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Stanbic ibtc annual report 2008
Stanbic ibtc annual report 2008
Stanbic ibtc annual report 2008
Stanbic ibtc annual report 2008
Stanbic ibtc annual report 2008
Stanbic ibtc annual report 2008
Stanbic ibtc annual report 2008
Stanbic ibtc annual report 2008
Stanbic ibtc annual report 2008
Stanbic ibtc annual report 2008
Stanbic ibtc annual report 2008
Stanbic ibtc annual report 2008
Stanbic ibtc annual report 2008
Stanbic ibtc annual report 2008
Stanbic ibtc annual report 2008
Stanbic ibtc annual report 2008
Stanbic ibtc annual report 2008
Stanbic ibtc annual report 2008
Stanbic ibtc annual report 2008
Stanbic ibtc annual report 2008
Stanbic ibtc annual report 2008
Stanbic ibtc annual report 2008
Stanbic ibtc annual report 2008
Stanbic ibtc annual report 2008
Stanbic ibtc annual report 2008
Stanbic ibtc annual report 2008
Stanbic ibtc annual report 2008
Stanbic ibtc annual report 2008
Stanbic ibtc annual report 2008
Stanbic ibtc annual report 2008
Stanbic ibtc annual report 2008
Stanbic ibtc annual report 2008
Stanbic ibtc annual report 2008
Stanbic ibtc annual report 2008
Stanbic ibtc annual report 2008
Stanbic ibtc annual report 2008
Stanbic ibtc annual report 2008
Stanbic ibtc annual report 2008
Stanbic ibtc annual report 2008
Stanbic ibtc annual report 2008
Stanbic ibtc annual report 2008
Stanbic ibtc annual report 2008
Stanbic ibtc annual report 2008
Stanbic ibtc annual report 2008
Stanbic ibtc annual report 2008
Stanbic ibtc annual report 2008
Stanbic ibtc annual report 2008
Stanbic ibtc annual report 2008
Stanbic ibtc annual report 2008
Stanbic ibtc annual report 2008
Stanbic ibtc annual report 2008
Stanbic ibtc annual report 2008
Stanbic ibtc annual report 2008
Stanbic ibtc annual report 2008
Stanbic ibtc annual report 2008
Stanbic ibtc annual report 2008
Stanbic ibtc annual report 2008
Stanbic ibtc annual report 2008
Stanbic ibtc annual report 2008
Stanbic ibtc annual report 2008
Stanbic ibtc annual report 2008
Stanbic ibtc annual report 2008
Stanbic ibtc annual report 2008
Stanbic ibtc annual report 2008
Stanbic ibtc annual report 2008
Stanbic ibtc annual report 2008
Stanbic ibtc annual report 2008
Stanbic ibtc annual report 2008
Stanbic ibtc annual report 2008
Stanbic ibtc annual report 2008
Stanbic ibtc annual report 2008
Stanbic ibtc annual report 2008
Stanbic ibtc annual report 2008
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Stanbic ibtc annual report 2008

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  • 1. 08 Annual Report RC 125097
  • 2. Being part of a bigger picture is exactly how we see our purpose in the financial services environment. In such a diverse world, finances are not just about money. They define how communities grow, work together and help connect solid ideas and practical innovations through improved networks. Our aim is to ensure that our customers are at the centre of our business and reap the reward of our combined strengths. This kind of cause and effect is no puzzle to us at Stanbic IBTC Bank PLC. We will continue to elevate the bar in real service delivery to all our customers. It is our connections and interlocking abilities that allow us to find the correct solution that really fits. From customers to shareholders to the capability of our people; every piece is essential for our vision. Overview Our vision values 4 Highlights 6 Stanbic IBTC - the group in brief 7 Recognition 10 Standard Bank Group at a glance 12 Business review 14 Chairman’s statement 16 Chief executive’s review 20 Economic review 23 Financial review 25 Executive committee 34 Personal and Business Banking 36 Corporate and Investment Banking 40 - Case study: The Lagos State Bond 44 - Case study: Lekki Concession Company (“LCC”) 46 - Case study: Lafarge Cement WAPCO Nigeria Limited 48 - Case study: MTN Nigeria Communications Limited (MTN Nigeria) 50 Wealth 52 Corporate governance risk management 54 Board of directors 56 Corporate governance report 58 Risk management 70 Annual financial statements 84 Directors’ report 86 Audit committee report 91 Consolidated financial statements 92 Report of the independent auditor 94 Statement of directors’ responsibilities 95 Statement of significant accounting policies 96 Balance sheet 100 Profit and loss account 101 Statement of consolidated cash flows 102 Notes to the consolidated financial statements 104 Statement of value added 133 Five year consolidated financial summary 134 Other information 136 Management team 138 Branch network 142 www.stanbicibtcbank.com Contents
  • 3. Respecting each other We have the highest regard for the dignity of all people. We respect each other and what Stanbic IBTC stands for. We recognise that there are corresponding obligations associated with our individual rights. Our vision values One vision To be the best financial solutions team - the customer’s choice. We will deploy our local knowledge and global emerging market expertise to deliver superior value to all our stakeholders, We will only succeed if we are able to attract, retain, develop and deploy teams of people with energy, passion and skills. Eight values Growing our people We encourage and help our people to develop to their full potential and measure our leaders on how well they grow and challenge the people they lead. We, and all aspects of our work, are interdependent. We appreciate that, as teams, we can achieve much greater things than as individuals. We value teams within and across business units, divisions and countries. Working in teamsServing our customers We do everything in our power to ensure that we provide our customers with the products, services and solutions to suit their needs, provided that everything we do for them is based on sound business principles. We strive to stay ahead by anticipating rather than reacting, but our actions are always carefully considered. Delivering to our shareholders We understand that we earn the right to exist by providing appropriate long-term returns to our shareholders. We try extremely hard to meet our various targets and deliver on our commitments. Guarding against arrogance We have confidence in our ability to achieve ambitious goals and we celebrate success, but we never allow ourselves to become arrogant. Upholding the highest levels of integrity Our entire business model is based on trust and integrity as perceived by our stakeholders, especially our customers. Being proactive Overview
  • 4. Stanbic IBTC the group in brief Stanbic IBTC highlights Stanbic IBTC bank’s results reflect the resilience of the group amidst continued global financial market turmoil. The strong capital position and healthy liquidity profile has positioned the bank to take advantage of business opportunities in its chosen growth markets. Subsidiaries Stanbic IBTC Asset Management Ltd. Stanbic IBTC Ventures Ltd. Stanbic IBTC Pension Managers Ltd. R.B. Resources Ltd. Stanbic Equities Ltd. Stanbic Nominees (Nigeria) Ltd. Overseas correspondent banks Australia and New Zealand Banking Group Citibank Commerzbank Credit Suisse Den Norske Deutsche Bank HSBC ING Financial Institutions Nordea Bank Standard Bank Group Standard Chartered Registered address head office Stanbic IBTC Bank PLC I.B.T.C. Place Walter Carrington Crescent P. O. Box 71707 Victoria Island Lagos, Nigeria Telephone: +234 (1) 2712400 Swift: SBICNGLX Facsmile: +234 (1) 2626541/2 E-Mail: info@stanbic.com Web: www.stanbicibtcbank.com 114% Gross revenue growth 32% Total loan growth 33% Deposit growth 52% Profit after tax growth 15% Return on equity Stanbic IBTC Bank PLC, a member of the Standard Bank Group is a full service universal bank with a clear focus on three main business pillars - Corporate Investment Banking, Personal Business Banking and Wealth Management. The Standard Bank Group, which has a controlling stake of 50.7% in Stanbic IBTC, has been in business for 146 years and is Africa’s largest banking group ranked by assets and earnings. The Stanbic IBTC Bank launch was announced in Lagos on 31 March 2008, signaling the successful conclusion of the merger. The launch of the merged entity was a significant step in the evolution of a new era of banking in Nigeria; assuming a leadership role in the transformation of the industry. Overview N61.2 billion Gross revenue Profit before tax Shareholders funds AAA Fitch rating N14.6 billion N80.7 billion
  • 5. Overview A broad-based financial services business Stanbic IBTC has consolidated its position in Nigeria over the past 18 months as a diversified business with a strong capital position and proven track record. Through focusing on the three key business segments – Corporate Investment Banking, Personal Business Banking and Wealth, we have continued to leverage the skills, economies of scale and synergies that come from being part of an international group and our excellent Nigerian pedigree. Personal Business Banking (PBB) Gross revenue N14.4 billion Banking and other financial services to individual customers and small to medium sized enterprises. Wealth Gross revenue N9.0 billion Investment management, pension fund administration and pension asset management Corporate Investment Banking (CIB) Gross revenue N39.8 billion Corporate and investment banking services to larger corporates, financial institutions and international counter- parties in Nigeria. 14% 23% 63% CIB PBB Wealth CIB PBB Wealth 3% 24% 73% CIB PBB Wealth 53% 17% 30% Gross revenue contribution Total Assets Profit before tax contribution
  • 6. 10 11 Recognition 4. Euromoney, African PPP Deal of the year 2008 – Standard Bank Group and Stanbic IBTC Bank PLC served as international arranger and biggest lender for the Lekki – Epe express way project. The project and structured finance team received this award for this groundbreaking project. Overview 2. This Day Awards 2009, Pension Fund Managers of the Year – Stanbic IBTC Pensions Managers Ltd has been awarded ‘Pension Fund Managers’ of the year 2009. SIPML remains Nigeria’s largest PFA (Pensions Fund Administrator), with over 600,000 retirement savings accounts and retirement assets in excess of N200 billion under management. SIPML currently pays over N550 million to over 13,000 retirees monthly. 5. Project Finance International, Africa Infrastructure Deal of the year - the project and structured finance team received this award for the Lekki – Epe express way deal 3. Bank of the Year, ACQ Finance Magazine Global Awards 2009 – The ACQ Finance Magazine Global Awards is an annual event that celebrates the top mergers and acquisitions dealmakers and their transactions. Stanbic IBTC Bank has been awarded ‘Bank of the Year, Africa, 2009. Getting an accolade of this value amidst several other notable competitors is a very important nod for Stanbic IBTC. 1. Ai Analyst of the Year, 2009 – Stanbic IBTC was awarded Analyst of the Year 2009, for raising awareness about African Capital Market opportunities. The Ai Financial Reporting Awards are the only African Awards that recognise the crucial importance professional financial reporting plays in informing investors and decision makers contemplating investments in Africa. This inaugural, but highly contested Analyst of the Year Award for the Banking Sector, was won by Yemi Kale and Muyiwa Oni of the research department in Stanbic IBTC. 6. 2009 Global Finance Magazine Award for the Best Investment Bank in Nigeria – this award was in recognition of Stanbic IBTC’s market share, number of deals as well as innovation in the Investment Banking Industry. 7. 2008 Nigeria Investment Banking League Award for Best Private Equity Deal in Nigeria – this award was in respect of the $550 million Private Placement by Starcomms Plc. Stanbic IBTC Bank PLC acted as a Joint Issuing House to the Placement.
  • 7. 12 13 Standard Bank Group at a glance 12 13 Overview * Market capitalisation R127 billion (US$14 billion) * Total assets R1.5 trillion (US$162 billion) * Operating in 17 African countries and 16 countries outside Africa * 50,321 employees (1941 in Nigeria) * 1,106 branches (62 in Nigeria) * 5,174 ATMs (68 in Nigeria) Branches in Nigeria Lagos Island - 14 South South - 8 Lagos Mainland - 12 North West - 6 South West - 7 FCT Abuja - 5 South East - 5 North East - 5 ATM Lagos Island - 20 South South - 7 Lagos Mainland - 11 North West - 6 South West - 9 FCT Abuja - 6 South East - 4 North East - 5
  • 8. 14 15 Business review 15 • Chairman’s statement • Chief executive’s review • Economic review • Financial review • Executive committee • Personal and Business Banking • Corporate and Investment Banking • Case studies: * The Lagos State Bond * Lekki Concession Company * Lafarge Cement WAPCO Nigeria Limited * MTN Nigeria Communications Limited • Wealth Business review
  • 9. 16 17 I t gives me great pleasure to preside over this 20th Annual General Meeting of our bank (AGM), which is coming shortly after we marked our 20th anniversary as a legal entity on 2 February 2009. It is particularly pleasing for me to be able to stand before you today to confirm unequivocally that, unlike many other financial institutions around the globe, Stanbic IBTC Bank remains in very sound financial shape. This is in spite of the twin effects of the global financial crisis which has ravaged several leading financial institutions and the economic recession, which is eroding income per capita in several leading economies. Stanbic IBTC Bank has retained its triple A (AAA) rating from Fitch. Our parent, the Standard Bank Group (“SBG”) achieved satisfactory results in 2008, reflecting the diversification and resilience of their businesses amidst continued global financial market turmoil. The capital injection from Industrial and Commercial Bank of China (ICBC) in March 2008 helped to ensure that SBG’s capital position remained strong. SBG’s liquidity profile remains healthy with liquidity management practices rigorously applied within a liquidity management framework. SBG’s vision of growing a full service, emerging markets financial organisation is unchanged and SBG continues to seek organic and acquisitive growth opportunities in Africa and other chosen markets which would enhance our own opportunities to service our customers wherever they operate. SBG remains committed to Nigeria. It is perhaps pertinent to emphasise that at Stanbic IBTC Bank we learnt several important lessons along the way in 2008. In my opinion, the single most important lesson is that we must continually uphold all those good habits, discipline and rigour that enabled us to speedily put up our “defences” even at the risk of being branded alarmists. Our board and management team were unanimous in recognising, relatively early, that what we were facing in 2008 was a global financial crisis of epic proportions. The accompanying credit crunch and de-leveraging led to falling asset values across several asset classes around the globe, including equities quoted on The Nigerian Stock Exchange (NSE). Commodity prices also collapsed very rapidly in some cases. Indeed, the severe and rapid fall in crude oil prices (a key determinant of Nigeria’s total export earnings) in the second half of 2008, from $147 a barrel to close to $40 a barrel, took Nigeria from an unprecedented boom into a period of severe belt-tightening in the space of a few months. The financial markets in Nigeria experienced significant volatility. In the first half of the year, on the back of an exceptional stock market performance in 2007 (The Nigerian Stock Exchange All Share Index gained 74% in 2007) and supported by a strong naira and growing foreign exchange reserves, the market was down by only 4% at 30th June 2008, an excellent return compared to the turmoil that was being experienced in other developed and emerging markets. With the benefit of hindsight it is easy to see that the high oil prices (surging towards $150 per barrel) and the ‘intervention’ of sovereign wealth funds in the financial crisis in the more developed markets helped mask the underlying weakness of the Nigerian market, especially the slower growth and high valuations, and encouraged the feeling of insulation from the world financial crises. The reality was that Nigeria was in fact not immune to the global financial problems as shown in the second half of the year. The market slowdown of the second quarter turned to a full scale crash as oil prices reversed sharply; foreign investors scrambled to exit the markets as their domestic liquidity crises deepened and the local financial markets witnessed their own share of liquidity squeeze. The impact was significant as the first half performance turned to second half blues and the market lost over 61% of its value from its all time high during the year and was down 45% for the year. Chairman’s statement “Stanbic IBTC Bank PLC remains in very sound financial shape. This is in spite of the twin effects of the global financial crisis which has ravaged several leading financial institutions and the economic recession, which is eroding income per capita in several leading economies. Stanbic IBTC Bank has retained its triple A (AAA) rating from Fitch” 16 Business review
  • 10. 18 19 Chairman’s statement Our bank participated in providing margin lending facilities to clients who were purchasing equities on the NSE. However, internal concentration guidelines, and a reduced risk appetite for this type of product stemming from the falling equity markets across the globe, resulted in a gradual reduction in our exposure to margin facilities from the first quarter of 2008. Unfortunately, due to the sharp decline in the stock prices during the last quarter of 2008, a number of borrowers were unable to keep up with the contractual margin requirements and thus, as a result of the strict application of the terms of these facilities, forced sales of these equities became necessary. Not withstanding our meticulous monitoring of these facilities, we sustained some losses, largely as a result of the NSE’s unexpected rule change via the sudden introduction of a more severe “circuit breaker”, which operated for a few months in the second half of 2008 and did not allow share prices to fall by more than 1% a day. In this atmosphere, several equities became unsaleable because the market felt they were overpriced but the stock prices were not allowed to speedily adjust downwards. We therefore witnessed a sustained erosion of the agreed margins, whilst being unable to trade significant volumes of equities. The circuit breaker was reinstated to the historical 5% level by the NSE in late 2008 which resulted in an increase in volumes to allow for the execution of a number of outstanding trades. Given the severity of the downturn by year end, a portion of our loan book reflected collateral shortfalls. To ensure that we complied with our historical accounting policies, which remain unaltered, it necessitated a N1.6 billion loan loss provision linked specifically to margin lending facilities. Our gross outstanding balance as at 31 December 2008 for margin lending was down to N8.30 billion. Accordingly, the financial statements which are being put before shareholders today for approval, have been prepared on the same conservative basis that our bank group has always utilised and after adjusting for the full impact of all known loan losses. The results are pleasing because they were achieved against a backdrop of severe financial turmoil. Income statement Gross earnings increased from N28.65 billion in the 9-month period ended 31 December 2007 to N61.24 billion for the year ended 31 December 2008. The 114% increase in Stanbic IBTC and its subsidiaries (“the group”) gross income is extremely pleasing and also demonstrates some of the immediate benefits of the merger with the Standard Bank Group. As part of gross income, non-interest revenue recorded an impressive increase of 57% from N12.88 billion in the 9-month period ended 31 December 2007 to N20.27 billion for the year ended 31 December 2008, stemming mainly from significant capital market transactions and activities during the first half of the year. The group’s net interest income increased correspondingly by 133% from N9.60 billion to N22.37 billion. The net interest increases are a result of transactional volume increases and an expanding customer base. The group’s operating expenses similarly increased by 143% from N9.44 billion to N22.98 billion in the corresponding period. The significant cost increase is a result of the groups continued investment in infrastructure and skills in order to build a base for sustainable future growth, and this is expected to continue in 2009 as we prepare a scalable platform. In addition cognisance must be taken of the fact that the previous financial year had nine months. A provision of N5.02 billion for loan and other asset impairments resulted in the group profit before tax amounting to N14.63 billion, which is a 33% increase over the N10.99 billion profit before tax for the nine months ended 31 December 2007. Group profit after tax and minority interest increased by 52% from N7.58 billion in the nine month period ended 31 December 2007 to N11.56 billion for the year ended 31 December 2008. Balance Sheet The Group’s total assets grew by 11% from N315.11 billion as at 31 December 2007 to N351.25 billion as at 31 December 2008; while the total liabilities grew by 13% in the same period from N239.09 billion to N269.88 billion. Shareholders’ funds grew by 7% from N75.57 billion to N80.67 billion. The change in shareholders’ funds merely represents the undistributed portion of the current year’s profits. The loans and advances portfolio has been conservatively and well provided against. At 31 December 2008 the total non - performing loan (NPL) book amounted to N15.54 billion representing 14% of the total loans and advances. Against this book are specific provisions of N9.43 billion representing 61% of the NPL’s. Your directors have recommended a dividend payout of 40 kobo per ordinary share of 50 kobo, amounting to N7.50 billion which is 60% higher than the dividend of 25 kobo paid last year for the nine month period ended 31 December 2007. Shareholders will recall that at an extra-ordinary general meeting held on 24 February 2009 they approved, subject to the approval of the Federal High Court, the write off of the losses that arose from the reinstatement and impairment of the goodwill attributable to our 2005 and 2007 mergers, which was previously written off directly against shareholders funds (capital) and is now required to be impaired through the profit and loss account. The reinstatement and impairment was done in accordance with the Nigerian Accounting Standard on Business Combinations (SAS 26). It should be noted that this change did not impact total shareholders funds. During the course of 2008, two new directors were appointed to the board of directors. The directors in question are Dr Alewyn Burger and Mr Rahtan Mahtani. Their appointments will be tabled for approval at this meeting. Mr Bond resigned from the board on account of his redeployment to China by the Standard Bank Group. We thank Mr Craig Bond for his immense contribution to our bank while he served on the board. In accordance with Article 81 of the Bank’s Memorandum and Articles of Association, six directors – Mr Ahmed Dasuki, Mrs Sola David-Borha, Mrs Ifeoma Esiri, Mr Ben Kruger, Mr Bhagwan Mahtani and Ms Marna Roets are retiring today as directors and, being eligible, are offering themselves for re-election. Later in the meeting, we will also be required to vote on nominations received in relation to our audit committee. As a group we are committed to upholding the highest levels of corporate governance and have implemented a comprehensive governance framework. Full details of this framework are provided elsewhere in this annual report. We are making significant investments in recruiting, retaining and managing highly talented people as this is a critical success factor in maintaining a competitive advantage. We believe that to be an employer of choice, a total value proposition to our staff needs to be considered. In this regard training, and in particular leadership development, has become a key differentiating factor for your bank. Amongst other forms of exposure and learning, the Standard Bank Group’s Global Leadership Centre (GLC) situated in South Africa plays an important role in developing excellence among our executive and senior management. The GLC offers internationally designed management development programmes aligned to global best practice and the group’s values and strategy. We also launched the Stanbic IBTC Bank training centre situated in Ikeja, which opened on 22 August 2008. The training centre can accommodate 90 learners across four classrooms. A total of 646 staff, participating in 1,128 learning interventions, have passed through the centre since inauguration. During 2008 we continued to donate funds towards various organisations.For 2009,aspartofourcorporatesocialresponsibilities, we will be focusing particularly on the health and education sectors. The outlook for global economic growth has deteriorated significantly in the past six months. Dislocations in developed financial markets have inevitably had a knock-on effect in developing markets and Nigeria has not been immune. Growth rates are expected to slow in 2009. In this regard a number of temporary measures were put in place by the Central Bank of Nigeria (“CBN”) to stabilise and protect the Nigerian economy. To stem the rapid decline in the naira from N117:1US$ to a high of N150 in the first quarter of 2009, tighter controls over foreign currency trading were instituted. These primarily made the CBN the primary buyer and seller of foreign currency effectively closing down the interbank currency market, significantly reducing the allowed net open position held by banks and limiting the spread/margin allowed on foreign currency transactions. In addition, in an effort to limit upward pressure on interest rate stemming from tighter liquidity in the market, maximum deposit and lending rates of 15% and 22% respectively were also introduced in the first quarter of 2009. We are pleased to note that all of these “extreme” measures have subsequently been relaxed. The outlook for global economic growth deteriorated significantly in the latter part of 2008 and early part of 2009. Dislocations in developed financial markets have inevitably had a knock-on effect in developing markets and Nigeria has not been immune thereto, particularly given the importance of oil revenues. Growth rates are expected to slow in 2009. Trading conditions will continue to be tough, largely impacting our businesses that are directly or indirectly dependent on the capital market, at the same time the market is expected to remain extremely competitive. These operating conditions will create both risks and opportunities across the group’s diverse financial services operations. The board is confident that with our skilled and passionate people and highly disciplined approach to risk management, the group is well positioned. Our focus will however remain on prudent risk management and the preservation of liquidity and capital. Finally, I would like to thank all the clients, shareholders and staff who have continued to stand with our institution during a very trying period of considerable financial turmoil. ATEDO N.A. PETERSIDE OON CHAIRMAN Business review
