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Barclays Bank of Zimbabwe HY 2014 financial results

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Barclays Bank of Zimbabwe listed on the Zimbabwe Stock Exchange has released its half year results. Check out insights into this company in their presentation which appears below. …

Barclays Bank of Zimbabwe listed on the Zimbabwe Stock Exchange has released its half year results. Check out insights into this company in their presentation which appears below.
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  • 1. Unaudited Financial Results for the half year ended 30 June 2014 1 Chairman’s Statement Managing Director’s Statement At Barclays, helping our customers respond to various challenges and opportunities presented in the economy is a key part of our journey to become the ‘Go-To’ Bank. We are determined to ensure that we effectively partner our clients through the development of products and services that help our customers achieve their ambitions, in the right way. The execution and delivery of our commitments to our stakeholders, in the right way, remains the foundation of our value system at Barclays. We believe that our focus on excellence will provide customers with a ‘Go-To’ bank that can assist them to prosper. With the sustained growth of our business within the current environment, our customers and clients remain at the centre of what we do. The period under review was characterised by increased loan facilities, continued new product development, and a robust citizenship agenda. Financial Performance The profit after tax of $1.7m was achieved compared to $0.8m from the previous period resulting from pre-tax profit growth of 126% year on year. This performance was premised on income growth of 9%. This is against the backdrop of interest yields trending down and transaction activity being subdued. Cost increases were contained within 2% benefitting from continued focus on cost efficiency initiatives. Our loan book grew by 14% year on year as we extended facilities to businesses and individuals across most sectors of the economy. The 4% decline from December 2013 levels reflects some seasonal trend on facility utilisation by some of our customers. In growing the loans we have maintained our focus on a quality asset book as demonstrated by Impairment stock to Gross loans ratio of 2% and a loan loss ratio of 0.7% Deposits grew from same period last year by 3% to $238m in 2014 without significant change to the bank’s effective cost of funds. Compared to the December 2013, deposits came down by 4% largely reflecting the seasonal nature of part of the deposit base. Market deposits have grown marginally over the same period. Meeting Customer and Client Expectation The increase in emerging technologies continues to transform our environment and influence the needs of our customers. As we strive to partner our customers and clients in their endeavours to prosper, we will ensure that we continue to nurture new products and services that meet the needs and expectations of our customers and continue to enhance customer experience. The launch of the Barclays Point of Sale (POS) acquiring has created an additional, safe and secure transactional channel for Barclays customers and non-customers. With a current installation of over 150 machines that accept Visa, MasterCard and Maestro cards all on one terminal, our POS machines become the preferred choice for retailers and businesses. 43% more customers downloaded the Barclays App (Application) which is available in the Apple iTunes Store and the Google Play Store, as compared to the same period last year. Our ATM money transfer product, CashSend grew by 8%, with customers sending higher value amounts through the channel as seen by the rise in purchased voucher values. Internet Banking rose by 169% buoyed by an increase in local transfer volumes. The take up of products under the bancassurance portfolio also increased by 160%. Realising Individual Potential Barclays Zimbabwe is focused on helping the next generation achieve their ambitions. The Barclays commitment is to touch the lives of 5 Million Young Futures across the globe over the period to 2015. We consider Zimbabwean youth and young adults to be our future colleagues, customers and clients. Through programmes focused on Enterprise, Employability and Financial skills, Barclays Zimbabwe is providing thousands of young adults with a platform to progress their goals, take their first steps towards building their own businesses, get jobs and become financially independent. Our countrywide network of colleagues, our skills and experience as a bank are being leveraged to achieve a positive impact beyond transactional financial contribution. Barclays Zimbabwe runs a holistic graduate attaché and graduate trainee programme that has seen significant investment being sustained. During the period under review, 39 young graduates have either been recruited or are currently on the programme through the graduate trainee programme and attachment opportunities. This brings the total number of graduate trainees and student attachés recruited since dollarization to 64. This is over and above the other joiners during the same period who also largely comprise university graduates. On- the-job training and development is a fundamental aspect within our investment in human capital. Our partnerships with UNICEF, BOOST Enactus and Junior Achievement Zimbabwe have directly impacted more than 110 000 young people in all provinces within Zimbabwe during the period under review. Our Drive Going Forward Whilst we remain focused on our strategy to deliver long term sustainable returns, we aim to make banking more convenient to our customers. This will show through initiatives being pursued into the second half to further enhance our e-channels and to sustain growth in loans. We will also continue to explore opportunities to become more efficient and to contain costs. We remain cognisant of the challenges in the environment and in all our endeavours we will adhere to best practice risk processes. My sincere appreciation to our valued stakeholders who continue to share our vision and contribute to the success of the Bank. G T Guvamatanga Managing Director 1 August 2014 2014 for Barclays Zimbabwe marks the 103rd year of operating in the country. For 23 of these years Barclays Zimbabwe has been listed on the Zimbabwe Stock Exchange after offering 30% of its equity to local shareholders. This makes the bank’s shares widely and publicly held. We continue to pride in this heritage and this inspires your Board and every colleague at the bank to live up to the bank’s Purpose - to help people achieve their ambitions in the right way. The bank’s performance for the first half of the year shows improvement trend over the same period last year. Growth momentum has however been slower relative to the position at 31 December 2013. Economic growth showed signs of slow down during the first half. The Ministry of Finance revised the projected 2014 GDP growth rate down to 3.1%. Exports continue to fall short of imports whilst Foreign Direct Investment levels are still to pick momentum. The need to address infrastructural deficits, to improve efficiencies across the various value chains in the economy and to promote local production is evident. It is also evident that the economy requires capital inflows, growth in exports and containment of the import bill to achieve desired levels of growth. Average monthly inflation over the first half was 0.08%. Inflation for traded goods has been trending down partly due to the effect of a weaker South African Rand but also due to stagnation in demand for certain goods. Inflation for non-traded goods like utilities has generally maintained a stable or upward trend. Analysts consider that interest rate ranges continued to narrow down partly reflecting a shift towards stronger quality lending in the market. Levels of non-performing loans went up to about 17% from about 15% as at December 2013 and this has generally made it more critical to focus on the quality of the loan portfolio and adhere to prudent risk practices. Customers and clients at the centre of what we do We continue to keep the customer at the centre of all our initiatives; and this is one of our values. We have prioritised the need to ensure that the bank is able to settle payment requests by customers on demand. Payment and service channels continue to be enhanced with the latest addition being a re-launch of the Point of Sale offering. The bank also seeks to promote e-channels already in place for better customer experience. Over the period, the loan product offering has been widened. The bank has also continued to facilitate significant lines of credit for customers. Barclays Zimbabwe as a member of the Barclays Bank Group will continue to seek to leverage global capabilities at its disposal for the advantage of its customers. Earnings performance The bank registered a profit after tax of $1.7 million dollars for the period. This result is a basic earnings per share of 0.08 cents for the period (2013 – 0.04 cents per share). This is a 106% growth in net profit compared to same period last year. Capital adequacy and liquidity The bank’s balance sheet continues to be sound. The bank meets the current minimum capital requirements and as at 30 June 2014, registered a total capital adequacy ratio of 17% ahead of the regulatory minimum of 12%. As required by the Reserve Bank of Zimbabwe, the bank submitted its proposals in respect of the minimum capital threshold of $100 million applicable from 2020. The liquidity ratio closed the period at 54%, ahead of the regulatory minimum of 30%. Global Credit Rating Company, issued its latest rating report on Barclays Bank of Zimbabwe in May 2014. The rating awarded is AA- on the long-term security class, with the rating outlook assessed as Stable. The bank’s liquidity management framework continues to be a high focus area for the Board under the current economic conditions. Governance and citizenship In addition to regular Board and Board Committee business, The Board conducted special business reviews over the period to ensure that its strategy remained on course. There were no changes to the Board during the period. The Bank continued its citizenship agenda with a thrust to empower youths and young adults through training and skills development programs under the themes of Enterprise, Employability and Financial Skills. This continues to be done through a number of programs and partnerships, which touch beneficiaries across all provinces of the country. In addition, every colleague at the bank is encouraged to be part of some volunteerism initiative. Going forward Your Bank continues plans to grow under a stable or improving economic landscape. We are encouraged by the reaffirmation by authorities that the multi-currency system will be sustained. We also trust that efforts underway to demonstrate policy clarity and consistency will be sustained in order to promote growth in long term investment by locals and foreigners alike. Dividend The bank is on a growth trajectory and seeks to continue to build momentum. This creates the need to increase the capital base in order to support further growth. Pursuant to this, the Bank does not propose a dividend for the period under review. A. S. Mandiwanza Chairman 1 August 2014
