owing from holding 
  company                                                      60 774            21 888 
                                                     ----------------  ---------------- 
                                                      ---------------   --------------- 
                                                     ----------------  ---------------- 
                                                              (10 332 
 Net cash outflow from investing activities                      891)       (2 957 308) 
                                                     ----------------  ---------------- 
                                                       --------------   --------------- 
                                                     ----------------  ---------------- 
 Net cash (outflow)/inflow before financing                    (8 510 
  activities                                                     814)        16 614 617 
                                                     ----------------  ---------------- 
                                                       --------------   --------------- 
                                                     ----------------  ---------------- 
 CASHFLOWS FROM FINANCING ACTIVITIES 
                                                     ----------------  ---------------- 
 Payment of interest on subordinated term 
  loan                                                       (81 740)          (75 525) 
                                                     ----------------  ---------------- 
 Dividends paid                                             (747 724)                 - 
                                                     ----------------  ---------------- 
                                                       --------------    -------------- 
                                                     ----------------  ---------------- 
 Net cash outflow from financing activities                 (829 464)          (75 525) 
                                                     ----------------  ---------------- 
                                                       --------------   --------------- 
                                                     ----------------  ---------------- 
 Net (decrease)/increase in cash and cash                      (9 340 
  equivalents                                                    278)        16 539 092 
                                                     ----------------  ---------------- 
 Cash and cash equivalents at beginning                        89 553 
  of the period                                                   202        69 421 257 
                                                     ----------------  ---------------- 
                                                      ---------------   --------------- 
                                                     ----------------  ---------------- 
 Cash and cash equivalents at the end                          80 212 
  of the period                                                   924        85 960 349 
                                                     ----------------  ---------------- 
                                                            =========         ========= 
                                                     ----------------  ---------------- 
 

NOTES TO THE CONDENSED FINANCIAL STATEMENTS

for the six months ended 30 June 2018

There are no material differences between the Bank and the Holding company as the Bank is the principal operating subsidiary of the Group. The notes to the financial statements under NMBZ Holdings Limited are therefore the same as those of the Bank in every material respect where applicable.

   a.      NON-INTEREST income 
 
                                          30 June 2018   30 June 2017 
                                                   US$            US$ 
                                         -------------  ------------- 
 Quoted and other investments fair 
  value adjustments                                  -         12 514 
                                         -------------  ------------- 
 Rental income                                 192 820         68 954 
                                         -------------  ------------- 
 Insurance claims and recoveries                     -         12 740 
                                         -------------  ------------- 
 Loss on disposal of property and 
  equipment                                          -       (56 639) 
                                         -------------  ------------- 
 Profit on disposal of investment 
  property                                     461 965         12 951 
                                         -------------  ------------- 
 Loss on disposal of non-current asset 
  held for sale                                      -       (75 300) 
                                         -------------  ------------- 
 Bad debts recovered                           505 756        187 377 
                                         -------------  ------------- 
 Other net operating income                    342 784          9 752 
                                         -------------  ------------- 
                                          ------------    ----------- 
                                         -------------  ------------- 
                                             1 503 325        172 349 
                                         -------------  ------------- 
                                               =======         ====== 
                                         -------------  ------------- 
 
   b.      Operating EXPITURE 
 
                                             30 June 2018     30 June 2017 
                                                      US$              US$ 
                                          ---------------  --------------- 
 The operating profit is after charging 
  the following: 
                                          ---------------  --------------- 
 Administration costs                           7 545 883        5 949 243 
                                          ---------------  --------------- 
 Staff costs - salaries, allowances 
  and related costs                             7 754 281        6 404 149 
                                          ---------------  --------------- 
 Directors' remuneration:                         412 023          361 629 
                                          ---------------  --------------- 
                  -Fees                           111 446          134 854 
                                          ---------------  --------------- 
                  -Expenses                        14 586            7 455 
                                          ---------------  --------------- 
                  -Services rendered              285 991          219 320 
                                          ---------------  --------------- 
 Amortisation of intangible assets                471 720          352 162 
                                          ---------------  --------------- 
 Depreciation                                     629 227          560 129 
                                          ---------------  --------------- 
                                           --------------   -------------- 
                                          ---------------  --------------- 
                                               16 813 134       13 627 312 
                                          ---------------  --------------- 
                                                 ========         ======== 
                                          ---------------  --------------- 
 
   c.      EARNINGS PER SHARE 

The calculation of earnings per share is based on the following figures:

   c.1     Earnings 
 
                          30 June 2018   30 June 2017 
                                   US$            US$ 
                         -------------  ------------- 
 Profit for the period       9 107 963      3 538 868 
                         -------------  ------------- 
 
   c.2    Number of shares 
 
                                     30 June 2018   30 June 2017 
 Weighted average shares in issue      16 506 050     16 506 050 
                                    -------------  ------------- 
 
   c.3    Earnings per share (US cents) 
 
 Basic    55.18   21.44 
 
   d.      SHARE CAPITAL 
   d.1    Authorised 

The authorised ordinary share capital at 30 June 2018 is at the historical cost figure of US$25 000 (2017 - US$25 000) comprising 25 million ordinary shares of US$0.001 each.

   d.2    Issued and fully paid 

The issued share capital at 30 June 2018 is at the historical cost figure of US$16 506 (2017 - US$16 506) comprising 16 506 050 (2017 - 16 506 050) ordinary shares of US$0.001 each.

