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Share Name | Share Symbol | Market | Type | Share ISIN | Share Description |
---|---|---|---|---|---|
Nmbz Holdings Ld | LSE:NMB | London | Ordinary Share | ZW0009011389 | ORD ZWR0.25 (UK REG) |
Price Change | % Change | Share Price | Bid Price | Offer Price | High Price | Low Price | Open Price | Shares Traded | Last Trade | |
---|---|---|---|---|---|---|---|---|---|---|
0.00 | 0.00% | 0.00 | - |
Industry Sector | Turnover | Profit | EPS - Basic | PE Ratio | Market Cap |
---|---|---|---|---|---|
0 | 0 | N/A | 0 |
TIDMNMB
RNS Number : 0281Z
NMBZ Holdings Ld
29 August 2018
NMBZ HOLDINGS LIMITED
NMB BANK LIMITED (Registered Commercial Bank)
CONDENSED UNAUDITED RESULTS
FOR THE SIX MONTHSED 30 JUNE 2018
FINANCIAL SUMMARY
30 June 30 June 31 December 2018 2017 2017 US$ US$ US$ -------------------- -------------- --------------------- Unaudited Unaudited Audited -------------------- -------------- --------------------- Total income (US$) 33 934 191 23 907 254 53 606 281 -------------------- -------------- --------------------- Net operating profit before impairment charge (US$) 13 178 672 5 716 478 16 870 839 -------------------- -------------- --------------------- Total comprehensive income (US$) 9 086 483 3 556 915 10 029 136 -------------------- -------------- --------------------- Basic earnings per share (US cents) 2.34 0.93 2.58 -------------------- -------------- --------------------- 364 580 273 478 Total deposits (US$) 517 790 348 956 385 -------------------- -------------- --------------------- 236 393 201 607 Total gross loans and advances (US$) 815 913 211 005 418 -------------------- -------------- --------------------- Total shareholders' funds and shareholders' liabilities (US$) 67 691 347 59 178 793 65 651 843 -------------------- -------------- ---------------------
Enquiries:
NMBZ HOLDINGS LIMITED
Benefit P Washaya, Chief Executive Officer, NMBZ Holdings Limited benefitw@nmbz.co.zw
Benson Ndachena, Chief Finance Officer, NMBZ Holdings Limited bensonn@nmbz.co.zw
Website: http://www.nmbz.co.zw
Email: enquiries@nmbz.co.zw
Telephone: (+263-4) 759 651/9
CHAIRMAN'S STATEMENT
INTRODUCTION
The operating environment in 2018 continued to be challenging largely due to nostro funding challenges, cash shortages, job losses and inflationary pressures. The period under review was characterised by the build-up to the country's harmonised elections held on 30 July 2018. The government continued with the various re-engaging efforts with the international community ushering in renewed hope and optimism for the economic prospects of the country. However, free, fair and credible elections remain the key yardstick that will determine the full acceptance of the country by the international community.
The Group has however continued to make considerable progress towards attaining its short and medium term goals. The financial results were largely driven by the banking subsidiary's continued expansion into the broader market segment, enhanced use of the bank's digital platforms, stricter credit underwriting standards and concerted efforts to contain non-performing loans and operating costs.
The key financial highlights of the Group as at 30 June 2018, which are commendable in the current difficult operating environment are as shown below:
- Shareholders' funds stood at US$67.7 million (2017 - US$65.7 million).
- Total assets stood at US$441.6 million (2017 - US$422.6 million).
- Total comprehensive income of US$9.1 million (2017 - US$3.6 million).
- Basic earnings per share (US cents) of 2.34 (2017 - 0.93).
GROUP RESULTS
Financial performance
The profit before taxation was US$11 757 594 during the period under review and this gave rise to total comprehensive income of US$9 086 483. The Group achieved an earnings per share of 2.34 cents (2017 - 0.93 cents).
Operating expenses amounted to US$16 820 851 and these were up 23% from a prior year amount of US$13 627 312. This was due to increased transaction processing and operational costs arising from the bank's digital drive and continued expansion into the broader market segments.
Impairment losses on loans and advances amounted to US$1 421 078 for the current period from a prior year amount of US$878 304 and the increase was mainly due to the adoption of IFRS 9 with effect from 1 January 2018. The bank has continued with its drive to reduce non-performing loans (NPLs) and this saw the NPL ratio reduce from 10.71% as at 30 June 2017 to 6.12% as at 30 June 2018. This is largely due to aggressive collections and stricter credit underwriting standards.
Financial position
The Group's total assets increased by 4% from US$422 564 352 as at 31 December 2017 to US$441 567 591 as at 30 June 2018 mainly due to a 33% increase in property and equipment together with an 8% increase in both investment securities and loans, advances and other accounts. These increases were partly offset by a decrease in cash and cash equivalents of 10%.
Gross loans and advances increased by 12% from US$211 005 418 as at 31 December 2017 to US$236 393 815 as at 30 June 2018 mainly due to increased uptake of the Bank's mortgage facilities, corporates and individuals loan facilities.
Gross investment securities (Treasury Bills and Bonds) increased from US$92 245 425 as at 31 December 2017 to US$100 137 224 as at 30 June 2018 in line with the Bank's exposure limits and risk appetite.
Total deposits increased by 4% from US$348 956 385 as at 31 December 2017 to US$364 580 517 as at 30 June 2018 as a result of increased current account balances due to the broadening of the bank's market segments.
The Bank maintained a sound liquidity position with a liquidity ratio of 42.09% and this was above the statutory minimum of 30%.
Capital
The banking subsidiary maintained adequate capital levels to cover all risks as reflected by a capital adequacy ratio of 22.21% as at 30 June 2018 (31 December 2017 - 24.26%). The ratio was well above the regulatory minimum of 12%.
The Group's shareholders' funds and shareholders' liabilities increased by 3% from US$65 651 843 as at 31 December 2017 to US$67 691 347 as at 30 June 2018 as a result of the current period's total comprehensive income, which was partly offset by the increase in IFRS 9 provisions adjusted through equity on 1 January 2018.
The Bank's regulatory capital as at 30 June 2018 was US$65 917 125 and was above the minimum regulatory capital of US$25 million. The bank remains on course to achieve the revised capital levels by 2020.
DIVID
The Board has resolved not to declare an interim dividend in order to fund the growth initiatives being pursued by the Group as well as to strengthen the regulatory capital position of the Group's banking subsidiary.
DIRECTORATE
There were no changes to the directorate during the period under review. The directors of both NMBZ Holdings Limited and NMB Bank Limited boards remain as follows: Mr Benedict A. Chikwanha (Board Chairman), Mr Benefit P. Washaya (Chief Executive Officer), Mr Benson Ndachena (Chief Finance Officer), Mr Charles Chikaura (Independent Non-Executive Director), Mr Erik Sandersen (Non-Executive Director), Mr James de la Fargue (Non-Executive Director), Ms Jean Maguranyanga (Independent Non-Executive Director), Mr Julius Tichelaar (Non-Executive Director) and Ms Sabinah Chitehwe (Independent Non-Executive Director).
CORPORATE SOCIAL INVESTMENTS
During the six months under review, the Group continued with its drive to invest into the country's educational system, the enhancement of youth entrepreneurial skills through partnering stakeholders with similar interests, the disadvantaged, vulnerable groups, supporting environmental protection and conservation initiatives, the arts and various sporting disciplines. The activities and charities supported during this period included Enactus programme for Universities' students run by BOOST Fellowship, several schools events, Birdlife Zimbabwe, Friends of Hwange, Friends of Dzikwa Society, Albino Trust of Zimbabwe, Salvation Army Annual Fundraising Pro-AM golf day and many other charitable initiatives.
CORPORATE DEVELOPMENTS
The Bank continued on its financial inclusion drive and this has seen the opening of a number of low cost accounts via our NMBLite product. We continue to invest in digital channels to support a cashless society and in this regard, we have intensified our drive to roll out our low-cost Point of Sale devices, mPOS, aimed at supporting SMEs and sole traders. I am happy to advise that the bank managed to open a USD & EURO correspondent banking relationship with a German Bank, ODDO BHF to facilitate foreign currency receipts and payments by our customers. Furthermore, we have taken on board a number of money transfer agents to facilitate remittances by Zimbabweans living in the diaspora.
OUTLOOK AND STRATEGY
The Bank will continue to accelerate the deployment of POS machines throughout the country and enhance all the e-channels for the convenience of our transacting customers. The Group will continue to broaden its target market by widening its catchment area to include segments of the mass market previously not catered for, thereby contributing to the financial inclusion agenda.
APPRECIATION
I remain sincerely grateful to our valued clients, depositors, shareholders and regulatory authorities who have continued to render their unwavering support to the Group. To my fellow board members, management and staff, I extend my heartfelt gratitude for their diligence, dedication and steadfast commitment which have culminated in the Group's remarkable results.
B. A. CHIKWANHA
CHAIRMAN
22 August 2018
CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME
for the six months ended 30 June 2018
Note 30 June 30 June 2018 2017 US$ US$ ------- ----------------- ----------------- Unaudited Unaudited ------- ----------------- ----------------- 18 562 15 251 Interest income 4 906 859 ------- ----------------- ----------------- (3 934 (4 563 Interest expense 668) 464) ------- ----------------- ----------------- --------------- -------------- ------- ----------------- ----------------- 14 628 10 668 Net interest income 238 395 ------- ----------------- ----------------- Net foreign exchange gains 1 109 447 571 892 ------- ----------------- ----------------- 12 773 Fee and commission income 5.1 587 7 892 196 ------- ----------------- ----------------- --------------- -------------- ------- ----------------- ----------------- 28 511 19 152 Revenue 272 483 ------- ----------------- ----------------- Other income 5.2 1 488 251 191 307 ------- ----------------- ----------------- -------------- -------------- ------- ----------------- ----------------- 29 999 19 343 Operating income 523 790 ------- ----------------- ----------------- (16 820 (13 627 Operating expenditure 6 851) 312) ------- ----------------- ----------------- Net operating income before impairment 13 178 charge 672 5 716 478 ------- ----------------- ----------------- Impairment losses on financial assets (1 421 measured at amortised cost 078) (878 304) ------- ----------------- ----------------- -------------- -------------- ------- ----------------- ----------------- 11 757 Profit before taxation 594 4 838 174 ------- ----------------- ----------------- (2 671 (1 281 Taxation charge 7 111) 259) ------- ----------------- ----------------- ------------- ------------- ------- ----------------- ----------------- Profit for the period 9 086 483 3 556 915 ------- ----------------- ----------------- Other comprehensive income, net of tax - - ------- ----------------- ----------------- ------------- ------------- ------- ----------------- ----------------- Total comprehensive income for the period 9 086 483 3 556 915 ------- ----------------- ----------------- ======== ======== ------- ----------------- ----------------- Earnings per share (US cents) ------- ----------------- ----------------- -Basic 9.3 2.34 0.93 ------- ----------------- ----------------- -Diluted 9.3 2.18 0.87 ------- ----------------- -----------------
CONSOLIDATED STATEMENT OF FINANCIAL POSITION
As at 30 June 2018
30 June 31 December 2018 2017 US$ US$ Note ------- ------------------- -------------------- Unaudited Audited ------- ------------------- -------------------- SHAREHOLDERS' FUNDS ------- ------------------- -------------------- Share capital 10 80 975 78 751 ------- ------------------- -------------------- 16 526 Capital reserves 297 18 119 337 ------- ------------------- -------------------- Revaluation reserves 90 310 90 310 ------- ------------------- -------------------- 35 242 Retained earnings 682 31 612 288 ------- ------------------- -------------------- -------------- -------------- ------- ------------------- -------------------- 51 940 Total equity 264 49 900 686 ------- ------------------- -------------------- 14 335 Redeemable ordinary shares 11 253 14 335 253 ------- ------------------- -------------------- Subordinated term loan 12 1 415 830 1 415 904 ------- ------------------- -------------------- ------------- -------------- ------- ------------------- -------------------- Total shareholders' funds and shareholders' 67 691
liabilities 347 65 651 843 ------- ------------------- -------------------- ======== ======== ------- ------------------- -------------------- OTHER LIABILITIES ------- ------------------- -------------------- Current tax liabilities 22 664 - ------- ------------------- -------------------- 373 853 356 912 Deposits and other liabilities 13 580 509 ------- ------------------- -------------------- --------------- --------------- ------- ------------------- -------------------- 441 567 422 564 Total shareholders' funds and liabilities 591 352 ------- ------------------- -------------------- ========= ========= ------- ------------------- -------------------- ASSETS ------- ------------------- -------------------- 80 212 Cash and cash equivalents 15 924 89 553 202 ------- ------------------- -------------------- Current tax assets - 231 007 ------- ------------------- -------------------- 228 201 210 483 Loans, advances and other assets 16.1.1 058 221 ------- ------------------- -------------------- 99 747 Investment securities 14.1 175 92 245 425 ------- ------------------- -------------------- Non - current assets held for sale 36 000 36 000 ------- ------------------- -------------------- Quoted and other investments 14.4.1 102 347 117 880 ------- ------------------- -------------------- 18 728 Investment properties 363 18 977 000 ------- ------------------- -------------------- Intangible assets 17 2 298 416 2 380 180 ------- ------------------- -------------------- Property and equipment 18 9 741 740 7 335 988 ------- ------------------- -------------------- Deferred tax assets 2 499 568 1 204 449 ------- ------------------- -------------------- --------------- --------------- ------- ------------------- -------------------- 441 567 422 564 Total assets 591 352 ------- ------------------- -------------------- ========= ========= ------- ------------------- --------------------
CONSOLIDATED STATEMENT OF CHANGES IN EQUITY
for the six months ended 30 June 2018
Capital Reserves Share Share Share Option Regulatory Revaluation Retained Capital Premium Reserve Reserve Reserve Earnings Total -------------- -------------- ---------------- ---------------- ---------------- ---------------- --------------- US$ US$ US$ US$ US$ US$ US$ -------------- -------------- ---------------- ---------------- ---------------- ---------------- --------------- Balances at 1 15 737 39 849 January 2017 78 598 548 62 563 1 785 136 - 22 185 818 663 -------------- -------------- ---------------- ---------------- ---------------- ---------------- --------------- Share based payments - share options exercised 153 21 734 - - - - 21 887 -------------- -------------- ---------------- ---------------- ---------------- ---------------- --------------- Profit for the six months - - - - - 3 556 915 3 556 915 -------------- -------------- ---------------- ---------------- ---------------- ---------------- --------------- Transfer to regulatory reserve - - - 815 833 - (815 833) - -------------- -------------- ---------------- ---------------- ---------------- ---------------- --------------- ---------- ------------- --------- ------------ ------------ ------------- ------------- -------------- -------------- ---------------- ---------------- ---------------- ---------------- --------------- Balances at 15 759 43 428 30 June 2017 78 751 282 62 563 2 600 969 - 24 926 900 465 -------------- -------------- ---------------- ---------------- ---------------- ---------------- --------------- Profit for the six months - - - - - 6 381 911 6 381 911 -------------- -------------- ---------------- ---------------- ---------------- ---------------- --------------- Other comprehensive income for the six months - - - - 90 310 - 90 310 -------------- -------------- ---------------- ---------------- ---------------- ---------------- --------------- Transfer from regulatory reserve - - - (303 477) - 303 477 - -------------- -------------- ---------------- ---------------- ---------------- ---------------- --------------- ---------- ------------- ---------- ------------- ------------ --------------- ------------- -------------- -------------- ---------------- ---------------- ---------------- ---------------- --------------- Balances at 31 15 759 49 900 December 2017 78 751 282 62 563 2 297 492 90 310 31 612 288 686 -------------- -------------- ---------------- ---------------- ---------------- ---------------- --------------- IFRS 9 adjustments - 1 January 2018 -------------- -------------- ---------------- ---------------- ---------------- ---------------- --------------- Transfer from regulatory reserve - - - (2 297 492) - 2 297 492 - -------------- -------------- ---------------- ---------------- ---------------- ---------------- --------------- Expected Credit Loss (ECL) adjustment - 1 January (8 575 2018 - - - - - (8 575 988) 988)
-------------- -------------- ---------------- ---------------- ---------------- ---------------- --------------- Deferred tax on ECL adjustment - 1 January 2018 - - - - - 2 208 317 2 208 317 -------------- -------------- ---------------- ---------------- ---------------- ---------------- --------------- ------------- ------------- --------------- --------------- --------------- --------------- -------------- -------------- -------------- ---------------- ---------------- ---------------- ---------------- --------------- Restated balances at 1 January 15 759 43 533 2018 78 751 282 62 563 - 90 310 27 542 109 015 -------------- -------------- ---------------- ---------------- ---------------- ---------------- --------------- Profit for the six months - - - - - 9 086 483 9 086 483 -------------- -------------- ---------------- ---------------- ---------------- ---------------- --------------- Share issue - scrip dividend 2 224 704 452 - - - - 706 676 -------------- -------------- ---------------- ---------------- ---------------- ---------------- --------------- (1 385 Dividends paid - - - - - (1 385 910) 910) -------------- -------------- ---------------- ---------------- ---------------- ---------------- --------------- ----------- ------------- ---------- ------------ ------------- ------------- ------------- -------------- -------------- ---------------- ---------------- ---------------- ---------------- --------------- Balances at 16 463 51 940 30 June 2018 80 975 734 62 563 - 90 310 35 242 682 264 -------------- -------------- ---------------- ---------------- ---------------- ---------------- --------------- ======= ======== ====== ======= ======== ======== ======== -------------- -------------- ---------------- ---------------- ---------------- ---------------- ---------------
CONSOLIDATED STATEMENT OF CASH FLOWS
for the six months ended 30 June 2018
30 June 30 June 2018 2017 US$ US$ ------------------ ----------------- Unaudited Unaudited ------------------ ----------------- CASH FLOWS FROM OPERATING ACTIVITIES ------------------ ----------------- Profit before taxation 11 757 594 4 838 174 ------------------ ----------------- Non-cash items: ------------------ ----------------- - Amortisation of intangible assets 471 720 352 162 ------------------ ----------------- -Depreciation 629 227 560 129 ------------------ ----------------- -Unrealised foreign exchange gains (16 352) (23 602) ------------------ ----------------- -Impairment losses on financial assets measured at amortised cost 1 421 078 878 304 ------------------ ----------------- -Quoted and other investments fair value adjustment - (31 590) ------------------ ----------------- -Loss on disposal of property and equipment - 56 639 ------------------ ----------------- -Loss on disposal of non current asset held for sale - 75 300 ------------------ ----------------- -Profit on disposal of investment properties (461 965) (12 951) ------------------ ----------------- -Interest capitalised on subordinated term loan 81 666 75 110 ------------------ ----------------- -Loss on disposal of quoted investments 15 074 - ------------------ ----------------- ------------- -------------- ------------------ ----------------- Operating cash flows before changes in operating assets and liabilities 13 898 042 6 767 674 ------------------ ----------------- Changes in operating assets and liabilities ------------------ ----------------- Increase in deposits and other liabilities 16 957 423 13 214 437 ------------------ ----------------- (Increase)/decrease in loans, advances and (27 710 other accounts 645) 86 953 ------------------ ----------------- -------------- ------------- ------------------ ----------------- Net cash generated from operations 3 144 820 20 069 065 ------------------ ----------------- --------------- -------------- ------------------ ----------------- Taxation ------------------ ----------------- Corporate tax paid (1 330 459) (453 139) ------------------ ----------------- Capital gains tax paid - (44 000) ------------------ ----------------- Witholding tax on dividends paid (97 294) - ------------------ ----------------- ----------------- -------------- ------------------ ----------------- Net cash inflow from operating activities 1 717 067 19 571 926 ------------------ ----------------- ----------------- ------------- ------------------ ----------------- CASH FLOWS FROM INVESTING ACTIVITIES ------------------ ----------------- Acquisition of intangible assets (389 956) (871 188) ------------------ ----------------- Acquisition of investment properties (3 897 104) (3 946 615) ------------------ ----------------- Acquisition of property and equipment (3 034 981) (820 030) ------------------ ----------------- Proceeds on disposal of property and equipment - 1 073 ------------------ ----------------- (Acquisitions)/disposals of investment securities (7 501 751) 174 613
------------------ ----------------- Proceeds on disposal of non-current asset held for sale - 2 150 000 ------------------ ----------------- Proceeds on disposal of investment properties 4 430 127 332 951 ------------------ ----------------- --------------- --------------- ------------------ ----------------- (10 393 (2 979 Net cash outflow from investing activities 665) 196) ------------------ ----------------- -------------- --------------- ------------------ ----------------- Net cash (outflow)/ inflow before financing activities (8 676 598) 16 592 730 ------------------ ----------------- -------------- -------------- ------------------ ----------------- CASH FLOWS FROM FINANCING ACTIVITIES ------------------ ----------------- Proceeds from share options exercised - 21 887 ------------------ ----------------- Payment of interest on subordinated term loan (81 740) (75 525) ------------------ ----------------- Dividends paid (573 719) - ------------------ ----------------- Share issue costs capitalised - scrip dividend (8 221) - ------------------ ----------------- --------------- --------------- ------------------ ----------------- Net cash outflow from financing activities (663 680) (53 638) ------------------ ----------------- --------------- --------------- ------------------ ----------------- Net (decrease)/increase in cash and cash equivalents (9 340 278) 16 539 092 ------------------ ----------------- Cash and cash equivalents at beginning of the period 89 553 202 69 421 257 ------------------ ----------------- --------------- -------------- ------------------ ----------------- Cash and cash equivalents at the end of the period 80 212 924 85 960 349 ------------------ ----------------- ========= ======== ------------------ -----------------
NOTES TO THE CONDENSED FINANCIAL STATEMENTS
for the six months ended 30 June 2017
1. REPORTING ENTITY
The Holding Company is incorporated and domiciled in Zimbabwe and is an investment holding company. Its registered office address is 64 Kwame Nkrumah Avenue, Harare. Its principal operating subsidiary is engaged in commercial and retail banking. NMB Bank Limited is a registered commercial bank and was incorporated in Zimbabwe on 16 October 1992 and commenced trading on 1 June 1993. The Bank operated as an Accepting House until 6 December 1999 when the licence was converted to that of a Commercial Bank. The Bank is exposed to the following risks in its operations: liquidity risk, credit risk, market risk, operational risk, foreign currency exchange rate risk and interest rate risk.