  • 2. Unaudited Financial Results for the half year ended 30 June 2014 2 The Board of Directors remains committed to the establishment, monitoring and practice of the highest corporate governance standards in the operations of Barclays Bank of Zimbabwe Limited (the Bank). Among its top priorities is ensuring effective control and timely and accurate disclosure of material information about the Bank. Laws and regulatory guidelines and directives are observed and complied with without exception. The Bank subscribes to the principles of international best practice as guided by, among others, local regulatory and the Barclays Group Corporate Governance guidelines. The Board of Directors is committed to the creation and sustenance of shareholder value and practices designed to ensure that the Bank’s conduct in all areas is beyond reproach. Main Board The Board of Directors is led by an independent non-executive Chairman, thereby ensuring effective and constructive checks and balances between executive management and the Board. The Directors held four Board meetings as at 30 June 2014 during which policies governing the Bank were discussed, among other things. Special focus was also given to the strategy of the Bank with 1 Board business review meeting having been held in the period under review. The Board comprises two executive directors and five independent non- executive directors. The Board has delegated some of its duties and responsibilities to sub-committees to ensure the efficient discharge of its mandate. The ultimate responsibility of running the Bank however still remains with the Board. The sub-committees of the Board are as detailed below. Audit Committee The primary functions of the Committee are to review the company’s accounting policies, the contents of the financial reports, disclosure controls and procedures, management’s approach to internal controls, the adequacy and scope of the external and internal audit functions, compliance with regulatory and financial reporting requirements, oversee the relationship with the company’s external auditors, as well as providing assurance to the Board that management’s control assurance processes are being implemented and are complete and effective. At each meeting, the Committee reviews reported and noted weaknesses in controls and any deficiencies in systems and the remediation plans to address them and mitigate enterprise risk. The Committee also monitors the ethical conduct of the Bank, its executives and senior officers and advises the Board as to whether or not the Bank is complying with the aims and objectives for which it has been established. During the period under review, there were no material losses as a result of internal control breakdowns. The committee wholly comprises independent non-executive directors. The members of the Committee as at 30 June 2014 were:- A. I. Lawson (Chairman) C. F. Dube E. Fundira Board Credit Committee The Board Credit Committee is tasked with the overall review of the Bank’s lending policies. At each meeting, the Committee deliberates and considers loan applications beyond the discretionary limits of management. It ensures that there are effective procedures and resources to identify and manage irregular or problem credit facilities, minimize credit loss and maximize recoveries. It also directs, monitors, reviews and considers all issues that may materially impact on the present and future quality of the Bank’s credit risk management. The Committee comprises one executive member and two independent non-executive directors. The members of the Committee as at 30 June 2014 were:- E. Fundira (Chairman) Prof. H. C. Sadza G. T. Guvamatanga Loans Review Committee This Committee has the overall responsibility for the review of the quality of the Bank’s loan portfolio to ensure that the lending function conforms to sound lending policies and keeps the Board and management adequately informed on noted risks. It assists the Board with discharging its responsibility to review the quality of the Bank’s loan portfolio. At every meeting, it reviews the quality of the loan portfolio with a view to ensuring compliance with the banking laws and regulations and all other applicable laws as well as internal policies. The Committee comprises two independent non-executive directors and one executive director. The members of the Committee as at 30 June 2014 were:- C.F. Dube (Chairman) A. I. Lawson S. Matsekete Human Resources and Nominations Committee The Human Resources and Nominations Committee assists the Board in the review of critical personnel issues as well as acting as a Remuneration and Terminal Benefits Committee. The Committee reviews and approves overall recommendations on employee remuneration as well as approving managerial appointments. The Committee ensures that the remuneration of directors is in line with the nature and size of the operations of the Bank as well as the Bank’s performance. In addition, the Committee also considers nominations to the Board and succession planning for the Board. The Committee comprises two independent non-executive directors and one executive director. The members of the Committee as at 30 June 2014 were:- Prof H.C. Sadza (Chairman) A. S. Mandiwanza G. T. Guvamatanga Executive Committee (EXCO) The Executive Committee is the operational management forum responsible for the delivery of the Bank’s operational plans. The Executive Committee acts as a link between the Board and management and is responsible for implementation of operational plans, annual budgeting and periodic review of strategic plans, as well as identification and management of key risks. The Executive Committee also reviews and approves guidelines for employee remuneration. The Executive Committee assists the Managing Director to manage the Bank, to guide and control the overall direction of the business of the Bank and acts as a medium of communication and co-ordination between business units and the Board. The Committee comprises executive directors and senior management. Assets and Liabilities/Treasury Committee The Treasury Committee is tasked with ensuring the achievement of sustainable and stable profits within a framework of acceptable financial risks and controls. The Treasury Committee ensures maximization of the value that can be generated from active management of the Bank’s balance sheet and financial risk within agreed risk parameters. It manages the funding and investment of the Bank’s balance sheet, liquidity and cash flow, as well as exposure of the Bank to interest rate, exchange rate, market and other related risks. It ensures that the Bank adopts the most appropriate strategy in terms of the mix of assets and liabilities given its expectation of the future and potential consequences of interest rate movements, liquidity constraints and foreign exchange exposure and capital adequacy. It also ensures that strategies conform to the Bank’s risk appetite and level of exposure as determined by the Risk Management Committee. The Committee comprises executive directors and heads of functions key to the proper discharge of the Committee’s responsibilities. Risk Management Committee (also known as Risk and Control Committee) This Committee ensures that the management and operation of the Bank’s business is done within the governance and control framework established by Barclays and other regulatory bodies. It determines and approves business level policies, ensuring alignment and consistency with the Barclays Group policies. It assists the Board of Directors in the discharge of its duties relating to corporate accountability and associated risks in terms of management, assurance and reporting. At every meeting, the Committee reviews internal audit reports and assesses the integrity of the risk control systems as well as ensuring that the risk policies and strategies are effectively managed. The Committee also monitors external developments relating to the practice of corporate accountability and reporting of specific associated risks, including emerging risks and their potential impact. The Committee comprises executive directors and management. Board Evaluation The Board conducts an annual peer based performance evaluation of the effectiveness of its operations. The process entails the members collectively evaluating the effectiveness of the Board as well as each other individually as the members. The evaluation considers specific criteria such as structure of the Board, effectiveness of committees, strategic leadership, corporate responsibility, attendance and participation of members and overall weaknesses noted. Action plans are put in place to address identified weaknesses with a view to continuously improving the performance of the Board and the individual members. The Board Evaluation for 2013 was conducted and concluded in the first quarter of 2014. The 2013 Board Evaluation exercise was facilitated by an external consultant and the outcome was shared with the Reserve Bank of Zimbabwe, per regulatory requirement, in March 2014. Directors Shareholding The following is a schedule of the directors’ shareholdings in the Bank as at 30 June 2014; A.S. Mandiwanza 5 117 C.F. Dube Nil Prof. H.C. Sadza Nil E. Fundira 2 130 G. T. Guvamatanga Nil S. Matsekete 10 000 A.I. Lawson 15 542 Interim Financial Statements The Directors are responsible for the preparation and integrity of the financial statements and related financial information contained in this report. The unaudited financial results have been prepared in accordance with IAS 34 and in a manner required by the Zimbabwe Companies Act (Chapter 24:03), the relevant statutory instrument (“SI”) SI 33/99 and SI 62/96 and the Zimbabwe Banking Act, (Chapter 24:20). Board and Committees Attendance: Half Year 2014 Main Board Name Total Meetings Total Present Total Absent A. S. Mandiwanza 4 4 Nil C. F. Dube 4 3 1 Prof. H. C. Sadza 4 3 1 E. Fundira 4 4 Nil G. T. Guvamatanga 4 4 Nil A. I. Lawson 4 4 Nil S. Matsekete 4 4 Nil Audit Committee Name Total Meetings Total Present Total Absent A. I. Lawson 4 4 Nil E. Fundira 4 3 1 C. F. Dube 4 4 Nil Human Resources & Nominations Committee Name Total Meetings Total Present Total Absent Prof. H.C. Sadza 2 2 Nil A.S. Mandiwanza 2 2 Nil G. T. Guvamatanga 2 2 Nil Credit Committee Name Total Meetings Meetings supposed to attend Total Present Total Absent E. Fundira 8 7 7 Nil Prof. H.C. Sadza 8 8 6 2 G. T. Guvamatanga 8 8 8 Nil Loans Review Committee Name Total Meetings Total Present Total Absent C. F. Dube 2 2 Nil A. I. Lawson 2 2 Nil S. Matsekete 2 2 Nil By Order of the Board W. Chimwaradze Company Secretary 1 August 2014 Corporate Governance Statement
