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NMBZ Holdings Ld Annual Financial Report

30/04/2020 7:00am

UK Regulatory (RNS & others)


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TIDMNMB

RNS Number : 3975L

NMBZ Holdings Ld

30 April 2020

NMBZ HOLDINGS LIMITED

Holding company of

NMB BANK LIMITED (Registered Commercial Bank)

CONDENSED AUDITED CONSOLIDATED RESULTS

FOR THE YEARED 31 DECEMBER 2019

FINANCIAL SUMMARY

 
                                          Inflation adjusted            Historical Cost 
                                       31 December   31 December   31 December    31 December 
                                      ------------  ------------  ------------  ------------- 
                                              2019          2018          2019           2018 
                                      ------------  ------------  ------------  ------------- 
                                                        Restated 
                                      ------------  ------------  ------------  ------------- 
                                           730 833       611 321       464 285 
 Total income (ZWL)                            973           454           244     74 740 671 
                                      ------------  ------------  ------------  ------------- 
 Operating profit before impairment 
  charge and loss on net monetary          438 598       249 655       341 453 
  position (ZWL)                               399           920           654     31 155 227 
                                      ------------  ------------  ------------  ------------- 
 Total comprehensive income                256 774                     473 463 
  (ZWL)                                        708    94 784 934           396     21 267 632 
                                      ------------  ------------  ------------  ------------- 
 Basic earnings per share (ZWL 
  cents)                                     21.05         24.24         71.56           5.43 
                                      ------------  ------------  ------------  ------------- 
                                         1 191 079     2 701 740     1 191 079        434 957 
 Total deposits (ZWL)                          845           776           845            949 
                                      ------------  ------------  ------------  ------------- 
 Total gross loans and advances            533 110     1 629 493       533 110        262 335 
  (ZWL)                                        289           700           289            026 
                                      ------------  ------------  ------------  ------------- 
 
 Total shareholders' funds and             707 853       514 858       579 169 
  shareholders' liabilities (ZWL)              329           707           046     79 962 313 
                                      ------------  ------------  ------------  ------------- 
 

Enquiries:

NMBZ HOLDINGS LIMITED

   Benefit P Washaya, Chief Executive Officer, NMBZ Holdings Limited          benefitw@nmbz.co.zw 
   Gerald Gore, Deputy Chief Executive Officer, NMBZ Holdings Limited        geraldg@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: +263-242-759 651/9

INTRODUCTION

The operating environment continues to be a challenging one; the Group however, continued in the pursuit of its short and medium term goals as evidenced by the accompanying results. The financial results continue to be largely driven by the Bank's continued diversification into the broader market segments, enhanced use of the bank's digital offerings, stricter credit underwriting standards, containment of non-performing loans and fair value gains on investment properties and property and equipment. The Group's financial performance was quite remarkable in spite of the multiplicity of challenges that characterized the operating environment.

The key inflation adjusted financial highlights of the Group as at 31 December 2019 are depicted below:

Shareholders' funds and shareholders' liabilities ZWL707.9 million (2018 - ZWL514.9 million)

Total income ZWL730.8 million (2018 - ZWL611.3 million)

Total comprehensive income ZWL265.8 million (2018 - ZWL94.8 million)

Operating income before impairments and

monetary adjustments ZWL438.6 million (2018 - ZWL249.7 million)

GROUP RESULTS

Hyperinflationary reporting

Following the liberalisation of the exchange rate in February of 2019, there has been a significant deterioration in the exchange rate of the local currency unit which in turn resulted in the economy plunging into hyper-inflation. In light of this background, the Directors assessed the impact of International Accounting Standard (IAS) 29 "Financial Reporting in Hyperinflationary Economies" and noted that the conditions required to apply IAS 29 had materialized in the Group's operating environment during the period under review. Furthermore, the Public Accountants and Auditors Board (PAAB) issued a pronouncement on 11 October 2019 indicating that the economy had become hyper-inflationary. The Directors have thus prepared the accompanying financial statements using the hyperinflationary accounting basis to achieve fair presentation at the reporting date of 31 December 2019. The results commentary below will be primarily on the Group's hyper-inflationary adjusted financial statements at the reporting date.

Financial performance

The profit before taxation was ZWL154 110 578 (2018 - ZWL145 890 961) during the period under review and this gave rise to total comprehensive income of ZWL256 774 708 (2018 - ZWL94 784 934) after total other comprehensive income of ZWL172 683 678. The Group achieved a basic earnings per share of 21.05 cents (2018 - 24.24 cents).

Operating expenses amounted to ZWL240 539 828 and these were down 17% from a prior year amount of ZWL289 533 595. The decrease in operating expenditure was due to cost containment measures as well as improved efficiencies arising out of digital innovations adopted by the Group.

Impairment losses on financial assets measured at amortised cost amounted to ZWL11 048 567 for the current period from a prior year amount of ZWL24 920 236 and the decrease was mainly due to a strict credit sanctioning regime which saw the underwriting of high creditworthy counterparties by the Banking subsidiary. The bank has continued with its drive to reduce non-performing loans (NPLs) and the ratio stood at 1.37% as at 31 December 2019. This was lower than the 31 December 2018 ratio of 7.43% and below the Bank's target of 5% by 31 December 2019. The decrease in the NPL ratio was largely due to aggressive collections and stricter credit underwriting standards.

Financial position

The Group's total assets decreased by 37% from ZWL3 294 291 270 as at 31 December 2018 to ZWL2 089 311 325 as at 31 December 2019 mainly due to an 85% decrease in investment securities, a decrease of 30% in cash and cash equivalents and a 46% decrease in loans, advances and other assets. These reductions were partly offset by a 77% increase in investment properties and a 207% increase in property and equipment.

Whilst the banking subsidiary continued with its intermediation role and support for the productive sectors as reflected, the reduction by 67% in gross loans and advances from ZWL1 629 493 700 as at 31 December 2018 to ZWL533 110 289 as at 31 December 2019 is reflective of the reduction in the value of monetary assets as a result of the hyperinflationary environment.

Investment securities (Treasury Bills and Bonds) decreased from ZWL728 294 724 as at 31 December 2018 to ZWL107 166 155 as at 31 December 2019 mainly due to some maturities of government stock as well as the effects of loss of value for monetary assets due to hyperinflationary pressures. The bank has set maximum limits for investment securities in order to ensure that most of the funds are channelled towards the productive sectors of the economy.

Total deposits decreased by 56% from ZWL2 701 740 776 restated as at 31 December 2018 to ZWL1 191 079 845 as at 31 December 2019 as a result of the aforementioned effects of the hyperinflationary operating environment.

The Bank's liquidity ratio closed the period at 60.72% (2018 - 41.62%) and this was above the statutory requirement of a minimum of 30%.

Capital

The banking subsidiary's capital adequacy ratio stood at 44.52% (Historical - 39.49%) as at 31 December 2019 (31 December 2018 - Historical - 23.25%). The ratio was above the statutory minimum of 12%. Our capitalisation level is adequate to cover all risks and supports the underwriting of new business.

The Group's shareholders' funds and shareholders' liabilities have increased by 37% from ZWL514 858 707 restated as at 31 December 2018 to ZWL707 853 329 as at 31 December 2019 largely as a result of the current year's total comprehensive income.

The Bank's regulatory capital as at 31 December 2019 was ZWL360 889 480 and is above the minimum required regulatory capital of ZWL25 million. The bank remains confident that its plan to meet the recently announced minimum capital of the ZWL equivalent of USD30 million for a Tier 1 bank by 31 December 2020 is achievable.

FUNCTIONAL CURRENCY

Further to my announcement in the Group's financial statements for the year ended 31 December 2018, we continued to closely monitor the developments in the economic and monetary landscape. On 22 February 2019, the Reserve Bank of Zimbabwe (RBZ) issued an Exchange Control Directive, RU 28 of 2019 which established an Interbank foreign exchange market to formalize the buying and selling of foreign currency through the Banks and Bureaux de Change. To operationalize this, the RBZ denominated the existing RTGS balances as RTGS dollars and initial trades between the RTGS dollar and the USD were pegged at USD/RTGS$1:2.5. On the same date, Statutory Instrument 33 (SI 33) of 2019 was also issued and it specified that all assets and liabilities that were in USD immediately before 22 February 2019 were deemed to have been valued in RTGS$ at a rate of USD/RTGS$1:1.

On 24 June 2019, through Statutory Instrument 142 (SI 142) of 2019, the Government of Zimbabwe discontinued the multicurrency regime which had been in place since February 2009 and introduced the Zimbabwe Dollar (ZWL), which was designated as the country's sole legal tender to be used for all local transactions and other purposes.

The Directors, having assessed all these developments, accounted for the change in the Group's functional currency from USD to RTGS dollars on 22 February 2019, which subsequently changed to Zimbabwe Dollars (ZWL) following the issuance of SI 142 of 2019 on 24 June 2019.

LEGACY DEBTS

The banking subsidiary owed USD13 840 412 to various providers of lines of credit at 31 December 2019. The Bank registered these foreign debts with the Reserve Bank of Zimbabwe (RBZ) as required by the regulatory directives. During the period under review, the Bank transferred to the RBZ the ZWL equivalent of the foreign debts at a rate of USD/ZWL1:1. The RBZ has indicated that they will be issuing a USD denominated instrument for these debts and consequently these debts and the RBZ deposits have been accounted for at the closing exchange rate of USD/ZWL 1:16.77 at 31 December 2019. This effectively values the original credit lines at a rate of 1:1 on a netted off basis. Subsequent to year end, the RBZ approved the line of credit balances amounting to USD13 840 412.

DIVID

The Board has resolved not to declare a dividend as the Group is focusing on achieving the recently announced minimum regulatory capital requirement of the ZWL equivalent of USD30 million for a Tier 1 bank by 31 December 2020 for its banking subsidiary.

DIRECTORATE

Mr Erik Sanderson (non-executive director) resigned from both NMBZ Holdings Limited and NMB Bank Limited boards with effect from 24 January 2019. I wish to thank him for his invaluable contributions to the Group during his tenure as a Director and wish him well in his future endeavours. Mr Erik Sanderson was replaced by Ms Christine Glover, who was appointed to the NMBZ Holdings Limited and NMB Bank Limited boards on 26 June 2019 and she brings in a wealth of experience and diversity to the Group attained over an illustrious career spanning over 30 years in the South African financial services sector. I would like to welcome Ms Glover to the boards and wish her a fruitful tenure.

Mr Givemore Taputaira was appointed as an Independent Non-Executive director of NMBZ Holdings Limited and NMB Bank Limited subsequent to year end on 2 January 2020. Mr Taputaira has over 18 years' experience in ICT and business development in 7 different countries within Africa. I would like to welcome Mr Taputaira to the boards and wish him a successful tenure on the boards.

The other directors of both NMBZ Holdings Limited and NMB Bank Limited boards remained 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 and Deputy Board Chairman), 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).

SUSTAINABILITY REPORTING

The Board is charged with the responsibility of ensuring that management executes its mandate in a sustainable manner to ensure the Group attains its short and long-term growth objectives. The Board has been buttressing a culture of responsible business practices by paying more attention to sustainability issues. The Group is fully aware of the important role played by the financial sector in the economy as well as the impact of its initiatives and actions on the communities in which the Group operates. We take this responsibility quite seriously as part of our commitment to the environment and societies in which we operate.

The Group's banking subsidiary is compliant with all regulatory and statutory requirements and continues with its drive to forge partnerships and alliances with various stakeholders to ensure the attainment of Sustainable Development Goals (SDGs). To this end, the Bank has played a pivotal role in the financing of the education sector, health, property and construction sectors as well as supporting the SMEs, the youth, the disadvantaged, the vulnerable groups, the arts, sports and support environmental conservation initiatives.

Through advancing affordable loans, support was extended to both educational institutions and students in pursuit of supporting the education sector. The Bank also provided support in the construction of dams and roads across the nation. Furthermore, the Bank extended funding to local authorities in a bid to ensure the provision of potable water and sanitation to residents. In a bid to clear the national housing backlog, the Bank also continued to advance mortgage facilities for residential accommodation. In line with its initiatives to support business, the Bank advanced mortgage facilities to its Corporate clients and SMEs towards the acquisition of commercial properties.

To demonstrate the priority being given to sustainability issues, the Group has enhanced its disclosures to include a report on sustainability in line with best practices.

CORPORATE SOCIAL INVESTMENTS

During the period under review, the Group channeled its Corporate Social Investments towards education, environment conservation as well as the support of disadvantaged and vulnerable groups. The Group donated food stuffs, blankets and clothes to the Manicaland and Masvingo Provinces following the Cyclone Idai disaster which occurred in March 2019. Donations were also made to KidzCan for treatment of children living with cancer, Emerald Hill School for the Deaf fish farming project and Emerald Hill Children's home.

The Group also invested in the promotion of sports and extra curriculum activities in schools through donations in support of career fairs, Inter Schools Derby and quizzes. We also partnered with Friends of Hwange Trust and Friend of the Environment (FOTE) in raising awareness of the need for environment and wildlife conservation.

CORPORATE DEVELOPMENTS

The bank continued to pursue its strategy of diversifying into the broader market segments, particularly embracing the currently unbanked bottom of the pyramid. Our financial inclusion strategy was anchored on low cost accounts and mPOS deployment. The bank has also continued to play a pivotal role in mortgage financing and supporting corporates through working capital support and retooling through the leasing arm.

During the period under review, the bank launched the TapCard in collaboration with a technical partner. The product has been well received in the market as it has brought convenience to clients conducting low value transactions.

The bank opened the Victoria Falls service centre during the period under review for the convenience of the Bank's Victoria Falls customers and tourists.

The construction of our Head Office along Borrowdale Road was successfully completed and we anticipate to occupy the building before the end of the first half of 2020.

OUTLOOK AND STRATEGY

The operating environment continues to be challenging mainly due to the constantly weakening exchange rate, high month-on-month inflation, incessant power outages, fuel shortages, drought induced food shortages and general low investor confidence in the country. Value preservation will be the Group's key focus area in light of the likely negative impact of inflation and the deteriorating exchange rate.

The bank has embarked on a digitization trajectory marked by the introduction of paperless low-cost account opening. The bank will continue to focus on operational efficiencies and service excellence across all market segments.

APPRECIATION

I wish to express my heartfelt appreciation to all our clients, shareholders, regulatory authorities and all other valued stakeholders for their continued support in this difficult operating environment. To my fellow Board members, management and staff, I extend my sincere gratitude for their hard work, diligence, commitment and resilience which has underpinned the achievement of these commendable results.

MR. B. A. CHIKWANHA

CHAIRMAN

27 April 2020

DIRECTORS' REPORT EXTRACT

for the year ended 31 December 2019

   1.         RESPONSIBILITY 

The Directors of the Group are mandated by the Companies Act (Chapter 24:03) of Zimbabwe to maintain adequate accounting records and to prepare consolidated and separate financial statements that present a true and fair view of the state of affairs of the Group and Company at the end of each financial year. The information contained in these consolidated and separate financial statements has been prepared on a going concern basis and is in accordance with the provisions of the Companies Act (Chapter 24:03) of Zimbabwe, the Banking Act (Chapter 24:20) of Zimbabwe and International Financial Reporting Standards (IFRSs).

   2.         INTERNAL FINANCIAL CONTROLS 

The board is responsible for ensuring that effective internal control systems are implemented within the Group. The Group maintains internal controls and systems designed to provide reasonable assurance of the integrity and reliability of its records, safeguard the assets of the Group and prevent and detect fraud and errors. The Audit Committee in conjunction with the external and internal auditors of the Group reviews and assesses the internal control systems of the Group in key risk areas.

   3.         GOING CONCERN 

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

   4.          STATEMENT OF COMPLIANCE 

The condensed consolidated financial statements are prepared with the aim of complying fully with International Financial Reporting Standards (IFRSs) and have been prepared in the manner required by the Companies Act (Chapter 24:03) of Zimbabwe and the Banking Act (Chapter 24:20) of Zimbabwe. The financial statement show the impact of the first time adoption of IFRS 16 which was adopted by the Group effective 1 January 2019. The detailed impact of this adoption is disclosed in note 3.12 (Changes in accounting policy).

The Directors have been able to achieve full compliance with IFRSs in previous reporting periods up to 31 December 2017. However, the 31 December 2019 and the comparative period financial reporting could only achieve partial compliance to the IFRS reporting framework due to developments detailed below.

The IFRS Conceptual Framework states that to achieve fair presentation to the financial statements, companies should consider the underlying economic substance of the transaction over and above the legal form. International Accounting Standard (IAS 21) "The Effects of Changes in Foreign Exchange Rates" requires the Directors to determine the functional currency of the reporting entity in preparing the entity's financial statements. In arriving at this conclusion, the entity is required to apply certain parameters which the Directors duly applied in their judgement. Furthermore, IAS 21 also requires the reporting entity to make certain judgements in determining the appropriate exchange rates to apply for certain transactions conducted in currencies other than the functional currency of the reporting entity.

As explained in Note 2.4.6, "Determination of the functional currency", it is our opinion that following the Monetary Policy pronouncements of 1 October 2018 and 20 February 2019, as well as the issuance of Exchange Control Directive RU 28 of 2019 on 22 February 2019, the country's functional currency appeared to have changed from the United States Dollar in terms of the IAS 21 considerations. However, the Government of Zimbabwe issued Statutory Instrument (SI 33) of 2019 on 22 February 2019, which prescribes the rate of USD1:RTGS$1 in accounting for all transactions and events before the effective date of the statutory instrument.

Furthermore, it is our interpretation that the SI 33 of 2019 issued in terms of the Presidential Powers Temporary Measures Act [Chapter 10:20], ranks supreme to any contrary legislation including quasi-legislations, which therefore implies that in preparing the financial statements, we sought to comply with the provisions of SI 33 of 2019 ahead of the IAS 21 requirements; consequently, the Group could not fully apply the requirements of IAS 8 "Accounting Policies, Changes in Accounting Estimates and Errors".

This, in our opinion resulted in non-compliance with IAS 21 and IAS 8 and that non-compliance had a significant impact on the true and fair presentation of the Group's financial position and would therefore urge users of the financial statements to exercise due caution.

The consolidated and separate financial statements were approved by the Board of Directors on 27 April 2020.

.................................................. ...................................

               MR B. A. CHIKWANHA                                                      MR B. P. WASHAYA 

CHAIRMAN CHIEF EXECUTIVE OFFICER

               27 APRIL 2020                                                                      27 APRIL 2020 

AUDITOR'S STATEMENT

These abridged financial statements have been audited by Ernst & Young Chartered Accountants (Zimbabwe) and an adverse audit opinion issued thereon due to non-compliance with International Accounting Standard 21, "The Effects of Changes in Foreign Exchange Rates"and non-compliance with International Accounting Standard 8, "Accounting Polices, Changes in Accounting Estimates and Errors". There are no key audit matters communicated in the auditor's report. The Auditor's report is available for inspection at the Holding Company's registered office. The Audit Partner for this engagement was Mr David Marange.

CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME

for the year ended 31 December 2019

 
                                               Inflation adjusted                          Historical Cost* 
                                                31 Dec                 31 Dec               31 Dec              31 Dec 
                          -------  -------------------  ---------------------  -------------------  ------------------ 
                           Note                   2019                   2018                 2019                2018 
                          -------  -------------------  ---------------------  -------------------  ------------------ 
                                                   ZWL                    ZWL                  ZWL                 ZWL 
                          -------  -------------------  ---------------------  -------------------  ------------------ 
                                                                     Restated 
                          -------  -------------------  ---------------------  -------------------  ------------------ 
                                               180 212                323 330 
 Interest income           4                       444                    808           70 557 190          39 333 178 
                          -------  -------------------  ---------------------  -------------------  ------------------ 
                                               (51 695                (72 131              (16 894 
                                                  746)                   939)                 088)         (8 865 016) 
 Interest expense                     ----------------       ----------------     ----------------    ---------------- 
                          -------  -------------------  ---------------------  -------------------  ------------------ 
                                               128 516                251 198 
 Net interest income                               698                    869           53 663 102          30 468 162 
                          -------  -------------------  ---------------------  -------------------  ------------------ 
 Fee and commission                            183 203                233 280 
  income                   5.1                     638                    093           87 242 303          28 539 376 
                          -------  -------------------  ---------------------  -------------------  ------------------ 
 Net foreign exchange                          254 811 
  gains                                            445             15 660 953           99 863 112           1 899 670 
                          -------  -------------------  ---------------------  -------------------  ------------------ 
                                     -----------------      -----------------   ----------------     ---------------- 
                          -------  -------------------  ---------------------  -------------------  ------------------ 
                                               566 531                500 139              240 768 
 Revenue                                           781                    915                  517          60 907 208 
                          -------  -------------------  ---------------------  -------------------  ------------------ 
                                          112 606                      39 049        206 622 
                                            446                           600           639                  4 968 447 
 Other income              5.2        ----------------      -----------------    ----------------      --------------- 
                          -------  -------------------  ---------------------  -------------------  ------------------ 
                                               679 138                539 189              447 391 
 Operating income                                  227                    515                  156          65 875 655 
                          -------  -------------------  ---------------------  -------------------  ------------------ 
                                              (240 539               (289 533             (105 937             (34 720 
                                                  828)                   595)                 502)                428) 
 Operating expenditure     6          ----------------      -----------------     ----------------    ---------------- 
                          -------  -------------------  ---------------------  -------------------  ------------------ 
 Operating income before 
  impairment 
  charge and loss on monetary                  438 598                249 655              341 453 
  position                                         399                    920                  654          31 155 227 
                                   -------------------  ---------------------  -------------------  ------------------ 
 Impairment losses on 
  financial 
  assets measured at 
  amortised                                    (11 048                (24 920              (11 048 
  cost                       16.3                 567)                   236)                 567)         (4 011 952) 
                          -------  -------------------  ---------------------  -------------------  ------------------ 
 Loss on net monetary                         (273 439                (78 844 
  position                                        254)                   723)                    -                   - 
                          -------  -------------------  ---------------------  -------------------  ------------------ 
                                      ----------------       ----------------     ---------------- 
   Profit before                               154 110                145 890              330 405     --------------- 
   taxation                                        578                    961                  087          27 143 275 
                          -------  -------------------  ---------------------  -------------------  ------------------ 
                                               (70 019                (51 106              (44 504 
                                                  548)                   027)                 548)         (5 922 074) 
 Taxation charge           7          ----------------       ----------------     ----------------    ---------------- 
                          -------  -------------------  ---------------------  -------------------  ------------------ 
                                                                                           285 900 
 Profit for the period                      84 091 030             94 784 934                  539          21 221 201 
                          -------  -------------------  ---------------------  -------------------  ------------------ 
 Other comprehensive 
 income 
                          -------  -------------------  ---------------------  -------------------  ------------------ 
 Items that will not be reclassified to 
  profit or loss 
                                                        ---------------------  -------------------  ------------------ 
 
 Revaluation of land and                       108 586                                     175 943 
  buildings, net of tax                            781                      -                  209              46 431 
                          -------  -------------------  ---------------------  -------------------  ------------------ 
 Translation gain on 
  change 
  in functional 
  currency,                                 64 096 897                      -           11 619 648                   - 
  net of tax                          ----------------       ----------------     ----------------     --------------- 
                          -------  -------------------  ---------------------  -------------------  ------------------ 
 Total comprehensive income for                256 774             94 784 934              473 463          21 267 632 
  the year                                         708              =========                  396           ========= 
                                             =========                                   ========= 
                                   -------------------  ---------------------  -------------------  ------------------ 
 Earnings/(losses) per share 
  (ZWL cents) 
                                   -------------------  ---------------------  -------------------  ------------------ 
 - Basic                   9.3                   21.05                  24.24                71.56                5.43 
                          -------  -------------------  ---------------------  -------------------  ------------------ 
 - Diluted                 9.3                   19.86                  22.85                67.52                5.11 
                          -------  -------------------  ---------------------  -------------------  ------------------ 
 - Headline                9.3                 (18.66)                  18.76                 7.78                4.70 
                          -------  -------------------  ---------------------  -------------------  ------------------ 
 

*The Historical Cost information has been shown as supplementary information for the benefit of users. These are not required in terms of International Accounting Standard (IAS) 29 "Financial Reporting in Hyperinflationary

Economies" . The Auditors have not expressed an opinion on the Historical Cost information.

CONSOLIDATED STATEMENT OF FINANCIAL POSITION

as at 31 December 2019

 
                                               Inflation adjusted                         Historical Cost* 
                                                 31 Dec               31 Dec               31 Dec               31 Dec 
                          -------  --------------------  -------------------  -------------------  ------------------- 
                           Note                    2019                 2018                 2019                 2018 
                          -------  --------------------  -------------------  -------------------  ------------------- 
                                                    ZWL                  ZWL                  ZWL                  ZWL 
                          -------  --------------------  -------------------  -------------------  ------------------- 
                                                                    Restated 
                          -------  --------------------  -------------------  -------------------  ------------------- 
 SHAREHOLDERS' FUNDS 
                          -------  --------------------  -------------------  -------------------  ------------------- 
 Share capital             10.2.1               796 878              769 225               84 116               80 975 
                          -------  --------------------  -------------------  -------------------  ------------------- 
                                                168 646              156 817 
 Capital reserves                                   241                  823           19 184 170           16 526 297 
                          -------  --------------------  -------------------  -------------------  ------------------- 
 Functional currency 
  translation 
  reserve                                    64 096 897                    -           11 619 648                    - 
                          -------  --------------------  -------------------  -------------------  ------------------- 
                                                108 586                                   176 079 
 Revaluation reserves                               781                    -                  950              136 741 
                          -------  --------------------  -------------------  -------------------  ------------------- 
                                                323 030              258 875              329 505 
                                                    939                  925                  569           47 377 400 
 Retained earnings                    -----------------     ----------------     ----------------     ---------------- 
                          -------  --------------------  -------------------  -------------------  ------------------- 
                                                665 157              416 462              536 473 
 Total equity                                       736                  973                  453           64 121 413 
                          -------  --------------------  -------------------  -------------------  ------------------- 
 
 Redeemable ordinary 
  shares                   11                14 335 253           89 043 407           14 335 253           14 335 253 
                          -------  --------------------  -------------------  -------------------  ------------------- 
 Subordinated term loan    12                28 360 340            9 352 327           28 360 340            1 505 647 
                          -------  --------------------  -------------------  -------------------  ------------------- 
                                      -----------------     ----------------     ----------------     ---------------- 
                          -------  --------------------  -------------------  -------------------  ------------------- 
 Total shareholders' 
  funds                                         707 853              514 858              579 169 
  and shareholders'                                 329                  707                  046           79 962 313 
  liabilities                         -----------------     ----------------     ----------------     ---------------- 
                          -------  --------------------  -------------------  -------------------  ------------------- 
 
 LIABILITIES 
                          -------  --------------------  -------------------  -------------------  ------------------- 
 Deposits and other                           1 268 146            2 779 432            1 268 146              447 105 
  liabilities              13.1                     016                  563                  016                  283 
                          -------  --------------------  -------------------  -------------------  ------------------- 
 Deferred tax                                   112 687 
  liabilities                                       043                    -           97 653 191                    - 
                          -------  --------------------  -------------------  -------------------  ------------------- 
                                                624 937                    -              624 937                    - 
 Current tax liabilities              -----------------    -----------------    -----------------     ---------------- 
                          -------  --------------------  -------------------  -------------------  ------------------- 
 Total shareholders' funds and                2 089 311            3 294 291            1 945 593              527 067 
  liabilities                                       325                  270                  190                  596 
                                             ==========           ==========           ==========            ========= 
                                   --------------------  -------------------  -------------------  ------------------- 
 
 ASSETS 
                          -------  --------------------  -------------------  -------------------  ------------------- 
 Cash and cash                                  492 304              698 426              492 304              112 440 
  equivalents              15                       267                  589                  267                  912 
                          -------  --------------------  -------------------  -------------------  ------------------- 
 Current tax assets                                   -            1 775 387                    -              285 822 
                          -------  --------------------  -------------------  -------------------  ------------------- 
                                                107 166              728 294              107 166              117 249 
 Investment securities     14.1                     155                  724                  155                  434 
                          -------  --------------------  -------------------  -------------------  ------------------- 
 Loans, advances and 
  other                                         852 557            1 581 873              817 960              254 202 
  assets                   16                       453                  937                  242                  945 
                          -------  --------------------  -------------------  -------------------  ------------------- 
 Non-current assets held 
  for sale                 17                         -              223 614                    -               36 000 
                          -------  --------------------  -------------------  -------------------  ------------------- 
 Trade and other 
  investments                                 1 612 131              698 799            1 612 131              112 501 
                          -------  --------------------  -------------------  -------------------  ------------------- 
                                                229 867              130 134              229 867 
 Investment properties                              982                  664                  982           20 950 606 
                          -------  --------------------  -------------------  -------------------  ------------------- 
 Intangible assets         18                11 613 782           17 333 130            1 397 186            2 036 775 
                          -------  --------------------  -------------------  -------------------  ------------------- 
                                                394 189              128 300              295 285 
 Property and equipment    19                       555                  867                  227           17 844 069 
                          -------  --------------------  -------------------  -------------------  ------------------- 
 Deferred tax assets                                  -            7 229 559                    -            1 908 532 
                          -------  --------------------  -------------------  -------------------  ------------------- 
                                      -----------------    -----------------    -----------------     ---------------- 
   Total assets                               2 089 311            3 294 291            1 945 593              527 067 
                                                    325                  270                  190                  596 
                                             ==========           ==========           ==========            ========= 
                          -------  --------------------  -------------------  -------------------  ------------------- 
 

*The Historical Cost information has been shown as supplementary information for the benefit of users. These are not required in terms of International Accounting Standard (IAS) 29 "Financial Reporting in Hyperinflationary Economies". The Auditors have not expressed an opinion on the Historical Cost information.