2. ACCOUNTING CONVENTION
Statement of compliance
These condensed consolidated interim financial statements have been prepared in accordance with International Accounting Standard (IAS) 34, Interim Financial Reporting. Selected explanatory notes are included to explain events and transactions that are significant to an understanding of the changes in financial position of the Group since the last annual consolidated financial statements as at and for the year ended 31 December 2017. These condensed consolidated interim financial statements do not include all the information required for the full annual financial statements prepared in accordance with International Financial Reporting Standards. The financial statements show the impact of the first time adoption of IFRS 9 which was adopted by the Group effective 1 January 2018. The detailed impact of this adoption is disclosed on note 3.12 (Changes in accounting policy).
These condensed consolidated interim financial statements were approved by the Board of Directors on 22 August 2018.
2.1 Basis of preparation
The condensed consolidated interim financial statements have been prepared under the historical cost convention except for quoted and other investments, investment properties and financial instruments which are carried at fair value and land and buildings which are stated at revalued amount. These condensed consolidated interim financial statements are reported in United States of America dollars and rounded to the nearest dollar.
2.2 Functional and presentation currency
For the purpose of the consolidated financial statements, the results and financial position of the group are expressed in United States dollars which is the functional currency of the Bank, and the presentation currency for the consolidated financial statements.
2.3 Basis of consolidation
The Group financial results incorporate the financial results of the Company and its subsidiaries. Subsidiaries are investees controlled by the Group. The Group controls an investee if it is exposed to, or has rights to, variable returns from its involvement with the investee. The financial statements of subsidiaries are included in the consolidated financial statements from the date on which control commences until the date when control ceases. The financial results of the subsidiaries are prepared for the same reporting period as the parent company, using consistent accounting policies. All intra-group balances, transactions, income and expenses; profits and losses resulting from intra-group transactions that are recognised in assets and liabilities are eliminated in full. When the Group loses control over a subsidiary, it derecognises the assets and liabilities of the subsidiary, and any related non-controlling interest and other components of equity. Any resulting gain or loss is recognised in profit or loss. Any interest retained in the former subsidiary is measured at fair value when control is lost.
2.4 Comparative financial information
The interim financial statements comprise consolidated statements of financial position, comprehensive income, changes in equity and cash flows. The comparative information covers a period of six months.
2.5 Use of estimates and judgements
The preparation of the interim financial statements requires Directors to make judgements, estimates and assumptions that affect the application of accounting policies and the reported amounts of assets, liabilities, income and expenses. Actual results may differ from these estimates.
The significant judgements made by management in applying the Group's accounting policies and key sources of estimation and uncertainity were the same as those applied to the consolidated financial statements as at and for the year ended 31 December 2017.
Estimates and underlying assumptions are reviewed on an ongoing basis. Revisions to estimates are recognized prospectively.
In the process of applying the Group's accounting policies, management has made the following judgements which have the most significant effect on the amounts recognised in the consolidated financial statements:
2.5.1 Deferred tax
Provision for deferred taxation is recognised in respect of temporary differences between the carrying amounts of assets and liabilities for financial reporting purposes and the amounts used for taxation purposes. Temporary differences arising out of the initial recognition of assets or liabilities and temporary differences on initial recognition of business combinations that affect neither accounting nor taxable profit are not recognised. The amount of deferred tax provided is based on the expected manner of realisation or settlement of the carrying amount of assets and liabilities, using tax rates enacted or substantively enacted at the reporting date. Deferred income tax assets and liabilities are measured at the tax rates that are expected to apply in the year when the asset is realised or the liability is settled, based on tax rates (and tax laws) that have been enacted or substantively enacted at the reporting date.
2.5.2 Land and buildings
The properties were valued by directors. The determined fair value of land and buildings is most sensitive to significant unobservable inputs. In addition, the property market is currently not stable due to liquidity constraints and hence comparable values are also not readily available.
2.5.3 Investment properties
Investment properties were valued by directors. The directors considered comparable market evidence of recent sale transactions and those transactions where firm offers had been made but awaiting acceptance. In addition, the property market is currently not stable due to liquidity constraints and hence comparable values are also not readily available.
2.5.4 Property and equipment
The directors exercised their judgment in determining the residual values of the other property and equipment which have been determined as nil. If the residual value of an asset increases by an amount equal to or greater than the asset's carrying amount, then depreciation of the asset ceases. Depreciation will only resume when the residual value decreases to an amount below the asset's carrying amount.
2.5.5 Investment securities
The Group has treasury bills and government bonds for which there is currently no market information to facilitate the application of fair value principles, in determining fair value disclosures. Directors have made a significant judgement in determining that the carrying amount approximates fair value. Refer to Note 14.1.
2.5.6 Intangible assets
Intangible assets are initially recognised at cost. Subsequently the assets are measured at cost less accumulated amortisation and any impairment loss.
2.5.7 Impairment losses on loan and advances
The Bank adopted IFRS 9 with effect from 1 January 2018. As permitted by the IFRS 9 transitional provisions, the Bank elected not to restate comparative figures.
The Bank recognises loss allowances for Expected Credit Losses (ECLs) on the following financial
instruments that are not measured at Fair Value through Profit or Loss (FVTPL):
-- loans and advances to banks;
-- loans and advances to customers;
-- debt investment securities;
-- lease receivables;
-- loan commitments issued; and
-- financial guarantee contracts issued.
No impairment loss is recognised on equity investments.
With the exception of purchased or originated credit-impaired (POCI) financial assets (which are considered separately below), ECLs are measured through a loss allowance at an amount equal to:
-- 12-month ECL, i.e. lifetime ECL that result from those default events on the financial instrument that are
possible within 12 months after the reporting date, (referred to as Stage 1); or
-- Full lifetime ECL, i.e. lifetime ECL that result from all possible default events over the life of the financial instrument, (referred to as Stage 2 and Stage 3).
A loss allowance for full lifetime ECL is required for a financial instrument if the credit risk on that financial instrument has increased significantly since initial recognition. For all other financial instruments, ECLs are measured at an amount equal to the 12-month ECL.
2.5.8 Non-current assets held for sale
Non-current assets or disposal group are held for sale if its carrying amount will be recovered principally through a sale transaction rather than through continuing use. These are measured at the lower of carrying amount and fair value less costs to sell and they are not depreciated.
Non-current assets were valued by the directors who considered comparable market evidence of recent sale transactions and those transactions where firm offers had been made but waiting acceptance. The determined fair value of non - current assets held for sale is most sensitive to significant unobservable inputs. In addition, the property market is currently not stable due to liquidity constraints and hence comparable values are not stable.
2.5.9 Determination of functional currency
The Group operates in an economy which is experiencing a shortage of foreign currency and consequently has exchange control regulations that impact the timing of payment of foreign payables among other matters. Given the context of the environment, management has assessed if there has been a change in the functional currency used by the Group. The assessment included consideration of whether the various modes of settlement may represent different forms of currency. It is observed that whether cash, bond notes, electronic
money transfers or point of sale transactions, the unit of measure across all these payment modes remains United States Dollars. Management concluded that the United States dollar is still the functional currency as presented in the prior year financial statements. Please refer to note 15.1 for additional information on the foreign currency shortages.
2.6.0 Going concern
The directors have assessed the ability of the Group to continue operating as a going concern and believe that the preparation of these consolidated financial statements on a going concern basis is still appropriate.
3. ACCOUNTING POLICIES
The selected principal accounting policies applied in the preparation of these condensed financial statements are set out below. These policies have been consistently applied unless otherwise stated.
3.1 Fair value measurement principles
The fair value of financial instruments is based on their quoted market price at the reporting date without any deduction for transaction costs. If a quoted market price is not available, the fair value of the instrument is estimated using pricing models or discounted cash flow techniques.
Where discounted cash flow techniques are used, estimated future cash flows are based on management's best estimates and the discount rate is a market related rate at the reporting date for an instrument with similar terms and conditions. Where pricing models are used, inputs are based on market related measures at the reporting date.
3.2 Investment properties
Investment properties are stated at fair value. Gains and losses arising from a change in fair value of investment properties are recognised in the statement of comprehensive income. The fair value is determined at the end of each reporting period by a professional valuer.
3.3 Share - based payments
The Group issues share options to certain employees in terms of the Employee Share Option Scheme. Share options are measured at fair value at the date of grant. The fair value determined at the date of grant of the options is expensed on a straight-line basis over the vesting period, based on the Group's estimate of shares that will eventually vest. Fair value is measured using the Black-Scholes option pricing model. The expected life used in the model has been adjusted, based on management's best estimate, for the effects of non-transferability, exercise restrictions and other behavioural considerations.
3.4 Property and equipment
The residual value and the useful life of property and equipment are reviewed at least each financial year-end. If the residual value of an asset increases by an amount equal to or greater than the asset's carrying amount, then the depreciation of the asset ceases. Depreciation will resume only when the residual value decreases to an amount below the asset's carrying amount.
3.5 Intangible assets
Intangible assets are initially recognised at cost. Subsequently, the assets are measured at cost less accumulated armotisation and any accumulated impairment losses.
3.6 Shareholders' funds
Shareholders' funds refer to the total investment made by the shareholders to the Group and it consists of share capital, share premium, share options reserve, retained earnings, redeemable ordinary shares and subordinated term loans.
3.7 Taxation
Income tax
Income tax expenses comprise current and deferred tax. It is recognised in profit or loss except to the extent that it relates to items recognised directly in equity or in other comprehensive income.
Current tax
Current tax comprises expected tax payable or receivable on the taxable income or loss for the year and any adjustment to the tax payable or receivable in respect of previous years. It is measured using rates enacted or substantively enacted at the reporting date in the country where the Bank operates and generates taxable income and any adjustment to tax payable in respect of previous years.
Current income tax assets and liabilities for the current period are measured at the amount expected to be recovered from or paid to the taxation authorities.
Deferred taxation
Deferred tax is recognised in respect of temporary differences between the carrying amounts of assets and liabilities for financial reporting purposes and the amounts used for taxation purposes. Deferred tax is not recognised for:
-- temporary differences on the initial recognition of assets or liabilities in a transaction that is not
a business combination and that affects neither accounting nor taxable profit or loss;
-- temporary differences related to investments in subsidiaries to the extent that it is probable that they will not reverse in the foreseeable future; and
-- taxable temporary differences arising on the initial recognition of goodwill.
Deferred tax assets are recognised for unused tax losses, unused tax credits and deductible temporary differences to the extent that it is probable that future taxable profits will be available against which they can be used. Deferred tax assets are reviewed at each reporting date and are reduced to the extent that it is no longer probable that the related tax benefit will be realised. Deferred tax is measured at the tax rates that are expected to be applied to temporary differences when they reverse, using tax rates enacted or substantively enacted at the reporting date.
The measurement of deferred tax reflects the tax consequences that would follow the manner in which the Bank expects, at the reporting date, to recover or settle the carrying amount of its assets and liabilities. For this purpose, the carrying amount of investment property measured at fair value is presumed to be recovered through sale, and the Bank has not rebutted this presumption.
Deferred tax assets and liabilities are offset if there is a legally enforceable right to offset current tax liabilities and assets, and they relate to taxes levied by the same tax authority on the same taxable entity, or on different tax entities, but they intend to settle current tax liabilities and assets on a net basis or their tax assets and liabilities will be realised simultaneously.
Additional taxes that arise from the distribution of dividends by the Bank are recognised at the same time as the liability to pay the related dividend is recognised. These amounts are generally recognised in profit or loss because they generally relate to income arising from transactions that were originally recognised in profit or loss.
3.8 Cash and cash equivalents
Cash and cash equivalents comprise cash and bank balances, and short term highly liquid investments with maturities of three months or less when purchased. Cash and cash equivalents are measured at amortised cost in the statement of financial position.
3.9 Revenue recognition
Revenue is recognised to the extent that it is probable that the economic benefits will flow to the Bank and the revenue can be reliably measured, regardless of when the payment is being made. Revenue is measured at the fair value of the consideration received or receivable, taking into account contractually defined terms of payment and excluding taxes or duty. The specific recognition criteria described below must also be met before revenue is recognised.
3.10 Interest income
For all financial instruments measured at amortised cost and financial instruments designated at fair value through profit or loss, interest income or expense is recorded using the effective interest rate (EIR), which is the rate that exactly discounts the estimated future cash payments or receipts through the expected life of the financial instrument or a shorter period, where appropriate, to the net carrying amount of the financial asset or liability.
Interest income includes income arising out of the banking activities of lending and investing.
3.11 Interest expense
Interest expense arises from deposit taking. The expense is recognised in profit or loss as it accrues, taking into account the effective interest cost of the liability.
3.12 Changes in accounting policy
The Bank has adopted IFRS 9 as issued by the International Accounting Standards Board (IASB) in July 2014 with a date of transition of 1 January 2018, which resulted in changes in accounting policies and adjustments to the amounts previously recognised in the financial statements.
As permitted by the transitional provisions of IFRS 9, the Bank elected not to restate comparative figures.
Any adjustments to the carrying amounts of financial assets and liabilities at the date of transition were recognised in the opening retained earnings and other reserves of the current period. Consequently, for notes disclosures, the consequential amendments to IFRS 7 disclosures have also only been applied to the current period. The comparative period notes disclosures repeat those disclosures made in the prior year.
The adoption of IFRS 9 has resulted in changes in the Bank's accounting policies for recognition, classification and measurement of financial assets and financial liabilities and impairment of financial assets. IFRS 9 also significantly amends other standards dealing with financial instruments such as IFRS 7 Financial Instruments: Disclosures.
Set out below are disclosures relating to the impact of the adoption of IFRS 9 on the Bank.
(a) Classification and measurement of financial instruments
The measurement category and the carrying amount of financial assets and liabilities in accordance with IAS 39 and IFRS 9 at 1 January 2018 are compared as follows:
IAS 39 IFRS 9 Measurement Category Carrying Measurement Carrying Amount Category Amount US$ US$ ------------------------- ------------ ------------ -------------- Financial Assets Cash and cash Amortised cost (Loans Amortised equivalents and advances) 89,553,202 cost 89,526,431 ------------------------- ------------ ------------ -------------- Amortised cost (Loans Amortised Loans and advances and advances) 210,483,221 cost 202,308,086 ------------------------- ------------ ------------ -------------- Amortised cost (Loans Amortised Investment securities and advances) 92,245,425 cost 91,871,343 ------------------------- ------------ ------------ -------------- Unquoted and other investments FVPL (Held for trading) 117,880 FVPL 117,880 ------------------------- ------------ ------------ -------------- 383,823, Total 392,399,728 740 ------------ ------------ -------------- Financial Liabilities Deposits and Amortised other liabilities Amortised cost 356,912,509 cost 356,912,509 ------------------------- ------------ ------------ --------------
(b) Reconciliation of statement of financial position balances from IAS 39 to IFRS 9
The Bank performed a detailed analysis of its business models for managing financial assets and an analysis of their cash flow characteristics to determine how the instruments shall be measured.
The following table reconciles the carrying amounts of financial assets, from their previous measurement categories in accordance with IAS 39 to their new measurement categories upon transition to IFRS 9 on 1 January 2018:
Carrying Amount 1 January 2018 US$ Amortised cost ----------------------------- Cash and cash equivalents ----------------------------- Opening balance - IAS 39 89 553 202 ----------------------------- Additional IFRS 9 impairment allowance Expected Credit Loss (ECL) (26 771) ----------------------------- -------------- ----------------------------- Closing balance - IFRS 9 89 526 431 ----------------------------- ======== ----------------------------- Loans and advances ----------------------------- Opening balance - IAS 39 210 483 221 ----------------------------- Additional IFRS 9 impairment allowance Expected Credit Loss (ECL) (8 175 135) ----------------------------- Less reclassifications - ----------------------------- --------------- ----------------------------- Closing balance - IFRS 9 202 308 086 ----------------------------- ========= ----------------------------- Investment securities
----------------------------- Opening balance - IAS 39 92 245 425 ----------------------------- Less reclassifications - ----------------------------- Additional IFRS 9 impairment allowance Expected Credit Loss (ECL) (374 082) ----------------------------- -------------- ----------------------------- Closing balance - IFRS 9 91 871 343 ----------------------------- ======== ----------------------------- Total financial assets measured at amortised cost 383 705 860 ----------------------------- Fair value through profit or loss ----------------------------- Unquoted investments 117 880 ----------------------------- --------------- ----------------------------- Total financial assets 383 823 740 ----------------------------- ========= -----------------------------
(c) Reconciliation of impairment allowance balance from IAS 39 to IFRS 9
The following table reconciles the prior period closing impairment allowance measured in accordance with the IAS 39 incurred loss model to the new expected credit loss allowance measured in accordance with the IFRS 9 expected loss model at 1 January 2018:
Measurement Category IAS 39 Remeasurement IFRS 9 impairment Impairment US$ loss allowance loss allowance balance balance US$ US$ Interbank placements - 26 771 26 771 ---------------- -------------- ------------------ Investment securities - 374 082 374 082 ---------------- -------------- ------------------ 5 445 968 8 175 135 13 621 103 ---------------- -------------- ------------------ Loans and advances 5 445 968 6 162 469 11 608 437 ---------------- -------------- ------------------ Loan commitments - 1 551 975 1 551 975 ---------------- -------------- ------------------ Financial guarantees - 460 691 460 691 ---------------- -------------- ------------------ ------------- ------------- ------------- ---------------- -------------- ------------------ Total 5 445 968 8 575 988 14 021 956 ---------------- -------------- ------------------ ======== ======== ======== ---------------- -------------- ------------------ 3.12.1 Financial Instruments
Measurement methods
Amortised cost and effective interest rates
The amortised cost is the amount at which the financial asset or financial liability is measured at initial recognition minus the principal repayments, plus or minus the cumulative amortisation using the effective interest method of any difference between that initial amount and the maturity amount and, for financial assets, an adjustment for any loss allowance.