  • 3. Unaudited Financial Results for the half year ended 30 June 2014 3 Statement of Financial Position as at 30 June 2014 Note 30.06. 2014 30.06. 2013 31.12. 2013 US$ US$ US$ Assets Cash and bank balances 3 106,671,433 130,449,635 130,533,824 Loans and advances to banks 4 204,122 160,998 103,623 Loans and advances to customers 5 111,009,124 97,471,468 115,328,746 Derivative assets 82,642 83,706 132,326 Investment securities 6 31,409,000 13,112,349 10,572,503 Other assets 8 6,893,915 6,190,052 9,629,424 Current income tax asset - 244,358 49,881 Investment property 9 5,690,000 5,670,000 5,690,000 Investment in joint venture 10 15,385,190 15,101,127 15,279,225 Property and equipment 11 20,370,820 21,095,514 20,486,945 Total assets 297,716,246 289,579,207 307,806,497 Liabilities Derivative liabilities 40,104 81,660 83,770 Balances due to group companies 7 88,759 327,264 56,496 Deposits from banks 12 186,602 379,318 145,342 Deposits from customers 13 238,375,675 230,088,419 247,984,999 Other liabilities 16 6,459,634 6,649,231 8,534,339 Provisions 17 1,691,342 6,197,465 1,648,773 Current income tax liabilities 70,928 - - Deferred income tax liabilities 4,879,808 4,128,194 5,011,727 Total liabilities 251,792,852 247,851,551 263,465,446 Equity Share capital 18 215,306 215,306 215,306 Share premium 18 23,642,135 23,642,135 23,642,135 Other reserves 18 13,437,567 13,345,819 13,621,087 Retained earnings 8,628,386 4,524,396 6,862,523 Total equity 45,923,394 41,727,656 44,341,051 Total equity and liabilities 297,716,246 289,579,207 307,806,497 Statement of Profit & Loss and Other Comprehensive Income for the half year ended 30 June 2014 Note 30.06. 2014 30.06. 2013 31.12. 2013 US$ US$ US$ Interest income 19 7,485,263 7,017,549 15,023,266 Interest expense 19 (645,404) (1,247,297) (2,707,279) Net interest income 6,839,859 5,770,252 12,315,987 Impairment losses on loans and advances 24 (394,210) (223,441) (712,098) Net interest income after loan impairment charges 6,445,649 5,546,811 11,603,889 Non-funded income 20 14,435,642 13,639,091 27,191,767 Total Income 20,881,291 19,185,902 38,795,656 Operating expenses 21 (18,400,486) (18,146,360) (33,890,735) Operating profit 2,480,805 1,039,542 4,904,921 Share of profit of joint venture 105,964 101,127 279,225 Profit before income tax 2,586,769 1,140,669 5,184,146 Income tax charge 15 (849,470) (296,452) (2,232,115) Profit for the period 1,737,299 844,217 2,952,031 Other comprehensive income Items that are or may be reclassified into profit or loss Net change in fair value of available-for-sale financial assets (249,286) 478,986 1,167,711 Tax effect thereof 72,986 (144,657) (352,192) (176,300) 334,329 815,519 Items that may never be reclassified into profit or loss Revaluation of property - - - Tax effect thereof - - - Total other comprehensive income for the period, net of tax (176,300) 334,329 815,519 Total comprehensive income for the period 1,560,999 1,178,546 3,767,550 Basic earnings per share (US cents) 0.08 0.04 0.14 Diluted earnings per share (US cents) 0.08 0.04 0.14 Statement of Cash Flows for the half year ended 30 June 2014 Note 30.06.2014 30.06.2013 31.12.2013 US$ US$ US$ Cash flow from operating activities Profit before income tax 2,586,769 1,140,669 5,184,146 Adjustments for non-cash items: Impairment losses on loans and advances 394,210 223,441 712,098 Depreciation of property and equipment 11 1,001,474 1,072,774 2,202,511 Effect of fair value gain on investment property and share of profit of joint venture (105,964) (101,127) (299,225) Loss/Profit on disposal of property and equipment (41,852) 34,652 (5,373) Accrued interest (138,577) (154,958) - Staff loan prepayment amortisation 4,676 (5,403) (17,033) Medical aid accrual fund - 780,433 (1,082,000) Share based payment expense 21,343 32,310 56,701 Net derivative assets (42,538) (2,046) (48,556) Cash flow from operating activities before changes in working capital 3,679,541 3,020,745 6,703,269 Decrease/(increase) in loans and advances to customers 4,068,665 (5,944,714) (24,279,019) Decrease/(increase) in other assets 2,735,509 (804,585) (4,243,957) (Decrease)/Increase in deposits from customers (9,609,324) 5,310,226 23,206,806 (Decrease)/Increase in other liabilities (2,032,136) 761,029 (296,857) Income taxes paid (787,594) (992,976) (2,058,166) Net cash (used)/generated from operating activities (1,945,339) 1,349,725 (967,924) Cash flow from investing activities Purchase of property and equipment 11 (889,486) (1,421,454) (1,975,104) Proceeds from sale of property and equipment 45,989 19,221 89,670 Proceeds from sale of investments - - 3,073,613 Net cash used in investing activities (843,497) (1,402,233) 1,188,179 Net increase/(decrease) in cash and cash equivalent (2,788,836) (52,508) 220,255 Cash and cash equivalents at the beginning of the period 130,435,609 130,221,673 130,221,673 Effect of exchange rate changes on cash and cash equivalents 39,204 (8,379) (6,319) Cash and cash equivalents at the end of the period 3.1 127,685,977 130,160,786 130,435,609 Statement of Changes in Equity for the half year ended 30 June 2014 Share capital Share premium Available- for-sale reserves Non- distributable reserves Property revaluation reserves General reserves Accumulated profits Share option reserves Total US$ US$ US$ US$ US$ US$ US$ US$ US$ Balance at 1 January 2013 215,306 23,642,135 996,896 7,796,469 3,205,952 343,951 3,517,975 809,929 40,528,613 Profit or loss Profit for the period - - - - - - 844,217 - 844,217 Other comprehensive income Fair value gain on available-for-sale-financial assets, net of income tax - - 334,329 - - - - - 334,329 Total comprehensive income for the period - - 334,329 - - - 844,217 - 1,178,546 Realisation of revaluation surplus, net of tax - - - - (25,710) - 25,710 - - Transactions with owners Employee share option scheme: - value of employee services charged to income statement - - - - - - - 20,817 20,817 - group share based payments - - - - - - - 11,493 11,493 - transfer to share capital and share premium on exercise of options - - - - - - - - - Other movements Adjustment to cash balances - - - (11,813) - - - - (11,813) Regulatory impairment allowances - - - - - (136,494) 136,494 - - Balance at 30 June 2013 215,306 23,642,135 1,331,225 7,784,656 3,180,242 207,457 4,524,396 842,239 41,727,656 Balance at 1 January 2014 215,306 23,642,135 1,812,415 7,784,656 3,154,532 2,854 6,862,523 866,630 44,341,051 Profit or loss Profit for the period - - - - - - 1,737,299 - 1,737,299 Other comprehensive income Fair value gain on available for-sale- financial assets, net of tax - - (176,300) - - - - - (176,300) Total comprehensive income for the year - - (176,300) - - - 1,737,299 - 1,560,999 Realisation of revaluation surplus, net of tax - - - - (25,710) - 25,710 - - Transactions with owners Employee share option scheme: - value of employee services charged to profit or loss - - - - - - - 15,228 15,228 - group share based payments - - - - - - - 6,116 6,116 - transfer to share capital and share premium on exercise of options - - - - - - - - - Other movements Regulatory impairment allowances - - - - - (2,854) 2,854 - - Balance at 30 June 2014 215,306 23,642,135 1,636,115 7,784,656 3,128,822 - 8,628,386 887,974 45,923,394
  • 4. Unaudited Financial Results for the half year ended 30 June 2014 4 Notes to the Financial Results for the half year ended 30 June 2014 1. General information The Bank, which is incorporated and domiciled in Zimbabwe is a registered commercial Bank under the Zimbabwe Banking Act, Chapter (24:20). The ultimate parent company is Barclays Bank Plc. The Bank has a primary listing on the Zimbabwe Stock Exchange. These unaudited financial results were approved for issue by the Board of Directors on 1 August 2014. 2. Basis of preparation 2.1 Statement of compliance The Bank’s unaudited financial results have been prepared in accordance with IAS 34 and in a manner required by the Zimbabwe Companies Act (Chapter 24:03), the relevant statutory instrument (“SI”) SI 33/99 and SI 62/96 and the Zimbabwe Banking Act, (Chapter 24:20). 2.2 Basis of measurement The unaudited financial results for the half year have been prepared on the historical cost basis except for the following; (i) Available-for-sale financial assets measured at fair value (ii) Investment property measured at fair value (iii) The liability for pensioner’s medical aid is recognised at the present value of expected future medical payments based on employee life expectancy. (iv) Derivative assets/liabilities measured at fair value (v) Buildings are measured using the revaluation model. Revaluation is performed after every 3 years. 2.3 Functional and presentation currency These unaudited financial results are presented in United States of America dollars (US$) which is the Bank’s functional currency. 2.4 Accounting policies The accounting policies applied in the preparation of the unaudited financial results are consistent with prior period. 3. Cash and bank balances 30.06.2014 US$ 30.06.2013 US$ 31.12.2013 US$ Cash in hand 38,915,625 25,445,513 38,617,716 Balances with the Central Bank 38,541,793 86,664,761 65,720,862 Bank balances due from group companies (Note 7.3) 29,153,928 18,127,073 26,195,246 Other bank balances 60,087 212,288 - Total cash and bank balances 106,671,433 130,449,635 130,533,824 Current 106,671,433 130,449,635 130,533,824 Non-current - - - Total 106,671,433 130,449,635 130,533,824 3.1 Cash and cash equivalents Cash and cash equivalents comprise cash in hand, treasury bills, deposits held at call with other banks and other short- term liquid investments with original maturities of three months or less. 30.06.2014 US$ 30.06.2013 US$ 31.12.2013 US$ Cash and bank balances (Note 3) 106,671,433 130,449,635 130,533,824 Loans and advances to banks (Note 4) 204,122 160,998 103,623 Bank balances due to group companies (88,759) (70,529) (56,496) Deposits from other banks (Note 12) (186,602) (379,318) (145,342) Treasury bills (Note 6.2) 21,085,783 - - Total cash and cash equivalents-statement of cash flows 127,685,977 130,160,786 130,435,609 4. Loans and advances to banks 30.06.2014 US$ 30.06.2013 US$ 31.12.2013 US$ Items in course of collection from other banks 204,122 160,998 103,623 Placements with other banks - - - Included in cash and cash equivalents 204,122 160,998 103,623 Loans and advances to other banks 204,122 160,998 103,623 Less allowance for impairment - - - Total 204,122 160,998 103,623 Current 204,122 160,998 103,623 Non-current - - - Total 204,122 160,998 103,623 5. Loans and advances to customers 30.06.2014 US$ 30.06.2013 US$ 31.12.2013 US$ Personal lending 22,441,214 15,364,120 19,865,880 Wholesale and corporate loans and advances 91,503,858 83,985,834 97,852,960 Gross loans and advances to customers 113,945,072 99,349,954 117,718,840 Less allowance for impairment (2,651,713) (1,768,846) (2,257,503) Interest on classified debt (284,235) (109,640) (132,591) Loans and advances to customers 111,009,124 97,471,468 115,328,746 Current 74,134,923 75,983,827 83,130,477 Non-current 36,874,201 21,487,641 32,198,269 Total 111,009,124 97,471,468 115,328,746 6. Investment securities 30.06.2014 US$ 30.06.2013 US$ 31.12.2013 US$ Investment securities held-to-maturity (Note 6.1) 7,171,763 10,400,334 7,171,763 Investment securities available-for-sale (Note 6.2) 24,237,237 2,712,015 3,400,740 Total 31,409,000 13,112,349 10,572,503 6.1 Investment securities held-to-maturity 30.06.2014 US$ 30.06.2013 US$ 31.12.2013 US$ At 1 January 7,171,763 10,245,376 10,245,376 Additions - Government bonds - - - Sale and redemption - - (3,073,613) Accrued interest - 154,958 - Total 7,171,763 10,400,334 7,171,763 Current 3,073,613 3,228,571 3,073,613 Non-current 4,098,150 7,171,763 4,098,150 Total 7,171,763 10,400,334 7,171,763 6.2 Investment securities available-for-sale 30.06.2014 US$ 30.06.2013 US$ 31.12.2013 US$ As at 1 January 3,400,740 4,264,271 4,264,271 Additions 21,085,783 - - Sale and redemption - (2,031,242) (2,031,242) (Losses)/gains from changes in fair value (249,286) 478,986 1,167,711 At end of period 24,237,237 2,712,015 3,400,740 Treasury bills 21,085,783 - - Equity investments 3,151,454 2,712,015 3,400,740 Total 24,237,237 2,712,015 3,400,740 Current 5,169,893 - - Non-current 19,067,344 2,712,015 3,400,740 Total 24,237,237 2,712,015 3,400,740 The fair value for quoted securities was determined using the closing stock market price on 30 June 2014. Fair value for unquoted securities was determined using the net asset value method. Treasury bills were valued at cost plus accrued interest due to unavailability of market values. Treasury bills of $14,182,904 were issued by the Government of Zimbabwe for the account of customer foreign currency balances held by Reserve Bank of Zimbabwe. At the time of reporting the Bank was in the process of allocating and transferring the Treasury bills to customers. 