CONSOLIDATED STATEMENT OF CHANGES IN EQUITY

for the year ended 31 December 2019

 
                                                                          Inflation adjusted 
                                                              Functional 
                                                                Currency 
                                                             Translation        Share Option       Revaluation            Retained 
                   Share Capital       Share Premium             Reserve             Reserve           Reserve            Earnings               Total 
               -----------------  ------------------  ------------------  ------------------  ----------------  ------------------  ------------------ 
                             ZWL                 ZWL                 ZWL                 ZWL               ZWL                 ZWL                 ZWL 
               -----------------  ------------------  ------------------  ------------------  ----------------  ------------------  ------------------ 
 Balances at 
  1 January                                  150 017                                                                       172 699             324 062 
  2018                   749 637                 691                   -             595 723                 -                 567                 619 
               -----------------  ------------------  ------------------  ------------------  ----------------  ------------------  ------------------ 
 Profit for 
  the year                     -                   -                   -                   -                 -          94 784 934          94 784 934 
               -----------------  ------------------  ------------------  ------------------  ----------------  ------------------  ------------------ 
 Share based 
  payments - 
  share 
  options 
  exercised               19 588           6 204 409                   -                   -                 -                   -           6 223 997 
               -----------------  ------------------  ------------------  ------------------  ----------------  ------------------  ------------------ 
 Dividends                     -                   -                   -                   -                 -         (8 608 577)         (8 608 577) 
  paid          ----------------    ----------------    ----------------    ----------------   ---------------    ----------------    ---------------- 
               -----------------  ------------------  ------------------  ------------------  ----------------  ------------------  ------------------ 
 Restated 
  balances at 
  31 December                                156 222                                                                       258 875             416 462 
  2018                   769 225                 100                   -             595 723                 -                 925                 973 
               -----------------  ------------------  ------------------  ------------------  ----------------  ------------------  ------------------ 
 
 Translation 
  gain on 
  change in 
  functional 
  currency, 
  net of 
  tax                          -                   -          64 096 897                   -                 -                   -          64 096 897 
               -----------------  ------------------  ------------------  ------------------  ----------------  ------------------  ------------------ 
 Share issue 
  - scrip 
  dividend                27 653          11 828 418                   -                   -                 -                   -          11 856 071 
               -----------------  ------------------  ------------------  ------------------  ----------------  ------------------  ------------------ 
 Profit for 
  the year                     -                   -                   -                   -                 -          84 091 030          84 091 030 
               -----------------  ------------------  ------------------  ------------------  ----------------  ------------------  ------------------ 
 Revaluation 
  of land and 
  buildings,                                                                                           108 586                                 108 586 
  net of tax                   -                   -                   -                   -               781                   -                 781 
               -----------------  ------------------  ------------------  ------------------  ----------------  ------------------  ------------------ 
                                                                                                                           (19 936             (19 936 
 Dividend                      -                   -                   -                   -                 -                016)                016) 
  paid          ----------------   -----------------   -----------------   -----------------   ---------------    ----------------    ---------------- 
               -----------------  ------------------  ------------------  ------------------  ----------------  ------------------  ------------------ 
 Balances at             796 878             168 050          64 096 897             595 723           108 586             323 030             665 157 
  31 December         ==========                 518          ==========          ==========               781                 939                 736 
  2019                                    ==========                                                 =========           =========           ========= 
               -----------------  ------------------  ------------------  ------------------  ----------------  ------------------  ------------------ 
 

CONSOLIDATED STATEMENT OF CHANGES IN EQUITY

for the year ended 31 December 2019

 
                                                                            Historical Cost* 
 
                                                                                  Functional 
                                                                                    Currency 
                                                            Share Option         Translation         Revaluation            Retained 
                   Share Capital       Share Premium             Reserve             Reserve             Reserve            Earnings               Total 
               -----------------  ------------------  ------------------  ------------------  ------------------  ------------------  ------------------ 
                             ZWL                 ZWL                 ZWL                 ZWL                 ZWL                 ZWL                 ZWL 
               -----------------  ------------------  ------------------  ------------------  ------------------  ------------------  ------------------ 
 Balances at 
  1 January 
  2018                    78 751          15 759 282              62 563                   -              90 310          27 542 109          43 533 015 
               -----------------  ------------------  ------------------  ------------------  ------------------  ------------------  ------------------ 
 Profit for 
  the year                     -                   -                   -                   -                   -          21 221 201          21 221 201 
               -----------------  ------------------  ------------------  ------------------  ------------------  ------------------  ------------------ 
 Revaluation 
  of land and 
  buildings, 
  net of tax                   -                   -                   -                   -              46 431                   -              46 431 
               -----------------  ------------------  ------------------  ------------------  ------------------  ------------------  ------------------ 
 Share based 
  payments - 
  share 
  options 
  exercised                2 224             704 452                   -                   -                   -                   -             706 676 
               -----------------  ------------------  ------------------  ------------------  ------------------  ------------------  ------------------ 
 Dividends                     -                   -                   -                   -                   -         (1 385 910)         (1 385 910) 
  paid          ----------------    ----------------    ----------------    ----------------   -----------------    ----------------    ---------------- 
               -----------------  ------------------  ------------------  ------------------  ------------------  ------------------  ------------------ 
 Balances at 
  31 December 
  2018                    80 975          16 463 734              62 563                   -             136 741          47 377 400          64 121 413 
               -----------------  ------------------  ------------------  ------------------  ------------------  ------------------  ------------------ 
 
 Share issue 
  - scrip 
  dividend                 3 141           2 657 873                   -                   -                   -                   -           2 661 014 
               -----------------  ------------------  ------------------  ------------------  ------------------  ------------------  ------------------ 
 Profit for                                                                                                                  285 900             285 900 
  the year                     -                   -                   -                   -                   -                 539                 539 
               -----------------  ------------------  ------------------  ------------------  ------------------  ------------------  ------------------ 
 Revaluation 
  of land and 
  buildings,                                                                                             175 943                                 175 943 
  net of tax                   -                   -                   -                   -                 209                   -                 209 
               -----------------  ------------------  ------------------  ------------------  ------------------  ------------------  ------------------ 
 Translation 
  gain on 
  change in 
  functional 
  currency, 
  net of 
  tax                          -                   -                   -          11 619 648                   -                   -          11 619 648 
               -----------------  ------------------  ------------------  ------------------  ------------------  ------------------  ------------------ 
 Dividend                      -                   -                   -                   -                   -         (3 772 370)         (3 772 370) 
  paid          ----------------   -----------------   -----------------   -----------------   -----------------     ---------------     --------------- 
               -----------------  ------------------  ------------------  ------------------  ------------------  ------------------  ------------------ 
 Balances at              84 116          19 121 607              62 563          11 619 648             176 079             329 505             536 473 
  31 December         ==========          ==========          ==========          ==========                 950                 569                 453 
  2019                                                                                                ==========           =========           ========= 
               -----------------  ------------------  ------------------  ------------------  ------------------  ------------------  ------------------ 
 
 

*The Historical Cost information has been shown as supplementary information for the benefit of users. These are not required in terms of International Accounting Standard (IAS) 29 "Financial Reporting in Hyperinflationary Economies". The Auditors have not expressed an opinion on the Historical Cost information.

CONSOLIDATED STATEMENT OF CASH FLOWS

for the year ended 31 December 2019

 
                                                                          Inflation adjusted                            Historical Cost * 
                                                                             31 Dec                31 Dec                31 Dec                31 Dec 
                                                             ----------------------  --------------------  --------------------  -------------------- 
                                                                               2019                  2018                  2019                  2018 
                                                             ----------------------  --------------------  --------------------  -------------------- 
                                                                                ZWL                   ZWL                   ZWL                   ZWL 
                                                             ----------------------  --------------------  --------------------  -------------------- 
                                                                                                 Restated 
                                                                                     --------------------  --------------------  -------------------- 
 CASH FLOWS FROM OPERATING ACTIVITIES 
                                                                                     --------------------  --------------------  -------------------- 
                                                                            154 110               145 890               330 405 
 Profit before taxation                                                         578                   961                   087            27 143 275 
                                                             ----------------------  --------------------  --------------------  -------------------- 
 Non-cash items: 
                                                             ----------------------  --------------------  --------------------  -------------------- 
 - Depreciation(excluding right 
  of use assets)                                                         15 427 213            11 991 839             2 307 360             1 370 312 
                                                             ----------------------  --------------------  --------------------  -------------------- 
 - Depreciation - Right of use 
  assets                                                                  3 088 496                     -             1 310 867                     - 
                                                             ----------------------  --------------------  --------------------  -------------------- 
 - Amortisation of intangible 
  assets                                                                  6 356 249             7 882 765               733 909               879 376 
                                                             ----------------------  --------------------  --------------------  -------------------- 
 
   *    Impairment losses on financial assets measured at 
        amortised costs                                                  11 048 567            24 920 236            11 048 567             4 011 952 
                                                             ----------------------  --------------------  --------------------  -------------------- 
                                                                            (93 624               (19 523              (194 387 
   *    Investment properties fair value gains                                 006)                  429)                  322)           (2 551 436) 
                                                             ----------------------  --------------------  --------------------  -------------------- 
 
   *    Trade and other investments fair value adjustment                 (913 332)             316 323             (1 499 630)              (10 154) 
                                                             ----------------------  --------------------  --------------------  -------------------- 
 
   *    (Profit)/loss on disposal of property and equipment                       -             (139 122)                     -              (22 396) 
                                                             ----------------------  --------------------  --------------------  -------------------- 
 - Profit on disposal of investment 
  properties                                                              (584 149)           (4 395 908)             (584 149)             (567 032) 
                                                             ----------------------  --------------------  --------------------  -------------------- 
 - Loss on disposal of quoted 
  investments                                                                     -               132 802                     -                15 074 
                                                             ----------------------  --------------------  --------------------  -------------------- 
 - Interest capitalised on subordinated 
  term loan                                                               3 779 812             1 065 166             1 151 954               171 483 
                                                             ----------------------  --------------------  --------------------  -------------------- 
 - Impairment reversal on land 
  and building                                                                    -                    -               (40 600)              (76 661) 
                                                             ----------------------  --------------------  --------------------  -------------------- 
                                                                            (92 386                                     (92 386 
 - Unrealised foreign exchange                                                 267)               128 510                  267)                20 689 
  loss/(gain)                                                    ------------------      ----------------        --------------      ---------------- 
                                                             ----------------------  --------------------  --------------------  -------------------- 
 
 Operating cash flows before changes                                                              168 270 
  in operating assets and liabilities                                     6 303 161                   142            58 059 776            30 384 482 
                                                             ----------------------  --------------------  --------------------  -------------------- 
 Changes in operating assets and 
  liabilities 
                                                             ----------------------  --------------------  --------------------  -------------------- 
 (Decrease)/increase in deposits                                         (1 875 561               582 831               552 444 
  and other liabilities                                                        738)                   246                   546            90 105 608 
                                                             ----------------------  --------------------  --------------------  -------------------- 
 
                                                                            939 229              (348 675              (326 882               (56 133 
 Decrease/(increase) in loans,                                                  952                  547)                  932)                  883) 
  advances and other assets                                     -------------------      ----------------     -----------------     ----------------- 
                                                             ----------------------  --------------------  --------------------  -------------------- 
                                                                           (886 621               402 425               283 621 
 Net cash (used)/ generated from                                               269)                   842                   390            64 356 207 
  operations                                                     ------------------    ------------------    ------------------    ------------------ 
                                                             ----------------------  --------------------  --------------------  -------------------- 
 TAXATION 
                                                                                     --------------------  --------------------  -------------------- 
 Tax on dividends paid                                                  (1 240 750)             (604 341)             (247 740)              (97 294) 
                                                             ----------------------  --------------------  --------------------  -------------------- 
                                                                            (14 520               (27 881 
 Corporate tax paid                                                            794)                  907)           (9 079 118)           (4 488 757) 
                                                             ----------------------  --------------------  --------------------  -------------------- 
                                                                -------------------     -----------------     ----------------- 
                                                                           (902 382               373 939               274 294     ----------------- 
   Net cash (outflow)/inflow from                                              813)                   541                   532            59 770 156 
   operations                                                   -------------------     -----------------     -----------------      ---------------- 
                                                             ----------------------  --------------------  --------------------  -------------------- 
 CASH FLOWS FROM INVESTING ACTIVITIES 
                                                                                     --------------------  --------------------  -------------------- 
 Acquisition of intangible assets                                         (636 901)           (4 501 240)              (94 320)             (535 971) 
                                                             ----------------------  --------------------  --------------------  -------------------- 
 Disposal/(acquisition) of investment                                       621 128              (155 312                                     (25 004 
  securities                                                                    569                  347)            10 083 280                  005) 
                                                             ----------------------  --------------------  --------------------  -------------------- 
 Proceeds on disposal of property 
  and equipment                                                                   -               139 122                     -                22 396 
                                                             ----------------------  --------------------  --------------------  -------------------- 
                                                                            (35 323               (58 952               (24 308 
 Acquisition of property and equipment                                         914)                  339)                  497)           (9 490 840) 
                                                             ----------------------  --------------------  --------------------  -------------------- 
 Proceeds on disposal of investment 
  properties                                                              5 888 719            29 826 660             5 888 719             4 801 846 
                                                             ----------------------  --------------------  --------------------  -------------------- 
                                                                                                  (37 784 
 Acquisition of investment properties                                   (1 939 045)                  075)             (351 515)           (6 082 924) 
                                                             ----------------------  --------------------  --------------------  -------------------- 
 Proceeds on disposal of quoted                                                   -                 4 035                     -                   458 
  investments                                                      ----------------      ----------------     -----------------      ---------------- 
                                                             ----------------------  --------------------  --------------------  -------------------- 
                                                                            589 117              (226 580                                     (36 289 
 Net cash generated/(used) in                                                   428                  236)           (8 782 333)                  040) 
  investing activities                                             ----------------      ----------------      ----------------      ---------------- 
                                                             ----------------------  --------------------  --------------------  -------------------- 
 
 
 CASH FLOWS FROM FINANCING ACTIVITIES 
                                        ------------------  ------------------  ------------------  ------------------ 
 Payment of interest on subordinated 
  term loan                                      (803 062)           (507 728)           (180 450)            (81 740) 
                                        ------------------  ------------------  ------------------  ------------------ 
 Repayment of lease liabilities                (4 186 976)                   -         (1 276 043)                   - 
                                        ------------------  ------------------  ------------------  ------------------ 
 Cash dividend paid                            (4 400 391)         (5 048 727)           (832 659)           (573 719) 
                                        ------------------  ------------------  ------------------  ------------------ 
                                                 (137 773)            (72 427)            (30 958)             (8 221) 
 Share issue costs - scrip dividend       ----------------    ----------------      --------------    ---------------- 
                                        ------------------  ------------------  ------------------  ------------------ 
 Net cash outflow from financing               (9 528 202)         (5 628 882)         (2 320 110)           (663 680) 
  activities                              ----------------    ----------------    ----------------    ---------------- 
                                        ------------------  ------------------  ------------------  ------------------ 
 Net increase in cash and cash                    (322 793             141 730             263 192 
  equivalents                                         586)                 476                 089          22 817 436 
                                        ------------------  ------------------  ------------------  ------------------ 
 Net foreign exchange and monetary 
  adjustments on cash and cash                     116 671                                 116 671 
  equivalents                                          264             436 508                 266              70 274 
                                        ------------------  ------------------  ------------------  ------------------ 
                                                   698 426             556 259             112 440 
 Cash and cash equivalents at                          589                 605                 912          89 553 202 
  beginning of the year                   ----------------    ----------------      --------------    ---------------- 
                                        ------------------  ------------------  ------------------  ------------------ 
 Cash and cash equivalents at                      492 304             698 426             492 304             112 440 
  the end of the year                                  267                 589                 267                 912 
                                                 =========           =========          ==========           ========= 
                                        ------------------  ------------------  ------------------  ------------------ 
 
 ADDITIONAL INFORMATION ON OPERATIONAL 
  CASH FLOWS FROM INTEREST 
                                        ------------------  ------------------  ------------------  ------------------ 
                                                   168 852             199 550 
 Interest received                                     277                 036          65 548 752          38 318 561 
                                        ------------------  ------------------  ------------------  ------------------ 
 Interest paid (including interest                 (48 055             (63 651             (15 089 
  on lease liability)                                 909)                654)                895)         (7 548 415) 
                                        ------------------  ------------------  ------------------  ------------------ 
 

*The Historical Cost information has been shown as supplementary information for the benefit of users. These are not required in terms of International Accounting Standard (IAS) 29 "Financial Reporting in Hyperinflationary Economies". The Auditors have not expressed an opinion on the Historical Cost information.

NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

for the year ended 31 December 2019

   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

The condensed consolidated financial statements are prepared and presented on the basis that they reflect the information necessary to be a fair summary of the annual financial statements from which they are derived. This includes financial results that agree with or can be recalculated from the related information in the audited consolidated financial statements and that contain the information necessary so as not to be misleading in the circumstances. The information contained in these consolidated financial results does not contain all the disclosures required by International Financial Reporting Standards, the Companies Act (Chapter 24:03) of Zimbabwe and the Banking Act (Chapter 24:20) of Zimbabwe, which are disclosed in the full consolidated annual financial statements from which this set of condensed financial statements were derived. For a better understanding of the Group`s financial position, its financial performance and cash flows for the year, these condensed financial statements should be read in conjunction with the audited consolidated annual financial statements.

   2.1       Basis of preparation 

The condensed consolidated financial statements including comparatives, have been prepared under the inflation adjusted accounting basis to account for changes in the general purchasing power of the ZWL. The restatement is based on the Consumer Price Index at the statement of financial position date. The Public Accountants and Auditors Board (PAAB) issued a pronouncement on 11 October 2019 indicating the economy had become hyper-inflationary. The Directors have thus prepared the accompanying financial statements using the hyperinflationary statements using the hyper-inflationary accounting basis. The indices are derived from the monthly inflation rates which are issued by the Zimbabwe National Statistics Agency (ZIMSTAT). As a result of the change in the Group's functional currency on 22 February 2019, the CPI indices for the prior periods are in respect of the USD functional currency which was prevailing at the time. The indices used are shown below. These condensed consolidated financial statements are reported in Zimbabwean dollars and rounded to the nearest dollar.

 
                     Indices   Conversion factor 
   Dates 
 31 December 2017      61.13              9.0232 
 31 December 2018      88.81              6.2115 
 31 December 2019     551.63              1.0000 
 

The indices have been applied to the historical costs of transactions and balances as follows:

-- All comparative figures as of and for the periods ended 31 December 2017, 31 December 2018 and 31 December 2019 have been restated by applying the change in the index from the date of last re-measurement to 31 December 2019;

-- Income statement transactions have been restated by applying the change in the index from the approximate date of the transactions to 31 December 2019;

-- Gains and losses arising from the monetary assets or liability positions have been included in the income statement;

-- Non-monetary assets and liabilities have been restated by applying the change in the index from the date of the transaction to 31 December 2019;

-- Property and equipment and accumulated depreciation have been restated by applying the change in the index from the earlier of February 2009 and date of their purchase or re-assessment to 31 December 2019;

-- Equity has been restated by applying the change in index from the date of issue to 31 December 2019;

The net impact of applying the procedures above is shown in the statement of comprehensive income as the gain or loss on net monetary position.

IAS 29 discourages the publication of historical results as a supplement to the inflation adjusted results. However, historical results have been published to allow comparability of the results during the transitional phase in applying the Standard.

   2.2       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 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.

   2.3       Comparative financial information 

The comparative information covers a period of twelve months.

   2.4       Use of estimates and judgements 

In preparation of the Group financial statements, Directors have made judgments, 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.

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

Information about assumptions and estimation uncertainties that have a significant risk of resulting in a material adjustment in the year ended 31 December 2019 is included in the following notes:

   2.4.1    Deferred tax 

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.

   2.4.2    Valuation of properties 

Significant judgements and estimates have been applied as detailed below for the valuation of Investment Properties and of Land and Buildings held under Property, Plant and Equipment:

Statutory Instrument 142 of 2019 introduced the Zimbabwe Dollar (ZWL) as the sole legal tender effective 24 June 2019. This appears to have been a follow up measure to the Monetary Policy Statement (MPS) of 22 February 2019 which added the RTGS$ to the then basket of currencies. The MPS established an Inter-Bank Foreign Exchange market which continued to function up to the reporting year end date. These events have created complex valuation challenges for the short term.

Valuations rely on historical market evidence for calculation inputs. This includes transaction prices for comparable properties, rents and capitalisation rates. Such market evidence does not exist at present to calculate ZWL values. Therefore, valuers have adopted the approach for the meanwhile of converting USD valuation inputs at the Inter-Bank Foreign Exchange Auction Rate of the day to calculate ZWL property values.

This approach, however, presents a multitude of risks to the users of the valuation reports. These are detailed below:

Overstating the property values

The key inputs for the valuation of non-residential investment property are the rent income and the capitalisation rate. No trends for ZWL rents have yet been established neither is there easily verifiable market evidence of ZWL transactions to enable analysis of the yields. It is unlikely that ZWL rent movements will mirror the activity on the Inter-Bank Foreign Exchange market. In addition, the property market will price the risk associated with the ZWL which is not a fully convertible currency, and this will be reflected through the capitalisation rates.

Therefore, a direct conversion of USD valuation inputs likely results in overstated ZWL property values.

Property sub-sectors will respond differently to the new currency

To use a single conversion rate for different property sub-sectors does not recognise the fact that each will respond differently to the reintroduced ZWL. Non-residential property is likely to lag behind the economic cycle quite considerably. Whereas residential property which is more sentiment driven, is likely to respond positively quicker.

Ignoring market dynamics (supply and demand)

Applying a conversion rate to USD valuation inputs to calculate ZWL property values is not an accurate reflection of market dynamics. Risks associated with currency trading do not reflect the risks associated with property trading. The two markets perceive and price their respective risks quite differently.

It is, therefore, unlikely that property values will strictly track the movement in the Inter-Bank Foreign Exchange Rate.

   2.4.3    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 judgment in determining that the carrying amount approximates fair value. (refer to note 14.1).

   2.4.4    Impairment losses on loans and advances 

The Bank adopted IFRS 9 with effect from 1 January 2018.

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.

The impairment loss on loans and advances is disclosed in more detail under note 8 and note 16.3.

   2.4.5    Non-current assets held for sale 

Non-current assets were valued by an independent professional valuer. All non-current assets held for sale are measured at their fair values. 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 and other market constraints and hence comparable values are also not stable.

   2.4.6    Determination of the functional currency 

The Government of Zimbabwe adopted a multi-currency regime in 2009. The British Pound, Euro, United States Dollar (USD), South African Rand (ZAR) and Botswana Pula were adopted as the multi-currency basket in February 2009. In January 2014, the Reserve Bank of Zimbabwe (RBZ) issued a Monetary Policy Statement which added the Chinese Yuan, Australian Dollar, Indian Rupee, Japanese Yen into the basket of multi-currencies. At the onset, the USD and the ZAR were the commonly used currencies, with the USD eventually gaining prominence resulting in it being designated as the functional and presentation currency by the transacting public and the Monetary Authorities, including the Group.

Between 2014 and 2016, the Zimbabwean economy experienced a massive liquidity crisis which eventually prompted the Monetary Authorities to introduce the bond notes in November 2016 whilst encouraging the public to continue using the other currencies in the multi-currency basket. The bond notes were introduced at an official fixed exchange rate of 1:1 with the USD and the Monetary Authorities specifically directed financial institutions not to open separate vault and cash accounts for the USD and the bond notes. The introduction of the bond notes gave rise to a three (3) tier pricing system wherein sellers and service providers would quote three (3) separate prices (USD, bond notes and RTGS/electronic transfers) for their merchandise and services respectively. Significant discounts were being offered for USD payments whilst a premium would be added for prices quoted in bond notes or electronic settlement via the Real Time Gross Settlement System (RTGS). These developments triggered a debate around the functional currency of Zimbabwe. It should be noted that the Group never participated in the three tier pricing and none of its products had multiple prices during the same period.

In October 2018, the Monetary Authorities instructed financial institutions to separate bond notes and USD accounts and indicated that corporates and individuals could proceed to open Nostro Foreign Currency Accounts (FCA), for foreign currency holdings, which were now being exclusively distinguished from the existing RTGS based accounts. However, it should be noted that at the time of this policy pronouncement, the Monetary Authorities did not state that they had introduced a new currency for Zimbabwe, which actually meant that the USD remained as the currency of reference. By 31 December 2018, there had been no pronouncement by the Monetary Authorities to the effect that there had been a new currency introduced, which could be considered as the country's functional currency.

On 22 February 2019, the Reserve Bank of Zimbabwe (RBZ) issued an Exchange Control Directive, RU 28 of 2019 which established an interbank foreign exchange market to formalise the buying and selling of foreign currency through the Banks and Bureaux de change. In order to establish an exchange rate between the current monetary balances and foreign currency, the Monetary Authorities denominated the existing RTGS balances in circulation as RTGS Dollars. Initial trades on 22 February 2019 were at USD1: RTGS$2.5. On the same date, Statutory Instrument 33 of 2019 was also issued and it specified that for accounting and other purposes, all assets and liabilities that were in USD immediately before the 22(nd) of February 2019 were deemed to have been valued in RTGS Dollars at a rate of 1:1 with the USD.

On 24 June 2019, the Monetary Authorities announced that the multi-currency regime, which the country was operating in since February 2009 had been discontinued and the country had adopted a mono-currency regime meaning that the sole legal tender would be the Zimbabwe Dollar (ZWL). In light of the developments summarised above, the Directors concluded that the Group's functional currency changed from US$ to ZWL with effect from 22 February 2019.

   2.4.6    Determination of functional currency 

The opening balances at 1 January 2019 are carried at USD/RTGS$1:1 in compliance with Statutory Instrument 33 (SI 33) of 2019. The Group used this fixed exchange rate at 1 January 2019 and thus did not comply with the requirements of International Accounting Standard 21 (IAS21), "The Effects of Changes in Foreign Exchange Rates", as doing so would have been in contravention of SI 33 of 2019. The financial statements were restated using the first available interbank mid-rate on 22 February 2019 of USD/RTGS$1:2.5, giving rise to the Functional Currency Translation Reserve of ZWL11 619 648. The International Financial Reporting Standards (IFRS) do not prescribe clear guidance on the treatment of the movements arising on the translation of foreign currencies on the date of change in functional currency. As such, the Directors had to apply their judgement on the treatment of these translation gains and losses in a manner that most faithfully represents the substance of the event and related transactions.

The Directors had to apply judgement in determining the rates at which the comparative information for the twelve months ended 31 December 2018 would be restated. The currency conversion challenge emanates from the existence of a 3-tier pricing structure during the comparative period depending on mode of settlement and the challenge was compounded by the fact that the official exchange rate between USD and the bond note/electronic balances was pegged at 1:1 and there was no orderly, functional market where foreign currency transactions were being conducted in order to establish credible foreign currency conversion rates. On that basis, the Directors have restated the comparative information at the official rate of USD/RTGS$(ZWL)1:1 as the cost and effort of restating the comparative information using any other rate outweighs the benefits that may arise from the exercise and would contravene the country's laws and regulations.

   2.4.7    Lease arrangements 

The Group adopted IFRS 16, Leases, on 1 January 2019. As permitted by the IFRS 16 transitional provisions, the Group elected not to restate comparative figures. The Directors exercised significant judgement on determining whether the various contractual relationships which the Group is party to, contain lease arrangements which fall into the scope of IFRS 16. Significant judgement was also exercised in determining whether the Group is reasonably certain that it will exercise extension options present in lease contracts as well as the determination of incremental borrowing rates applied in determining the lease liability.

   2.5       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 condensed 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 consolidated 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 measured 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 registered 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 amortisation and any accumulated impairment losses.

   3.6       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 Group 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 Group 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 Group 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.

   3.7       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.

   3.8       Revenue recognition 

Revenue is recognised to the extent that it is probable that the economic benefits will flow to the Group 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.