  • 11. 20 21 I t is a pleasure to report on the first full trading year as a merged entity. 2008 for Nigeria was a year characterized by mixed fortunes. The early part of the year saw a continuation of the growth trend of 2007 across most sectors of the economy, while the second half of the year saw the impacts of a sharply lower capital market and the global financial crisis taking hold. Stanbic IBTCs’ performance for 2008 in many ways mirrors that of the macro environment. However, overall we are pleased with the banks financial performance for 2008. You will find included herein a number of reports outlining individual business unit performances. As one might expect certain of the businesses found the environment considerably tougher in the second half, while others continued to make great strides. Notable contributions were made by Global Markets, Investment Banking, Stock Broking and Pension Managers businesses. We set ourselves ambitious targets for the banking businesses which in general were not fully achieved. However to describe this as a failure would not be doing justice to the many individuals who have built a great platform from which we would hope to see notable returns from in 2009.The launch of our new Business Online platform in December 2008 is an example thereof. The Bank made considerable and necessary investments in building capacity and improving the integrity of systems for today and the future, as well as in People and Infrastructure in general. While endeavouring to maximize returns from our existing and potential market leading businesses to compensate therefore, such investments have had a negative impact on certain efficiency ratios. Such ratios however were broadly in line with expectations. We are grateful that as an indicator of some key successes, 2008 saw Stanbic IBTC receiving a number of accolades and awards, including: • Best Issuing House in Africa-African Bankers Award • Award of Excellence as Global Custodian in Nigeria • African PPP Deal of the Year-Lekki-Epe Expressway-Euromoney • African Infrastructure Deal of the Year-Lekki-Epe Expressway-Project Finance International • Best Bond House-Euromoney • This Day Awards 2009, Pension Fund Managers of the Year • 2009 Global Finance Magazine Award for the Best Investment Bank in Nigeria • 2008 Nigeria Investment Banking League Award for Best Private Equity Deal in Nigeria A big thank you to all our customers and staff without whom none of the above would have been possible. 20 Chief executive’s review 2008 for Nigeria was a year characterised by mixed fortunes. The early part of the year saw a continuation of the growth trend of 2007 across most sectors of the economy, while the second half of the year saw the impacts of a sharply lower capital market and the global financial crisis taking hold. Stanbic IBTCs’ performance for 2008 in many ways mirrors that of the macro environment. However, overall we are pleased with the banks financial performance for 2008. Business review
  • 12. 22 23 Chief executive’s review Globally, 2008 has demonstrated the value and importance of a universal banking model, alongside the need for the skills and disciplines required for effective risk management. The value of the universal banking model is now far better understood. We are already such an institution, however continue to strive to achieve a more balanced contribution from our three core franchises. On the risk side we have implemented and continuously endeavour to refine an Enterprisewide Risk Management Framework which we adopted in line with global and Standard Bank Group best practices. To all our stakeholders who have assisted in making 2008 a reality – thank you. I particularly would like to thank our Customers, the executive committee team, my deputy – Sola David-Borha, the chairman – Atedo Peterside and the board for their commitment, contribution and invaluable support. Given that global and domestic markets have contrived to present a very challenging landscape for 2009, we will continue to adopt a measured approach to short term gains versus long term sustainability. We however enter the year with a quiet optimism and sense of anticipation of what could be achieved. CHRIS NEWSON CHIEF EXECUTIVE Stanbic IBTC continues to believe and invest in its People. The launching of the new brand in March 2008, incorporating our core values, was an important step in ensuring all staff feel part of a new beginning, understand what it is we stand for and act appropriately with each other, customers and all stakeholders. Our training and development drive has received a considerable boost with the opening of our own training centre in Ikeja - The Blue Academy. Already we have seen the number of training interventions with our staff increase dramatically. We also firmly believe that our ability to develop true leaders will sustain and grow our organisation into the future. In this regard the ability to leverage off the Standard Banks’ Global Leadership Centre is fantastic. A number of our senior staff members have already attended courses in Johannesburg. Critical to our future success will be the ability to ensure that an appropriate performance based culture prevails in the bank. Significant effort has gone into designing processes, educating staff and defining key measures aligned to each function and individual. Equally part of building the right performance culture is also the ability to attract and retain great talent – something which is a key responsibility of all management. As mentioned in my report last year, we have organized ourselves around three core business units being Corporate Investment Banking, Personal Business Banking and Wealth. Such a structure is designed around customer needs and to facilitate our ability to cross sell and work in teams. We believe that customers and the bank are starting to extract the benefits there from but a continued focus thereon remains a priority. A key aspect of teamwork is the ability to leverage off our parentage, that being the Standard Bank Group. We continue to strive to ensure that customers and staff benefit from the value that this relationship brings. 2008 has seen the launching of new localised products, the building of new business initiatives, the execution of significant transactions, the building of infrastructure and the acquisition of new customers as a direct consequence thereof. The recent affirmation by Fitch of Stanbic IBTCs’ AAA local rating (the only bank in Nigeria to attain this) is a further tangible benefit of being part of the Standard Bank Group. Business reviewEconomic review Global economic environment The first half of 2008 saw a gradual but managed unwinding of excess leverage by the international financial system, combined with a slowdown in developed economies. Financial and real economy asset prices started to fall sharply, but growth continued to be robust across all emerging markets. The strong outlook for growth in these newly established economies, combined with a lack of alternative asset classes to absorb excessive global liquidity, led to a rapid rise in commodity prices. In particular, oil prices rose rapidly to over US$ 100/bbl, and this put further downward pressure on growth in developed markets. However, in August 2008, a series of correlated shocks hit OECD financial markets, as underlying problems with mortgage backed securities caused instability in financial institutions. This in turn led to the collapse of Lehman Brothers and government intervention to rescue key financial players such as AIG, with later equity injections into most large financial institutions. The bankruptcy of Lehman led to the effective closure of key credit and commercial paper markets. These financial shocks helped to significantly enhance the slowdown in OECD growth, and a fall in export demand combined with a freeze in international lending and a rapid decline in commodity prices have placed significant downward pressure on growth across all emerging markets. 2009 will see one of the sharpest periods of global slowdown in the last century. Impact on commodity prices In the first half of 2008, global commodity prices rose very rapidly due to a combination of short-term supply constraints and a perception in the financial markets of continued demand from emerging markets. Commodity prices became extremely overbought due to a rapid increase in financial flows into commodity indexes. The rapid slowdown in the global growth outlook since August 2008, combined with enormous wealth destruction in the financial markets, led to a swift reversal of this final leg of the commodity cycle. The price of oil fell from US$ 147/bbl in July 2008 to around US$45/bbl in December. Whilst financial de-leveraging continues and more negative news on global growth emerges, the price of oil may fall further, although supply constraints will provide more support to commodities in general in the second half of 2009. Impact of international capital flows In the second half of 2008, international capital flows dropped sharply. At the same time, many asset classes around the world sold off heavily, pushing up yields on investment grade credits to over 20%. At the same time, banks efforts to delever their balance sheets led to a contraction in trade financing. Nigeria felt the effects of these global shifts, with international credit lines squeezed in the fourth quarter of 2008. With relative yields in the international markets much higher going into 2009, Nigerian banks and corporates will face greater challenges in raising international financing. Official foreign exchange assets: CBN reserves and sovereign savings 0 10000 20000 30000 40000 50000 60000 H2:08fH1:08H2:07H1:07H2:06H1:06 US$ m CBN foreign exchange Reserves Sovereign Savings
  • 13. 24 25 Financial review Nigerian policy environment Nigeria’s policy environment continued to reflect the benefits derived from the last five years of reform in a range of economic policy areas. Government continued to employ a benchmark budget oil price to insulate spending from the high levels of volatility in oil price, while oil savings are being earmarked for key power infrastructure spending. The local debt markets continued to evolve, with the yield curve lengthened to twenty years and local government debt also being developed. The ongoing growth of the Nigerian private pension industry continues to add investor funds in the market, supporting liquidity. The Central Bank of Nigeria (CBN) continued to develop its frameworks on monetary policy management, moving towards an interest rate framework based around a single lending (repo) rate, with open market operations increasingly important for managing liquidity. Interest rates trended marginally up during the first half of the year as the CBN tightened rates to fight inflation, but have fallen sharply since September as the CBN allowed more liquidity in part to offset the impact of the global crisis. Credit growth and core inflation -20 0 20 40 60 80 100 Oct’08Apr’08Oct’07Apr’07Oct’06Apr’06Oct’05Apr’05Oct’04Apr’04Oct’03Apr’03Oct’02Mar-02 Broadway Y/Y% CPI EXC FOOD Y/Y% In the dynamic environment of Nigeria’s growing economy, inflation management continued to be challenging, with inflation rates rising in the second half of 2008 due to rapid increases in bank lending to the private sector. This will continue to be a challenge in 2009. Crucially, towards the end of 2008, the CBN has also chosen to reflect the changing macroeconomic fundamentals of lower oil prices by allowing the naira to depreciate against the US dollar, to ensure Nigeria remains in external equilibrium. This trend will continue into the early part of 2009 until oil prices recover later in the year. Real economy developments The real economy continued to grow rapidly at around 8.5% year-on- year in 2008, as increased government spending helped to support continued rapid expansion of banking and other service sectors. This momentum showed in strong corporate earnings across a range of sectors, in turn ensuring that increased employment continues to expand the size and potential of the domestic market. In 2009, with prudent fiscal spending based on a US$ 45/bbl oil price limiting the role of government spending in further expansion, we expect GDP growth to cool. Still, with strong domestic demand particularly for services, we expect 5% non-oil economic growth, which will be above average for emerging markets. Summary The first half of 2008 saw Nigeria sustain strong economic performance alongside a strong naira. However, testing global conditions have since begun to feed through to the local economy through tighter international credit and a softer oil price, which has caused the naira to weaken and will lead to lower fiscal spending in 2009. Nonetheless, with very low external debt levels and strong domestic demand, the economy will remain well positioned to strengthen again as oil prices rise in the second half of next year. Business reviewEconomic review Overview of financial results The Group posted strong results in the first half of the year, contrasted by a tougher second half which was characterised by more challenging local and international markets. Profit after tax grew by 52% and the group achieved an after tax return on average equity of 15%. The relatively high return on equity reflects a continued philosophy to maximise shareholder returns by engaging in profitable business relationships (quality) without an undue focus on volumes or short term gains while still investing for the future. The tougher trading conditions and decreased liquidity in the second half of the year adversely affected the business segments that derive their revenue primarily from capital market activities. The impacted business segments are: • Asset management • Stockbroking • Corporate finance due to limited capital raising opportunities • Custody services Despite the tougher trading conditions, the group continued to grow transactional banking and foreign exchange volumes in the second half of the year. Return on equity Return on equity (profit before tax) 19% 19% Return on equity (profit after tax) 15% 14% 2007 Duringtheyearthebankmadeconsiderableandnecessaryinvestments in people and infrastructure. As part of our focus on talent, we invested in recruiting skilled people. Furthermore, we concentrated on building the capacity and integrity of our platforms, risk systems and businesses for today and for future growth. Such investment has had a negative impact on certain of the banks’ efficiency ratios and is set to continue during the coming year. Economic factors impacting the results Globally, the systemic credit and liquidity crisis deepened as interbank and wholesale funding markets stalled in the wake of fading confidence amongst financial institutions. Significant deleveraging followed as financial institutions realised assets to cover liquidity shortfalls, resulting in dramatic repricing. The lack of liquidity and the dramatically reduced risk appetite severely limited both the ability and willingness of global financial institutions to finance normal corporate requirements, bringing about a slowdown in market activity and a collapse in commodity prices. This market turmoil and consequent loss of confidence resulted in investors withdrawing funds from emerging markets and currencies devalued significantly. On the back of rising inflation in the second half of 2008 and reduced liquidity, lending rates increased. The bank’s prime lending rate had increased to 20.5% at the end of the December 2008. December’08December’07March’07March’06 Shareholders’ fund (average) ROE (PAT) Funds 0 10,000 20,000 30,000 40,000 50,000 60,000 70000 80,000 90,000 0% 5% 10% 15% 20% 25% 30% ROE 2008 Oct’02 Oct’03 Oct’04 Oct’05 Oct’06 Oct’07 Oct’08
  • 14. 26 27 Profit and loss analysis 0 10 20 30 40 50 60 70 80 Dec’08Dec’07Mar’07Mar’06 Earnings per share (Kobo) Net interest income Interest income 40,973,373 15,772,018 160% Interest expense (18,611,300) (6,170,948) 202% Net interest income 22,362,073 9,601,070 133% Growth in net interest income of 133% was supported by strong growth in all asset classes coupled with wider interest margins due to rising interest rates. Significant growth areas were commercial paper, medium term advances and infrastructure financing to corporate customers. Net interest margin (“NIM”) was 6.04% compared to the prior year of 5.79%. The improvement in NIM was largely due to the endowment impact of higher interest rates on shareholder‘s funds and the growth in transactional deposits in Personal Business Banking coupled with higher lending rates. Financial review Net interest income and net interest margin CAGR (2006-2008) 66% Non-interest revenue Net fees and commission increased significantly by 65%. Strong growth in fee income was experienced in all major product categories supported by strong investment banking flows, significant volume increases within our asset management and stockbroking businesses and growth in transactional banking volumes. Fee and commissions 14,995,807 9,088,614 65% Trading revenue 4,115,433 1,990,370 107% Other revenue 1,155,901 1,800,034 (36%) Non interest income 20,267,141 12,879,018 57% Trading revenue grew significantly by 107%. An excellent trading performance was achieved in foreign exchange and debt capital markets. Foreign exchange trading revenue improved significantly on the back of increased customer flows, the repatriation of investments by foreign investors in response to the global financial crisis and increased volatility. Debt capital market trading posted strong results in the first half of the year but this was not sustained in the second half due to the reduced liquidity and investment flows in the market, both locally and offshore. Decline in other income by 36% resulted mainly from the non- recurrence of substantial gains from the sale of property and equity investments in the prior period. Business review Year ended 31 Dec 2008 9 months ended 31 Dec 2007 Change N 000’s Mar’06 Mar’07 Dec’07 Dec’08 0 5,000 10,000 15,000 20,000 25,000 0.0% 2.0% 4.0% 6.0% 8.0% 10.0% Net Interest income Margin before impairment charges Margin after impairment charges N’mn Year ended 31 Dec 2008 9 months ended 31 Dec 2007 ChangeN 000’s Composition of non interest revenue CAGR (2006-2008) 72% Non interest revenue Mar’06 Mar’07 Dec’07 Dec’08 Fees Commission Trading income Other income N’mn 0 5,000 10,000 15,000 20,000 25,000 Mar’06 Mar’07 Dec’07 Dec’08 Non-interest revenue Percentage of total revenue 0 5,000 10,000 15,000 20,000 25,000 0% 10% 20% 30% 40% 50% 60% 70% N’mn Credit impairment charges Specific provisions 4,540,861 1,681,913 170% General provisions 478,974 361,770 32% Total 5,019,835 2,043,683 146% The146%increaseincreditimpairmentchargesisduetoourcontinued prudent provisioning policy in light of deteriorating economic conditions. As a function of the depreciating currency, rapid fall in oil prices and general predictions for slow growth in Nigeria, we have taken a prudent stance in classifying potential exposures in sectors that are likely to be affected; coupled with additional provisioning in respect of margin facilities as a consequence of declining share prices. A N1.6 billion loan loss provision specifically for margin facilities was raised during the year. Consequently the credit loss ratio deteriorated from 2.5% to 5.1% The group has not modified its provisioning policy and continues to impair assets using the same principles it used in the previous years. The group’s gross exposure to margin loans continues to be prudently managed, and as at 31 December 2008 the gross margin lending book at N8.3 billion represents 8% of the gross loan book. Credit impairment charges 12 months ended 31 Dec 2008 9 months ended 31 Dec 2007 ChangeN 000’s 0 500 1,000 1,500 2,000 2,500 3,000 3,500 4,000 4,500 5,000 Mar’06 Mar’07 Dec’07 Dec’08 Credit impairment charges on NPLs Credit loss ratio Credit impairment charges on PLs 0.0% 1.0% 2.0% 3.0% 4.0% 5.0% 6.0% 7.0% 8.0% 9.0% 10.0% N millions Earnings per share (Kobo)
  • 15. 28 29 Non-performing loans (NPL) increased by 39% to N15.5billion which represents 14% of the gross loan book an increase from 12% in 2007. The marginal increase is a reflection of the increased inherent risk partly offset by our comprehensive risk management framework and prudent provisioning policies. The group continues to hold adequate credit provision. Provision adequacy after taking into account the net present value (NPV) of security held stands at 188%. The group has not modified its provision policy and continues to impair assets using the same principles it used in previous years. Total deposits and current accounts increased by 33% to N95 billion. Customer liabilities increased following the growth in our demand deposit customer base and increased term funding as we continued to structure products and facilities to attract term funding from a very competitive market. Liquidity Liquidity conditions in international money markets and debt capital markets tightened considerably during 2008, and ongoing risk aversion of investors remains evident. In response to the adverse market conditions, heightened focus was placed on the frequency and rigour of the application of prudent practices within the bank’s liquidity management framework. Surplus liquidity buffers, comprising unencumbered and readily available marketable assets, amounted to N104 billion as at 31 December 2008. Further information on the group’s liquidity management is contained in the risk management section starting on page 70. Operating expense Operating expenses increased significantly by 143%, comprising 124% growth in staff costs and 164% in other operating expenses respectively. On an annualised basis operating expenses increased by 68%. The cost-to-income ratio deteriorated from 42% to 54%. This was a year in which the two legacy banks integrated their systems, operations and brands and therefore incurred significant one-off expenses. Excluding the effect of non-recurring integration costs incurred in 2008, operating expenses grew by 106% and the cost to income ratio was 48%. Staff costs 10,834,830 4,843,220 124% Auditor’s remuneration 130,000 88,870 46% Communication 359,891 152,648 136% Depreciation 1,433,223 771,336 86% Information technology 824,603 354,009 133% Marketing expenses 460,765 461,288 0% Premises 756,100 821,502 -8% Training, travel accomodation 1,343,794 300,344 347% Other 4,158,714 1,651,060 152% Total other operating Expenses 9,467,091 4,601,057 106% Integration costs 2,680,563 – n/a Total operating expeses 22,982,484 9,444,277 143% Variable remuneration as a % of fixed remuneration 41% 32% – Variable remuneration as a % of total staff costs 28% 23% – Cost-to-income ratio 54% 42% – The significant cost increases are as a result of the group continuing its investment and growth strategy, and as such, is investing in infrastructure that is designed to ensure scalability and sustainable growth in the future. There has been significant investment in the following: • IT infrastructure • IT systems • Branch network In addition, in order to improve our service offering and delivery especially in the personal and business banking market, the staff headcount increased by 61% to 1941. The investment is starting to bear fruit as customer numbers, transactional volumes and service levels are all increasing. Balance sheet analysis Key balance sheet indicators Loans advances to banks 111,592,259 79,578,685 40% Net loans and advance to customers 98,398,273 79,464,605 24% Total loans advances 209,990.532 159,043,290 32% Deposits current acc. 95,240,375 71,390,744 33% Shareholders funds 80,665,041 75,563,215 7% The loans and advances book grew by 32% to N210 billion, comprising a 40% growth in loans and advance to banks and a 24% increase in net loans and advances to customers from N79 billion to N98 billion despite a significant decrease in margin facilities during the year under review. The increase in customer loans and advances is primarily attributable to increased utilisation by corporate clients and sign-on of new clients. Corporate loans and advances grew by 54% on the back of increased overdrafts, term lending and commercial paper. Significant projects financed in 2008 include the Lekki-Epe Expressway. Personal business banking loans and advances declined by 20% largely due to a deliberate slow down of margin lending from March 2008, coupled with a further reduction from July 2008 in light of the declining capital market. The decision to restrict this type of facility was informed by internal concentration guidelines, and a reduced risk appetite for this type of product stemming partly as a function of the falling equity markets across the globe and in Nigeria, resulted in a gradual reduction in our exposure to margin facilities from the first quarter of 2008. Mortgage lending and overdraft balances increased significantly but were fully offset by the reduction of margin facilities. N 000s 31 Dec 2008 31 Dec 2007 Change 31 Dec 2008 31 Dec 2007 Change Gross loans and advances to customers Composition of gross loans and advances Mar’06 Mar’07 Dec’07 Dec’08 Gross loan advances NPLs 0 20 40 60 80 100 120 N billions Commercial paper Medium Term Finance Margin facilities Overdrafts Home Loans Instalment Sales (VAF) Commercial paper Medium Term Finance Margin facilities Overdrafts Home Loans Instalment Sales (VAF) 33% 28% 4% 2% 25% 8% Financial review Business review Year ended 9 months ended Year ended 9 month ended N’000s N 000s 2008 2007 Marketeable assets 58,154 83,657 Short-term foreign currency placements 40,546 20,657 Total unencumbered marketable assets 98,700 104,314 Other readily accessible liquidity 5,500 – Total unencumbered surplus liquidity 104,200 104,314 Provision adequacy N’000s balance suspense value (NPV) NPL adequacy Margin lending 2,995 6 2,289 700 1,672 239% Other balances 12,543 1,255 6,968 4,320 7,759 180% Total 15,538 1,261 9,257 5,020 9,431 188% Gross NPL Interest in Security Net Provision Provision
  • 16. 30 31 Capital Total shareholder funds grew by 7% to N81 billion on the back of a solid financial performance in 2008. The bank continues to be well capitalised. Regulatory capital increased by 4% from N73 billion to N76 billion during the period under review. Capital adequacy at 31 December 2008 was 36% against a regulatory requirement of 10%. N 000s 2008 2007 Growth Tier I capital 74,797,845 72,609,197 3% Tier II capital 1,003,733 511,853 96% Total qualifying capital 75,801,578 73,121,050 4% Risk weighted assets 210,561,983 180,673,670 17% Capital adequacy Tier I 36% 40% Total 36% 40% Proposed dividend The board of directors has proposed a dividend of 40kobo per share, amounting to N7,500,000,000 for the 12 months ended 31 December 2008 on the issued share capital of 18.75billion ordinary shares, subject to the approval by the shareholders at the next annual general meeting. This represents an increase of 60% over the dividend paid for the period ended 31 December 2007 of 25kobo per share on the issued share capital of 18.75billion ordinary shares amounting to N4,687,500,000. Accounting policies Basis of preparation The balance sheet and profit and loss account and specific disclosures are published in compliance with section 27 (1) of BOFIA Cap B3 Laws of the Federation of Nigeria 2004. The information disclosed has been extracted from the full financial statements of the bank and the group and cannot be expected to provide as full an understanding of the financial performance, financial position and financing and investing activities of the bank and the group as the full financial statements. Year ended 31 Dec 2008 Year ended 31 Dec 2007 Change (%) Net operating income 42,629,214 29,696,169 44% Operating expenses (22,982,484) (13,713,717) 68% Provision for losses (5,019,835) (4,098,705) 22% Profit before tax 14,626,895 11,883,747 23% Taxation (2,632,465) (3,179,204) -17% Profit after tax 11,994,430 8,704,543 38% Minority interest (430,279) (265,024) 62% Profit after tax and minority interest 11,564,151 8,439,519 37% Key Ratios Earnings per share (kobo) 64 46 38% Cost to income ratio 53.9% 46.2% Net interest margin 6.04% 5.56% Return on equity 15.2% 15.6% Credit loss ratio 5.1% 5.2% Financial review Annualised results Business review Changes in accounting policies The accounting policies are consistent with those adopted in the previous year except for: • The adoption of SAS 26 Business Combinations with an effective date of 1 January 2008 and retrospective application for all transactions subsequent to 1 January 2005. This new standard requires that goodwill arising from an acquisition is not amortised but instead tested for impairment at least annually. The goodwill arising from the acquisition of Chartered Bank and Stanbic Bank Nigeria has been reinstated and tested for impairment in accordance with the new standard. The goodwill arising from the purchase of both Chartered Bank and Stanbic Bank Nigeria has been found to fully impaired. Annualised results (unaudited) The group’s consolidated financial statements are prepared in accordance with, and comply with generally accepted accounting practice (GAAP) as issued by the Nigerian Accounting Standards Board (NASB). However to allow for effective comparison annualised results have been prepared to take into account the changes the company has undergone in the recent past. Following the successful completion of the merger arrangement between IBTC Chartered Bank and Stanbic Bank Nigeria in September 2007, the group changed its accounting year to 31 December with effect from the 2007 year end. This resulted in financial statements for 2007 being prepared for a nine month period. To allow for effective comparison the 2007 financial results shown below have been annualised. The annualised results were arrived at by summing the published results for the 9 month period ended 31 December 2007 with the group’s published results for the quarter ended 31st March 2007.