The effective interest rate is the rate that exactly discounts estimated future cash payments or receipts through the expected life of the financial asset or financial liability to the gross carrying amount of a financial asset (i.e. its amortised cost before any impairment allowance) or to the amortised cost of a financial liability. The calculation does not consider expected credit losses and includes transaction costs, premiums or discounts and fees and points paid or received that are integral to the effective interest rate, such as origination fees. For purchased or originated credit-impaired ('POCI') financial assets - assets that are credit-impaired at initial recognition - the Bank calculates the credit-adjusted effective interest rate, which is calculated based on the amortised cost of the financial asset instead of its gross carrying amount and incorporates the impact of expected credit losses in estimated future cash flows.
When the Bank revises the estimates of future cash flows, the carrying amount of the respective financial assets or financial liability is adjusted to reflect the new estimate discounted using the original effective interest rate. Any changes are recognised in profit or loss.
Interest Income
Interest income is calculated by applying the effective interest rate to the gross carrying amount of financial assets, except for:
a) Purchased or originated credit-impaired (POCI) financial assets, for which the original credit-adjusted effective interest rate is applied to the amortised cost of the financial asset.
b) Financial assets that are not 'POCI' but have subsequently become credit-impaired (or 'stage 3'), for which interest revenue is calculated by applying the effective interest rate to their amortised cost (i.e net of the expected credit loss provision).
Initial recognition and measurement
Financial assets and financial liabilities are recognised when the entity becomes a party to the contractual provisions of the instrument. Regular way purchases and sales of financial assets are recognised on trade-date, the date on which the Bank commits to purchase or sell the asset.
At initial recognition, the Bank measures a financial asset or financial liability at its fair value plus or minus, in the case of a financial asset or financial liability not at fair value through profit or loss; transaction costs that are incremental and directly attributable to the acquisition or issuance of the financial asset or financial liability respectively, such as fees and commissions. Transaction costs of financial assets and financial liabilities carried at fair value through profit or loss are expensed in profit or loss. Immediately after initial recognition, an expected credit loss allowance (ECL) is recognised for financial assets measured at amortised cost and investments in debt instruments measured at FVOCI, which results in an accounting loss being recognised in profit or loss when an asset is newly originated.
When the fair value of financial assets and liabilities differs from the transaction price on initial recognition, the entity recognises the difference as follows:
(a) When the fair value is evidenced by a quoted price in an active market for an identical asset or liability (i.e. a Level 1 input) or based on a valuation technique that uses only data from observable markets, the difference is recognised as a gain or loss.
(b) In all other cases, the difference is deferred and the timing of recognition of deferred day one profit or loss is determined individually. It is either amortised over the life of the instrument, deferred until the instrument's fair value can be determined using market observable inputs, or realised through settlement.
3.12.1.1 Financial Assets
(i) Classification and subsequent measurement
From 1 January 2018, the Group has applied IFRS 9 and classifies its financial assets in the
following measurement categories:
-- Fair value through profit or loss (FVPL); -- Fair value through other comprehensive income (FVOCI); or -- Amortised cost.
The classification requirements for debt and equity instruments are described below:
Debt instruments
Debt instruments are those instruments that meet the definition of a financial liability from the issuer's perspective, such as loans, government and corporate bonds and trade receivables purchased from clients in factoring arrangements without recourse.
Classification and subsequent measurement of debt instruments depend on:
-- the Bank's business model for managing the asset; and -- the cash flow characteristics of the asset.
Based on these factors, the Bank classifies its debt instruments into one of the following three measurement categories:
-- Amortised cost: Assets that are held for collection of contractual cash flows where those cash flows represent solely payments of principal and interest ('SPPI'), and that are not designated at FVPL, are measured at amortised cost. The carrying amount of these assets is adjusted by any expected credit loss allowance. Interest income from these financial assets is included in interest and similar income using the effective interest rate method.
-- Fair value through other comprehensive income (FVOCI): Financial assets that are held for collection of contractual cash flows and for selling the assets, where the assets' cash flows represent solely payments of principle and interest and that are not designated at FVPL, are measured at fair value through other comprehensive income (FVOCI). Movements in the carrying amount are taken through OCI, except for the recognition of impairment gains or losses, interest revenue and foreign exchange gains and losses on the instrument's amortised cost which are recognised in profit or loss. When the financial asset is derecognised, the cumulative gain or loss previously recognised in OCI is reclassified from equity to profit or loss and recognised in "Net Investment Income'. Interest income from these financial assets is included in 'Interest Income' using the effective interest rate method.
-- Fair value through profit or loss: Assets that do not meet the criteria for amortised cost or FVOCI are measured at fair value through profit or loss. A gain or loss on a debt investment that is subsequently measured at fair value through profit or loss and is not part of a hedging relationship is recognised in profit or loss and presented in the profit or loss statement within 'Net Trading Income" in the period in which it arises, unless it arises from debt instruments that were designated at fair value or which are not held for trading, in which case they are presented separately in 'Net Investment Income'. Interest income from these financial assets is included in "Interest income" using the effective interest rate method.
Business model: the business model reflects how the Bank manages the assets in order to generate cash flows. That is, whether the Bank's objective is solely to collect the contractual cash flows from the assets or is to collect both the contractual cash flows and cash flows arising from the sale of assets. If neither of these is applicable (e.g. financial assets are held for trading purposes), then the financial assets are classified as part of 'other' business model and measured at FVPL. Factors considered by the Bank in determining the business model for a group of assets include past experience on how the cash flows for these assets were collected, how the asset's performance is evaluated and reported to key management personnel, how risks are assessed and managed and how managers are compensated. Securities held for trading are held principally for the purpose of selling in the near term or are part of a portfolio of financial instruments that are managed together and for which there is evidence of a recent actual pattern of short-term profit-taking. These securities are classified in the 'other' business model and measured at FVPL.
Where the business model is to hold assets to collect contractual cash flows or to collect contractual cash flows and sell, the Bank assesses whether financial instruments' cash flows represent solely payments of principal and interest (the "SPPI" test). In making this assessment, the Bank considers whether the contractual cash flows are consistent with a basic lending arrangement i.e. interest includes only consideration for the time value of money, credit risk, other basic lending risks and a profit margin that is consistent with a basic lending arrangement. Where the contractual terms introduce exposure to risk or volatility that are inconsistent with a basic lending arrangement, the related financial asset is classified and measured at fair value through profit or loss.
The Bank reclassifies debt investments when and only when its business model for managing those assets changes. The reclassification takes place from the start of the first reporting period following the change. Such changes are expected to be very infrequent and none occurred during the period.
Equity instruments
Equity instruments are instruments that meet the definition of equity from the issuer's perspective; that is, instruments that do not contain a contractual obligation to pay and that evidence a residual interest in the issuer's net assets. Examples of equity instruments include basic ordinary shares.
The Bank subsequently measures all equity investments at fair value through profit or loss, except where the Bank's management has elected, at initial recognition, to irrevocably designate an equity investment at fair value through other comprehensive income. The Bank policy is to designate equity investments as FVOCI when those investments are held for purposes other than to generate investment returns. When this election is used, fair value gains and losses are recognised in OCI and are not subsequently reclassified to profit or loss, including on disposal. Impairment losses (and reversal of impairment losses) are not reported separately from other changes in fair value. Dividends, when representing a return on such investments, continue to be recognised in profit or loss as other income when the Bank's right to receive payments is established.
Gains and losses on equity investments at FVPL are included in the 'Other Income' line in the statement of profit or loss.
(ii) Impairment
The Bank recognises loss allowances for Expected Credit Losses (ECLs) on the following financial instruments that are not measured at Fair Value through Profit or Loss (FVTPL):
-- loans and advances to banks;
-- loans and advances to customers;
-- debt investment securities;
-- lease receivables;
-- loan commitments issued; and
-- financial guarantee contracts issued.
No impairment loss is recognised on equity investments.
With the exception of POCI financial assets (which are considered separately below), ECLs are measured through a loss allowance at an amount equal to:
-- 12-month ECL, i.e. lifetime ECL that result from those default events on the financial instrument that are possible within 12 months after the reporting date, (referred to as Stage 1); or
-- Full lifetime ECL, i.e. lifetime ECL that result from all possible default events over the life of the financial instrument, (referred to as Stage 2 and Stage 3).
A loss allowance for full lifetime ECL is required for a financial instrument if the credit risk on that financial instrument has increased significantly since initial recognition. For all other financial instruments, ECLs are measured at an amount equal to the 12-month ECL.
Expected Credit Losses
ECLs are a probability-weighted estimate of the present value of credit losses. These are measured as the present value of the difference between the cash flows due to the Bank under the contract and the cash flows that the Bank expects to receive arising from the weighting of multiple future economic scenarios, discounted at the asset's EIR.
For undrawn loan commitments, the ECL is the difference between the present value of the difference between the contractual cash flows that are due to the Bank if the holder of the commitment draws down the loan and the cash flows that the Bank expects to receive if the loan is drawn down; and
For financial guarantee contracts, the ECL is the difference between the expected payments to reimburse the holder of the guaranteed debt instrument less any amounts that the Bank expects to receive from the holder, the debtor or any other party.
The Bank measures ECL on an individual basis, or on a collective basis for portfolios of loans that share similar economic risk characteristics. The measurement of the loss allowance is based on the present value of the asset's expected cash flows using the asset's original EIR, regardless of whether it is measured on an individual basis or a collective basis.
Credit-impaired financial assets
A financial asset is credit-impaired when one or more events that have a detrimental impact on the estimated future cash flows of that financial asset have occurred. Evidence that a financial asset is credit-impaired include observable data about the following events:
(a) significant financial difficulty of the issuer or the borrower; (b) a breach of contract, such as a default or past due event;
(c) the lender(s) of the borrower, for economic or contractual reasons relating to the borrower's financial difficulty, having granted to the borrower a concession(s) that the lender(s) would not otherwise consider;
(d) it becoming probable that the borrower will enter bankruptcy or other financial reorganisation;
(e) the disappearance of an active market for that financial asset because of financial difficulties; or
(f) the purchase or origination of a financial asset at a deep discount that reflects the incurred credit losses.
It may not be possible to identify a single discrete event-instead, the combined effect of several events may have caused financial assets to become credit-impaired.
Purchased or originated credit-impaired (POCI) financial assets
For POCI the Bank only recognises the cumulative changes in lifetime expected credit losses since initial recognition. At each reporting date, the Bank recognises in profit or loss the amount of the change in lifetime expected credit losses as an impairment gain or loss. The Bank recognises favourable changes in lifetime expected credit losses as an impairment gain, even if the lifetime expected credit losses are less than the amount of expected credit losses that were included in the estimated cash flows on initial recognition.
The Bank assesses on a forward-looking basis the expected credit losses ('ECL') associated with its debt instrument assets carried at amortised cost and FVOCI and with the exposure arising from loan commitments and financial guarantee contracts. The Bank recognises a loss allowance for such losses at each reporting date. The measurement of ECL reflects:
-- An unbiased and probability-weighted amount that is determined by evaluating a range of possible outcomes;
-- The time value of money; and
-- Reasonable and supportable information that is available without undue cost or effort at the reporting date about past events, current conditions and forecasts of future economic conditions.
For loan commitments and financial guarantee contracts, the loss allowance is recognised as a provision. The Bank keeps track of the changes in the loss allowance for financial assets separately from those for loan commitments and financial guarantee contracts. However, if a financial instrument includes both a loan (i.e. financial asset) and an undrawn commitment (i.e. loan commitment) component and the Bank does not separately identify the expected credit losses on the loan commitment component from those on the financial asset component, the expected credit losses on the loan commitment is recognised together with the loss allowance for the financial asset. To the extent that the combined expected credit losses exceed the gross carrying amount of the financial asset, the expected credit losses is recognised as a provision.
Definition of default
Critical to the determination of ECL is the definition of default. The definition of default is used in measuring the amount of ECL and in the determination of whether the loss allowance is based on 12-month or lifetime ECL, as default is a component of the probability of default (PD) which affects both the measurement of ECLs and the identification of a significant increase in credit risk.
The Bank considers the following as constituting an event of default:
-- The borrower is past due more than 90 days on any material credit obligation to the Bank or; -- The borrower is unlikely to pay its credit obligations to the Bank in full.
The definition of default is appropriately tailored to reflect different characteristics of different types of assets. Overdrafts are considered as being past due once the customer has breached an advised limit or has been advised of a limit smaller than the current amount outstanding.
When assessing if the borrower is unlikely to pay its credit obligation, the Bank takes into account both qualitative and quantitative indicators. The information assessed depends on the type of the asset, for example in corporate lending a qualitative indicator used is the breach of covenants, which is not relevant for retail lending. Quantitative indicators, such as overdue status and non-payment on another obligation of the same counterparty are key inputs in this analysis. The Bank uses a variety of sources of information to assess default which are either developed internally or obtained from external sources.
Significant increase in credit risk
The Bank monitors all financial assets, undrawn loan commitments and financial guarantee contracts that are subject to the impairment requirements to assess whether there has been a significant increase in credit risk since initial recognition. If there has been a significant increase in credit risk the Bank will measure the loss allowance based on lifetime rather than 12-month ECL. The Bank's accounting policy is not to use the practical expedient that financial assets with 'low' credit risk at the reporting date are deemed not to have had a significant increase in credit risk. As a result the Bank monitors all financial assets, undrawn loan commitments and financial guarantee contracts that are subject to impairment for significant increase in credit risk.
In assessing whether the credit risk on a financial instrument has increased significantly since initial recognition, the Bank compares the risk of a default occurring on the financial instrument at the reporting date based on the remaining maturity of the instrument with the risk of a default occurring that was anticipated for the remaining maturity at the current reporting date when the financial instrument was first recognised. In making this assessment, the Bank considers both quantitative and qualitative information that is reasonable and supportable, including historical experience and forward-looking information that is available without undue cost or effort, based on the Bank's historical experience and expert credit assessment including forward-looking information.
Multiple economic scenarios form the basis of determining the probability of default at initial recognition and at subsequent reporting dates. Different economic scenarios will lead to a different probability of default. It is the weighting of these different scenarios that forms the basis of a weighted average probability of default that is used to determine whether credit risk has significantly increased.
For corporate lending, forward-looking information includes the future prospects of the industries in which the Bank's lenders operate, obtained from economic expert reports, financial analysts, governmental bodies and other similar organisations, as well as consideration of various internal and external sources of actual and forecast economic information. For the retail portfolio, forward looking information includes the same economic forecasts as the corporate portfolio with additional forecasts of local economic indicators, particularly for regions with a concentration to certain industries, as well as internally generated information of customer payment behaviour. The Bank allocates its counterparties to a relevant internal credit risk grade depending on their credit quality. The quantitative information is a primary indicator of significant increase in credit risk and is based on the change in lifetime PD by comparing:
-- The remaining lifetime PD at the reporting date; with
-- the remaining lifetime PD for this point in time that was estimated based on facts and circumstances at the time of initial recognition of the exposure.
The PDs used are forward looking and the Bank uses the same methodologies and data used to measure the loss allowance for ECL.
The qualitative factors that indicate significant increase in credit risk are reflected in PD models on a timely basis. However, the Bank still considers separately additional qualitative factors to assess if credit risk has increased significantly. For corporate lending there is particular focus on assets that are included on the Bank's 'watch list' and for the retail portfolio the Bank considers the expectation of forbearance and payment holidays, credit scores and any other changes in the borrower's circumstances which are likely to adversely affect one's ability to meet contractual obligations.
Given that a significant increase in credit risk since initial recognition is a relative measure, a given change, in absolute terms, in the PD will be more significant for a financial instrument with a lower initial PD than compared to a financial instrument with a higher PD.
The Bank assumes that when an asset becomes 30 days past due, the Bank considers that a significant increase in credit risk has occurred and the asset is in stage 2 of the impairment model, i.e. the loss allowance is measured as the lifetime ECL.
(iii) Modification of loans
The Bank sometimes renegotiates or otherwise modifies the contractual cash flows of loans to customers. When this happens, the Bank assesses whether or not the new terms are substantially different to the original terms. The Bank does this by considering, among others, the following factors:
-- If the borrower is in financial difficulty, whether the modification merely reduces the contractual cash flows to amounts the borrower is expected to be able to pay.
-- Whether any substantial new terms are introduced, such as a profit share/equity-based return that substantially affects the risk profile of the loan.
-- Significant extension of the loan term when the borrower is not in financial difficulty. Significant change in the interest rate.
-- Change in the currency the loan is denominated in.
-- Insertion of collateral, other security or credit enhancements that significantly affect the credit risk associated with the loan.
If the terms are substantially different, the Bank derecognises the original financial asset and recognises a 'new' asset at fair value and recalculates the new effective interest rate for the asset. The date of renegotiation is consequently considered to be the date of initial recognition for impairment calculation purposes, including for the purpose of determining whether a significant increase in credit risk has occurred. However, the Bank also assesses whether the new financial asset recognised is deemed to be credit-impaired at initial recognition, especially in circumstances where the renegotiation was driven by the debtor being unable to make the originally agreed payments. Differences in the carrying amount are also recognised in profit or loss as a gain or loss on derecognition.
If the terms are not substantially different, the renegotiation or modification does not result in derecognition, and the Bank recalculates the gross carrying amount based on the revised cash flows of the financial asset and recognises a modification gain or loss in profit or loss. The new gross carrying amount is recalculated by discounting the modified cash flows at the original effective interest rate (or credit-adjusted effective interest rate for purchased or originated credit-impaired financial assets).
(iv) Derecognition other than on a modification
Financial assets, or a portion thereof, are derecognised when the contractual rights to receive the cash flows from the assets have expired, or when they have been transferred and either
-- the Bank transfers substantially all the risks and rewards of ownership, or
-- the Bank neither transfers nor retains substantially all the risks and rewards of ownership and the Bank has not retained control.
The Bank enters into transactions where it retains the contractual rights to receive cash flows to other entities and transfers substantially all of the risks and rewards. These transactions are accounted for as 'pass through' transfers that result in derecognition if the Bank:
(i) Has no obligation to make payments unless it collects equivalent amounts from the assets;
(ii) Is prohibited from selling or pledging the assets; and
(iii) Has an obligation to remit any cash it collects from the assets without material delay.
Collateral (shares and bonds) furnished by the Bank under standard repurchase agreements and securities lending and borrowing transactions are not derecognised because the Bank retains substantially all the risks and rewards on the basis of the predetermined repurchase price, and the criteria for derecognition are therefore not met. This also applies to certain securitisation transactions in which the Bank retains a subordinated residual interest.
3.12.1.2 Financial Liabilities
i) Classification and subsequent measurement
In both the current and prior period, financial liabilities are classified as subsequently measured at amortised cost, except for:
Financial liabilities at fair value through profit or loss: this classification is applied to financial liabilities held for trading (e.g. short positions in the trading booking) and other financial liabilities designated as such at initial recognition. Gains or losses on financial liabilities designated at fair value through profit or loss are presented partially in other comprehensive income (the amount of change in the fair value of the financial liability that is attributable to changes in the credit risk of that liability, which is determined as the amount that is not attributable to changes in market conditions that give rise to market risk) and partially profit or loss (the remaining amount of change in the fair value of the liability). This is unless such a presentation would create, or enlarge, an accounting mismatch, in which case the gains and losses attributable to changes in the credit risk of the liability are also presented in profit or loss;
Financial liabilities arising from the transfer of financial assets which did not qualify for derecognition, whereby a financial liability is recognised for the consideration received for the transfer. In subsequent periods, the Bank recognises any expense incurred on the financial liability.