   3.9       Interest income 

For all financial instruments measured amortised cost, 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.

   3.10     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.

   3.11     Shareholders' funds and shareholders' liabilities 

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

   3.12       Changes in accounting policy 

On 1 January 2019, the Group adopted IFRS 16, "Leases" as issued by the International Accounting Standards Board (IASB) in January 2016 with a date of transition of 1 January 2019, which resulted in changes in accounting policy and adjustments to the amounts previously recognised in the financial statements.

As permitted by the transitional provisions of IFRS 16, the Group elected not to restate comparative figures. The Group changed its accounting policy for leases where the Group is the lessee.

Prior to the change in accounting policy leases in which a significant portion of the risks and rewards of ownership were not transferred to the Group as lessee were classified as operating leases. Payments made under operating leases were charged to profit or loss on a straight-line basis over the period of the lease.

Lease income from operating leases where the Group is a lessor is recognised in income on a straight-line basis over the lease term. The respective leased assets are included in the statement of financial position based on their nature. The Group did not need to make any adjustments to the accounting for assets held as lessor as a result of adopting the new leasing standard. Upon adoption of IFRS 16, Leases, on 1 January 2019, the Group did not restate comparatives for the 2018 reporting period, as permitted under the specific transition provisions in the standard. The reclassifications and the adjustments arising from the new leasing rules are therefore recognised in the opening statement of financial position on 1 January 2019.

On adoption of IFRS 16, the Group recognised lease liabilities in relation to leases which had previously been classified as 'operating leases' under the principles of IAS 17, Leases. On date of adoption, these liabilities were measured at the present value of the remaining lease payments, discounted using the Group's incremental borrowing rate as of 1 January 2019. The weighted average incremental borrowing rate applied to the lease liabilities on 1 January 2019 was 12.35%.

The Group has also elected not to reassess whether other contracts not previously classified as leases are, or contains a lease at the date of initial application. Instead, for contracts entered into before the transition date the Group relied on its assessment made by applying IAS 17, Leases, and Interpretation 4, Determining whether an Arrangement contains a Lease.

Lease accounting

Measurement of right-of-use assets

The associated right-of-use assets for property leases were measured on a prospective basis. The right-of-use assets were measured at the amount equal to the lease liability at the date of initial adoption, adjusted by the amount of any prepaid or accrued lease payments relating to that lease recognised in the consolidated statement of financial position as at 31 December 2018.

   3.12    Changes in accounting policy 

Adjustments recognised in the statement of financial position on 1 January 2019

The change in accounting policy affected the following items in the statement of financial position on 1 January 2019:

   --    Right-of-Use assets - Increased by ZWL3 078 687. 
   --    Lease liabilities - Increased by ZWL3 078 687. 
   --    There was no impact on Retained earnings on 1 January 2019. 

The impact of the first time adoption of IFRS 16 on 1 January 2019 is shown below:

 
                                                 IAS 17               Change              IFRS 16 
 Statement of financial position                    ZWL                  ZWL                  ZWL 
  (extract) 
                                   --------------------  -------------------  ------------------- 
 
                                                      -            3 078 687            3 078 687 
 Right-of-use assets                  -----------------    -----------------    ----------------- 
                                   --------------------  -------------------  ------------------- 
                                                      -            3 078 687            3 078 687 
 Total assets impact                  -----------------    -----------------    ----------------- 
                                   --------------------  -------------------  ------------------- 
 Liabilities 
                                   --------------------  -------------------  ------------------- 
                                                      -            3 078 687            3 078 687 
 Lease liabilities                    -----------------    -----------------    ----------------- 
                                   --------------------  -------------------  ------------------- 
                                                      -            3 078 687            3 087 687 
 Total liabilities impact             -----------------    -----------------    ----------------- 
                                   --------------------  -------------------  ------------------- 
 Retained earnings                                    -                    -                    - 
                                             ==========          ===========           ========== 
                                   --------------------  -------------------  ------------------- 
 

Reconciliation of IAS 17 Operating Lease commitments to IFRS 16 Lease liability

 
                                                                   ZWL 
 Lease commitments (up to 1 year at 31 December 
  2018                                                       1 343 715 
                                                  -------------------- 
                                                             2 769 694 
 Add extension period lease costs                    ----------------- 
                                                  -------------------- 
 Total IAS 17 undiscounted lease commitments                 4 113 409 
                                                  -------------------- 
                                                           (1 034 722) 
 Discounting Group's incremental borrowing rate     ------------------ 
                                                  -------------------- 
 IFRS 16 Lease liability at 1 January 2019                   3 078 687 
                                                            ========== 
                                                  -------------------- 
 

The adoption of IFRS 16 has resulted in changes in the Group's accounting policies for recognition, classification and measurement of lease arrangements in which the Group is a party. Lease payments are allocated between principal and finance cost. The finance cost is charged to profit or loss over the lease period so as to produce a constant periodic rate of interest on the remaining balance of the liability for each period.

Right-of-use assets are generally depreciated over the shorter of the asset's useful life and the lease term on a straight-line basis. In circumstances where the Group is reasonably certain to exercise a purchase option, the right-of-use asset is depreciated over the underlying asset's useful life. The Group revalues its land and buildings that are presented within property and equipment and it has elected not to do so for the right-of-use buildings held by the Group.

Lessor accounting

The Group did not need to make any adjustments to the accounting for lease contracts in which the Group is the lessor under operating leases as a result of the adoption of IFRS 16.

   3.13     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.

3.13.1 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:

   (i)      Classification and subsequent measurement (continued) 

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 "Other 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 'Other Income'. Interest income from these financial assets is included in "Interest income" using the effective interest rate method.

   (i)      Classification and subsequent measurement (continued) 

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):

   --    cash and cash equivalents; 
   --    loans and advances to customers; 
   --    investment securities; 
   --    lease receivables; 
   --    facilities approved but not drawn down; 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.

3.13.2 Financial Liabilities

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. 

3.13.3 Financial guarantee contracts and loan commitments

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.

   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.

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.

   3.13.4   Critical accounting estimates and judgements 

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.

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 2.4 (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.

   3.13.5   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.

The 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 a 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.

3.13.6 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

 
                                     Inflation adjusted                            Historical Cost 
                                  31 December           31 December           31 December           31 December 
                         --------------------  --------------------  --------------------  -------------------- 
                                         2019                  2018                  2019                  2018 
                         --------------------  --------------------  --------------------  -------------------- 
                                          ZWL                   ZWL                   ZWL                   ZWL 
                         --------------------  --------------------  --------------------  -------------------- 
                                                           Restated 
                         --------------------  --------------------  --------------------  -------------------- 
 Loans and advances 
  to banks                          4 277 927             6 893 435             2 368 733               793 220 
                         --------------------  --------------------  --------------------  -------------------- 
 Loans and advances 
  to customers                    143 515 089           234 835 190            58 942 089            28 570 221 
                         --------------------  --------------------  --------------------  -------------------- 
                                   32 419 428            81 602 183             9 246 368             9 969 737 
 Investment securities     ------------------    ------------------    ------------------    ------------------ 
                         --------------------  --------------------  --------------------  -------------------- 
                                  180 212 444           323 330 808            70 557 190            39 333 178 
                                  ===========           ===========           ===========           =========== 
                         --------------------  --------------------  --------------------  -------------------- 
 
   5.         non interest income 
   5.1       FEE AND COMMISSION INCOME 
 
                                        Inflation adjusted                            Historical Cost 
                                     31 December           31 December           31 December           31 December 
                            --------------------  --------------------  --------------------  -------------------- 
                                            2019                  2018                  2019                  2018 
                            --------------------  --------------------  --------------------  -------------------- 
                                             ZWL                   ZWL                   ZWL                   ZWL 
                            --------------------  --------------------  --------------------  -------------------- 
                                                              Restated 
                            --------------------  --------------------  --------------------  -------------------- 
 Retail banking customer 
  fees                                56 804 021            89 572 472            24 101 648            11 107 290 
                            --------------------  --------------------  --------------------  -------------------- 
 Corporate banking credit 
  related fees                        15 823 020            22 757 379            10 259 457             2 621 449 
                            --------------------  --------------------  --------------------  -------------------- 
 Financial guarantee fees                498 673             1 880 927               212 188               148 518 
                            --------------------  --------------------  --------------------  -------------------- 
 International banking 
  commissions                          6 544 147             4 037 381             3 070 999               491 279 
                            --------------------  --------------------  --------------------  -------------------- 
                                         103 533               115 031 
                                             777                   934            49 598 011            14 170 840 
 Digital banking fees         ------------------    ------------------    ------------------    ------------------ 
                            --------------------  --------------------  --------------------  -------------------- 
                                         183 203               233 280            87 242 303            28 539 376 
                                             638                   093            ==========           =========== 
                                      ==========           =========== 
                            --------------------  --------------------  --------------------  -------------------- 
 
   5.2       Other income 
 
                                              Inflation adjusted                          Historical Cost 
                                          31 December           31 December          31 December           31 December 
                                  -------------------  --------------------  -------------------  -------------------- 
                                                 2019                  2018                 2019                  2018 
                                  -------------------  --------------------  -------------------  -------------------- 
                                                  ZWL                   ZWL                  ZWL                   ZWL 
                                  -------------------  --------------------  -------------------  -------------------- 
                                                                   Restated 
                                  -------------------  --------------------  -------------------  -------------------- 
 Trade and other investments 
  fair value adjustments                      913 332             (316 323)            1 499 630                10 154 
                                  -------------------  --------------------  -------------------  -------------------- 
 Loss of disposal of quoted 
  investments                                       -             (132 802)                    -              (15 074) 
                                  -------------------  --------------------  -------------------  -------------------- 
 
 Fair value gains on investment                                                          194 387 
  properties                               93 624 006            19 523 429                  322             2 551 436 
                                  -------------------  --------------------  -------------------  -------------------- 
 Profit on disposal of 
  investment properties                       584 149             4 395 908              584 149               567 032 
                                  -------------------  --------------------  -------------------  -------------------- 
 Profit on disposal of 
  property and equipment                            -               139 122                    -                22 396 
                                  -------------------  --------------------  -------------------  -------------------- 
 Rental income                              1 280 872             3 012 142              391 885               365 269 
                                  -------------------  --------------------  -------------------  -------------------- 
 Bad debts recovered                       14 744 269            10 622 718            9 519 359             1 295 428 
                                  -------------------  --------------------  -------------------  -------------------- 
                                            1 459 818             1 805 406              240 294               171 806 
 Other net operating income         -----------------    ------------------    -----------------    ------------------ 
                                  -------------------  --------------------  -------------------  -------------------- 
                                              112 606            39 049 600              206 622             4 968 447 
                                                  446           ===========                  639           =========== 
                                           ==========                                 ========== 
                                  -------------------  --------------------  -------------------  -------------------- 
 
     6.         Operating EXPITURE 
 
                                          Inflation adjusted                            Historical Cost 
                                       31 December           31 December           31 December           31 December 
                              --------------------  --------------------  --------------------  -------------------- 
                                              2019                  2018                  2019                  2018 
                              --------------------  --------------------  --------------------  -------------------- 
                                               ZWL                   ZWL                   ZWL                   ZWL 
                              --------------------  --------------------  --------------------  -------------------- 
                                                                Restated 
                                                    --------------------  --------------------  -------------------- 
 The operating profit is after recognising 
  the following: 
                                                    --------------------  --------------------  -------------------- 
                                           116 149               130 979 
 Administration costs                          272                   605            55 318 360            15 963 308 
                              --------------------  --------------------  --------------------  -------------------- 
 Audit fees: 
                              --------------------  --------------------  --------------------  -------------------- 
     - Current year                      1 580 232               755 184               993 686                98 991 
                              --------------------  --------------------  --------------------  -------------------- 
     - Prior year                          318 198               849 895               200 090               111 406 
                              --------------------  --------------------  --------------------  -------------------- 
 Impairment reversal on 
  land and buildings*                    -                     -                      (40 600)              (76 661) 
                              --------------------  --------------------  --------------------  -------------------- 
 Depreciation - (excluding 
  right of use assets)                  15 427 213            11 991 839             2 307 360             1 370 312 
                              --------------------  --------------------  --------------------  -------------------- 
 Amortisation of intangible 
  assets                                 6 356 249             7 882 765               733 909               879 376 
                              --------------------  --------------------  --------------------  -------------------- 
 Depreciation -right of 
  use assets                             3 088 496                     -             1 310 867                     - 
                              --------------------  --------------------  --------------------  -------------------- 
 Directors' remuneration                 6 154 500             8 147 609             2 531 536               971 121 
                              --------------------  --------------------  --------------------  -------------------- 
     - Fees                              1 585 033             1 838 595               644 487               219 246 
                              --------------------  --------------------  --------------------  -------------------- 
 
        *    Expenses                      127 149               149 410                80 767                17 364 
                              --------------------  --------------------  --------------------  -------------------- 
     - Services rendered                 4 442 318             6 159 604             1 806 282               734 511 
                              --------------------  --------------------  --------------------  -------------------- 
 
 Staff costs - salaries,                                         128 926 
  allowances and related                91 465 668                   698            42 582 294            15 402 575 
  costs                          -----------------     -----------------     -----------------     ----------------- 
                              --------------------  --------------------  --------------------  -------------------- 
                                           240 539               289 533               105 937            34 720 428 
                                               828                   595                   502           =========== 
                                        ==========           ===========            ========== 
                              --------------------  --------------------  --------------------  -------------------- 
 

*The impairment reversal on land and building arose due to fair value changes in the Group's land and buildings measured using the revaluation model.

   7.          taxation 
 
                                Inflation adjusted                       Historical Cost 
                             31 December         31 December         31 December        31 December 
                      ------------------  ------------------  ------------------  ----------------- 
 Income tax expense                 2019                2018                2019               2018 
                      ------------------  ------------------  ------------------  ----------------- 
                                     ZWL                 ZWL                 ZWL                ZWL 
                      ------------------  ------------------  ------------------  ----------------- 
                                                    Restated 
                      ------------------  ------------------  ------------------  ----------------- 
 Current tax                   9 989 877          27 541 426           9 989 877          4 433 942 
                      ------------------  ------------------  ------------------  ----------------- 
 Deferred tax                 60 029 671          23 564 601          34 514 671          1 488 132 
                      ------------------  ------------------  ------------------  ----------------- 
                       -----------------   -----------------   -----------------   ---------------- 
                              70 019 548          51 106 027          44 504 548          5 922 074 
                              ==========          ==========          ==========         ========== 
                      ------------------  ------------------  ------------------  ----------------- 
 
   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. Impairment losses are applied to write off loans and advances in part or in whole when they are considered partly or wholly irrecoverable. The aggregate impairment losses which are made during the year are dealt with as per paragraph 8.3.

   9.         EARNINGS PER SHARE 

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

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 dilutive 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 
 
                              Inflation adjusted            Historical Cost 
                           31 December   31 December   31 December   31 December 
                         -------------  ------------  ------------  ------------ 
                                  2019          2018          2019          2018 
                         -------------  ------------  ------------  ------------ 
                                   ZWL           ZWL           ZWL           ZWL 
                         -------------  ------------  ------------  ------------ 
                                            Restated 
                         -------------  ------------  ------------  ------------ 
 Profit for the year        84 091 030    94 784 934   285 900 539    21 221 201 
                         -------------  ------------  ------------  ------------ 
 Headline earnings for 
  the period              (74 560 459)    73 333 507    31 088 574    18 382 583 
                         -------------  ------------  ------------  ------------ 
 
   9.2       Number of shares 
 
                                            Inflation adjusted                            Historical Cost 
                                         31 December           31 December           31 December           31 December 
         ---------------------  --------------------  --------------------  --------------------  -------------------- 
                                                2019                  2018                  2019                  2018 
         ---------------------  --------------------  --------------------  --------------------  -------------------- 
 9.2.1    Basic earnings per 
          share 
         ---------------------  --------------------  --------------------  --------------------  -------------------- 
  Weighted average number 
   of ordinary shares for 
   basic and headline earnings 
   per share                             399 498 150           390 959 988           399 498 150           390 959 988 
 -----------------------------  --------------------  --------------------  --------------------  -------------------- 
 
 9.2.2    Diluted earnings per share 
         -------------------------------------------  --------------------  --------------------  -------------------- 
  Number of shares at 
   beginning of period                   392 955 196           384 974 542           392 955 196           384 974 542 
 -----------------------------  --------------------  --------------------  --------------------  -------------------- 
          Effect of dilution: 
         ---------------------  --------------------  --------------------  --------------------  -------------------- 
          Share options                            -                     -                     -                     - 
          exercised 
         ---------------------  --------------------  --------------------  --------------------  -------------------- 
  Weighted average number 
   of shares issued - scrip                6 542 954             5 985 446             6 542 954             5 985 446 
   dividend                        -----------------     -----------------     -----------------     ----------------- 
 -----------------------------  --------------------  --------------------  --------------------  -------------------- 
                                         404 171 689           390 959 988           404 171 689           390 959 988 
 -----------------------------  --------------------  --------------------  --------------------  -------------------- 
  Share options approved 
   but not granted                        23 942 639            23 942 639            23 942 639            23 942 639 
 -----------------------------  --------------------  --------------------  --------------------  -------------------- 
                                   -----------------     -----------------     -----------------     ----------------- 
         ---------------------  --------------------  --------------------  --------------------  -------------------- 
                                         423 440 789           414 902 627           423 440 789           414 902 627 
                                          ==========            ==========            ==========            ========== 
         ---------------------  --------------------  --------------------  --------------------  -------------------- 
                                                 ZWL                   ZWL                   ZWL                   ZWL 
         ---------------------  --------------------  --------------------  --------------------  -------------------- 
                                                                  Restated 
         ---------------------  --------------------  --------------------  --------------------  -------------------- 
 9.2.3    Headline (losses)/ 
          earnings 
         ---------------------  --------------------  --------------------  --------------------  -------------------- 
  Profit for the period                   84 091 030            94 784 934           285 900 539            21 221 201 
 -----------------------------  --------------------  --------------------  --------------------  -------------------- 
          Add/(deduct) non-recurring items 
         -------------------------------------------  --------------------  --------------------  -------------------- 
  Loss on disposal of 
   quoted investments                              -               132 802                     -                15 074 
 -----------------------------  --------------------  --------------------  --------------------  -------------------- 
  Trade investments fair 
   value gains                             (913 332)               316 323           (1 499 630)              (10 154) 
 -----------------------------  --------------------  --------------------  --------------------  -------------------- 
  Profit on disposal of 
   property and equipment                          -             (139 122)                     -              (22 396) 
 -----------------------------  --------------------  --------------------  --------------------  -------------------- 
  Profit on disposal of 
   investment properties                   (584 149)           (4 395 908)             (584 149)             (567 032) 
 -----------------------------  --------------------  --------------------  --------------------  -------------------- 
  Unrealised foreign exchange 
   revaluation gains                    (92 386 267)               128 510          (92 386 267)                20 689 
 -----------------------------  --------------------  --------------------  --------------------  -------------------- 
 
  Fair value gains on                                                                   (194 387 
   investment properties                (93 624 006)          (19 523 429)                  322)           (2 551 436) 
 -----------------------------  --------------------  --------------------  --------------------  -------------------- 
                                          28 856 265             2 029 397            34 045 403               276 637 
  Tax thereon                      -----------------     -----------------     -----------------     ----------------- 
 -----------------------------  --------------------  --------------------  --------------------  -------------------- 
  Headline (losses)/ earnings           (74 560 459)            73 333 507            31 088 574            18 382 583 
                                          ==========            ==========            ==========            ========== 
 -----------------------------  --------------------  --------------------  --------------------  -------------------- 
 

This is calculated in accordance with the Statement of Investment Practice No. 1 issued by the former Institute of Investment Management and Research (now the Chartered Financial Analysts (CFA) Society of the UK).

   9.3       Earnings/(losses) per share (ZWL cents) 
 
                Inflation adjusted            Historical Cost 
             31 December   31 December   31 December   31 December 
            ------------  ------------  ------------  ------------ 
                    2019          2018          2019          2018 
            ------------  ------------  ------------  ------------ 
                     ZWL           ZWL           ZWL           ZWL 
            ------------  ------------  ------------  ------------ 
                              Restated 
            ------------  ------------  ------------  ------------ 
 Basic             21.05         24.24         71.56          5.43 
            ------------  ------------  ------------  ------------ 
 Diluted           19.86         22.85         67.52          5.11 
            ------------  ------------  ------------  ------------ 
 Headline        (18.66)         18.76          7.78          4.70 
            ------------  ------------  ------------  ------------ 
 
   10.       SHARE CAPITAL 
 
 10.1                                    31 December    31 December    31 December    31 December 
                                                2019           2018           2019           2018 
       ------------------------------  -------------  -------------  -------------  ------------- 
                                              Shares         Shares            ZWL            ZWL 
                                             million        million 
       ------------------------------  -------------  -------------  -------------  ------------- 
        Authorised 
       ------------------------------  -------------  -------------  -------------  ------------- 
        Ordinary shares of ZWL0.00028 
         each                                    600            600        168 000        168 000 
                                          ==========     ==========     ==========     ========== 
       ------------------------------  -------------  -------------  -------------  ------------- 
 
   10.2     Issued and fully paid 
 
                                                Inflation adjusted 
                               31 December      31 December   31 December   31 December 
         ----------------  ---------------  ---------------  ------------  ------------ 
                                      2019             2018          2019          2018 
         ----------------  ---------------  ---------------  ------------  ------------ 
                            Shares million   Shares million           ZWL           ZWL 
         ----------------  ---------------  ---------------  ------------  ------------ 
                                                                               Restated 
         ----------------  ---------------  ---------------  ------------  ------------ 
 10.2.1   Ordinary shares 
         ----------------  ---------------  ---------------  ------------  ------------ 
          Ordinary shares              404              393       796 878       769 225 
                                ==========       ==========    ==========    ========== 
         ----------------  ---------------  ---------------  ------------  ------------ 
 
 
                                           Historical Cost 
                        31 December      31 December   31 December   31 December 
  ----------------  ---------------  ---------------  ------------  ------------ 
                               2019             2018          2019          2018 
  ----------------  ---------------  ---------------  ------------  ------------ 
                     Shares million   Shares million           ZWL           ZWL 
  ----------------  ---------------  ---------------  ------------  ------------ 
                                                                        Restated 
  ----------------  ---------------  ---------------  ------------  ------------ 
   Ordinary shares 
  ----------------  ---------------  ---------------  ------------  ------------ 
   Ordinary shares              404              393        84 116        80 975 
                         ==========       ==========    ==========    ========== 
  ----------------  ---------------  ---------------  ------------  ------------ 
 
 
                                                      Inflation adjusted 
                                     31 December      31 December   31 December   31 December 
          ---------------------  ---------------  ---------------  ------------  ------------ 
                                            2019             2018          2019          2018 
          ---------------------  ---------------  ---------------  ------------  ------------ 
                                  Shares million   Shares million           ZWL           ZWL 
                                                                                     Restated 
          ---------------------  ---------------  ---------------  ------------  ------------ 
 10.2.2    Redeemable ordinary 
            shares 
          ---------------------  ---------------  ---------------  ------------  ------------ 
  Redeemable ordinary 
   shares                                    104              104        29 040       180 382 
 ------------------------------  ---------------  ---------------  ------------  ------------ 
                                      ==========       ==========    ==========    ========== 
 ------------------------------  ---------------  ---------------  ------------  ------------ 
 
 
                                                        Historical Cost 
                                     31 December      31 December   31 December   31 December 
          ---------------------  ---------------  ---------------  ------------  ------------ 
                                            2019             2018          2019          2018 
          ---------------------  ---------------  ---------------  ------------  ------------ 
                                  Shares million   Shares million           ZWL           ZWL 
          ---------------------  ---------------  ---------------  ------------  ------------ 
 10.2.2    Redeemable ordinary 
            shares 
          ---------------------  ---------------  ---------------  ------------  ------------ 
  Redeemable ordinary 
   shares                                    104              104        29 040        29 040 
 ------------------------------  ---------------  ---------------  ------------  ------------ 
                                      ==========       ==========    ==========    ========== 
 ------------------------------  ---------------  ---------------  ------------  ------------ 
 

A total of 11 216 493 ordinary shares were issued to existing shareholders in June 2019 as a scrip dividend.

Of the unissued ordinary shares of 196 million shares (2018 - 207 million), options which may be granted in terms of the 2012 ESOS amount to 23 942 639 (2018 - 23 942 639). No share options were exercised from the Scheme as at 31 December 2019. The share option scheme expires in 2022.

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

   11.       REDEEMABLE ORDINARY SHARES 
 
                                 Inflation adjusted                       Historical Cost 
                              31 December         31 December         31 December        31 December 
                       ------------------  ------------------  ------------------  ----------------- 
                                     2019                2018                2019               2018 
                       ------------------  ------------------  ------------------  ----------------- 
                                      ZWL                 ZWL                 ZWL                ZWL 
                       ------------------  ------------------  ------------------  ----------------- 
                                                     Restated 
                       ------------------  ------------------  ------------------  ----------------- 
 Nominal value (note 
  10.2.2)                          29 040             180 382              29 040             29 040 
                       ------------------  ------------------  ------------------  ----------------- 
 Share premium                 14 306 213          88 863 025          14 306 213         14 306 213 
                       ------------------  ------------------  ------------------  ----------------- 
                        -----------------   -----------------   -----------------   ---------------- 
                               14 335 253          89 043 407          14 335 253         14 335 253 
                               ==========          ==========          ==========         ========== 
                       ------------------  ------------------  ------------------  ----------------- 
 

On 30 June 2013, the Group received USD14 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 103 714 287) for individually investing USD4 943 715. This amount, net of share issue expenses, was used to recapitalise the Bank in order to contribute towards the minimum capital requirements previously set by the Reserve Bank of Zimbabwe of ZWL200 million by 31 December 2020. FMO and Norfund came 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 at 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 entailed in the share buy-back agreement. 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. The shares issued gave rise to a potential financial liability and are classified as redeemable ordinary shares.

   12.      SUBORDINATED TERM LOAN 
 
                                 Inflation adjusted                      Historical Cost 
                              31 December        31 December        31 December        31 December 
                        -----------------  -----------------  -----------------  ----------------- 
                                     2019               2018               2019               2018 
                        -----------------  -----------------  -----------------  ----------------- 
                                      ZWL                ZWL                ZWL                ZWL 
                        -----------------  -----------------  -----------------  ----------------- 
                                                    Restated 
                        -----------------  -----------------  -----------------  ----------------- 
 At 1 January                   9 352 328         12 776 031          1 505 647          1 415 904 
                        -----------------  -----------------  -----------------  ----------------- 
 Monetary adjustment          (9 851 926)        (3 981 143)                  -                  - 
                        -----------------  -----------------  -----------------  ----------------- 
 Exchange revaluation          25 883 189                  -         25 883 189                  - 
                        -----------------  -----------------  -----------------  ----------------- 
 Interest capitalised           3 779 812          1 065 167          1 151 954            171 483 
                        -----------------  -----------------  -----------------  ----------------- 
 Interest paid                  (803 062)          (507 728)          (180 450)           (81 740) 
                        -----------------  -----------------  -----------------  ----------------- 
                         ----------------   ----------------   ----------------   ---------------- 
                               28 360 340          9 352 327         28 360 340          1 505 647 
                               ==========         ==========         ==========          ========= 
                        -----------------  -----------------  -----------------  ----------------- 
 

In 2013, the Group received a subordinated term loan amounting to USD1.4 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 defaulted on a principal repayments with respect to this subordinated loan during the year ended 31 December 2019 as a result of the prevailing nostro funding challenges affecting the economy. However, there were no defaults on interest payments. There were no breaches to the financial covenants between the Group and the Development Financial Institution at the reporting date of 31 December 2019.

On 22 February 2019, the Reserve Bank of Zimbabwe (RBZ) issued an Exchange Control directive, RU 28 of 2019 which established an interbank foreign exchange market to formalise the buying and selling of foreign currency through the Banks and Bureaux de change. In order to establish an exchange rate between the current monetary balances and foreign currency, the Monetary Authorities denominated the existing RTGS balances in circulation, as RTGS dollars. The RBZ pegged the initial trades at US$/RTGS$1:2.5. In order to manage the transition, the RBZ also advised on the same date that all foreign liabilities or legacy debts due to suppliers and service providers, declared dividends e.t.c would be treated separately after registering such debts with the RBZ Exchange Control Department for an orderly expunging of these debts.

Consequently, the Group registered its legacy debts, which included the subordinated term loan and offshore lines of credit and transferred the ZWL equivalent of these debts at a rate of US$/ZWL1:1 to the RBZ in terms of the RBZ directive. As such, in terms of SI 33 of 2019 and the RBZ directive. These legacy debts and the related amounts transferred to the RBZ in terms of the RBZ directive on the legacy debts, have been translated using the interbank rate at reporting date. Subsequent to year end, the RBZ approved the legacy debt in respect of the subordinated term loan.