  • 17. 32 33 Financial review Business review IFRS Results The Standard Bank Group (‘SBG’) reports its results in accordance with International Financial Reporting Standards (IFRS). Accordingly the group prepares IFRS results for inclusion in SBG’s results. Below are extracts of the income statement and balance sheet for the year ended 31 December 2008 prepared in accordance with IFRS. The fundamental differences between Nigerian GAAP (NGAAP) and IFRS are: • NGAAP employs a historical cost convention whereas IFRS employs fair value. • Credit impairments are calculated based on expected losses (a set percentage based on prudential guidelines) instead of the IFRS incurred loss methodology with fair value calculations for security • Under NGAAP revenue on yield instruments is recognised purely on an accrual basis with no mark to market adjustments Assets Cash and balances with central banks 9,604,745 Pledged assets 16,876,438 Derivative assets 518,334 Trading securities 59,823,043 Financial investments 28,417,474 Loans and advances 229,390,963 Loans and advances to customers 121,034,101 Loans and advances to banks 108,356,862 Other assets 39,433,978 Equity investment 1,100 Other intangible assets 133,601 Property and equipment 8,119,832 Total assets 392,319,508 Equity and liabilities Equity 83,959,372 Equity attributable to ordinary shareholders 83,259,137 Ordinary share capital 9,375,000 Ordinary share premium 84,303,797 Reserves (10,419,660) Minority interest 700,235 Liabilities 308,360,136 Trading liabilities 62,698,142 Deposit and current accounts 147,933,566 Deposits and current accounts with Customers 90,885,434 Deposits and current accounts with Banks 57,048,132 Other liabilities 90,540,067 Current and deferred tax liabilities 7,188,361 Total equity and liabilities 392,319,508 Year ended 31 December 2008 N 000 Balance Sheet Income Statement Year ended 31 December 2008 N 000 Interest income 28,586,216 Interest expense (12,698,369) Net interest income 15,887,847 Non-interest revenue 27,764,495 Net Fees and commissions revenue 14,421,311 Fees and commission revenue 14,554,755 Fees and commission expense (133,444) Trading revenue 11,150,413 Other revenue 2,192,771 Total income 43,652,342 Credit impairment charges (2,961,649) Credit Impairment charges on non-performing loans (2,231,783) Credit Impairment charges on performing loans (729,866) Income after credit impairment charges 40,690,693 Operating expenses (23,786,913) Staff costs (10,606,861) Other operating expenses (13,180,052) Profit before tax 16,903,780
  • 18. 34 35 Executive committee Kayode SololaDr Demola Sogunle Obinnia Abajue 35 Chris Newson (44) Chief executive officer B.Com CA (SA), CSEP Oversees all business activities of Stanbic IBTC Bank South African institute of Chartered Accontants, CIBN Kandolo Kasongo (53) Head of credit MBA Oversees the credit function, application of best practice underwriting principles and subsequent credit management practices to minimise credit losses. Marna Roets (42) Executive director, Business support B.Com (Hons) CA (SA) Oversees and co-ordinated the activites of business support unit heads South Afrian Institute of Chartered Accountants Angela Omo-Dare (49) Company secretary and head, legal LLB, BL, LLM Oversees and coordinates the company secretariat and legal functions of the bank CIBN, NBA Sola David-Borha (48) Deputy managing director; Executive director, Corporate Investment Banking B.Sc, MBA Oversees and co-ordinates the activities of all Business unit heads under CIB CIBN, NESG, FITC Isioma Ogodazi (51) Head of human resources BA, Post Graduate Diploma Responsible for setting the strategic people agenda for the bank and providing consulting support for executive management. Institute of Personel Developmemt UK Nigeria Sola David-BorhaChris Newson Marna Roets Jacques TroostYinka Sanni Angela Omo-DareIsioma OgodaziKandolo Kasongo Yinka Sanni (43) Executive director, Corporate Investment Banking BA (Hons), MBA ACS Co-Head of CIB, responsible for providing oversight for Transactional Products Services. This includes Institutional and Corporate Banking, Private Client Services, Investor services, Corporate Affairs and Research CIS, CIBN Ronald Pfende (37) Chief financial officer (West Africa) B.Com (Hons), MBL, CA (SA), CA(Z) Responsible for finance in the West Africa region (Nigeria and Ghana) which encompasses financial control, reporting, planning and management. Also oversees the bank’s tax administration. South African Institute of Chartered Accountants, Institute of Chartered Accountants of Zimbabwe Obinnia Abajue (33) Head - wealth group B.Sc, MBA, FCA Head of wealth division which includes Stanbic IBTC Pension Managers Limited and Stanbic IBTC Asset Management Limited ACIB, ACS, – Institute of Chartered Accountants of Nigeria Kayode Solola (41) Head of global markets MBA, ACA Oversees treasury activities which include foreign currency, money and fixed income trading and asset and liability management Institute of Chartered Accountants of Nigeria Jacques Troost (45) Executive director, Personal Business Banking B.Com (Hons) Oversees and coordinates the activities of all business unit heads under PBB Dr. Demola Sogunle (44) Head, group risk B.Sc, M.Sc, PhD, MBA Overseeing the development and implementation of a risk management framework that is consistent with the complexity of the group. CIBN, MMAN Business review Ronald Pfende
  • 19. 36 37 0 20000 40000 60000 80000 100000 DecNovOctSepAugJulJunMayAprMarFebJan Us-on-us Them-on-us Us-on-them 0 30000 60000 90000 120000 150000 DecNovOctSepAugJulJunMayAprMarFebJan 0 10000 20000 30000 40000 50000 60000 70000 80000 DecemberNovemberOctoberSeptemberAugustJulyJuneMayAprilMarchFebruaryJanuary Monthly SMS notifications Monthly email notifications ATM withdrawal transactional volumes per usage type ATM volumes of all transaction types per month 0 100000 200000 300000 400000 500000 DecemberNovemberOctoberSeptemberAugustJulyJuneMayAprilMarchFebruaryJanuary Overview The Personal Business Banking (“PBB”) division focuses on personal customers of all income levels and business clients excluding large corporations, government and institutions. The division provides products and services to clients through the following channels: • suites • branch network • self service channels (ATM and internet banking). Products offered include vehicle and assets finance, unsecured personal loans, bancassurance, mortgage loans, a range of trade finance products. current accounts, savings accounts and various investment products. For PBB 2008 was about establishing the necessary base to become a competitive personal and business banking entity. Resources were utilised to introduce a proven branch operating model, determine the strategy for upgrading and expanding the footprint of both direct and indirect channel, while also ensuring that branches are correctly positioned from a foot flow, customer reach and customer experience perspective. The other key focus was to ensure that basic lending products were made available while upgrading the current range of liability products with a view to reactivating the existing client base, penetrating the mid and upper end of the formal market while improving the service experience of our clients. As a catalyst to achieving the above, significant emphasis was placed on the training and development of our staff and introducing world class people management practices. During 2008 significant investment was made towards upgrading the communication and information technology infrastructure to ensure continued availability of services to customers. Dual communications links were introduced to 53 branches, with the remaining branches being scheduled for completion during the first half of 2009. Uptimes of branches and ATMs are closely monitored to ensure continued improvement to the availability. A detailed review of the PBB concentration in the asset book in the early part of 2008 highlighted an unacceptably high exposure to margin facilities and in light of global trends a decision was quickly taken to reduce the bank’s exposure to this product. Although this decision had a negative impact on the asset book, it ensured that the bank was not exposed to an undue level of risk. By December 2008 the gross margin lending balance had been reduced to N8.3 billion. In addition the bank continues to follow its conservative credit provisioning policy, and an additional N1.6 billion provision was raised in respect of margin facilities. In summary, 2008 year was about getting the basics right and building a sound foundation for future growth. Strategy Our strategy is to serve both the personal as well as the business banking client requirements, from the most basic to the most sophisticated financial service needs, to maintain high standards of customer service by utilising cost efficient delivery channels while significantly growing the transactional volumes. A new branch operating model was introduced, which focuses on an improved customer service experience and at the same time, providing a more effective sales platform for our sales and relationship teams. Where appropriate, processing and back office functions have been centralised. At the same time, alternative service channels are also in the process of being upgraded and rolled out. This will ensure that our clients have a choice of channel for the delivery of their financial needs including ATM and internet banking solutions. The bank continued to invest in its branch and ATM networks through revamping, relocating, and opening branches, replacing and introducing additional ATMs. New products were launched, which include Vehicle and Asset Finance (VAF), mortgage loans and unsecured personal loans while transactional, savings and investment products were upgraded. Business reviewPersonal and Business Banking
  • 20. 38 39 Financial performance Despite the fact that operating costs grew in absolute terms due to headcount increases in the distribution network, product development, VAF fulfilment, customer strategy and direct channels. This investment in new talent had a positive effect on new customer acquisitions, customer service experience and increased product take up by the customers. The investment in the upgrade of our branch and ATM network also added to the growth in overall operational costs. Notwithstanding all of this transaction volumes grew at an acceptable level during 2008 which had a positive impact on gross revenues which increased to N14.4 billion. Financial highlights N millions Gross revenue 14,378 Total cost 10,024 Tax provision 618 Profit after tax 3,735 Net asset 21,486 Looking ahead In 2009 we foresee a more challenging environment due to rising interest rates, the devaluation of the Naira and reduced government revenue. These factors will impact consumers and could reduce the demand for certain banking products. We want to continue to grow our market share by investing in new branches and ATMs, while also continuing to upgrade and relocate existing branches to ensure that they are all well positioned for increased client activity. More focus will also be placed on cross sell opportunities to the current PBB account base and leveraging off corporate relationships within a framework of operational efficiency. Further to this, additional channels and products will be introduced to the current client base while customers in segments previously not focused on will be catered for by introducing segment specific service and product types. This will be underpinned by continuous investment in our staff through training and development opportunities and in infrastructure. Personal and Business Banking Monthly internet banking transaction volumes Sales volumes DecemberNovemberOctoberSeptemberAugustJulyJune 0 30000 60000 90000 120000 150000 DecNovOctSepAugJulJunMayAprMarFebJan 0 2000 4000 6000 8000 10000 12000 14000 16000 18000 20000 6591 Business review
  • 21. 40 41 Corporate and Investment Banking Overview Stanbic IBTC’s Corporate Investment Banking (CIB) division serves a wide range of local and international corporate and institutional clients. The services offered include debt and equity advisory, structured and project finance, trades services, transactional banking and lending, global markets, custody, private clients services and private equity funding. We have built up a strong track record in the past and have further enhanced our offering with a structure that facilitates client focus. This will position the bank to participate effectively in growing Nigerian capital markets and financing infrastructure projects. Our CIB franchise has evolved in line with the growing sophistication of clients transactional and financing requirements in Nigeria and continues to enhance its reputation as one of Nigeria’s leading investment banks with a number of landmark transactions in 2008. These include: • The arrangement and co-financing of a N20 billion senior 15-year facility for the construction of additional lanes, rehabilitation, tolling and modernization of the existing 46km Lekki-Epe expressway by Lekki Concession Company being the first successful Public Private Partnership (PPP) project in Nigeria. • Sole issuing house to the private placement of a 9.45% stake up to US$944.7m by MTN Nigeria Communications Limited. This is reputed to be one of the largest successful private placements in the history of the Nigerian Capital Market. • Joint issuing house to the hybrid offerings of N198 billion done by Zenith Bank Plc which was oversubscribed as over N400 billion was raised. • US$550 million (N64.35 billion) private placement of new and existing shares by Starcomms Plc, the first telecommunications company to be listed on the Nigerian Stock Exchange. • Mandated as one of the joint financial advisers / issuing house to the on-going N275 billion debt issuance programme by the Lagos State Government. Stanbic IBTC remains Nigeria’s pre-eminent investment banking institution and leading issuing house by transaction value. At the 2008 African Banker Awards, the bank retained the Best Issuing House award for the second year running. We also won the Best Bond House in Nigeria at the 2008 Euromoney Awards and received a “Commended” rating for 2007/2008 at the Global Custodian Award for Excellence. In addition, the Lekki-Epe expressway PPP project earned the bank the African PPP and African Infrastructure Deal of the Year Awards from Euromoney and Project Finance International respectively. Strategy The year was characterised by taking advantage of the positive synergies arising from the merger of the Stanbic and IBTC brands. Given IBTC’s excellent local pedigree as a leading investment bank and wealth manager in the country and riding upon the strong international experience and reputation of the Standard Bank Group, we were able to strengthen our CIB franchise within the local market. In positioning the bank for a better transactional banking pedigree, we launched new Business Online (nBOL), an electronic banking solution which provides access to electronic statements, electronic transaction initiation, levels of authorisation and enhanced reconciliation of accounts through an internet-based solution. With this, we are well placed to partner with the public and private sectors to deploy electronic payment solutions. This capability will help strengthen our annuity businesses by improving on deposit collections and Web Pay transactions. Our strategy is to consolidate our existing CIB franchise by building expertiseindebtcapitalmarkets,infrastructuralfinancing,derivatives, private equity funding and private client services. Subject to receiving regulatory approvals, a private equity fund of US$200 million is being launched in conjunction with Standard Bank for investment in selected private companies. Business review
  • 22. 42 43 Corporate and Investment Banking Looking ahead We plan to take full advantage of all opportunities offered us by the current global financial turmoil by strengthening our risk management capabilities. One of the things the global financial crisis has highlighted is the importance of an annuity business to a universal banking franchise. Our primary focus in 2009 will be to grow our deposit base by driving collections and generating more sectoral focused quality loan assets, ensuring that all risks are priced correctly. Although revenue will increasingly be under pressure, we intend to focus on cost management to reduce the strain to the bank’s bottom line. Given the unprecedented collapse of the global financial markets, more focus is aimed at sourcing US dollar funding, capital, liquidity and credit risk management. Our strategy is to move to a product neutral operating model before the end of 2009. This will make us customer-centric with relationship managers who have a sound knowledge of the bank’s products and services, supported by product specialists to ensure we can service all the financial needs of our customers. Business review CIB is also well placed to maximize our cross border capabilities by linking potential investors in South Africa, China, Russia and other emerging markets with Nigerian businesses. We will work with ICBC China, Standard Bank London and Standard Bank South Africa in promoting our custodial and trade businesses. We are also at the forefront of working with key regulators in shaping the regulatory framework to align with global best practices. Our Global Markets expertise remains strong, providing a full range of risk management products, services and structured solutions to our clients. Our presence in the market is evident in the areas of foreign exchange and currency risk, fixed income, interest rate management, money market and securities trading. With this, and our strong international network, we aim to continue to maximise business opportunities and minimise risk in such a way that adds value to our corporate and institutional clientele, most especially in this volatile global economic situation. Investments have been made in recruiting highly skilled people, and we have focused on new products, risk systems to develope scalable infrastructure. This investment is set to continue during the coming year. Financial performance The events in the global financial market and the Nigerian capital markets notwithstanding, the combination of our knowledge of the local market and strong international network and support contributed positively to our financial performance. Financial Highlights N millions Gross revenue 39,734 Total cost 31,343 Tax provision 638 Profit after tax 7,160 Net asset 56,918
  • 23. 44 45 Case study: Lagos State Bond Stanbic IBTC has worked closely with the Lagos State Government (“the State ”) over the years to structure innovative solutions to the State’s long term financing needs. In 2002, Stanbic IBTC acted as lead issuing and underwriter to a N15 billion, 7 year redeemable bond issue, which was the largest public debt issue in the history of the Nigerian capital markets at that time. The proceeds of that bond issue, which was recently completely redeemed by the State, were utilised to finance various developmental projects embarked upon by the State at that time. The Programme Stanbic IBTC is currently acting as joint issuing house/arranger and primary dealer to the Lagos State N275 billion debt issuance programme (“the programme”), under which the State expects to issue a series of bonds of varying maturity up to an aggregate amount of N275 billion. The programme, which was approved by the Lagos State Executive Council in January 2009, was created to give the State access to the capital markets as the need arises to finance various infrastructure initiatives through the issuance of long term investment vehicles such as bonds, notes and other securities. These infrastructure initiatives include the construction/upgrade of roads and bridges, water transportation projects, a rail transportation systems, environmental projects, housing sector initiatives, health care initiatives and improvement in the educational system. Financing The first issuance under the programme was a N50 billion 5 year fixed rate bond (Series 1) issued by way of a public offering in January 2009. The bond was issued at a fixed rate coupon of 13% per annum and is the largest state government debt offering ever undertaken in Nigeria. The proceeds of the bond issue, which was oversubscribed, will be utilised to finance ongoing infrastructure projects and refinance loans obtained to make down payments on these infrastructure projects. The distribution of the issue was diverse with the majority being placed with financial institutions, pension funds and asset managers. The issue received an A+ rating from Agusto Co, while Lagos State was assigned an AA (national) and BB- (long term international) rating by Fitch Ratings. Lagos State Lagos State was created in May 1967 and is Nigeria’s financial, commercial and industrial nerve centre. At its current growth rate it is forecast to be the third largest mega city in the world by 2015 and is the only state in Nigeria that generates a significant majority of its revenues internally: the State’s internally generated revenue currently exceeds 200% of its statutory allocation from the Federation Account. The State has developed a medium-term strategy intended to address the issues of accelerated economic growth and sustainable urban development through both government initiatives and public-private partnerships. This should result in a marked increase in productivity, growth and overall development of the State’s economy, and prepare Lagos State for its emergence as a internationally-recognised mega city. Stanbic IBTC will be there to assist the State to achieve its objectives. 45 Business review
  • 24. 46 47 Case study: Lekki Concession Company (“LCC”) Lekki Concession Company (“LCC”) – a special purpose company, has partnered with the Lagos State Government for construction of the Lekki-Epe expressway on a build, operate and maintain agreement. The agreement is for 30 years, after which the asset will be handed over to the State Government. The Programme Phase 1 of the project is the upgrading of the first 49.4km of the Lekki-Epe road. Phase 2 of the project involves the development of the first 20km of the coastal road with an option to develop the southern bypass. Benefits of the project to the population of Lagos State will be traffic decongestion and a number of services that will be available on the road such as street lighting, break-down assistance, an ambulance service and a customer call centre. The expressway will also have much improved security, and the project will have spillover effects such as employment creation and increased real estate values. Financing Standard Bank Group alongside the Lekki Concession Company closed financing for the US$426 million (N50.1bn) Lekki-Epe Expressway PPP on 17th October 2008. Standard Bank, South Africa, acted as co-financial advisor while Standard Bank London and Stanbic IBTC acted as arranger, underwriter and largest lender to the project. Funding for the project, which should take three years to complete, comes from the Lagos State Government which invested US$42 million (N5 billion) in a twenty year mezzanine debt tranche. The African Development Bank provided US$85 million (N10 billion) senior debt over 15 years. Local lenders, including First Bank of Nigeria and United Bank for Africa, provided a 12-year note issuance facility of US$80 million (N9.4 billion). Other banks that partcipated in this tranche were Zenith Bank, First Inland Bank, Diamond Bank and Fidelity Bank. The remaining term funding was provided by Standard Bank London which became the sole arranger of the US$93 million (N11 billion) 15-year international tranche – underwritten by Standard Bank London and Stanbic IBTC Bank PLC. The project represents a milestone as it is the largest PPP deal closed in Nigeria to date and is the first 15-year tenured financing and longest tenured cross-currency swap. Total equity for the deal is US$58.9 million (N6.93 billion) and was provided by: • Asset Resource Management Co Ltd (“ARM”); • Africa Infrastructure Investment Fund (“AIIF); • Larue Projects; and • Hi-Tech Construction. The debt to equity ratio is 68:32, and the total project value of N50 billion comprises of the senior debt tranche of N30.4 billion, equity of N6.9 billion, mezzanine debt of N5 billion, and the balance from other sources including pre-completion revenues. Business review
  • 25. 48 49 Lafarge Cement WAPCO Nigeria Plc, one of the largest cement producing companies in Nigeria plans to increase its production capacity over the next few years. To achieve this, the company is embarking upon an expansion plan which will increase its production by 2.2 million metric tonnes per annum and will also construct a 70MW captive power plant operated by natural gas and / or low pour fuel Oil (“LPFO”) which will replace its existing power source. The programme Since conceptualisation of the project in December 2007, a feasibility study on the expansion project has been undertaken and an environmental impact assessment (EIA) study, which is mandatory in Nigeria for a project of this size was completed. The construction phase commenced in mid 2008, and is expected to be completed by Q1 / Q2 of 2010. It is expected that the expanded plant will become fully operational by the first half of 2011 following installation of electricity supply and plant commissioning. Stanbic IBTC Bank PLC has been appointed by the company as the global coordinator for the expansion project funding and as co-lead arranger on both the Naira and US$ tranches with two other banks. Financial closure on the transaction was achieved in May 2009. Financing The estimated project cost (including power station investments of €55 million), will be financed through a mix of internal cash flows and external debt financing. The debt portion of the project amounting to €225 million is to be financed on the balance sheet of Lafarge WAPCO. Total estimated capital expenditure of €354 million will be incurred equally over a three year period commencing in 2008: 33% in 2008, 33% in 2009 and 33% in 2010. Debt tranches - The expansion project funding will comprise of three tranches (each with a tenor of four years): • Facility A - The US Dollar equivalent of €85 million, in the form of a foreign currency term loan. • Facility B - The Naira equivalent of €140 million, in the form of a syndicated medium term discounted note issuance facility. • Facility C - The Naira equivalent of €85 million, in the form of a syndicated medium term discounted note issuance facility. Facility C is, a stand-by facility which may be called or drawn at the option of the company exclusively, to refinance the total amount outstanding under Facility A, on the date when the option is being exercised. 49 Business reviewCase study: Lafarge Cement WAPCO Nigeria Limited
  • 26. 50 51 MTN Nigeria is the largest mobile network operator in Nigeria, the second largest in Africa and is one of the most recognised brands in Nigeria. As at 31 December 2008, MTN Nigeria had over 23 million subscribers and a 36% market share of the entire Nigerian telecommunications market. MTN and Stanbic IBTC have a relationship spanning over a decade. From underwriting and co-arranging a US$ 450 million facility for the MTN Group in 2001 in anticipation of the Nigerian GSM licence auction, to arranging a US$ 2 billion loan syndication for MTN Nigeria in 2007, Stanbic IBTC has been intimately involved in MTN Nigeria’s expansion from inception. The programme In2008,StanbicIBTCactedassoleissuinghousetoaprivateplacement of a 9.45% equity stake in MTN Nigeria which was undertaken to broaden the Nigerian shareholder base of MTN Nigeria. MTN Group and some of the founding shareholders of MTN Nigeria provided the shares on offer and participation in the placement was restricted to Nigerian individual and institutional investors who met stringent Know Your Cusomer requirements as specified by MTN Nigeria. All prospective investors were specifically invited to participate in compliance with regulatory restrictions. The private placement A total of 38 465 381 linked units comprising 38 465 381 ordinary shares and 38 465 381 preference shares were sold at a price of US$24.46 per linked unit, yielding proceeds of close to US$1 billion. The minimum subscription was US$10 million for financial institutions and US$5 million for other investors, and investors were given an option to pay in either US$ or Naira. Given the high minimum subscription and the limited universe of possible investors, the placement had to be uniquely structured and marketed to ensure success. The placement generated unprecedented domestic demand from Nigerian institutional and individual investors and the securities on offer were placed with less than 80 investors, with an average subscription amount of US$12 million per investor. The placement is currently the largest concluded private placement in the history of the Nigerian capital markets. The market The Nigerian mobile telecommunications market is currently the largest and fastest growing market in Africa. Significant growth is expected in this market given the relatively low penetration levels and the increasing demand for access to communication. MTN Nigeria is well placed to participate in the expected growth in the mobile market, due to its extensive established network infrastructure, market prominence, knowledge and experience of the Nigerian market. Stanbic IBTC will continue to assist MTN Nigeria to maintain its leadership position in the Nigerian telecommunications market. 51 Business reviewCase study: MTN Nigeria Communications Limited (MTN Nigeria)
  • 27. 52 53 Wealth Overview In 2008, the Group’s wealth business comprised four separate but related companies and business: • private non-pension asset management and stock broking (asset management)) through Stanbic IBTC Asset Management• pension fund administration (PFA) and management through Stanbic IBTC Pension Managers • proprietary investments (Ventures) through Stanbic IBTC Ventures • stock broking through Stanbic Equities Limited. The wealth businesses form an integral part of the investment banking franchise of Stanbic IBTC upon which the bank’s reputation has been built. These businesses have remained as separate companies due to the local regulatory requirements for participation in each of the sectors. As a result of the merger of Stanbic Bank Nigeria and IBTC Chartered Bank PLC, the Stanbic IBTC Group held two stock broking licences as both banks had stock broking subsidiaries. To comply with regulatory requirements the two stock broking businesses will be consolidated under one licence in 2009. In addition, effective 2009, the stock broking businesses and Ventures will be moved to CIB leaving only the investment management businesses (pension and non-pension management) in Wealth. Over the years, the asset management and PFA businesses have become the largest players in their various business areas in Nigeria. In 2008, despite the significant fall in equities values, our asset management operations remained the largest in Nigeria, measured by assets under management and we continued to manage the largest mutual fund in Nigeria, the Stanbic IBTC Nigerian Equity Fund. We were also the largest stock broking house in Nigeria by transaction value, out of over 250 stockbrokers, trading close to 13% of the market turnover in 2008. Our pension fund administration business on its part remained the largest pension fund administrator in Nigeria by assets under management and number of clients. The PFA won the prestigious Pension Fund Manager of the Year 2008 award from This Day newspapers, one of Nigeria’s leading newspapers, whilst the asset management business had previously won the Fund Manager of the Year award from This Day for its success in the asset management business. During the year, we increased out shareholding in the PFA from 65% to 70.59%. Our shareholding in Stanbic Equities Limited remained at 93.57%. All other businesses are fully owned by the group. An important factor to understanding the wealth business is the management of the regulatory environment in Nigeria. Each of the businesses is subject to a different regulator with different preferences and each with a strong requirement for independence of the business. This is however most pronounced in the PFA business where the regulator, the National Pension Commission, requires a completely independent business and restricts group cooperation with a particular focus on the investment transaction side. Similar tendencies are exhibited by the Securities Exchange Commission in regulating the asset management business and to a more limited extent, The Nigerian Stock Exchange, for the stock broking business. Needless to say, regulatory compliance is a major activity within the wealth business, ensuring that the business structures and activities are completely compliant with regulatory demands. Following the recapitalisation and consolidation of the Nigerian banking sector and the strong market performance that followed, most banks gradually transformed into financial services groups and acquired or established their own wealth management subsidiaries and businesses. In addition, the more forward looking boutiques have seized the opportunity to grow their balance sheets while a number of foreign players also entered the market actively. The year 2008 was therefore focused on restructuring and consolidating the wealth businesses to position them for what is expected to be fierce competition in the market place in the face of increasing globalisation of the Nigerian financial sector. For the PFA business, we are also playing a leading role in the development of self regulatory capacity in line with the requirements of the National Pension Commission. Business review Strategy The wealth business model has been focused essentially on building its fee generation capability while minimising the capital requirements. The businesses were traditionally designed to operate in a ‘hub and spoke’ arrangement from the financial tripod in Nigeria – Lagos, Abuja and Port Harcourt – and provide access to the capital markets for individual and institutional investors on an agency basis. Consequently, the companies held little or no positions in the markets in which they traded, merely acting as agents and providing (and managing) vehicles for investment access to the markets. All of the group’s proprietary investments were therefore made through the Ventures to eliminate potential conflicts with clients. In 2008, the main focus was to consolidate on the strengths of the businesses while repositioning them to extend their lead in the market place. The challenge was therefore to position both businesses for extensive retail expansion and penetration. In the pension space, significant mileage has been achieved with close to 700,000 individual clients and over 7,000 employers representing an estimated 20% of the registered individual pension market now being managed by the PFAs. The asset management and mutual fund business grew its client base across its funds to just over 30,000, while the stockbroking business enjoyed a market share of close to 13% by transaction value. The strategic focus on consolidation paid off handsomely as the businesses successfully seized the opportunity of a buoyant first half to restructure and reposition for the future. Operating platform changes and investments were carried out to position the wealth group as a knowledge business on a sales-and-service platform. The wealth businesses essentially provide our clients with the know-how to grow and preserve their wealth through managed vehicles that are available on a retail (versus wholesale) basis. Appropriate emphasis is now being placed on customer segmentation and on driving group and institutional schemes without neglecting the high net worth individuals. A key result of this consolidation is the focus on integration and cross selling with the bank – on the buy side by providing access to clients for CIB products and on the sell side by providing investment products for the retail platform. This not only creates a formidable distribution platform for the wealth business but also positions the businesses as major counterparties in the Nigerian financial market with significant leverage in the market place. Financial performance Despite the market difficulties, revenues and net earnings grew by over 36% and 8% respectively over the 2007 results for the wealth group. The key driver for 2008 was the PFA business where revenue and earnings growth over 2007 exceeded 100%, reflecting the strength of its underlying business. Total assets under management grew by 29% to N287 billion (ie over US$2 billion). Incentive fees virtually disappeared with the poor equities market performance while stockbroking revenues showed a solid performance largely based on the high market activity of the early part of the year. The 2008 market performance certainly tested the resilience of the wealth business model which was based on helping clients invest predominantly in the equities and fixed income markets in Nigeria. The model has proved to be successful. The gains of the first three quarters could not be reversed by the weakness of the last quarter while the pain was well distributed through the business units with the volatility experienced by the asset management and stockbroking businesses significantly offset by the stability of the PFA’s revenues. Although operating costs grew in absolute terms with headcount increasesanddepreciationofincreasingcapitalexpenditure,significant operating efficiencies were extracted leading to improvements in key operating metrics and in our growth and scaling capabilities. Looking ahead Without doubt, the volatility and challenges of 2008 will ensure that most clients will consider a different approach to investments in 2009 and beyond. With an increasing and more diversified pipeline of mutual funds, we expect that the accumulation of investment assets in 2009 will remain a key driver to income growth. The ongoing and continued flight to safety by local investors provides an excellent opportunity to leverage the heritage of the Standard Bank Group in the local market and provide secure investment options for our clients. We anticipate that opportunities to access, pool and diversify investments conveniently on our wealth platform will provide the necessary attraction to current and potential clients. Recognising the need to provide clients with increased convenience in handling and discussing their personal finances, in 2009, the wealth businesses will be relocating to new premises in Lagos and Abuja as well as expanding the number of hubs throughout the country. The investment in distribution infrastructure, as well as the attendant increase and upskilling of the staff, is expected to yield significant results quickly and ensure that we remain the wealth manager of choice in Nigeria.