7. Related party balances and transactions The Bank is controlled by Afcarme Zimbabwe Holdings (Private) Limited incorporated and domiciled in Zimbabwe which owns 68% (2013:68%) of the ordinary shares. The remaining 32% of the shares are widely held. The ultimate parent of the Bank is Barclays Bank Plc incorporated in the United Kingdom. There are other companies which are related to Barclays Bank of Zimbabwe Limited through common shareholdings or common directorship. In the normal course of business, placings of foreign currencies made with group companies are at market interest rates. The related party transactions, outstanding balances at 30 June 2014 and related expense and income for the period are as follows: 7.1 Loans and advances to related parties Directors and other key management personnel 30.06.2014 US$ 30.06.2013 US$ 31.12.2013 US$ Loans outstanding at 1 January 707,906 520,775 520,775 Loans issued during the period 41,612 37,670 317,237 Loan repayments during the period (60,359) (64,739) (130,106) Loans outstanding at end of period 689,159 493,706 707,906 Current 157,200 129,272 162,657 Non-current 531,959 364,434 545,249 Total 689,159 493,706 707,906 Interest income earned 20,188 14,148 32,218 Of the loans advanced to directors and other key management personnel US$431,711 is secured and repayable over 18 to 30 years. The balance of US$257,445 is unsecured and repayable monthly over 3 years at average interest rates of 5,9% (2013:5.5%). Loans and advances to non-executive directors as at 30 June 2014 were US$9,887 (2013: US$16,384.) repayable within 3 years and at an average interest rate of 5.9%. No impairment losses have been recognised in respect of loans advanced to related parties (2013: nil) 7.2 Deposits from related parties Directors and other key management personnel 30.06.2014 US$ 30.06.2013 US$ 31.12.2013 US$ Deposits at 1 January 130,164 209,906 209,906 Deposits received during the period 1,089,577 1,437,655 2,795,888 Deposits repaid during the period (989,341) (1,530,964) (2,875,630) Deposits at end of period 230,400 116,597 130,164 Current 230,400 116,597 130,164 Non-current - - - Total 230,400 116,597 130,164 Interest expense on deposits - - - The above deposits carry no interest and are repayable on demand 7.3 Bank balances with group companies 30.06.2014 US$ 30.06.2013 US$ 31.12.2013 US$ Bank balances due from group companies (Note 3) 29,153,928 18,127,073 26,195,246 Bank balances due to group companies (Note 3.1) (88,759) (327,264) (56,496) Other balances due from group companies (Note 8) 1,993,691 1,453,116 1,802,297 Total 31,058,860 19,252,925 27,941,047 The balances were assessed and no impairment losses have been recognised for bank balances due from group companies. 7.4 Balances with related parties-related through common directorship/trusteeship 30.06.2014 US$ 30.06.2013 US$ 31.12.2013 US$ Deposits Loan advances Deposits Loan advances Deposits Loan advances Current 3,864,025 7,644,000 1,232,778 19,937,145 1,410,370 16,492,145 Non-current - 17,200,000 - 12,600,000 - 10,800,000 Total 3,864,025 24,844,000 1,232,778 32,537,145 1,410,370 27,292,145 Repayments on loans to related parties were made on due dates. New loans were also granted. Interest income on the loans was US$1,045,997 (2013: US$1,193,130). The balances were assessed and no impairment losses have been recognised for balances with related parties through common directorship/trusteeship. 7.5 Foreign exchange swaps and contracts with related parties As at 30 June 2014, the Bank had the following outstanding SWAP and forward exchange contract transactions with ABSA and Barclays Capital. Counterparty Up to 1 month US$ 1 to 3 months US$ 3 to 6 months US$ Total US$ ABSA 1,926,662 183,322 1,532,470 3,642,454 Barclays Capital - - 750,000 750,000 At 30 June 2014 1,926,662 183,322 2,282,470 4,392,454 7.6 Key management compensation 30.06.2014 US$ 30.06.2013 US$ 31.12.2013 US$ Salaries and other short-term employee benefits 1,059,398 623,731 1,551,444 Post-employment benefits 73,476 60,496 140,571 Share-based payments 25,701 - 53,642 Total 1,158,575 684,227 1,745,657 Key management personnel are those persons having authority and responsibility for planning, directing and controlling the activities of the Bank directly or indirectly. These include the Managing Director, Chief Finance Officer, Head of Credit Risk, Banking Divisional Director, Commercial Divisional Director, Head of Operations, Chief Technology Officer, Chief Internal Auditor, Head of Compliance, Company Secretary and Head of Human Resources. During the period two members were added to key management. 8. Other assets 31.06.2014 US$ 31.06.2013 US$ 31.12.2013 US$$ Prepayments and stationery 966,993 811,794 1,049,850 Card transactions 1,428,265 1,438,566 5,429,995 Other debtors 2,012,527 1,855,088 646,150 Receivable from Group 1,993,691 1,453,116 1,802,297 Remittances in transit - 317 1,060 Staff loans market interest rate adjustment 492,439 631,171 700,072 Total 6,893,915 6,190,052 9,629,424 Current 6,565,622 5,768,433 9,162,709 Non-current 328,293 421,619 466,715 Total 6,893,915 6,190,052 9,629,424
  • 5. Unaudited Financial Results for the half year ended 30 June 2014 5 Notes to the Financial Results for the half year ended 30 June 2014 9. Investment property 9.1. Reconciliation of carrying amount 31.06.2014 US$ 31.06.2013 US$ 31.12.2013 US$ Investment property at fair value as at 1 January 5,690,000 5,670,000 5,670,000 Net gains from fair value adjustment - - 20,000 Transfers from property and equipment - - - Investment property at fair value as at end of period 5,690,000 5,670,000 5,690,000 Non-current 5,690,000 5,670,000 5,690,000 Total 5,690,000 5,670,000 5,690,000 Investment property comprises three commercial properties that are leased to third parties. No contingent rents are charged. Rental income from investment property of US$239,003 (2013: US$.287,492) is recognised in other income. The fair value of investment property was determined by external, independent property valuers, having the appropriate recognised professional qualifications and recent experience in the location and category of the property being valued. The independent valuers provide the fair value of the Bank`s investment property portfolio annually. The last valuation of investment properties was at 31 December 2013. The fair value measurement of the investment property has been categorised as Level 3 fair value (Note 14) based on the inputs to the valuation technique used. 10. Investment in joint venture The Bank has a 50% interest in Makasa Sun (Private) Limited, a jointly controlled entity which owns a property in Victoria Falls. Makasa Sun (Private) Limited is incorporated in Zimbabwe. The Bank’s interest in Makasa Sun (Private) Limited is accounted for using the equity method in the financial statements. Summarised financial information of the joint venture, based on its financial results, and reconciliation with the carrying amount of the investment in the financial results are set out below; 30.06.2014 US$ 30.06.2013 US$ 31.12.2013 US$ Current assets, including cash and cash equivalents 874,358 295,334 681,492 Non-current assets 30,000,000 30,000,000 30,000,000 Current liabilities, including tax payable (103,981) (93,080) (16,550) Non-current liabilities, including deferred tax liabilities (1,500,000) (1,500,000) (1,500,000) Equity 29,270,377 30,202,254 30,558.451 Proportion of the Bank’s ownership 50% 50% 50% Carrying amount of the investment 15,385,190 15,101,127 15,279,225 Summarised statement of profit or loss of Makasa Sun (Private) Limited 30.06.2014 US$ 30.06.2013 US$ 31.12.2013 US$ Rental income 289,156 276,151 759,080 Operating expenses (3,671) (3,754) (6,958) Profit before income tax 285,485 272,397 752,122 Income tax expense (73,512) (70,142) (193,671) Profit for the period 211,973 202,255 558,451 Barclays Bank’s share of profit for the period 105,986 101,127 279,225 The joint venture had no contingent liabilities or capital commitments as at 30 June 2014 (2013: Nil). 11. Property and equipment Half-year ended 30 June 2014 Leasehold Land US$ Buildings US$ Computers US$ Equipment US$ Furniture and fittings US$ Motor vehicles US$ Totals US$ Opening carrying amount 43,414 15,582,878 1,302,371 1,274,600 231,757 2,051,925 20,486,945 Additions - - 566,226 41,249 41,900 240,111 889,486 Disposals - - (5,580) - (67,999) (50,500) (124,079) Depreciation charge on disposals - - 1,442 - 68,000 50,500 119,942 Depreciation charge - (162,312) (219,297) (242,874) (40,932) (336,059) (1,001,474) Closing carrying amount 43,414 15,420,566 1,645,162 1,072,975 232,726 1,955,977 20,370,820 At 30 June 2014 Cost or valuation 43,414 15,907,502 3,419,127 2,574,678 744,954 3,898,203 26,587,878 Accumulated depreciation and impairment - (486,936) (1,773,965) (1,501,703) (512,228) (1,942,226) (6,217,058) Carrying amount 43,414 15,420,566 1,645,162 1,072,975 232,726 1,955,977 20,370,820 Property and equipment was subjected to impairment testing at the reporting date, through internal evaluation of the obsolescence of equipment. Land and buildings were last revalued on 31 December 2012 by independent valuers. Revaluation takes place after every three years. There is no revaluation that has taken place in the current reporting period. If buildings were stated on the historical cost basis, the carrying amount would be US$12,376,450 (2013: US$12,631,822). No items of property and equipment were pledged as at 30 June 2014. 12. Deposits from banks 31.06. 2014 US$ 31.06. 2013 US$ 31.12. 