   13.       DepositS and other LIABILITIES 
   13.1     Deposits and other liabilities 
 
                                            Inflation adjusted                            Historical Cost 
                                         31 December           31 December           31 December           31 December 
                                --------------------  --------------------  --------------------  -------------------- 
                                                2019                  2018                  2019                  2018 
                                --------------------  --------------------  --------------------  -------------------- 
                                                 ZWL                   ZWL                   ZWL                   ZWL 
                                --------------------  --------------------  --------------------  -------------------- 
                                                                  Restated 
                                --------------------  --------------------  --------------------  -------------------- 
 Deposits from banks and 
  other financial                            309 012               460 337               309 012                74 110 
  institutions**                                 254                   446                   254                   527 
                                --------------------  --------------------  --------------------  -------------------- 
 
                                                                 2 241 403               882 067               360 847 
 Current and deposit accounts            882 067 591                   330                   591                   422 
  from customers*                  -----------------     -----------------     -----------------     ----------------- 
                                --------------------  --------------------  --------------------  -------------------- 
                                           1 191 079             2 701 740                 1 191               434 957 
 Total deposits                                  845                   776               079 845                   949 
                                --------------------  --------------------  --------------------  -------------------- 
                                                                                          77 066                12 147 
 Trade and other payables*                77 066 171            77 691 787                   171                   334 
                                --------------------  --------------------  --------------------  -------------------- 
                                   -----------------     -----------------     -----------------     ----------------- 
                                           1 268 146             2 779 432                 1 268               447 105 
                                                 016                   563               146 016                   283 
                                          ==========            ==========            ==========           =========== 
                                --------------------  --------------------  --------------------  -------------------- 
 

* 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 trade and other payables are lease liabilities in respect of leased properties in which the Group is a lessee.

Also included in trade and other liabilities are ECL provisions in respect of guarantees and facilities approved but not drawn down.

** Included in deposits from banks and other financial institutions are loan balances of ZWL145 815 913, ZWL73 709 541 and ZWL20 128 080 due to Nederlandse Financierings-Maatschappij Voor Ontiwikkelingslanden (FMO), Swedfund and Afreximbank. The carrying amounts of deposits from other banks and other financial institutions approximate the related fair values. All the loan balances except for Afreximbank are part of the Group's legacy debts which were registered with the Reserve Bank of Zimbabwe (RBZ) for an orderly expunging of the debts. During the period under review, the Group transferred the ZWL equivalent of the legacy debts at a rate of US$/ZWL1:1 to the RBZ as per requirement of the Exchange Control directive RU 28 of 2019. There were no breaches to the financial covenants. However, the Group defaulted on the principal repayments repayments on the FMO and Swedfund facilities during the period under review due to the nostro-funding challenges that were prevailing in the economy and subsequent to period end, the above mentioned lines of credit balances have since been transferred to the RBZ for an orderly expunging of the debts. The Bank has been communicating with the lenders regarding these developments.

The line of credit balances have been translated at 31 December 2019 at the closing rate of USD/ZWL1:16.77. Consequently, the amount transferred to the RBZ for the settlement of these debts has been translated at the same closing rate as it represents the Bank's right to the settlement of the related lines of credit. Subsequent to year end, the RBZ approved the legacy debt in respect of the FMO and Swedfund lines of credit.

   13.2     Maturity analysis 
 
                                Inflation adjusted                        Historical Cost 
                             31 December         31 December         31 December         31 December 
                      ------------------  ------------------  ------------------  ------------------ 
                                    2019                2018                2019                2018 
                      ------------------  ------------------  ------------------  ------------------ 
                                     ZWL                 ZWL                 ZWL                 ZWL 
                      ------------------  ------------------  ------------------  ------------------ 
                                                    Restated 
                      ------------------  ------------------  ------------------  ------------------ 
                               1 044 719           2 323 856           1 044 719             374 121 
 Less than 1 month                   581                 969                 581                 777 
                      ------------------  ------------------  ------------------  ------------------ 
 1 to 3 months                50 530 229         160 474 300          50 530 229          25 835 037 
                      ------------------  ------------------  ------------------  ------------------ 
 3 to 6 months                33 694 415          46 681 277          33 694 415           7 515 300 
                      ------------------  ------------------  ------------------  ------------------ 
 6 months to 1 year           43 929 895          73 178 050          43 929 895          11 781 062 
                      ------------------  ------------------  ------------------  ------------------ 
 1 to 5 years                 18 013 895          96 358 627          18 013 895          15 512 943 
                      ------------------  ------------------  ------------------  ------------------ 
 Over 5 years                    191 830           1 191 553             191 830             191 830 
                      ------------------  ------------------  ------------------  ------------------ 
                       -----------------   -----------------   -----------------   ----------------- 
                               1 191 079           2 701 740           1 191 079             434 957 
                                     845                 776                 845                 949 
                              ==========          ==========          ==========         =========== 
                      ------------------  ------------------  ------------------  ------------------ 
 
   13.3     Sectoral analysis of deposits 
 
                                                        Inflation adjusted 
                                           31 December                   31 December 
                                    ------------------  --------  ------------------  -------- 
                                                  2019                          2018 
                                    ------------------  --------  ------------------  -------- 
                                                   ZWL                           ZWL 
                                    ------------------  --------  ------------------  -------- 
                                                               %            Restated         % 
                                    ------------------  --------  ------------------  -------- 
 Agriculture                                25 380 717         2          68 358 319         2 
                                    ------------------  --------  ------------------  -------- 
 Banks and other financial 
  institutions                             309 012 254        26         460 337 446        17 
                                    ------------------  --------  ------------------  -------- 
 Distribution                              119 294 305        10         261 075 456        10 
                                    ------------------  --------  ------------------  -------- 
 Individuals                               103 037 176         9         172 324 302         6 
                                    ------------------  --------  ------------------  -------- 
 Manufacturing                             164 249 753        14         433 554 818        16 
                                    ------------------  --------  ------------------  -------- 
 Mining companies                           20 256 979         2          56 385 095         2 
                                    ------------------  --------  ------------------  -------- 
 Municipalities and parastatals             57 993 887         4         179 797 201         7 
                                    ------------------  --------  ------------------  -------- 
 Other deposits                            115 811 950        10         371 331 382        14 
                                    ------------------  --------  ------------------  -------- 
 Services                                  216 039 339        18         608 900 962        23 
                                    ------------------  --------  ------------------  -------- 
 Transport and telecommunications           60 003 485         5          89 675 795         3 
                                    ------------------  --------  ------------------  -------- 
                                     -----------------   -------   -----------------   ------- 
                                             1 191 079       100       2 701 740 776       100 
                                                   845      ====          ==========      ==== 
                                            ========== 
                                    ------------------  --------  ------------------  -------- 
 
 
                                                          Historical Cost 
                                           31 December                   31 December 
                                    ------------------  --------  ------------------  -------- 
                                                  2019                          2018 
                                    ------------------  --------  ------------------  -------- 
                                                   ZWL         %                 ZWL         % 
                                    ------------------  --------  ------------------  -------- 
 Agriculture                                25 380 717         2          11 005 126         2 
                                    ------------------  --------  ------------------  -------- 
 Banks and other financial 
  institutions                             309 012 254        26          74 110 527        17 
                                    ------------------  --------  ------------------  -------- 
 Distribution                              119 294 305        10          42 030 992        10 
                                    ------------------  --------  ------------------  -------- 
 Individuals                               103 037 176         9          27 742 789         6 
                                    ------------------  --------  ------------------  -------- 
 Manufacturing                             164 249 753        14          69 798 745        16 
                                    ------------------  --------  ------------------  -------- 
 Mining companies                           20 256 979         2           9 077 534         2 
                                    ------------------  --------  ------------------  -------- 
 Municipalities and parastatals             57 993 887         5          28 945 864         7 
                                    ------------------  --------  ------------------  -------- 
 Other deposits                            115 811 950        10          59 781 285        14 
                                    ------------------  --------  ------------------  -------- 
 Services                                  216 039 339        18          98 028 025        23 
                                    ------------------  --------  ------------------  -------- 
 Transport and telecommunications           60 003 485         5          14 437 062         3 
                                    ------------------  --------  ------------------  -------- 
                                     -----------------   -------   -----------------   ------- 
                                             1 191 079       100         434 957 949       100 
                                                   845      ====          ==========      ==== 
                                            ========== 
                                    ------------------  --------  ------------------  -------- 
 
   14.       FINANCIAL INSTRUMENTS 
   14.1      Investment securities 
 
                                                             Inflation adjusted                      Historical Cost 
                                                          31 December        31 December        31 December        31 December 
                                             -----  -----------------  -----------------  -----------------  ----------------- 
                                              Note               2019               2018               2019               2018 
                                             -----  -----------------  -----------------  -----------------  ----------------- 
                                                                  ZWL                ZWL 
                                             -----  -----------------  -----------------  -----------------  ----------------- 
                                                                                Restated 
                                             -----  -----------------  -----------------  -----------------  ----------------- 
 Amortised cost                                               107 568            731 055            107 568            117 693 
  - Gross                                                         657                055                657                824 
                                             -----  -----------------  -----------------  -----------------  ----------------- 
 Impairment allowance                         16.3          (402 502)        (2 760 331)          (402 502)          (444 390) 
                                             -----  -----------------  -----------------  -----------------  ----------------- 
 - ECL at 1 January 
  2018                                                    (2 760 331)        (3 375 428)          (444 390)          (374 082) 
                                             -----  -----------------  -----------------  -----------------  ----------------- 
 - Monetary adjustment                                      2 399 717            615 097                  -                  - 
                                             -----  -----------------  -----------------  -----------------  ----------------- 
 
   *    ECL charged through profit and loss                  (41 888)          (436 718)             41 888           (70 308) 
                                             -----  -----------------  -----------------  -----------------  ----------------- 
                                                     ----------------   ----------------   ----------------   ---------------- 
                                                              107 166            728 294            107 166            117 249 
                                                                  155                724                155                434 
                                                            =========          =========          =========          ========= 
                                                    -----------------  -----------------  -----------------  ----------------- 
 

The Group holds treasury bills and government bonds amounting to ZWL107 568 657 with interest rates ranging from 2% to 15%. 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 ZWL107 568 657, a total of ZWL83 102 011 had been pledged as security against interbank borrowings.

   14.2     Maturity analysis of investment securities - amortised cost 
 
                                  Inflation adjusted                      Historical Cost 
                               31 December        31 December        31 December         31 December 
                        ------------------  -----------------  -----------------  ------------------ 
                                      2019               2018               2019                2018 
                        ------------------  -----------------  -----------------  ------------------ 
                                       ZWL                ZWL                ZWL                 ZWL 
                        ------------------  -----------------  -----------------  ------------------ 
                                                     Restated 
                        ------------------  -----------------  -----------------  ------------------ 
 Less than 1 month               2 500 000                  -          2 500 000                   - 
                        ------------------  -----------------  -----------------  ------------------ 
 1 to 3 months                   6 390 075            883 566          6 390 075             142 245 
                        ------------------  -----------------  -----------------  ------------------ 
 3 to 6 months                  19 000 000         38 101 190         19 000 000           6 133 977 
                        ------------------  -----------------  -----------------  ------------------ 
                                                      267 119 
 6 months to 1 year             54 787 417                415         54 787 417          43 004 020 
                        ------------------  -----------------  -----------------  ------------------ 
                                                      354 250 
 1 to 5 years                   13 508 934                171         13 508 934          57 031 351 
                        ------------------  -----------------  -----------------  ------------------ 
                                11 382 231         70 700 713         11 382 231          11 382 231 
 Over 5 years             ----------------    ---------------    ---------------    ---------------- 
                        ------------------  -----------------  -----------------  ------------------ 
                                   107 568            731 055            107 568             117 693 
                                       657                055                657                 824 
                        ------------------  -----------------  -----------------  ------------------ 
 Expected Credit loss 
  allowance                      (402 502)        (2 760 331)          (402 502)           (444 390) 
                        ------------------  -----------------  -----------------  ------------------ 
                          ----------------    ---------------    ---------------    ---------------- 
                                   107 166            728 294            107 166             117 249 
                                       155                724                155                 434 
                                ==========         ==========         ==========         =========== 
                        ------------------  -----------------  -----------------  ------------------ 
 
   14.5     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.

14.5.1 Financial instruments measured at fair value - fair value hierarchy

 
                                                  Inflation adjusted 
                                   31 Dec 
                     --------------------  -----------------  -----------------  ---------------- 
                                     2019            Level 1            Level 2           Level 3 
                     --------------------  -----------------  -----------------  ---------------- 
                                      ZWL                ZWL                ZWL               ZWL 
                     --------------------  -----------------  -----------------  ---------------- 
 Trade investments              1 612 131                  -                  -         1 612 131 
                     --------------------  -----------------  -----------------  ---------------- 
                        ----------------1   ----------------   ----------------   --------------- 
                                  612 131                  -                  -         1 612 131 
                                =========          =========          =========         ========= 
                     --------------------  -----------------  -----------------  ---------------- 
 
                                   31 Dec 
                     --------------------  -----------------  -----------------  ---------------- 
                                     2018            Level 1            Level 2           Level 3 
                     --------------------  -----------------  -----------------  ---------------- 
                                      ZWL                ZWL                ZWL               ZWL 
                     --------------------  -----------------  -----------------  ---------------- 
                                 Restated 
                     --------------------  -----------------  -----------------  ---------------- 
 Trade investments                698 799                  -                  -           698 799 
                     --------------------  -----------------  -----------------  ---------------- 
                      ----------------698   ----------------   ----------------   --------------- 
                                      799                  -                  -           698 799 
                                =========          =========          =========         ========= 
                     --------------------  -----------------  -----------------  ---------------- 
 
 
                                                  Historical Cost 
                               31 Dec 
                     ----------------  -----------------  -----------------  ---------------- 
                                 2019            Level 1            Level 2           Level 3 
                     ----------------  -----------------  -----------------  ---------------- 
                                  ZWL                ZWL                ZWL               ZWL 
                     ----------------  -----------------  -----------------  ---------------- 
 Trade investments          1 612 131                  -                  -         1 612 131 
                     ----------------  -----------------  -----------------  ---------------- 
                      ---------------   ----------------   ----------------   --------------- 
                            1 612 131                  -                  -         1 612 131 
                            =========          =========          =========         ========= 
                     ----------------  -----------------  -----------------  ---------------- 
 
                               31 Dec 
                     ----------------  -----------------  -----------------  ---------------- 
                                 2018            Level 1            Level 2           Level 3 
                     ----------------  -----------------  -----------------  ---------------- 
                                  ZWL                ZWL                ZWL               ZWL 
                     ----------------  -----------------  -----------------  ---------------- 
 Trade investments            112 501                  -                  -           112 501 
                     ----------------  -----------------  -----------------  ---------------- 
                       --------------   ----------------   ----------------   --------------- 
                              112 501                  -                  -           112 501 
                            =========          =========          =========         ========= 
                     ----------------  -----------------  -----------------  ---------------- 
 

During the reporting periods ended 31 December 2019 and 31 December 2018, 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.

Level 3 fair value measurements

Reconciliation - Trade and other investments

 
                                  Inflation adjusted                        Historical Cost 
                               31 December         31 December         31 December         31 December 
                        ------------------  ------------------  ------------------  ------------------ 
                                      2019                2018                2019                2018 
                        ------------------  ------------------  ------------------  ------------------ 
                                       ZWL                 ZWL                 ZWL                 ZWL 
                        ------------------  ------------------  ------------------  ------------------ 
                                                      Restated 
                        ------------------  ------------------  ------------------  ------------------ 
 Balance at 1 January              698 799           1 015 122             112 501             102 347 
                        ------------------  ------------------  ------------------  ------------------ 
 Gain recognised in 
  profit or loss                   913 332           (316 323)           1 499 630              10 154 
                        ------------------  ------------------  ------------------  ------------------ 
                         -----------------   -----------------   -----------------   ----------------- 
                                 1 612 131             698 799           1 612 131             112 501 
                                ==========          ==========          ==========         =========== 
                        ------------------  ------------------  ------------------  ------------------ 
 
   14.5.2     Financial instruments not measured at fair value 

Below is a list of the Group's financial investments not measured at fair value, but whose carrying amounts approximate fair value.

 
                                       Inflation adjusted                        Historical Cost 
                                    31 December         31 December         31 December         31 December 
                             ------------------  ------------------  ------------------  ------------------ 
                                           2019                2018                2019                2018 
                             ------------------  ------------------  ------------------  ------------------ 
                                            ZWL                 ZWL                 ZWL                 ZWL 
                             ------------------  ------------------  ------------------  ------------------ 
                                                           Restated 
                             ------------------  ------------------  ------------------  ------------------ 
 Assets 
                             ------------------  ------------------  ------------------  ------------------ 
                                        492 304                                 492 304             112 440 
 Cash and cash equivalents                  267         698 426 589                 267                 912 
                             ------------------  ------------------  ------------------  ------------------ 
 
 Loans, advances and                    852 557           1 581 873             817 960             254 202 
  other accounts                            453                 937                 242                 945 
                             ------------------  ------------------  ------------------  ------------------ 
                                        107 166                                 107 166             117 249 
 Investment securities                      155         728 294 724                 155                 434 
                                                                                                    117 249 
                                                                                                        431 
                             ------------------  ------------------  ------------------  ------------------ 
                              -----------------   -----------------   -----------------   ----------------- 
   Total                              1 452 027           3 008 595           1 417 430             483 893 
                                            875                 250                 664                 291 
                                     ==========          ==========          ==========         =========== 
                             ------------------  ------------------  ------------------  ------------------ 
 
 Liabilities 
                             ------------------  ------------------  ------------------  ------------------ 
 Deposits and other                   1 268 146           2 779 432           1 268 146             447 105 
  liabilities                               016                 563                 016                 283 
                             ------------------  ------------------  ------------------  ------------------ 
                              -----------------   -----------------   -----------------   ----------------- 
                                      1 268 146           2 779 432           1 268 146             447 105 
                                            016                 563                 016                 283 
                                     ==========          ==========          ==========          ========== 
                             ------------------  ------------------  ------------------  ------------------ 
 
 
   15.       CASH AND CASH EQUIVALENTS 
 
                                      Inflation adjusted                     Historical Cost 
                                   31 December        31 December        31 December       31 December 
                             -----------------  -----------------  -----------------  ---------------- 
                                          2019               2018               2019              2018 
                             -----------------  -----------------  -----------------  ---------------- 
                                           ZWL                ZWL                ZWL               ZWL 
                             -----------------  -----------------  -----------------  ---------------- 
                                                         Restated 
                             -----------------  -----------------  -----------------  ---------------- 
 Balances with the Central             267 032            553 329            267 032 
  Bank                                     753                510                753        89 081 480 
                             -----------------  -----------------  -----------------  ---------------- 
 
 Current, nostro accounts*             160 209                               160 209 
  and cash                                 897         83 397 817                897        13 426 360 
                             -----------------  -----------------  -----------------  ---------------- 
 Interbank placements 
  (see below)                       65 000 000         62 114 988         65 000 000        10 000 000 
                             -----------------  -----------------  -----------------  ---------------- 
 Expected Credit loss 
  allowance (see below)              (438 383)          (415 726)          (438 383)          (66 928) 
                             -----------------  -----------------  -----------------  ---------------- 
                              ----------------   ----------------   ----------------   --------------- 
                                       492 304            698 426            492 304           112 440 
                                           267                589                267               912 
                                     =========          =========          =========         ========= 
                             -----------------  -----------------  -----------------  ---------------- 
 
 
                                                               Inflation adjusted                     Historical Cost 
                                                            31 December        31 December        31 December       31 December 
                                             -------  -----------------  -----------------  -----------------  ---------------- 
                                              Note                 2019               2018               2019              2018 
                                             -------  -----------------  -----------------  -----------------  ---------------- 
                                                                    ZWL                ZWL                ZWL               ZWL 
                                             -------  -----------------  -----------------  -----------------  ---------------- 
                                                                                  Restated 
                                             -------  -----------------  -----------------  -----------------  ---------------- 
 Interbank placements                                        65 500 000         62 114 988         65 500 000        10 000 000 
                                             -------  -----------------  -----------------  -----------------  ---------------- 
 Expected Credit Loss 
  allowance - Stage 
  1                                             16.3          (438 383)          (415 726)          (438 383)          (66 928) 
                                             -------  -----------------  -----------------  -----------------  ---------------- 
 
    *    ECL charged at 1 January 2018                        (415 726)          (241 552)           (66 928)          (26 770) 
                                             -------  -----------------  -----------------  -----------------  ---------------- 
 
     *    Monetary adjustment                                   348 796             75 267                  -                 - 
                                             -------  -----------------  -----------------  -----------------  ---------------- 
 
    *    ECL charged through profit or loss                   (371 455)          (249 441)          (371 455)          (40 158) 
                                             -------  -----------------  -----------------  -----------------  ---------------- 
                                                       ----------------   ----------------   ----------------   --------------- 
                                                             65 061 617         61 669 262         65 061 617         9 933 072 
                                                              =========          =========          =========         ========= 
                                                      -----------------  -----------------  -----------------  ---------------- 
 

*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 and the Bank's transactions which include payments and cash withdrawals.

   16.       TOTAL LOANS, ADVANCES AND OTHER ASSETS 
 
                                Inflation adjusted                        Historical Cost 
                             31 December         31 December         31 December         31 December 
                      ------------------  ------------------  ------------------  ------------------ 
                                    2019                2018                2019                2018 
                      ------------------  ------------------  ------------------  ------------------ 
                                     ZWL                 ZWL                 ZWL                 ZWL 
                      ------------------  ------------------  ------------------  ------------------ 
                                                    Restated 
                      ------------------  ------------------  ------------------  ------------------ 
 Fixed term loans - 
  Corporate                  264 688 911         360 494 147         264 688 911          58 036 580 
                      ------------------  ------------------  ------------------  ------------------ 
 Fixed term loans -                                  481 889 
  Retail                      94 772 446                 884          94 772 446          77 580 291 
                      ------------------  ------------------  ------------------  ------------------ 
 Mortgages                    58 587 891         381 324 576          58 587 891          61 390 107 
                      ------------------  ------------------  ------------------  ------------------ 
 Overdrafts                   97 600 960         316 455 428          97 600 959          50 946 710 
                      ------------------  ------------------  ------------------  ------------------ 
                       -----------------   -----------------   ----------------- 
                                 515 650           1 540 164             515 650   ----------------- 
                                     207                 035                 207         247 953 688 
                      ------------------  ------------------  ------------------  ------------------ 
 Other assets                336 907 246          41 709 902         302 310 035           6 249 257 
                      ------------------  ------------------  ------------------  ------------------ 
                       -----------------    ----------------    ----------------    ---------------- 
                                 852 557           1 581 873         817 960 242         254 202 945 
                                     453                 937          ==========          ========== 
                              ==========          ========== 
                      ------------------  ------------------  ------------------  ------------------ 
 
   16.1     Maturity analysis 
 
                                            Inflation adjusted                           Historical Cost 
                                         31 December           31 December         31 December           31 December 
                                --------------------  --------------------  ------------------  -------------------- 
                                                2019                  2018                2019                  2018 
                                --------------------  --------------------  ------------------  -------------------- 
                                                 ZWL                   ZWL                 ZWL                   ZWL 
                                --------------------  --------------------  ------------------  -------------------- 
                                                                  Restated 
                                --------------------  --------------------  ------------------  -------------------- 
                                             138 436                                   138 436 
 Less than 1 month                               142           418 736 981                 142            67 413 196 
                                --------------------  --------------------  ------------------  -------------------- 
 1 to 3 months                            64 154 025           119 655 513          64 154 025            19 263 549 
                                --------------------  --------------------  ------------------  -------------------- 
 3 to 6 months                            21 639 536            42 415 802          21 639 536             6 828 594 
                                --------------------  --------------------  ------------------  -------------------- 
                                             105 500                                   105 500 
 6 months to 1 year                              893           154 585 667                 893            24 887 015 
                                --------------------  --------------------  ------------------  -------------------- 
                                             153 679                                   153 679 
 1 to 5 years                                    923           585 389 675                 923            94 242 902 
                                --------------------  --------------------  ------------------  -------------------- 
                                          49 699 770           308 710 062          49 699 770            49 699 770 
 Over 5 years                       ----------------      ----------------    ----------------      ---------------- 
                                --------------------  --------------------  ------------------  -------------------- 
                                             533 110   1 629 493                       533 110 
 Total advances                                  289    700                                289           262 335 026 
                                --------------------  --------------------  ------------------  -------------------- 
 
 Allowances for impairment                   (17 115               (82 617             (17 115               (13 300 
  losses on loans and advance                   341)                  211)                341)                  688) 
                                --------------------  --------------------  ------------------  -------------------- 
 IAS 39 impairment loss 
  allowance at 1 January                           -          (49 140 224)                   -           (5 445 968) 
                                --------------------  --------------------  ------------------  -------------------- 
 
 ECL recognized through                      (82 617                                   (13 300 
  retained earnings                             210)          (73 766 120)                688)           (8 175 135) 
                                --------------------  --------------------  ------------------  -------------------- 
 Monetary adjustment                      69 316 522            38 298 875                   -                     - 
                                --------------------  --------------------  ------------------  -------------------- 
 ECL charge through profit 
  or loss                                (4 929 615)          (24 234 082)         (4 929 615)           (3 901 487) 
                                --------------------  --------------------  ------------------  -------------------- 
 Bad debts written off                     1 114 962            26 224 339           1 114 962             4 221 902 
                                --------------------  --------------------  ------------------  -------------------- 
 Suspended interest on 
  credit impaired financial                (344 741)           (6 712 454)           (344 741)           (1 080 650) 
  assets                           -----------------     -----------------     ---------------     ----------------- 
                                --------------------  --------------------  ------------------  -------------------- 
                                             515 650             1 540 164             515 650               247 953 
                                                 207                   035                 207                   688 
                                --------------------  --------------------  ------------------  -------------------- 
                                             336 907                                   302 310 
 Other assets                                    246            41 709 902                 035             6 249 257 
                                --------------------  --------------------  ------------------  -------------------- 
                                    ----------------      ----------------    ----------------     ----------------- 
                                             852 557             1 581 873             817 960               254 202 
                                                 453                   937                 242                   945 
                                          ==========            ==========          ==========            ========== 
                                --------------------  --------------------  ------------------  -------------------- 
 

The Bank is continuing recovery efforts in respect of loans written off amounting to ZWL1 114 962.

   16.2      Sectoral analysis of utilisations 
 
                                 Inflation adjusted                                    Historical Cost 
                       31 December               31 December               31 December               31 December 
                 -----------------  -----  -----------------  -----  -----------------  -----  -----------------  ----- 
                              2019                      2018                      2019                      2018 
                 -----------------  -----  -----------------  -----  -----------------  -----  -----------------  ----- 
                               ZWL      %                ZWL      %                ZWL      %                ZWL      % 
                 -----------------  -----  -----------------  -----  -----------------  -----  -----------------  ----- 
                                                    Restated 
                 -----------------  -----  -----------------  -----  -----------------  -----  -----------------  ----- 
 Agriculture 
  and                                                232 228 
  horticulture          96 767 992     18                415     14         96 767 992     18         37 386 857     14 
                 -----------------  -----  -----------------  -----  -----------------  -----  -----------------  ----- 
 Conglomerates           2 397 398      -         66 415 845      4          2 397 398      -         10 692 402      4 
                 -----------------  -----  -----------------  -----  -----------------  -----  -----------------  ----- 
                                                     179 525 
 Distribution           87 785 991     16                412     11         87 785 991     16         28 902 108     11 
                 -----------------  -----  -----------------  -----  -----------------  -----  -----------------  ----- 
 Food & 
  beverages             29 457 868      6         39 162 651      3         29 457 868      6          6 304 863      3 
                 -----------------  -----  -----------------  -----  -----------------  -----  -----------------  ----- 
                           126 212                   624 331                   126 212                   100 512 
 Individuals                   109     24                973     38                109     24                291     38 
                 -----------------  -----  -----------------  -----  -----------------  -----  -----------------  ----- 
 Manufacturing          60 715 905     11         54 233 187      3         60 715 905     11          8 731 095      3 
                 -----------------  -----  -----------------  -----  -----------------  -----  -----------------  ----- 
 Mining                  1 157 120      -          4 368 507      -          1 157 120      -            703 294      - 
                 -----------------  -----  -----------------  -----  -----------------  -----  -----------------  ----- 
                           128 615                   429 227                   128 615                    69 102 
 Services                      906     24                710     27                906     24                116     27 
                 -----------------  -----  -----------------  -----  -----------------  -----  -----------------  ----- 
                 -----------------  -----  -----------------  -----  -----------------  -----  -----------------  ----- 
                           533 110    100          1 629 493    100            533 110    100            262 335    100 
                               289    ===                700    ===                289    ===                026    === 
                        ==========                ==========                ==========                ========== 
                 -----------------  -----  -----------------  -----  -----------------  -----  -----------------  ----- 
 

The material concentration of loans and advances is with individuals at 24% (2018 - 38%) and services sector at 24% (2018 - 27%).