  • 28. 54 5555 • Board of directors • Corporate governance • Risk management Corporate governance Corporate governance risk management
  • 29. 56 57 Atedo N.A. Peterside OON (53) BSc, MBA Appointed: Director 1989 Chairman 2007 Directorships: Stanbic IBTC Bank PLC, Stanbic IBTC Pension Managers Limited, Stanbic IBTC Ventures Limited, Stanbic IBTC Asset Management Limited, Nigerian Breweries Plc, Presco Plc Committee member: None Chris Newson (44) B. Com, CA (SA) CSEP Appointed: 2008 Directorships: Stanbic IBTC Bank PLC, Stanbic Equities Nigeria Limited, Stanbic Nominees Nigeria Limited, Stanbic IBTC Asset Management Limited Committee member: Board credit committee, Board risk management committee Yinka Sanni (43) BA, MBA, ACS Appointed: 2005 Directorships: Stanbic IBTC Bank PLC, Stanbic IBTC Asset Management Limited, Stanbic IBTC Pension Managers Limited Committee member: Board risk management committee Jacques Troost (45) B.Comm (Hons) Appointed: 2007 Directorships: Stanbic IBTC Bank PLC Committee member: Board credit committee, Board risk management committee Moses Adedoyin (60) Appointed: 2005 Directorships: Stanbic IBTC Bank PLC Committee member: Board credit committee, Statutory audit committee Ben Kruger (49) B. Com (Hons) CA (SA) Appointed: 2007 Directorships: Stanbic IBTC, Standard Bank Plc, SSA Trading (Pty) Ltd Committee member: Chairman. Board credit committee, Board risk management committee, Board remuneration committee Bhagwan Mahtani (55) Appointed: 2005 Directorships: Stanbic IBTC Bank PLC, Aegean Investments Limited, Churchgate Nigeria Limited, First Century International Limited, Foco International Investments Limited, T F Kuboye Co, International Seafoods Limited, International Glass Limited. Committee member: None Atedo N.A. Peterside OON, Chairman Moses Adedoyin, Non-Executive DirectorJacques Troost, Executive DirectorYinka Sanni, Executive DirectorMarna Roets, Executive Director Dr Christopher Kolade CON, Non-Executive Director Ben Kruger, Non-Executive Director Bhagwan Mahtani, Non-Executive Director Chris Newson, Chief Executive Officer Board of directors Sola David-Borha (48) BSc, MBA Appointed: 1994 Directorships: Stanbic IBTC Bank PLC, Stanbic Nominees Nigeria Limited, Stanbic Equities Nigeria Limited, Stanbic IBTC Asset Management Limited, Stanbic IBTC Pension Managers Limited, Stanbic IBTC Ventures Limited, Board Member-Financial Institutions TrainingCentre (FITC) Committee member: Board credit committee, Board risk management committee Marna Roets (42) B.Com (Hons) CA (SA) Appointed: 2007 Directorships: Stanbic IBTC Bank PLC, Stanbic Equities Nigeria Limted, Stanbic Nominees Limted Committee member: Board risk management committee Dr Alewyn Burger (57) Msc, Ph.D, AEP UNISA SPL, AMP Appointed: November 2008 Directorships: Stanbic IBTC Bank PLC, SAP Banking Advisory Board, CIO advisory Board of Accenture Europe, Integrated Process Solutions, MTN Banking Committee member: None Mallam Ahmed Dasuki (50) BSc, MSC Appointed: 1989 Directorships: Stanbic IBTC Bank PLC, MTN Nigeria Communications Limited, Phillips Project Centre Limited, Tinapa Business Resorts Limited, SASpv Limited, Islama Financial and Investment Trust, Interglobal Limited, Celtelcom Investment Limited Committee member: Board remuneration committee Ifeoma Esiri (56) LL, BL, LLM Appointed: 2004 Directorships: Stanbic IBTC Bank PLC, Stanbic IBTC Asset Management Limited, Podini International Limited, Veritas Geophysical Nigeria Limited, Ashburt Leisures Limited, Ashburt Beverages Limited, Ashburt Oil and Gas Limited Committee member: Chairperson. Board risk management committee, Statutory audit committee Dr Christopher Kolade CON (76) BA, Dip.Ed Appointed: 2008 Directorships: Stanbic IBTC Bank PLC, Acorn Petroleum PLC, System Specs Nigeria Limited, Cornerstone Insurance PLC Committee member: Board credit committee, Board remuneration committee Ratan Mahtani (53) Appointed: November 2008 Directorships: Stanbic IBTC Bank PLC, Aegean Investments Limited, Churchgate Nigeria Limited, First Century International Limited, Foco International Investments Limited, T F Kuboye Co, International Seafoods Limited Committee member: None Jacko Maree (53) B. Com, MA, PMD Appointed: 2007 Directorships: Stanbic IBTC Bank PLC, Standard Bank Group, The Standard Bank of South Africa, Standard Bank Plc,Liberty Group, Liberty Holdings, Standard International Holding SA Committee member: Chairman. Board remuneration committee Sam Unuigbe (66) BSc Econs, FCA (Eng Wales) FCA (Nig) FCTI Appointed: 1993 Directorships: Stanbic IBTC Bank PLC, Philips Project Centre Limited, Delta Afrik Limited, Delta Tek Engineering Limited, Delta Terra Tek Limited Committee member: Board credit committee, Statutory audit committee Lt Gen (rtd) Mohammed Inuwa Wushishi CFR GCON (69) PSI Appointed: 2005 Directorships: Stanbic IBTC Bank PLC, UAC of Nigeria Plc, UACN Property Development Company PLC Automotive Components Industries Limited, Acorn Petroleum Limited, Umfat Holdings Limited Committee member: Board risk management committee Ifeoma Esiri, Non-Executive DirectorDr Alewyn Burger, Non-Executive Director Ratan Mahtani, Non-Executive Director Lt Gen (rtd) Mohammed Inuwa Wushishi CFR GCON, Non-Executive Director Sam Unuigbe, Non-Executive DirectorJacko Maree, Non-Executive Director Mallam Ahmed Dasuki, Non-Executive Director Sola David-Borha, Deputy Chief Executive Officer 57 Corporate governance
  • 30. 58 59 Corporate governance report Introduction The bank is a member of the Standard Bank Group, which holds a 50.7% equity holding in the bank. Standard Bank Group (“SBG”) is committed to implementing initiatives that improve corporate governance for the benefit of all stakeholders. SBG’s board of directors remains steadfast in implementing governance practices that comply with international best practice, where substance prevails over form. Subsidiary entities within SBG are guided by these principles in establishing their respective governance frameworks, which are aligned to SBG’s standards in addition to meeting the relevant jurisdictional requirements in their areas of operation. Stanbic IBTC Bank Plc (“Stanbic IBTC or the bank”), and its subsidiaries (“the group”), as a member of SBG, operates under a governance framework which enables the board to balance its role of providing oversight and strategic counsel with its responsibility to ensure conformance with regulatory requirements, group standards and acceptable risk tolerance parameters. The major subsidiaries of the bank; Stanbic IBTC Asset Management Limited and Stanbic IBTC Pension Managers Limited have their own distinct boards and take account of the particular statutory and regulatory requirements of the businesses they operate. These subsidiaries are currently implementing a governance framework that will enable their boards to balance their roles in providing oversight and strategic counsel with their responsibility for ensuring compliance with the regulatory requirements that apply in their areas of operation and the standards and acceptable risk tolerance parameters adopted by the group. In doing so, they are committed to aligning their respective governance frameworks to that of the group. As the bank is the holding company for the subsidiaries in the group, the bank’s board also acts as the group board, with oversight of the full activities of the group. A number of committees have been established by the group’s board that assist the board in fulfilling its stated objectives. The committees’ roles and responsibilities are set out in their mandates, which are reviewed annually to ensure they remain relevant. The mandates set out their roles, responsibilities, scope of authority, composition and procedures for reporting to the board. Codes and regulations The group operates in highly regulated industries and compliance with applicable legislation, regulations, standards and codes, including transparency and accountability, remain an essential characteristic of its culture. The board monitors compliance with these by means of management reports, which include information on the outcome of any significant interaction with key stakeholders such as the group’s various regulators. The group complies with all applicable legislation, regulations, standards and codes. Shareholders’ Responsibilities The shareholders’ role is to approve the appointments of the board of directors and the external auditors. This role is extended to holding the board accountable and responsible for efficient and effective corporate governance. Developments during 2008 During 2008, the following developments in the group’s corporate governance practices occurred: • integration of the two legacy banks, requiring ongoing efforts to align governance practices with SBG standards; • established and implemented the mandates of a number of board and management committees; • ensured all the requirements of the Investment and Securities Act 2008, whether they apply to the bank, its directors or employees as capital market operators and/or as a public liability company quoted on the Nigerian Stock Exchange, were communicated to all directors and staff; • ongoing focus on directors’ training with particular emphasis on attending a directors conference for all Standard Bank Africa directors where experiences across the continent could be shared; • our Code of Ethics was rolled out to all staff across the organisation: • implemented new governance committees and reporting structures; and • implemented a personal account trading policy, which regulates the trading in group securities during sensitive periods where access to privileged information could occur. Focus areas for 2009 The Bank intends during 2009 to: • fully comply with CBN requirements on independent directors; • develop its own Code of Corporate Governance which it will operate alongside the CBN Code of Corporate Governance; • finalise the governance framework for subsidiaries; • continue the focus on directors’ training via formal training sessions and information bulletins on issues that are relevant; • develop sustainability reporting; and • enhance the level of information provided to and interaction with shareholders. Board and directors Board structure and composition Ultimate responsibility for governance rests with the board of directors of the group, who ensure that appropriate controls, systems and practices are in place. The group has a unitary board structure and the roles of chairman and chief executive are separate and distinct. The group’s chairman is a non-executive director. The number and stature of non-executive directors ensures that sufficient consideration and debate are brought to bear on decision making, thereby contributing to the efficient running of the board. One of the features of the manner in which the board operates is the role played by board committees, which facilitate the discharge of board responsibilities. The committees each have a board approved mandate that is regularly reviewed. Details on how these committees operate are provided elsewhere in this report. Strategy The board considers and approves the group’s strategy. Once the financial and governance objectives for the following year have been agreed, the board monitors performance against financial objectives and detailed budgets on an on-going basis, through quarterly reporting. Regularinteractionbetweentheboardandtheexecutiveisencouraged. Management is invited, as required, to make presentations to the board on material issues under consideration. Directors are provided with unrestricted access to the group’s management and company information, as well as the resources required to carry out their responsibilities, including external legal advice, at the group’s expense. It is the board’s responsibility to ensure that effective management is in place to implement the agreed strategy, and to consider issues relating to succession planning. The board is satisfied that the current pool of talent available within the bank and the group, and the ongoing work to deepen the talent pool, provides adequate succession depth in both the short and long term. Skills, knowledge, experience and attributes of directors The board ensures that directors possess the skills, knowledge and experience necessary to fulfil their obligations. The directors bring a balanced mix of attributes to the board, including: • international and domestic experience; • operational experience; • knowledge and understanding of both the macroeconomic and the microeconomic factors affecting the group; • local knowledge and networks; and • financial, legal, entrepreneurial and banking skills. The credentials and demographic profile of the board are regularly reviewed toensuretheboard’scompositionremainsbothoperationally and strategically appropriate. Appointments philosophy The appointments philosophy ensures alignment with all necessary legislation and regulations which include, but are not limited to the requirements of the Companies Allied Matters Act Cap C20 Laws of the Federation of Nigeria 2004 and the Banks Other Financial Institutions Act Cap B3 Laws of the Federation of Nigeria 2004 as well as the Companies and Banks Act of SBG’s home country. Consideration for the appointment of directors and key executives take into account compliance with legal and regulatory requirements and appointments to external boards to monitor potential for conflicts of interest and ensure directors can dedicate sufficient focus to the group’s business. The board takes cognisance of the skills, knowledge and experience of the candidate, as well as other attributes considered necessary to the prospective role. The board, on 22 July 2008 appointed two new directors, while one director resigned his appointment. The new appointments took effect when the required regulatory approvals were obtained to same. In terms of the articles of association, the appointments are only effective until the next annual general meeting, at which time the shareholders will be asked to approve each appointment. As at 31 December 2008, the board had appointed four executive directors and 13 non-executive directors. On 7 April 2009, Central Bank of Nigeria approval was obtained to the appointment of an additional executive director, whom had formerly been a member of the board in a non – executive capacity. Regulatory approvals are also being sought for an additional non – executive director, who is to be designated an independent director The board has the right mix of competencies and experience. Corporate governance
  • 31. 60 61 Board responsibilities The key terms of reference in the board’s mandate, which forms the basis for its responsibilities, are to: • agree the group’s objectives, strategies and plans for achieving those objectives; • annually review the corporate governance process and assess achievement against objectives; • review its mandate at least annually and approve recommended changes; • delegate to the chief executive or any director holding any executive office or any senior executive any of the powers, authorities and discretions vested in the board’s directors, including the power of sub-delegation; and to delegate similarly such powers, authorities and discretions to any committee and subsidiary company boards as may exist or be created from time to time; • determine the terms of reference and procedures of all board committees and review their reports and minutes; • consider and evaluate reports submitted by members of the executive; • ensure that an effective risk management process exists and is maintained throughout the bank and its subsidiaries to ensure financial integrity and safeguarding of the group’s assets • review and monitor the performance of the chief executive and the executive team; • ensure consideration is given to succession planning for the chief executive and executive management; • establish and review annually, and approve major changes to, relevant group policies; • approve the remuneration of non-executive directors on the board and board committees, based on recommendations made by the remuneration committee, and recommended to shareholders for approval; • approve capital funding for the group, and the terms and conditions of rights or other issues and any prospectus in connection therewith; • ensure that an adequate budget and planning process exists, performance is measured against budgets and plans, and approve annual budgets for the group; • approve significant acquisitions, mergers, take-overs, divestments of operating companies, equity investments and new strategic alliances by the group; • consider and approve capital expenditure recommended by the executive committee; • consider and approve any significant changes proposed in accounting policy or practice, and consider the recommendations of the statutory audit committee; Corporate governance report • consider and approve the annual financial statements, quarterly results and dividend announcements and notices to shareholders, and consider the basis for determining that the group will be a going concern as per the recommendation of the statutory audit committee; • assume ultimate responsibility for financial, operational and internal systems of control, and ensure adequate reporting on these by committees to which they are delegated; • take ultimate responsibility for regulatory compliance and ensure that reporting to the board is comprehensive; • ensure a balanced and understandable assessment of the group’s position in reporting to stakeholders; • review non financial matters that have not been specifically delegated to a management committee; and • specifically agree, from time to time, matters that are reserved for its decision, retaining the right to delegate any of these matters to any committee from time to time in accordance with the articles of association. Delegation of authority The ultimate responsibility for the bank’s and group’s operations rests with the board. The board retains effective control through a well-developed governance structure of board committees. These committees provide in-depth focus on specific areas of board responsibility. The board delegates authority to the chief executive to manage the business and affairs of the group. The executive committee assists the chief executive when the board is not in session, subject to specified parameters and any limits on the board’s delegation of authority to the chief executive. Membership of the executive committee is set out on pages 34 and 35. In addition, a governance framework for executive management assists the chief executive in his task. Board-delegated authorities are regularly monitored by the company secretary’s office. The corporate governance framework adopted by the board on 25 October 2007 and formalised with mandate approvals on 29 January 2008 is set out opposite: The corporate governance framework adopted by the board on 25 October 2007 and formalised with mandate approvals on 29 January 2008 is set out below: Stanbic IBTC board Shareholders Credit committee Remuneration commitee (REMCO) Risk management commitee Audit commitee Credit committee Country risk commitee Executive committee Personal Business Banking exco Corporate investment banking exco Business Support exco Wealth exco Board commitees Statutory Management IT programme of works Operational risk compliance committee Investment committee Career Management commitee Corporate governance Asset liability committee (ALCO)
  • 32. 62 63 Members’ attendance at credit committee meetings during the financial year ended 31 December 2008 are stated below: Name Jan April July Oct Ben Kruger (Chairman) P P P P Chris Newson P P P P Sola David-Borha P P P P Jacques Troost P P P P Sam Unuigbe P P P P Moses Adedoyin P P P P Dr Christopher Kolade CON P P A P P = Attendance A = Apology Risk management committee The board is ultimately responsible for risk management. The main purpose of the risk management committee, as specified in its mandate, is the provision of independent and objective oversight of risk management within the group. The committee is assisted in fulfilling its mandate by a number of management committees. To achieve effective oversight, the committee reviews and assesses the integrity of risk control systems and ensures that risk policies and strategies are effectively managed and contribute to a culture of discipline and control that reduces the opportunity for fraud. The risk management committee was vested, among others, with the following responsibilities: • to oversee management’s activities in managing credit, market, liquidity, operational, legal and other risks of the bank; • to periodically review the group’s risk management systems and report thereon to the board; • to ensure that the group’s material business risks are being effectively identified, quantified, monitored and controlled and that the systems in place to achieve this are operating effectively at all times; and • such other matters relating to the group’s risk assets as may be specifically delegated to the committee by the board. The committee’s mandate is in line with SBG’s standards, while taking account of local circumstances. A more in-depth risk management section, which provides details of the overall framework for risk management in the group commences on page 70 of this report. The committee consisted of the eight directors, four of whom, including the chairman were non – executives. Corporate governance report Induction and training An induction programme designed to meet the needs of each new director is being implemented. One-on-one meetings are scheduled with management to introduce new directors to the group and its operations. The company secretary manages the induction programme. The CBN’s code of conduct is provided to new directors on their appointment. Directors are kept abreast of all relevant legislation and regulations as well as sector developments leading to changing risks to the organisation on an on - going basis. This is achieved by way of management reporting and quarterly board meetings, which are structured to form part of ongoing training. A number of non-executive directors attended a group workshop and conference in October 2008, while some directors attended a workshop for directors conducted by the Financial Institutions Training Centre in December 2008. These workshops were aimed at enhancing the skills of bank directors. Board meetings The board meets, at a minimum, once every quarter with ad-hoc meetings being held whenever deemed necessary. One ad - hoc meeting was held during the period under review. Directors, in accordance with the Articles of Association of the bank, attend meetings either in person or via tele conferencing. Directors are provided with comprehensive board documentation at least four days prior to each of the scheduled meetings. Board effectiveness and evaluation The board is focused on continued improvements in its corporate governance performance and in its effectiveness. During the year the board of directors underwent an evaluation conducted by an independent consultant. The aim of this evaluation was to assist the board and committees to constantly improve their effectiveness. The assessment conducted in 2008 focused on structure, process and effectiveness. The report on this evaluation was discussed at a board meeting and relevant action points have been noted for implementation to further improve board functioning. The performance of the chairman and chief executive are assessed annually, providing a basis to set their remuneration. Board committees Some of the functions of the board have been delegated to board committees, consisting of board members appointed by the board, which operate under mandates established on 29 January 2008. Credit committee The credit committee during the period under review was vested with the following responsibilities: • recommend for the board’s approval the bank’s credit policies and guidelines; • review and approve credit facilities to be granted by the bank that are within such monetary amounts as may from time to time be set by the board; • approval of credit granted to insiders and staff in the cadres AGM and above; and • such other matters relating to the credit operations of the bank as may be specifically delegated to the committee by the board. The committee’s mandate is in line with SBG’s standards, while taking account of local circumstances. The mandate ensures that effective frameworks for credit governance are in place across the bank. This involves ensuring that the committees within the structure operate according to clearly defined mandates and delegated authority, and providing for the adequate management, measurement, monitoring and control of credit risk, including country risk. The committee reports on credit portfolios, adequacy of provisions and status of non-performing loans. The credit committee met its objectives in the year under review. Attendance at board meetings from 1 January to 31 December 2008 is set out in the following table: Name Jan Feb Apr July Oct Atedo N.A.Peterside OON (Chariman) P P P P P Chris Newson P P P P P Sola David-Borha P P P P P Marna Roets P P P P P Jacques Troost P P P P P Moses Adedoyin P P P P P Craig Bond 1 A P A A – Mallam Ahmed Dasuki P P P A P Ifeoma Esiri P P P P P Dr Christopher Kolade CON P P P P P Ben Kruger P P P P P Bhagwan Mahtani P P P P – Jacko Maree P P P P A Yinka Sanni P P P P P Sam Unuigbe P P P P P Lft. Gen. (rtd) M.I. Wushishi CFR GCON A A P A A Dr Alewyn Burger 2 – – – – – Ratan Mahtani 2 – – – – – P = Attendance A = Apology - = Not applicable 1 Resigned from Board on 22 July 2008 2 Regulatory approvals to appointments were fully obtained after October 2008 Board Meeting Corporate governance
  • 33. 64 65 criteria set in advance. This incentivises the commitment and focus required to achieve targets. Long-term incentives seek to ensure that the objectives of management and shareholders are broadly aligned over longer time periods. Remuneration policy The group has always had a clear policy on the remuneration of staff, executive and non-executive directors which sets such remuneration at levels that are fair and reasonable in a competitive market for the skills, knowledge, experience required. REMCO assists the group’s board in monitoring the implementation of the group remuneration policy, which ensures that: • salary structures and policies, as well as cash and share-based incentives, motivate sustained high performance and are linked to corporate performance objectives; • stakeholders are able to make a reasonable assessment of reward practices and the governance process; and • the group complies with all applicable laws and codes. Remuneration structure Non-executive directors Terms of service Directors are appointed by the shareholders at the AGM, although boardappointmentsmaybemadebetweenAGMs.Theseappointments are made in terms of the group’s policy. Shareholder approvals for such interim appointments are sought at the annual general meeting that holds immediately after such appointments are made. Non-executive directors are required to retire after three years and may offer themselves for re-election. If recommended by the board, their re-election is proposed to shareholders at the AGM. In terms of regulations, a non-executive director can not hold office for more than 12 consecutive years. If a director over the age of 70 is seeking re-election to the board, his age must be disclosed to shareholders at the meeting at which such re-election is to occur. REMCO utilises the services of a number of suppliers and advisors to assist it in tracking market trends relating to all levels of staff, including fees for non-executive directors. In 2008 the following suppliers were used: • KPMG • PricewaterhouseCoopers • Hay Group; • IRRC The board reviews REMCO’s proposals and, where relevant, will submit them to shareholders for approval at the Annual General Meeting. The board remains ultimately responsible for the remuneration policy. At 1 January 2008 the committee consisted of four directors, all of whom were non –executives. Craig Bond, who resigned from the board on 22 July 2008, was replaced on the committee by Ben Kruger. Members’ attendance at REMCO meetings during the financial year ended 31 December 2008 is stated below: Name Jan Apr July Oct Jacko Maree (Chairman) P P P A Craig Bond 1 A P P – Mallam Ahmed Dasuki P P A P Dr Christopher Kolade CON P P P P Ben Kruger 2 – – – P P = Attendance A = Apology - = Not applicable 1 Resigned from committee on 22 July 2008. 2 Appointed to committee on 22 July 2008 Remuneration Introduction The purpose of this section is to provide stakeholders with an understanding of the remuneration philosophy and policy applied across the group for executive management, employees, and directors (executive and non-executive). Members’ attendance at risk management committee meetings during the financial year ended 31 December 2008 is stated below: Name Jan April July Oct Ifeoma Esiri (Chairman) P P P P Lt. Gen M.I. Wushishi CFR GCON P P P P Ben Kruger P P P P Yinka Sanni 1 – P P P Chris Newson P P P P Sola David-Borha P P P P Marna Roets P P P P Jacques Troost P P P P P = Attendance A = Apology - = Not applicable 1 Yinka Sanni was appointed to the committee at the January 2008 board meeting and attended committee meetings from April 2008. Remuneration committee Theremunerationcommittee(REMCO)wasvestedwithresponsibilities during the year under review that included: • reviewing remuneration philosophy and policy; • considering the guaranteed remuneration, annual performance bonus and pension incentives of the group’s highest-paid executive directors and managers; • reviewing the performance measures and criteria to be used for annual incentive payments for all employees; • determining the remuneration of executive directors; • determining the remuneration of the chairman and non-executive directors, which are subject to board and shareholder approval; • considering the average percentage increases of the guaranteed remuneration of executive management across the group, as well as long-term and short-term incentives; and • agreeing incentive schemes across the group. The chief executive and deputy chief executive attend meetings by invitation. Other members of executive management are invited to attend when appropriate. No individual, irrespective of position, is expected to be present when his or her remuneration is discussed. When determining the remuneration of executive and non-executive directors as well as senior management, REMCO is expected to review market and competitive data, taking into account the group’s performance using indicators such as earnings. Remuneration philosophy The group’s board and remuneration committee set a remuneration philosophy which is guided by SBG’s philosophy and policy as well as the specific social, regulatory, legal and economic context of Nigeria. In this regard, the group employs a cost to company structure, where all benefits are included in the listed salary and appropriately taxed. The following key factors have informed the implementation of reward policies and procedures that support the achievement of business goals: • the provision of rewards that enable the attraction, retention and motivation of employees and the development of a high performance culture; • maintaining competitive remuneration in line with the market, trends and required statutory obligations; • rewarding people according to their contribution; • allowing a reasonable degree of flexibility in remuneration processes and choice of benefits by employees; • moving to a cost-to-company remuneration structure; and • educating employees on the full employee value proposition. The group’s remuneration philosophy aligns with its core values, including growing our people, upholding the highest levels of integrity and delivering value to our shareholders. The philosophy emphasises the fundamental value of our people and their role in ensuring sustainable growth. This approach is crucial in an environment where skills remain scarce. The group board sets the principles for the group‘s remuneration philosophy in line with the approved business strategy and objectives. The philosophy aims to maintain an appropriate balance between employee and shareholder interests. The deliberations of REMCO inform the philosophy, taking into account reviews of performance at a number of absolute and relative levels – from a business, an individual and a competitive point of view. A key success factor for the group is its ability to attract, retain and motivate the talent it requires to achieve its strategic and operational objectives. The group’s remuneration philosophy includes short-term and long-term incentives to support this ability. Short-term incentives, which are delivery specific, are viewed as strong drivers of competitiveness and performance. A significant portion of top management’s reward is therefore variable, being determined by financial performance and personal contribution against specific Corporate governanceCorporate governance report