2013 US$ Items in course of collection 186,602 379,318 145,342 Total 186,602 379,318 145,342 Current 186,602 379,318 145,342 Total 186,602 379,318 145,342 The above comprises financial instruments classified as liabilities at amortised cost. 13. Deposits from customers Deposits due to customers are primarily composed of amounts payable on demand. 30.06.2014 US$ 30.06.2013 US$ 31.12.2013 US$ Large corporate and business banking customers: - Current/settlement accounts 141,000,044 125,692,561 146,154,818 - Time deposits 7,248,954 1,955,988 6,297,120 Small to medium enterprises (“SMEs”) - Current/settlement accounts 17,243,445 28,234,406 28,859,128 - Time deposits - - 500,958 Retail customers: - Current/demand accounts 71,676,519 71,726,406 65,570,421 - Time deposits 1,206,713 2,479,058 602,554 Total 238,375,675 230,088,419 247,984,999 Current 238,375,675 230,088,419 247,984,999 Total 238,375,675 230,088,419 247,984,999 Deposits due to customers only include financial instruments classified as liabilities at amortised cost. Fair value of deposits from customers approximates carrying amount because of their short tenure. Included in customer accounts are deposits of US$1,033,000 (2013: US$1,171,521) held as collateral for loans advanced and letters of credit. The fair value of the deposits approximates carrying amount 13.1 Concentrations of customer deposits were as follows: 30.06.2014 US$ % 30.06.2013 US$ % 31.12.2013 US$ % Trade and services 74,647,118 31 75,548,598 33 80,598,197 32 Energy and minerals 942,609 - 4,410,816 2 142,941 - Agriculture 7,085,490 2 3,441,873 1 23,608,610 9 Construction and property 1,325,914 1 1,013,569 - 1,377,248 1 Light and heavy industry 18,015,761 8 16,217,369 8 16,652,785 7 Physical persons 72,883,232 31 74,205,464 32 66,172,975 27 Transport and distribution 43,139,846 18 38,829,830 17 40,355,110 16 Financial services 20,335,705 9 16,420,900 7 19,077,133 8 Total 238,375,675 100 230,088,419 100 247,984,999 100 14. Fair value hierarchy The Bank 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 prices (unadjusted) in active markets for identical instruments. This level includes listed equity securities traded on the Zimbabwe Stock Exchange and New York Stock Exchange. • Level 2 – Inputs other than quoted prices included within Level 1 that are observable, either directly (that is, as prices) or indirectly (that is, derived from prices). • Level 3 – inputs for the asset or liability that are not based on observable market data (unobservable inputs). This category includes equity investments and debt instruments with significant unobservable components. This category includes non-listed equity investments. • The hierarchy requires the use of observable market data when available. The Bank considers relevant and observable market prices in its valuations where possible. The table below analyses financial instruments measured at fair value at the end of the reporting period, by the level in the fair value hierarchy into which the fair value measurement is categorised. The amounts are based on the values recognised in the statement of financial position. Fair values US$ Level 1 US$ Level 2 US$ Level 3 US$ Valuation techniques and inputs Derivative assets 82,642 - 82,642 - Present value for similar items in active markets Equity investment securities - listed 3,091,233 3,091,233 - - Quoted prices Equity investment securities - unlisted 60,221 - - 60,221 Net asset value Investment property 5,690,000 - - 5,690,000 Discounted cash flow at risk adjusted interest rates Total assets at 30 June 2014 8,841,454 3,091,233 82,642 5,750,221 Derivative liabilities 40,104 40,104 - - Present value for similar items in active markets Share options 887,973 887,973 - - Volatility, dividend yield and risk free rate of return. Total liabilities at 30 June 2014 928,077 928,077 - - The following table shows a reconciliation from the beginning balances to the ending balances for fair value measurements in Level 3 of the fair value hierarchy: Reconciliation of level 3 items 30.06.2014 30.06.2013 Available- for-sale financial assets US$ Investment property US$ Total assets US$ Available- for-sale financial assets US$ Investment property US$ Total assets US$ Balance at 1 January 81,067 5,690,000 5,771,067 70,836 5,670,000 5,740,836 Transfers into Level 3 - - - - - - Transfers out of Level 3 - - - - - - Total losses for the period -Included in profit or loss -Included in other comprehensive income - Purchases (20,846 - (20,846 - ) ) - - - - - - (20,846 - ) - - - - - - - - - - - - Total 60,221 5,690,000 5,750,221 70,836 5,670,000 5,740,836 Whilst the Bank believes that its estimates of fair value are appropriate, the use of different methodologies or assumptions could lead to different measurements of fair value. 15. Income tax expense Current income tax and deferred income tax have been fully provided for. Deferred income taxes are calculated on all temporary differences under the liability method using an effective tax rate of 25.75%, (2013:25.75%). 30.06.2014 US$ 30.06.2013 US$ 31.12.2013 US$ Current income taxes on income for the financial year 908,404 463,428 1,723,094 Deferred income tax: origination and reversal of temporary differences (58,934) (166,976) 509,021 Income tax charge 849,470 296,452 2,232,115 16. Other liabilities 30.06.2014 US$ 30.06.2013 US$ 31.12.2013 US$ Accrued expenses 2,195,662 1,424,886 1,435,940 Internal accounts including bank cheque account 4,262,883 5,224,345 7,098,399 Remittances in transit 1,089 - - Total 6,459,634 6,649,231 8,534,339 Current 6,459,634 6,649,231 8,534,339 Total 6,459,634 6,649,231 8,534,339 17. Provisions 30.06.2014 US$ 30.06.2013 US$ 31.12.2013 US$ Staff retention incentive 1,058,834 910,451 1,199,046 Outstanding employee leave 632,508 532,581 449,727 Future medical aid liability - 4,754,433 - Total 1,691,342 6,197,465 1,648,773 Current 1,691,342 1,758,356 1,648,773 Non-current - 4,439,109 - Total 1,691,342 6,197,465 1,648,773 18. Share capital and other reserves 18.1 Share capital Number of shares (millions) Ordinary shares US$ Share premium US$ Total US$ Authorised shares Ordinary shares of USc0.01 each 5,000 500,000 - 500,000 Issued shares At 1 January 2014 2,153 215,306 23,642,135 23,857,441 Employee share option scheme: - - - - Proceeds from shares issued - - - - At 30 June 2014 2,153 215,306 23,642,135 23,857,441 18.2 Other reserves 30.06.2014 US$ 30.06.2013 US$ 31.12.2013 US$ Non distributable reserve 7,784,656 7,784,656 7,784,656 Property revaluation reserve 3,128,822 3,180,242 3,154,532 Share option reserve 887,974 842,239 866,630 Available-for-sale reserve 1,636,115 1,331,225 1,812,415 General reserve - 207,457 2,854 Total 13,437,567 13,345,819 13,621,087 The total authorised number of ordinary shares at year end was 5 billion (2013: 5 billion). The Bank’s shares have a nominal value of USc0,01 from date of issue in United States dollars. The unissued share capital is under the control of the directors subject to the restrictions imposed by the Zimbabwe Companies Act (Chapter 24.03), The Zimbabwe Stock Exchange listing requirements and the Articles and Memorandum of Association of the Bank.
  • 6. Unaudited Financial Results for the half year ended 30 June 2014 6 Notes to the Financial Results for the half year ended 30 June 2014 24.1 Credit risk Credit risk is the risk that the Bank’s customers, clients or counterparties default on their loan or credit commitments. Default occurs when counterparties are not able or willing to pay interest, repay capital or otherwise fulfil their contractual obligations under loan agreements or other credit facilities Risk limit and mitigation policies The Bank uses a range of policies and practices to mitigate credit risk. The most traditional of these is taking of security for funds advanced and credit scoring all customer borrowing applications and only lending to those which meet the pre-set criteria. The Bank monitors cash flows and utilisation against limits to identify customers under stress and takes corrective action in consultation with the customer. The Bank has Credit Risk and Loans Review Committees, chaired by non-executive directors to monitor the risks. In measuring credit risk of loans and advances the Bank reflects three components: i) the probability of default by the client or counterparty on its contractual obligations; ii) current exposures to the counterparty and its likely future development; and iii) the likely recovery ratio on the defaulted obligations Principal collateral types used for loans and advances are: • mortgages over residential and commercial properties; and • charges over business assets such as premises, inventory and accounts receivable, moveable assets and shares The legal department is responsible for conducting sufficient legal review to confirm that the approved collateral is legally effective. Ratio of value of loan to value of security is assessed on grant date and continuously monitored. Each customer based on their probability of default is graded into one of ten grades, reflecting their credit quality. Impairment and provisioning policies The Bank maintains an early warning list for those customers who are believed to be facing difficulties. Customers are categorised into Early Warning Lists (“EWL”) 1-3. Those in EWL1 have temporary problems and the risk of default is low. EWL2 implies there are doubts that the customer will pay but the risk of default is medium. EWL3 implies that there are doubts that the customer will pay and the risk of default is high. Internal policies allow for the calculation of specific, identified and collective impairment (on homogenous portfolios). Unidentified impairment is also calculated on each portfolio level. The Bank has a monitoring mechanism in place which grades its assets into various categories as prescribed by the regulator in the banking regulations. Impairments are then raised in compliance with the banking regulations and international financial reporting standards. The tables below analyse credit risk exposure to loans and advances in detail: 24.1(a) Loans and advances are summarised below as follows: 30.06.2014 30.06.2013 31.12.2013 Loans and advances to customers US$ Loans and advances to banks US$ Loans and advances to customers US$ Loans and advances to banks US$ Loans and advances to customers US$ Loans and advances to banks US$ Neither past due nor impaired 108,618,337 204,122 98,213,177 160,998 116,528,748 103,623 Past due but not impaired (Note 24.1c) 2,497,629 - - - - - Individually impaired (Note 24.1d) 2,829,106 - 1,136,777 - 1,190,092 - Gross value of loans and advances 113,945,072 204,122 99,349,954 160,998 117,718,840 103,623 Less: allowance for impairment (Note 24.1g) (2,651,713) - (1,768,846) - (2,257,503) - Interest on classified debt (284,235) - (109,640) - (132,591) - Net value of loans and advances 111,009,124 204,122 97,471,468 160,998 115,328,746 103,623 The Bank secures its loans and advances with liens over residential or commercial property, stock or other financial securities but is generally not permitted to sell or re-pledge the security in the absence of default by the owner of the collateral. The Bank has an internal rating scale which is now being mapped into the Basel II grading system. Balances in neither past due nor impaired category are investment grade, those in past due but not impaired category are standard monitoring grade and individually impaired is default grade. 