   16.3      Impairment analysis of financial assets measured at amortised cost 
 
                                                                  Inflation adjusted 
                                                Stage 1            Stage 2            Stage 3              Total 
                                     ------------------  -----------------  -----------------  ----------------- 
 Gross carrying amount at                     2 312 305            156 020            120 997          2 589 322 
  1 January 2019                                    213                016                202                431 
                                     ------------------  -----------------  -----------------  ----------------- 
                                             (1 930 043           (140 902           (101 517         (2 172 462 
 Monetary adjustment                               173)               082)               652)               907) 
                                     ------------------  -----------------  -----------------  ----------------- 
 Transfers 
                                     ------------------  -----------------  -----------------  ----------------- 
                                            (9 851 828)         11 175 756        (1 323 928) 
                                     ------------------  -----------------  -----------------  ----------------- 
     - to 12 months to ECL                    1 342 842        (1 232 110)          (110 732)                  - 
                                     ------------------  -----------------  -----------------  ----------------- 
     - to lifetime ECL not credit 
      impaired                             (10 333 912)         12 836 932        (2 503 020)                  - 
                                     ------------------  -----------------  -----------------  ----------------- 
     - to lifetime ECL credit 
      impaired                                (860 758)          (429 066)          1 289 824                  - 
                                     ------------------  -----------------  -----------------  ----------------- 
 
 Net movement in financial 
  assets                                    518 917 352         14 563 834         10 873 808        493 479 711 
                                     ------------------  -----------------  -----------------  ----------------- 
                                       ----------------   ----------------   ----------------   ---------------- 
   Balance as at 31 December                891 327 564         11 729 856          7 281 814        910 339 235 
   2019                                       =========          =========          =========          ========= 
                                     ------------------  -----------------  -----------------  ----------------- 
 
 Loss allowance analysis 
                                     ------------------  -----------------  -----------------  ----------------- 
 At 1 January 2019                            7 749 444            853 372          5 209 190         13 812 006 
                                     ------------------  -----------------  -----------------  ----------------- 
 
 - ECL - Loans, advances 
  & guarantees                                7 238 126            853 372          5 209 190         13 300 688 
                                     ------------------  -----------------  -----------------  ----------------- 
     - ECL - Investment securities              444 390                  -                  -            444 390 
                                     ------------------  -----------------  -----------------  ----------------- 
     - ECL - Interbank placements                66 928                  -                  -             66 928 
                                     ------------------  -----------------  -----------------  ----------------- 
 
 Transfers                                    (856 306)          876 277             (10 971)                  - 
                                     ------------------  -----------------  -----------------  ----------------- 
     - to 12 month ECL                           35 131           (32 748)            (2 383)                  - 
                                     ------------------  -----------------  -----------------  ----------------- 
     - to lifetime ECL not credit 
      impaired                                (677 699)          1 024 067          (346 368)                  - 
                                     ------------------  -----------------  -----------------  ----------------- 
     - to lifetime ECL credit 
      impaired                                (222 738)          (115 042)            337 780                  - 
                                     ------------------  -----------------  -----------------  ----------------- 
 
 Net increase/(decrease)                                                               (1 216 
  in ECL                                     13 174 795          (909 955)               273)         11 048 567 
                                     ------------------  -----------------  -----------------  ----------------- 
 Loans and advances                           5 940 881          (909 955)          (101 311)         11 833 962 
                                     ------------------  -----------------  -----------------  ----------------- 
 Guarantees and facilities 
  approved not drawn down                     6 904 347                  -                  -          6 904 347 
                                     ------------------  -----------------  -----------------  ----------------- 
 Investment securities                         (41 888)                  -                  -           (41 888) 
                                     ------------------  -----------------  -----------------  ----------------- 
 Interbank placements                           371 455                  -                  -            371 455 
                                     ------------------  -----------------  -----------------  ----------------- 
 Bad debts written off                                -                  -        (1 114 962)        (1 114 962) 
                                     ------------------  -----------------  -----------------  ----------------- 
                                       ----------------   ----------------   ----------------   ---------------- 
   Balance as at 31 December                 20 058 931            819 694          3 981 948         24 860 573 
   2019                                       =========          =========          =========          ========= 
                                     ------------------  -----------------  -----------------  ----------------- 
 
 Loans and advances                          12 313 699            819 694          3 981 948         17 115 341 
                                     ------------------  -----------------  -----------------  ----------------- 
 Guarantees and facilities 
  approved not drawn down                     6 904 347                  -                  -          6 904 347 
                                     ------------------  -----------------  -----------------  ----------------- 
 Investment securities                          402 502                  -                  -            402 502 
                                     ------------------  -----------------  -----------------  ----------------- 
 Interbank placements                           438 383                  -                  -            438 383 
                                     ------------------  -----------------  -----------------  ----------------- 
                                       ----------------   ----------------   ----------------   ---------------- 
                                             20 058 931            819 694          3 981 948         24 860 573 
                                              =========          =========          =========          ========= 
                                     ------------------  -----------------  -----------------  ----------------- 
 
   16.3      Impairment analysis of financial assets measured at amortised cost 
 
                                                                      Inflation adjusted 
                                                   Stage 1            Stage 2            Stage 3                 Total 
                                       -------------------  -----------------  -----------------  -------------------- 
 Gross carrying amount at 
                                       -------------------  -----------------  -----------------  -------------------- 
                                                 1 908 250            120 058            104 655             2 132 965 
 1 January 2018                                        869                774                972                   616 
                                       -------------------  -----------------  -----------------  -------------------- 
                                                                      (17 657 
 Transfers                                    (56 348 947)               164)         73 706 111                     - 
                                       -------------------  -----------------  -----------------  -------------------- 
     - to 12 months to ECL                       8 833 534        (6 811 219)        (2 022 315)                     - 
                                       -------------------  -----------------  -----------------  -------------------- 
     - to lifetime ECL not credit 
      impaired                                (59 389 538)         64 335 897        (4 946 359)                     - 
                                       -------------------  -----------------  -----------------  -------------------- 
     - to lifetime ECL credit                                         (74 881 
      impaired                                 (5 792 943)               842)         80 674 785                     - 
                                       -------------------  -----------------  -----------------  -------------------- 
 
 Net movement in financial                                                               (57 364 
  assets                                       460 403 291         53 318 406               881)           456 356 816 
                                       -------------------  -----------------  -----------------  -------------------- 
                                        ------------------   ----------------   ----------------   ------------------- 
   Balance as at 31 December                     2 312 305            156 020            120 997             2 589 322 
   2018                                                213                016                202                   432 
                                               ===========          =========         ==========           =========== 
                                       -------------------  -----------------  -----------------  -------------------- 
 
 Loss allowance analysis 
                                       -------------------  -----------------  -----------------  -------------------- 
 At 1 January 2018 (IAS 39 
  Provisions)                                            -                  -                  -            33 827 627 
                                       -------------------  -----------------  -----------------  -------------------- 
 Adjustment on initial application 
  of IFRS 9                                              -                  -                  -            53 269 744 
                                       -------------------  -----------------  -----------------  -------------------- 
 ECL on 1 January 2018                          56 371 366          8 293 922         22 432 083            87 097 371 
                                       -------------------  -----------------  -----------------  -------------------- 
     - ECL - Loans, advances & 
      guarantees                                53 881 468          8 293 922         22 432 083            84 607 473 
                                       -------------------  -----------------  -----------------  -------------------- 
     - ECL - Investment securities               2 323 613                  -                  -             2 323 613 
                                       -------------------  -----------------  -----------------  -------------------- 
     - ECL - Interbank placements                  166 285                  -                  -               166 285 
                                       -------------------  -----------------  -----------------  -------------------- 
 
                                                                      (20 208 
 Transfers                                     (2 770 223)               639)         22 978 862                     - 
                                       -------------------  -----------------  -----------------  -------------------- 
     - to 12 month ECL                             186 494          (117 714)           (68 780)                     - 
                                       -------------------  -----------------  -----------------  -------------------- 
     - to lifetime ECL not credit 
      impaired                                 (1 363 101)          2 212 294          (849 193)                     - 
                                       -------------------  -----------------  -----------------  -------------------- 
     - to lifetime ECL credit                                         (22 303 
      impaired                                 (1 593 616)               219)         23 896 835                     - 
                                       -------------------  -----------------  -----------------  -------------------- 
 
 Net increase/(decrease) in                                            17 215             13 170 
  ECL                                          (5 465 471)                436                271            24 920 236 
                                       -------------------  -----------------  -----------------  -------------------- 
 
 Loans, advances and guarantees                (6 151 630)         17 215 436         13 170 271            24 234 077 
                                       -------------------  -----------------  -----------------  -------------------- 
 Investment securities                             436 718                  -                  -               436 718 
                                       -------------------  -----------------  -----------------  -------------------- 
 Interbank placements                              249 441                  -                  -               249 441 
                                       -------------------  -----------------  -----------------  -------------------- 
                                                                                         (26 224 
 Bad debts written off                                   -                  -               339)          (26 224 339) 
                                       -------------------  -----------------  -----------------  -------------------- 
                                           ---------------    ---------------    ---------------       --------------- 
   Balance as at 31 December                    48 135 672          5 300 719             32 356            85 793 268 
   2018                                          =========          =========                877             ========= 
                                                                                       ========= 
                                       -------------------  -----------------  -----------------  -------------------- 
 
 Loans, advances and guarantees                 44 959 615          5 300 719         32 356 877            82 617 211 
                                       -------------------  -----------------  -----------------  -------------------- 
 Investment securities                           2 760 331                  -                  -             2 760 331 
                                       -------------------  -----------------  -----------------  -------------------- 
 Interbank placements                              415 726                  -                  -               415 726 
                                       -------------------  -----------------  -----------------  -------------------- 
                                           ---------------    ---------------    ---------------       --------------- 
                                                48 135 672          5 300 719             32 356            85 793 268 
                                                 =========          =========                877             ========= 
                                                                                       ========= 
                                       -------------------  -----------------  -----------------  -------------------- 
 
   16.4     Credit-impaired financial assets 
 
                                                 Inflation adjusted                    Historical Cost 
                                              31 December       31 December       31 December       31 December 
                                         ----------------  ----------------  ----------------  ---------------- 
                                                     2019              2018              2019              2018 
                                         ----------------  ----------------  ----------------  ---------------- 
                                                      ZWL               ZWL               ZWL               ZWL 
                                         ----------------  ----------------  ----------------  ---------------- 
                                                                   Restated 
                                         ----------------  ----------------  ----------------  ---------------- 
 Total credit impaired financial                                    120 997 
  assets                                        7 281 814               202         7 281 814        19 479 550 
                                         ----------------  ----------------  ----------------  ---------------- 
 Expected credit losses 
  on credit impaired financial                                      (32 356 
  assets                                      (3 981 948)              877)       (3 981 948)       (5 209 190) 
                                         ----------------  ----------------  ----------------  ---------------- 
 Retail loans insurance                         (499 057)       (3 099 890)         (499 057)         (499 057) 
                                         ----------------  ----------------  ----------------  ---------------- 
 Suspended interest on credit-impaired 
  financial assets                              (344 739)       (6 712 456)         (344 739)       (1 080 650) 
                                         ----------------  ----------------  ----------------  ---------------- 
                                          ---------------   ---------------   ---------------   --------------- 
   Net credit impaired financial                2 456 070        78 827 979         2 456 070        12 690 653 
   assets                                       =========        ==========         =========        ========== 
                                         ----------------  ----------------  ----------------  ---------------- 
 

The net credit impaired financial assets represents recoverable portions covered by realisable security, which includes guarantees, cessation of debtors, mortgages over properties, equities and promissory notes all fair valued at ZWL9 395 900 (2018 - ZWL57 221 103).

   16.5     Loans to related parties (included under loans, advances and other assets) 
 
                                   Inflation adjusted                         Historical Cost 
                                 31 December         31 December          31 December         31 December 
                        --------------------  ------------------  -------------------  ------------------ 
                                        2019                2018                 2019                2018 
                        --------------------  ------------------  -------------------  ------------------ 
                                         ZWL                 ZWL                  ZWL                 ZWL 
                        --------------------  ------------------  -------------------  ------------------ 
                                                        Restated 
                        --------------------  ------------------  -------------------  ------------------ 
 Executive directors                 746 174             559 259              746 174              90 036 
                        --------------------  ------------------  -------------------  ------------------ 
 Officers                         26 946 866          75 255 339           26 946 866          12 115 488 
                        --------------------  ------------------  -------------------  ------------------ 
 Officers' companies                       -                   -                    -                   - 
                           -----------------    ----------------    -----------------    ---------------- 
                        --------------------  ------------------  -------------------  ------------------ 
                                  27 693 040          75 816 277           27 693 040          12 205 524 
                        --------------------  ------------------  -------------------  ------------------ 
 ECL on staff loans - 
  Stage 1                           (48 750)           (997 126)             (48 750)           (160 529) 
                        --------------------  ------------------  -------------------  ------------------ 
                         -----------------27    ----------------   ----------------27    ---------------- 
                                     644 290              74 819              644 290              12 044 
                                  ==========                 151           ==========                 995 
                                                      ==========                                ========= 
                        --------------------  ------------------  -------------------  ------------------ 
 
   17.       NON-CURRENT ASSETS HELD FOR SALE 
 
                                   Inflation adjusted                        Historical Cost 
                                 31 December        31 December         31 December         31 December 
                         -------------------  -----------------  ------------------  ------------------ 
                                        2019               2018                2019                2018 
                         -------------------  -----------------  ------------------  ------------------ 
                                         ZWL                ZWL                 ZWL                 ZWL 
                         -------------------  -----------------  ------------------  ------------------ 
                                                       Restated 
                         -------------------  -----------------  ------------------  ------------------ 
 At 1 January                        223 614            324 836              36 000              36 000 
                         -------------------  -----------------  ------------------  ------------------ 
 Monetary adjustment               (187 614)          (101 122) 
                         -------------------  -----------------  ------------------  ------------------ 
 Fair value adjustment             144 000                    -            144 000                    - 
                         -------------------  -----------------  ------------------  ------------------ 
 Reclassifications                 (180 000)                  -           (180 000)                   - 
                         -------------------  -----------------  ------------------  ------------------ 
                          ------------------   ----------------   -----------------   ----------------- 
                                  ==========            223 614                   -              36 000 
                                                     ==========          ==========          ========== 
                         -------------------  -----------------  ------------------  ------------------ 
 
   18.       INTANGIBLE ASSETS 
 
                                                     Inflation adjusted 
 
                                   Work in Progress             Computer 
                                                                Software             Total 
                                 ------------------  -------------------  ---------------- 
                                                ZWL                  ZWL               ZWL 
                                 ------------------  -------------------  ---------------- 
 Cost 
                                 ------------------  -------------------  ---------------- 
                                                                                    42 585 
 Balance at 1 January 2018                2 011 554           40 573 726               280 
                                 ------------------  -------------------  ---------------- 
 Acquisitions                                     -            4 501 240         4 501 240 
                                 ------------------  -------------------  ---------------- 
                                        (2 011 554)            2 011 554                 - 
 Capitalisation                    ----------------    -----------------    -------------- 
                                 ------------------  -------------------  ---------------- 
                                                                                    47 086 
 Balance at 31 December 2018                      -           47 086 519               519 
                                 ------------------  -------------------  ---------------- 
 Acquisitions                                     -              636 901           636 901 
                                 ------------------  -------------------  ---------------- 
                                   ----------------     ----------------    -------------- 
   Balance at 31 December 2019                    -               47 723            47 723 
                                          =========                  421               421 
                                                               =========          ======== 
                                 ------------------  -------------------  ---------------- 
 
 Accumulated amortisation 
                                 ------------------  -------------------  ---------------- 
                                                                                    21 870 
 Balance at 1 January 2018                        -           21 870 624               624 
                                 ------------------  -------------------  ---------------- 
                                                  -            7 882 765         7 882 765 
 Amortisation for the year         ----------------     ----------------    -------------- 
                                 ------------------  -------------------  ---------------- 
                                                                                    29 753 
 Balance at 31 December 2018                      -           29 753 389               389 
                                 ------------------  -------------------  ---------------- 
 
 Amortisation for the year                        -            6 356 249         6 356 249 
                                 ------------------  -------------------  ---------------- 
                                   ----------------   ----------------36    -------------- 
   Balance at 31 December 2019                    -              109 639            36 109 
                                          =========            =========               639 
                                                                                  ======== 
                                 ------------------  -------------------  ---------------- 
 
 Carrying amount 
                                 ------------------  -------------------  ---------------- 
 At 31 December 2019                              -           11 613 782            11 613 
                                          =========           ==========               782 
                                                                                  ======== 
                                 ------------------  -------------------  ---------------- 
 Restated at 31 December 2019                     -           17 333 130            17 333 
                                          =========            =========               130 
                                                                                  ======== 
                                 ------------------  -------------------  ---------------- 
 
 At 1 January 2018 - Restated             2 011 554           18 703 102            18 703 
                                          =========           ==========               102 
                                                                                  ======== 
                                 ------------------  -------------------  ---------------- 
 
   18.       INTANGIBLE ASSETS 
 
                                                      Historical Cost 
 
                                   Work in Progress             Computer 
                                                                Software             Total 
                                 ------------------  -------------------  ---------------- 
                                                ZWL                  ZWL               ZWL 
                                 ------------------  -------------------  ---------------- 
 Cost 
                                 ------------------  -------------------  ---------------- 
 Balance at 1 January 2018                  228 595            4 610 839         4 839 434 
                                 ------------------  -------------------  ---------------- 
 Acquisitions                                     -              535 971           535 971 
                                 ------------------  -------------------  ---------------- 
                                          (228 595)              228 595                 - 
 Capitalisation                    ----------------    -----------------    -------------- 
                                 ------------------  -------------------  ---------------- 
 Balance at 1 January 2019                        -            5 375 405         5 375 405 
                                 ------------------  -------------------  ---------------- 
 Acquisitions                                     -               94 320            94 320 
                                 ------------------  -------------------  ---------------- 
                                   ----------------   -----------------5    -------------- 
   Balance at 31 December 2019                    -              469 725             5 496 
                                          =========           ==========               725 
                                                                                  ======== 
                                 ------------------  -------------------  ---------------- 
 
 Accumulated amortisation 
                                 ------------------  -------------------  ---------------- 
 Balance at 1 January 2018                        -            2 459 254         2 459 254 
                                 ------------------  -------------------  ---------------- 
                                                  -              879 376           879 376 
 Amortisation for the year         ----------------    -----------------    -------------- 
                                 ------------------  -------------------  ---------------- 
 Balance at 1 January 2019                        -            3 338 630         3 338 630 
                                 ------------------  -------------------  ---------------- 
 Amortisation for the year                        -              733 909           733 909 
                                 ------------------  -------------------  ---------------- 
                                   ----------------    -----------------    -------------- 
   Balance at 31 December 2019                    -            4 072 539             4 072 
                                          =========           ==========               539 
                                                                                  ======== 
                                 ------------------  -------------------  ---------------- 
 
 Carrying amount 
                                 ------------------  -------------------  ---------------- 
 At 31 December 2019                              -            1 397 186         1 397 186 
                                          =========           ==========          ======== 
                                 ------------------  -------------------  ---------------- 
 At 1 January 2019                                -            2 036 775         2 036 775 
                                          =========           ==========          ======== 
                                 ------------------  -------------------  ---------------- 
 
 At 1 January 2018                          228 595            2 151 585         2 380 180 
                                          =========           ==========          ======== 
                                 ------------------  -------------------  ---------------- 
 

19. PROPERTY AND EQUIPMENT

 
                                                                                                            Inflation adjusted 
                                                                                                     Capital 
                                                                                                     work in                                                      Furniture             Right of             Freehold 
                                                                                                    progress             Computers      Motor Vehicles          & Equipment         Use Assets**    Land & Buildings*              Total 
                                                                                                              --------------------  ------------------  -------------------  -------------------  -------------------  ----------------- 
                                                                                                         ZWL                   ZWL                 ZWL                  ZWL                  ZWL                  ZWL                ZWL 
                                       ---------------------------------------------------------------------  --------------------  ------------------  -------------------  -------------------  -------------------  ----------------- 
 Cost/Revaluation amount                                                                            Restated              Restated            Restated             Restated             Restated             Restated           Restated 
                                       ---------------------------------------------------------------------  --------------------  ------------------  -------------------  -------------------  -------------------  ----------------- 
                                                                                                                                                                                                                                 134 041 
 At 1 January 2018 - restated                                                                      7 543 367            51 159 818          11 316 290           37 574 947                    -           26 446 800                217 
                                       ---------------------------------------------------------------------  --------------------  ------------------  -------------------  -------------------  -------------------  ----------------- 
                                                                                                                                                                                                                                  58 952 
 Additions                                                                                        44 595 731            12 286 506             765 673            1 304 428                    -                    -                339 
                                       ---------------------------------------------------------------------  --------------------  ------------------  -------------------  -------------------  -------------------  ----------------- 
 Capitalisations                                                                                 (1 921 005)                     -                   -            1 600 244                    -                    -          (320 762) 
                                       ---------------------------------------------------------------------  --------------------  ------------------  -------------------  -------------------  -------------------  ----------------- 
 Revaluation gain                                                                                          -                     -                   -                    -                    -                    -                  - 
                                       ---------------------------------------------------------------------  --------------------  ------------------  -------------------  -------------------  -------------------  ----------------- 
 Disposals                                                                                                 -                     -           (679 532)            (115 636)                    -                    -          (795 168) 
                                       ---------------------------------------------------------------------  --------------------  ------------------  -------------------  -------------------  -------------------  ----------------- 
 Reclassification from Investment                                                                                                                                                                                                 14 286 
 properties                                                                                       14 286 447                     -                   -                    -                    -                    -                447 
                                       ---------------------------------------------------------------------  --------------------  ------------------  -------------------  -------------------  -------------------  ----------------- 
                                                                                           -----------------                                                                                                             --------------- 
                                                                                                      64 504    ------------------   -----------------   ------------------   ------------------     ----------------            206 164 
  At 31 December 2018 - restated                                                                         540            63 446 324          11 402 431           40 363 978                    -           26 446 800                073 
                                       ---------------------------------------------------------------------  --------------------  ------------------  -------------------  -------------------  -------------------  ----------------- 
                                                                                                                                                                                                                                  35 323 
 Additions                                                                                        18 335 381            11 478 659           1 160 355            4 349 518                    -                    -                914 
                                       ---------------------------------------------------------------------  --------------------  ------------------  -------------------  -------------------  -------------------  ----------------- 
 Initial recognition - Right                                                                                                                                                                                                      14 609 
  of Use Asset                                                                                             -                     -                   -                    -           14 609 335                    -                335 
                                       ---------------------------------------------------------------------  --------------------  ------------------  -------------------  -------------------  -------------------  ----------------- 
                                                                                                     (14 413 
 Capitalisations                                                                                        772)             1 226 643             293 684            1 017 871                    -           11 875 574                  - 
                                       ---------------------------------------------------------------------  --------------------  ------------------  -------------------  -------------------  -------------------  ----------------- 
 Translation gains on change                                                                                                                                                                                                      86 325 
  in functional                                                                                            -                     -                   -                    -                    -           86 325 787                787 
                                       ---------------------------------------------------------------------  --------------------  ------------------  -------------------  -------------------  -------------------  ----------------- 
                                                                                                                                                                                                                                 146 244 
 Revaluation gain                                                                                          -                     -                   -                    -                    -          146 244 823                823 
                                       ---------------------------------------------------------------------  --------------------  ------------------  -------------------  -------------------  -------------------  ----------------- 
                                                                                           -----------------    ------------------   -----------------   ------------------   ------------------   ------------------    --------------- 
   At 31 December 2019                                                                                68 426            76 151 627          12 856 470           45 731 367           14 609 335              270 892            488 667 
                                                                                                         150           ===========         ===========          ===========          ===========                  984                932 
                                                                                                 ===========                                                                                              ===========        =========== 
                                       ---------------------------------------------------------------------  --------------------  ------------------  -------------------  -------------------  -------------------  ----------------- 
 Accumulated depreciation 
                                       ---------------------------------------------------------------------  --------------------  ------------------  -------------------  -------------------  -------------------  ----------------- 
                                                                                                                                                                                                                                  66 666 
 At 1 January 2018 - restated                                                                              -            25 307 664           8 168 624           31 115 124                    -            2 075 120                532 
                                       ---------------------------------------------------------------------  --------------------  ------------------  -------------------  -------------------  -------------------  ----------------- 
                                                                                                                                                                                                                                  11 991 
 Charge for the year                                                                                       -             7 479 598           1 609 623            2 504 435                    -              398 182                839 
                                       ---------------------------------------------------------------------  --------------------  ------------------  -------------------  -------------------  -------------------  ----------------- 
 Disposals                                                                                                 -                     -           (679 532)            (115 633)                    -                    -          (795 165) 
                                       ---------------------------------------------------------------------  --------------------  ------------------  -------------------  -------------------  -------------------  ----------------- 
                                                                                                                                                                                                                         --------------- 
                                                                                           -----------------     -----------------   -----------------   ------------------   ------------------     ----------------             77 863 
  At 31 December 2018 - restated                                                                           -            32 787 262           9 098 715           33 503 926                    -            2 473 302                206 
                                       ---------------------------------------------------------------------  --------------------  ------------------  -------------------  -------------------  -------------------  ----------------- 
 Charge for the year - Property                                                                                                                                                                                                   15 427 
  and equipment                                                                                            -            10 649 093           1 724 758            3 053 363                    -              604 282                214 
                                       ---------------------------------------------------------------------  --------------------  ------------------  -------------------  -------------------  -------------------  ----------------- 
 Charge for period - Right 
  of Use Asset                                                                                             -                     -                   -                    -            3 088 496                    -          3 088 496 
                                       ---------------------------------------------------------------------  --------------------  ------------------  -------------------  -------------------  -------------------  ----------------- 
                                                                                         -------------------   -------------------   -----------------   ------------------   ------------------     ----------------   ---------------- 
                                       ---------------------------------------------------------------------  --------------------  ------------------  -------------------  -------------------  -------------------  ----------------- 
 At 31 December 2019                                                                                       -            41 495 216          10 823 473           36 557 289            3 088 496            3 077 584             94 478 
                                                                                                  ==========           ===========          ==========          ===========          ===========           ==========                377 
                                                                                                                                                                                                                               ========= 
                                       ---------------------------------------------------------------------  --------------------  ------------------  -------------------  -------------------  -------------------  ----------------- 
 Carrying amount 
  At 31 December 2019                                                                                 68 426            34 656 411           2 032 997            9 174 077           11 520 838              267 815            394 189 
                                                                                                         150           ===========          ==========          ===========          ===========                  400                555 
                                                                                                  ==========                                                                                               ==========          ========= 
                                       ---------------------------------------------------------------------  --------------------  ------------------  -------------------  -------------------  -------------------  ----------------- 
 At 1 December 2018 - Restated                                                                    64 504 540            30 659 062           2 303 716            6 860 052                    -           23 973 498            128 300 
                                                                                                  ==========           ===========          ==========          ===========          ===========           ==========                867 
                                                                                                                                                                                                                               ========= 
                                       ---------------------------------------------------------------------  --------------------  ------------------  -------------------  -------------------  -------------------  ----------------- 
 At 1 January 2018 - Restated                                                                      7 543 367            28 325 456           3 147 666            6 459 818                    -           21 898 381             67 374 
                                                                                                  ==========           ===========          ==========          ===========          ===========           ==========                688 
                                                                                                                                                                                                                               ========= 
                                       ---------------------------------------------------------------------  --------------------  ------------------  -------------------  -------------------  -------------------  ----------------- 
 
 

*Assets measured using the revaluation model.

** Right-of-Use Assets recognised in respect of leased properties in which the Group is a lessee. The Right-of-Use Assets are depreciated over the shorter of the lease term including extension options where the Group is certain to exercise such and the useful life of the underlying asset.