  • 34. 66 67 Fees Non-executive directors receive fixed annual fees and sitting allowances for service on boards and board committees in line with the Central Bank of Nigeria’s guidelines on the remuneration payable to such directors. There are no contractual arrangements for compensation for loss of office. Non-executive directors do not receive short-term incentives, nor do they participate in any long- term incentive schemes. REMCO reviews the non-executive directors’ fees annually and make recommendations on same to the board for consideration. Fees are payable for the reporting period 1 January to 31 December of each year. Category 20091 2008 Chairman 32,200 000 28,747 000 Director 8,950 000 7,990 350 Board committees 105,000 90,000 Ad hoc meeting attendance2 105,000 90,000 1 Proposed for approval by shareholders at the 2009 AGM. 2 Fees quoted for meetings other than board meetings represent per diem sitting allowance as no annual fees are payable to committee members. Retirement benefits Non-executive directors do not participate in the pension scheme. Executive directors Executive directors receive a remuneration package and qualify for long-term incentives on the same basis as other employees. Executive directors’ bonuses and pension incentives are subject to an assessment by REMCO of performance against various criteria. The criteria include the financial performance of the group, based on key financial measures and qualitative aspects of performance, such as effective implementation of group strategy and human resource leadership. The employment contracts of executive directors have a termination clause of three months. Group Bank Fees Sitting Allowance 141,643 141,423 Executive Compensation 409,240 364,065 Total 550,863 505,508 Remuneration for 2009 The group will continue to ensure its remuneration policies and practices remain competitive, incentivise performance and are aligned across the group and with its values. Statutory audit committee The role of the audit committee is defined by the Companies Allied Matters Act Cap C20 Laws of the Federation of Nigeria 2004 and includes making recommendations to the board on financial matters. These matters include assessing the integrity and effectiveness of accounting, financial, compliance and other control systems. The committee also ensures effective communication between internal auditors, external auditors, the board and management. The committee’s key terms of reference comprise various categories of responsibilities and include the following: • review the audit plan with the external auditors with specific reference to the proposed audit scope, and approach to risk activities and the audit fee; • meet with external auditors to discuss the audit findings and consider detailed internal audit reports with the internal auditors; • annually evaluate the role, independence and effectiveness of the internal audit function in the overall context of the risk management systems; • review the accounting policies adopted by the group and all proposed changes in accounting policies and practices; • consider the adequacy of disclosures; • review the significant differences of opinion between management and internal audit; • review the independence and objectivity of the external auditors; and • all such other matters as are reserved to the audit committee by the Companies Allied Matters Act Cap C20 Laws of the Federation of Nigeria 2004 and the bank’s Articles of Association. As specified in the Central Bank of Nigeria (CBN) Code of Corporate Governance (“the CBN code”), the audit committee members have recent and relevant financial experience. Executive directors, other than the CEO, are required to retire from the board by rotation in the same manner as non-executive directors and may offer themselves for re-election. If recommended by the board, their re-election is proposed to shareholders at the AGM. Management and general Total remuneration package for employees comprises the following: • guaranteed remuneration – based on market value and the role played; • annual bonus and pension incentive – used to incentivise the achievement of group objectives; • share-based incentives – rewards the sustainable creation of shareholder value and aligns behaviour to this goal; • pension – provides a competitive post-retirement benefit in line with other employees; and • where applicable, expatriate benefits in line with other expatriates in Nigeria. Terms of service The minimum terms and conditions for managers are governed by relevant legislation and the notice period is one month. Employees on international assignments both into Nigeria and redeployment to other parts of the group, have notice periods of three months. Fixed remuneration Managerial remuneration is based on a total cost-to-company structure. Cost-to-company comprises a fixed cash portion, compulsory benefits (medical aid and retirement fund membership) and optional benefits. Market data is used to benchmark salary levels and benefits. Salaries are normally reviewed annually in March. For all employees, performance-related payments have formed an increasing proportion of total remuneration over time to achieve business objectives and reward individual contribution. All employees (executives, managers and general staff) are rated on the basis of performance and potential and this is used to influence performance-related remuneration. Rating and the consequent pay decision is done on an individual basis. There is therefore a link between rating, measuring individual performance and reward. Short-term incentives All staff participate in a performance bonus scheme. Individual awards are based on a combination of business unit performance, job level and individual performance. In keeping with the remuneration philosophy, the bonus scheme seeks to attract and retain high- performing managers. As well as taking performance factors into account, the size of the award is assessed in terms of market-related issues and pay levels for each skill set, which may for instance be influenced by the scarcity of skills in that area. Long-term incentives It is essential for the group to retain key skills over the longer term. The group is establishing an equity growth scheme for qualifying managers and is in the process of obtaining the relevant consent to same from Central Bank of Nigeria. Participation rights in such scheme will be granted to qualifying managers in accordance with the rules of the scheme approved by the board. The scheme is designed to align the interests of the group, its subsidiaries and key employees, as well as to attract and retain skilled, competent people. Retention agreements As part of the group’s strategy to retain highly mobile and talented employees, the group has selectively entered into agreements in terms of which retention payments are made. Retention payments have to be repaid should the individual concerned leave within a stipulated period. Post-retirement benefits - Pension Retirement benefits are typically provided on the same basis for employees of all levels and are defined contribution benefits. Remuneration for 2008 The amounts specified below represent the total remuneration paid to executive and non-executive directors for the period under review: Corporate governanceCorporate governance report
  • 35. 68 69 Composition The committee is made up of six members, three of whom are non - executive directors while the remaining three members are shareholders elected at the Annual General Meeting (AGM). The committee, as required by the CBN code, chaired by a shareholder representative. At the AGM held on 5 September 2008, Sam Cookey, who did not stand for re-election to the committee was replaced as a shareholder representative by Waheed Adegbite. Members’ attendance at audit committee meetings during the financial year ended 31 December 2008 is stated below Name Feb April July Oct Oluyomi Adeyemi – Wilson SR P P P P (Chairman) Sam UnuigbeNE P P P P Ifeoma EsiriNE P P P P Moses AdedoyinNE P P P P Oshuwa Gbadebo – Smith SR P A P P Sam Cookey SR A A P – Waheed Adegbite – – – P SR = Shareholders representative NE = Non Executive Director P = Attendance A = Apology - = Not applicable 1 Resigned from committee on 5 September 2008 2 Appointed to the committee on 5 September 2008 Management committees The group has the following management committees: Stanbic IBTC Group executive committee (exco) • CIB exco • PBB exco • Wealth exco • Business support exco • Credit committee • Asset and liability committee (ALCO) • IT steering committee (“program of works”) • Investment committee • Operational risk and compliance committee • Career management committee Company secretary It is the role of the company secretary to ensure the board remains cognisant of its duties and responsibilities. In addition to providing the board with guidance on its responsibilities, the company secretary keeps the board abreast of relevant changes in legislation and governance best practices. The company secretary oversees the induction of new directors, including subsidiary directors, as well as the ongoing training of directors. All directors have access to the services of the company secretary. Going concern On the recommendation of the statutory audit committee, the board annually considers and assesses the going concern basis for the preparation of the financial statements at the year end. The board continues to view the company as a going concern for the foreseeable future. Relationship with shareholders As an indication of its fundamental responsibility to create shareholder value, effective and ongoing communication with shareholders is seen as essential. In addition to the ongoing engagement facilitated by the company secretary, the group encourages shareholders to attend the AGM and other shareholder meetings where interaction is welcomed. The chairman of the group’s statutory audit committee is available at the meeting to respond to questions from shareholders. Voting at general meetings is conducted by way of poll rather than a show of hands to give full effect to the provisions of Section 10 of the Banks Other Financial Institutions Act Cap B3 LFN 2004 and separate resolutions are proposed on each significant issue. Dealing in securities In line with its commitment to conduct business professionally and ethically, the group has introduced policies to restrict the dealing in securities by directors, shareholder representatives on the audit committee and employees. A personal account trading policy is in place to prohibit employees and directors from trading in group securities during closed periods, which period commences from 1 December to publication of final results. Compliance with this policy is monitored on an ongoing basis. Sustainability Social and environmental responsibility remains an important part of the group’s culture. The monitoring and reporting of sustainability issues is still an evolving discipline within our organisation. Based on input received from all members of SBG (including Nigeria) the SBG board of directors identified and approved the following sustainability issues as material to the group as a whole: • Liquidity and capital • Customer satisfaction • Regulation • Infrastructure • People practice • HIV/AIDS • Supply change management • Supporting communities • Environment Social responsibility As an Nigerian business, the group understands the challenges and benefits of doing business in Africa, and owes its existence to the people and societies within which it operates. The group is committed therefore not only to the promotion of economic development but also to the strengthening of civil society and human well being. The group intends to concentrate its social investment expenditure in defined focus areas in order to make the greatest impact. These areas of focus will be subject to annual revision as the country’s socio-economic needs change. The group has established a CSR unit that will handle this issue. Our focus in 2009 will be on health and education. Ethics and organisational integrity A Code of Ethics was rolled out in the bank during the year. Breaches of the Code Although Section 5.2.6 of the CBN Code provides that at least two non – executive directors of the bank should be independent directors, the bank currently has only one independent non – executive director. The bank however recently identified a second independent non – executive director and is in the process of obtaining the required regulatory approvals to his appointment. The bank on a number of occasions breached the requirement that anticipatory approvals granted by board committees should be ratified at a committee meeting held within 30 days of the grant of such approval. However, all such anticipatory approvals were subsequently ratified by the relevant committee, albeit outside of the specified time line. Corporate governanceCorporate governance report
  • 36. 70 71 Risk management Overview Introduction The effective management of risk is fundamental to the business activities of Stanbic IBTC, as the group remains committed to the objective of increasing shareholders’ value by developing and growing business that is consistent with agreed risk appetite. The group seeks to achieve an appropriate balance between risk and reward in its businesses, and continues to build and enhance the risk management capabilities that will assist in delivering its growth plans in a controlled environment. Risk management is at the core of the operating and management structures of the group. The group seeks to limit adverse variations in earnings and equity by managing the balance sheet and capital within specified levels of risk appetite. Managing and controlling risks, and in particular avoiding undue concentrations of exposure and limiting potential losses from stress events are essential elements of the group’s risk management and control framework, which ultimately leads to the protection of the group’s reputation. Responsibility and accountability for risk management resides at all levels within the group, from the executive down through the organisation to each business manager and independent risk officer. Internal audit provides an independent assessment of the adequacy and effectiveness of controls and procedures and reports independently to the statutory audit committee, whilst external audit reports independently on the group annual financial statements. Subsidiary entities within the group are guided by the group enterprise risk management (ERM) framework in establishing their respective risk management frameworks. The major subsidiaries of the bank; Stanbic IBTC Asset Management Limited, Stanbic Equities Limited and Stanbic IBTC Pension Managers Limited are committed to aligning their respective risk management practices to that of the group and adopting acceptable risk tolerance parameters in line with the group. Key aspects of risk management are the risk governance and the organisational structures established by the group to manage risk according to a set of risk governance standards, which are implemented across the group and are supported by appropriate risk policies and procedures. Risks are controlled at the level of individual exposure, at a portfolio level, and in aggregate across all business and risk types. The bank and its subsidiaries has an independent control process which provides an objective view of risk taking activities where required. All exposures are independently monitored and reviewed. Key achievements in 2008 The past year has been very challenging and, at the same time, very enriching in terms of key lessons learnt. Some of the challenges included the integration of the legacy banks, implementation and roll- out of all risk governance standards, mandates, policies and procedures approved by the board early in the year and the development of a risk culture in a rapidly expanding group. Simultaneously, the group had to cope with extreme degrees of volatility in world markets. The group’s existing control framework and procedures performed well in the midst of rising levels of risk while monitoring and reporting lines were strengthened through the implementation of an escalation matrix. The executive continually communicated to all levels of staff to enhance awareness and vigilance. Highlights were: • The group developed and started monitoring key risk indicators for the whole bank and a number of key business units; • The risk self assessment (RSA) of some business units as well as the bank’s risk control self assessment (RCSA) were conducted and concluded; • In spite of market volatility, the bank’s value at risk (VaR) models performed well with no breaches and conservative VaR utilisation; • The automated anti-money laundering monitoring and detection system was implemented. With this system, alerts were generated for suspicious transactions and hot listed names; • The know your customer (KYC) compliance project completed; • The group developed its business continuity management (BCM) plan and conducted a desktop walkthrough test. Focus areas for 2009 Given the continued turmoil in the world financial markets, risk management will continue to receive significant focus with particular attention paid to enhancing the systems capability surrounding all levels of risk management. In particular, we will focus on: • Implementation of automated scoring, collections management, intuitive credit and treasury systems; • Localisation of a robust system to enhance monitoring and management capability of market and liquidity risks; • Continued enhancement of the group’s management standards, practices and systems with a focus on employing, training and retaining talented staff; • On-goingembeddingofanoperationalriskmanagementframework within the group by conducting RSAs for other key business units; • Facilitating an enhanced control environment and direct risk oversight by deploying designated independent risk officers to more business units and implementing a risk assurance functions; • Enhancing the quality and depth of the operational risk database for the bank; • Enhancement of the anti-money laundering system to provide for monitoring of transactions above specific value and frequency thresholds • Continued maintenance of a conservative structural liquidity mismatch profile, supported by adequate levels of marketable assets; and • Conduct a BCM simulation exercise Risk management framework Governance structure The group’s activities are complex, diverse and expanding rapidly into market segments and regions with different challenges. Hence, it is imperative that there is strong and independent oversight at all levels across the group. The risk governance structure (see diagram overleaf) provides executivemanagementandtheboard,throughthevariouscommittees, with the forums to evaluate, consider and debate key risks faced by the group and assess the effectiveness of the management of these risks through a number of reports received from the chief risk officers across Stanbic IBTC. The board committees comprise the statutory audit committee, credit board committee, risk management board committee, while executive management oversight at a bank and group level is achieved through management committees focusing on specific risks. Each of these committees has a mandate which describes the membership and responsibilities of such committees. Approach and structure The group’s approach to risk management is based on well established governance processes and relies both on individual responsibility and collective oversight, supported by comprehensive reporting. This approach balances strong corporate oversight at senior management level with independent risk management structures in the business. Business unit heads are specifically responsible for the management of risk within their business. As such, they are responsible for ensuring that they have appropriate risk management frameworks that are adequate in design, effective in operation and meet minimum group standards. This responsibility is achieved either through the establishment of dedicated business unit risk management functions in some subsidiary companies or through centralised risk functions servicing a number of business units. In the former case, adequate provision for the independence of the business unit risk management structures is essential in recognition of different regulatory requirements. An important element that underpins the group’s approach to the management of all risk is independence and appropriate segregation of responsibilities between business and risk. Risk officers report separately through to the head of group risk who reports to the chief executive officer of Stanbic IBTC and also through a matrix reporting line to the Standard Bank Group (SBG). All key risks are supported by the risk department. Corporate governance
  • 37. 72 73 Risk managementStanbic IBTC Bank PLC Board Exco Risk Credit Audit Management committees Board sub-committees ALCO Operational risk compliance Risk governance standards, policies and procedures The group has developed a set of risk governance standards for each major risk type. The standards set out and ensure alignment and consistency in the manner in which the risk types across the group are governed, identified, measured, managed, controlled and reported. All standards are applied consistently across the group and are approved by the board. It is the responsibility of business unit executive management to ensure that the requirements of the risk governance standards, policies and procedures are implemented within the business units. Each standard is supported by group policies and business unit policies and procedural documents as required. Business units and group risk functions are required to self assess, at least annually, their compliance with group risk standards and policies. Risk governance standards set out the framework for managing each major risk type and policies are developed where required on specific items as stated within the standards. Details with regards to the implementation of these policies within each particular business unit are set out in the processes and procedures documentation. Risk appetite Risk appetite is an expression of the maximum level of residual risk that the group is prepared to accept in order to deliver its business objectives. It is the balance of return and risk determined by the board through the board and executive risk committees in consultation with the business units as the group implements business plans, recognising a range of possible outcomes. The board establishes the group’s parameters for risk appetite by: • providing strategic leadership and guidance; • reviewing and approving annual budgets and forecasts for the group and each business unit; and • regularly reviewing and monitoring the group’s performance in relation to risk through quarterly board reports. Risk appetite is expressed by balancing: • budgetary provisions for expected losses that are consistent with the risk appetite implied by the business plans; • an agreed tolerance for profit and loss volatility – an acceptable scenario that is lower than budget by an amount that is consistent with the risk appetite implied by the business plans; • the risk adjusted returns generated from risk-taking being acceptable; and • in the context of stress tests, portfolio analyses and concentration limits, risk assessments, risk indicators and other measures devised by the business unit risk functions which serve to identify and constrain threats to earnings and capital. Risk appetite is determined with reference to measures such as: • budgeted loss write-offs and provisions; • limits on exposures to individual counterparties, sectors, industries or geographies • limits on trading exposures; and • Interest rate movements. Stress testing Stress testing serves as a diagnostic and forward looking tool to improve the group’s understanding of its market and liquidity risks profile under event based scenarios. Management reviews the outcome of stress tests and selects appropriate mitigating actions to minimise and manage the risks to the group. Residual risk is then evaluated against the risk appetite. Examples of potential action to take are: • reviewing and changing limits; • limiting exposures in selected sectors or products; and • re-balancing of portfolio’s to reduce risk sensitivity. Risk categories The bank’s enterprise risk management framework is designed to govern, identify, measure, manage, control and report on the principal risks to which the group is exposed. These risks, with applicability as appropriate, are defined as follows: Credit risk Credit risk arises primarily in the bank operations where an obligor fails to perform obligations, in accordance with agreed terms or the counterparty’s ability to meet such contractual obligation is impaired. Credit risk comprises counterparty risk, settlement risk, country risk and concentration risk. Counterparty risk is the risk of loss to Stanbic IBTC as a result of failure by a counterparty to meet its financial and/or contractual obligations to the bank. It has three components: • primary credit risk which is the exposure at default (EAD) arising from lending and related banking product activities, including their underwriting; • pre-settlement credit risk which is the EAD arising from unsettled forward and derivative transactions, arising from the default of the counterparty to the transaction and measured as the cost of replacing the transaction at current market rates; and • issuer risk which is the EAD arising from traded credit and equity products, and including their underwriting. Settlement risk is the risk of loss to Stanbic IBTC from a transaction settlement, where value is exchanged, failing such that the counter value is not received in whole or part. Country and cross border risk is the risk of loss arising from political or economical conditions or events in a particular country which reduce the ability of counterparties (including the relevant sovereign and other members of the Standard Bank Group internationally) in that particular country to fulfil their obligations to Stanbic IBTC. Cross border risks is the risk of restriction on the transfer and convertibility of local currency funds, into foreign currency funds thereby limiting payment by offshore counterparties to the bank. Concentration risk refers to any single exposure or group of exposures large enough to cause credit losses which threaten Stanbic IBTC’s capital adequacy or ability to maintain its core operations. It is the risk that a common factor within a risk type or across risk types causes credit losses or an event occurs within a risk type which results in credit losses. Market risk Market risk is defined as the risk of a decrease in the actual or effective market value of a portfolio of financial instruments caused by adverse moves in market variables such as equity and bond prices, currency exchange and interest rates, credit spreads, and correlations and implied volatilities in all of the above. Market risk covers both the impact of these risk factors on the market value of traded instrument as well as the impact on the bank’s net interest margin as a consequence of interest rate risk on banking assets and liabilities. Liquidity risk Liquidity risk arises when a bank is unable to meet its payment obligations as and when they fall due. This may be caused by the bank’s inability to liquidate assets or to obtain funding to meet its liquidity needs. Credit Shareholders Statutory committees SubsidiariesPricingCountry riskInvestment Corporate governance