24.1(b) Loans and advances neither past due nor impaired Loans and advances neither past due nor impaired and which are not part of renegotiated loans are considered to be investment grade. Past due loans and advances are those whose repayments (capital and interests) are outstanding for more than 30 days. Such loans are either impaired or renegotiated (Note 24.1(f)). 24.1 (c) Loans and advances past due but not impaired Late processing and other administrative delays on the side of the borrower can lead to a financial asset being past due but not impaired. Loans and advances less than 90 days past due are not considered impaired, unless other information is available to indicate the contrary. Gross amount of loans and advances that were past due but not impaired were as follows: 30.06.2014 30.06.2013 31.12.2013 Personal Loans US$ Wholesale and corporate loans US$ Total US$ Personal Loans US$ Wholesale and corporate loans US$ Total US$ Personal Loans US$ Wholesale and corporate loans US$ Total US$ Up to 1 month 82,362 2,012,016 2,094,378 - - - - - - 1-3 months 33,208 370,043 403,251 - - - - - - 3-6 months - - - - - - - - - 6-12 months - - - - - - - - - Over 12 months - - - - - - - - - Total 115,570 2,382,059 2,497,629 - - - - - - Fair value of collateral - 440,000 440,000 - - - - - - Amount under collateralisation - 370,043 370,043 - - - - - - 24.1(d) Loans and advances individually impaired A loan is considered impaired if the customer misses instalments or fails to repay the loan on due date. 30.06.2014 30.06.2013 31.12.2013 Personal loans US$ Wholesale and corporate loans US$ Total US$ Personal loans US$ Wholesale and corporate loans US$ Total US$ Personal loans US$ Wholesale and corporate loans US$ Total US$ Gross carrying amount 86,306 2,742,800 2,829,106 104,342 1,032,435 1,136,777 126,229 1,063,863 1,190,092 Less allowance for impairment (86,255) (713,634) (799,889) (19,202) (665,727) (684,929) (38,789) (670,123) (708,912) Net carrying amount 51 2,029,166 2,029,217 85,140 366,708 451,848 87,440 393,740 481,180 24.1(e) Non performing loans and advances These are loans and overdrafts on which interest is no longer accrued or included in income unless the customer pays back. These non-performing (past due) assets include balances where the principal amount and / or interest is due and unpaid for 90 days or more. 30.06.2014 US$ 30.06.2013 US$ 31.12.2013 US$ Total non-performing loans and receivables 2,829,106 724,768 1,094,997 Less specific allowance for impairment (799,889) (484,663) (701,257) Net carrying amount 2,029,217 240,105 393,740 24.1(f) Loans and advances renegotiated During the period ended 30 June 2014, the Bank did not have any renegotiated loans and advances to customers and banks. 19. Net interest income 30.06.2014 US$ 30.06.2013 US$ 31.12. 2013 US$ Interest income 7,485,263 7,017,549 15,023,266 Loans and advances to customers 6,673,216 5,418,504 11,792,499 Bank balances 517,078 1,432,896 2,907,092 Investment securities 294,969 166,149 323,675 Interest expense 645,404 1,247,297 2,707,279 Deposits from other banks 9,864 - 27,993 Deposits due to customers 635,540 1,247,297 2,679,286 Net interest income 6,839,859 5,770,252 12,315,987 No interest income was accrued on impaired financial assets 20. Non funded income 30.06.2014 US$ 30.06.2013 US$ 31.12.2013 US$ Ledger fees 5,015,337 3,069,817 7,966,883 Cash withdrawal fees 3,130,223 4,458,502 6,746,598 Other fee and commission income 4,648,314 4,357,375 9,272,947 Net foreign exchange income 1,360,913 1,344,194 2,647,183 Rental income 239,003 393,960 552,783 Profit on disposal of assets 41,852 - 5,373 Total 14,435,642 13,639,091 27,191,767 Net fee and commission income above excludes amounts included in determining the effective interest rate on financial assets measured at amortised cost. 21. Operating expenses 21.1 Staff costs 30.06.2014 US$ 30.06.2013 US$ 31.12.2013 US$ Salaries and allowances 8,728,371 8,145,695 16,896,169 Retrenchment cost - - 206,183 Social security costs 100,097 35,559 131,886 Share options granted to directors and employees 21,343 32,310 56,701 Pension costs: defined contribution plans 791,576 738,374 1,492,674 Post-employment medical benefits - 923,421 (1,082,000) Directors’ remuneration: Fees - for services as directors 101,590 44,812 85,574 Other – for services as management 529,569 221,762 347,040 Total staff costs 10,272,546 10,141,933 18,134,227 21.2 Other administrative expenses include: 30.06.2014 US$ 30.06.2013 US$ 31.12.2013 US$ Property and equipment Repairs and maintenance 675,749 494,084 1,173,435 Depreciation 1,001,474 1,072,774 2,202,511 Other property costs 597,854 680,570 1,250,269 Security and cash handling costs 918,263 955,158 1,770,728 Communication costs 1,130,574 718,900 2,228,334 Auditors remuneration:- - audit fees 184,562 114,594 305,829 - other - - 34,961 Operating lease payments 1,237,739 1,209,762 2,427,123 Other expenses 2,381,725 2,758,585 4,363,318 Total other administrative expenses 8,127,940 8,004,427 15,756,508 Total staff costs 10,272,546 10,141,933 18,134,227 Total operating expenses 18,400,486 18,146,360 33,890,735 22. Loan commitments, guarantees and other financial facilities At 30 June 2014, the contractual amounts of the Bank’s financial instruments that commit it to extend credit to customers, guarantee and other facilities were as follows: 30.06.2014 US$ 30.06.2013 US$ 31.12 2013 US$ Loan commitments 40,722,316 29,809,300 41,964,258 Guarantees and standby letters of credit 1,968,090 1,519,690 1,503,830 Total 42,690,406 31,328,990 43,468,088 23. Segment analysis Management has determined the operating segments based on the reports reviewed by the Country Management Committee (the chief operating decision-maker), which is responsible for allocating resources to the reportable segments and assesses its performance. All operating segments used by the Bank meet the definition of a reportable segment under IFRS 8. The Country Management Committee assesses the performance of the operating segments based on a measure of profit or loss. This measurement basis excludes the effects of non-recurring expenditure from the operating segments such as restructuring costs and legal expenses. The measure also excludes the effects of equity- settled share-based payments and unrealised gains or losses on financial instruments The Bank has three main business segments: • Retail banking – incorporating direct debit facilities, private customer current accounts, savings, deposits, investment savings products, custody, credit and debit cards, consumer loans and mortgages; • Corporate banking – incorporating direct debit facilities, current accounts, deposits, overdrafts, loan and other credit facilities and foreign currency products; • Treasury - incorporating financial instruments and foreign currency trading. Treasury also includes the management of the overall bank operating asset balances and balance sheet structure Revenue allocated to the segments is from external customers who are domiciled in Zimbabwe. There were no trading revenues from transactions with a single external customer that amounted to 10% or more of the Bank’s revenues. Costs incurred by support functions are allocated to the three main business segments on the basis of determined cost drivers. 23.1 Segment results of operations The segment information provided to the Country Management Committee for the segments for the half-year ended 30 June 2014 is as follows:- At 30 June 2014 Retail banking US$ Corporate banking US$ Treasury banking US$ Total US$ Net interest income from external customers 1,751,024 4,896,494 192,341 6,839,859 Loan impairment charges (190,784) (203,426) - (394,210) Net fee and commission income 8,855,303 3,860,095 59,487 12,774,885 Other income 213,535 250,756 1,302,430 1,766,721 Staff costs (6,096,270) (3,648,600) (426,086) (10,170,956) General and administrative expenses (591,898) (316,629) (53,374) (961,901) Depreciation (584,201) (379,195) (38,078) (1,001,474) Other operating expenses (3,646,440) (2,394,096) (225,619) (6,266,155) Operating (loss)/profit (289,731) 2,065,398 811,101 2,586,769 Income tax expense 74,606 (531,840) (392,236) (849,470) Total assets 42,695,211 98,346,803 156,674,232 297,716,246 Total liabilities 86,532,037 158,061,094 7,199,721 251,792,852 24. Financial risk management The Bank’s business involves taking on risks in a targeted manner and managing them professionally. The core functions of the Bank’s risk management are to identify all key risks for the Bank, measure these risks, manage the risk positions and determine capital allocations. The Bank regularly reviews its risk management policies and systems to reflect changes in markets, products and best market practice. The Bank’s aim is to achieve an appropriate balance between risk and return and minimise potential adverse effects on the Bank’s financial performance. The Bank defines risk as the possibility of losses or profits foregone, which may be caused by internal or external factors. The Board provides written principles for overall risk management, as well as written policies covering specific areas, such as foreign exchange risk, interest rate risk and credit risk. Internal audit is responsible for the review of risk management and the control environment. The risks arising from financial instruments to which the Bank is exposed include credit risk, liquidity risk, market risk and operational risk.