   e.      CASH AND CASH EQUIVALENTS 
 
                                            30 June 2018   31 December 2017 
                                                     US$                US$ 
                                        ----------------  ----------------- 
 Balances with the Central Bank               47 967 665         79 876 937 
                                        ----------------  ----------------- 
 Current, nostro accounts and cash             4 432 659          6 676 265 
                                        ----------------  ----------------- 
 Interbank placements (see e.1 below)         28 000 000          3 000 000 
                                        ----------------  ----------------- 
                                         ---------------     -------------- 
                                        ----------------  ----------------- 
                                              80 400 324         89 553 202 
                                        ----------------  ----------------- 
 Expected credit loss allowance (see           (187 400)                  - 
  e.1 below) 
                                        ----------------  ----------------- 
                                          --------------    --------------- 
                                        ----------------  ----------------- 
                                              80 212 924         89 553 202 
                                        ----------------  ----------------- 
                                                ========           ======== 
                                        ----------------  ----------------- 
 
   e.1     Interbank Placement 
 
                                             30 June 2018   31 December 2017 
                                                      US$                US$ 
                                           --------------  ----------------- 
 Interbank Placements                         28 000 000           3 000 000 
                                           --------------  ----------------- 
 Expected credit loss allowance                 (187 400)                  - 
                                           --------------  ----------------- 
     -ECL at 1 January 2018                      (26 771)                  - 
                                           --------------  ----------------- 
     -ECL charged through profit or loss        (160 629)                  - 
                                           --------------  ----------------- 
                                            -------------       ------------ 
                                           --------------  ----------------- 
                                               27 812 600          3 000 000 
                                           --------------  ----------------- 
                                                 ========            ======= 
                                           --------------  ----------------- 
 
   f.        INVESTMENT PROPERTIES 
 
                                30 June 2018   31 December 2017 
                                         US$                US$ 
                             ---------------  ----------------- 
 Opening balance                  18 977 000         14 202 270 
                             ---------------  ----------------- 
 Additions                         3 897 104          4 792 475 
                             ---------------  ----------------- 
 Fair value adjustments                    -            302 255 
                             ---------------  ----------------- 
 Disposals                       (4 145 741)          (320 000) 
                             ---------------  ----------------- 
                              --------------    --------------- 
                             ---------------  ----------------- 
           Closing balance        18 728 363         18 977 000 
                             ---------------  ----------------- 
                                   =========          ========= 
                             ---------------  ----------------- 
 

Investment properties comprise commercial and residential properties that are leased out to third parties and land held for future development. No properties were encumbered.

Rental income amounting to US$192 820 (2017 - US$68 954) was received and no operating expenses were incurred on the investment properties in the current year due to the net leasing arrangement on the properties.

Included in investment properties are properties measured at US$5 701 106 as at 30 June 2018 which were acquired as part of the foreclosure process with marketability restrictions. The Bank has no restrictions on the realisability of all the remaining investment properties and no contractual obligations to purchase, construct or develop the investment properties or for repairs, maintenance and enhancements.

f. INVESTMENT PROPERTIES

Measurement of fair value

The fair value of the Bank's investment properties as at 31 December 2017 was arrived at on the basis of valuations carried out by independent professional valuers, PMA Real Estate (Private) Limited. The valuation which conforms to International Valuation Standards, was in terms of the policy as set out in the accounting policies section and was derived with reference to market information close to the date of the valuation.

As there were no professional valuations done as at 30 June 2018, the investment properties are recorded at the fair values as obtained by the professional valuers as at 31 December 2017.

Fair value hierarchy

Level 2

The fair value for investment properties of US$13 027 257 has been categorised under Level 2 in fair value hierarchy based on the inputs used for the valuation technique highlighted above.

The following table shows the reconciliation between the opening and closing balances for Level 2 fair values:

 
                              30 June 2018   31 December 2017 
                                       US$                US$ 
                          ----------------  ----------------- 
 At 1 January                    8 722 000          7 382 270 
                          ----------------  ----------------- 
 Acquisitions                    2 951 257          1 740 158 
                          ----------------  ----------------- 
 Transfer from level 3           1 354 000                  - 
                          ----------------  ----------------- 
 Disposals                               -          (320 000) 
                          ----------------  ----------------- 
 Fair value adjustments                  -           (80 428) 
                          ----------------  ----------------- 
                           ---------------     -------------- 
                          ----------------  ----------------- 
 Balance at 31 December         13 027 257          8 722 000 
                          ----------------  ----------------- 
                                 =========           ======== 
                          ----------------  ----------------- 
 

Level 3

The fair value for investment properties of US$5 701 106 has been categorised under Level 3 in the fair value hierarchy based on the inputs used for the valuation technique highlighted above.

The following table shows the reconciliation between the opening and closing balances for Level 2 fair values:

 
                                  30 June     31 December 
                                     2018            2017 
                                      US$             US$ 
 At 1 January                  10 255 000       6 820 000 
                          ---------------  -------------- 
 Acquisitions                     945 847       3 052 317 
                          ---------------  -------------- 
 Transfer to level 2          (1 354 000)               - 
                          ---------------  -------------- 
 Disposals                    (4 145 741)               - 
                          ---------------  -------------- 
 Fair value adjustments                 -         382 683 
                          ---------------  -------------- 
                           --------------   ------------- 
                          ---------------  -------------- 
 Balance at 31 December         5 701 106      10 255 000 
                          ---------------  -------------- 
                                 ========        ======== 
                          ---------------  -------------- 
 

The values were arrived at by applying yield rates of 5% on rental values of between US$4 - US$7 per square metre. Some of the properties are leased out under operating lease to various tenants.

Valuation technique and significant unobservable inputs

The following table shows the valuation technique used in measuring the fair value of investment properties, as well as the significant unobservable inputs used.

 
 Valuation      Significant unobservable                                     Inter-relationship between 
 technique       inputs                                                       key unobservable inputs 
                                                                              and fair value measurement 
  The                                                                        The estimated fair value 
  investment     *    Weighted average expected market rental growth (5%);   would increase /(decrease) 
  method                                                                     if: 
  Discounted                                                                  *    expected market rental growth were higher/ (lower); 
  Cash Flows     *    Void period (average 3 months after the end of each 
  was used to         lease); 
  value                                                                       *    void periods were shorter/(longer); 
  all income 
  producing      *    Occupancy rate (55%); and 
  properties.                                                                 *    the occupancy rates were higher /(lower); and 
 
                 *    Average market yield of 10%. 
                                                                              *    the risk adjusted discount rates were lower/ 
                                                                                   (higher). 
 