  • 38. 74 75 The bank’s capital adequacy ratio is shown in the table below December 08 December 07 Capital Adequacy (actual in %) 36 40 Regulatory capital The bank complied with minimum capital requirements imposed by the regulators during the period under review. Apart from the local requirements, the group is also required to comply with the capital adequacy requirement in terms of South African banking regulations measured on Basel II principles. This act of compliance coupled with the risk governance structure and implementation of ERM framework as well as collation of loss data, amongst others, have continued to bolster the group’s readiness for a regulatory regime that is anchored on Basel II principles in the near future. Credit risk Framework and governance By the very nature of its business, credit risk remains a key component of financial risks faced by any bank. As such, Stanbic IBTC has established sound governance principles to ensure that credit risk is managed within a comprehensive risk management control framework. The principles guiding the assumption of credit risk and the overall framework for its application, governance, and reporting is defined in the Stanbic IBTC credit risk standard. The standard covers all forms of credit risk, intentional or otherwise, and is supported by credit risk policies and procedures to the extent required to further define the credit risk framework and its implementation across the bank. In reaching credit decisions and taking credit risk, both the credit and business functions must consistently and responsibly balance risk and return, as return is not the sole prerogative of business neither is risk the sole prerogative of credit. Credit (and the other risk functions, as applicable) and business must work in partnership to understand the risk and apply appropriate risk pricing, with the overall aim of optimising the bank’s risk adjusted performance. The standard, policies and procedures and compliance therewith are not substitutes for common sense and good business judgment. Risk management Credit risk management In Stanbic IBTC, the reporting lines, responsibilities and authority for managing credit risk are clear and independent. Ultimate responsibility for credit risk rests with the board and which has delegated this to the following organs: Board credit committee The purpose of the board credit committee is to ensure that effective credit governance is in place in order to provide for the adequate management, measurement, monitoring and control of credit risk including country risk. In addition to its pre-existing role, the committee has also been vested with the following responsibilities as may be set by the board: • setting overall risk appetite; • review and approve credit facilities that are within monetary amounts as determined by the board from time to time • ensuring committees within the structure operate according to defined mandates and delegated authorities; • maintain overall accountability and authority for the adequacy and appropriateness of all aspects of the bank credit risk management process; • utilise appropriate tools to measure, monitor and control credit risk in line with the SBG policies whist taking into account local circumstances; • recommend the bank’s credit policies and guidelines for board approval; and • any other matters relating to credit as may be delegated to the committee by the board. Credit risk management committee The credit risk management committee (CRMC) is the management credit decision-making function and it operates within defined authority as determined by the board credit committee. The CRMC effectively enhances credit discipline within the bank and is responsible for controlling, inter alia, delegated authorities, concentration risk, distressed debt and regulatory issues pertaining to credit, credit audits, policy and governance. In addition to the above, the credit committee provides oversight of governance; recommends to the board credit committee the level of the bank’s risk appetite; monitors model performance, development and validation; determine counterparty and portfolio risk limits and approval, country, industry, market, product, customer segment and maturity concentration risk; risk mitigation; impairments and risk usage. Head of credit The head of credit has functional responsibility for credit risk management across the bank and is positioned at a sufficiently senior level in order to ensure the necessary experience and independence of judgment. The head of credit is responsible for providing an independent and objective check on credit risk taking activities to safeguard the integrity of the entire credit risk process. Credit risk mitigation Guarantees, collateral and the transaction structure are used by the bank to mitigate credit risks both identified and inherent though the amount and type of credit risk is determined on a case by case basis. The bank’s credit policy and guidelines are used in a consistent manner, security is valued appropriately and reviewed regularly for enforceability and to meet changing business needs. Credit risk measurement A key element in the measurement of credit risk is the assignment of credit ratings. All customers including corporate, individuals and institutions and special purpose vehicles (SPVs) are awarded risk gradings to determine expected defaults across asset portfolios and risk bands. The risk ratings attributed to counterparties are based on a combination of factors which cover business and financial risks: • all counterparties for which the bank has facility limits in place are assigned a credit rating. The rating is forward looking (i.e. predictive in nature) and discriminatory (i.e. ability to rank order). However, all local ratings are capped by the country rating; • a foreign currency rating and associated probability of default (PD) must be used for all exposures to counterparties in a currency other than naira; • facility risk arising from exposure and/or facility specific factors such as collateral and seniority must be measured and addressed as part of the credit risk mitigation analysis and should not affect or impact on the counterparty rating; • external support, as distinct from mitigants, can be recognised in the rating process on a defined basis, provided it is consistently applied; • theprocessandmethodologytoassignaratingtoeachcounterparty and a PD to each rating must be the responsibility of, and signed off by, the credit committee; and • pricing must be based on the risk grades assigned to the counterparty. The bank currently uses an international comparable 25 point master rating scale for all performing counterparties. Operational risk Operational risk is defined as the risk of loss resulting from inadequate or failed processes, people and systems (including information technology and infrastructure) or from external events. The definition of operational risk also includes: • information risk – the risk of unauthorised use, modification of disclosure of information resources; • fraud risk – the risk of losses resulting from fraudulent activities • environmental risk – the risk of inadvertently participating in the destruction of the environment • legal risk - the risk that the bank will be exposed to litigation; • taxation risk – the risk that the bank will incur a financial loss due to incorrect interpretation and application of taxation legislation or due to the impact of new taxation legislation on existing business. • compliance risk - the risk that the bank does not comply with applicable laws and regulations or supervisory requirements. Business risk Business risk is the risk of loss due to adverse local and global operating conditions such as decrease in demand, increased competition, increased cost, or by entity specific causes such as inefficient cost structures, poor choice of strategy and reputation damage. Capital management - Basel 1 Capital adequacy The bank manages its capital base to achieve a prudent balance between maintaining capital ratios to support business growth and depositors’ confidence, and providing competitive returns to shareholders. Stanbic IBTC ensures that its actions do not compromise sound governance and appropriate business practices and it eliminates any negative effect on payment capacity, liquidity and profitability. Capital adequacy ratios, which reflect the capital strength of an entity compared to the minimum regulatory requirement, is calculated by dividing the capital held by the bank by its risk weighted assets. Risk weighted assets are determined by applying prescribed risk weighting to on- and off- balance sheet exposures according to the relative credit risk of the counterparty. Corporate governance
  • 39. 76 77 Risk management Liquidity risk Framework and governance The nature of banking and trading activities results in a continuous exposure to liquidity risk. The bank’s liquidity risk management framework is designed to measure and manage the liquidity position at various levels of consolidation such that payment obligations can be met at all times, under both normal and considerably stressed conditions. Under the delegated authority of the board of directors, ALCO sets liquidity risk policies in accordance with regulatory requirements and international best practice. Limits and guidelines are prudently set and reflect the bank’s conservative appetite for liquidity risk. ALCO is charged with ensuring compliance with liquidity risk standards and policies. Liquidity and funding management The bank has incorporated the following elements as part of a cohesive liquidity management process: • short-term and long-term cash flow management; • maintaining a structurally sound balance sheet; • expanding a diversified funding base; • undertaking regular liquidity stress testing; and • maintaining adequate liquidity contingency plans. The cumulative impact of the above elements is monitored, at least monthly by ALCO and the process is underpinned by a system of extensive controls. The latter includes the application of purpose built technology, documented processes and procedures, independent oversight and regular independent reviews and evaluations of the effectiveness of the system. Cash flow management Active liquidity and funding management is an integrated effort across a number of functional areas. Short-term cash flow projections are used to plan for and meet the day-to-day requirements of the business, including adherence to prudential and ALCO requirements. Long-term funding needs are derived from projected balance sheet structures and positions are regularly updated. An active presence is maintained in professional markets, supported by efforts in relationship management with corporate and institutional clients. Structural requirements The maturity analysis for financial liabilities represents the basis for effective management of exposure to structural liquidity risk. Behavioural profiling is applied to assets, liabilities and off-balance sheet commitments with an indeterminable maturity or draw-down period, as well as to certain liquid assets. This process is used to identify significant additional sources of structural liquidity in the form of liquid assets and core deposits such as current and savings accounts that although repayable on demand or at short notice, exhibit stable behaviour. Limits and guidelines are set to restrict the mismatch between the expected inflows and outflows of funds in different time buckets. One of the mechanisms employed to ensure adherence to these limits and guidelines is the active management of the long-term funding ratio. This ratio is defined as those funding-related liabilities to the public with a remaining maturity of greater than six months, as a percentage of total funding-related liabilities to the public. The table - Static anticipated liquidity gap above - indicates that the bank is well poised to adequately withstand any expected outflows in all time buckets. Diversified funding base Concentration risk limits are used to ensure that funding diversification is maintained across products, sectors, and counterparties. Primary sources of funding are in the form of deposits across a spectrum of retail and wholesale clients. As mitigants, the bank maintains marketable securities in excess of regulatory requirement in order to condone occasional breaches of concentration limits. Liquidity stress testing Anticipated on- and off-balance sheet cash flows are subjected to a variety of bank specific and systemic stress scenarios in order to evaluate the impact of unlikely but plausible events on liquidity positions. Scenarios are based on both historical events, such as past emerging markets crises, and hypothetical events, such as a bank specific crisis. The results obtained from stress testing provide meaningful input when defining target liquidity risk positions. Liquidity contingency plans Liquidity contingency plans are designed to, as far as possible, protect stakeholder interests and maintain market confidence in order to ensure a positive outcome in the event of a liquidity crisis. The plans incorporate an extensive early warning indicator methodology supported by a clear and decisive crisis response strategy. Early warning indicators span both bank specific and systemic crises and are monitored based on assigned frequencies and tolerance levels. The crisis response strategy is formulated around the relevant crisis management structures and addresses internal and external communications, liquidity generation, operations, as well as heightened and supplementary information requirements. Market risk The identification, management, control, measurement and reporting of market risk is categorised as follows: Trading market risk These risks arise in trading activities where the bank acts as a principal with clients in the market. The group policy is that all trading activities are contained within the group’s Corporate Investment Banking trading operations. Banking book interest rate risk These risks arise from the structural interest rate risk caused by the differing repricing characteristics of banking assets and liabilities. Foreign currency risk These risks arise as a result of changes in the fair value or future cash flows of financial exposures as a result of changes in foreign exchange rates other than those included in the Value at Risk (VaR) analysis for Corporate Investment Banking’s trading positions. Equity investment risk These risks arise from equity price changes caused by listed and unlisted investments. This risk is managed through the equity investment committee, which is a sub-committee of the executive committee. Static anticipated liquidity gap Cum. Gap as a % of total deposit Overnight 1 month 2-3 months 4-6 months 7-12 months 13-24 months Local currency mismatches 69.4 94.5 107.5 106.6 115 103.2 Foreign currency mismatches 85.3 126 91.9 124.1 76.4 152.4 Non performing loans N’000s CIB PBB Total NPL net of IIS Specific provision NPL Net of IIS Specific provision NPL Net of IIS Specific provision Substandard 90 9 1,286 129 1,376 138 Doubtful 7,982 3,951 1,701 850 9,603 4,801 Lost 1,098 2,292 2,200 2,200 3,298 4,492 Total 9,090 6,252 5,187 3,179 14,277 9,431 Non performing loan analysis The tables below show analyses of non performing loans as at December 2008. The bank’s margin facilities which comprise 8% of the bank’s risk assets are soundly managed and within acceptable concentration limits. Provisioning against these balances have been made on a basis consistent with prior years. Provision adequacy N’000s balance suspense value (NPV) NPL adequacy Margin lending 2,995 6 2,289 700 1,672 239% Other balances 12,543 1,255 6,968 4,320 7,759 180% Total 15,538 1,261 9,257 5,020 9,431 188% Gross NPL Interest in Security Net Provision Provision Corporate governance
  • 40. 78 79 Distribution of trading income in 2008 The histogram above shows the distribution of daily income and losses during 2008. It captures trading income volatility and shows the number of days in which the bank’s trading related revenues fell within particular ranges. The distribution is skewed to the profit side. The graph below shows the VaR analysis and actual income of the foreign currency trading unit throughout the year. Analysis of trading book market risk exposures The table below shows the historical VaR utilisation for the bank’s foreign currency trading positions. The maximum (and minimum) VaR amounts show the bands in which the values at risk fluctuated. Risk management Framework and governance The board approves the market risk appetite and standards for all types of market risk. The board grants general authority to take on market risk exposure to ALCO. ALCO sets market risk policies to ensure that the measurement, reporting, monitoring and management of market risk associated with operations of the bank follow a common governance framework. The bank’s ALCO reports to exco and also to board risk committee. In-country risk management is subject to SBG oversight for compliance with group standards and minimum requirements. The market risk management unit, which is independent of trading operations and accountable to ALCO, monitors market risk exposures due to trading and banking activities. This unit monitors exposures and respective excesses daily, report monthly to ALCO and quarterly to the board risk committee. Market risk measurement The techniques used to measure and control market risk include: • daily VaR; • VaR back-testing; • stress tests; • PV01; • other market risk measures; and • annual net interest income at risk. Daily value-at-risk (VaR) VaR is a statistical measurement of the potential loss of value resulting from market movements over a period of time given a predetermined probability (95% confidence level). VaR limits and exposure measurements are in place for foreign currency risks. The bank generally uses the historical VaR approach to derive quantitative measures, specifically for market risk under normal market conditions. Normal VaR is based on a holding period of one day and a confidence level of 95%. Daily losses exceeding the VaR are likely to occur, on average, 13 times in every 250 days. The use of historic VaR has limitations as it is based on historical correlations and volatilities in market prices and assumes that future prices will follow the observed historical distribution. Hence, there is a need to back-test the VaR model regularly. -400 -200 0 200 400 600 800 1000 1200 Jan 2008 FX PL Norm al VaR Dec VaR back-testing The bank back-tests its foreign currency exposure VaR model to verify the predictive ability of the VaR calculations thereby ensuring the appropriateness of the model. Back-testing compares the daily hypothetical profit and loss under the one-day buy and hold assumption to the prior day VaR. Profit or loss for back-testing is based on the theoretical profits or losses derived purely from foreign currency spot moves and it is calculated over 250 cumulative trading- days at 95% confidence level. Stress tests Stress testing provides an indication of the potential losses that could occur in extreme market conditions. The stress tests carried out include individual market risk factor testing and combinations of market factors per trading desk and for combinations of trading desks. Stress tests include a combination of historical, hypothetical and Monte Carlo type simulations. PV01 PV01 is a risk measure used to assess the effect of a change in interest rate of one basis point on the price of an asset. A limit is set for the fixed income and money market trading portfolios. Other market risk measures Other market risk measures specific to individual business units include permissible instruments, concentration of exposures, gap limits, maximum tenor and stop loss triggers. In addition, only approved products that can be independently priced and properly processed are permitted to be traded. The market risk unit independently validates and documents new pricing models and perform an annual review of existing models to ensure models are still relevant and behaving within expectations. In addition, the market risk department assesses the daily liquid closing price inputs used to value instruments and performs a review of less liquid prices from a reasonableness perspective at least monthly. Where differences are significant, mark-to-market adjustments are made. Annual net interest income at risk A dynamic forward-looking annual net interest income forecast is used to quantify the banks’ anticipated interest rate exposure. This approach involves the forecasting of both changing balance sheet structures and interest rate scenarios, to determine the effect these changes may have on future earnings. The analysis is completed under both normal market conditions as well as stressed market conditions. 120 105 = 120 90 = 105 75 = 90 60 = 75 45 = 60 30 = 45 15 = 30 = 15= -15 -15 = -30 -30 0 10 20 30 40 50 60 70 80 90 100 110 120 130 140 150 160 Loss Profit N’millions FX VaR (US$) Minimum Average Maximum 31 Dec 2008 Normal VaR 964 35,208 124,008 60,478 Stress VaR 8,903 937,029 2,411,500 1,024,221 Analysis of banking book market risk exposures Banking-related market risk exposure principally involves the management of the potential adverse effect of interest rate movement on net interest income. This risk is transferred to and managed within the bank’s treasury operations under supervision of ALCO. The main analytical techniques used to quantify banking book interest rate risk are earnings and valuation-based measures. In doing so, cognisance is taken of embedded options, such as loan prepayments and accounts where the behaviour differs from the contractual position. In analysing the re-pricing gaps for the bank’s non-trading portfolios, all assets and liabilities are sited in gap intervals based on their repricing characteristics. Assets and liabilities for which no specific contractual repricing or maturity dates exist are placed in gap intervals based on management’s judgment and statistical analysis, as determined by the most likely repricing behaviour. Market risk on equity investments The equity committee has governance and oversight of all investment decisions. The committee is tasked with the formulation of risk appetite and oversight of investment performance. Periodic reviews and reassessments are undertaken on the performance of the investments. Operational risk Approach to operational risk The Stanbic IBTC approach to managing operational risk is to adopt practices that are “fit for purpose”, in order to increase the efficiency and effectiveness of the group’s resources, minimise losses and utilise opportunities. This approach is aligned to Stanbic IBTC’s and SGB’s enterprise risk management frameworks and adopts the sound practices recommended by various sources, including the Basel II Accord’s “Sound Practices for the Management and Supervision of Operational Risk” and the regulators. The group continues to embed operational risk practices into its day-to-day business activities. Corporate governance
  • 41. 80 81 Risk management Governance The board risk management committee, as the delegated risk oversight body on behalf of the board, has the ultimate responsibility for operational risk. It ensures quality, integrity and reliability of operational risk management across the group. The operational risk and compliance committee (ORCC) serves as the oversight body in the application of the group’s risk management framework. This is achieved through enforcing standards for identification, assessing, controlling, monitoring and reporting. ORCC reviews and recommends operational risk appetite and tolerance to the executive committee and the board risk management committee. Management and measurement of operational risk The operational risk management framework serves to ensure that risk owners are clearly accountable for the risk inherent within the business activities of the group. The key element in the framework includes methodologies and tools to identify, measure, and manage operational risks, a governance model, processes to ensure internal training and awareness, communication, and change management. Risk and control self assessments are designed to be forward-looking. Management is required to identify risks that could threaten the achievement of business objectives and together with the required set of controls and actions, mitigate the risks. Risk assessment also incorporates a regular review of identified risks. The loss data collection process ensures that all operational risk loss events and near misses are captured into a centralised database. The flow of information into the loss event database is a bottom-up approach. The capture process identifies and classifies all incidents in terms of an incident classification list. This information is used to monitor the state of operational efficiency, address trends, implement corrective action and manage recovery where possible. The group uses key risk indicators (KRIs) to monitor the risks highlighted in the risk and control self-assessment process. The implementation of the KRIs is an integral element of the framework and is therefore compulsory throughout the group. Business units are required to report on a regular and event-driven basis. The reports include a profile of the key risk to the achievement of their business objectives, control issues of bank-level significance, and operational risk events. The bank developed its business continuity management plan and conducted a desktop walkthrough test. A desktop walkthrough is a facilitated paper walkthrough of the recovery plan and any associated processes and procedures that would be used in a real disaster. A scenario is defined, and each team member has specific responsibilities as defined in checklists in the recovery plan. The group maintains adequate insurance to cover key operational and other risks. Information risk management Information risk is defined as the risk of accidental or intentional unauthorised use, modification, disclosure or destruction of information resources, which compromises their confidentiality, integrity or availability. From a strategic perspective, information risk management is treated as a particular discipline within the operational risk framework. In essence, information risk management not only protects the group’s information resources from a wide range of threats, but also enhances business operations, ensures business continuity, maximises return on investments and supports the implementation of various services. The approach to the management of information risk in the group is in accordance with global best practice, applicable laws and regulations. The group has embarked on an enterprise-wide comprehensive awareness/education campaign to ensure that the culture of information protection is entrenched and the risks associated with handling information are mitigated. Fraud risk management Stanbic IBTC has a set of values that embraces honesty, integrity and ethics and, in this regard, has a “Zero Tolerance” approach to fraud and corruption. Where necessary, disciplinary, civil and criminal actions are taken against staff and third parties who perpetrate fraud. Staff found guilty of dishonesty through the group’s disciplinary processes will be listed on appropriate industry databases for dismissed staff. The group’s forensic unit, which is responsible for fraud risk management practices, in conjunction with law enforcement agencies, investigates all losses incurred as a result of criminal activity from staff and third parties with the end result being a criminal conviction and recovery of the crime proceeds. There are anti-fraud mechanisms and regular campaigns in place to mitigate fraud risk. These measures include constant review and re- engineering of the group’s internal processes, engagement of law enforcement agencies, industry forums and collaborative workshops to discuss best practices to combat fraud and a group-wide fraud prevention incentive programme. Environmental risk management Stanbic IBTC acknowledges that the development of a corporate culture whereby environmental protection and the sound management of natural resources in both its own operating environment and with all the parties with which it has a business association is crucial to sustainable development. The bank adopts a precautionary approach to environmental management, striving to anticipate and prevent environmental risk degradation. The group’s approach is in line with the guidelines set out in the Equitor Principles and the provisions of the environmental laws of the country. Legal risk management Legal risk is defined as the potential loss that may be suffered by the group as a result of the imposition of a court judgment against the group. Legal risk can also arise as a result of the loss from a contract that cannot be legally enforced or the group may be liable for damages to third parties. The legal risk unit carries out, amongst others, the following functions as part of its legal risk management process: • signing-off of all contacts entered into by the group; • ensuring that service level agreements (SLAs) are executed between the group and service providers; • drafting of standard product documentation; • reviewing and monitoring legal claims made against the group; and • obtaining legal opinion in respect of all the litigations that the group is involved in, to ascertain if there is a need for provision to be made in cases where the likelihood of success against the bank is high. Provision is made in all instances where the group is of the opinion that there is a likelihood that the claims against it may succeed. Occupational health and safety The health and safety of employees, clients and other stakeholders continues to be a priority and the group aims to effectively identify and reduce the potential for accidents or injuries. To this end, an occupational health and safety policy for the group has been approved by the ORCC and exco respectively. This policy was approved by the board in April 2009. Compliance risk management Compliance is an independent core risk management activity overseen by the group’s compliance unit, which is overseen by the chief compliance officer. The unit provides independent reports to the ORCC, exco and the board risk management committee. The group chief compliance officer has unrestricted access to the chief executive officer and the chairperson of the board risk management committee. The group’s approach to managing legislative risk exposures is proactive and premised on internationally accepted principles of risk management. The group fosters a culture of compliance which is seen not only as a requirement of law but also a good business practice. Compliance risk Compliance risk refers to the risk of failing to comply with applicable laws, regulators, codes of conduct and standards of good practice, which may result in regulatory sanctions, financial or reputation loss. It focuses on ensuring that the group complies with laid down regulations that are applicable to its business and operations. The compliance risk function of the group carries out, amongst others, the following functions as part of its compliance risk management process: • maintain compliance risk management plans for at least five regulatory requirements that are rated highest in terms of their impact of the group’s business; • maintain an appropriate and relevant schedule of all the laws that are applicable to the group and circulate this to all the business units within the group; • liaise with regulators to co-ordinate inspections and examinations and ensure that findings contained in the inspection or examination reports are satisfactorily closed out; and • respond to regulatory requests for information and documents. Corporate governance