19. PROPERTY AND EQUIPMENT

 
                                                                                                              Historical Cost 
                                                                                                     Capital 
                                                                                                     work in                                                      Furniture              Right of             Freehold 
                                                                                                    progress            Computers       Motor Vehicles          & Equipment            Use Assets     Land & Buildings              Total 
                                                                                                              -------------------  -------------------  -------------------  --------------------  -------------------  ----------------- 
 Cost/Revaluation amount                                                                                 ZWL                  ZWL                  ZWL                  ZWL                   ZWL                  ZWL                ZWL 
                                           -----------------------------------------------------------------  -------------------  -------------------  -------------------  --------------------  -------------------  ----------------- 
                                                                                                                                                                                                                                   14 727 
 At 1 January 2018                                                                                   293 716            5 435 325            1 255 902            4 029 210                     -            3 713 804                957 
                                           -----------------------------------------------------------------  -------------------  -------------------  -------------------  --------------------  -------------------  ----------------- 
 Additions                                                                                         7 179 544            1 978 026              126 267              210 003                     -                    -          9 490 840 
                                           -----------------------------------------------------------------  -------------------  -------------------  -------------------  --------------------  -------------------  ----------------- 
 Capitalisations                                                                                   (309 266)                    -                    -              257 626                     -                    -           (51 640) 
                                           -----------------------------------------------------------------  -------------------  -------------------  -------------------  --------------------  -------------------  ----------------- 
 Revaluation gain                                                                                          -                    -                    -                    -                     -              139 194            139 194 
                                           -----------------------------------------------------------------  -------------------  -------------------  -------------------  --------------------  -------------------  ----------------- 
 Disposals                                                                                                 -                    -            (109 399)             (18 616)                     -                    -          (128 015) 
                                           -----------------------------------------------------------------  -------------------  -------------------  -------------------  --------------------  -------------------  ----------------- 
 Reclassification from Investment 
 properties                                                                                        2 300 000                    -                    -                    -                     -                    -          2 300 000 
                                           -----------------------------------------------------------------  -------------------  -------------------  -------------------  --------------------  -------------------  ----------------- 
                                                                                                                                                                                                                          --------------- 
                                                                                          ------------------   ------------------    -----------------   ------------------    ------------------     ----------------             26 478 
   At 31 December 2018                                                                             9 463 994            7 413 351            1 269 770            4 478 223                     -            3 852 998                336 
                                           -----------------------------------------------------------------  -------------------  -------------------  -------------------  --------------------  -------------------  ----------------- 
                                                                                                                                                                                                                                   24 308 
 Additions                                                                                        19 774 151            2 975 151              206 348            1 352 847                     -                    -                497 
                                           -----------------------------------------------------------------  -------------------  -------------------  -------------------  --------------------  -------------------  ----------------- 
 Right of Use Assets                                                                                       -                    -                    -                    -             4 096 580                    -          4 096 580 
                                           -----------------------------------------------------------------  -------------------  -------------------  -------------------  --------------------  -------------------  ----------------- 
 
 Translation gain on change                                                                                                                                                                                                        15 653 
  in functional currency                                                                                   -                    -                    -                    -                     -           15 653 157                157 
                                           -----------------------------------------------------------------  -------------------  -------------------  -------------------  --------------------  -------------------  ----------------- 
                                                                                                     (14 413 
 Capitalisations                                                                                        772)            1 226 643              293 684            1 017 871                     -           11 875 574                  - 
                                           -----------------------------------------------------------------  -------------------  -------------------  -------------------  --------------------  -------------------  ----------------- 
                                                                                                                                                                                                               236 960            236 960 
 Revaluation gain                                                                                          -                    -                    -                    -                     -                  551                551 
                                           -----------------------------------------------------------------  -------------------  -------------------  -------------------  --------------------  -------------------  ----------------- 
 Reversal of impairment                                                                                    -                    -                    -                    -                     -               40 600             40 600 
                                           -----------------------------------------------------------------  -------------------  -------------------  -------------------  --------------------  -------------------  ----------------- 
                                                                                          ------------------   ------------------    -----------------   ------------------    ------------------     ----------------    --------------- 
   At 31 December 2019                                                                                14 824           11 615 145            1 769 802            6 848 941             4 096 580              268 382            307 537 
                                                                                                         373          ===========          ===========          ===========           ===========                  880                722 
                                                                                                 ===========                                                                                               ===========        =========== 
                                           -----------------------------------------------------------------  -------------------  -------------------  -------------------  --------------------  -------------------  ----------------- 
 Accumulated depreciation 
                                           -----------------------------------------------------------------  -------------------  -------------------  -------------------  --------------------  -------------------  ----------------- 
 At 1 January 2018                                                                                         -            2 764 564              938 774            3 361 092                     -              327 540          7 391 970 
                                           -----------------------------------------------------------------  -------------------  -------------------  -------------------  --------------------  -------------------  ----------------- 
 Charge for the year                                                                                       -              843 339              178 887              283 982                     -               64 104          1 370 312 
                                           -----------------------------------------------------------------  -------------------  -------------------  -------------------  --------------------  -------------------  ----------------- 
 Disposals                                                                                                 -                    -            (109 399)             (18 616)                     -                    -          (128 015) 
                                           -----------------------------------------------------------------  -------------------  -------------------  -------------------  --------------------  -------------------  ----------------- 
                                                                                                                                                                                                                          --------------- 
                                                                                                                -----------------    -----------------   ------------------   -------------------    -----------------              8 634 
   At 31 December 2018                                                                   -------------------            3 607 903            1 008 262            3 626 458                     -              391 644                267 
                                           -----------------------------------------------------------------  -------------------  -------------------  -------------------  --------------------  -------------------  ----------------- 
 Charge for the year                                                                                       -            1 427 692              222 449              481 383                     -              175 836          2 307 360 
                                           -----------------------------------------------------------------  -------------------  -------------------  -------------------  --------------------  -------------------  ----------------- 
 Charge for period - Right 
  of Use Asset                                                                                             -                    -                    -                    -             1 310 867                    -          1 310 867 
                                           -----------------------------------------------------------------  -------------------  -------------------  -------------------  --------------------  -------------------  ----------------- 
                                                                                          ------------------   ------------------   ------------------   ------------------   -------------------   ------------------   ---------------- 
                                           -----------------------------------------------------------------  -------------------  -------------------  -------------------  --------------------  -------------------  ----------------- 
 At 31 December 2019                                                                                       -            5 035 595            1 230 711            4 107 841             1 310 867              567 480             12 252 
                                                                                                 ===========          ===========          ===========          ===========           ===========          ===========                495 
                                                                                                                                                                                                                              =========== 
                                           -----------------------------------------------------------------  -------------------  -------------------  -------------------  --------------------  -------------------  ----------------- 
 Carrying amount 
  At 31 December 2019                                                                                 14 824            6 579 550              539 091            2 741 100             2 785 713              267 815            295 285 
                                                                                                         373          ===========          ===========          ===========           ===========                  400                227 
                                                                                                 ===========                                                                                               ===========        =========== 
                                           -----------------------------------------------------------------  -------------------  -------------------  -------------------  --------------------  -------------------  ----------------- 
 At 1 December 2018                                                                                9 463 994            3 805 448              261 508              851 766                     -            3 461 354             17 844 
                                                                                                  ==========          ===========           ==========          ===========           ===========            =========                069 
                                                                                                                                                                                                                                ========= 
                                           -----------------------------------------------------------------  -------------------  -------------------  -------------------  --------------------  -------------------  ----------------- 
 At 1 January 2017                                                                                   293 715            2 670 761              317 128              668 118                     -            3 386 264          7 335 986 
                                                                                                 ===========          ===========          ===========          ===========           ===========          ===========        =========== 
                                           -----------------------------------------------------------------  -------------------  -------------------  -------------------  --------------------  -------------------  ----------------- 
 
 

Measurement of fair value

Fair value hierarchy

Immovable properties were revalued as at 31 December 2019 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. All movable assets are measured at their carrying amounts which are arrived at by the application of a depreciation charge on their cost values over the useful lives of the assets.

The valuation of land and buildings was arrived by applying yield rates of 10% on rental levels of between ZWL48 - ZWL112 per square metre.

Level 3

The fair value of immovable properties of ZWL267 815 400 (2018 - ZWL3 461 354) has been categorised under level 3 in the fair value hierarchy based on the inputs used for the valuation technique described below.

The following shows reconciliation between the opening and closing balances for level 3 fair values:

 
                                        Inflation adjusted                          Historical Cost 
                                     31 December          31 December           31 December         31 December 
                            --------------------  -------------------  --------------------  ------------------ 
                                            2019                 2018                  2019                2018 
                            --------------------  -------------------  --------------------  ------------------ 
                                             ZWL                  ZWL                   ZWL                 ZWL 
                            --------------------  -------------------  --------------------  ------------------ 
                                                             Restated 
                            --------------------  -------------------  --------------------  ------------------ 
 At 1 January                         23 973 498           26 446 800             3 461 354           3 386 264 
                            --------------------  -------------------  --------------------  ------------------ 
 Translation gains on 
  change in functional 
  currency                            86 325 787                    -            15 649 358                   - 
                            --------------------  -------------------  --------------------  ------------------ 
 Transfers from work 
  in progress                         11 875 574                    -            11 875 574                   - 
                            --------------------  -------------------  --------------------  ------------------ 
                                         146 244                                    236 960 
 Revaluation gain                            823                    -                   551              62 533 
                            --------------------  -------------------  --------------------  ------------------ 
 Impairment reversal                           -                    -                40 600              76 661 
                            --------------------  -------------------  --------------------  ------------------ 
 Depreciation                          (604 282)          (2 473 302)             (172 037)            (64 104) 
                            --------------------  -------------------  --------------------  ------------------ 
                             ----------------267   ----------------23   ----------------267   ----------------3 
   Balance at 31 December                815 400              973 498               815 400             461 354 
                                      ==========           ==========            ==========           ========= 
                            --------------------  -------------------  --------------------  ------------------ 
 

Valuation technique and significant unobservable inputs

The following table shows the valuation technique used in measuring the fair value of immovable 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 Direct                                                                     The estimated fair value would 
 Comparison         *    Weighted average expected market rental growth (5%);   increase /(decrease) if: 
 Method was              and                                                     *    expected market rental growth were higher/ (lower); 
 applied                                                                              and 
 on all 
 residential        *    Average market yield of 10%. 
 properties                                                                      *    the risk adjusted discount rates were lower/ 
                                                                                      (higher). 
 
 
 
                                                                                Below is an indication of 
                                                                                the sensitivity analysis at 
                                                                                different discount rates:- 
              ---------------------------------------------------------------  ---------------------------------------------------------- 
 

Below is an indication of the sensitivity analysis at different discount rates:

 
 Change in rate       Change in fair value 
                  December 2019   December 2018 
                 --------------  -------------- 
                   ZWL             ZWL 
                 --------------  -------------- 
 + 5%                 2 224 000         863 329 
                 --------------  -------------- 
 + 3%                 1 334 400         517 997 
                 --------------  -------------- 
 + 1%                   444 800         172 666 
                 --------------  -------------- 
 - 1%                 - 444 800       - 172 666 
                 --------------  -------------- 
 - 3%               - 1 334 400       - 517 997 
                 --------------  -------------- 
 - 5%                -2 224 400       - 868 329 
                 --------------  -------------- 
 
   20.       CAPITAL COMMITMENTS 
 
                                      Inflation adjusted                        Historical Cost 
                                   31 December        31 December         31 December           31 December 
                            ------------------  -----------------  ------------------  -------------------- 
                                          2019               2018                2019                  2018 
                            ------------------  -----------------  ------------------  -------------------- 
                                           ZWL                ZWL                 ZWL                   ZWL 
                            ------------------  -----------------  ------------------  -------------------- 
                                                         Restated 
                            ------------------  -----------------  ------------------  -------------------- 
 Capital expenditure 
  contracted for                     5 828 388         18 208 295           5 828 388             2 931 385 
                            ------------------  -----------------  ------------------  -------------------- 
 Capital expenditure 
  authorised but not yet               117 569                                117 569 
  contracted for                           873         56 481 152                 873             9 092 999 
                            ------------------  -----------------  ------------------  -------------------- 
                             -----------------   ----------------   -----------------   -----------------12 
   Balance at 31 December              123 398             74 689             123 398               024 384 
                                           261                447                 261            ========== 
                                    ==========         ==========          ========== 
                            ------------------  -----------------  ------------------  -------------------- 
 

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

   21.       CONTINGENT LIABILITIES 
 
                                       Inflation adjusted                           Historical Cost 
                                      31 December        31 December            31 December          31 December 
                            ---------------------  -----------------  ---------------------  ------------------- 
                                             2019               2018                   2019                 2018 
                            ---------------------  -----------------  ---------------------  ------------------- 
                                              ZWL                ZWL                    ZWL                  ZWL 
                            ---------------------  -----------------  ---------------------  ------------------- 
                                                            Restated 
                            ---------------------  -----------------  ---------------------  ------------------- 
                                          126 952                                   126 952 
 Guarantees                                   189         38 260 135                    189            6 159 566 
                            ---------------------  -----------------  ---------------------  ------------------- 
 
 Facilities approved                                         128 398 
  but not drawn down                   20 067 960                555             20 067 960           20 671 107 
                            ---------------------  -----------------  ---------------------  ------------------- 
 Expected credit losses 
  on facilities approved 
  but not drawdown                    (1 477 002)        (9 447 346)            (1 477 002)          (1 520 945) 
                            ---------------------  -----------------  ---------------------  ------------------- 
 Expected credit losses 
  on guarantees                       (5 427 344)        (3 438 303)            (5 427 344)            (553 538) 
                            ---------------------  -----------------  ---------------------  ------------------- 
                             -----------------140   ----------------   -----------------140   ----------------24 
   Balance at 31 December                 115 803            153 773                115 803              756 190 
                                       ==========                041             ==========            ========= 
                                                          ========== 
                            ---------------------  -----------------  ---------------------  ------------------- 
 
   22.       EXCHANGE RATES 

The following exchange rates have been used to translate the foreign currency balances to Zimbabwe dollars at year end:

 
                                31 December   31 December 
                                       2019          2018 
                                 Mid - rate    Mid - rate 
                        -----  ------------  ------------ 
                                        ZWL           ZWL 
                        -----  ------------  ------------ 
 United States Dollar    USD        16.7734        1.0000 
                        -----  ------------  ------------ 
 British Sterling        GBP        22.1677        1.2785 
                        -----  ------------  ------------ 
 South African Rand      ZAR         0.8350       14.2254 
                        -----  ------------  ------------ 
 European Euro           EUR        18.8164        1.1490 
                        -----  ------------  ------------ 
 Botswana Pula           BWP         0.6302       10.7296 
                        -----  ------------  ------------ 
 
   23.       EVENTS AFTER THE REPORTING PERIOD 

Subsequent to the Group's reporting period ended 31 December 2019, the World Health Organisation (WHO) declared COVID-19 a world pandemic and the Government of Zimbabwe declared COVID-19 a national disaster. The Directors have concluded that the COVID-19 pandemic is a non-adjusting event, as it does not reflect conditions that existed at the reporting date.

The current health emergency caused by the global spread of COVID-19 has significant implications for the Zimbabwean economy and the Group is following the advice and directives of the World Health Organization (WHO) as well as the Government of Zimbabwe in order to provide a safe environment for all of the Group's stakeholders including shareholders, customers and employees. The Government of Zimbabwe implemented a number of measures to mitigate the widespread transmission of the virus, which include the declaration of a 21-day national lockdown effective 30 March 2020 subsequently extended by a further 14 days to 3 May 2020. The national lockdown coupled with the other devastating effects of the novel virus are expected to result in a decline in transactional volumes due to the restrictions in movement, thereby negatively affecting the Bank's fee and commission income. These measures would also have an impact on the cashflows of the Bank's customers who do not fall within the essential services category, albeit to varying extents depending on the underlying business models. This might result in a deterioration of the Bank's credit risk and liquidity risk profile. The Group's foreign exchange risk is also expected to deteriorate on account of the negative economic performance outlook in view of the economic restrictions necessitated by the COVID-19 pandemic.

Credit risk

The Bank's significant credit exposures are in the following sectors: services (24%), individuals (24%), agriculture (18%) and distribution (16%), the majority of which are secured by tangible collateral. The Bank has observed that the majority of businesses within the services, agricultural and distribution sectors have been predominately classified as essential services in terms of the national lockdown pronounced by the Government of Zimbabwe in response to the COVID-19 pandemic. This would imply that the deterioration of credit risk in terms of the Bank's borrowing clients falling into these categories is not expected to be severe. However, the Bank is closely monitoring the developments and the Group has strengthened its credit risk management practices in response to the operating environment. The majority of the Bank's individual customers are employed by the Government which has continued to pay full salaries to date. Furthermore, the Bank takes comfort in that the majority of its borrowing individual customers are in the mortgages category, which would not be expected to result in significant increases in Expected Credit Loss ("ECL") allowances due to their low Loss Given Default (LGD) factor. The Reserve Bank also issued a directive providing guidance on how Banks are to approach credit provisioning in respect of the COVID-19 crisis. The guidance indicated that Banks will not have to adjust ECL stages for previously performing clients whose credit risk would have increased due to COVID-19. This will also minimize the increase in Bank's ECL due to COVID-19.

Liquidity risk

The Bank manages its liquidity risk through the Asset and Liability Management Committee ("ALCO"), which monitors the Bank's liquidity gap on a daily basis. In response to the COVID-19 pandemic, the Bank strengthened its liquidity risk management practices to ensure that the increased liquidity risk is well managed and does not deteriorate below internal benchmarks, which surpass the regulatory thresholds. As at the end of Q1 of 2020, the Bank had a stable liquidity position and is well positioned to meet its foreign and long-term obligations as they fall due. Through the Reserve Bank of Zimbabwe ("RBZ"), the Government also announced a raft of measures including the relaxation of exchange control regulations to allow the use of foreign currency, classified as free funds in the economy, for improved flexibility and convenience on the part of the transacting public in response to the measures adopted to fight the novel virus. Resultantly, this has increased the flow of foreign currency into the formal channels of the economy and the Bank is set to benefit from this development.

Foreign exchange risk

The Bank's ALCO management committee also monitors the Group's exposure to foreign exchange risk on a daily basis. In response to the increase in foreign exchange rate risk, the Bank has also buttressed its risk management practices in that regard to ensure the Bank is well positioned to handle foreign exchange fluctuations arising from market volatility due to the raging global pandemic.

COVID-19 Impact assessment and mitigation

Whilst the Group is cognizant of the negative impacts of the COVID-19 pandemic on its revenues and asset quality, the severity and operational impact of the restrictions for the remainder of the year cannot be reasonably estimated at this point in time. The Group, however, continues to monitor the situation closely and will provide further updates when visibility improves and there is greater clarity over the expected financial performance on the Group in 2020; as every listed entity on the ZSE will continue to trade under cautionary for the duration of the lockdown period, including any subsequent extensions, until the lockdown has been formally dispensed with in terms of the enabling legal instrument.

In view of this unprecedented economic and business uncertainty, the Group is firmly focused on protecting its business; mitigating any potential adverse financial impact and ensuring that the Group is well positioned for a recovery trajectory post the pandemic. An extensive range of business continuity measures are in place in order to ensure business continuity. These measures include enhanced safety and sanitation protocols at all our operating Units, as well as making significant adjustments to work practices to ensure social distancing. The measures are summarised below:

-- Encouraging customers to make use of the Bank's digital channels for transacting purposes.

   --           Enabling offsite working for all critical staff. 
   --           Reviewing all discretionary and non-essential expenditures 

-- Suspension of all capital expenditure and limiting it to expenditures that promote the new operating order.

   --           Buttressing the credit, market and liquidity risk management practices. 
   --           Continue to broaden the Bank's market segments. 

The above mentioned measures have been quite effective in managing the Group's key performance indicators and benchmarks in response to the adverse effects of the COVID-19 virus. Prior to the advent of COVID-19, the Bank had embarked on a digitalisation drive to improve the customer experience, enhancement of service delivery and broadening the customer digital touch points. This strategy has proven to be quite pivotal in the current operating environment and will continue underpin the Bank's business model in order to neutralize the reduced transactional activities due to the closure of most businesses except those which were classified as essential.

Having considered all the factors and the mitigation in place, the Directors have made a going concern assessment and believe the Group will continue operating in the foreseeable future.

NMB BANK LIMITED

STATEMENT OF COMPREHENSIVE INCOME

for the year ended 31 December 2019

 
                                               Inflation adjusted                         Historical Cost* 
                                            31 December          31 December          31 December          31 December 
                             -----  -------------------  -------------------  -------------------  ------------------- 
                                                   2019                 2018                 2019                 2018 
                             -----  -------------------  -------------------  -------------------  ------------------- 
                                                    ZWL                  ZWL                  ZWL                  ZWL 
                             -----  -------------------  -------------------  -------------------  ------------------- 
                                                                    Restated 
                             -----  -------------------  -------------------  -------------------  ------------------- 
 
                                                180 212              323 330 
 Interest income                                    444                  808           70 557 190           39 333 178 
                                    -------------------  -------------------  -------------------  ------------------- 
                                                (51 695              (72 131              (16 894 
                                                   746)                 939)                 088)          (8 865 016) 
 Interest expense                     -----------------    -----------------     ----------------    ----------------- 
                                    -------------------  -------------------  -------------------  ------------------- 
                                                128 516              251 198 
 Net interest income                                698                  869           53 663 102           30 468 162 
                                    -------------------  -------------------  -------------------  ------------------- 
                                                183 203              233 280 
 Fee and commissions income                         638                  093           87 242 303           28 539 376 
                                    -------------------  -------------------  -------------------  ------------------- 
                                                254 811 
                                                    445           15 660 953           99 863 112            1 899 670 
 Net foreign exchange gains            ----------------     ----------------     ----------------     ---------------- 
                                    -------------------  -------------------  -------------------  ------------------- 
                                                566 531              500 139              240 768 
 Revenue                                            781                  915                  517           60 907 208 
                                    -------------------  -------------------  -------------------  ------------------- 
                                                112 606                                   206 622 
                                                    446           39 129 126                  639            4 983 521 
 Other income                  a       ----------------     ----------------     ----------------     ---------------- 
                             -----  -------------------  -------------------  -------------------  ------------------- 
                                                679 138              539 269              447 391 
 Operating income                                   227                  041                  156           65 890 729 
                                    -------------------  -------------------  -------------------  ------------------- 
                                               (240 474             (289 465             (105 925              (34 712 
                                                   168)                 631)                 077)                 711) 
 Operating expenditure         b      -----------------    -----------------    -----------------    ----------------- 
                             -----  -------------------  -------------------  -------------------  ------------------- 
 Operating income before 
  impairment 
  charge and loss on net monetary               438 664              249 803              341 466 
  position                                          059                  410                  079           31 178 018 
                                    -------------------  -------------------  -------------------  ------------------- 
 Impairment losses on loans 
  and advances financial 
  assets measured at amortised                  (11 048              (24 920              (11 048 
  cost                                             567)                 236)                 567)          (4 011 952) 
                                    -------------------  -------------------  -------------------  ------------------- 
                                               (341 311             (114 114 
                                                   482)                 337)                    -                    - 
 Loss on net monetary position        -----------------     ----------------     ----------------     ---------------- 
                                    -------------------  -------------------  -------------------  ------------------- 
                                                                     110 768              330 417 
 Profit before taxation                      86 304 010                  837                  512           27 166 066 
                                    -------------------  -------------------  -------------------  ------------------- 
                                                (70 006              (51 105              (44 513 
                                                   030)                 622)                 700)          (5 923 385) 
 Taxation                             -----------------    -----------------    -----------------    ----------------- 
                                    -------------------  -------------------  -------------------  ------------------- 
                                                                                          285 903 
 Profit for the period                       16 297 980           59 663 215                  812           21 242 681 
                                    -------------------  -------------------  -------------------  ------------------- 
 Other comprehensive income 
                             -----  -------------------  -------------------  -------------------  ------------------- 
 
 Revaluation of land and                        108 586                                   175 943 
  buildings, net of tax         c                   781                    -                  209               46 431 
                             -----  -------------------  -------------------  -------------------  ------------------- 
 Translation gain on change 
  in functional currency, 
  net of tax                                 64 096 897                    -           11 619 648                    - 
                                    -------------------  -------------------  -------------------  ------------------- 
                                       ----------------     ----------------     ----------------     ---------------- 
                                                188 981               59 663              473 466               21 289 
                                                    658                  215                  669                  112 
                                              =========            =========            =========            ========= 
                             -----  -------------------  -------------------  -------------------  ------------------- 
 
 Earnings/(losses) per share 
  (ZWL cents) 
                                    -------------------  -------------------  -------------------  ------------------- 
 - Basic and diluted          d.4                 98.74               361.46             1 732.12               128.70 
                             -----  -------------------  -------------------  -------------------  ------------------- 
 - Headline                   d.4              (862.43)               230.70               188.37               111.41 
                             -----  -------------------  -------------------  -------------------  ------------------- 
 

*The Historical Cost information has been shown as supplementary information for the benefit of users. These are not required in terms of International Accounting Standard (IAS) 29 "Financial Reporting in Hyperinflationary Economies". The Auditors have not expressed an opinion on the Historical Cost information.

STATEMENT OF FINANCIAL POSITION

as at 31 December 2019

 
                                                Inflation adjusted                         Historical Cost* 
                                             31 December          31 December           31 December        31 December 
                            ------  --------------------  -------------------  --------------------  ----------------- 
                             Note                   2019                 2018                  2019               2018 
                            ------  --------------------  -------------------  --------------------  ----------------- 
                                                     ZWL                  ZWL                   ZWL                ZWL 
                            ------  --------------------  -------------------  --------------------  ----------------- 
                                                                     Restated 
                            ------  --------------------  -------------------  --------------------  ----------------- 
 SHAREHOLDER'S FUNDS 
                            ------  --------------------  -------------------  --------------------  ----------------- 
 Share capital                 e                 161 906              161 906                16 506             16 506 
                            ------  --------------------  -------------------  --------------------  ----------------- 
 Share premium                               287 040 745          287 040 745            31 474 502         31 474 502 
                                    --------------------  -------------------  --------------------  ----------------- 
 Functional currency translation 
  reserve                                     64 096 897                    -            11 619 648                  - 
                                    --------------------  -------------------  --------------------  ----------------- 
 Revaluation reserve                         108 586 781                    -           176 079 950            136 741 
                                    --------------------  -------------------  --------------------  ----------------- 
                                             217 387 032          221 025 066           329 398 472         47 267 030 
 Retained earnings                    ------------------     ----------------    ------------------    --------------- 
                                    --------------------  -------------------  --------------------  ----------------- 
                                             677 273 361          508 227 717           548 589 078         78 894 779 
 Total shareholder's funds             -----------------     ----------------    ------------------    --------------- 
                                    --------------------  -------------------  --------------------  ----------------- 
 LIABILITIES 
                            ------  --------------------  -------------------  --------------------  ----------------- 
                                               1 265 602            2 776 169             1 265 602            447 138 
 Deposits and other liabilities                      395                  240                   395                216 
                                    --------------------  -------------------  --------------------  ----------------- 
 Current tax liabilities                         700 457                    -               700 457                  - 
                                    --------------------  -------------------  --------------------  ----------------- 
 Deferred tax liabilities                    112 700 544                    -            97 666 693                  - 
                                    --------------------  -------------------  --------------------  ----------------- 
 Subordinated term loan                       28 360 340            9 352 327            28 360 340          1 505 647 
                                    --------------------  -------------------  --------------------  ----------------- 
 Amount owing to Holding                       2 143 122                    -             2 143 122                  - 
  company                              -----------------    -----------------     -----------------    --------------- 
                                    --------------------  -------------------  --------------------  ----------------- 
                                               1 409 506            2 785 521             1 394 473            448 643 
                                                     858                  567                   007                863 
 Total liabilities                     -----------------    -----------------     -----------------    --------------- 
                                    --------------------  -------------------  --------------------  ----------------- 
 Total shareholder's funds           2 086 780                      3 293 749             1 943 062            527 538 
  and liabilities                     219                                 284                   085                642 
                                      ===========                  ==========           ===========          ========= 
                            ------  --------------------  -------------------  --------------------  ----------------- 
 
 ASSETS 
                            ------  --------------------  -------------------  --------------------  ----------------- 
                                                                                                               112 440 
 Cash and cash equivalents     f             492 304 267          698 426 589           492 304 267                912 
                            ------  --------------------  -------------------  --------------------  ----------------- 
 Current tax assets                                    -            1 306 292                     -            210 302 
                                    --------------------  -------------------  --------------------  ----------------- 
                                                                                                               117 249 
 Investment securities                       107 166 155          728 294 727           107 166 155                434 
                                    --------------------  -------------------  --------------------  ----------------- 
 Loans, advances and other                                          1 578 360                                  254 195 
  assets                                     850 026 347                  157           815 429 137                558 
                                    --------------------  -------------------  --------------------  ----------------- 
 Amount owing from Holding 
  Company                                              -            3 467 901                     -            558 303 
                                    --------------------  -------------------  --------------------  ----------------- 
 Non - current assets held 
  for sale                                             -              223 614                     -             36 000 
                                    --------------------  -------------------  --------------------  ----------------- 
 Unquoted investments                          1 612 131              698 799             1 612 131            112 501 
                                    --------------------  -------------------  --------------------  ----------------- 
 Investment properties         g             229 867 982          130 134 664           229 867 982         20 950 606 
                            ------  --------------------  -------------------  --------------------  ----------------- 
 Intangible assets                            11 613 782           17 333 130             1 397 186          2 036 775 
                                    --------------------  -------------------  --------------------  ----------------- 
 Property and equipment                      394 189 555          128 300 867           295 285 227         17 844 069 
                                    --------------------  -------------------  --------------------  ----------------- 
                                                       -            7 202 541                     -          1 904 182 
 Deferred tax assets                   -----------------    -----------------     -----------------    --------------- 
                                    --------------------  -------------------  --------------------  ----------------- 
 Total assets                        2 086 780                      3 293 749             1 943 062            527 538 
                                      219                                 284                   085                642 
                                      ==========                   ==========            ==========          ========= 
                                    --------------------  -------------------  --------------------  ----------------- 
 

*The Historical Cost information has been shown as supplementary information for the benefit of users. These are not required in terms of International Accounting Standard (IAS) 29 "Financial Reporting in Hyperinflationary Economies". The Auditors have not expressed an opinion on the Historical Cost information.