  The direct 
  comparison 
  method was 
  applied 
  on all 
  residential 
  properties. 
               -----------------------------------------------------------  ---------------------------------------------------------- 
 

g. NON-CURRENT ASSETS HELD FOR SALE

 
                                       30 June 2018   31 December 2017 
                                                US$                US$ 
                                   ----------------  ----------------- 
 Carrying amount as at 1 January             36 000          2 261 300 
                                   ----------------  ----------------- 
 Disposals                                        -        (2 225 300) 
                                   ----------------  ----------------- 
                                    ---------------     -------------- 
                                   ----------------  ----------------- 
                                             36 000             36 000 
                                   ----------------  ----------------- 
                                          =========           ======== 
                                   ----------------  ----------------- 
 

h. CORPORATE GOVERNANCE AND RISK MANAGEMENT

   1.      RESPONSIBILITY 

These condensed financial statements are the responsibility of the directors. This responsibility includes the setting up of internal control and risk management processes, which are monitored independently. The information contained in these condensed financial statements has been prepared on the going concern basis and is in accordance with the provisions of the Companies Act (Chapter 24:03), the Banking Act (Chapter 24:20) and International Financial Reporting Standards.

   2.      CORPORATE GOVERNANCE 

The Bank adheres to principles of corporate governance derived from the King III Report, the United Kingdom Combined Code and RBZ corporate governance guidelines. The Bank is cognisant of its duty to conduct business with due care and in good faith in order to safeguard all stakeholders' interests.

   3.      BOARD OF DIRECTORS 

Board appointments are made to ensure a variety of skills and expertise on the Board. Non-executive directors are of such calibre as to provide independence to the Board. The Chairman of the Board is an independent non-executive director. The Board is supported by mandatory committees in executing its responsibilities. The Board meets at least quarterly to assess risk, review performance and provide guidance to management on both operational and policy issues.

The Board conducts an annual peer based evaluation on the effectiveness of its activities. The process involves the members evaluating each other collectively as a board and individually as members. The evaluation, as prescribed by the RBZ, takes into account the structure of the board, effectiveness of committees, strategic leadership, corporate social responsibility, attendance and participation of members and weaknesses noted. Remedial plans are invoked to address identified weaknesses with a view to continually improve the performance and effectiveness of the Board and its members.

   3.1   Directors' attendance at NMB Bank Limited Board meetings 
 
                 Board of      Audit          Risk            Asset and       Loans         Human            Credit 
                  Directors    Committee      Management      Liability       Review        Resources,       Committee 
                                                              Management      Committee     Remuneration 
                                                              Committee                     and 
                                                              (ALCO) &                      Nominations 
                                                              Finance                       Committee 
                                                              Committee 
 Mr. B. A. 
  Chikwanha      2      2                     2     2                                       2     2          2    2 
                -----  -----  ---  --------  ----  --------  ---  ---------  ----  ------  ----  ---------  ---  -------- 
 Mr. B. P. 
  Washaya        2      2                                     2    2                        2     2          2    2 
                -----  -----  ---  --------  ----  --------  ---  ---------  ----  ------  ----  ---------  ---  -------- 
 Mr. J. de la 
  Fargue         2      2                     2     2         2    2                        2     2          2    2 
                -----  -----  ---  --------  ----  --------  ---  ---------  ----  ------  ----  ---------  ---  -------- 
 Mr. C. 
  Chikaura       2      2      2    2         2     2         2    2                        2     2          2    2 
                -----  -----  ---  --------  ----  --------  ---  ---------  ----  ------  ----  ---------  ---  -------- 
 Mr. J. 
  Tichelaar      2      2                                     2    2          2     2       2     2 
                -----  -----  ---  --------  ----  --------  ---  ---------  ----  ------  ----  ---------  ---  -------- 
 Mr. B. 
  Ndachena       2      2                                     2    2 
                -----  -----  ---  --------  ----  --------  ---  ---------  ----  ------  ----  ---------  ---  -------- 
 Ms. S. 
  Chitehwe       2      2      2    2                         2    2          2     2 
                -----  -----  ---  --------  ----  --------  ---  ---------  ----  ------  ----  ---------  ---  -------- 
 Mr. E. 
  Sandersen      2      2                     2     2         2    2          2     2 
                -----  -----  ---  --------  ----  --------  ---  ---------  ----  ------  ----  ---------  ---  -------- 
 Ms. J. 
  Maguranyanga   2      2      2    2                                         2     2       2     2 
                -----  -----  ---  --------  ----  --------  ---  ---------  ----  ------  ----  ---------  ---  -------- 
 
 
 Meetings planned 
  Meetings attended 
 
   4.      RISK MANAGEMENT 

The Board of Directors has overall responsibility for the establishment and oversight of the Bank's risk management framework. The Board has established the Board Asset and Liability Management Committee (ALCO) and Board Risk and Compliance Committee, which are responsible for defining the Group's risk universe, developing policies and monitoring implementation.

Risk management is linked logically from the level of individual transactions to the Bank level. Risk management activities broadly take place simultaneously at the following different hierarchy levels:

a) Strategic Level: This involves risk management functions performed by senior management and the board of directors. It includes the definition of risk, ascertaining the Bank's risk appetite, formulating strategy and policy for managing risk and establishes adequate systems and controls to ensure overall risk remains within acceptable levels and is adequately compensated.

b) Macro Level: It encompasses risk management within a business area or across business lines. These risk management functions are performed by middle management.

c) Micro Level: This involves "On-the-line" risk management where risks are actually created. These are the risk management activities performed by individuals who assume risk on behalf of the organization such as Treasury Front Office, Corporate Banking, Retail banking etc. The risk management in these areas is confined to operational procedures set by management.