(ii) Derecognition
Financial liabilities are derecognised when they are extinguished (i.e. when the obligation specified in the contract is discharged, cancelled or expires).
The exchange between the Bank and its original lenders of debt instruments with substantially different terms, as well as substantial modifications of the terms of existing financial liabilities, are accounted for as an extinguishment of the original financial liability and the recognition of a new financial liability. The terms are substantially different if the discounted present value of the cash flows under the new terms, including any fees paid net of any fees received and discounted using the original effective interest rate, is at least 10% different from the discounted present value of the remaining cash flows of the original financial liability. In addition, other qualitative factors, such as the currency that the instrument is denominated in, changes in the type of interest rate, new conversion features attached to the instrument and change in covenants are also taken into consideration. If an exchange of debt instruments or modification of terms is accounted for as an extinguishment, any costs or fees incurred are recognised as part of the gain or loss on the extinguishment. If the exchange or modification is not accounted for as an extinguishment, any costs or fees incurred adjust the carrying amount of the liability and are amortised over the remaining term of the modified liability.
3.12.1.3 Financial guarantee contracts and loan commitments
Financial guarantee contracts are contracts that require the issuer to make specified payments to reimburse the holder for a loss it incurs because a specified debtor fails to make payments when due, in accordance with the terms of a debt instrument. Such financial guarantees are given to banks, financial institutions and others on behalf of customers to secure loans, overdrafts and other banking facilities.
Financial guarantee contracts are initially measured at fair value and subsequently measured at the higher of:
-- The amount of the loss allowance; and
-- The premium received on initial recognition less income recognised in accordance with the principles of IFRS 15.
Loan commitments provided by the Bank are measured as the amount of the loss allowance. The Bank has not provided any commitment to provide loans at below-market interest rate, or that can be settled net in cash or by delivering or issuing another financial instrument.
For loan commitments and financial guarantee contracts, the loss allowance is recognised as a provision. However, for contracts that include both a loan and an undrawn commitment and the Bank cannot separately identify the expected credit losses on the undrawn commitment component from those on the loan component, the expected credit losses on the undrawn commitment are recognised together with the loss allowance for the loan. To the extent that the combined expected credit losses exceed the gross carrying amount of the loan, the expected credit losses are recognised as a provision.
3.12.1.4 Critical Accounting Estimates and Judgements
The preparation of financial statements requires the use of accounting estimates which, by definition, will seldom equal the actual results. Management also needs to exercise judgement in applying the Bank's accounting policies.
Note 2.5 (Use of estimates and judgements) provides an overview of the areas that involve a higher degree of judgement or complexity, and major sources of estimation uncertainty that have a significant risk of resulting in a material adjustment within the next financial year. Detailed information about each of these estimates and judgements is included in the related notes together with information about the basis of calculation for each affected line item in the financial statements.
3.12.1.5 Measurement of the expected credit loss allowance
The measurement of the expected credit loss allowance for financial assets measured at amortised cost and FVOCI is an area that requires the use of complex models and significant assumptions about future economic conditions and credit behaviour (e.g. the likelihood of customers defaulting and the resulting losses). A number of significant judgements are also required in applying the accounting requirements for measuring ECL, such as:
-- Determining criteria for significant increase in credit risk; -- Choosing appropriate models and assumptions for the measurement of ECL; -- Establishing the number and relative weightings of forward-looking scenarios for each type of product/market and the associated ECL; and -- Establishing groups of similar financial assets for the purposes of measuring ECL.
The Bank evaluates ECLs for 7 portfolios of audited corporates with overdraft limits, audited corporates without overdraft limits, unaudited corporates with overdraft limits, unaudited corporates without overdraft limits, SMEs with limits, SMEs without limits and Retail loans.
The guiding principle of the Expected Credit Loss evaluation is to reflect the general pattern of deterioration or improvement in the credit quality of financial instruments and allocate commensurate loss provisions. Under the general approach, there are two measurement bases:
-- 12-month ECLs (Stage 1 ECLs) that is evaluated for all financial instruments with no significant deterioration in credit quality since initial recognition.
-- Lifetime ECLs (Stages 2 and 3 ECLs) that is evaluated for financial instruments for which significant increase in credit risk or default has occurred on an individual or collective basis.
Probability of Default (PD)
The Bank defines Probability of Default as the likelihood that a borrower will fail to meet their contractual obligations in the future. The Bank's PD models have been built using historical credit default experience, present credit information as well as forward looking factors which affect the capacity of borrowers to meet their contractual obligations. The Bank used the logistic regression approach to construct PD models for Corporate, SME, Retail and Treasury Bills portfolios while the Merton model was adopted for Interbank Placements. The PD models are used at entity level to evaluate 12-month PDs for Day 1 losses and for financial instruments with no significant deterioration in credit risk since initial recognition, whilst lifetime PD is used for financial instruments for which significant increase in credit risk or default has occurred. 12-month PDs are derived using borrower present risk characteristics while lifetime PDs are derived using a combination of 12-month PDs, present borrower behaviour and forward looking macroeconomic factors.
Exposure at Default (EAD)
The Bank defines Exposure at Default as an estimation of the extent to which the Bank will be exposed to a counterparty in the event of a default. The Bank's EAD models have been built using historical experience of debt instruments that defaulted. The Bank used the linear regression approach to construct EAD models for Corporate, SME and Retail portfolios. For TBs and Interbank Placements, the Bank took a conservative approach of considering the full outstanding balance as the EAD at any given point in the lifetime of an instrument. The Bank's EAD models that use Credit Conversion Factors (CCFs) are applied on fully drawn down instruments while models that use Loan Equivalents (LEQs) are applied on partly drawn instruments. The EAD models are used at entity level to evaluate the proportion of the exposure that will be outstanding at the point of default.
Loss Given Default (LGD)
The Bank defines Loss Given Default as an estimate of the ultimate credit loss in the event of a default. The Bank's LGD models were built using historical experience of defaulted debt instruments and observed recoveries. The Bank used the linear regression approach to construct LGD models for Corporate, SME and Retail portfolios. For Treasury Bills and Interbank Placements, the Bank took a conservative approach of taking a fixed 100% as the LGD at any given point in the lifetime of an instrument. The LGD models are used at portfolio level to evaluate 12-month LGDs for financial instruments with no significant increase in credit risk since initial recognition and lifetime is applied LGDs for financial instruments for which significant increase in credit risk has occurred. 12-month LGDs were derived as historical loss rates while lifetime LGDs were derived using a combination of 12-month LGDs and forward looking macroeconomic factors such as GDP and Inflation.
TheB Bank's ECL model combines the output of the PD, EAD and LGD and computes an Expected Credit Loss that takes into account time value of money using the Effective Interest Rates (EIR) and time to maturity of the debt instruments.
The final ECL is a probability-weighted amount that is determined by evaluating three (3) possible outcomes of Best Case ECL, Baseline Case ECL, and Worst Case ECL. The Bank has modelled these three cases in such a way that the Best Case represents scenario of lower than market average default rates, the Base Case represents scenarios of comparable market average default rates and the Worst Case represent scenarios of higher than market average default rates.
3.12.2 Regulatory guidelines and International Financial Reporting Standards requirements in respect of the Bank's activities
Renegotiated loans and advances
Where possible, the Bank seeks to restructure loans rather than to take possession of collateral. This may involve extending the payment arrangements and the agreement of new loan conditions. Once the terms have been re-negotiated, any impairment is measured using the original effective interest rate (EIR) as calculated before the modification of terms and the loan is no longer considered past due. Management continuously renews re-negotiated loans to ensure that all criteria are met and that future payments are likely to occur. The loans continue to be subject to an individual or collective impairment assessment, calculated using the loans original EIR.
Collateral valuation
The Bank seeks to use collateral, where possible, to mitigate its risks on financial assets. The collateral comes in various forms such as cash, securities, letters of credit/guarantees, real estate, receivables, inventories, other non-financial assets and credit enhancements such as netting agreements. The fair value of collateral is generally assessed, at a minimum, at inception and based on the Bank's quarterly reporting schedule, however, some collateral, for example, cash or securities relating to margining requirements, is valued daily. To the extent possible, the Bank uses active market data for valuing financial assets, held as collateral. Other financial assets which do not have a readily determinable market value are valued using models. Non-financial collateral, such as real estate, is valued based on data provided by third parties such as mortgage brokers, housing price indices, audited financial statements, and other independent sources.
Collateral repossessed
The Bank's policy is to determine whether a repossessed asset is best used for its internal operations or should be sold. Assets determined to be useful for the internal operations are transferred to their relevant asset category at the lower of their repossessed value or the carrying value of the original secured asset. Assets that are determined better to be sold are immediately transferred to assets held for sale at their fair value at the repossession date in line with the Bank's policy.
4. INTEREST INCOME 30 June 30 June 2018 2017 US$ US$ Loans and advances to banks 239 723 699 288 -------------- -------------- Loans and advances to customers 13 689 900 12 518 050 -------------- -------------- Investment securities 4 633 283 2 034 521 -------------- -------------- ------------- ------------- -------------- -------------- 18 562 906 15 251 859 -------------- -------------- ======== ======== -------------- --------------
non-interest income
5.1 FEE AND COMMISSION INCOME 30 June 2018 30 June 2017 US$ US$ -------------- --------------- Retail banking customer fees 11 080 346 6 870 362 -------------- --------------- Corporate banking credit related fees 1 332 111 642 446 -------------- --------------- Financial guarantee income 128 889 101 215 -------------- --------------- International banking commissions 232 241 278 173 -------------- --------------- ------------- -------------- -------------- --------------- 12 773 587 7 892 196 -------------- --------------- ======== ======== -------------- --------------- 5.2 OTHER INCOME 30 June 2018 30 June 2017 US$ US$ -------------- ------------- Loss on disposal of quoted investments (15 074) - -------------- ------------- Net gain from quoted and other investments - 31 590 -------------- ------------- Loss on disposal of property and equipment - (56 639) -------------- ------------- Profit on disposal of investment properties 461 965 12 951 -------------- ------------- Loss on disposal of non-current asset held for sale - (75 300) -------------- ------------- Insurance claims and recoveries - 12 740 -------------- ------------- Rental income 192 820 68 954 -------------- ------------- Bad debts recovered 505 756 187 377 -------------- ------------- Other net operating income 342 784 9 634 -------------- ------------- ------------- ----------- -------------- ------------- 1 488 251 191 307 -------------- ------------- ======= ====== -------------- ------------- 6. Operating EXPITURE 30 June 2018 30 June 2017 US$ US$ --------------- --------------- The operating profit is after charging the following: --------------- --------------- Administration costs 7 553 600 5 949 243 --------------- --------------- Staff costs -salaries, allowances and related costs 7 754 281 6 404 149 --------------- --------------- Directors' remuneration: 412 023 361 629 --------------- --------------- -Fees 111 446 134 854 --------------- --------------- -Expenses 14 586 7 455 --------------- --------------- -Services rendered 285 991 219 320 --------------- --------------- Amortisation of intangible assets 471 720 352 162 --------------- --------------- Depreciation 629 227 560 129 --------------- ---------------
-------------- -------------- --------------- --------------- 16 820 851 13 627 312 --------------- --------------- ======== ======== --------------- --------------- 7. taxation 30 June 2018 30 June 2017 US$ US$ -------------- -------------- Income tax expense -------------- -------------- Current tax 1 757 913 464 472 -------------- -------------- Deferred tax 913 198 701 637 -------------- -------------- Capital gains tax - 115 150 -------------- -------------- ------------- ------------- -------------- -------------- 2 671 111 1 281 259 -------------- -------------- ======== ======== -------------- -------------- 8. IMPAIRMENT LOSSES ON LOANS AND ADVANCES
Impairment losses are calculated by estimating the expected credit losses for all financial assets (including loan commitments and guarantees) measured at amortised cost or fair value through OCI (FVOCI). ECLs arising from financial assets measured at armotised cost and at FVOCI are recognized in profit or loss. However, the loss allowance in respect of assets measured at FVOCI shall not reduce the carrying amount of the financial asset in the Statement of Financial Position but will be accumulated in a reserve through OCI. The aggregate impairment losses which are made during the year are dealt with as per paragraph 8.3.
8.1 Lifetime expected credit losses
Lifetime ECLs are recognized where the Bank's counterparty to a financial asset has been classified as default as defined in the Bank's accounting and credit policies. Financial assets are written off against lifetime ECL provisions once the probability of recovering any significant amounts becomes remote.
8.2 Twelve Month Expected credit losses
The 12-Month ECL relates to the day 1 impairment provisions on financial assets as well as financial assets which are considered not to have had a significant increase in credit risk as defined in the Bank's accounting and credit policies.
8.3 Regulatory Guidelines and International Financial Reporting Standards Requirements
The Banking Regulations 2000 gives guidance on provisioning for doubtful debts and stipulates certain minimum percentages to be applied to the respective categories of the loan book.
IFRS 9, Financial Instruments IFRS 9, prescribes the provisioning for impairment losses based on the expected credit losses from the expected cash flows from financial assets held by the bank, including guarantees and loan commitments.
The two prescriptions are likely to give different results. The Group has taken the view that where the IFRS 9 charge is less than the amount provided for in the Banking Regulations, the difference is recognised directly in equity as a transfer from retained earnings to a regulatory reserve and where it is more, the full amount will be charged to the profit or loss.
8.4 Suspended interest
Interest on loans and advances is accrued to income until such time as reasonable doubt exists about its collectability, thereafter and until all or part of the loan is written off, interest continues to accrue on customers' accounts, but is not included in income. Such suspended interest is deducted from loans and advances in the statement of financial position. This policy meets the requirements of the Banking Regulations 2000 issued by the RBZ.
9. EARNINGS PER SHARE
Basic earnings per share is calculated by dividing the profit for the period attributable to ordinary equity holders of NMBZ Holdings Limited by the weighted average number of ordinary shares outstanding during the period.
Diluted earnings per share is calculated by dividing the profit attributable to ordinary equity holders of NMBZ Holdings Limited adjusted for the after tax effect of: (a) any dividends or other items related to dilutive potential ordinary shares deducted in arriving at profit or loss attributable to ordinary equity holders of the parent entity; (b) any interest recognised in the period related to dilute potential ordinary shares; (c) any other changes in income or expense that would result from the conversion of the dilutive potential ordinary shares, by the weighted average number of ordinary shares outstanding during the year plus the weighted average number of ordinary shares; that would be issued on the conversion of all the dilutive potential ordinary shares into ordinary shares.
9.1 Earnings
30 June 2018 30 June 2017 US$ US$ ------------- ------------- Profit for the period 9 086 483 3 556 915 ------------- -------------
9.2 Number of shares
30 June 2018 30 June 2017 US$ US$ ----------------- ----------------- 9.2.1 Basic earnings per share ----------------- ----------------- Weighted average number of ordinary shares for ----------------- ----------------- basic earnings per share 388 946 301 384 518 549 ----------------- ----------------- 9.2.2 Diluted earnings per share ----------------- ----------------- Number of shares at beginning of period 384 974 542 384 427 351 ----------------- ----------------- Shares issued - share options exercised - 547 191 ----------------- ----------------- Shares issued - scrip dividend 7 943 318 - ----------------- ----------------- Effect of dilution: ----------------- ----------------- Share options granted but not exercised - - ----------------- ----------------- Share options approved but not yet granted 23 942 639 23 942 639 ----------------- ----------------- ---------------- ---------------- ----------------- ----------------- 416 860 499 408 917 181 ----------------- ----------------- ========= ========= ----------------- -----------------
9.3 Earnings per share (US cents)
30 June 2018 30 June 2017 Basic 2.34 0.93 ------------- ------------- Diluted basic 2.18 0.87 ------------- ------------- 10. SHARE CAPITAL 10.1 Authorised 30 June 2018 31 December 30 June 2018 31 December 2017 2017 Shares (million) Shares (million) US$$ US$ ----------------- ----------------- ------------- ------------ Ordinary shares of US$0.00028 each 600 600 168 000 168 000 ----------------- ----------------- ------------- ------------ ==== ==== ====== ====== ----------------- ----------------- ------------- ------------ 10.2 Issued and fully paid 10.2.1 Ordinary shares 30 June 2018 31 December 30 June 2018 31 December 2017 2017 Shares (million) Shares (million) US$$ US$ ----------------- ----------------- ------------- ------------ Ordinary shares 289 282 80 975 78 751 ----------------- ----------------- ------------- ------------ ==== === ====== ====== ----------------- ----------------- ------------- ------------ 10.2.2 Redeemable ordinary shares 30 June 2018 31 December 30 June 2018 31 December 2017 2017 Shares (million) Shares (million) US$$ US$ ----------------- ----------------- ------------- ------------ Redeemable ordinary
shares 104 104 29 040 29 040 ----------------- ----------------- ------------- ------------ ==== === ====== ====== ----------------- ----------------- ------------- ------------
A total of 7 943 318 ordinary shares were issued to existing shareholders in March 2018 as scrip dividend. Of the unissued ordinary shares of 207 million shares (2017 - 214 million), options which may be granted in terms of the 2012 ESOS amount to 23 942 639. No share options were exercised from the scheme as at 30 June 2018.
Subject to the provisions of section 183 of the Companies Act (Chapter 24:03), the unissued shares are under the control of the directors.
11. REDEEMABLE ORDINARY SHARES 30 June 2018 31 December 2017 US$ US$ --------------- ----------------- Nominal value (note 10.2.2) 29 040 29 040 --------------- ----------------- Share premium 14 306 213 14 306 213 --------------- ----------------- -------------- --------------- --------------- ----------------- 14 335 253 14 335 253 --------------- ----------------- ======== ======== --------------- -----------------
On 30 June 2013 the Company received US$14 831 145 capital from Nederlandse Financierings-Maatschappij Voor Ontiwikkelingslanden N.V. (FMO), Norwegian Investment Fund for Developing Countries (Norfund) and AfricInvest Financial Sector Holdings (AfricInvest) who were allocated 34 571 429 shares each (total of 103 714 287) for individually investing US$4 943 715. This amount, net of share issue expenses, was used to recapitalise the Bank in order to contribute towards the minimum capital requirements set by the Reserve Bank of Zimbabwe of US$100 million by 31 December 2020. FMO and Norfund combined together with Rabobank to form ARISE which is a development finance institution primarily focusing on investing in African financial institutions to support and enhance financial service delivery in Africa.
NMBZ Holdings Limited (NMBZ) entered into a share buy-back agreement with Norfund, FMO and AfricInvest, where these three strategic investors have a right on their own discretion at any time after the 5(th) anniversary (30 June 2018) but before the 9(th) anniversary (30 June 2022) of its first subscription date, to request NMBZ to buy back all or part of its NMBZ shares at a price to be determined using the agreed terms as detailed in the share buy-back agreement. The 5(th) anniversary, which is the initial exercisable date of the share buy-back agreement was reached on 30 June 2018. However, the financial liability referred to below did not arise as the Bank has not yet reached the US$100 million minimum capital threshold. It is a condition precedent that at any point when the share buy-back is being considered, the proceeds used to finance the buy-back should come from the distributable reserves which are over and above the minimum regulatory capital requirements. Further, no buy-back option can be exercised by any investor after the 9(th) anniversary (30 June 2022) of the effective date.
The share buy-back agreement creates a potential obligation for NMBZ Holdings Limited to purchase its own instruments. Thus shares issued gave rise to a potential financial liability and are classified as redeemable ordinary shares as shareholders' liabilities.