STATEMENT OF CHANGES IN EQUITY

for the year ended 31 December 2019

 
                                                                   Inflation adjusted 
                                                               Functional 
                                                                 Currency 
                                                              Translation         Revaluation             Retained 
                    Share Capital       Share Premium             Reserve             Reserve             Earnings                 Total 
               ------------------  ------------------  ------------------  ------------------  -------------------  -------------------- 
                              ZWL                 ZWL                 ZWL                 ZWL                  ZWL                   ZWL 
               ------------------  ------------------  ------------------  ------------------  -------------------  -------------------- 
 Balances at 
  1 January 
  2018                    161 906         287 040 745                   -                   -          166 006 337           453 208 988 
               ------------------  ------------------  ------------------  ------------------  -------------------  -------------------- 
 Profit for 
  the year                      -                   -                   -                   -           59 663 215            59 663 215 
               ------------------  ------------------  ------------------  ------------------  -------------------  -------------------- 
 Revaluation                    -                   -                   -                   -                    -                     - 
 of land and 
 buildings, 
 net of tax 
               ------------------  ------------------  ------------------  ------------------  -------------------  -------------------- 
 Dividends                      -                   -                   -                   -          (4 644 485)           (4 644 485) 
  paid          -----------------   -----------------   -----------------   -----------------    -----------------    ------------------ 
               ------------------  ------------------  ------------------  ------------------  -------------------  -------------------- 
 Balances at 
  31 December 
  2018                    161 906         287 040 745                   -                   -          221 025 066           508 227 718 
               ------------------  ------------------  ------------------  ------------------  -------------------  -------------------- 
 
 Translation 
  gain on 
  change in 
  functional 
  currency, 
  net of tax                    -                   -          64 096 897                   -                    -            64 096 897 
               ------------------  ------------------  ------------------  ------------------  -------------------  -------------------- 
 Profit for 
  the year                      -                   -                   -                   -           16 297 980            16 297 980 
               ------------------  ------------------  ------------------  ------------------  -------------------  -------------------- 
 Revaluation 
  of land and 
  buildings, 
  net of tax                    -                   -                   -         108 586 781                    -           108 586 781 
               ------------------  ------------------  ------------------  ------------------  -------------------  -------------------- 
 Dividend:                      -                   -                   -                   -         (19 936 014)          (19 936 014) 
  paid           ----------------   -----------------   -----------------   -----------------     ----------------     ----------------- 
               ------------------  ------------------  ------------------  ------------------  -------------------  -------------------- 
 Balances at              161 906         287 040 745          64 096 897         108 586 781          217 387 032           677 273 361 
  31 December          ==========          ==========          ==========          ==========           ==========            ========== 
  2019 
               ------------------  ------------------  ------------------  ------------------  -------------------  -------------------- 
 

STATEMENT OF CHANGES IN EQUITY

for the year ended 31 December 2019

 
                                                                      Historical Cost* 
                                                                  Functional 
                                                                    Currency 
                                                                 Translation          Revaluation             Retained 
                    Share Capital        Share Premium               Reserve              Reserve             Earnings                 Total 
               ------------------  -------------------  --------------------  -------------------  -------------------  -------------------- 
                              ZWL                  ZWL                   ZWL                  ZWL                  ZWL                   ZWL 
               ------------------  -------------------  --------------------  -------------------  -------------------  -------------------- 
 Balances at 
  1 January 
  2018                     16 506           31 474 502                     -               90 310           26 772 073            58 353 391 
               ------------------  -------------------  --------------------  -------------------  -------------------  -------------------- 
 Profit for 
  the year                      -                    -                     -                    -           21 242 681            21 242 681 
               ------------------  -------------------  --------------------  -------------------  -------------------  -------------------- 
 Revaluation 
  of land and 
  buildings, 
  net of tax                    -                    -                     -               46 431                    -                46 131 
               ------------------  -------------------  --------------------  -------------------  -------------------  -------------------- 
 Dividend                       -                    -                     -                    -            (747 724)             (747 724) 
  paid          -----------------    -----------------     -----------------    -----------------    -----------------     ----------------- 
               ------------------  -------------------  --------------------  -------------------  -------------------  -------------------- 
 Balances at 
  31 December 
  2018                     16 506           31 474 502                     -              136 741           47 267 030            78 894 779 
               ------------------  -------------------  --------------------  -------------------  -------------------  -------------------- 
 
 Profit for 
  the year                      -                    -                     -                    -          285 903 812           285 903 812 
               ------------------  -------------------  --------------------  -------------------  -------------------  -------------------- 
 Revaluation 
  of land and 
  buildings, 
  net of tax                    -                    -                     -          175 943 209                    -           175 943 209 
               ------------------  -------------------  --------------------  -------------------  -------------------  -------------------- 
 Dividend 
  paid                                               -                     -                    -          (3 772 370)           (3 772 370) 
               ------------------  -------------------  --------------------  -------------------  -------------------  -------------------- 
 Translation 
  gain on 
  change in 
  functional 
  currency,                     -                    -            11 619 648                    -                    -            11 619 648 
  net of tax     ----------------    -----------------     -----------------    -----------------    -----------------     ----------------- 
               ------------------  -------------------  --------------------  -------------------  -------------------  -------------------- 
 Balances at               16 506           31 474 502            11 619 648          176 079 950          329 398 472           548 589 078 
  31 December          ==========           ==========            ==========           ==========           ==========            ========== 
  2019 
               ------------------  -------------------  --------------------  -------------------  -------------------  -------------------- 
 

*The Historical Cost information has been shown as supplementary information for the benefit of users. These are not required in terms of International Accounting Standard (IAS) 29 "Financial Reporting in Hyperinflationary Economies". The Auditors have not expressed an opinion on the Historical Cost information.

 
                                                                          Inflation adjusted                                 Historical Cost* 
                                                                       31 December              31 December              31 December             31 December 
                                                           -----------------------  -----------------------  -----------------------  ---------------------- 
                                                                              2019                     2018                     2019                    2018 
                                                           -----------------------  -----------------------  -----------------------  ---------------------- 
                                                                               ZWL                      ZWL                      ZWL                     ZWL 
                                                           -----------------------  -----------------------  -----------------------  ---------------------- 
                                                                                                   Restated 
                                                                                    -----------------------  -----------------------  ---------------------- 
 CASH FLOWS FROM OPERATING ACTIVITIES 
                                                                                    -----------------------  -----------------------  ---------------------- 
 Profit before taxation                                                 86 304 010              110 768 837              330 417 512              27 166 066 
                                                           -----------------------  -----------------------  -----------------------  ---------------------- 
 Non-cash items 
                                                           -----------------------  -----------------------  -----------------------  ---------------------- 
 
   *    Impairment losses on financial assets measured at 
        amortised cost                                                  11 048 567               24 920 236               11 048 567               4 011 952 
                                                           -----------------------  -----------------------  -----------------------  ---------------------- 
                                                                                                                            (194 387 
   *    Investment properties fair value adjustment                   (93 624 006)             (19 523 429)                     322)             (2 551 436) 
                                                           -----------------------  -----------------------  -----------------------  ---------------------- 
 
   *    Profit on disposal of property and equipment                             -                  139 122                        -                (22 396) 
                                                           -----------------------  -----------------------  -----------------------  ---------------------- 
 
   *    Profit on disposal of investment properties                      (584 149)              (4 395 908)                (584 149)               (567 032) 
                                                           -----------------------  -----------------------  -----------------------  ---------------------- 
 
   *    Trade and other investments fair value gains                     (913 332)                316 323                (1 499 630)                (10 154) 
                                                           -----------------------  -----------------------  -----------------------  ---------------------- 
 
   *    Impairment reversal on land and buildings                               -                         -                 (40 600)                (76 661) 
                                                           -----------------------  -----------------------  -----------------------  ---------------------- 
 
   *    Depreciation (excluding Right of use assets)                    15 427 213               11 991 839                2 307 360               1 370 312 
                                                           -----------------------  -----------------------  -----------------------  ---------------------- 
 
   *    Depreciation - Right of use assets                               3 088 496                        -                1 310 867                       - 
                                                           -----------------------  -----------------------  -----------------------  ---------------------- 
 
   *    Interest capitalised on subordinated term loan                   3 779 812                1 065 166                1 151 954                 171 483 
                                                           -----------------------  -----------------------  -----------------------  ---------------------- 
 
   *    Amortisation of intangible assets                                6 356 249                7 882 765                  733 909                 879 376 
                                                           -----------------------  -----------------------  -----------------------  ---------------------- 
                                                                      (92 386 267)                  128 510             (92 386 267)                  20 689 
   *    Unrealised foreign exchange loss/(gain)               --------------------      -------------------     --------------------     ------------------- 
                                                           -----------------------  -----------------------  -----------------------  ---------------------- 
 Operating cash flows before 
  changes in operating assets 
  and liabilities                                                     (61 503 405)              123 706 240               58 072 202              30 321 926 
                                                           -----------------------  -----------------------  -----------------------  ---------------------- 
 Changes in operating assets 
  and liabilities 
                                                           -----------------------  -----------------------  -----------------------  ---------------------- 
 (Decrease)/increase in deposits                                        (1 809 709 
  and other liabilities                                                       298)              617 889 994              530 528 880              90 143 854 
                                                           -----------------------  -----------------------  -----------------------  ---------------------- 
 
                                                                                                   (348 675                 (305 020 
 Decrease/(increase) in loans,                                         984 547 294                     517)                     105)            (56 133 878) 
  advances and other assets                                   --------------------      -------------------     --------------------     ------------------- 
                                                           -----------------------  -----------------------  -----------------------  ---------------------- 
                                                                          (886 665 
 Net cash (used)/generated from                                               408)              402 507 937              283 580 977              64 331 902 
  operations                                                  --------------------      -------------------      -------------------     ------------------- 
                                                           -----------------------  -----------------------  -----------------------  ---------------------- 
 Taxation 
                                                           -----------------------  -----------------------  -----------------------  ---------------------- 
                                                                       (14 520 794 
                                                                                 )             (27 881 907)              (9 079 118)             (4 488 757) 
 Corporate tax paid                                           --------------------      -------------------     --------------------     ------------------- 
                                                           -----------------------  -----------------------  -----------------------  ---------------------- 
                                                                          (901 186 
 Net cash (outflow)/ inflow from                                              202)              374 626 030              274 501 860              59 843 145 
  operating activities                                        --------------------      -------------------      -------------------     ------------------- 
                                                           -----------------------  -----------------------  -----------------------  ---------------------- 
 CASH FLOWS FROM INVESTING ACTIVITIES 
                                                           -----------------------  -----------------------  -----------------------  ---------------------- 
 Proceeds on disposal of property 
  and equipment                                                                  -                  139 122                        -                  22 396 
                                                           -----------------------  -----------------------  -----------------------  ---------------------- 
 Acquisition of intangible assets                                        (636 901)              (4 501 240)                 (94 320)               (535 971) 
                                                           -----------------------  -----------------------  -----------------------  ---------------------- 
 Acquisition of property and 
  equipment                                                           (35 323 914)             (58 952 339)             (24 308 497)             (9 490 840) 
                                                           -----------------------  -----------------------  -----------------------  ---------------------- 
 Acquisition of investment properties                                  (1 939 045)             (37 784 075)                (351 515)             (6 082 924) 
                                                           -----------------------  -----------------------  -----------------------  ---------------------- 
 (Disposal)/Acquisition of investment                                                              (155 312 
  securities                                                           621 128 566                     399)               10 083 280            (25 004 013) 
                                                           -----------------------  -----------------------  -----------------------  ---------------------- 
 Decrease in amount owing from 
  Holding Company                                                        3 467 895                  579 288                  558 303                  93 261 
                                                           -----------------------  -----------------------  -----------------------  ---------------------- 
 Increase in amount owing to 
  Holding Company                                                       10 733 345                        -                2 143 122                       - 
                                                           -----------------------  -----------------------  -----------------------  ---------------------- 
 Proceeds on disposal of investment                                      5 888 719               29 826 660                5 888 719               4 801 846 
  properties                                                   -------------------      -------------------      -------------------     ------------------- 
                                                           -----------------------  -----------------------  -----------------------  ---------------------- 
                                                                                                   (226 004 
 Net cash inflow /(outflow) from                                       603 318 667                     982)              (6 080 908)            (36 196 245) 
  investing activities                                         -------------------      -------------------      -------------------     ------------------- 
                                                           -----------------------  -----------------------  -----------------------  ---------------------- 
 
 
 CASH FLOWS FROM FINANCING ACTIVITIES 
                                                          ------------------  -------------------  ------------------- 
 Dividend paid                              (19 936 015)         (6 382 843)          (3 772 370)            (747 724) 
                                    --------------------  ------------------  -------------------  ------------------- 
 Payment of interest on 
  subordinated 
  term loan                                    (803 062)           (507 728)            (180 450)             (81 740) 
                                    --------------------  ------------------  -------------------  ------------------- 
                                             (4 186 976)                   -          (1 276 043)                    - 
 Repayment of lease liabilities       ------------------    ----------------    -----------------     ---------------- 
                                    --------------------  ------------------  -------------------  ------------------- 
 Net cash outflow from financing            (24 926 052)         (6 890 571)          (5 228 863)            (829 464) 
  activities                          ------------------     ---------------    -----------------    ----------------- 
                                    --------------------  ------------------  -------------------  ------------------- 
 
 Net (decrease)/ increase in                    (322 793             141 730              263 192 
  cash and cash equivalents                         587)                 477                  089           22 817 436 
                                    --------------------  ------------------  -------------------  ------------------- 
 Net foreign exchange and monetary 
  adjustments on cash and cash                                                            116 671 
  equivalents                                116 671 266             436 504                  266               70 274 
                                    --------------------  ------------------  -------------------  ------------------- 
 
                                                 698 426             556 259              112 440               89 553 
 Cash and cash equivalents at                        589                 608                  912                  202 
  beginning of the year               ------------------    ----------------     ----------------     ---------------- 
                                    --------------------  ------------------  -------------------  ------------------- 
 Cash and cash equivalents at 
  the end of the year (note f)                   492 304             698 426              492 304              112 440 
                                                     267                 589                  267                  912 
                                              ==========           =========           ==========            ========= 
                                    --------------------  ------------------  -------------------  ------------------- 
 
 ADDITIONAL INFORMATION ON OPERATIONAL 
  CASH FLOWS FROM INTEREST 
                                                          ------------------  -------------------  ------------------- 
                                                                     199 550 
 Interest received                           168 852 277                 036           65 548 752           38 318 561 
                                    --------------------  ------------------  -------------------  ------------------- 
                                             (48 055                 (63 651              (15 089 
 Interest paid                                 909)                     654)                 895)          (7 548 415) 
                                    --------------------  ------------------  -------------------  ------------------- 
 

*The Historical Cost information has been shown as supplementary information for the benefit of users. These are not required in terms of International Accounting Standard (IAS) 29 "Financial Reporting in Hyperinflationary Economies". The Auditors have not expressed an opinion on the Historical Cost information.

NOTES TO THE CONDENSED FINANCIAL STATEMENTS

for the year ended 31 December 2019

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.         OTHER income 
 
                                          Inflation adjusted                          Historical Cost 
                                       31 December          31 December          31 December          31 December 
                               -------------------  -------------------  -------------------  ------------------- 
                                              2019                 2018                 2019                 2018 
                               -------------------  -------------------  -------------------  ------------------- 
                                               ZWL                  ZWL                  ZWL                  ZWL 
                               -------------------  -------------------  -------------------  ------------------- 
                                                               Restated 
                               -------------------  -------------------  -------------------  ------------------- 
 Trade and other investments 
  fair value gains                         913 332        (316 323)                1 499 630               10 154 
                               -------------------  -------------------  -------------------  ------------------- 
 Profit on disposal 
  of investment properties                 584 149            4 395 908              584 149              567 032 
                               -------------------  -------------------  -------------------  ------------------- 
 Profit on disposal 
  of property and equipment                      -              139 122                    -               22 396 
                               -------------------  -------------------  -------------------  ------------------- 
 Fair value gains on 
  investment properties                 93 624 006           19 523 429          194 387 322            2 551 436 
                               -------------------  -------------------  -------------------  ------------------- 
 Rental income                           1 280 872            3 012 142              391 885              365 269 
                               -------------------  -------------------  -------------------  ------------------- 
 Bad debts recovered                    14 744 289           10 622 718            9 519 359            1 295 428 
                               -------------------  -------------------  -------------------  ------------------- 
 Other operating income                  1 459 818            1 752 130              240 294              171 806 
                               -------------------  -------------------  -------------------  ------------------- 
                                ------------------   ------------------   ------------------   ------------------ 
                                           112 606           39 129 126              206 622            4 983 521 
                                               446           ==========                  639           ========== 
                                        ==========                                ========== 
                               -------------------  -------------------  -------------------  ------------------- 
 
   b.        Operating EXPITURE 
 
                                       Inflation adjusted                      Historical Cost 
                                    31 December        31 December        31 December        31 December 
                              -----------------  -----------------  -----------------  ----------------- 
                                           2019               2018               2019               2018 
                              -----------------  -----------------  -----------------  ----------------- 
                                            ZWL                ZWL                ZWL                ZWL 
                              -----------------  -----------------  -----------------  ----------------- 
                                                          Restated 
                              -----------------  -----------------  -----------------  ----------------- 
 The operating profit is after recognising 
  the following: 
                                                 -----------------  -----------------  ----------------- 
                                        116 124            130 911 
 Administration costs                       211                642         55 305 935         15 955 591 
                              -----------------  -----------------  -----------------  ----------------- 
 Audit fees: 
                              -----------------  -----------------  -----------------  ----------------- 
     - Current year                   1 580 232            755 184            993 686             98 991 
                              -----------------  -----------------  -----------------  ----------------- 
     - Prior year                       318 198            849 895            200 090            111 406 
                              -----------------  -----------------  -----------------  ----------------- 
 Impairment reversal on 
  land and buildings*                  -                  -                  (40 600)           (76 661) 
                              -----------------  -----------------  -----------------  ----------------- 
 Depreciation - (excluding 
  Right of use assets)               15 427 213         11 991 839          2 307 360          1 370 312 
                              -----------------  -----------------  -----------------  ----------------- 
 Amortisation of intangible 
  assets                              6 356 249          7 882 765            733 909            879 376 
                              -----------------  -----------------  -----------------  ----------------- 
 Depreciation - Right of 
  use assets                          3 088 496                  -          1 310 867                  - 
                              -----------------  -----------------  -----------------  ----------------- 
 Directors' remuneration              6 154 500          8 147 609          2 531 536            971 121 
                              -----------------  -----------------  -----------------  ----------------- 
     - Fees for services as 
      directors                       1 585 033          1 838 595            644 487            219 246 
                              -----------------  -----------------  -----------------  ----------------- 
     - Expenses                         127 149            149 410             80 767             17 364 
                              -----------------  -----------------  -----------------  ----------------- 
     - Services rendered              4 442 318          6 159 603          1 806 282            734 511 
                              -----------------  -----------------  -----------------  ----------------- 
 Staff costs - salaries, 
  allowances and related                                   128 926 
  costs                              91 465 669                698         42 582 294         15 402 575 
                              -----------------  -----------------  -----------------  ----------------- 
                               ----------------   ----------------   ----------------   ---------------- 
                                        240 474            289 465            105 925             34 712 
                                            168                631                077                711 
                                     ==========         ==========         ==========         ========== 
                              -----------------  -----------------  -----------------  ----------------- 
 

*The impairment reversal on land and buildings arose due to fair value changes in the Bank's land and buildings measured using the revaluation model.

   c.         Other comprehensive income 
 
                                  Inflation adjusted                      Historical Cost 
                               31 December        31 December        31 December        31 December 
                         -----------------  -----------------  -----------------  ----------------- 
                                      2019               2018               2019               2018 
                         -----------------  -----------------  -----------------  ----------------- 
                                       ZWL                ZWL                ZWL                ZWL 
                         -----------------  -----------------  -----------------  ----------------- 
                                                     Restated 
                         -----------------  -----------------  -----------------  ----------------- 
 Translation gain on 
  change in functional 
  currency                      86 325 787                  -         15 649 358                  - 
                         -----------------  -----------------  -----------------  ----------------- 
 Tax effect                   (22 228 890)                  -        (4 029 710)                  - 
                         -----------------  -----------------  -----------------  ----------------- 
                           ---------------    ---------------    ---------------    --------------- 
                                64 096 897                  -         11 619 648                  - 
                           ---------------    ---------------    ---------------    --------------- 
                         -----------------  -----------------  -----------------  ----------------- 
 Revaluations of land 
  and buildings                146 244 823                  -        236 960 551             62 533 
                         -----------------  -----------------  -----------------  ----------------- 
 Tax effect                   (37 658 042)                  -       (61 017 342)           (16 102) 
                         -----------------  -----------------  -----------------  ----------------- 
                           ---------------                       --------------- 
                                   108 586   ----------------            175 943    --------------- 
                                       781                  -                209             46 431 
                           ---------------    ---------------    ---------------    --------------- 
                         -----------------  -----------------  -----------------  ----------------- 
                           ---------------    ---------------    ---------------    --------------- 
                                   172 683                  -            187 562             46 431 
                                       678          =========                857          ========= 
                                 =========                             ========= 
                         -----------------  -----------------  -----------------  ----------------- 
 
   d.         EARNINGS PER SHARE 

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

 
                                               Inflation adjusted                          Historical Cost 
                                            31 December          31 December          31 December          31 December 
       ---------------------------  -------------------  -------------------  -------------------  ------------------- 
                                                   2019                 2018                 2019                 2018 
       ---------------------------  -------------------  -------------------  -------------------  ------------------- 
                                                    ZWL                  ZWL                  ZWL                  ZWL 
       ---------------------------  -------------------  -------------------  -------------------  ------------------- 
                                                                    Restated 
       ---------------------------  -------------------  -------------------  -------------------  ------------------- 
 d.1    Earnings/(losses) 
       ---------------------------  -------------------  -------------------  -------------------  ------------------- 
  Profit for the 
   year                                      16 297 980           59 663 215          285 903 812           21 242 681 
 ---------------------------------  -------------------  -------------------  -------------------  ------------------- 
  Headline earnings                       (142 353 508)           38 078 986           31 091 848           18 388 988 
 ---------------------------------  -------------------  -------------------  -------------------  ------------------- 
 d.2    Number of shares 
       ---------------------------  -------------------  -------------------  -------------------  ------------------- 
  Weighted average 
   shares in issue                           16 506 050           16 506 050           16 506 050           16 506 050 
 ---------------------------------  -------------------  -------------------  -------------------  ------------------- 
 d.3    Headline (losses)/ earnings 
       ------------------------------------------------  -------------------  -------------------  ------------------- 
  Profit for the 
   period                                    16 297 980           59 663 215          285 903 812           21 242 681 
 ---------------------------------  -------------------  -------------------  -------------------  ------------------- 
        Add/(deduct) non-recurring 
         items 
       ------------------------------------------------  -------------------  -------------------  ------------------- 
  Trade investments 
   fair value gains                           (913 332)              316 323          (1 499 630)             (10 154) 
 ---------------------------------  -------------------  -------------------  -------------------  ------------------- 
  Profit on disposal 
   of property and 
   equipment                                          -            (139 122)                    -             (22 396) 
 ---------------------------------  -------------------  -------------------  -------------------  ------------------- 
  Profit on disposal 
   of investment properties                   (584 149)          (4 395 908)            (584 149)            (567 032) 
 ---------------------------------  -------------------  -------------------  -------------------  ------------------- 
  Unrealised foreign 
   exchange revaluation 
   gains                                   (92 386 267)              128 510         (92 386 267)               20 689 
 ---------------------------------  -------------------  -------------------  -------------------  ------------------- 
  Fair value gains 
   on investment properties                (93 624 006)         (19 523 429)        (194 387 322)          (2 551 436) 
 ---------------------------------  -------------------  -------------------  -------------------  ------------------- 
                                             28 856 265            2 029 397           34 045 403              272 755 
  Tax thereon                         -----------------    -----------------    -----------------    ----------------- 
 ---------------------------------  -------------------  -------------------  -------------------  ------------------- 
        Headline earnings                 (142 353 508)           38 078 986           31 091 848           18 388 988 
                                            ===========          ===========          ===========          =========== 
       ---------------------------  -------------------  -------------------  -------------------  ------------------- 
 
 d.4    Earnings/(losses) per share 
         (ZWL cents) 
       ------------------------------------------------  -------------------  -------------------  ------------------- 
  Basic and diluted                               98.74               361.46             1 732.12               128.70 
 ---------------------------------  -------------------  -------------------  -------------------  ------------------- 
  Headline                                     (862.43)               230.70               188.37               111.41 
 ---------------------------------  -------------------  -------------------  -------------------  ------------------- 
 
   e.         SHARE CAPITAL 
   e.1       Authorised 

The authorised ordinary share capital at 31 December 2019 is at the historical cost figure of ZWL25 000 (2018 - ZWL25 000) comprising 25 million ordinary shares of ZWL0.001 each.

   e.2         Issued and fully paid 

The issued share capital at 31 December 2019 is at the inflation adjusted figure of ZWL161 906 (2018 restated - ZWL161 906) and historical cost of ZWL16 506 (2018 - 16 506) comprising 16 506 050 (2018 - 16 506 050) ordinary shares of ZWL0.001 each in historical cost terms.

   f.          CASH AND CASH EQUIVALENTS 
 
                                                         Inflation adjusted                            Historical Cost 
                                                      31 December           31 December           31 December           31 December 
                                             --------------------  --------------------  --------------------  -------------------- 
                                                             2019                  2018                  2019                  2018 
                                             --------------------  --------------------  --------------------  -------------------- 
                                                              ZWL                   ZWL                   ZWL                   ZWL 
                                             --------------------  --------------------  --------------------  -------------------- 
                                                                               Restated 
                                             --------------------  --------------------  --------------------  -------------------- 
 
 Balances with the Central                                267 032               553 329               267 032 
  Bank*                                                       753                   510                   753            89 081 480 
                                             --------------------  --------------------  --------------------  -------------------- 
 Current, nostro accounts                                 160 209                                     160 209 
  and cash                                                    897            83 397 817                   897            13 426 360 
                                             --------------------  --------------------  --------------------  -------------------- 
 Interbank placements (see 
  below)                                               65 500 000            62 114 988            65 500 000            10 000 000 
                                             --------------------  --------------------  --------------------  -------------------- 
 
 Expected Credit loss allowance                         (438 383)             (415 726)             (438 383)              (66 928) 
  (see below)                                   -----------------     -----------------     -----------------     ----------------- 
                                             --------------------  --------------------  --------------------  -------------------- 
                                                          492 304               698 426               492 304               112 440 
                                                              267                   589                   267                   912 
                                                        =========             =========             =========             ========= 
                                             --------------------  --------------------  --------------------  -------------------- 
 
 Interbank placements 
                                             --------------------  --------------------  --------------------  -------------------- 
 Interbank placements                                  65 500 000            62 114 988            65 500 000            10 000 000 
                                             --------------------  --------------------  --------------------  -------------------- 
 Expected Credit Loss allowance 
  - Stage 1                                             (438 383)             (415 726)             (438 383)              (66 928) 
                                             --------------------  --------------------  --------------------  -------------------- 
 
    *    ECL charged at 1 January 2018                  (415 726)             (241 552)              (66 928)              (26 770) 
                                             --------------------  --------------------  --------------------  -------------------- 
 
     *    Monetary adjustment                             348 796                75 267                     -                     - 
                                             --------------------  --------------------  --------------------  -------------------- 
 
    *    ECL charged through profit or loss             (371 455)             (249 441)             (371 455)              (40 158) 
                                             --------------------  --------------------  --------------------  -------------------- 
                                                 ----------------      ----------------      ----------------       --------------- 
                                                       65 061 617            61 669 262            65 061 617             9 933 072 
                                                        =========             =========             =========             ========= 
                                             --------------------  --------------------  --------------------  -------------------- 
 

* Included in balances with the Central Bank is an amount of USD13 840 412 (ZWL232 409 731 equivalent) transferred by the Bank in respect of legacy debt settlements as directed by the RBZ directive RU28 of 2019.

   g.         INVESTMENT PROPERTIES 
 
                                        Inflation adjusted                    Historical Cost 
                                     31 December       31 December       31 December       31 December 
                                ----------------  ----------------  ----------------  ---------------- 
                                            2019              2018              2019              2018 
                                ----------------  ----------------  ----------------  ---------------- 
                                             ZWL               ZWL               ZWL               ZWL 
                                ----------------  ----------------  ----------------  ---------------- 
                                                          Restated 
                                ----------------  ----------------  ----------------  ---------------- 
 
                                         130 134           112 544 
 At 1 January                                664               359        20 950 606        18 977 000 
                                ----------------  ----------------  ----------------  ---------------- 
 Additions                             1 939 045        37 784 075           351 515         6 082 924 
                                ----------------  ----------------  ----------------  ---------------- 
                                                           (25 430 
 Disposals                           (5 304 570)              752)       (5 304 570)       (4 360 754) 
                                ----------------  ----------------  ----------------  ---------------- 
                                                                             194 387 
 Fair value gains                     93 624 006        19 523 429               322         2 551 436 
                                ----------------  ----------------  ----------------  ---------------- 
 Reclassification from 
  non-current assets held 
  for sale                               180 000                 -           180 000                 - 
                                ----------------  ----------------  ----------------  ---------------- 
 
 Reclassification to property                              (14 286 
  and equipment                                -              447)                 -       (2 300 000) 
                                ----------------  ----------------  ----------------  ---------------- 
 Translation gain on change 
  in functional currency               9 294 837                 -        19 303 109                 - 
                                ----------------  ----------------  ----------------  ---------------- 
                                 ---------------   ---------------   ---------------   --------------- 
   At 31 December 2019                   229 867           130 134           229 867            20 950 
                                             982               664               982               606 
                                       =========         =========         =========         ========= 
                                ----------------  ----------------  ----------------  ---------------- 
 

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

Rental income amounting to ZWL1 280 872 (2018 - ZWL3 012 142) was received and no operating expenses were incurred on the leased investment properties in the current year due to the net leasing arrangement on the properties.