Risk management is premised on four (4) mutually reinforcing pillars, namely:

   a)   adequate board and senior management oversight; 
   b)   adequate strategy, policies, procedures and limits; 
   c)   adequate risk identification, measurement, monitoring and information systems; and 
   d)   comprehensive internal controls and independent reviews. 
   4.1     Credit risk 

Credit risk is the risk that a financial contract will not be honoured according to the original set of terms. The risk arises when borrowers or counterparties to a financial instrument fail to meet their contractual obligations. The Bank's general credit strategies centre on sound credit granting process, diligent credit monitoring and strong loan collection and recovery. There is a separation between loan collection and recovery. There is a separation between loan granting and credit monitoring to ensure independence and effective management of the loan portfolio. The Board has put in place sanctioning committees with specific credit approval limits. The Credit Management department does the initial review of all applications before recommending them to the Executive Credit Committee and finally the Board Credit Committee depending on the loan amount. The Bank has in place a Board Loans Review Committee responsible for reviewing the quality of the loan book and adequacy or loan loss provisions.

The Bank has automated credit processes from loan origination, appraisal, monitoring and collections. The system has a robust loan monitoring and reporting module which is critical in managing credit risk. In view of the Bank's move into the mass market, retail credit has become a key area of focus. The Bank has put in place robust personal loan monitoring systems and structures to mitigate retail loan delinquencies.

   4.1         Credit Management 
   --           Responsible for evaluating & approving credit proposals from the business units. 

-- Together with business units, has primary responsibility on the quality of the loan book.

   --           Reviewing credit policy for approval by the Board Credit Committee. 

-- Reviewing business unit level credit portfolios to ascertain changes in the credit quality of individual customers or other counterparties as well as the overall portfolio and detect unusual developments.

-- Approve initial customer internal credit grades or recommend to the Credit Committees for approval.

   --           Setting the credit risk appetite parameters. 
   --           Ensure the Bank adheres to limits, mandates and its credit policy. 

-- Ensure adherence to facility covenants and conditions of sanction e.g. annual audits, gearing levels, management accounts.

-- Manage trends in asset and portfolio composition, quality and growth and non-performing loans.

   --           Manage concentration risk both in terms of single borrowers or Bank as well as sector concentrations and the review of such limits. 

Credit Monitoring and Financial Modelling

   --           Independent Credit Risk Management. 
   --           Independent on-going monitoring of individual credit and portfolios. 

-- Triggers remedial actions to protect the interests of the Bank, if appropriate (e.g. in relation to deteriorated credits).

-- Monitors the on-going development and enhancement of credit risk management across the Bank.

   --           Reviews the Internal Credit Rating System. 
   --           On-going championing of the Basel II methodologies across the Bank. 

-- Ensures consistency in the rating processes and performs independent review of credit grades to ensure they conform to the rating standards.

-- Confirm the appropriateness of the credit risk strategy and policy or recommends necessary revisions in response to changes/trends identified.

Credit Administration

   --           Prepares and keeps custody of all facility letters. 
   --           Security registration. 
   --           Safe custody of security documents. 

-- Ensures all conditions of sanction are fulfilled before allowing drawdown or limit marking.

-- Review of credit files for documentation compliance e.g. call reports, management accounts.

Recoveries

The recoveries unit is responsible for all collections and ensures that the Bank maximizes recoveries from Non-Performing Loans (NPLs).

   4.2       Market risk 

This is the exposure of the Bank's on and off balance sheet positions to adverse movement in market prices resulting in a loss in earnings and capital. The market prices will range from money market (interest rate risk), foreign exchange and equity markets in which the bank operates. The Bank has in place a Management Asset and Liability Committee (ALCO) which monitors market risk and recommends the appropriate levels to which the Bank should be exposed at any time. Net Interest Margin is the primary measure of interest rate risk, supported by periodic stress tests to assess the Bank's ability to withstand stressed market conditions. On foreign exchange risk, the bank monitors currency mismatches and makes adjustments depending on exchange rate movement forecast. The mismatches per currency are contained within 5% of the Bank's capital position.

ALCO meets on a monthly basis and operates within the prudential guidelines and policies established by the Board ALCO. The Board ALCO is responsible for setting exposure thresholds and limits, and meets on a quarterly basis.

   4.3       Liquidity risk 

Liquidity risk is the risk of financial loss arising from the inability of the Bank to fund asset increases or meet obligations as they fall due without incurring unacceptable costs or losses. The Bank identifies this risk through maturity profiling of assets and liabilities and assessment of expected cash flows and the availability of collateral which could be used if additional funding is required.

The daily liquidity position is monitored and regular liquidity stress testing is conducted under a variety of scenarios covering both normal and more severe market conditions. All liquidity policies and procedures are subject to review and approval by the Board ALCO.

The key measure used by the bank for managing liquidity risk is the ratio of net liquid assets to deposits to customers. The Bank also actively monitors its loans to deposit ratio against a set threshold in a bid to monitor and limit funding risk. The Bank monitors funding concentration risk by reviewing the ratio of top 20 depositors to the total funding. Funding mix is also monitored by monitoring the contribution of wholesale and demand deposits to the total funding for the bank. Liquidity risk is monitored through a daily liquidity meeting. This is augmented by a monthly management ALCO and a quarterly board ALCO.

The key measure used by the Bank for managing liquidity risk is the ratio of net liquid assets to deposits from customers. The Bank monitors its liquidity ratio in compliance with Banking Regulations to ensure that it is not less than 30% of the liabilities to the public. Liquid assets consist of cash and cash equivalents, short term bank deposits and unencumbered liquid investment securities available for immediate sale.