12. SUBORDINATED TERM LOAN 30 June 2018 31 December 2017 US$ US$ --------------- ------------------ At 1 January 1 415 904 1 415 490 --------------- ------------------ Interest capitalised 81 666 165 345 --------------- ------------------ Interest paid (81 740) (164 931) --------------- ------------------ -------------- ----------------- --------------- ------------------ 1 415 075 1 415 490 --------------- ------------------ ========= ========== --------------- ------------------
In 2013, the Bank received a subordinated term loan amounting to US$1.4 million from a Development Financial Institution which attracts an interest rate of LIBOR plus 10% and has a seven year maturity date (13 June 2020) from the first disbursement date.
The above liability would, in the event of the winding up of the issuer, be subordinated to the claims of depositors and all other creditors of the issuer. The Group has not had any defaults of the principal and interest and other breaches with respect to this subordinated loan during the six months period ended 30 June 2018.
13. DepositS and other accounts 13.1 Deposits and other accounts 30 June 31 December 2018 2017 US$ US$ ---------------- ------------------ Deposits from banks and other financial institutions** 40 108 144 17 213 617 ---------------- ------------------ 324 472 Current and deposit accounts* 373 331 742 768 ---------------- ------------------ --------------- ----------------- ---------------- ------------------ 364 580 Total deposits 517 348 956 385 ---------------- ------------------ Trade and other payables* 9 273 063 7 956 124 ---------------- ------------------ --------------- ----------------- ---------------- ------------------ 373 853 580 356 912 509 ---------------- ------------------ ========= ========== ---------------- ------------------
`
*The carrying amounts of current and deposit accounts and trade and other payables approximate the
related fair values due to their short term nature.
** Included in deposits from banks and other financial institutions are loan balances of US$5 103 666
(30 June 2017 - US$5 015 157), US$3 308 393 (30 June 2017 - Nil), US$1 642 642 214 (30 June 2017 - Nil) and US$2 014 799 (30 June 2017 - US$4 178 313) due to Norsad, Nederlandse Financierings-Maatschappij Voor Ontiwikkelingslanden (FMO), Swedfund and Societie de Promotion de Paticipation Pour la Cooperation Economique SA (Proparco) respectively. FMO and Swedfund facilities will mature on 16 October 2020, whilst the Proparco facility will mature on 15 April 2019. The Norsad facility matured on 18 April 2018. The Group defaulted on the Norsad principal amount due to Nostro funding challenges. However, the total outstanding amount due to Norsad was subsequently settled in full on the 20(th) of July 2018. The Group did not have any other defaults on the principal and interest with respect to the other loans during the period ended 30 June 2018.
There were breaches to the Proparco, Norsad and Norfund financial covenants regarding the following ratios as at 30 June 2018:
Aggregate large exposure ratio - 40.22% (instead of a maximum of 25%).
Loan loss reserve - 21.13% (instead of a minimum of 40%).
The Bank will apply for a waiver of the non - compliant ratios by 30 September 2018.
13.2 Maturity analysis 30 June 2018 31 December 2017 US$ US$ ------------------ ----------------- Less than one month 289 309 149 279 698 410 ------------------ ----------------- 1 to 3 months 33 234 951 37 746 638 ------------------ ----------------- 3 to 6 months 8 546 582 2 472 911 ------------------ ----------------- 6 months to 1 year 8 925 463 11 751 881 ------------------ ----------------- 1 to 5 years 24 372 542 17 094 715 ------------------ ----------------- Over 5 years 191 830 191 830 ------------------ ----------------- ----------------- --------------- ------------------ ----------------- 364 580 517 348 956 385 ------------------ -----------------
========== ========= ------------------ -----------------
13.3 Sectoral analysis of deposits
30 June 31 December 2018 2017 US$ % US$ % ---------------- --------- ---------------- ----- Agriculture 9 964 726 3 10 034 242 3 ---------------- --------- ---------------- ----- Banks and other financial institutions 40 108 144 11 17 213 617 5 ---------------- --------- ---------------- ----- Distribution 39 474 723 11 38 540 570 11 ---------------- --------- ---------------- ----- Individuals 28 201 344 8 29 133 379 8 ---------------- --------- ---------------- ----- Manufacturing 57 303 068 16 62 426 525 18 ---------------- --------- ---------------- ----- Mining companies 7 953 095 2 8 086 319 2 ---------------- --------- ---------------- ----- Municipalities and parastatals 23 343 897 6 25 633 695 7 ---------------- --------- ---------------- ----- Other deposits 59 672 117 16 57 598 053 17 ---------------- --------- ---------------- ----- Services 82 224 391 23 87 501 920 25 ---------------- --------- ---------------- ----- Transport and telecommunications companies 16 335 012 4 12 788 065 4 ---------------- --------- ---------------- ----- --------------- -------- --------------- ---- ---------------- --------- ---------------- ----- 364 580 348 956 517 100 385 100 ---------------- --------- ---------------- ----- ========= ==== ========= === ---------------- --------- ---------------- ----- 14. FINANCIAL INSTRUMENTS 14.1 Investment securities 30 June 2018 31 December 2017 US$ US$ -------------- ----------------- Held to maturity - 13 744 715 -------------- ----------------- Loans and receivables - 78 500 710 -------------- ----------------- Armotised cost - Gross 100 137 224 - -------------- ----------------- Impairment loss allowance (390 049) - -------------- ----------------- -ECL at 1 January 2018 (374 082) - -------------- ----------------- -ECL charged through profit (15 967) - or loss -------------- ----------------- ------------- -------------- -------------- ----------------- 99 747 175 92 245 425 -------------- ----------------- ======== ======== -------------- -----------------
The Group holds treasury bills and government bonds totalling US$100 137 224 with interest rates ranging from 2% to 10%. The Treasury Bills are measured at amortised cost in line with the Bank's business model to collect contractual cashflows and the contractual terms are such that the financial assets give rise to cashflows that are solely payments of principal and interest. Of the total Treasury Bills balance of US$100 137 224, a total of US$52 152 776 had been pledged as security against interbank borrowings.
14.2 Maturity analysis of investment securities held to maturity 30 June 2018 31 December 2017 US$ US$ ---------------- ----------------- Less than 1 month - - ---------------- ----------------- 1 to 3 months - - ---------------- ----------------- 3 to 6 months - - ---------------- ----------------- 6 months to 1 year - 2 424 461 ---------------- ----------------- 1 to 5 years - - ---------------- ----------------- Over 5 years - 11 320 254 ---------------- ----------------- -------------- -------------- ---------------- ----------------- - 13 744 715 ------------------------------------- ----------------- ======== ======== ------------------------------------- -----------------
14.2.1 Maturity analysis of investment securities - amortised cost
30 June 2018 31 December 2017 US$ US$ --------------- ----------------- Less than 1 month 7 424 461 - --------------- ----------------- 1 to 3 months 1 138 890 - --------------- ----------------- 3 to 6 months - - --------------- ----------------- 6 months to 1 year 3 776 223 - --------------- ----------------- 1 to 5 years 76 415 419 - --------------- ----------------- Over 5 years 11 382 231 - --------------- ----------------- -------------- -------------- --------------- ----------------- 100 137 224 - --------------- ----------------- ======== ======== --------------- ----------------- 14.3 Maturity analysis of investment securities available for sale 30 June 2018 31 December 2017 US$ US$ ------------------------------------- ----------------- Less than 1 month - 6 150 000 ------------------------------------- ----------------- 1 to 3 months - 142 246 ------------------------------------- ----------------- 3 to 6 months - 722 972 ------------------------------------- ----------------- 6 months to 1 year - 6 138 889 ------------------------------------- ----------------- 1 to 5 years - 65 346 603 ------------------------------------- ----------------- -------------- -------------- ------------------------------------- ----------------- - 78 500 710 ---------------------------------------------------------- ----------------- ======== ======== ---------------------------------------------------------- ----------------- 14.4 Fair values of financial instruments The fair values of financial assets and financial liabilities that are traded in active markets are based on quoted market prices or dealer price quotations. For all other financial instruments, the Group determines fair values using other valuation techniques. For financial instruments that trade infrequently and have little price transparency, fair value is less objective, and requires varying degrees of judgement depending on liquidity, concentration, uncertainty of market factors, pricing assumptions and other risks affecting the specific instrument. Valuation models
The Group measures fair values using the following fair value hierarchy, which reflects the significance of the inputs used in making the measurements. --Level 1: inputs that are quoted market prices (unadjusted) in active markets for identical instruments. --Level 2: inputs other than quoted prices included within Level 1 that are observable either directly (i.e. as prices) or indirectly (i.e. derived from prices). This category includes instruments valued using: quoted market prices in active markets for similar instruments; quoted prices for identical or similar instruments in markets that are considered less than active; or other valuation techniques in which all significant inputs are directly or indirectly observable from market data. --Level 3: inputs that are unobservable. This category includes all instruments for which the valuation technique includes inputs not based on observable data and the unobservable inputs have a significant effect on the instrument's valuation. This category includes instruments that are valued based on quoted prices for similar instruments for which significant unobservable adjustments or assumptions are required to reflect differences between the instruments. The objective of valuation techniques is to arrive at a fair value measurement that reflects the price that would be received to sell the asset or paid to transfer the liability in an orderly transaction between market participants at the measurement date.
14.4.1 Financial instruments measured at fair value - fair value hierarchy
30 June 2018 Level 1 Level 2 Level 3 US$ 2013 US$ US$ ------------- ------------ -------------- --------------- Trade investments 102 347 - - 102 347 ------------- ------------ -------------- --------------- Quoted investments - - - - ------------- ------------ -------------- --------------- ------------ ----------- ------------- -------------- ------------- ------------ -------------- --------------- 102 347 - - 102 347 ------------- ------------ -------------- --------------- ======= ======= ======== ======== ------------- ------------ -------------- ---------------
During the reporting period ended 30 June 2018 and 31 December 2017, there were no transfers between Level 1 and Level 2 fair value measurements, and no transfers into and out of Level 3 fair value measurements. The trade investments were valued using the market value method.
31 December 2017 Level 1 Level 2 Level 3 US$ 2013 US$ US$ ------------ ------------ -------------- --------------- Trade investments 102 347 - - 102 347 ------------ ------------ -------------- --------------- Quoted investments 15 533 15 533 - - ------------ ------------ -------------- --------------- ----------- ----------- ------------- -------------- ------------ ------------ -------------- --------------- 117 880 15 533 - 102 347 ------------ ------------ -------------- --------------- ======= ======= ======== ======== ------------ ------------ -------------- ---------------
Level 3 fair value measurements
Reconciliation of trade investments
30 June 2018 31 December 2017 US$ US$ ------------- ----------------- Opening balance 102 347 88 930 ------------- ----------------- Gain recognized in profit or loss - 13 417 ------------- ----------------- ---------- ---------- ------------- ----------------- Closing balance 102 347 102 347 ------------- ----------------- ====== ===== ------------- ----------------- 14.4.2 Financial instruments not measured at fair value
The table below sets out the fair values of financial instruments not measured at fair value and analyses them by the level in the fair value hierarchy into which each fair value measurement is categorised.
30 June Total carrying 2018 Level 1 Level 2 Level 3 amount ------------------ ----------------- ------------------- ------------------ US$ US$ US$ US$ ------------------ ----------------- ------------------- ------------------ Assets ------------------ ----------------- ------------------- ------------------ Cash and cash equivalents - 80 212 924 - 80 212 924 ------------------ ----------------- ------------------- ------------------ Loans, advances and other 228 201 accounts - - 228 201 058 058 ------------------ ----------------- ------------------- ------------------ Investment securities - - 99 747 175 99 747 175 ------------------ ----------------- ------------------- ------------------ ---------------- ---------------- ----------------- ----------------- ------------------ ----------------- ------------------- ------------------ 408 161 Total - 80 212 924 327 948 233 157 ------------------ ----------------- ------------------- ------------------ ========== ========== =========== ========== ------------------ ----------------- ------------------- ------------------ Liabilities ------------------ ----------------- ------------------- ------------------ 373 853 Deposits and other liabilities - 373 853 580 - 580 ------------------ ----------------- ------------------- ------------------ --------------- ---------------- ------------------ --------------- ------------------ ----------------- ------------------- ------------------ 373 853 - 373 853 580 - 580 --------------------------------------------------- ----------------- ------------------- ------------------ ======== ========== =========== ========= --------------------------------------------------- ----------------- ------------------- ------------------ 31 December Total carrying 2017 Level 1 Level 2 Level 3 amount ------------------ ---------------- ---------------- ----------------- US$ US$ US$ US$ ------------------ ---------------- ---------------- ----------------- Assets ------------------ ---------------- ---------------- ----------------- 89 553 Cash and cash equivalents - 202 - 89 553 202 ------------------ ---------------- ---------------- -----------------
Loans, advances and other 210 483 210 483 accounts - - 221 221 ------------------ ---------------- ---------------- ----------------- 92 245 Investment securities - - 425 92 245 425 ------------------ ---------------- ---------------- ----------------- ---------------- --------------- --------------- ---------------- ------------------ ---------------- ---------------- ----------------- 89 553 302 728 392 281 Total - 202 646 848 ------------------ ---------------- ---------------- ----------------- ========== ========= ========= ========== ------------------ ---------------- ---------------- ----------------- Liabilities ------------------ ---------------- ---------------- ----------------- 356 912 356 912 Deposits and other liabilities - 509 - 509 ------------------ ---------------- ---------------- ----------------- --------------- --------------- --------------- --------------- ------------------ ---------------- ---------------- ----------------- 356 912 356 912 - 509 - 509 --------------------------------------------------- ---------------- ---------------- ----------------- ========= ========= ========= ========= --------------------------------------------------- ---------------- ---------------- ----------------- 15. CASH AND CASH EQUIVALENTS 30 June 2018 31 December 2017 US$ US$ -------------- ----------------- Balances with Central Bank 47 967 665 79 876 937 -------------- ----------------- Current, nostro accounts* and cash 4 432 659 6 676 265 -------------- ----------------- Interbank placements (see 15.1 below ) 28 000 000 3 000 000 -------------- ----------------- ------------- -------------- -------------- ----------------- 80 400 324 89 553 202 -------------- ----------------- Expected Credit Loss allowance (187 400) - (see 15.1 below) -------------- ----------------- ------------- ------------- -------------- ----------------- 80 212 924 89 553 202 -------------- ----------------- ======== ======== -------------- ----------------- 15.1 Interbank placements 30 June 31 December 2018 2017 US$ US$ Interbank placements 28 000 000 3 000 000 -------------- ------------- Expected Credit Loss allowance (187 400) - -------------- ------------- -ECL at 1 January 2018 (26 771) - -------------- ------------- -ECL charged through profit or (160 629) - loss -------------- ------------- ------------- ------------ -------------- ------------- 27 812 600 3 000 000 -------------- ------------- ======== ======= -------------- -------------
*Nostro accounts are foreign domiciled bank accounts operated by the Bank for the facilitation of offshore transactions on behalf of clients.
Balances with the Central Bank, other banks and cash are used to facilitate customer transactions which include payments and cash withdrawals. During the year, the Central Bank through Exchange Control Operational Guide 8 (ECOGAD 8) introduced prioritisation criteria which have to be followed when making foreign payments on behalf of customers. After prioritisation, foreign payments are then made subject to availability of bank balances with foreign correspondent banks, resulting in possible delay of payment of telegraphic transfers. However, no delay is expected in the settlement of local transactions through the Real Time Gross Settlement (RTGS) system.
Of the cash and cash equivalents balance, an amount of US$526 316 was pledged to Proparco as collateral for offshore lines of credit.
16. LOANS, ADVANCES AND OTHER ASSETS 16. 1 Total loans, advances and other assets 30 June 2018 31 December 2017 16.1.1 Advances US$ US$ --------------- ---------------- Fixed term loans 23 902 358 20 026 342 --------------- ---------------- Mortgages 55 823 132 37 295 987 --------------- ---------------- Loans and overdrafts 141 547 262 147 011 597 --------------- ---------------- -------------- --------------- --------------- ---------------- 221 272 752 204 333 927 --------------- ---------------- Other assets 6 928 306 6 149 294 --------------- ---------------- -------------- --------------- --------------- ---------------- 228 201 058 210 483 221 --------------- ---------------- ========= ========= --------------- ---------------- 16.1.2 Maturity analysis 30 June 31 December 2018 2017 ----------------- ------------------ US$ US$ ----------------- ------------------ Less than one month 77 348 152 71 137 746 ----------------- ------------------ 1 to three months 9 204 580 10 680 845 ----------------- ------------------ 3 to 6 months 3 111 437 2 954 340 ----------------- ------------------ 6 months to 1 year 10 939 739 11 024 220 ----------------- ------------------ 100 085 1 to 5 years 752 80 804 577 ----------------- ------------------ Over 5 years 35 704 155 34 403 690 ----------------- ------------------ --------------- --------------- ----------------- ------------------ 236 393 Total advances 815 211 005 418 ----------------- ------------------
Allowance for impairment losses on (14 446 loans and advances 564) (5 445 968) ----------------- ------------------ (5 445 968) - * IAS 39 impairment loss allowance at 1 January 2018 ----------------- ------------------ (8 175 135) - * ECL recognized through retained earnings ----------------- ------------------ (1 244 482) - * ECL charged through profit or loss ----------------- ------------------ Bad debts written off 419 021 - ----------------- ------------------ Suspended interest on credit-impaired financial assets (674 499) (1 225 523) ----------------- ------------------ --------------- --------------- ----------------- ------------------ 221 272 752 204 333 927 ----------------- ------------------ Other assets 6 928 306 6 149 294 ----------------- ------------------ ---------------- ---------------- ----------------- ------------------ 228 201 058 210 483 221 ----------------- ------------------ ========== ========== ----------------- ------------------
16.2 Sectoral analysis of utilizations
30 June 31 December 2018 2017 US$ % US$ % ---------------- -------- ---------------- --------- Agriculture and horticulture 32 049 091 14 28 531 460 14 ---------------- -------- ---------------- --------- Conglomerates 9 807 551 4 9 210 926 4 ---------------- -------- ---------------- --------- Distribution 29 278 993 12 28 737 726 14 ---------------- -------- ---------------- --------- Food & beverages 9 117 969 4 10 417 745 5 ---------------- -------- ---------------- --------- Individuals 86 679 204 37 82 589 355 39 ---------------- -------- ---------------- --------- Manufacturing 13 604 975 6 8 565 178 4 ---------------- -------- ---------------- --------- Mining 729 841 0 736 466 - ---------------- -------- ---------------- --------- Services 55 126 191 23 42 216 562 20 ---------------- -------- ---------------- --------- --------------- ------- --------------- -------- ---------------- -------- ---------------- --------- 236 393 815 100 211 005 418 100 ---------------- -------- ---------------- --------- ========= ==== ========= ===== ---------------- -------- ---------------- ---------
The material concentration of loans and advances are to individuals at 37% (2017 - 39%) and the services sector at 23% (2017 - 20%).
16.3 Allowance for impairment losses on financial assets 30 June 2018 Lifetime 12 Month Total ECL ECL ------------------------- ------------------- --------------- US$ US$ US$ ------------------------- ------------------- --------------- At 1 January 2018 (IAS 39 provisions) - - 5 445 968 ------------------------- ------------------- --------------- Adjustment on initial application of IFRS 9 - - 8 575 988 ------------------------- ------------------- --------------- ECL Balance at 1 Jan 2018 4 946 633 9 075 323 14 021 956 ------------------------- ------------------- --------------- * ECL - Loans and advances 4 946 633 8 64 470 13 621 103 ------------------------- ------------------- --------------- * ECL - Investment Securities - 374 082 374 082 ------------------------- ------------------- --------------- * ECL - Interbank Placements - 26 771 26 771 ------------------------- ------------------- --------------- Total charge against profits 9 522 1 411 556 1 421 078 ------------------------- ------------------- --------------- * ECL - Loans and advances 9 522 1 234 960 1 244 482 ------------------------- ------------------- --------------- * ECL - Investment Securities - 15 967 15 967 ------------------------- ------------------- --------------- * ECL - Interbank Placements - 160 629 160 629 ------------------------- ------------------- --------------- Bad debts written off (419 021) - (419 021) ------------------------- ------------------- --------------- ------------- ------------- ------------- ------------------------- ------------------- --------------- Balance 4 537 134 10 486 879 15 024 013 ------------------------- ------------------- --------------- ======== ======== ======== ------------------------- ------------------- ---------------
*The Bank adopted IFRS 9 effective 1 January 2018, the resultant increase in impairment provision on the effective date were recognized through retained earnings, as the Bank did not elect retrospective application of the standard.