  • 7. Unaudited Financial Results for the half year ended 30 June 2014 7 Notes to the Financial Results for the half year ended 30 June 2014 Reconciliation of allowance by nature of advance Residential mortgage loans US$ Other personal loans US$ Wholesale corporate loans US$ Total US$ Balance at 1 January 2014 - 251,138 2,006,365 2,257,503 Charge for the year - 190,784 203,426 394,210 New and increase in impairment allowances - 232,231 402,151 634,382 Release in impairment allowances - (41,447) (198,725) (240,172) Amounts written off during the year as uncollectible - - - - At 30 June 2014 - 441,922 2,209,791 2,651,713 Residential mortgage loans US$ Other personal loans US$ Wholesale corporate loans US$ Total US$ Balance at 1 January 2013 - 19,845 1,525,560 1,545,405 Charge for the year - 162,590 60,851 223,441 New and increase in impairment allowances - 176,091 573,307 749,398 Release in impairment allowances - (13,501) (512,456) (525,957) Amounts written off during the year as uncollectible - - - - At 30 June 2013 - 182,435 1,586,411 1,768,846 Impairment allowances are determined in terms of the requirements of IAS 39, ‘‘Financial Instruments: Recognition and Measurement.’’ Impairment allowances in excess of this, as required by the banking regulations, are accounted for as a transfer from distributable reserves to general reserves. Assets are written off when it is considered that recovery is no longer possible or when the cost to recover exceeds the amount to be recovered. 24.1(h) Repossessed collateral During 2014, the Bank did not repossess any assets held as collateral on loans and advances to customers. 24.1(i) Credit risk concentration 30.06.2014 30.06.2013 31.12.2013 Industry/Sector Loans and advances US$ % Loans and advances US$ % Loans and advances US$ % Trade and services 8,868,772 8 9,858,979 10 8,306,488 7 Energy and minerals - - - - - - Agriculture 15,892,505 14 11,926,016 12 10,169,194 9 Construction and property - - - - - - Light and heavy industry 32,157,994 28 39,373,967 40 45,078,881 38 Physical persons 22,441,214 20 15,364,120 15 19,865,880 17 Transport and distribution 34,584,587 30 22,826,872 23 34,298,397 29 Financial services - - - - - - State - - - - - - Other - - - - - - Gross amount 113,945,072 100 99,349,954 100 117,718,840 100 Less impairment allowance (2,651,713) - (1,768,846) - (2,257,503) - Interest on classified debt (284,235) - (109,640) - (132,591) - Net amount 111,009,124 - 97,471,468 - 115,328,746 - 24.1(j) Concentration of credit risk As at 30 June 2014 Industry/Sector Total loans US$ Past due/ Impaired loans US$ Write offs/ (recoveries) US$ Impairment allowance US$ Trade and services 8,868,772 160,875 - 160,875 Energy and minerals - - - - Agriculture 15,892,505 2,581,925 - 552,759 Construction and property - - - - Light and heavy industry 32,157,994 - - - Physical persons 22,441,214 86,306 - 86,255 Transport and distribution 34,584,587 - - - Financial services - - - - State - - - - Other - - - - Gross amount at 30 June 2014 113,945,072 2,829,106 - 799,889 24.2 Liquidity risk Liquidity risk is the risk that the Bank may fail to meet its payment obligations when they fall due and to replace funds when they are withdrawn, the consequences of which may be the failure to meet the obligations to repay deposits and fulfil commitments to lend. 24.2(a) Liquidity risk management process The Bank identifies this risk through periodic liquidity gap analysis and the maturity profile of assets and liabilities. Where major gaps appear, action is taken in advance to close or minimise the gaps. The Bank’s Assets and Liabilities Committee (“ALCO”) monitors and manages liquidity risk The Bank’s liquidity management process as carried out by the ALCO and Treasury units includes: • Day to day funding and monitoring future cash flows to ensure that funding requirements are met; • Maintaining a high balance of cash that can easily be liquidated as protection against unforeseen funding gaps; • Monitoring liquidity ratios against internal and regulatory benchmarks; • Limits are set across the business to control liquidity risk; • Early warning indicators are set to identify the emergence of increased liquidity risk • Sources of liquidity are regularly reviewed by ALCO to maintain a wide diversification of source of funding. 24.2(b) Liquidity ratios 30.06.2014 US$ 30.06.2013 US$ 31.12.2013 US$ Cash and bank balances 106,671,433 130,449,635 130,533,824 Loans and advances to banks 204,122 160,998 103,623 Treasury bills 21,085,783 - - Deposits from banks (186,602) (379,318) (145,342) Amounts due to group companies (88,759) (70,529) (56,496) Total liquid assets 127,685,977 130,160,786 130,435,609 Deposits from customers 229,920,008 225,653,373 240,584,367 Other money market deposits 8,455,667 4,435,046 7,400,632 Total liabilities to the public 238,375,675 230,088,419 247,984,999 Liquidity ratio 54% 57% 53% RBZ minimum 30% 30% 30% 24. Financial risk management (continued) 24.1(g) Allowance for impairment Reconciliation of allowance for impairment 30.06.2014 30.06.2013 31.12.2013 Specific allowance for impairment US$ Collective allowance for impairment US$ Specific allowance for impairment US$ Collective allowance for impairment US$ Specific allowance for impairment US$ Collective allowance for impairment US$ Balance at 1 January 708,912 1,548,591 660,564 884,841 660,564 884,841 Income received on claims previously written off - - - - - - New and increase in impairment allowance 119,507 514,875 37,301 712,097 87,783 1,431,129 Release (28,530) (211,642) (12,936) (513,021) (39,435) (767,379) Loans written off - - - - - - As at end of period 799,889 1,851,824 684,929 1,083,917 708,912 1,548,591 24.2(c) Liquidity profiling as at 30 June 2014 The amounts disclosed in the table below are the contractual undiscounted cash flows. The assets which are used to manage liquidity risk which is mainly cash are also included on the table based on the contractual maturity profile. Up to 1 month US$ 1 to 3 months US$ 3 to 6 months US$ 6 months to 1 year US$ 1 to 5 years US$ Over 5 years US$ Total US$ Carrying amount On statement of financial position items-as at 30 June 2014 Liabilities Derivative liabilities 16,659 1,722 21,723 - - - 40,104 40,104 Bank balances due to group companies 88,759 - - - - - 88,759 88,759 Deposits from banks 186,602 - - - - - 186,602 186,602 Deposits from customers 222,150,710 755,125 119,151 1,167,786 15,185,528 - 239,378,300 238,375,675 Other liabilities 7,092,142 - 430,877 627,957 - - 8,150,976 8,150,976 Current income tax assets - 70,928 - - - - 70,928 70,928 Total liabilities 229,534,872 827,775 571,751 1,795,743 15,185,528 - 247,915,669 246,913,044 Assets held for managing liquidity risk Cash and bank balances 106,671,433 - - - - - 106,671,433 106,671,433 Government bonds and treasury bills - - 3,349,882 5,730,165 21,036,473 - 30,116,520 28,257,546 Loans and advances to banks 204,122 - - - - - 204,122 204,122 Loans and advances to customers 27,294,355 22,950,048 17,071,450 15,070,433 36,389,321 484,880 119,260,487 110,870,547 Derivative assets 46,567 2,426 33,649 - - - 82,642 82,642 Other assets 5,434,483 - - - - - 5,434,483 5,434,483 Total Assets 139,650,960 22,952,474 20,454,981 20,800,598 57,425,794 484,880 261,769,687 251,659,350 Liquidity gap (89,883,912) 22,124,699 19,883,230 19,004,855 42,240,266 484,880 13,854,018 Cumulated liquidity gap (89,883,912) (67,759,213) (47,875,984) (28,871,128) 13,369,138 13,854,018 Contingent liabilities and commitments Assets Guarantees and letters of credit 394,100 100,655 260,480 1,212,855 - - 1,968,090 - Commitment to lend 40,722,316 - - - - - 40,722,316 - Total assets 41,116,416 100,655 260,480 1,212,855 - - 42,690,406 - Liabilities Guarantees and letters of credit 394,100 100,655 260,480 1,212,855 - - 1,968,090 - Commitment to lend 40,722,316 - - - - - 40,722,316 - Total liabilities 41,116,416 100,655 260,480 1,212,855 - - 42,690,406 - Liquidity gap - - - - - - - - The Bank determines ideal weights for maturity time buckets which are used to benchmark the actual maturity profile. Maturity mismatches across the time buckets are managed through the tenor of new advances and the profile of time deposits by ALCO and should the need arise through support from Barclays Africa. 24.3 Market Risk The Bank takes on exposure to market risks, which is the risk that the fair value or future cash flows of a financial instrument will fluctuate because of changes in market prices. Market risks arise from open positions in interest rate, currency and equity products, all of which are exposed to general and specific market movements and changes in the level of volatility of market rates or prices such as interest rates, credit spreads, foreign exchange rates and equity prices. The Bank separates exposures to market risk into either trading or banking book. The Bank does not have a trading book, all the market risk is arising from the banking book which includes the retail and wholesale banking assets. 24.3(a) Market risk measurement techniques The Bank applies a ‘value at risk’ (“VaR”) methodology to its banking portfolios to estimate the market risk of positions held and the maximum losses expected, based upon a number of assumptions for various changes in market conditions. The measurement techniques used to measure and control market risk include: (i) Daily Value at Risk (“DVaR”) Value at Risk is a statistically based estimate of the potential loss on the current portfolio from adverse market movements. It expresses the maximum amount the Bank might lose but only to a certain level of confidence. There is therefore a statistical probability that actual loss could be greater than the ‘VaR’ estimate. The ‘VaR’ model makes assumptions on the pattern of market movements based on historical holding periods. The use of this approach does not prevent losses outside of these limits in the event of more significant market movements. ‘DVaR’ is an estimate of the potential loss which might arise from unfavourable market movements, if the current positions were held unchanged for one business day, measured to a confidence of 99%. Daily losses exceeding the ‘DVaR’ figure are likely to occur, on average twice in every 100 business days. (ii) Stress tests Interest rate stress risk is the potential loss against the Bank if there is a large interest rate movement (expected once in every five years). Stress tests provide an indication of losses that could arise in extreme positions. Foreign exchange stress risk is the potential loss against the Bank if there is a large foreign exchange movement (expected once in every five years). (iii) Annual Earnings at Risk (“AEaR”) AEaR measures the sensitivity of annual earnings to shocks in the market rates at the 99th percentile for change over a one year period. This shock is consistent with the standardised interest rate shock recommended by Basel II framework for assessing banking book interest rate risk. (iv) Economic capital Economic capital methodologies are used to calculate risk sensitive capital allocations for businesses incurring market risk. Consequently the businesses incur capital charges related to their market risk. The table below summarises the DVaR statistics for the Bank. The assumed interest volatility for the DVaR is the daily volatility of 5% and 10% for long dated and short dated instruments observed over a period of one year. One day risk Type of risk or activity High US$ Medium US$ Low US$ Year-end US$ Currency 2,113 1,106 457 457 Interest 3,943,173 3,765,502 2,243,507 2,243,507 Aggregate VaR at 30 June 2014 3,945,286 3,766,608 2,243,964 2,243,964 Two week risk Type of risk or activity High US$ Medium US$ Low US$ Year-end US$ Currency 6,682 3,498 1,444 1,444 Interest 12,469,409 11,907,563 11,156,949 11,492,305 Aggregate VaR at 30 June 2014 12,476,091 11,911,061 11,158,393 11,493,749 ALCO closely monitors this risk. The Bank is satisfied with its risk management processes and systems in place which have enabled the Bank to minimise losses. 24.4 Interest rate risk Interest rate risk is the risk that the Bank will be adversely affected by changes in the level or volatility of market interest rates. The Bank is exposed to various risks associated with the effects of fluctuations in the prevailing levels of market interest rates on its financial position and cash flows. The responsibility of managing risk lies with the Assets and Liabilities Committee (ALCO). On a day to day basis, risks are managed through a number of management committees. Through this process, the Bank monitors compliance within the overall risk policy framework and ensures that the framework is kept up to date. Risk management information is provided on a regular basis to the Risk and Control Committee and the Board.