  • 42. 82 83 Risk management In line with the above responsibility, the compliance unit ensures that recently enacted laws, regulations and circulars are obtained and circulated to all the relevant departments of the group to guide them appropriately. Furthermore, newly enacted laws are reviewed and included in the group’s regulatory schedule which contains the provisions of all the laws that are applicable to the group in its day to day activities. The regulatory schedule is circulated amongst business units accordingly for their guidance. The compliance unit serves as the interface between the bank and its primary regulators during spot checks and routine examinations carried out by the regulators with the aim of ensuring that all issues raised by the regulators are properly addressed. In this regards, the compliance unit regularly interacts with different regulators and law enforcement agencies, such as Nigerian Police; Nigerian Financial Intelligence Unit (NFIU); Economic and Financial Crimes Commission (EFCC); and the National Drug Law Enforcement Agency (NDLEA). The accounts under regulatory investigation are placed on internal monitoring and a recommendation may be made for those accounts to be closed where there is evidence that the account is being used for fraudulent activities. Money laundering control The bank attaches utmost importance to ensuring that know your customer (KYC), anti-money laundering and terrorist financing control legislations are strictly adhered to. These legislations impose certain obligations on the bank such as ensuring that all customers of the bank have passed through a KYC scrutiny; that records of customers and their transactions are kept for a five year period; and that certain threshold transactions are reported on a weekly basis. Key legislations and regulations that govern anti-money laundering are the Money Laundering (Prohibition) Act 2004; Central Bank of Nigeria (CBN) KYC Manual; various CBN circulars, and the Economic and Financial Crimes Commission (EFCC) Act of 2004. In accordance with the relevant provisions of the Money Laundering (Prohibition) Act of 2004, training programmes are also organised for the group’s employees and over 950 employees of the group have been trained already in this regard. Training is carried out in an easy to understand manner that allows members of staff to have a good understanding of key issues such as KYC, money laundering, suspicious transactions and terrorist financing. Early in the year, the bank had categorised all its active accounts into categories A, B, and C for high, medium and low risk accounts respectively to allow for a risk based monitoring of customer accounts. As part of the bank’s commitment and resolve to combat the scourge of money laundering an automated anti-money laundering (AML) solution was recently installed to ensure that the process of identifying and capturing suspicious transactions is more effective. This process enables the bank to monitor transactions of customers that are viewed to be unusual on a continuous basis. Reputational risk Reputational risk is the risk caused by damage to an organisation’s reputation, name or brand. Such damage may result from a breakdown of trust, confidence or business relationships. Safeguarding the group’s reputation is of paramount importance to its continued success and is the responsibility of every member of staff. As a group, Stanbic IBTC places a high premium on its reputation and all its members of staff are constantly reminded of the need to ensure that the bank’s name is protected at all times and in all situations. As a banking group, Stanbic IBTC’s good reputation depends on the way in which it conducts business, but it is also affected by the way in which clients, to whom it provides financial services, conducts themselves. Corporate governance
  • 43. 84 8585 • Directors’ report • Audit committee report • Consolidated financial statements * Statements of directors’ responsibilities * Report of the independent auditor * Statement of significant accounting policies * Balance sheet * Profit and loss account * Statement of consolidated cash flows * Notes to theconsolidated financial statements * Statement of value added * Five year consolidated financial summary Annual financial statements Annual financial statements
  • 44. 86 87 Directors’ shareholding: The directors specified below held shares either directly or indirectly on 1 April 2008 and continued to hold direct or indirect shareholdings in the bank throughout the year under review. Ordinary Shares As at 1.1.08 As at 31.12.08 Direct Indirect Direct Indirect Atedo N. A. Peterside OON 200,000,000 – 220,000,000 – Chris Newson – – – – Sola David - Borha 16,121,573 – 16,121,573 – Marna Roets – – – – Jacques Troost – – – – Moses Adedoyin 44,32,000 – 44,320,000 – Mallam Ahmed Dasuki 115,005,223 – 109,000,722 – Dr Alewyn Burger – – – – Ifeoma Esiri 119 844 394 – 113,844,394 – Dr Christopher Kolade CON – – – – Ben Kruger – – – – Bhagwan Mahtani * 53,373,333 2,007,202,958 53,373,333 2,007,202,958 Ratan Mahtani** 53,373,333 2,007,202,958 53,373,333 2,007,202,958 Jacko Maree – – – – Yinka Sanni 2,242,020 – 3,450,000 – Sam Unuigbe 121,605,600 – 121,605,600 – Lt Gen (rtd) M.I. Wushishi CFR GCON*** – 214,000,000 – 214,000,000 * Bhagwan Mahtani has an indirect holding in the bank through a number of companies that include Aegean Investments Limited, Churchgate Nigeria Limited, First Century International Limited, Foco International Investments Limited, T F Kuboye Co and International Seafoods Limited, in which companies he has either a direct or indirect interest. ** Ratan Mahtani has a direct shareholding in the bank of 53,373,333 Ordinary Shares of 50 kobo each and also has a similar indirect holding in the same companies as Bhagwan Mahtani. *** Lt Gen (rtd) M.I. Wushishi CFR GCON, has an indirect holding in the bank through Umfat Holdings Ltd, a company in which he is the majority shareholder. Directors’ report In compliance with the Companies Allied Matters Act Cap C20 Laws of the Federation of Nigeria 2004 (“CAMA”) the directors present the directors’ report for Stanbic IBTC Bank PLC. The report also makes reference to issues relating to the bank’s wholly - owned subsidiaries: Stanbic IBTC Asset Management Limited, Stanbic IBTC Ventures Limited and Stanbic Nominees Limited; the subsidiaries in which it has a majority equity stake; Stanbic Equities Limited, RB Resources Limited; Stanbic IBTC Ventures’ and Stanbic IBTC Pension Managers Limited. Where reference is made to the bank and its subsidiaries such reference is classified as a reference to the Stanbic IBTC Bank Group (the group). During the year under review, the bank provided corporate and investment banking, asset management, private banking and retail banking services from a total of 62 branches and private banking suites. The bank’s subsidiaries in turn provided a range of services that included asset management, stock broking, custodial services, pension fund administration and property development. Asset Values: As at 31 December 2008 the group’s total assets amounted to N351 billion, of which net fixed assets were in the sum of N15 billion. The group’s capital and reserves exceeded N81 billion (including minority interest of N711 million). Board of Directors As at 31 December 2008, the board was comprised of the following 17 persons: Atedo N. A. Peterside OON Chairman Chris Newson CEO Sola David – Borha Deputy CEO Marna Roets Executive director Jacques Troost Executive director Moses Adedoyin Non – executive director Mallam Ahmed Dasuki Non – executive director Dr Alewyn Burger Non – executive director Ifeoma Esiri Non – executive director Dr Christopher Kolade CON Non - executive director Ben Kruger Non – executive director Bhagwan Mahtani Non – executive director Ratan Mahtani Non – executive director Jacko Maree Non – executive director Yinka Sanni Non – executive director Sam Unuigbe Non – executive director Lt Gen (rtd) M.I. Wushishi CFR GCON Non – executive director On the 22nd of July 2008, Craig Bond, who was appointed to the board on 25 October 2007 voluntarily resigned from the board. Dr Alewyn Burger and Ratan Mahtani were appointed to the board on 22 July 2008, subject to the bank obtaining all regulatory approvals for their appointments, which approvals were fully obtained by December 2008. In accordance with Article 81 of the bank’s Articles of Association, Sola David Borha, Marna Roets, Mallam Ahmed Dasuki, Ifeoma Esiri, Ben Kruger and Bhagwan Mahtani retire by rotation and being eligible, offer themselves for re – election. The appointments of Dr Alewyn Burger and Ratan Mahtani, which took effect after the September 2008 annual general meeting will be tabled for shareholders’ approval at the annual general meeting (AGM) that will, amongst other items, discuss and where appropriate approve the bank’s financial statements for the year ended 31 December 2008. Annual financial statements
  • 45. 88 89 Auditors InaccordancewithSection357(2)oftheCompaniesAlliedMattersActCapC20LawsoftheFederationofNigeria2004,PricewaterhouseCoopers have indicated their willingness to continue in office as external auditors to the company. A resolution will be proposed, and if considered appropriate passed, by shareholders, at the AGM, to authorise the directors to fix the remuneration of the auditors. Charitable other donations During the year under review and in conformity with its laid down policy on donations, the group donated the amounts indicated below to finance specified activities of the recipient organisations: Nigeria Chamber of Commerce 300,000.00 Nigeria Police College 286,000.00 Society of Petroleum Engineers 250,000.00 National Youth Service Corps 235,000.00 Minna Golf Club 200,000.00 2008 Annual Small World Event 200,000.00 Ivory Club of Nigeria 50,000.00 Military Hospital Ikoyi 20,000.00 Sacred Heart Hospital 20,000.00 Rayfield Club 20,000.00 Ibadan South West lga 10,000.00 Nig Inst. of Estate Surv. Valuer 10,000.00 Ministry of Environment’s Office 10,000.00 Lagos State Security Trust Fund 10,000,000.00 Directors’ responsibilities The directors’ responsibilities are specified in the corporate governance section of this Annual Report. Record of directors’ attendance The record of directors’ attendance at board and shareholders’ meetings during the financial year under review is disclosed in the corporate governance section of the Annual Report. Equity and range analysis As at 31 December 2007 the bank had a total of 117,145 shareholder accounts and the range analysis of their holdings is specified below: Equity and Range Analysis. Range Holders Units No. % Cum No % Cum. 1 -1,000 27,704 23.65 27,704 23,357,812 0.12 23,357,812 1,001 -5,000 49,541 42.29 77,245 137,984,524 0.74 161,346,336 5,001 -10,000 15,424 13.17 92,669 131,123,315 0.70 292,469,651 10,001 -50,000 17,841 15.23 110,510 433,643,662 2.31 726,113,313 50,001 -100,000 3,115 2.66 113,625 250,943,678 1.34 977,056,991 100,001 -500,000 2,752 2.35 116,377 624,415,585 3.33 1,601,472,576 500,001 -1,000,000 379 0.32 116,756 295,782,216 1.58 1,897,254,792 1,000,001 -2,000,000 159 0.14 116,915 231,155,019 1.23 2,128,409,811 2,000,001 -5,000,000 103 0.09 117,018 325,921,995 1.74 2,454,331,806 5,000,001 -10,000,000 50 0.04 117,068 359,054,129 1.91 2,813,385,935 10,000,001 -50,000,000 43 0.04 117,111 947,040,518 5.05 3,760,426,453 50,000,001 -100,000,000 10 0.01 117,121 754,901,123 4.03 4,515,327,576 100,000,001 -999,999,999,999 24 0.02 117,145 14,234,672,424 75.92 18,750,000,000 Grand Total 117,145 100% 18,750,000,000 100% Results and Dividends The Group The Bank N’000 N’000 Profit after Tax 11,994,430 9,214,802 Dividend Proposed 7,500,000 7,500,000 Transfer to Reserves 2,938,672 2,764,441 Directors’ report Naira Annual financial statements
  • 46. 90 91 Directors’ report Miscellaneous Subsidiaries The names of IBTC Asset Management Limited, IBTC Pension Managers Limited and IBTC Ventures Limited were changed to Stanbic IBTC Asset Management Limited, Stanbic IBTC Pension Managers Limited and Stanbic IBTC Ventures Limited respectively, which new names reflect their association with Stanbic IBTC. The group’s equity holding in Stanbic IBTC Pension Managers Limited, which was formerly held by IBTC Ventures Limited, was transferred to the bank during the year and the percentage shareholding of that company now held by the bank increased to 70.59%. Accordingly, Stanbic IBTC Pension Managers Limited is now a direct subsidiary of the bank. The issued and authorised share capital of Stanbic IBTC Asset Management increased from N300 million to N1 billion. The bank disposed of the totality of its equity holding in Britex Nigeria Limited, which it had acquired as a SMEIS investment which ceased to be a subsidiary of the bank in July 2008. R B Resources in which the bank has a 90% equity holding is currently being wound up. Stanbic IBTC Asset Management Limited (“SIAML”) combined with Stanbic Equities was the largest Stock-broking firm by transaction value on The Nigerian Stock Exchange (“The NSE”) for the third year running. Stanbic IBTC Pension Managers Limited is the largest pension administrator by number of accounts and assets under management. Employment of disabled persons: The group does not currently employ any disabled person. However, its recruitment policy, which is based solely on merit, does not discriminate against any person on the grounds of physical disability or because he /she has HIV/AIDS. Health, safety and welfare at work: The group provides comprehensive medical, dental and optical cover for all employees and their dependants under a group health insurance scheme. Where an employee acting within the scope of his/her employment accidentally injures a third party the group will, within acceptable limits, defray such party’s medical expenses. Employees can also receive independent counselling and advise at the group’s expense in relation to work and life problems, as the group has subscribed to an independent counselling advisory service utilised throughout the Standard Bank Group and known as ICAS. Employee involvement and training: To ensure that it appropriately addressed employees’ welfare and concerns throughout the year under review, the group: - kept staff informed of all matters affecting them and the group in general and encouraged their contributions towards the development of staff policies. - held a number of staff meetings that discussed the group’s day-to- day operations, business focus and staff welfare issues. - ensuredthatstaffreceivedcontinuouson-the-jobtrainingandalso attended relevant programmes conducted by reputable third party facilitators both within and outside Nigeria, as well as the Standard Bank Global Leadership Centre (GLC) in South Africa. The Committee reviewed Management’s Response to the Auditors findings in respect of management matters and we and the Auditors are satisfied with management’s response thereto. On a review of insider / related party transactions the Committee was satisfied with their status. The Committee therefore recommended that the Audited Financial Statements of the group for the year ended 31 December 2008 and the Auditors’ Report thereon, be presented for adoption by the company at the Annual General Meeting. The Committee also approved the provision made in the Financial Statements in relation to the remuneration of the auditors. Eng. Oluyomi Adeyemi Wilson Chairman, Audit Committee 3 February 2009 Audit committee report In compliance with the provisions of Section 359(3) to (6) of the Companies Allied Matters Act Cap C20 Laws of the Federation of Nigeria 2004 the Committee considered the Audited Financial Statements for year ended 31 December 2008 together with the Management Control Report from the Auditors and the bank’s response to this report at its meeting held on 3 February 2008. In our opinion, the scope and planning of the audit for the year ended 31 December 2008 was adequate. After due consideration, the Committee accepted the Report of the Auditors that the financial statements were in accordance with ethical practices and in accordance with generally accepted accounting practices and gives a true and fair view of the state of the bank’s financial affairs. Annual financial statements
  • 47. 92 93 Consolidated financial statements 31 December 2008 • Report of the Independent auditor • Statement of directors’ responsibilities • Statement of significant accounting policies • Balance sheet • Profit and loss account • Statement of consolidated cash flows • Notes to the consolidated financial statements • Statement of value added • Five year consolidated financial summary 93 Annual financial statements
  • 48. 94 95 Annual financial statementsReport of the independent auditor Report on consolidated financial statements We have audited the accompanying consolidated financial statements of Stanbic IBTC Bank PLC (“the bank”) and its subsidiaries (together “the group”) which comprise the consolidated balance sheet as of 31 December 2008 and the consolidated profit and loss account and consolidated statement of cash flows for the year then ended and a summary of significant accounting policies and other explanatory notes. Directors’ responsibility for the financial statements The directors are responsible for the preparation and fair presentation of these consolidated financial statements in accordance with Nigerian Statements of Accounting Standards and with the requirements of the Companies and Allied Matters Act and the Banks and Other Financial Institutions Act. This responsibility includes: designing, implementing and maintaining internal control relevant to the preparation and fair presentation of financial statements that are free from material misstatement, whether due to fraud or error; selecting and applying appropriate accounting policies; and making accounting estimates that are reasonable in the circumstances. Auditor’s responsibility Our responsibility is to express an independent opinion on the consolidated financial statements based on our audit. We conducted our audit in accordance with International Standards on Auditing. Those standards require that we comply with ethical requirements and plan and perform our audit to obtain reasonable assurance that the financial statements are free from material misstatement. An audit involves performing procedures to obtain audit evidence about the amounts and disclosures in the financial statements. The procedures selected depend on the auditor’s judgement, including the assessment of the risks of material misstatement of the financial statements, whether due to fraud or error. In making those risk assessments, the auditor considers internal control relevant to the entity’s preparation and fair presentation of the financial statements in order to design audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the company’s internal control. An audit also includes evaluating the appropriateness of accounting policies used and the reasonableness of accounting estimates made by the directors, as well as evaluating the overall presentation of the financial statements. We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our opinion. Opinion In our opinion, the accompanying consolidated financial statements give a true and fair view of the state of the financial affairs of the bank and the group as of 31 December 2008 and of their profits and cash flows for the year then ended in accordance with Nigerian Statements of Accounting Standards, the Companies and Allied Matters Act and the Banks and Other Financial Institutions Act. Report on other legal and regulatory requirements The Companies and Allied Matters Act and the Banks and Other Financial Institutions Act require that in carrying out our audit we consider and report to you on the following matters. We confirm that: i) we have obtained all the information and explanations which to the best of our knowledge and belief were necessary for the purposes of our audit; ii) in our opinion proper books of account have been kept, so far as appears from our examination of those books; iii) the bank’s balance sheet and profit and loss account are in agreement with the books of account; iv) our examination of loans and advances was carried out in accordance with the Prudential Guidelines for licensed banks issued by the Central Bank of Nigeria; v) related party transactions and balances are disclosed in Note 30 to the financial statements in accordance with the Central Bank of Nigeria circular BSD/1/2004; vi) the bank contravened certain sections of the Banks and Other Financial Institutions Act during the year as explained in Note 31 to the consolidated financial statements. vii) except for the contraventions disclosed in Note 31 to the consolidated financial statements, the bank has complied with the requirements of the relevant circulars issued by the Central Bank of Nigeria during the year. Chartered Accountants 31 May 2009 Lagos, Nigeria Report of the independent auditor to the members of Stanbic IBTC Bank PLC • Nigerian Accounting Standards; • Prudential guidelines for licensed banks; • relevant circulars issued by the Central Bank of Nigeria; • the requirements of the Banks and Other Financial Institutions Act; and • the requirements of the Companies and Allied Matters Act. The directors are of the opinion that the consolidated financial statements give a true and fair view of the state of the financial affairs of the group and of its profit or loss. The directors further accept responsibility for the maintenance of accounting records that may be relied upon in the preparation of the consolidated financial statements, as well as adequate systems of internal financial control. Nothing has come to the attention of the directors to indicate that the bank and its subsidiaries will not remain a going concern for at least twelve months from the date of this statement. Statement of directors’ responsibilities The Companies and Allied Matters Act and the Banks and Other Financial Institutions Act, require the directors to prepare financial statements for each financial year that give a true and fair view of the state of financial affairs of the bank at the end of the year and of its profit or loss. The responsibilities include ensuring that the bank: a) keeps proper accounting records that disclose, with reasonable accuracy, the financial position of the company and comply with the requirements of the Companies and Allied Matters Act, and the Banks and Other Financial Institutions Act; b) establishes adequate internal controls to safeguard its assets and to prevent and detect fraud and other irregularities; and c) prepares its financial statements using suitable accounting policies supported by reasonable and prudent judgements and estimates, and are consistently applied. The directors accept responsibility for the annual financial statements, which have been prepared using appropriate accounting policies supported by reasonable and prudent judgements and estimates, in conformity with: ATEDO N.A. PETERSIDE O O N CHRIS NEWSON (Chairman) (Chief Executive Officer) 29 APRIL 2009 31 May 2009
  • 49. 96 97 Annual financial statements Segments whose total revenue (internal and external), absolute profit or loss or total assets are 10% or more of the group total, are reported separately. Transactions between segments are priced at market- related rates. H. Provision against credit risk Provision is made in accordance with the Statement of Accounting Standard for Banks and Non-Bank Financial Institutions, (SAS 10) issued by the Nigerian Accounting Standards Board, and Prudential Guidelines issued by the Central Bank of Nigeria. For each account that is not performing in accordance with the terms of the related facility, provision is made as follows: Interest and/or principal outstanding for over: Classification Minimum Provision 90 days but less than 180 days Substandard 10% 180 days but less than 360 days Doubtful 50% Over 360 days Lost 100% When a loan is deemed uncollectible, it is written off against the related provision for impairments. Subsequent recoveries are credited to the provision for loan losses in the profit and loss account. If the amount of the impairment subsequently decreases due to an event occuring after the write-down, the release of the provision is credited as a reduction of the provision for impairment in the profit and loss account. A minimum of 1% general provision is made in accordance with prudential guidelines. Statement of significant accounting policies The principal accounting policies adopted in the preparation of these consolidated financial statements are set out below. These policies have been consistently applied to all years presented, unless otherwise stated. A. Basis of preparation The consolidated financial statements are prepared in compliance with Nigerian Statements of Accounting Standards (SAS) issued by the Nigerian Accounting Standards Board (NASB). The consolidated financial statements are presented in the functional currency, Nigerian Naira (N), rounded to the nearest thousand, and prepared under the historical cost convention as modified by the revaluation of certain investment securities, property, plant and equipment. The preparation of financial statements in conformity with Generally Accepted Accounting Principles in Nigeria requires the use of estimates and assumptions that affect the reported amounts of assets and liabilities, and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. Although these estimates are based on the directors’ best knowledge of current events and actions, actual results may differ from those estimates. B. Basis of consolidation Subsidiary undertakings, which are those companies in which the group, directly or indirectly, has interest of more than half the voting rights or otherwise has power to control, have been consolidated. All intercompany transactions, balances and unrealised surpluses and deficits on transactions between group companies have been eliminated. Where necessary, accounting policies for subsidiaries have been adjusted to ensure consistency with the policies adopted by the group. The acquisition method of accounting is used to account for the acquisition of subsidiaries and other entities by the group. Identifiable assets acquired, liabilities and contigent liabilities assumed in a business combination are measured at their fair values at the acquisition date, irrespective of the extent of any minority interest. The excess of the cost of acquisition over the fair value of the group’s share of the identifiable net assets acquired is recorded as goodwill. If the cost of acquisition is less than the fair value of the net assets of the entities acquired, the difference is recognised directly in the profit and loss account. C. Goodwill Goodwill represents the excess of the cost of an acquisition over the group’s interest in the net fair value of the identifiable assets, liabilities and contingent liabilities of the acquired entity, associate or joint venture at the date of acquisition. Goodwill arising on the acquisition of an entity is reported in the balance sheet as an intangible asset. Goodwill arising on acquisitions is allocated to cash generating units and tested annually for impairment. Negative goodwill is recognised as income in the period in which it arises. Gains or losses on the disposal of an entity include the carrying amount of goodwill relating to the entity sold. Where there has been impairment in the value of goodwill, the loss is identified in the year in which the impairment was made. D. Recognition of interest income and expense i) Interest income and expense are recognised in the profit and loss account for all interest bearing instruments on an accrual basis using the effective yield method based on the outstanding principal, except for interest income overdue for more than 90 days, which is suspended and recognised only to the extent that cash is received. ii) Income accruing on advances under finance lease is amortised over the lease period to achieve a constant rate of return on the outstanding net investment. Rental income on equipment leased to customers is recognised on a straight line basis over the lease term. iii) Income earned on bonds and guarantees are recorded as commissions in the period in which they occur. E. Fees and commission Fees and commission are generally recognised on an accrual basis when the service has been provided. Commitment fees for loans that are likely to be drawn down are deferred (together with related direct costs) and recognised as an adjustment to the effective interest on loans. Commissions and fees arising from negotiating, or participating in the negotiation of a transaction for a third party, such as establishing letters of credit, arrangement of the acquisition of shares or other securities or the purchase or sale of businesses are recognised on completion of the underlying transaction. Portfolio and other management advisory and services fees are recognised based on the applicable service contracts, usually on a time - apportionment basis. Asset management fees related to investment funds are recognised rateably over the period the service is provided. F. Foreign currency transactions Transactions denominated in foreign currency are converted into Naira at the rate of exchange ruling at the date of the transaction. Foreign currency balances are translated at the rate of exchange prevailing at the balance sheet date or, where appropriate, at the related forward exchange rate. Exchange differences are included in the profit and loss account in the period in which they arise. Forward contracts Losses arising from forward contracts are recognised as soon as they appear to be likely, while gains are not recognised until they are realised. However for a perfectly matched or hedged transaction, gains are recognised or losses deferred to the extent that the loss or gain has been recognised on the matching or hedging investment. G. Segment reporting An operating segment is a component of the group engaged in business activities, whose operating results are regularly reviewed by management in order to make decisions about resources to be allocated to segments and assessing segment performance. The group’s identification of segments and the measurement of segment results are based on the group’s internal reporting to management. It represents the classification of the group’s activities in segments that reflect the risk and return of the group’s product offerings in different product markets. Additional information relating to products and services, geographic areas and major customers is provided.