   4.4       Operational risk 

This risk is inherent in all business activities and is the risk of loss arising from inadequate or failed internal processes, people, systems or from external events. The Bank utilises monthly Key Risk Indicators to monitor operational risk in all units. Further to this, the Bank has an elaborate Operational Loss reporting system in which all incidents with a material impact on the well-being of the Bank are reported to risk management. The risk department conducts periodic risk assessments on all the units within the Bank aimed at identifying the top risks and ways to minimise their impact. There is a Board Risk and Compliance Committee whose function is to ensure that this risk is minimized. The Committee, with the assistance of the internal audit function and the Risk Management department assesses the adequacy of the internal controls and makes the necessary recommendations to the Board.

   4.5       Legal and compliance risk 

Legal risk is risk from uncertainty due to legal actions or uncertainty in the applicability or interpretation of contracts, laws or regulations. Legal risk may entail such issues as contract formation, capacity and contract frustration. Compliance risk is the risk arising from non - compliance with laws and regulations. To manage this risk, permanent relationships are maintained with firms of legal practitioners and access to legal advice is readily available to all departments. The Bank has an independent compliance function which is responsible for identifying and monitoring all compliance issues and ensures the Bank complies with all regulatory and statutory requirements.

   4.6        Reputational risk 

Reputation risk is the risk of loss of business as a result of negative publicity or negative perceptions by the market with regards to the way the Bank conducts its business. To manage this risk, the Bank strictly monitors customers' complaints, continuously train staff at all levels, conducts market surveys and periodic reviews of business practices through its Internal Audit department. The directors are satisfied with the risk management processes in the Bank as these have contributed to the minimisation of losses arising from risky exposures.

   4.7       Strategic risk 

This refers to current and prospective impact on a Bank's earnings and capital arising from adverse business decisions or implementing strategies that are not consistent with the internal and external environment. To manage this risk, the Bank always has a strategic plan that is adopted by the Board of Directors. Further, attainment of strategic objectives by the various departments is monitored periodically at management level.

   4.8       Risk Ratings 
   4.8.1    Reserve Bank of Zimbabwe Ratings 

The Reserve Bank of Zimbabwe conducted an onsite inspection on the Bank in the last quarter of 2016 and detailed below were the final ratings.

4.8.1.1 CAMELS* Ratings

 
                       Latest RBS**   Latest RBS      Previous 
   CAMELS Component       Ratings       Ratings      RAS Ratings 
                        24/11/2016     30/06/2013    31/01/2008 
 Capital Adequacy           2              2             4 
                      -------------  ------------  ------------- 
 Asset Quality              3              4             2 
                      -------------  ------------  ------------- 
 Management                 3              3             3 
                      -------------  ------------  ------------- 
 Earnings                   2              2             3 
                      -------------  ------------  ------------- 
 Liquidity                  3              2             3 
                      -------------  ------------  ------------- 
 Sensitivity to 
  Market Risk               2              2             3 
                      -------------  ------------  ------------- 
 Composite Rating           3              3             3 
                      -------------  ------------  ------------- 
 

*CAMELS is an acronym for Capital Adequacy, Asset quality, Management, Earnings, Liquidity and Sensitivity to Market Risk. CAMELS rating system uses a rating scale of 1-5, where '1' is Strong, '2' is Satisfactory, '3' is Fair, '4' is Weak and '5' is Critical.

**RBS stands for Risk-Based Supervision

4.8.1.2 Summary RAS ratings

 
                           Latest RAS***   Latest RAS    Previous RBS 
       RAS Component          Ratings        Ratings        Ratings 
                             24/11/2016     30/06/2013    31/01/2008 
 Overall Inherent              High         Moderate       Moderate 
  Risk 
                          --------------  ------------  ------------- 
 Overall Risk Management    Acceptable     Acceptable     Acceptable 
  Systems 
                          --------------  ------------  ------------- 
 Overall Composite           Moderate       Moderate       Moderate 
  Risk 
                          --------------  ------------  ------------- 
 Direction of Overall         Stable         Stable         Stable 
  Composite Risk 
                          --------------  ------------  ------------- 
 

*** RAS stands for Risk Assessment System

4.8.1.3 Summary risk matrix -24 November 2016 on - site examination

 
                      Level of    Adequacy of        Overall      Direction 
     Type of Risk      Inherent    Risk Management    Composite    of Overall 
                       Risk        Systems            Risk         Composite 
                                                                   Risk 
 Credit               High        Acceptable         High         Stable 
                     ----------  -----------------  -----------  ------------ 
 Liquidity            High        Acceptable         High         Stable 
                     ----------  -----------------  -----------  ------------ 
 Interest Rate        Moderate    Acceptable         Moderate     Stable 
                     ----------  -----------------  -----------  ------------ 
 Foreign Exchange     Low         Acceptable         Low          Stable 
                     ----------  -----------------  -----------  ------------ 
 Operational          Moderate    Acceptable         Moderate     Stable 
  Risk 
                     ----------  -----------------  -----------  ------------ 
 Legal & Compliance   Moderate    Acceptable         Moderate     Stable 
                     ----------  -----------------  -----------  ------------ 
 Reputation           Moderate    Acceptable         Moderate     Stable 
                     ----------  -----------------  -----------  ------------ 
 Strategic Risk       High        Acceptable         Moderate     Stable 
                     ----------  -----------------  -----------  ------------ 
 Overall              Moderate    Acceptable         Moderate     Stable 
                     ----------  -----------------  -----------  ------------ 
 

KEY

Level of Inherent Risk

Low - reflects a lower than average probability of an adverse impact on a banking institution's capital and earnings. Losses in a functional area with low inherent risk would have little negative impact on the banking institution's overall financial condition.

Moderate - could reasonably be expected to result in a loss which could be absorbed by a banking institution in the normal course of business.

High - reflects a higher than average probability of potential loss. High inherent risk could reasonably be expected to result in a significant and harmful loss to the banking institution.