31 December 2017 ---------------- Specific Portfolio Total US$ US$ US$ ---------------- ----------------- ---------------- At 1 January 6 207 672 2 097 445 8 305 117 ---------------- ----------------- ---------------- Total charge against profits 3 334 133 519 016 3 853 149 ---------------- ----------------- ---------------- Bad debts written off (6 712 298) - (6 712 298) ---------------- ----------------- ---------------- --------------- ---------------- --------------- ---------------- ----------------- ----------------
Balance 2 829 507 2 616 461 5 445 968 ---------------- ----------------- ---------------- ========= ========= ========= ---------------- ----------------- ---------------- 16.4 Credit-impaired financial assets 30 June 2018 31 December 2017 US$ US$ -------------------- ------------------- Total credit-impaired financial assets 14 462 782 16 848 747 -------------------- ------------------- Expected credit losses on credit-impaired financial assets (4 537 134) (2 829 507) -------------------- ------------------- Retail loans insurance (1 499 057) (1 457 059) -------------------- ------------------- Suspended interest on credit-impaired financial assets (674 499) (1 225 523) -------------------- ------------------- --------------- --------------- -------------------- ------------------- Net credit-impaired financial assets 7 752 092 11 336 658 -------------------- ------------------- ========= ========= -------------------- -------------------
The net credit-impaired financial assets of these accounts represents recoverable portions covered by realisable security, which includes guarantees, cession of debtors, mortgages over properties, equities and promissory notes all fair valued at US$14 134 875 (2017 - US$15 483 847).
16.5 Loans to related parties (Included under loans, advances and other assets)
30 June 2018 31 December 2017 US$ US$ --------------- --------------- Executive directors 142 330 201 084 --------------- --------------- Officers 8 372 130 7 566 669 --------------- --------------- Officers' companies - - --------------- --------------- -------------- -------------- --------------- --------------- 8 514 460 7 767 753 --------------- --------------- Fair value adjustments - (276 695) --------------- --------------- ------------- -------------- --------------- --------------- 8 514 460 7 491 058 --------------- --------------- ======== ========= --------------- --------------- 17. INTANGIBLE ASSETS Work in progress* Computer software Total US$ US$ US$ ------------------ ------------------ --------------- Cost ------------------ ------------------ --------------- Balance at 1 January 2017 228 595 3 045 126 3 273 721 ------------------ ------------------ --------------- Acquisitions - 1 565 713 1 565 713 ------------------ ------------------ --------------- ---------- ------------ ------------ ------------------ ------------------ --------------- Balance at 31 December 2017 228 595 4 610 839 4 839 434 ------------------ ------------------ --------------- Acquisitions - 389 956 389 956 ------------------ ------------------ --------------- ---------- ------------ ------------- ------------------ ------------------ --------------- Balance at 30 June 2018 228 595 5 000 795 5 229 390 ------------------ ------------------ --------------- ====== ======= ======== ------------------ ------------------ --------------- Accumulated amortisation ------------------ ------------------ --------------- Balance at 1 January 2017 - 1 626 687 1 626 687 ------------------ ------------------ --------------- Amortisation for the year - 832 567 832 567 ------------------ ------------------ --------------- --------- ------------- ----------- ------------------ ------------------ --------------- Balance at 31 December 2017 - 2 459 254 2 459 254 ------------------ ------------------ --------------- Amortisation for the period - 471 720 471 720 ------------------ ------------------ --------------- --------- ------------ -------------- ------------------ ------------------ --------------- Balance at 30 June 2018 - 2 930 974 2 930 974 ------------------ ------------------ --------------- ===== ======== ======== ------------------ ------------------ --------------- Carrying amount ------------------ ------------------ --------------- At 30 June 2018 228 595 2 069 821 2 298 416 ------------------ ------------------ --------------- ======= ======== ======== ------------------ ------------------ --------------- At 31 December 2017 228 595 2 151 585 2 380 180 ------------------ ------------------ --------------- ======= ======== ======== ------------------ ------------------ ---------------
*The work in progress relates to a computer software whose development commenced in 2015 and is now expected to be fully deployed for its intended use in the second half of 2018. The Directors performed an impairment assessment on the intangible asset and were satisfied that the asset had no signs of impairment
as at 30 June 2018.
18. PROPERTY AND EQUIPMENT Capital work Computers Motor vehicles Furniture and Freehold Total in progress equipment buildings US$ US$ US$ US$ US$ US$ --------------- --------------- ---------------- ------------------- ----------------- -------------- Cost --------------- --------------- ---------------- ------------------- ----------------- -------------- Balance at 1 12 562 January 2017 188 947 3 677 901 1 283 448 3 913 914 3 498 454 664 --------------- --------------- ---------------- ------------------- ----------------- -------------- Additions 268 310 1 598 813 52 454 115 296 4 060 2 038 933 --------------- --------------- ---------------- ------------------- ----------------- -------------- Capitalisations (163 541) 163 541 - - - - --------------- --------------- ---------------- ------------------- ----------------- -------------- Revaluation gain - - - - 121 630 121 630 --------------- --------------- ---------------- ------------------- ----------------- -------------- Reversal of
impairment - - - - 89 660 89 660 --------------- --------------- ---------------- ------------------- ----------------- -------------- Disposals - (4 930) (80 000) - - (84 930) --------------- --------------- ---------------- ------------------- ----------------- -------------- ------------- ------------ ------------ ------------- -------------- ------------- --------------- --------------- ---------------- ------------------- ----------------- -------------- At 31 December 14 727 2017 293 716 5 435 325 1 255 902 4 029 210 3 713 804 957 --------------- --------------- ---------------- ------------------- ----------------- -------------- Additions 2 422 645 367 378 95 317 149 641 - 3 034 981 --------------- --------------- ---------------- ------------------- ----------------- -------------- Capitalisations - - - - - - --------------- --------------- ---------------- ------------------- ----------------- -------------- ------------- ------------ ------------ ------------ ------------ ------------- --------------- --------------- ---------------- ------------------- ----------------- -------------- Balance at 30 17 762 June 2018 2 716 361 5 802 703 1 351 219 4 178 851 3 713 804 938 --------------- --------------- ---------------- ------------------- ----------------- -------------- ------------- ------------ ------------ ------------ ------------ ======== --------------- --------------- ---------------- ------------------- ----------------- -------------- Accumulated depreciation --------------- --------------- ---------------- ------------------- ----------------- -------------- At 1 January 2017 - 2 203 125 772 200 3 044 870 262 183 6 282 378 --------------- --------------- ---------------- ------------------- ----------------- -------------- Charge for the year - 563 658 191 574 316 222 65 357 1 136 811 --------------- --------------- ---------------- ------------------- ----------------- -------------- Disposals - (2 219) (25 000) - - (27 219) --------------- --------------- ---------------- ------------------- ----------------- -------------- -------------- -------------- -------------- ------------ ------------- ------------ --------------- --------------- ---------------- ------------------- ----------------- -------------- Balance at 31 December 2017 - 2 764 564 938 774 3 361 092 327 540 7 391 970 --------------- --------------- ---------------- ------------------- ----------------- -------------- Charge for period - 365 490 83 752 145 671 34 314 629 227 --------------- --------------- ---------------- ------------------- ----------------- -------------- Disposals - - - - - - --------------- --------------- ---------------- ------------------- ----------------- -------------- ----------- ------------ ------------ ------------- ------------ ------------ --------------- --------------- ---------------- ------------------- ----------------- -------------- Balance at 30 June 2018 - 3 130 054 1 022 526 3 506 763 361 854 8 021 197 --------------- --------------- ---------------- ------------------- ----------------- -------------- ======= ======= ======== ======= ======= ======= --------------- --------------- ---------------- ------------------- ----------------- -------------- Carrying amount at 30 June 2018 2 716 361 2 672 649 328 692 672 088 3 351 950 9 741 740 --------------- --------------- ---------------- ------------------- ----------------- -------------- ======= ======= ======= ======= ======== ======= --------------- --------------- ---------------- ------------------- ----------------- -------------- Carrying amount at 31 December 2017 293 716 2 670 762 317 128 668 118 3 386 264 7 335 988 --------------- --------------- ---------------- ------------------- ----------------- -------------- ======= ======= ======= ======= ======= ======= --------------- --------------- ---------------- ------------------- ----------------- -------------- 19. CAPITAL COMMITMENTS 30 June 31 December 2018 2017 US$ US$ -------------- ---------------- Capital expenditure contracted for 4 227 911 607 736 -------------- ---------------- Capital expenditure authorised but not yet contracted for 7 796 473 10 502 287 -------------- ---------------- ------------- --------------- -------------- ---------------- 12 024 384 11 110 023 -------------- ---------------- ======== ========= -------------- ----------------
The capital expenditure will be funded from the Group's own resources.
20. CONTINGENT LIABILITIES 30 June 31 December 2018 2017 US$ US$ ----------------- ----------------- Guarantees 7 877 009 8 195 056 ----------------- ----------------- 49 602 Facilities approved but not drawn down 321 28 943 947 ----------------- ----------------- Irrevocable letters of credit 1 750 000 - ----------------- ----------------- Expected credit losses on facilities approved (1 904 - but not drawn down 931) ----------------- ----------------- Expected credit losses on guarantees (498 782) - ----------------- ----------------- ---------------- ---------------- ----------------- ----------------- 56 825 617 37 139 003 ----------------- ----------------- ========= ========= ----------------- ----------------- 21. EXCHANGE RATES
The following exchange rates have been used to translate the foreign currency balances to United States of America dollars (US$) at period end:-
Mid-rate Mid-rate 30 June 2018 31 December 2017 ----- ------------- ------------ US$ US$ ----- ------------- ------------ British Pound Sterling GBP 1.3164 1.3525 ----- ------------- ------------ South African Rand ZAR 13.8288 12.3250 ----- ------------- ------------ European Euro EUR 1.1640 1.1994 ----- ------------- ------------ Botswana Pula BWP 10.4384 9.8232 ----- ------------- ------------
NMB BANK LIMITED
STATEMENT OF COMPREHENSIVE INCOME
for the six months ended 30 June 2018
30 June 30 June 2018 2017 US$ US$ ------ ----------------- --------------- Unaudited Unaudited ------ ----------------- --------------- Note ------ ----------------- --------------- 15 251 Interest income 18 562 906 859 ----------------- --------------- (4 563 Interest expense (3 934 668) 480) ----------------- --------------- -------------- -------------- ------ ----------------- --------------- 10 688 Net interest income 14 628 238 379 ----------------- --------------- Net foreign exchange gains 1 109 447 571 892 ----------------- --------------- Fee and commission income 12 773 587 7 892 196 ----------------- --------------- -------------- -------------- ------ ----------------- --------------- 19 152 Revenue 28 511 272 467 ----------------- --------------- Non-interest income a 1 503 325 172 349 ------ ----------------- --------------- ------------- ------------- ------ ----------------- --------------- 19 324 Operating income 30 014 597 816 ----------------- --------------- (16 813 (13 627 Operating expenditure b 134) 312) ------ ----------------- --------------- --------------- -------------- ------ ----------------- --------------- Net operating income before impairment charge 13 201 463 5 697 504 ----------------- --------------- Impairment losses on financial assets measured at amortised cost (1 421 078) (878 304) ----------------- --------------- -------------- ------------ ------ ----------------- --------------- Profit before taxation 11 780 385 4 819 200 ----------------- --------------- (1 280 Taxation charge (2 672 422) 332) ----------------- --------------- ------------- ------------- ------ ----------------- --------------- Profit for the period 9 107 963 3 538 868 ----------------- --------------- Other comprehensive income net of tax - - ------ ----------------- --------------- -------------- -------------- ------ ----------------- --------------- Total comprehensive income for the period 9 107 963 3 538 868 ----------------- --------------- ======= ======= ------ ----------------- --------------- Earnings per share (US cents) ------ ----------------- --------------- -Basic c 55.18 21.44 ------ ----------------- ---------------
NMB BANK LIMITED
STATEMENT OF FINANCIAL POSITION
As at 30 June 2018
30 June 2018 31 December 2017 US$ US$ -------- ----------------- ------------------- Unaudited Audited -------- ----------------- ------------------- EQUITY Note -------- ----------------- ------------------- Share capital d 16 506 16 506 -------- ----------------- ------------------- Share premium 31 474 502 31 474 502 ----------------- ------------------- Regulatory reserve - 2 297 492 ----------------- ------------------- Revaluation reserve 90 310 90 310 ----------------- ------------------- Retained earnings 35 132 312 30 842 252 ----------------- ------------------- ---------------- -------------- -------- ----------------- ------------------- Total shareholder's funds 66 713 630 64 721 062 ----------------- ------------------- LIABILITIES -------- ----------------- ------------------- Deposits and other accounts 373 919 007 356 977 472 ----------------- ------------------- Subordinated term loan 1 415 830 1 415 904 ----------------- ------------------- Current tax liabilities 98 183 - -------- ----------------- ------------------- ---------------- --------------- -------- ----------------- ------------------- Total liabilities 375 433 020 358 393 376 ----------------- ------------------- --------------- -------------- -------- ----------------- ------------------- Total shareholder's funds and liabilities 442 146 650 423 114 438
----------------- ------------------- ========= ========= -------- ----------------- ------------------- ASSETS -------- ----------------- ------------------- Cash and cash equivalents e 80 212 924 89 553 202 -------- ----------------- ------------------- Current tax assets - 155 488 ----------------- ------------------- Loans, advances and other assets 228 193 673 210 475 836 ----------------- ------------------- Investment securities 99 747 175 92 245 425 ----------------- ------------------- Amount owing from Holding Company 590 791 651 564 ----------------- ------------------- Non - current assets held for sale g 36 000 36 000 -------- ----------------- ------------------- Unquoted investments 102 347 102 347 ----------------- ------------------- Investment properties f 18 728 363 18 977 000 -------- ----------------- ------------------- Intangible assets 2 298 416 2 380 180 ----------------- ------------------- Property and equipment 9 741 740 7 335 988 ----------------- ------------------- Deferred tax assets 2 495 221 1 201 408 ----------------- ------------------- ---------------- ----------------- -------- ----------------- ------------------- Total assets 442 146 650 423 114 438 ----------------- ------------------- ========== ========== -------------------------------------------- ----------------- -------------------
NMB BANK LIMITED
STATEMENT OF CHANGES IN EQUITY
for the six months ended 30 June 2018
Capital Reserves Share Capital Share Premium Revaluation Regulatory Retained Total Reserve Reserve Earnings -------------- --------------- --------------- --------------- ---------------- ---------------- US$ US$ US$ US$ US$ US$ -------------- --------------- --------------- --------------- ---------------- ---------------- Balances at 1 January 54 713 2017 16 506 31 474 502 - 1 785 136 21 437 257 401 -------------- --------------- --------------- --------------- ---------------- ---------------- Profit for the six months - - - - 3 538 868 3 538 868 -------------- --------------- --------------- --------------- ---------------- ---------------- Transfer to regulatory reserve - - - 815 833 (815 833) -------------- --------------- --------------- --------------- ---------------- ---------------- ---------- ------------- -------------- -------------- --------------- -------------- -------------- --------------- --------------- --------------- ---------------- ---------------- Balances at 30 58 252 June 2017 16 506 31 474 502 - 2 600 969 24 160 292 269 -------------- --------------- --------------- --------------- ---------------- ---------------- Profit for the six months - - - - 6 378 483 6 378 483 -------------- --------------- --------------- --------------- ---------------- ---------------- Other comprehensive income - - 90 310 - - 90 310 -------------- --------------- --------------- --------------- ---------------- ---------------- Transfer from regulatory reserve - - - (303 477) 303 477 - -------------- --------------- --------------- --------------- ---------------- ---------------- --------- ------------- ----------- ------------- -------------- ------------- -------------- --------------- --------------- --------------- ---------------- ---------------- Balances at 31 64 721 December 2017 16 506 31 474 502 90 310 2 297 492 30 842 252 062 -------------- --------------- --------------- --------------- ---------------- ---------------- IFRS 9 adjustments - 1 January 2018 -------------- --------------- --------------- --------------- ---------------- ---------------- Transfer from regulatory reserve - - - (2 297 492) 2 297 492 - -------------- --------------- --------------- --------------- ---------------- ---------------- Expected Credit Loss (ECL) adjustment - 1 January (8 575 2018 - - - - (8 575 988) 988) -------------- --------------- --------------- --------------- ---------------- ---------------- Deferred Tax on ECL adjustment - 1 January 2018 - - - - 2 208 317 2 208 317 -------------- --------------- --------------- --------------- ---------------- ---------------- ----------- -------------- -------------- -------------- --------------- -------------- -------------- --------------- --------------- --------------- ---------------- ---------------- Restated balances at 1 58 353 January 2018 16 506 31 474 502 90 310 - 26 772 073 391 -------------- --------------- --------------- --------------- ---------------- ---------------- Profit for the six months - - - - 9 107 963 9 107 963 -------------- --------------- --------------- --------------- ---------------- ---------------- Dividends paid - - - - (747 724) (747 724) -------------- --------------- --------------- --------------- ---------------- ---------------- --------- ------------- ----------- ------------- ------------- -------------- -------------- --------------- --------------- --------------- ---------------- ---------------- Balances at 30 66 713 June 2018 16 506 31 474 502 90 310 - 35 132 312 630 -------------- --------------- --------------- --------------- ---------------- ---------------- ====== ======== ======= ======= ======== ======== -------------- --------------- --------------- --------------- ---------------- ----------------
NMB BANK LIMITED
STATEMENT OF CASH FLOWS
for the six months ended 30 June 2018
30 June 30 June 2017 2018 US$ US$ ---------------- ---------------- Unaudited Unaudited ---------------- ---------------- CASH FLOWS FROM OPERATING ACTIVITIES ---------------- ---------------- 11 780 Profit before taxation 385 4 819 200 ---------------- ---------------- Non-cash items ---------------- ---------------- -Impairment losses on financial assets measured at amortised cost 1 421 078 878 304 ---------------- ---------------- -Loss on disposal of property and equipment - 56 639 ---------------- ---------------- -Profit on disposal of investment property (461 965) (12 951) ---------------- ---------------- -Loss on disposal of non-current assets held for sale - 75 300 ---------------- ---------------- -Amortisation of intangible assets 471 720 352 162 ---------------- ---------------- -Depreciation 629 227 560 129 ---------------- ---------------- -Unrealised foreign exchange gains (16 352) (23 602) ---------------- ---------------- -Quoted and other investments fair value adjustment - (12 513) ---------------- ---------------- -Interest capitalised on subordinated loan 81 666 75 110 ---------------- ---------------- -------------- --------------- ---------------- ---------------- Operating cash flows before changes in operating 13 905 assets and liabilities 759 6 767 778 ---------------- ---------------- Changes in operating assets and liabilities ---------------- ---------------- 16 957 Increase in deposits and other liabilities 887 13 214 333 ---------------- ---------------- (Increase)/decrease in loans, advances (27 711 and other accounts 110) 86 953 ---------------- ---------------- -------------- -------------- ---------------- ---------------- Net cash generated from operations 3 152 536 20 069 064 ---------------- ---------------- -------------- -------------- ---------------- ---------------- Taxation ---------------- ---------------- (1 330 Corporate tax paid 459) (453 139) ---------------- ---------------- Capital gains tax paid - (44 000) ---------------- ---------------- -------------- -------------- ---------------- ---------------- Net cash inflow from operating activities 1 822 077 19 571 925 ---------------- ---------------- --------------- --------------- ---------------- ---------------- CASH FLOWS FROM INVESTING ACTIVITIES ---------------- ---------------- Proceeds on disposal of property and equipment - 1 073 ---------------- ---------------- Acquisition of intangible assets (389 956) (871 188) ---------------- ---------------- (3 034 Acquisition of property and equipment 981) (820 030) ---------------- ---------------- (3 897 Acquisition of investment properties 104) (3 946 615) ---------------- ---------------- (Acquisition)/disposal of investment (7 501 securities 751) 174 613 ---------------- ---------------- Proceeds on disposal of non-current asset held for sale - 2 150 000 ---------------- ---------------- Proceeds on disposal of investment property 4 430 127 332 951 ---------------- ---------------- Decrease in amount owing from holding company 60 774 21 888 ---------------- ---------------- --------------- --------------- ---------------- ---------------- (10 332 Net cash outflow from investing activities 891) (2 957 308) ---------------- ---------------- -------------- --------------- ---------------- ---------------- Net cash (outflow)/inflow before financing (8 510 activities 814) 16 614 617 ---------------- ---------------- -------------- --------------- ---------------- ---------------- CASHFLOWS FROM FINANCING ACTIVITIES ---------------- ---------------- Payment of interest on subordinated term loan (81 740) (75 525) ---------------- ---------------- Dividends paid (747 724) - ---------------- ---------------- -------------- -------------- ---------------- ---------------- Net cash outflow from financing activities (829 464) (75 525) ---------------- ---------------- -------------- --------------- ---------------- ---------------- Net (decrease)/increase in cash and cash (9 340 equivalents 278) 16 539 092 ---------------- ---------------- Cash and cash equivalents at beginning 89 553 of the period 202 69 421 257 ---------------- ---------------- --------------- --------------- ---------------- ----------------
Cash and cash equivalents at the end 80 212 of the period 924 85 960 349 ---------------- ---------------- ========= ========= ---------------- ----------------
NOTES TO THE CONDENSED FINANCIAL STATEMENTS
for the six months ended 30 June 2018
There are no material differences between the Bank and the Holding company as the Bank is the principal operating subsidiary of the Group. The notes to the financial statements under NMBZ Holdings Limited are therefore the same as those of the Bank in every material respect where applicable.