  • 8. Unaudited Financial Results for the half year ended 30 June 2014 8 24. Financial risk management (continued) 24.4 Interest rate risk (continued) The table below summarises the Bank’s interest rate risk exposure. As at 30 June 2014 Up to 1 month US$ 1 to 3 months US$ 3 to 6 months US$ 6 months to 1 year US$ 1 to 5 years US$ Over 5 years US$ Non-interest bearing US$ Total US$ Assets Cash and bank balances 40,702,117 - - - - - 65,969,316 106,671,433 Government bonds and Treasury bills - - 3,073,613 5,169,863 20,014,070 - - 28,257,546 Derivative assets - - - - - - 82,642 82,642 Loans and advances to banks 204,122 - - - - - - 204,122 Loans and advances to customers 48,738,421 62,270,703 - - - - - 111,009,124 Other assets 1,629,612 - - - - 1,038,216 4,226,087 6,893,915 Available- for- sale financial assets - - - - - - 3,151,454 3,151,454 Investment property - - - - - - 5,690,000 5,690,000 Investment in joint venture - - - - - - 15,385,190 15,385,190 Property and equipment - - - - - - 20,370,820 20,370,820 Total assets 91,274,272 62,270,703 3,073,613 5,169,863 20,014,070 1,038,216 114,875,509 297,716,246 Liabilities Derivative liabilities - - - - - - 40,104 40,104 Bank balances due to group companies 88,759 - - - - - - 88,759 Deposits from banks 186,602 - - - - - - 186,602 Deposits from customers 222,150,709 755,125 119,151 1,167,786 14,182,904 - - 238,375,675 Other liabilities - - - - - - 8,150,976 8,150,976 Current income tax liabilities - - - - - - 70,928 70,928 Deferred income tax liabilities - - - - - - 4,879,808 4,879,808 Total liabilities 222,426,070 755,125 119,151 1,167,786 14,182,904 - 13,141,816 251,792,852 Interest rate re-pricing gap (131,151,798) 61,515,578 2,954,462 4,002,077 5,831,166 1,038,216 101,733,693 45,923,394 Cumulative gap (131,151,798) (69,636,220) (66,681,758) (62,679,681) (56,848,515) (55,810,299) 45,923,394 The Bank’s interest rate risk position is shown below: 30.06.2014 30.06.2013 31.12.2013 Impact on earnings US$ Impact on capital US$ Impact on earnings US$ Impact on capital US$ Impact on earnings US$ Impact on capital US$ 1000bps increase in interest rates (4,685,936) (4,685,936) (3,070,000) (3,070,000) (5,083,996) (5,083,996) 1000bps decrease in interest rates 4,685,936 4,685,936 3,070,000 3,070,000 5,083,996 5,083,996 Bench - - - - 24.5 Foreign exchange risk This is a risk that the value of a financial liability or asset denominated in foreign currency will fluctuate due to changes in the exchange rate. The Bank takes on exposures to the effects of fluctuations in the prevailing foreign currency exchange rates in the financial position and cash flows. Foreign exchange risk is managed through use of Daily Value at Risk techniques and Stress tests. In addition mismatches on foreign exchange assets and liabilities are minimised through the daily monitoring of the net foreign exchange exposure by treasury. Currency swaps are also used to manage foreign exchange risk where necessary. The table below summarises the Bank’s financial instruments at carrying amounts, categorised by currency. At 30 June 2014 US$ GBP (US$ equiv) Rand (US$ equiv) Other foreign currency (US$ equiv) Total US$ Assets Cash and bank balances 94,679,151 3,490,710 5,853,215 2,648,357 106,671,433 Investment securities 31,409,000 - - - 31,409,000 Loans and advances to banks 204,122 - - - 204,122 Loans and advances to customers 111,007,751 46 1,283 44 111,009,124 Other assets 1,927,219 1,592,272 1,026 739 3,521,256 Total assets 239,227,243 5,083,028 5,855,524 2,649,140 252,814,935 Liabilities Bank balances due to group companies 67,148 21,611 - - 88,759 Deposits from banks 186,602 - - - 186,602 Deposits from customers 228,875,119 3,262,009 3,746,779 2,491,768 238,375,675 Other liabilities 6,140,326 - 240,676 78,632 6,459,634 Total liabilities 235,269,195 3,283,620 3,987,455 2,570,400 245,110,670 Net currency positions 3,958,048 1,799,408 1,868,069 78,740 7,704,265 25. Capital management The Bank’s objectives when managing capital, which is a broader concept than the ‘equity’ on the face of the statement of financial position, are: • to comply with the capital requirements set by the banking regulators; • to safeguard the Bank’s ability to continue as a going concern so that it can continue to provide returns for shareholders and benefits to customers and other stakeholders and; • to maintain a strong capital base to support the development of its business. Capital adequacy and the use of regulatory capital are monitored daily by the Bank’s management and the Directors, employing techniques based on guidelines developed by the Basel Committee as implemented by the Reserve Bank of Zimbabwe for supervisory purposes. The Bank’s regulatory capital is managed by management and comprises three tiers • Tier 1 Capital: comprises reserve and currency translation reserve. • Tier 2 Capital: comprises impairment allowance, revaluation reserve and part of currency translation reserve. • Tier 3 Capital: comprises operational and market risk capital. The Reserve Bank of Zimbabwe requires each bank to maintain a core capital adequacy ratio of 8% and total capital adequacy ratio of 12%. The table below summarises the composition of regulatory capital and the ratios of the Bank. Capital adequacy 30.06.2014 US$ 30.06.2013 US$ 31.12.2013 US$ Share capital 215,306 215,306 215,306 Share premium 23,642,135 23,642,135 23,642,135 Accumulated profits 8,628,386 4,524,396 6,862,523 Share option reserve fund 887,973 842,239 866,630 Available for sale reserve 1,636,115 1,331,225 1,812,415 Currency translation reserve 3,405,069 3,405,069 3,405,069 Total core capital 38,414,984 33,960,370 36,804,078 Less market and operational risk capital (6,866,578) (6,133,220) (5,898,917) Tier 1 capital 31,548,406 27,827,150 30,905,161 Currency translation reserve movement 4,379,587 4,379,587 4,379,587 Revaluation reserve 3,128,822 3,180,242 3,154,532 General provisions (limited to 1.25% of weighted risk assets) 1,851,824 1,083,917 1,551,445 Tier 2 capital 9,360,233 8,643,746 9,085,564 Total tier 1 & 2 capital 40,908,639 36,470,896 39,990,725 Market risk 258,296 95,645 77,137 Operational risk 6,608,282 6,037,575 5,821,780 Tier 3 capital 6,866,578 6,133,220 5,898,917 Total tier 1, 2 & 3 capital base 47,775,217 42,604,116 45,889,642 Less deductions from capital (3,161,341) (2,712,015) (3,413,929) Total capital base 44,613,876 39,892,101 42,475,713 Credit risk weighted assets 172,042,247 156,152,618 178,738,814 Operational risk equivalent assets 82,603,522 75,469,695 72,772,244 Market risk equivalent assets 3,228,701 1,195,561 964,222 Total risk weighted assets (RWAs) 257,874,470 232,817,874 252,475,280 Tier 1 capital ratio 12% 12% 12% Tier 1 and 2 capital ratio 16% 16% 16% Total capital adequacy ratio 17% 17% 17% Credit risk capital is subject to internal ratings based approach which uses guidelines provided by the regulator. On this approach the banking book exposures are categorised into broad classes of assets with different underlying risk characteristics. Risk components are transformed into risk weighted assets using predetermined exposure and loss probability factors. Capital requirements for credit risk are derived from the risk weighted assets. Market risk capital is assessed using internal models approach that considers the risk characteristics of the different trading book assets. Risk components are transformed into risk weighted assets and, therefore, capital requirements, based on predetermined exposure and loss probability factors. Operational risk capital is assessed using the standardised approach. This approach is tied to average gross income over three years per regulated business lines as indicator of scale of operations. Total capital charge for operational risk equals the sum of charges per business lines. Total capital for the Bank is assessed to be sufficient to support current business and planned capital projects. Growth in advances will continue to be pursued cautiously and in such a way as to achieve economic asset yields. 26. Other risks Strategic risk The roles of the chairman and the managing director are not vested in the same person. The executive team formulates the strategy under the guidance of the Board which approves it. The executive directors bear the responsibility to execute the approved strategy. The Board reviews the performance and suitability of the strategy at least quarterly. Legal and compliance risk The Risk Management Committee of the Board ensures that the management and operations of the Bank’s business is done within the governance and regulatory control framework established by Barclays Bank Plc, the Reserve Bank of Zimbabwe and other regulatory bodies. A dedicated legal and compliance unit is in place to monitor legal and compliance requirements and ensure that they are met on a daily basis. Reputation risk The Bank adheres to very strict reputation standards set for Barclays international operations. The Human Resources Committee of the Board assists the Board in ensuring that staff complies with set policies and practices consistent with the reputation demands of both the Bank and the industry. The compliance unit and human resources function monitor compliance by both management and staff with the Bank’s ethical codes and compliance standards. Operational risk This is the risk of losses arising from inadequate or failed internal processes, people and/or systems or from external events. Practices to minimise operational risk are embedded across all transaction cycles. Risk workshops are held for the purpose of identifying major risks in the operating environment and methods of mitigating the risks. The Bank employs the standardised approach to determine capital required to cover operational risk. Each function carries out a risk and control assessment of their processes on a regular basis. The assessment results are reviewed by Operational Risk Management department. Barclays Internal Audit audits selected functions at given times. 27. Risks and Ratings The Central Bank conducts regular examinations of Banks and financial institutions it regulates. The last on-site examination of the Bank was, as at 13 July 2012 and it assessed the overall condition of the Bank to be fair. This is a score of “3” on the CAMELS rating scale. The CAMELS rating evaluates banks on capital adequacy, asset quality, management and corporate governance, liquidity and funds management and sensitivity to market risks. The CAMELS and Risk Assessment System (RAS) ratings are summarised in the following tables; CAMELS ratings CAMELS component Latest Rating - July 2012 Capital 2 - Satisfactory Asset quality 2 - Satisfactory Management 3 - Fair Earnings 3 - Fair Liquidity 2 - Satisfactory Sensitivity to market risk 1 - Strong Summary risk matrix - July 2012 onsite supervision Type of risk Level of inherent risk Adequacy of risk management systems Overall composite risk Direction of overall composite risk Credit Low Acceptable Low Stable Liquidity Low Strong Low Stable Foreign exchange Low Strong Low Stable Interest rate Low Strong Low Stable Strategic risk High Weak High Increasing Operational risk Moderate Strong Moderate Stable Legal and compliance Moderate Acceptable Moderate Stable Reputation Moderate Acceptable Moderate Increasing Overall Moderate Acceptable Moderate Stable Interpretation of risk matrix Level of inherent risk Low - reflects 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 exceptions or by the failure to adhere to written policies and procedures. Acceptable - management of risk is largely effective but lacking to some modest degree. While the institution might be having some minor risk management weaknesses, these have been recognised and are being addressed. Management information systems are generally adequate. Strong - management effectively identifies and controls all types of risk posed by the relevant functional areas or per inherent risk. The Board and senior management are active participants in managing risk and ensure appropriate policies and limits are put in place. The policies comprehensively define the Bank’s risk tolerance. Responsibilities and accountabilities are effectively communicated. Overall composite risk Low - would be assigned to low inherent risk areas. Moderate risk areas may be assigned to a low composite risk where internal controls and risk management systems are strong and effectively mitigate much of the risk. Moderate - risk management systems appropriately mitigates inherent risk. For a given low risk area, significant weaknesses in the risk management systems may result in a moderate composite risk assessment. On the other hand, a strong risk management system may reduce the risk so that any potential financial loss from the activity would have only a moderate negative impact on the financial condition of the organisation. High - risk management systems do not significantly mitigate the high inherent risk. Thus, the activity could potentially result in a financial loss that would have a significant impact on the Bank’s overall condition. Direction of overall composite risk Increasing - based on the current information, risk is expected to increase in the next 12 months. Decreasing - based on current information, risk is expected to decrease in the next 12 months. Stable - based on current information, risk is expected to be stable in the next 12 months. External Credit Ratings Rating agent Latest credit ratings – 2014/15 Previous credit ratings – 2013/14 Previous credit ratings – 2012/13 Global Credit Rating Co. (Long term rating) AA- AA- AA- The last rating was done in May 2014 and expires in May 2015. The Reserve Bank of Zimbabwe gave the Bank a rating of “Fair” after an On-Site examination done in 2012. 28. Going concern The Directors have assessed the ability of the Bank to continue as a going concern and believe that the preparation of these financial statements on a going concern basis is still appropriate. 29. Events after reporting date As at the date of reporting no significant or reportable post balance sheet events were identified. Notes to the Financial Results for the half year ended 30 June 2014

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