Adequacy of Risk Management Systems

Weak - risk management systems are inadequate or inappropriate given the size, complexity and risk profile of the banking institution. Institution's risk management systems are lacking in important ways and therefore a cause of more than normal supervisory attention. The internal control systems will be lacking in important aspects particularly as indicated by continued control exceptions or by the failure to adhere to written policies and procedures.

Acceptable - management of risk is largely effective but lacking to some modest degree. While the institution might be having some minor risk management weaknesses, these have been recognized and are being addressed. Management information systems are generally adequate.

Strong - management effectively identifies and controls all types of risk posed by the relevant functional areas or per inherent risk. The board and senior management are active participants in managing risk and ensure appropriate policies and limits are put in place. The policies comprehensively define the bank's risk tolerance, responsibilities and accountabilities are effectively communicated.

Overall Composite Risk

Low - would be assigned to low inherent risk areas. Moderate risk areas may be assigned a low composite risk where internal controls and risk management systems are strong and effectively mitigate much of the risk.

Moderate - risk management systems appropriately mitigates inherent risk. For a given low risk area, significant weaknesses in the risk management systems may result in a moderate composite risk assessment. On the other hand, a strong risk management system may reduce the risk so that any potential financial loss from the activity would have only a moderate negative impact on the financial condition of the organization.

High - risk management systems do not significantly mitigate the high inherent risk. Thus, the activity could potentially result in a financial loss that would have a significant impact on the bank's overall condition.

Direction of Overall Composite Risk

Increasing - based on the current information, risk is expected to increase in the next 12 months.

Decreasing - based on current information, risk is expected to decrease in the next 12 months.

Stable - based on the current information, risk is expected to be stable in the next 12 months.

   4.8.2    External Credit Ratings 

The external credit ratings were given by Global Credit Rating (GCR), a credit rating agency accredited with the Reserve Bank of Zimbabwe.

Security class 2017 2016

Long term BB+ BB+

The current rating expires in August 2018.

   4.9       Regulatory Compliance 

There were no instances of regulatory non-compliance in the period under review. The Bank remains committed to complying with and adhering to all regulatory requirements.

   5.         CAPITAL MANAGEMENT 

The primary objective of the Bank's capital management is to ensure that the Bank complies with the RBZ requirements. In implementing the current capital requirements, the RBZ requires the Banking subsidiary to maintain a prescribed ratio of total capital to total risk weighted assets.

Regulatory capital consists of Tier 1 capital, which comprises share capital, share premium, retained earnings (including current year profit), statutory reserve and other equity reserves.

The other component of regulatory capital is Tier 2 capital, which includes subordinated term debt, revaluation reserves and portfolio provisions.

Tier 3 capital relates to an allocation of capital to market and operational risk.

Various limits are applied to elements of the capital base. The core capital (Tier 1) shall comprise not less than 50% of the capital base and the regulatory reserves and portfolio provisions are limited to 1.25% of total risk weighted assets.

The Bank's regulatory capital position at 30 June 2018 was as follows:

 
                                                              30 June       31 December 
                                                                 2018              2017 
                                                                  US$            US$ 
                                                      ---------------  ---------------- 
 Share capital                                                 16 506            16 506 
                                                      ---------------  ---------------- 
                                                           31 474 
 Share premium                                               502             31 474 502 
                                                      ---------------  ---------------- 
                                                               35 132 
 Retained earnings                                                312        30 842 252 
                                                      ---------------  ---------------- 
 Fair value gain on investment properties                   (706 195)       (1 197 871) 
                                                      ---------------  ---------------- 
                                                       --------------     ------------- 
                                                      ---------------  ---------------- 
                                                               65 917 
 Total                                                            125        61 135 389 
                                                      ---------------  ---------------- 
 Less: capital allocated for market and operational            (3 913 
  risk                                                           116)       (2 918 935) 
                                                      ---------------  ---------------- 
 Credit to insiders                                                 -                 - 
                                                      ---------------  ---------------- 
                                                       --------------    -------------- 
                                                      ---------------  ---------------- 
                                                               62 004 
 Tier 1 capital                                                   009        58 216 454 
                                                      ---------------  ---------------- 
 Tier capital (subject to limit as per Banking 
  regulations)                                              5 180 970         5 183 773 
                                                      ---------------  ---------------- 
 Revaluation Reserve - Investment property                    706 195         1 197 871 
                                                      ---------------  ---------------- 
 Revaluation Reserve - Property and equipment                  90 310            90 310 
                                                      ---------------  ---------------- 
 Subordinated debt                                            382 397           477 782 
                                                      ---------------  ---------------- 
 Regulatory reserve (limited to 1.25% of risk 
  weighed assets)                                                   -         2 297 492 
                                                      ---------------  ---------------- 
 Stage 1& 2 ECL provisions (limited to 1.25%                4 002 068                 - 
  of risk weighed assets) 
                                                      ---------------  ---------------- 
 General provisions (limited to 1.25% of risk 
  weighed assets)                                                   -         1 120 318 
                                                      ---------------  ---------------- 
                                                       --------------   --------------- 
                                                      ---------------  ---------------- 
                                                               67 184 
 Total Tier 1 & 2 capital                                         979        63 400 227 
                                                      ---------------  ---------------- 
 Tier 3 capital (sum of market and operational 
  risk capital)                                             3 913 116         2 918 935 
                                                      ---------------  ---------------- 
                                                       --------------     ------------- 
                                                      ---------------  ---------------- 
                                                               71 098 
 Total capital base                                               095        66 319 162 
                                                      ---------------  ---------------- 
                                                             ========         ========= 
                                                      ---------------  ---------------- 
                                                       320 165                  273 424 
 Total risk weighted assets                             461                         840 
                                                      ---------------  ---------------- 
                                                             ========         ========= 
                                                      ---------------  ---------------- 
 Tier 1 ratio                                                  19.37%            21.29% 
                                                      ---------------  ---------------- 
 Tier 2 ratio                                                   1.62%             1.90% 
                                                      ---------------  ---------------- 
 Tier 3 ratio                                                   1.22%             1.07% 
                                                      ---------------  ---------------- 
 Total capital adequacy ratio                                  22.21%            24.26% 
                                                      ---------------  ---------------- 
 RBZ minimum required capital adequacy ratio                   12.00%            12.00% 
                                                      ---------------  ---------------- 
 
   7.         SEGMENT INFORMATION 

For management purposes, the Bank is organised into five operating segments based on products and services as follows:

 
            Retail Banking          Individual customer's deposits and consumer 
                                     overdrafts, credit card facilities and 
                                     funds transfer facilities. 
 