a. NON-INTEREST income 30 June 2018 30 June 2017 US$ US$ ------------- ------------- Quoted and other investments fair value adjustments - 12 514 ------------- ------------- Rental income 192 820 68 954 ------------- ------------- Insurance claims and recoveries - 12 740 ------------- ------------- Loss on disposal of property and equipment - (56 639) ------------- ------------- Profit on disposal of investment property 461 965 12 951 ------------- ------------- Loss on disposal of non-current asset held for sale - (75 300) ------------- ------------- Bad debts recovered 505 756 187 377 ------------- ------------- Other net operating income 342 784 9 752 ------------- ------------- ------------ ----------- ------------- ------------- 1 503 325 172 349 ------------- ------------- ======= ====== ------------- ------------- b. Operating EXPITURE 30 June 2018 30 June 2017 US$ US$ --------------- --------------- The operating profit is after charging the following: --------------- --------------- Administration costs 7 545 883 5 949 243 --------------- --------------- Staff costs - salaries, allowances and related costs 7 754 281 6 404 149 --------------- --------------- Directors' remuneration: 412 023 361 629 --------------- --------------- -Fees 111 446 134 854 --------------- --------------- -Expenses 14 586 7 455 --------------- --------------- -Services rendered 285 991 219 320 --------------- --------------- Amortisation of intangible assets 471 720 352 162 --------------- --------------- Depreciation 629 227 560 129 --------------- --------------- -------------- -------------- --------------- --------------- 16 813 134 13 627 312 --------------- --------------- ======== ======== --------------- --------------- c. EARNINGS PER SHARE
The calculation of earnings per share is based on the following figures:
c.1 Earnings 30 June 2018 30 June 2017 US$ US$ ------------- ------------- Profit for the period 9 107 963 3 538 868 ------------- ------------- c.2 Number of shares 30 June 2018 30 June 2017 Weighted average shares in issue 16 506 050 16 506 050 ------------- ------------- c.3 Earnings per share (US cents) Basic 55.18 21.44 d. SHARE CAPITAL d.1 Authorised
The authorised ordinary share capital at 30 June 2018 is at the historical cost figure of US$25 000 (2017 - US$25 000) comprising 25 million ordinary shares of US$0.001 each.
d.2 Issued and fully paid
The issued share capital at 30 June 2018 is at the historical cost figure of US$16 506 (2017 - US$16 506) comprising 16 506 050 (2017 - 16 506 050) ordinary shares of US$0.001 each.
e. CASH AND CASH EQUIVALENTS 30 June 2018 31 December 2017 US$ US$ ---------------- ----------------- Balances with the Central Bank 47 967 665 79 876 937 ---------------- ----------------- Current, nostro accounts and cash 4 432 659 6 676 265 ---------------- ----------------- Interbank placements (see e.1 below) 28 000 000 3 000 000 ---------------- ----------------- --------------- -------------- ---------------- ----------------- 80 400 324 89 553 202 ---------------- ----------------- Expected credit loss allowance (see (187 400) - e.1 below) ---------------- ----------------- -------------- --------------- ---------------- ----------------- 80 212 924 89 553 202 ---------------- ----------------- ======== ======== ---------------- ----------------- e.1 Interbank Placement 30 June 2018 31 December 2017 US$ US$ -------------- ----------------- Interbank Placements 28 000 000 3 000 000 -------------- ----------------- Expected credit loss allowance (187 400) - -------------- ----------------- -ECL at 1 January 2018 (26 771) - -------------- ----------------- -ECL charged through profit or loss (160 629) - -------------- ----------------- ------------- ------------ -------------- ----------------- 27 812 600 3 000 000 -------------- ----------------- ======== ======= -------------- ----------------- f. INVESTMENT PROPERTIES 30 June 2018 31 December 2017 US$ US$ --------------- ----------------- Opening balance 18 977 000 14 202 270 --------------- ----------------- Additions 3 897 104 4 792 475 --------------- ----------------- Fair value adjustments - 302 255 --------------- ----------------- Disposals (4 145 741) (320 000) --------------- ----------------- -------------- --------------- --------------- ----------------- Closing balance 18 728 363 18 977 000 --------------- ----------------- ========= =========
--------------- -----------------
Investment properties comprise commercial and residential properties that are leased out to third parties and land held for future development. No properties were encumbered.
Rental income amounting to US$192 820 (2017 - US$68 954) was received and no operating expenses were incurred on the investment properties in the current year due to the net leasing arrangement on the properties.
Included in investment properties are properties measured at US$5 701 106 as at 30 June 2018 which were acquired as part of the foreclosure process with marketability restrictions. The Bank has no restrictions on the realisability of all the remaining investment properties and no contractual obligations to purchase, construct or develop the investment properties or for repairs, maintenance and enhancements.
f. INVESTMENT PROPERTIES
Measurement of fair value
The fair value of the Bank's investment properties as at 31 December 2017 was arrived at on the basis of valuations carried out by independent professional valuers, PMA Real Estate (Private) Limited. The valuation which conforms to International Valuation Standards, was in terms of the policy as set out in the accounting policies section and was derived with reference to market information close to the date of the valuation.
As there were no professional valuations done as at 30 June 2018, the investment properties are recorded at the fair values as obtained by the professional valuers as at 31 December 2017.
Fair value hierarchy
Level 2
The fair value for investment properties of US$13 027 257 has been categorised under Level 2 in fair value hierarchy based on the inputs used for the valuation technique highlighted above.
The following table shows the reconciliation between the opening and closing balances for Level 2 fair values:
30 June 2018 31 December 2017 US$ US$ ---------------- ----------------- At 1 January 8 722 000 7 382 270 ---------------- ----------------- Acquisitions 2 951 257 1 740 158 ---------------- ----------------- Transfer from level 3 1 354 000 - ---------------- ----------------- Disposals - (320 000) ---------------- ----------------- Fair value adjustments - (80 428) ---------------- ----------------- --------------- -------------- ---------------- ----------------- Balance at 31 December 13 027 257 8 722 000 ---------------- ----------------- ========= ======== ---------------- -----------------
Level 3
The fair value for investment properties of US$5 701 106 has been categorised under Level 3 in the fair value hierarchy based on the inputs used for the valuation technique highlighted above.
The following table shows the reconciliation between the opening and closing balances for Level 2 fair values:
30 June 31 December 2018 2017 US$ US$ At 1 January 10 255 000 6 820 000 --------------- -------------- Acquisitions 945 847 3 052 317 --------------- -------------- Transfer to level 2 (1 354 000) - --------------- -------------- Disposals (4 145 741) - --------------- -------------- Fair value adjustments - 382 683 --------------- -------------- -------------- ------------- --------------- -------------- Balance at 31 December 5 701 106 10 255 000 --------------- -------------- ======== ======== --------------- --------------
The values were arrived at by applying yield rates of 5% on rental values of between US$4 - US$7 per square metre. Some of the properties are leased out under operating lease to various tenants.
Valuation technique and significant unobservable inputs
The following table shows the valuation technique used in measuring the fair value of investment properties, as well as the significant unobservable inputs used.
Valuation Significant unobservable Inter-relationship between technique inputs key unobservable inputs and fair value measurement The The estimated fair value investment * Weighted average expected market rental growth (5%); would increase /(decrease) method if: Discounted * expected market rental growth were higher/ (lower); Cash Flows * Void period (average 3 months after the end of each was used to lease); value * void periods were shorter/(longer); all income producing * Occupancy rate (55%); and properties. * the occupancy rates were higher /(lower); and * Average market yield of 10%. * the risk adjusted discount rates were lower/ (higher). The direct comparison method was applied on all residential properties. ----------------------------------------------------------- ----------------------------------------------------------
g. NON-CURRENT ASSETS HELD FOR SALE
30 June 2018 31 December 2017 US$ US$ ---------------- ----------------- Carrying amount as at 1 January 36 000 2 261 300 ---------------- ----------------- Disposals - (2 225 300) ---------------- ----------------- --------------- -------------- ---------------- ----------------- 36 000 36 000 ---------------- ----------------- ========= ======== ---------------- -----------------
h. CORPORATE GOVERNANCE AND RISK MANAGEMENT
1. RESPONSIBILITY
These condensed financial statements are the responsibility of the directors. This responsibility includes the setting up of internal control and risk management processes, which are monitored independently. The information contained in these condensed financial statements has been prepared on the going concern basis and is in accordance with the provisions of the Companies Act (Chapter 24:03), the Banking Act (Chapter 24:20) and International Financial Reporting Standards.
2. CORPORATE GOVERNANCE
The Bank adheres to principles of corporate governance derived from the King III Report, the United Kingdom Combined Code and RBZ corporate governance guidelines. The Bank is cognisant of its duty to conduct business with due care and in good faith in order to safeguard all stakeholders' interests.
3. BOARD OF DIRECTORS
Board appointments are made to ensure a variety of skills and expertise on the Board. Non-executive directors are of such calibre as to provide independence to the Board. The Chairman of the Board is an independent non-executive director. The Board is supported by mandatory committees in executing its responsibilities. The Board meets at least quarterly to assess risk, review performance and provide guidance to management on both operational and policy issues.
The Board conducts an annual peer based evaluation on the effectiveness of its activities. The process involves the members evaluating each other collectively as a board and individually as members. The evaluation, as prescribed by the RBZ, takes into account the structure of the board, effectiveness of committees, strategic leadership, corporate social responsibility, attendance and participation of members and weaknesses noted. Remedial plans are invoked to address identified weaknesses with a view to continually improve the performance and effectiveness of the Board and its members.
3.1 Directors' attendance at NMB Bank Limited Board meetings Board of Audit Risk Asset and Loans Human Credit Directors Committee Management Liability Review Resources, Committee Management Committee Remuneration Committee and
(ALCO) & Nominations Finance Committee Committee Mr. B. A. Chikwanha 2 2 2 2 2 2 2 2 ----- ----- --- -------- ---- -------- --- --------- ---- ------ ---- --------- --- -------- Mr. B. P. Washaya 2 2 2 2 2 2 2 2 ----- ----- --- -------- ---- -------- --- --------- ---- ------ ---- --------- --- -------- Mr. J. de la Fargue 2 2 2 2 2 2 2 2 2 2 ----- ----- --- -------- ---- -------- --- --------- ---- ------ ---- --------- --- -------- Mr. C. Chikaura 2 2 2 2 2 2 2 2 2 2 2 2 ----- ----- --- -------- ---- -------- --- --------- ---- ------ ---- --------- --- -------- Mr. J. Tichelaar 2 2 2 2 2 2 2 2 ----- ----- --- -------- ---- -------- --- --------- ---- ------ ---- --------- --- -------- Mr. B. Ndachena 2 2 2 2 ----- ----- --- -------- ---- -------- --- --------- ---- ------ ---- --------- --- -------- Ms. S. Chitehwe 2 2 2 2 2 2 2 2 ----- ----- --- -------- ---- -------- --- --------- ---- ------ ---- --------- --- -------- Mr. E. Sandersen 2 2 2 2 2 2 2 2 ----- ----- --- -------- ---- -------- --- --------- ---- ------ ---- --------- --- -------- Ms. J. Maguranyanga 2 2 2 2 2 2 2 2 ----- ----- --- -------- ---- -------- --- --------- ---- ------ ---- --------- --- -------- Meetings planned Meetings attended 4. RISK MANAGEMENT
The Board of Directors has overall responsibility for the establishment and oversight of the Bank's risk management framework. The Board has established the Board Asset and Liability Management Committee (ALCO) and Board Risk and Compliance Committee, which are responsible for defining the Group's risk universe, developing policies and monitoring implementation.
Risk management is linked logically from the level of individual transactions to the Bank level. Risk management activities broadly take place simultaneously at the following different hierarchy levels:
a) Strategic Level: This involves risk management functions performed by senior management and the board of directors. It includes the definition of risk, ascertaining the Bank's risk appetite, formulating strategy and policy for managing risk and establishes adequate systems and controls to ensure overall risk remains within acceptable levels and is adequately compensated.
b) Macro Level: It encompasses risk management within a business area or across business lines. These risk management functions are performed by middle management.
c) Micro Level: This involves "On-the-line" risk management where risks are actually created. These are the risk management activities performed by individuals who assume risk on behalf of the organization such as Treasury Front Office, Corporate Banking, Retail banking etc. The risk management in these areas is confined to operational procedures set by management.
Risk management is premised on four (4) mutually reinforcing pillars, namely:
a) adequate board and senior management oversight; b) adequate strategy, policies, procedures and limits; c) adequate risk identification, measurement, monitoring and information systems; and d) comprehensive internal controls and independent reviews. 4.1 Credit risk
Credit risk is the risk that a financial contract will not be honoured according to the original set of terms. The risk arises when borrowers or counterparties to a financial instrument fail to meet their contractual obligations. The Bank's general credit strategies centre on sound credit granting process, diligent credit monitoring and strong loan collection and recovery. There is a separation between loan collection and recovery. There is a separation between loan granting and credit monitoring to ensure independence and effective management of the loan portfolio. The Board has put in place sanctioning committees with specific credit approval limits. The Credit Management department does the initial review of all applications before recommending them to the Executive Credit Committee and finally the Board Credit Committee depending on the loan amount. The Bank has in place a Board Loans Review Committee responsible for reviewing the quality of the loan book and adequacy or loan loss provisions.
The Bank has automated credit processes from loan origination, appraisal, monitoring and collections. The system has a robust loan monitoring and reporting module which is critical in managing credit risk. In view of the Bank's move into the mass market, retail credit has become a key area of focus. The Bank has put in place robust personal loan monitoring systems and structures to mitigate retail loan delinquencies.
4.1 Credit Management -- Responsible for evaluating & approving credit proposals from the business units.
-- Together with business units, has primary responsibility on the quality of the loan book.
-- Reviewing credit policy for approval by the Board Credit Committee.
-- Reviewing business unit level credit portfolios to ascertain changes in the credit quality of individual customers or other counterparties as well as the overall portfolio and detect unusual developments.
-- Approve initial customer internal credit grades or recommend to the Credit Committees for approval.
-- Setting the credit risk appetite parameters. -- Ensure the Bank adheres to limits, mandates and its credit policy.
-- Ensure adherence to facility covenants and conditions of sanction e.g. annual audits, gearing levels, management accounts.
-- Manage trends in asset and portfolio composition, quality and growth and non-performing loans.
-- Manage concentration risk both in terms of single borrowers or Bank as well as sector concentrations and the review of such limits.
Credit Monitoring and Financial Modelling
-- Independent Credit Risk Management. -- Independent on-going monitoring of individual credit and portfolios.
-- Triggers remedial actions to protect the interests of the Bank, if appropriate (e.g. in relation to deteriorated credits).
-- Monitors the on-going development and enhancement of credit risk management across the Bank.
-- Reviews the Internal Credit Rating System. -- On-going championing of the Basel II methodologies across the Bank.
-- Ensures consistency in the rating processes and performs independent review of credit grades to ensure they conform to the rating standards.
-- Confirm the appropriateness of the credit risk strategy and policy or recommends necessary revisions in response to changes/trends identified.
Credit Administration
-- Prepares and keeps custody of all facility letters. -- Security registration. -- Safe custody of security documents.
-- Ensures all conditions of sanction are fulfilled before allowing drawdown or limit marking.
-- Review of credit files for documentation compliance e.g. call reports, management accounts.
Recoveries
The recoveries unit is responsible for all collections and ensures that the Bank maximizes recoveries from Non-Performing Loans (NPLs).
4.2 Market risk
This is the exposure of the Bank's on and off balance sheet positions to adverse movement in market prices resulting in a loss in earnings and capital. The market prices will range from money market (interest rate risk), foreign exchange and equity markets in which the bank operates. The Bank has in place a Management Asset and Liability Committee (ALCO) which monitors market risk and recommends the appropriate levels to which the Bank should be exposed at any time. Net Interest Margin is the primary measure of interest rate risk, supported by periodic stress tests to assess the Bank's ability to withstand stressed market conditions. On foreign exchange risk, the bank monitors currency mismatches and makes adjustments depending on exchange rate movement forecast. The mismatches per currency are contained within 5% of the Bank's capital position.
ALCO meets on a monthly basis and operates within the prudential guidelines and policies established by the Board ALCO. The Board ALCO is responsible for setting exposure thresholds and limits, and meets on a quarterly basis.
4.3 Liquidity risk
Liquidity risk is the risk of financial loss arising from the inability of the Bank to fund asset increases or meet obligations as they fall due without incurring unacceptable costs or losses. The Bank identifies this risk through maturity profiling of assets and liabilities and assessment of expected cash flows and the availability of collateral which could be used if additional funding is required.
The daily liquidity position is monitored and regular liquidity stress testing is conducted under a variety of scenarios covering both normal and more severe market conditions. All liquidity policies and procedures are subject to review and approval by the Board ALCO.
The key measure used by the bank for managing liquidity risk is the ratio of net liquid assets to deposits to customers. The Bank also actively monitors its loans to deposit ratio against a set threshold in a bid to monitor and limit funding risk. The Bank monitors funding concentration risk by reviewing the ratio of top 20 depositors to the total funding. Funding mix is also monitored by monitoring the contribution of wholesale and demand deposits to the total funding for the bank. Liquidity risk is monitored through a daily liquidity meeting. This is augmented by a monthly management ALCO and a quarterly board ALCO.