Included in investment properties are properties which were acquired as part of the foreclosure process with marketability restrictions measured at ZWL4 668 863 as at 31 December 2019. 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.

Measurement of fair value

Fair value hierarchy

The fair value of the Bank's investment properties as at 31 December 2019 has been 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.

Level 3

The fair value for investment properties of ZWL229 867 982 (2018 - restated ZWL130 134 664) has been categorised under level 3 in the fair value hierarchy based on the inputs used for the valuation technique described below.

The following shows reconciliation between the opening and closing balances for level 3 fair values:

 
                                             Inflation adjusted                    Historical Cost 
                                          31 December       31 December       31 December       31 December 
                                     ----------------  ----------------  ----------------  ---------------- 
                                                 2019              2018              2019              2018 
                                     ----------------  ----------------  ----------------  ---------------- 
                                                  ZWL               ZWL               ZWL               ZWL 
                                     ----------------  ----------------  ----------------  ---------------- 
                                                               Restated 
                                     ----------------  ----------------  ----------------  ---------------- 
                                              130 134           112 544 
 At 1 January                                     664               359        20 950 606        18 977 000 
                                     ----------------  ----------------  ----------------  ---------------- 
 Additions                                  1 939 045        37 784 075           351 515         6 082 924 
                                     ----------------  ----------------  ----------------  ---------------- 
                                                                (25 430 
 Disposals                                (5 304 570)              752)       (5 304 570)       (4 360 754) 
                                     ----------------  ----------------  ----------------  ---------------- 
                                                                                  194 387 
 Fair value gains                          93 624 006        19 523 429               322         2 551 436 
                                     ----------------  ----------------  ----------------  ---------------- 
 Reclassification from non-current 
  assets held for sale                        180 000                 -           180 000                 - 
                                     ----------------  ----------------  ----------------  ---------------- 
 
 Reclassification to property                                   (14 286 
  and equipment                                     -              447)                 -       (2 300 000) 
                                     ----------------  ----------------  ----------------  ---------------- 
 Translation gain on change 
  in functional currency                    9 294 837                 -        19 303 109                 - 
                                     ----------------  ----------------  ----------------  ---------------- 
                                      ---------------   ---------------   ---------------   --------------- 
   At 31 December 2019                        229 867           130 134           229 867            20 950 
                                                  982               664               982               606 
                                            =========         =========         =========         ========= 
                                     ----------------  ----------------  ----------------  ---------------- 
 

The values were arrived at by applying yield rates of 5% on rental values of between ZWL64 - ZWL112 per square metre. The properties are leased out under operating lease to various tenants.

The values were arrived at by applying yield rates of 5% on rental values of between ZWL64 - ZWL112 per square metre. 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 all                                                                   *    void periods were shorter/(longer); 
 income 
 producing      *    Occupancy rate (55%); and 
 properties.                                                                 *    the occupancy rates were higher /(lower); and 
 
 The direct     *    Average market yield of 10%. 
 comparison                                                                  *    the risk adjusted discount rates were lower/ 
 method was                                                                       (higher). 
 applied on     *    Marketability restrictions for level 3 items due to 
 all                 underlying contractual agreements with third parties 
 residential   . 
 properties. 
              -----------------------------------------------------------  ---------------------------------------------------------- 
 

Below is an indication of the sensitivity analysis at different discount rates:-

 
                      Change in fair value 
 Change in rate   December 2019   December 2018 
                 --------------  -------------- 
                            ZWL             ZWL 
                 --------------  -------------- 
            +5%      18 654 576       7 241 473 
                 --------------  -------------- 
            +3%      11 192 736       4 344 880 
                 --------------  -------------- 
            +1%       3 730 912       1 448 293 
                 --------------  -------------- 
            -1%      -3 730 912     - 1 448 293 
                 --------------  -------------- 
            -3%     -11 192 736     - 4 344 880 
                 --------------  -------------- 
            -5%     -18 654 576     - 7 241 473 
                 --------------  -------------- 
 
   h.         CORPORATE GOVERNANCE AND RISK MANAGEMENT 
   1.         RESPONSIBILITY 

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

   2.          CORPORATE GOVERNANCE 

The Bank adheres to principles of corporate governance derived from the National Code on Corporate Governance Zimbabwe, King IV Report, the United Kingdom Combined Code and Reserve Bank of Zimbabwe 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.

Board and Director evaluations are carried out an annual basis, wherein the effectiveness of the Board is reviewed, including its gender and skills mix. Furthermore, the independence of Independent Non-Executive Directors is reviewed on an annual basis.

The Bank has in place an Ethics Charter ("Code of Ethics") that all Board and staff members are required to adhere to. Also the Bank adheres to its Environmental and Social Risk Management Framework, wherein its main objectives are to:

-- Identify and assess environmental and social risks and opportunities associated with a Client's activities and its sphere of influence;

   --    Promote improved social and environmental performance of a Client's companies; and 

-- Avoid, or where avoidance is not possible, minimize, mitigate, or compensate for adverse impacts on workers, affected communities, and the environment.

   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 (NMB Bank Limited Board is the same as the NMBZ Holdings Limited Board)

 
                  Board of       Audit          Risk            Asset and       Loans         Human             Credit         Head Office 
                   Directors      Committee     Management      Liability       Review        Resources,         Committee      Project 
                                                                Management      Committee     Remuneration                      Sub-Committee 
                                                                Committee                     and 
                                                                (ALCO) &                      Nominations 
                                                                Finance                       Committee 
                                                                Committee 
 Mr. B. A. 
  Chikwanha      4    4                        4    4                                         4    4           5    5 
                ---  --------  ---  --------  ---  ---------      ----------  ---  --------  ---  ----------  ---  --------  ----  ----------- 
 Mr. B. 
  Ndachena (E)   4    4                                        4   4                                                          5     5 
                ---  --------  ---  --------  ---  ---------      ----------  ---  --------  ---  ----------  ---  --------  ----  ----------- 
 Mr. B. P. 
  Washaya (E)    4    4                                        4   4                          4    4           5    5 
                ---  --------  ---  --------  ---  ---------      ----------  ---  --------  ---  ----------  ---  --------  ----  ----------- 
 Ms. S. 
  Chitehwe       4    4         5    4                         4   3           4    4                                         5     4 
                ---  --------  ---  --------  ---  ---------      ----------  ---  --------  ---  ----------  ---  --------  ----  ----------- 
 Mr. J. 
  Tichelaar      4    3                        4    3          4   3           4    3         4    3 
                ---  --------  ---  --------  ---  ---------      ----------  ---  --------  ---  ----------  ---  --------  ----  ----------- 
 Mr. J. de la 
  Fargue         4    4                        4    4          4   4                          4    4           5    5         5     5 
                ---  --------  ---  --------  ---  ---------      ----------  ---  --------  ---  ----------  ---  --------  ----  ----------- 
 Ms. J. 
  Maguranyanga   4    4         5    5                                         4    4         4    4 
                ---  --------  ---  --------  ---  ---------      ----------  ---  --------  ---  ----------  ---  --------  ----  ----------- 
 Mr. C. 
  Chikaura       4    4         5    5         4    4          4   4                          4    4           5    5         5     5 
                ---  --------  ---  --------  ---  ---------      ----------  ---  --------  ---  ----------  ---  --------  ----  ----------- 
 Ms. C. Glover   4    3                        4    3          4   3           4    3 
                ---  --------  ---  --------  ---  ---------      ----------  ---  --------  ---  ----------  ---  --------  ----  ----------- 
 
 

KEY

 
   Meetings planned 
 
 
 Meetings attended 
 

(E) Executive.

   4.          RISK MANAGEMENT 

The Board of Directors has overall responsibility for the establishment and oversight of the Group's risk management framework. The Board has established the Board Asset and Liability Management Committee (ALCO) and the Board Risk and Compliance Committee, which are responsible for defining the Group's risk universe, developing policies and monitoring implementation. The Board also has the Board Credit Committee (BCC) which is responsible for sanctioning credits and the Board Loans Review Committee (LRC), which is responsible for monitoring asset quality and adherence to the credit risk management policy.

Risk management is linked logically from the level of individual transactions to the Group 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 Group'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 organisation 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 Group'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 independency 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 Group has in place a Board Loans Review Committee responsible for reviewing the quality of the loan book and adequacy of loan loss provisions.

The Group has an 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 group's move into the mass market, retail credit has become a key area of focus. The group has put in place robust personal loan monitoring systems and structures to mitigate retail loan delinquencies. This includes a rigorous scheme assessment and a dedicated pre-delinquency team and a separate recoveries team.

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 Group 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 group 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 Group, if appropriate (e.g. in relation to deteriorated credits).

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

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

-- 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 Group maximises recoveries from Non-Performing Loans (NPLs) and loans and advances written off.

   4.2       Market risk 

This is the exposure of the Group'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 Group has in place a Management Asset and Liability Committee (ALCO) which monitors market risk and

recommends the appropriate levels to which the Group 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

Group's ability to withstand stressed market conditions. On foreign exchange risk, the bank monitors

currency mismatches and make adjustments depending on exchange rate movement forecast. The

mismatches per currency are contained within 5% of the Group's capital position.

Management 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 Group to fund asset increases or meet obligations as they fall due without incurring unacceptable costs or losses. The Group 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 Group also actively monitors its loans to deposit ratio against a set threshold in a bid to monitor and limit funding risk. The group 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 reports produced by the Risk Management department. This is augmented by a monthly management ALCO and a quarterly board ALCO meetings.

   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 Group utilises monthly Key Risk Indicators to monitor operational risk in all units. Further to this, the Group has an elaborate Operational Loss reporting system in which all incidents with a material impact on the well-being of the Group are reported to risk management. The risk department conducts periodic risk assessments on all the units within the Group 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 minimised. The Risk 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 the 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 Group has an independent compliance function which is responsible for identifying and monitoring all compliance issues and ensures the Group 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 Group conducts its business. To manage this risk, the Group

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 Group 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 Group'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 Group 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       Environmental, Social & Governance (ESG) Risk 

Environment, Social and Governance (ESG) or sustainability risk is the consideration of non-financial risks arising from the environment (flora and fauna) as well as societal issues. The Group is not only concerned about making profits, but is also keen on assessing the impact it has on the planet and the people it interacts with. There is a growing number of frameworks and standards aimed at addressing global concerns on sustainability. Global risk reports show that environmental and societal risks have overtaken economic and geopolitical risks in terms of both likelihood and impact.

To manage this risk, during the reporting period, the Bank appointed an ESG risk manager within the Risk Department. This function is responsible for ESG policy implementation, coordination, reviews and reporting. The Group commits to responsible financing through abiding to its Exclusion List and continues to enhance its ESG policies, processes and procedures as well as to train staff on sustainability issues. The Group conducts risk reviews to identify and measure sustainability risks and in the process implement relevant and adequate controls around these risks.

   4.9       Risk Ratings 
   4.9.1    Reserve Bank of Zimbabwe Ratings 

The Reserve Bank of Zimbabwe conducted an onsite inspection on the Group's banking subsidiary on 24 November 2016. Below are the final ratings from the onsite examination.

4.9.1.1 CAMELS* Ratings

 
                       Latest RBS**   Previous RBS   Previous RBS 
   CAMELS Component       Ratings        Ratings        Ratings 
                        24/11/2016     30/06/2013     31/01/2008 
 C apital Adequacy          2              2              4 
                      -------------  -------------  ------------- 
 A sset Quality             3              4              2 
                      -------------  -------------  ------------- 
 M anagement                3              3              3 
                      -------------  -------------  ------------- 
 E arnings                  2              2              3 
                      -------------  -------------  ------------- 
 L iquidity                 3              2              3 
                      -------------  -------------  ------------- 
 S ensitivity 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.

4.9.1.2 Summary RAS ratings

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

*** RAS stands for Risk Assessment System.

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

 
                      Level of Inherent   Adequacy of        Overall      Direction 
     Type of Risk      Risk                Risk Management    Composite    of Overall 
                                           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 
                     ------------------  -----------------  -----------  ------------ 
 Strategic Risk       Moderate            Acceptable         Moderate     Stable 
                     ------------------  -----------------  -----------  ------------ 
 Operational Risk     Moderate            Acceptable         Moderate     Stable 
                     ------------------  -----------------  -----------  ------------ 
 Legal & Compliance   Moderate            Acceptable         Moderate     Stable 
                     ------------------  -----------------  -----------  ------------ 
 Reputation           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 recognised 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 organisation.

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.

   4.9.2    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 2019 2018

Long term BB- BBB-

The current rating expires in August 2020.

   4.10     Regulatory Compliance 

There was no regulatory breach resulting in penalties during the period under review. The Bank is committed to comply with and adhere 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 31 December was as follows:

 
                                               Inflation adjusted                         Historical Cost 
                                                   2019                 2018                  2019               2018 
                                   --------------------  -------------------  --------------------  ----------------- 
                                                    ZWL                  ZWL                   ZWL                ZWL 
                                   --------------------  -------------------  --------------------  ----------------- 
                                                                    Restated 
                                   --------------------  -------------------  --------------------  ----------------- 
 Share capital                                  161 906              161 906                16 506             16 506 
                                   --------------------  -------------------  --------------------  ----------------- 
                                                                     287 040 
 Share premium                              287 040 745                  745            31 474 502         31 474 502 
                                   --------------------  -------------------  --------------------  ----------------- 
                                                                     221 025               329 398 
 Retained earnings                          217 387 032                  066                   472         47 267 030 
                                   --------------------  -------------------  --------------------  ----------------- 
                                                                     (20 234 
 Fair value gains on investment                       -                 771)                     -        (3 257 631) 
  properties                          -----------------     ----------------     -----------------     -------------- 
                                   --------------------  -------------------  --------------------  ----------------- 
                                                                     487 992               360 889 
                                            504 589 683                  947                   480         75 500 407 
                                   --------------------  -------------------  --------------------  ----------------- 
 
 Less: capital allocated                                             (24 142               (13 706 
  for market and operational               (13 706 269)                 847)                  269)        (3 886 799) 
  risk                                -----------------     ----------------     -----------------     -------------- 
                                   --------------------  -------------------  --------------------  ----------------- 
                                                                     463 850               347 183 
 Tier 1 capital                             490 883 414                  099                   211         71 613 608 
                                   --------------------  -------------------  --------------------  ----------------- 
 Tier 2 capital (subject 
  to limit as per Banking                                                                  205 935 
  Regulations)                              193 856 644           50 068 140                   382          8 197 298 
                                   --------------------  -------------------  --------------------  ----------------- 
 Fair value gains on investment 
  properties                                          -           20 234 771                     -          3 257 631 
                                   --------------------  -------------------  --------------------  ----------------- 
 Functional currency translation 
  resrv                                      64 096 897                    -            11 619 648                  - 
                                   --------------------  -------------------  --------------------  ----------------- 
 
 Fair valuation gains on                                                                   176 079 
  land and buildings                        108 586 781                    -                   950            136 741 
                                   --------------------  -------------------  --------------------  ----------------- 
 Subordinated debt                              294 339            1 876 817               294 339            302 152 
                                   --------------------  -------------------  --------------------  ----------------- 
 Stage 1 & 2 ECL provisions 
  - (limited to 1,25% of 
  risk weighted assets)                      20 878 627           27 956 552            17 941 445          4 500 774 
                                   --------------------  -------------------  --------------------  ----------------- 
                                                                     513 918               553 118 
 Tier 1 & 2 capital                         684 740 058                  239                   593          9 810 906 
                                   --------------------  -------------------  --------------------  ----------------- 
 Tier 3 capital (sum of 
  market and operational                                              24 142                13 706 
  risk capital)                              13 706 269                  847                   269          3 886 799 
                                   --------------------  -------------------  --------------------  ----------------- 
                                      -----------------      ---------------       ---------------     -------------- 
  Total capital base                            698 446              538 061               566 824         83 697 705 
                                                    328                  087                   862          ========= 
                                             ==========           ==========             ========= 
                                   --------------------  -------------------  --------------------  ----------------- 
                                              1 568 817            2 236 524             1 435 315            360 061 
 Total risk weighted assets                         144                  251                   609                931 
                                   --------------------  -------------------  --------------------  ----------------- 
 
 Tier 1 ratio                                    31.29%               20.74%                24.19%             19.89% 
                                   --------------------  -------------------  --------------------  ----------------- 
 Tier 2 ratio                                    12.36%                2.24%                14.35%              2.28% 
                                   --------------------  -------------------  --------------------  ----------------- 
 Tier 3 ratio                                     0.87%                1.08%                 0.95%              1.08% 
                                   --------------------  -------------------  --------------------  ----------------- 
 Total capital adequacy 
  ratio                                          44.52%               24.06%                39.49%             23.25% 
                                   --------------------  -------------------  --------------------  ----------------- 
 RBZ minimum required                               12%                  12%                   12%                12% 
                                   --------------------  -------------------  --------------------  ----------------- 
 
   6.         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 2019 and 2018.

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

 
                    Retail Banking            Corporate             Treasury       International             Digital 
  Inflation                                     Banking              Banking             Banking             Banking                 Other               Total 
  adjusted 
                               ZWL                  ZWL                  ZWL                 ZWL                 ZWL                   ZWL                 ZWL 
                 -----------------  -------------------  -------------------  ------------------  ------------------  --------------------  ------------------ 
 For the year 
 ended 31 
 December 
 2019 
                 -----------------  -------------------  -------------------  ------------------  ------------------  --------------------  ------------------ 
 Income 
                 -----------------  -------------------  -------------------  ------------------  ------------------  --------------------  ------------------ 
 Third party                                                                                                                       433 612             730 833 
  income                80 752 147           88 765 652           35 363 708           7 984 485          84 355 453                   528                 973 
                 -----------------  -------------------  -------------------  ------------------  ------------------  --------------------  ------------------ 
 Interest and 
  similar                                       (19 832              (27 722                                                                           (51 695 
  expense              (4 141 148)                 183)                 415)                   -                   -                     -                746) 
                 -----------------  -------------------  -------------------  ------------------  ------------------  --------------------  ------------------ 
                                      -----------------                                             ----------------     -----------------     --------------- 
                      ------------               68 933    -----------------    ----------------              84 355               433 612             679 138 
  Net operating         76 610 999                  468            7 641 293           7 984 485                 453                   528                 227 
  income           ---------------      ---------------    -----------------    ----------------    ----------------     -----------------     --------------- 
                 -----------------  -------------------  -------------------  ------------------  ------------------  --------------------  ------------------ 
 Other material 
 non-cash 
 items 
                 -----------------  -------------------  -------------------  ------------------  ------------------  --------------------  ------------------ 
 Impairment 
  losses on 
  financial 
  assets 
  measured at 
  amortised 
  cost                   2 505 772            8 129 454              413 341                   -                   -                     -          11 048 567 
                 -----------------  -------------------  -------------------  ------------------  ------------------  --------------------  ------------------ 
 Depreciation 
  of property 
  and equipment          7 432 905              335 771              103 329              57 662           6 792 659               698 150          15 427 213 
                 -----------------  -------------------  -------------------  ------------------  ------------------  --------------------  ------------------ 
 Depreciation 
  of right of 
  use assets                     -                    -                    -                   -                   -             3 088 496           3 088 496 
                 -----------------  -------------------  -------------------  ------------------  ------------------  --------------------  ------------------ 
 Amortisation 
  of intangible 
  assets                         -                    -                    -                   -                   -             6 356 249           6 356 249 
                 -----------------  -------------------  -------------------  ------------------  ------------------  --------------------  ------------------ 
 Segment                                                                                                                           (11 987 
  profit/(loss)         31 020 284           18 939 582           20 861 597           (766 697)          28 236 805                  559)          86 304 010 
                 -----------------  -------------------  -------------------  ------------------  ------------------  --------------------  ------------------ 
 Income tax                                                                                                                        (70 006             (70 006 
  charge                         -                    -                    -                   -                   -                  030)                030) 
                 -----------------  -------------------  -------------------  ------------------  ------------------  --------------------  ------------------ 
 Revaluation of 
  land and 
  buildings,                                                                                                                       108 586             108 586 
  net of tax                     -                    -                    -                   -                   -                   781                 781 
                 -----------------  -------------------  -------------------  ------------------  ------------------  --------------------  ------------------ 
 Translation 
  gain on 
  change                        -                    -                    -                   -                   -             64 096 897          64 096 897 
  in functional 
  currency         ---------------    -----------------    -----------------    ----------------    ----------------     -----------------     --------------- 
                 -----------------  -------------------  -------------------  ------------------  ------------------  --------------------  ------------------ 
 Profit/(loss)              31 020               18 939               20 861           (766 697)              28 236                98 985             188 981 
 for the year                  284                  582                  597          ==========                 805                   867                 658 
                         =========           ==========           ==========                              ==========            ==========           ========= 
                 -----------------  -------------------  -------------------  ------------------  ------------------  --------------------  ------------------ 
 As at 31 
 December 2019 
                 -----------------  -------------------  -------------------  ------------------  ------------------  --------------------  ------------------ 
 Assets and 
 liabilities 
                 -----------------  -------------------  -------------------  ------------------  ------------------  --------------------  ------------------ 
 Capital 
  expenditure 
  (property 
  and equipment 
  and 
  intangible 
  assets)                6 592 267                    -              124 352              19 881           1 064 734            28 159 581          35 960 815 
                 -----------------  -------------------  -------------------  ------------------  ------------------  --------------------  ------------------ 
                           360 259              569 190              327 314             110 907                                   707 061           2 089 780 
 Total assets                  251                  851                  026                 699          12 041 259                   131                 219 
                 -----------------  -------------------  -------------------  ------------------  ------------------  --------------------  ------------------ 
 Total                     575 250              407 188              261 424                                                       113 325           1 409 506 
  liabilities                  093                  006                  308          38 506 936                   -                   724                 856 
                 -----------------  -------------------  -------------------  ------------------  ------------------  --------------------  ------------------ 
 
   6.         SEGMENT INFORMATION 

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

 
                     Retail Banking           Corporate             Treasury         International             Digital 
  Inflation                                     Banking              Banking               Banking             Banking                Other              Total 
  adjusted - 
  Restated 
                                ZWL                 ZWL                  ZWL                   ZWL                 ZWL                  ZWL                ZWL 
                 ------------------  ------------------  -------------------  --------------------  ------------------  -------------------  ----------------- 
 For the year 
 ended 31 
 December 2018 
                 ------------------  ------------------  -------------------  --------------------  ------------------  -------------------  ----------------- 
 Income 
                 ------------------  ------------------  -------------------  --------------------  ------------------  -------------------  ----------------- 
 Third party                107 042              79 066                                                                             321 801 
  income                        023                 196           50 020 957             3 509 546          49 960 329                  928        611 400 980 
                 ------------------  ------------------  -------------------  --------------------  ------------------  -------------------  ----------------- 
 Interest and 
  similar                                        (6 855              (37 225               (22 356 
  expense               (6 694 647)                508)                 265)                  520)                   -                    -       (72 131 939) 
                 ------------------  ------------------  -------------------  --------------------  ------------------  -------------------  ----------------- 
                     --------------   -----------------    -----------------     -----------------     ---------------     ----------------    --------------- 
                            100 347              73 210               12 795               (18 846              49 960              321 801            539 269 
  Net operating                 377                 688                  692                  975)                 329                  928                041 
  income           ----------------     ---------------    -----------------    ------------------    ----------------    -----------------    --------------- 
                 ------------------  ------------------  -------------------  --------------------  ------------------  -------------------  ----------------- 
 Other material 
 non-cash 
 items: 
                 ------------------  ------------------  -------------------  --------------------  ------------------  -------------------  ----------------- 
 Impairment 
  losses on 
  financial 
  assets 
  measured at 
  amortised                                      18 336 
  cost                    5 651 813                 125              932 298                     -                   -                    -         24 920 236 
                 ------------------  ------------------  -------------------  --------------------  ------------------  -------------------  ----------------- 
 Depreciation 
  of property 
  and equipment           2 961 021             292 320               94 689                26 157           5 416 693            3 200 958         11 991 839 
                 ------------------  ------------------  -------------------  --------------------  ------------------  -------------------  ----------------- 
 Amortisation 
  of intangible 
  assets                          -                   -                    -                     -                   -            7 882 765          7 882 765 
                 ------------------  ------------------  -------------------  --------------------  ------------------  -------------------  ----------------- 
 Segment 
  profit/(loss)           6 450 806           9 783 584            4 176 244           (1 875 083)           5 652 381           67 406 463        110 768 837 
                 ------------------  ------------------  -------------------  --------------------  ------------------  -------------------  ----------------- 
 Income tax                                                                                                                         (51 105 
  charge                          -                   -                    -                     -                   -                 622)       (51 105 622) 
                 ------------------  ------------------  -------------------  --------------------  ------------------  -------------------  ----------------- 
 Other                            -                  -                     -                     -                   -                    -                  - 
 comprehensive 
 income             ---------------   -----------------    -----------------     -----------------     ---------------     ----------------    --------------- 
                 ------------------  ------------------  -------------------  --------------------  ------------------  -------------------  ----------------- 
 Profit/(loss)            6 450 806               9 783            4 176 244                (1 875           5 652 381               35 483         59 663 215 
 for the                  =========                 584           ==========                  083)           =========                  421          ========= 
 year at                                     ==========                                 ==========                               ========== 
 31 December 
 2018 
                 ------------------  ------------------  -------------------  --------------------  ------------------  -------------------  ----------------- 
 Assets and 
 Liabilities 
                 ------------------  ------------------  -------------------  --------------------  ------------------  -------------------  ----------------- 
 Capital 
  expenditure 
  (property 
  and equipment 
  and 
  intangible 
  assets)                10 501 839              25 637                    -                74 729           1 120 059           47 766 046         59 488 310 
                 ------------------  ------------------  -------------------  --------------------  ------------------  -------------------  ----------------- 
                            561 604             809 433              919 179                                                        950 329          3 293 749 
 Total assets                   751                 458                  760            19 837 695          33 384 462                  158                284 
                 ------------------  ------------------  -------------------  --------------------  ------------------  -------------------  ----------------- 
 Total                      919 829             824 719              797 512                                                        174 093          2 785 521 
  liabilities                   080                 196                  901            69 367 300                   -                  090                567 
                 ------------------  ------------------  -------------------  --------------------  ------------------  -------------------  ----------------- 
 
 
   6.1       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) (242) 759651                                      +263 (2922) 70169 
   Facsimile         +(263) (242) 759648                                      +263 (2922) 68535 
   Website:          http://www.nmbz.co.zw 
   Email:              enquiries@nmbz.co.zw 

Transfer Secretaries

   In Zimbabwe                                                                          In UK 

First Transfer Secretaries Computershare Investor Services PLC

   1 Armagh Avenue                                                                  The Pavilions 
   (Off Enterprise Road)                                                            Bridgewater Road 
   Eastlea                                                                                    Bristol 
   P O Box 11                                                                            BS99 9ZZ 

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

FR ILMLTMTMTBIM

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