            Corporate Banking       Loans and other credit facilities and 
                                     deposit and current accounts for corporate 
                                     and institutional customers. 
 
            Treasury                Money market investment, securities trading, 
                                     accepting and discounting of instruments 
                                     and foreign currency trading. 
 
            International Banking   Handles the Bank's foreign currency denominated 
                                     banking business and manages relationships 
                                     with correspondent. 
 
            Digital Banking         Handles the Bank's Digital Banking products 
                                     including Card and POS services. 
 

Management monitors the operating results of its business units separately for the purpose of making decisions about resource allocation and performance assessment. Segment performance is evaluated based on operating profit or loss which in certain respects is measured differently from operating profit or loss in the financial statements. Income taxes are managed on a bank wide basis and are not allocated to operating segments.

Interest income is reported net as management primarily relies on net interest revenue as a performance measure, not the gross income and expense.

Transfer prices between operating segments are on arm's length basis in a manner similar to transactions with third parties.

No revenue from transactions with a single external customer or counterparty amounted to 10% or more of the Bank's total revenue in 2018 and 2017.

The following table presents income, profit and certain asset and liability information regarding the Bank's operating segments and service units:

For the six months ended 30 June 2018

 
                          Retail      Corporate                  International         Digital 
                         Banking        Banking       Treasury         Banking         Banking          Unallocated             Total 
                 ---------------  -------------  -------------  --------------  --------------  -------------------  ---------------- 
                             US$            US$            US$             US$             US$                  US$               US$ 
                 ---------------  -------------  -------------  --------------  --------------  -------------------  ---------------- 
 Income 
                 ---------------  -------------  -------------  --------------  --------------  -------------------  ---------------- 
                          11 042 
 Third party                 858      8 951 893      5 905 068         232 241       6 313 881            1 503 324        33 949 265 
                 ---------------  -------------  -------------  --------------  --------------  -------------------  ---------------- 
 Interest and 
  similar                                               (1 953 
  expense              (728 955)    (1 252 450)           263)               -               -                    -       (3 934 668) 
                 ---------------  -------------  -------------  --------------  --------------  -------------------  ---------------- 
                   -------------   ------------   ------------    ------------   -------------        -------------   --------------- 
                 ---------------  -------------  -------------  --------------  --------------  -------------------  ---------------- 
 Net operating            10 313 
  income                     903      7 699 443      3 951 805         232 241       6 313 881            1 503 324        30 014 597 
                 ---------------  -------------  -------------  --------------  --------------  -------------------  ---------------- 
                   -------------   ------------   ------------    ------------   -------------        -------------    -------------- 
                 ---------------  -------------  -------------  --------------  --------------  -------------------  ---------------- 
 Other material 
 non-cash items 
                 ---------------  -------------  -------------  --------------  --------------  -------------------  ---------------- 
 Impairment 
  losses on 
  financial 
  assets                 393 553        850 930        176 595               -               -                    -         1 421 078 
                 ---------------  -------------  -------------  --------------  --------------  -------------------  ---------------- 
 Depreciation 
  of property 
  and equipment          204 418         14 666          1 756           2 620         179 170              226 597           629 227 
                 ---------------  -------------  -------------  --------------  --------------  -------------------  ---------------- 
 Amortisation 
  of intangible 
  assets                       -              -              -               -               -              471 721           471 720 
                 ---------------  -------------  -------------  --------------  --------------  -------------------  ---------------- 
 Segment profit 
  (loss)               2 670 536      2 665 999      2 107 650         134 148       2 698 728            1 503 324        11 780 385 
                 ---------------  -------------  -------------  --------------  --------------  -------------------  ---------------- 
 Income tax 
  expense                      -              -              -               -               -          (2 672 422)       (2 672 422) 
                 ---------------  -------------  -------------  --------------  --------------  -------------------  ---------------- 
                  --------------   ------------   ------------    ------------    ------------       --------------      ------------ 
                 ---------------  -------------  -------------  --------------  --------------  -------------------  ---------------- 
 Profit/(loss) 
  for the year         2 670 536      3 289 764      2 107 650       (489 617)       2 698 728          (1 169 098)         9 107 963 
                 ---------------  -------------  -------------  --------------  --------------  -------------------  ---------------- 
                        ========        =======        =======         =======         =======             ========           ======= 
                 ---------------  -------------  -------------  --------------  --------------  -------------------  ---------------- 
 

The following table presents income, profit and certain asset and liability information regarding the Bank's operating segments and service units:

For the six months ended 30 June 2018

 
                     Retail     Corporate                 International                Digital 
                    Banking       Banking      Treasury         Banking                Banking   Unallocated       Total 
               ------------  ------------  ------------  --------------  ---------------------  ------------  ---------- 
                        US$           US$           US$             US$                    US$           US$         US$ 
               ------------  ------------  ------------  --------------  ---------------------  ------------  ---------- 
 Assets and 
 Liabilities 
               ------------  ------------  ------------  --------------  ---------------------  ------------  ---------- 
 Capital 
  expenditure       162 917        98 427             -               -                302 422     2 857 371   3 421 137 
               ------------  ------------  ------------  --------------  ---------------------  ------------  ---------- 
                                                                                                                 442 146 
 Total assets    78 869 755   120 258 765   141 925 000       2 015 747              2 184 872    96 892 511         650 
               ------------  ------------  ------------  --------------  ---------------------  ------------  ---------- 
 Total                                                                                                           375 433 
  liabilities   119 707 909   137 685 538    95 375 380      14 003 048                      -     8 661 145         020 
               ------------  ------------  ------------  --------------  ---------------------  ------------  ---------- 
 