The key measure used by the Bank for managing liquidity risk is the ratio of net liquid assets to deposits from customers. The Bank monitors its liquidity ratio in compliance with Banking Regulations to ensure that it is not less than 30% of the liabilities to the public. Liquid assets consist of cash and cash equivalents, short term bank deposits and unencumbered liquid investment securities available for immediate sale.
4.4 Operational risk
This risk is inherent in all business activities and is the risk of loss arising from inadequate or failed internal processes, people, systems or from external events. The Bank utilises monthly Key Risk Indicators to monitor operational risk in all units. Further to this, the Bank has an elaborate Operational Loss reporting system in which all incidents with a material impact on the well-being of the Bank are reported to risk management. The risk department conducts periodic risk assessments on all the units within the Bank aimed at identifying the top risks and ways to minimise their impact. There is a Board Risk and Compliance Committee whose function is to ensure that this risk is minimized. The Committee, with the assistance of the internal audit function and the Risk Management department assesses the adequacy of the internal controls and makes the necessary recommendations to the Board.
4.5 Legal and compliance risk
Legal risk is risk from uncertainty due to legal actions or uncertainty in the applicability or interpretation of contracts, laws or regulations. Legal risk may entail such issues as contract formation, capacity and contract frustration. Compliance risk is the risk arising from non - compliance with laws and regulations. To manage this risk, permanent relationships are maintained with firms of legal practitioners and access to legal advice is readily available to all departments. The Bank has an independent compliance function which is responsible for identifying and monitoring all compliance issues and ensures the Bank complies with all regulatory and statutory requirements.
4.6 Reputational risk
Reputation risk is the risk of loss of business as a result of negative publicity or negative perceptions by the market with regards to the way the Bank conducts its business. To manage this risk, the Bank strictly monitors customers' complaints, continuously train staff at all levels, conducts market surveys and periodic reviews of business practices through its Internal Audit department. The directors are satisfied with the risk management processes in the Bank as these have contributed to the minimisation of losses arising from risky exposures.
4.7 Strategic risk
This refers to current and prospective impact on a Bank's earnings and capital arising from adverse business decisions or implementing strategies that are not consistent with the internal and external environment. To manage this risk, the Bank always has a strategic plan that is adopted by the Board of Directors. Further, attainment of strategic objectives by the various departments is monitored periodically at management level.
4.8 Risk Ratings 4.8.1 Reserve Bank of Zimbabwe Ratings
The Reserve Bank of Zimbabwe conducted an onsite inspection on the Bank in the last quarter of 2016 and detailed below were the final ratings.
4.8.1.1 CAMELS* Ratings
Latest RBS** Latest RBS Previous CAMELS Component Ratings Ratings RAS Ratings 24/11/2016 30/06/2013 31/01/2008 Capital Adequacy 2 2 4 ------------- ------------ ------------- Asset Quality 3 4 2 ------------- ------------ ------------- Management 3 3 3 ------------- ------------ ------------- Earnings 2 2 3 ------------- ------------ ------------- Liquidity 3 2 3 ------------- ------------ ------------- Sensitivity to Market Risk 2 2 3 ------------- ------------ ------------- Composite Rating 3 3 3 ------------- ------------ -------------
*CAMELS is an acronym for Capital Adequacy, Asset quality, Management, Earnings, Liquidity and Sensitivity to Market Risk. CAMELS rating system uses a rating scale of 1-5, where '1' is Strong, '2' is Satisfactory, '3' is Fair, '4' is Weak and '5' is Critical.
**RBS stands for Risk-Based Supervision
4.8.1.2 Summary RAS ratings
Latest RAS*** Latest RAS Previous RBS RAS Component Ratings Ratings Ratings 24/11/2016 30/06/2013 31/01/2008 Overall Inherent High Moderate Moderate Risk -------------- ------------ ------------- Overall Risk Management Acceptable Acceptable Acceptable Systems -------------- ------------ ------------- Overall Composite Moderate Moderate Moderate Risk -------------- ------------ ------------- Direction of Overall Stable Stable Stable Composite Risk -------------- ------------ -------------
*** RAS stands for Risk Assessment System
4.8.1.3 Summary risk matrix -24 November 2016 on - site examination
Level of Adequacy of Overall Direction Type of Risk Inherent Risk Management Composite of Overall Risk Systems Risk Composite Risk Credit High Acceptable High Stable ---------- ----------------- ----------- ------------ Liquidity High Acceptable High Stable ---------- ----------------- ----------- ------------ Interest Rate Moderate Acceptable Moderate Stable ---------- ----------------- ----------- ------------ Foreign Exchange Low Acceptable Low Stable ---------- ----------------- ----------- ------------ Operational Moderate Acceptable Moderate Stable Risk ---------- ----------------- ----------- ------------ Legal & Compliance Moderate Acceptable Moderate Stable ---------- ----------------- ----------- ------------ Reputation Moderate Acceptable Moderate Stable ---------- ----------------- ----------- ------------ Strategic Risk High Acceptable Moderate Stable ---------- ----------------- ----------- ------------ Overall Moderate Acceptable Moderate Stable ---------- ----------------- ----------- ------------
KEY
Level of Inherent Risk
Low - reflects a lower than average probability of an adverse impact on a banking institution's capital and earnings. Losses in a functional area with low inherent risk would have little negative impact on the banking institution's overall financial condition.
Moderate - could reasonably be expected to result in a loss which could be absorbed by a banking institution in the normal course of business.
High - reflects a higher than average probability of potential loss. High inherent risk could reasonably be expected to result in a significant and harmful loss to the banking institution.
Adequacy of Risk Management Systems
Weak - risk management systems are inadequate or inappropriate given the size, complexity and risk profile of the banking institution. Institution's risk management systems are lacking in important ways and therefore a cause of more than normal supervisory attention. The internal control systems will be lacking in important aspects particularly as indicated by continued control exceptions or by the failure to adhere to written policies and procedures.
Acceptable - management of risk is largely effective but lacking to some modest degree. While the institution might be having some minor risk management weaknesses, these have been recognized and are being addressed. Management information systems are generally adequate.
Strong - management effectively identifies and controls all types of risk posed by the relevant functional areas or per inherent risk. The board and senior management are active participants in managing risk and ensure appropriate policies and limits are put in place. The policies comprehensively define the bank's risk tolerance, responsibilities and accountabilities are effectively communicated.
Overall Composite Risk
Low - would be assigned to low inherent risk areas. Moderate risk areas may be assigned a low composite risk where internal controls and risk management systems are strong and effectively mitigate much of the risk.
Moderate - risk management systems appropriately mitigates inherent risk. For a given low risk area, significant weaknesses in the risk management systems may result in a moderate composite risk assessment. On the other hand, a strong risk management system may reduce the risk so that any potential financial loss from the activity would have only a moderate negative impact on the financial condition of the organization.
High - risk management systems do not significantly mitigate the high inherent risk. Thus, the activity could potentially result in a financial loss that would have a significant impact on the bank's overall condition.
Direction of Overall Composite Risk
Increasing - based on the current information, risk is expected to increase in the next 12 months.
Decreasing - based on current information, risk is expected to decrease in the next 12 months.
Stable - based on the current information, risk is expected to be stable in the next 12 months.
4.8.2 External Credit Ratings
The external credit ratings were given by Global Credit Rating (GCR), a credit rating agency accredited with the Reserve Bank of Zimbabwe.
Security class 2017 2016
Long term BB+ BB+
The current rating expires in August 2018.
4.9 Regulatory Compliance
There were no instances of regulatory non-compliance in the period under review. The Bank remains committed to complying with and adhering to all regulatory requirements.
5. CAPITAL MANAGEMENT
The primary objective of the Bank's capital management is to ensure that the Bank complies with the RBZ requirements. In implementing the current capital requirements, the RBZ requires the Banking subsidiary to maintain a prescribed ratio of total capital to total risk weighted assets.
Regulatory capital consists of Tier 1 capital, which comprises share capital, share premium, retained earnings (including current year profit), statutory reserve and other equity reserves.
The other component of regulatory capital is Tier 2 capital, which includes subordinated term debt, revaluation reserves and portfolio provisions.
Tier 3 capital relates to an allocation of capital to market and operational risk.
Various limits are applied to elements of the capital base. The core capital (Tier 1) shall comprise not less than 50% of the capital base and the regulatory reserves and portfolio provisions are limited to 1.25% of total risk weighted assets.
The Bank's regulatory capital position at 30 June 2018 was as follows:
30 June 31 December 2018 2017 US$ US$ --------------- ---------------- Share capital 16 506 16 506 --------------- ---------------- 31 474 Share premium 502 31 474 502 --------------- ---------------- 35 132 Retained earnings 312 30 842 252 --------------- ---------------- Fair value gain on investment properties (706 195) (1 197 871) --------------- ---------------- -------------- ------------- --------------- ---------------- 65 917 Total 125 61 135 389 --------------- ---------------- Less: capital allocated for market and operational (3 913 risk 116) (2 918 935) --------------- ---------------- Credit to insiders - - --------------- ---------------- -------------- -------------- --------------- ---------------- 62 004 Tier 1 capital 009 58 216 454 --------------- ---------------- Tier capital (subject to limit as per Banking regulations) 5 180 970 5 183 773 --------------- ---------------- Revaluation Reserve - Investment property 706 195 1 197 871 --------------- ---------------- Revaluation Reserve - Property and equipment 90 310 90 310 --------------- ---------------- Subordinated debt 382 397 477 782 --------------- ---------------- Regulatory reserve (limited to 1.25% of risk weighed assets) - 2 297 492 --------------- ---------------- Stage 1& 2 ECL provisions (limited to 1.25% 4 002 068 - of risk weighed assets) --------------- ---------------- General provisions (limited to 1.25% of risk weighed assets) - 1 120 318 --------------- ---------------- -------------- --------------- --------------- ---------------- 67 184 Total Tier 1 & 2 capital 979 63 400 227 --------------- ---------------- Tier 3 capital (sum of market and operational risk capital) 3 913 116 2 918 935 --------------- ---------------- -------------- ------------- --------------- ---------------- 71 098 Total capital base 095 66 319 162 --------------- ---------------- ======== ========= --------------- ---------------- 320 165 273 424 Total risk weighted assets 461 840 --------------- ---------------- ======== ========= --------------- ---------------- Tier 1 ratio 19.37% 21.29% --------------- ---------------- Tier 2 ratio 1.62% 1.90% --------------- ---------------- Tier 3 ratio 1.22% 1.07% --------------- ---------------- Total capital adequacy ratio 22.21% 24.26% --------------- ---------------- RBZ minimum required capital adequacy ratio 12.00% 12.00% --------------- ---------------- 7. SEGMENT INFORMATION
For management purposes, the Bank is organised into five operating segments based on products and services as follows:
Retail Banking Individual customer's deposits and consumer overdrafts, credit card facilities and funds transfer facilities. Corporate Banking Loans and other credit facilities and deposit and current accounts for corporate and institutional customers. Treasury Money market investment, securities trading, accepting and discounting of instruments and foreign currency trading. International Banking Handles the Bank's foreign currency denominated banking business and manages relationships with correspondent. Digital Banking Handles the Bank's Digital Banking products including Card and POS services.
Management monitors the operating results of its business units separately for the purpose of making decisions about resource allocation and performance assessment. Segment performance is evaluated based on operating profit or loss which in certain respects is measured differently from operating profit or loss in the financial statements. Income taxes are managed on a bank wide basis and are not allocated to operating segments.
Interest income is reported net as management primarily relies on net interest revenue as a performance measure, not the gross income and expense.
Transfer prices between operating segments are on arm's length basis in a manner similar to transactions with third parties.
No revenue from transactions with a single external customer or counterparty amounted to 10% or more of the Bank's total revenue in 2018 and 2017.
The following table presents income, profit and certain asset and liability information regarding the Bank's operating segments and service units:
For the six months ended 30 June 2018
Retail Corporate International Digital Banking Banking Treasury Banking Banking Unallocated Total --------------- ------------- ------------- -------------- -------------- ------------------- ---------------- US$ US$ US$ US$ US$ US$ US$ --------------- ------------- ------------- -------------- -------------- ------------------- ---------------- Income --------------- ------------- ------------- -------------- -------------- ------------------- ---------------- 11 042 Third party 858 8 951 893 5 905 068 232 241 6 313 881 1 503 324 33 949 265 --------------- ------------- ------------- -------------- -------------- ------------------- ---------------- Interest and similar (1 953 expense (728 955) (1 252 450) 263) - - - (3 934 668) --------------- ------------- ------------- -------------- -------------- ------------------- ---------------- ------------- ------------ ------------ ------------ ------------- ------------- --------------- --------------- ------------- ------------- -------------- -------------- ------------------- ---------------- Net operating 10 313 income 903 7 699 443 3 951 805 232 241 6 313 881 1 503 324 30 014 597 --------------- ------------- ------------- -------------- -------------- ------------------- ---------------- ------------- ------------ ------------ ------------ ------------- ------------- -------------- --------------- ------------- ------------- -------------- -------------- ------------------- ---------------- Other material non-cash items --------------- ------------- ------------- -------------- -------------- ------------------- ---------------- Impairment losses on financial assets 393 553 850 930 176 595 - - - 1 421 078 --------------- ------------- ------------- -------------- -------------- ------------------- ---------------- Depreciation of property and equipment 204 418 14 666 1 756 2 620 179 170 226 597 629 227 --------------- ------------- ------------- -------------- -------------- ------------------- ---------------- Amortisation of intangible assets - - - - - 471 721 471 720 --------------- ------------- ------------- -------------- -------------- ------------------- ---------------- Segment profit (loss) 2 670 536 2 665 999 2 107 650 134 148 2 698 728 1 503 324 11 780 385 --------------- ------------- ------------- -------------- -------------- ------------------- ---------------- Income tax expense - - - - - (2 672 422) (2 672 422) --------------- ------------- ------------- -------------- -------------- ------------------- ---------------- -------------- ------------ ------------ ------------ ------------ -------------- ------------ --------------- ------------- ------------- -------------- -------------- ------------------- ---------------- Profit/(loss) for the year 2 670 536 3 289 764 2 107 650 (489 617) 2 698 728 (1 169 098) 9 107 963 --------------- ------------- ------------- -------------- -------------- ------------------- ---------------- ======== ======= ======= ======= ======= ======== ======= --------------- ------------- ------------- -------------- -------------- ------------------- ----------------
The following table presents income, profit and certain asset and liability information regarding the Bank's operating segments and service units:
For the six months ended 30 June 2018
Retail Corporate International Digital Banking Banking Treasury Banking Banking Unallocated Total ------------ ------------ ------------ -------------- --------------------- ------------ ---------- US$ US$ US$ US$ US$ US$ US$ ------------ ------------ ------------ -------------- --------------------- ------------ ---------- Assets and Liabilities ------------ ------------ ------------ -------------- --------------------- ------------ ---------- Capital expenditure 162 917 98 427 - - 302 422 2 857 371 3 421 137 ------------ ------------ ------------ -------------- --------------------- ------------ ---------- 442 146 Total assets 78 869 755 120 258 765 141 925 000 2 015 747 2 184 872 96 892 511 650 ------------ ------------ ------------ -------------- --------------------- ------------ ---------- Total 375 433 liabilities 119 707 909 137 685 538 95 375 380 14 003 048 - 8 661 145 020 ------------ ------------ ------------ -------------- --------------------- ------------ ----------
The following table presents income, profit and certain asset and liability information regarding the Bank's operating segments and service units:
For the six months ended 30 June 2017
Retail Corporate International Banking Banking Treasury Banking Unallocated Total --------------- ------------- ------------- -------------- ---------------- ----------------- US$ US$ US$ US$ US$ US$ --------------- ------------- ------------- -------------- ---------------- ----------------- Income --------------- ------------- ------------- -------------- ---------------- ----------------- Third party 13 649 826 6 423 079 3 323 829 278 173 213 389 23 888 296 --------------- ------------- ------------- -------------- ---------------- ----------------- Interest and similar expense (994 627) (1 380 011) (2 188 842) - - (4 563 480)
--------------- ------------- ------------- -------------- ---------------- ----------------- ------------ ------------ ------------ ------------ ------------- ---------------- --------------- ------------- ------------- -------------- ---------------- ----------------- Net operating income 12 655 199 5 043 068 1 134 987 278 173 213 389 19 324 816 --------------- ------------- ------------- -------------- ---------------- ----------------- ------------ ------------ ------------ ------------ ------------- -------------- --------------- ------------- ------------- -------------- ---------------- ----------------- Other material non-cash items --------------- ------------- ------------- -------------- ---------------- ----------------- Impairment losses on financial investments 386 633 491 671 - - - 878 304 --------------- ------------- ------------- -------------- ---------------- ----------------- Depreciation of property and equipment 484 699 8 140 7 074 3 029 57 187 560 129 --------------- ------------- ------------- -------------- ---------------- ----------------- Amortisation of intangible assets - - - - 352 162 352 162 --------------- ------------- ------------- -------------- ---------------- ----------------- ------------- ------------ ------------ ------------ ------------- ------------- --------------- ------------- ------------- -------------- ---------------- ----------------- Segment profit/ (loss) 2 064 734 1 687 824 1 142 198 (288 946) 213 390 4 819 200 --------------- ------------- ------------- -------------- ---------------- ----------------- Income tax expense - - - - (1 280 332) (1 280 332) --------------- ------------- ------------- -------------- ---------------- ----------------- -------------- ------------ ------------ ------------- ------------ ------------ --------------- ------------- ------------- -------------- ---------------- ----------------- Profit for the year 2 064 734 1 687 824 1 142 198 (288 946) (1 066 942) 3 538 868 --------------- ------------- ------------- -------------- ---------------- ----------------- ======= ======= ======= ======= ======= ======= --------------- ------------- ------------- -------------- ---------------- -----------------
The following table presents income, profit and certain asset and liability information regarding the Bank's operating segments and service units:
Retail Corporate International Banking Banking Treasury Banking Unallocated Total ------------ ------------ ------------ -------------- ------------ ---------- As at 31 December US$ US$ US$ US$ US$ US$ 2017 ------------ ------------ ------------ -------------- ------------ ---------- Assets and Liabilities ------------ ------------ ------------ -------------- ------------ ---------- Capital expenditure 1 386 270 2 388 1 958 2 873 2 211 157 3 604 646 ------------ ------------ ------------ -------------- ------------ ---------- 423 114 Total assets 108 656 867 152 311 200 118 870 271 3 612 619 39 663 481 438 ------------ ------------ ------------ -------------- ------------ ---------- 358 393 Total liabilities 109 755 085 128 928 542 96 952 318 15 052 401 7 705 030 376 ------------ ------------ ------------ -------------- ------------ ---------- 8. GEOGRAPHICAL INFORMATION
The Bank operates in one geographical market, Zimbabwe.
Registered Offices
4(th) Floor NMB Centre
Unity Court George Silundika Avenue/
Cnr 1(st) Street/Kwame Nkrumah Avenue Leopold Takawira Street
Harare Bulawayo
Zimbabwe Zimbabwe Telephone +263 (024) 2 759651 +263 (029) 22 70169 Facsimile +263 (024) 2 759648 +263 (029) 22 68535 Website: http://www.nmbz.co.zw Email: enquiries@nmbz.co.zw
Transfer Secretaries
In Zimbabwe In UK
First Transfer Secretaries Computershare Services PLC
1 Armagh Avenue The Pavilions (Off Enterprise Road) Bridgewater Road Eastlea Bristol P O Box 11 BS 999 ZZ
Harare United Kingdom
Zimbabwe
This information is provided by RNS, the news service of the London Stock Exchange. RNS is approved by the Financial Conduct Authority to act as a Primary Information Provider in the United Kingdom. Terms and conditions relating to the use and distribution of this information may apply. For further information, please contact rns@lseg.com or visit www.rns.com.
END
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