The following table presents income, profit and certain asset and liability information regarding the Bank's operating segments and service units:

For the six months ended 30 June 2017

 
                             Retail      Corporate                  International 
                            Banking        Banking       Treasury         Banking       Unallocated              Total 
                    ---------------  -------------  -------------  --------------  ----------------  ----------------- 
                                US$            US$            US$             US$               US$                US$ 
                    ---------------  -------------  -------------  --------------  ----------------  ----------------- 
 Income 
                    ---------------  -------------  -------------  --------------  ----------------  ----------------- 
 Third party             13 649 826      6 423 079      3 323 829         278 173           213 389         23 888 296 
                    ---------------  -------------  -------------  --------------  ----------------  ----------------- 
 Interest and 
  similar expense         (994 627)    (1 380 011)    (2 188 842)               -                 -        (4 563 480) 
                    ---------------  -------------  -------------  --------------  ----------------  ----------------- 
                       ------------   ------------   ------------    ------------     -------------   ---------------- 
                    ---------------  -------------  -------------  --------------  ----------------  ----------------- 
 Net operating 
  income                 12 655 199      5 043 068      1 134 987         278 173           213 389         19 324 816 
                    ---------------  -------------  -------------  --------------  ----------------  ----------------- 
                       ------------   ------------   ------------    ------------     -------------     -------------- 
                    ---------------  -------------  -------------  --------------  ----------------  ----------------- 
 Other material 
 non-cash items 
                    ---------------  -------------  -------------  --------------  ----------------  ----------------- 
 Impairment losses 
  on financial 
  investments               386 633        491 671              -               -                 -            878 304 
                    ---------------  -------------  -------------  --------------  ----------------  ----------------- 
 Depreciation of 
  property 
  and equipment             484 699          8 140          7 074           3 029            57 187            560 129 
                    ---------------  -------------  -------------  --------------  ----------------  ----------------- 
 Amortisation of 
  intangible 
  assets                          -              -              -               -           352 162            352 162 
                    ---------------  -------------  -------------  --------------  ----------------  ----------------- 
                      -------------   ------------   ------------    ------------     -------------      ------------- 
                    ---------------  -------------  -------------  --------------  ----------------  ----------------- 
 Segment profit/ 
  (loss)                  2 064 734      1 687 824      1 142 198       (288 946)           213 390          4 819 200 
                    ---------------  -------------  -------------  --------------  ----------------  ----------------- 
 Income tax 
  expense                         -              -              -               -       (1 280 332)        (1 280 332) 
                    ---------------  -------------  -------------  --------------  ----------------  ----------------- 
                     --------------   ------------   ------------   -------------      ------------       ------------ 
                    ---------------  -------------  -------------  --------------  ----------------  ----------------- 
 Profit for the 
  year                    2 064 734      1 687 824      1 142 198       (288 946)       (1 066 942)          3 538 868 
                    ---------------  -------------  -------------  --------------  ----------------  ----------------- 
                            =======        =======        =======         =======           =======            ======= 
                    ---------------  -------------  -------------  --------------  ----------------  ----------------- 
 

The following table presents income, profit and certain asset and liability information regarding the Bank's operating segments and service units:

 
                                Retail     Corporate                 International 
                               Banking       Banking      Treasury         Banking   Unallocated       Total 
                          ------------  ------------  ------------  --------------  ------------  ---------- 
 As at 31 December                 US$           US$           US$             US$           US$         US$ 
  2017 
                          ------------  ------------  ------------  --------------  ------------  ---------- 
 Assets and Liabilities 
                          ------------  ------------  ------------  --------------  ------------  ---------- 
 Capital expenditure         1 386 270         2 388         1 958           2 873     2 211 157   3 604 646 
                          ------------  ------------  ------------  --------------  ------------  ---------- 
                                                                                                     423 114 
 Total assets              108 656 867   152 311 200   118 870 271       3 612 619    39 663 481         438 
                          ------------  ------------  ------------  --------------  ------------  ---------- 
                                                                                                     358 393 
 Total liabilities         109 755 085   128 928 542    96 952 318      15 052 401     7 705 030         376 
                          ------------  ------------  ------------  --------------  ------------  ---------- 
 
       8.     GEOGRAPHICAL INFORMATION 

The Bank operates in one geographical market, Zimbabwe.

Registered Offices

4(th) Floor NMB Centre

Unity Court George Silundika Avenue/

   Cnr 1(st) Street/Kwame Nkrumah Avenue                                Leopold Takawira Street 

Harare Bulawayo

   Zimbabwe                                                                              Zimbabwe 
   Telephone         +263 (024) 2 759651                                     +263 (029) 22 70169 
   Facsimile          +263 (024) 2 759648                                     +263 (029) 22 68535 
   Website:           http://www.nmbz.co.zw 
   Email:               enquiries@nmbz.co.zw 

Transfer Secretaries

   In Zimbabwe                                                                          In UK 

First Transfer Secretaries Computershare Services PLC

   1 Armagh Avenue                                                                  The Pavilions 
   (Off Enterprise Road)                                                            Bridgewater Road 
   Eastlea                                                                                    Bristol 
   P O Box 11                                                                             BS 999 ZZ 

Harare United Kingdom

Zimbabwe

This information is provided by RNS, the news service of the London Stock Exchange. RNS is approved by the Financial Conduct Authority to act as a Primary Information Provider in the United Kingdom. Terms and conditions relating to the use and distribution of this information may apply. For further information, please contact rns@lseg.com or visit www.rns.com.

END

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