  • 50. 98 99 Annual financial statements I. Finance leases Investments under finance lease arrangements to customers are recorded as receivables at an amount equal to the net investment in the lease i.e. the present value of the lease payments. The difference between the gross receivable and the present value of the receivable is recognised as unearned income. Income accruing on the lease is amortised over the lease period on a basis reflecting a constant periodic rate of return on the outstanding net investment. J. Investment securities Investment securities are classified as short term and long term securities. Debt and equity securities intended to be held for a period not exceeding one year are classified as short term investments. Investment securities intended to be held for an indefinite period of time, or until maturity, and which may be sold in response to needs for liquidity or change in market rates, exchange rates or equity prices are classified as long term investments. Short term investments Short term investments held by the bank are stated at net realisable value. Unrealised gains are included in the revaluation reserve account. Unrealised losses are taken to the revaluation reserve account to the extent that a previous gain is offset. Otherwise, unrealised losses are charged to the profit and loss account. Short term investments held by subsidiaries engaged in stockbroking activities are held at market value. Unrealised gains are included in the revaluation reserve account. Unrealised losses are taken to the revaluation reserve account to the extent that a previous gain is offset. Otherwise, unrealised losses are charged to the profit and loss account. Short term investments held by subsidiaries engaged in pension fund administration are stated at lower of cost and net realisable value. Short term investments held by other subsidiaries are stated at lower of cost and market value. Unrealised losses are charged to the profit and loss account. Long term investments Long term investment securities held by the bank are stated at lower of cost and market value. Unrealised losses are charged to the profit and loss account. Long term securities held by subsidiaries that are engaged in stock broking activities and pension fund administration are stated at cost. Long term securities held by other subsidiaries are stated at revalued amount. Unrealised gains are included in the revaluation reserve account. Unrealised losses are taken to the revaluation reserve account to the extent that a previous gain is offset. Otherwise, unrealised losses are charged to the profit and loss account. Interest Interest earned whilst holding investment securities is reported as interest income, while dividend received is reported as dividend income. Realised gains and losses on disposal of investments are charged to the profit and loss account for the period of disposal. K. Investment properties Investment in real estate is stated at market value and revalued every three years. Revaluation losses are charged to the profit and loss account, while revaluation gains are taken to the profit and loss account to the extent that a previous loss is offset. Otherwise, revaluation gains are included in the revaluation reserve. L. Dealing securities Dealing securities are stated at their market prices. All gains and losses realised and unrealised from trading in dealing securities are reported in trading income. Interest earned whilst holding dealing securities is reported as trading income. M. Investments in subsidiaries Investments in subsidiaries are carried in the bank’s balance sheet at cost less provisions for impairment losses. Where, in the opinion of the directors, there has been impairment in the value of an investment, the loss is recognised as an expense in the period in which the impairment is identified. On disposal of an investment, the difference between the net disposal proceeeds and the carrying amount is charged to the profit and loss account. N. Operating leases Leases to customers in which a significant portion of the risks and rewards of ownership are retained by the bank are classified as operating leases, and accounted for by the bank as an item of fixed asset. The depreciation of these assets is on the basis of the bank’s normal depreciation policy for the various classes of assets leased out. The periodic lease rentals receivable are treated as rental income in the income statement during the period they occur; while initial direct costs incurred are written off to the income statement in the period incurred. O. Dividend Proposed diviends on ordinary shares are disclosed as a note to the financial statements in the period in which they are proposed by the directors, amounts ratified for dividend payment by the shareholders are recognised as charge against the distributable reserve in the period in which the payment become obligatory. P. Fixed assets All categories of fixed assets are initially recorded at historical cost less depreciation. Subsequent costs are included in the asset’s carrying amount or recognised as a separate asset, as appropriate, only when it is probable that future economic benefits associated with the item flow to the company and the cost of the item can be measured reliably. All other repairs and maintenance are charged to the profit and loss account during the financial period in which they are incurred. Fixed assets are periodically reviewed for impairment. Where the carrying amount of an asset is greater than its estimated recoverable amount, it is written down immediately to its recoverable amount. The recoverable amount is the higher of an asset’s fair value less costs to sell and value in use. Gains and losses on disposal of fixed assets are determined by reference to their carrying amounts and are taken into account in determining operating profit. Q. Depreciation Depreciation is calculated on a straight line basis to write-off fixed assets and equipment on lease over their estimated useful life. The basis of calculation for each class of asset are set out below: Leasehold land Over the life of the lease Building 25 years Motor vehicles 4 years Furniture, fittings and equipment 4 years Computer equipment software 3 years Leasehold assets, machinery equipment Over the life of the lease R. Income taxation Income tax expense is the aggregate of the charges to the profit and loss account in respect of current income tax, education tax, information technology development tax and deferred income tax. Current income tax is the amount of income tax payable on the taxable profit for the period determined in accordance with the Company Income Tax Act (CITA). Education tax is assessed at 2% of the chargeable profits whilst information technology development tax is assessed at 1% of profit before tax. Deferred income tax is provided in full using the liability method on all temporary differences arising between the tax bases of assets and liabilities and their carrying values for financial reporting purposes. Deferred income tax is determined using tax rates enacted or substantively enacted at the balance sheet date and are expected to apply when the deferred income tax liability is settled. Deferred income tax assets are recognised only to the extent that it is probable that future taxable profits will be available against which the temporary difference can be utilised. S. Retirement benefits The group operates a defined contribution pension scheme in line with the provisions of the Pension Reform Act, with contributions based on the sum that consists of employees basic salary, housing and transport allowance in the ratio 7.5% by the employee and 7.5% by the employer. The group’s contributions to the scheme are charged to the profit and loss account in the period to which they relate, and the scheme’s assets are held by pension fund administrators on behalf of the beneficiary staff. T. Off-balance sheet engagements Off-balance sheet engagements comprise direct credit substitutes and transaction related contingencies such as guarantees, acceptances, bid bonds and performance guarantees which the bank is a party to in its normal course of business. Income earned on bonds and guaratees are amortised over the life of the guarantee, while other fees are recognised as commissions in the period in which they occur. U. Fiduciary activities Where the group acts in a fiduciary capacity such as a nominee, assets and liabilities arising there from, together with the related undertakings to return such assets to the customers, are excluded from the financial statements. Statement of significant accounting policies
  • 51. 100 101 31 December 2008 31 December 2007 Group Bank Group Bank N’000 N’000 N’000 N’000 Note Gross earnings 61,240,514 53,872,418 28,651,036 24,731,949 Interest income 2 40,973,373 40,601,907 15,772,018 15,497,517 Interest expense 3 (18,611,300) (18,652,358) (6,170,948) (5,998,062) Net interest margin 22,362,073 21,949,549 9,601,070 9,499,455 Other income 4 20,267,141 13,270,511 12,879,018 9,234,432 Total income 42,629,214 35,220,060 22,480,088 18,733,887 Provision for risk and other assets 16 (5,019,835) (5,204,786) (2,043,683) (2,043,683) Income after provision for losses charged 37,609,379 30,015,274 20,436,405 16,690,204 Operating expenses 5 (22,982,484) (19,472,593) (9,444,277) (7,893,800) Net profit before tax 14,626,895 10,542,681 10,992,128 8,796,404 Tax 6 (2,632,465) (1,327,879) (3,142,280) (1,854,639) Profit after tax 11,994,430 9,214,802 7,849,848 6,941,765 Minority interest 26 (430,279) – (265,024) – Profit after tax and minority interest 11,564,151 9,214,802 7,584,824 6,941,765 APPROPRIATIONS: Transfer to statutory reserve 25 2,938,672 2,764,441 2,162,399 2,082,530 Transfer to retained earnings 25 8,625,478 6,450,361 5,422,425 4,859,235 11,564,150 9,214,802 7,584,824 6,941,765 Earnings per share (basic) 9 64 k 49 k 71 k 63 k Earnings per share (diluted) 9 64 k 49 k 42 k 37 k The board of directors has proposed a dividend of 40kobo per share (31 December 2007: 25kobo per share) on the issued share capital of 18.75 billion ordinary shares of 50kobo each, subject to the approval by the shareholders at the next annual general meeting. The accounting policies on pages 96 to 99 and the notes on pages 106 to 135 form an integral part of these financial statements. 12 months ended 9 months ended 31 December 2008 31 December 2007 Group Bank Group Bank N’000 N’000 N’000 N’000 Note ASSETS Cash and short term funds 10 11,586,637 11,440,683 13,037,811 13,035,852 Due from other banks 11 111,592,259 110,158,503 79,578,685 71,800,274 Short term investments 12 14,548,809 13,540,991 52,467,959 52,467,959 Loans and advances 14 98,398,273 99,010,288 79,464,605 79,635,690 Advances under finance leases 17 4,261,548 4,261,548 1,989,477 1,989,477 Other assets 18 19,455,342 19,189,336 11,761,803 13,423,728 Long term investments 13 75,977,624 73,224,722 68,145,092 63,821,968 Fixed assets 19 15,432,906 14,905,000 8,661,669 8,345,046 351,253,398 345,731,071 315,107,101 304,519,994 LIABILITIES Deposits, current and other accounts 20 95,240,375 98,891,532 71,390,744 72,455,223 Due to other banks 21 82,201,637 82,201,637 67,298,123 66,851,937 Tax payable 6 5,821,429 3,240,391 5,640,502 3,612,948 Other liabilities 22 74,033,687 72,342,775 66,784,442 61,593,834 Deferred tax 7 378,467 236,727 441,654 51,107 Long term loans 23 12,201,358 12,201,358 27,533,212 27,533,212 269,876,953 269,114,420 239,088,677 232,098,261 EQUITY Share capital 24 9,375,000 9,375,000 9,375,000 9,375,000 Reserves 25 71,290,041 67,241,651 66,188,215 63,046,733 Shareholders’ funds 80,665,041 76,616,651 75,563,215 72,421,733 MINORITY INTEREST 26 711,404 – 455,209 – LIABILITIES, EQUITY AND MINORITY INTEREST 351,253,398 345,731,071 315,107,101 304,519,994 ACCEPTANCES AND GUARANTEES 27 50,860,640 50,860,640 56,259,272 56,259,272 The consolidated financial statements and notes on pages 95 to 135 were approved by the board of directors on 29 April 2009 and signed on its behalf by: The accounting policies on pages 96 to 99 and the notes on pages 106 to 135 form an integral part of these financial statements. Balance sheet ATEDO N.A. PETERSIDE OON CHRIS NEWSON (Chairman) (Chief Executive Officer) Profit and loss account Annual financial statements
  • 52. 102 103 12 months ended 9 months ended 31 December 2008 31 December 2007 Group Bank Group Bank N’000 N’000 N’000 N’000 CASH FLOWS FROM INVESTING ACTIVITIES: Purchase of investment securities (note vi) (9,470,271) (8,246,155) (19,166,995) (18,316,342) Investment in subsidiaries – (1,264,706) – – Net cash inflow from acquisition of subsidiary (note viii) - – – 91,430,209 91,430,209 Increase of investment in existing subsidiary (264,706) – – – Purchase of other investments (1,007,818) – – – Investment in SMEEIS (224,277) (224,277) (729,218) (729,218) Proceeds from sale /(realisation) of underwriting commitments and other investments (note vii) 4,872,098 4,532,737 (2,960,694) (4,193,636) Purchase of tangible fixed assets (8,795,756) (8,377,949) (2,358,494) (2,200,145) Proceeds from sale of tangible fixed assets (note v) 73,821 57,534 18,763 10,537 Net cash (used in)/ generated from investing activities (14,816,909) (13,522,816) 66,233,571 66,001,405 CASH FLOWS FROM FINANCING ACTIVITIES: (Decrease)/ increase in long term loans (15,331,854) (15,331,854) 21,924,360 21,924,360 Dividend paid (4,767,500) (4,687,500) (3,750,000) (3,750,000) Net cash (used in)/generated from financing activities (20,099,354) (20,019,354) 18,174,360 18,174,360 Net (decrease)/increase in cash and cash equivalents (3,899,215) 2,301,445 68,518,399 61,521,553 Balance at 1 January 140,179,183 132,398,813 71,660,784 70,877,260 Balance at 31 December 136,279,968 134,700,258 140,179,183 132,398,813 12 months ended 9 months ended 31 December 2008 31 December 2007 Group Bank Group Bank N’000 N’000 N’000 N’000 CASH FLOWS FROM OPERATING ACTIVITIES: Operating profit excluding non cash items (note ii) 11,480,094 7,748,979 13,661,076 12,266,705 - Taxes paid (1,945,629) (1,222,558) (707,397) (610,464) Operating profit before changes in operating 9,534,465 6,526,421 12,953,679 11,656,241 assets liabilities (Increase) / decrease in operating assets: Loans to customers (17,759,354) (18,200,283) (32,011,631) (33,199,204) Finance leases (2,778,067) (2,778,067) (224,487) (224,487) Accrued interest and fees receivable (4,185,211) (4,180,278) 1,742,319 1,566,637 Prepaid interest (2,383,359) (2,020,796) 579,852 452,510 Prepaid expenses (3,774,420) (2,798,869) 329,648 356,812 Uninvested SMEEIS commitments (127,662) 11,564 387,033 319,531 Due from subsidiary companies – 834,826 – – Due from Standard Bank Group (SBG) 398,906 398,906 (669,869) (1,226,486) Deposit for underwriting commitments 7,500,000 7,500,000 (7,500,000) (7,500,000) WHT recoverable (223,426) (238,047) 40,590 (141,878) Deposit for shares 616,395 – (616,395) – Open buy back treasury bills holdings with banks (1,500,000) (1,500,000) – – Due from asset management and custody clients 574,793 – (574,793) – Sundry receivables (878,402) (246,710) 59,231 148,298 (24,519,807) (23,217,754) (38,458,502) (39,448,267) Increase / (decrease) in operating liabilities: Deposits current and other accounts 23,849,631 26,436,309 (6,726,175) (10,526,713) Due to other banks 14,903,514 15,349,700 195,511 (250,612) Liability on refinanced letters of credit (968,492) (968,492) 2,202,703 2,202,703 Liability on cash-backed letters of credit 5,692,404 5,692,403 830,723 830,723 Interest payable 1,983,794 1,983,796 619,280 619,279 Accrued expenses 2,942,370 2,974,135 900,631 1,095,685 Unearned income 1,663,721 1,634,560 951,324 1,057,673 Application monies received 9,297,897 9,785,267 8,340,946 7,924,400 Due to asset management clients (15,803,729) (11,619,322) 1,051,859 899,527 Drafts/bankers’ cheques payable (421,576) (157,256) 718,037 718,037 Collections/remittances payable 552,089 946,296 624,855 328,697 Other payables 2,310,767 477,552 (94,403) 238,415 46,002,390 52,534,948 9,615,291 5,137,814 Net cash generated from/(used in) operating activities 31,017,048 35,843,615 (15,889,532) (22,654,212) Statement of consolidated cash flows Annual financial statements
  • 53. 104 105 vi. Purchase of investment securities 12 months ended 9 months ended 31 December 2008 31 December 2007 Group Bank Group Bank N’000 N’000 N’000 N’000 Purchase of quoted securities (608,337) – (321,706) – Purchase of unquoted securities – – (300) – Purchase of investment in government securities (8,861,934) (8,246,155) (18,844,990) (18,316,342) (9,470,271) (8,246,155) (19,166,995) (18,316,342) vii. Sale /(realisation ) of underwriting commitment Realisation of underwriting commitments 4,872,098 4,532,737 (4,807,580) (4,807,580) Sale of other investments – – 1,846,886 613,944 4,872,098 4,532,737 (2,960,694) (4,193,636) viii. Net cash flows resulting from acquisition of subsidiary During the year ended December 2007, the bank acquired the net asset of Stanbic Bank Nigeria Limited (SBN) at a purchase consideration of N66.87billion. The net cash inflow resulting from acquisition of SBN is as detailed below: Cash and short term funds – – 6,588,974 6,588,974 Due from other banks – – 81,392,667 81,392,667 Treasury bills – – 3,448,569 3,448,569 Investments – – 15,426,642 15,426,642 Loans and advances – – 13,701,085 13,701,085 Advances under finance leases – – 1,334,954 1,334,954 Other assets – – 3,138,837 3,138,837 Fixed assets – – 864,696 864,696 Total asset acquired: – – 125,896,424 125,896,424 Deposits, current and other accounts – – (10,085,889) (10,085,889) Due to other banks – – (61,262,534) (61,262,534) Tax payable – – (1,273,164) (1,273,164) Other liabilities – – (23,200,174) (23,200,174) Deferred tax – – (34,541) (34,541) Net asset acquired: – – 30,040,122 30,040,122 Goodwill on acquisition – – 36,834,878 36,834,878 Purchase consideration - shares allotted – – 66,875,000 66,875,000 Cash paid on acquisition of subsidiary – – – – Cash and cash equivalent acquired: - Cash and short term funds – – 6,588,974 6,588,974 - Due from other banks – – 81,392,667 81,392,667 - Treasury bills – – 3,448,569 3,448,569 Net cash inflow resulting from – – 91,430,209 91,430,209 acquisition of subsidiary i. Analysis of cash and cash equivalent balances as at 31 December For the purpose of the cash flow statement, cash and cash equivalents comprises coins, bank notes, balances with Central Bank of Nigeria, amounts due from local and foreign banks, net of outstanding bank overdrafts, money at call and short notice, and investment in short term liquid instruments. Cash and cash equivalent at the end of the financial year, is reconciled to the related items in the balance sheet as follows: Notes to the consolidated financial statements 12 months ended 9 months ended 31 December 2008 31 December 2007 Group Bank Group Bank N’000 N’000 N’000 N’000 Cash and short term funds 11,586,637 11,440,683 13,037,811 13,035,852 Due from other banks 111,592,259 110,158,503 79,578,685 71,800,274 Treasury bills 13,101,072 13,101,072 47,562,687 47,562,687 136,279,968 134,700,258 140,179,183 132,398,813 ii. Operating profit excluding non cash items Operating profit /(loss) excluding interest (7,735,177) (11,406,869) 1,391,058 (703,051) Add: Interest received 40,973,373 40,601,907 15,772,018 15,497,517 Less: Interest paid (18,611,300) (18,652,358) (6,170,948) (5,998,062) Operating profit before tax 14,626,894 10,542,680 10,992,128 8,796,404 Adjustment for non-cash and other items: - Depreciation 1,433,223 1,256,052 771,336 669,539 - Withholding tax provisions (311,283) (292,258) – – - Profit on disposal of investments (406,745) (67,384) (1,329,030) (431,466) - Loss / (gain) on sale of assets (note v) 517,477 504,410 (5,012) (2,220) - Loan loss provisions/suspended interest (note iii) (668,319) (668,321) 2,872,678 2,872,678 - Forward cover gain (4,188,186) (4,188,186) – – - Other known losses (write back)/provisions (note iv) 477,033 661,984 358,976 361,770 Operating profit excluding non cash items 11,480,094 7,748,979 13,661,076 12,266,705 iii. Reconciliation of increase / (decrease) in loan loss provisions and suspended interest Provision for loans and advances (Note 16) 4,540,861 4,540,861 1,681,913 1,681,913 Provision for finance leases (Note 16) 1,941 1,941 – – Movement on unearned income on finance leases 504,055 504,055 336,753 336,753 Interest charged and suspended for the year (Note 15) 1,274,250 1,274,250 1,878,671 1,878,671 Write-back/charge-off/reclassification (6,989,426) (6,989,426) (1,024,659) (1,024,659) (668,319) (668,321) 2,872,678 2,872,678 iv. Reconciliation of increase / (decrease) in other known loss provisions Provision for other known losses 477,033 661,984 361,770 361,770 Amounts written off – – (2,794) – 477,033 661,984 358,976 361,770 v. Reconciliation of (profit) / loss on disposal of fixed assets Cost 985,928 951,904 52,579 28,270 Depreciation (394,631) (389,960) (38,828) (19,953) Net book value 591,297 561,944 13,751 8,317 Sales proceed (73,821) (57,534) (18,763) (10,537) Loss/(gain) on disposal 517,476 504,410 (5,012) (2,220) Annual financial statements
  • 54. 106 107 12 months ended 9 months ended 31 December 2008 31 December 2007 Group Bank Group Bank N’000 N’000 N’000 N’000 3. INTEREST EXPENSE Analysis by type: Current accounts 427,085 429,045 218,691 219,818 Deposit accounts 7,508,696 7,547,794 4,749,380 4,686,976 Interbank takings 4,555,194 4,555,194 610,284 610,284 Rediscounted instruments 6,120,325 6,120,325 592,593 480,984 18,611,300 18,652,358 6,170,948 5,998,062 Analysis by source: Bank 4,555,194 4,555,194 610,284 610,284 Non bank 14,056,106 14,097,164 5,560,664 5,387,778 18,611,300 18,652,358 6,170,948 5,998,062 Analysis by geographical location: Paid in Nigeria 17,717,011 17,758,070 4,457,871 4,284,985 Paid outside Nigeria 894,289 894,288 1,713,077 1,713,077 18,611,300 18,652,358 6,170,948 5,998,062 4. OTHER INCOME Fees 6,282,394 4,553,611 8,284,570 3,326,208 Foreign exchange earnings 4,115,433 4,115,433 1,990,370 1,990,062 Commissions 8,713,413 3,966,047 804,044 804,044 Rental income 140,463 140,463 141,866 141,866 Dividend from subsidiaries – – – 2,320,000 Dividend income 202,935 27,330 72,974 21,792 Other investment income – – 81,923 43,532 Profit from disposal of investments 406,745 67,384 1,329,030 431,466 Profit from disposal of assets – – 5,012 2,220 Other income 405,758 400,243 169,229 153,242 20,267,141 13,270,511 12,879,018 9,234,432 1. CONSOLIDATED FINANCIAL STATEMENTS The group comprises Stanbic IBTC Bank PLC (“the bank”) and its subsidiary undertakings. The group provides corporate and investment banking, asset management, pension fund administration and personal and business banking services. The bank was incorporated as a private limited liability company on 2 February 1989, granted a merchant banking license on 3 February 1989, and commenced operations on 1 March 1989. Its merchant banking license was converted into universal banking license in January 2002, pursuant to the universal banking scheme of the Central Bank of Nigeria. The bank’s shares are quoted on The Nigerian Stock Exchange and held by both foreign and Nigerian individual and corporate investors. The bank, which was incorporated as Investment Banking Trust Company Plc (“IBTC”), merged with Chartered Bank Plc and Regent Bank Plc on 19 December 2005, and changed its name to IBTC Chartered Bank Plc. On 24 September 2007, the bank merged with Stanbic Bank Nigeria Limited (“SBN”), a wholly owned subsidiary of Stanbic Africa Holdings Limited (‘’SAHL’’), SAHL, a subsidiary of Standard Bank Group (“SBG”) of South Africa, in accordance with the scheme of merger, acquired majority shareholding (50.1%) in the bank whose name was subsequently changed to Stanbic IBTC Bank Plc. In 1996, the bank acquired majority shareholdings (99.99%) in two companies incorporated in Nigeria, namely IBTC Ventures Limited (“IVL”) and IBTC Asset Management Limited (“IAML”). As at December 2008, IVL had a 70.59% equity holding in IBTC Pension Managers Limited (“IPML”) which is a licenced Pension Fund Administrator, up from an initial holding of 60%. This happened by virture of additional acquisition of 10.59% of IPML’s shares from other shareholders, which took place during the year. In December 2008, the shareholding of IVL in IPML was acquired by the bank. RB Resources Ltd (subsidiary of Regent Bank Plc) and Britex Nigeria Ltd (an SMEEIS Investment by Chartered Bank Plc and Regent Bank Plc with 55% combined holding) became subsidiaries of the bank through the merger with Regent Bank Plc and Chartered Bank Plc. Stanbic Equities Limited (‘’SEL’’) and Stanbic Nominees Limited (‘’SNL’’), subsidiaries of SBN, also became subsidiaries of the bank through the merger with SBN. In October 2008, the subsidiaries changed their names to Stanbic IBTC Ventures Limited (“SIVL”), Stanbic IBTC Asset Management Limited (“SIAML”) and Stanbic IBTC Pension Managers Limited (“SIPML”) respectively in line with the bank’s new corporate identity. The financial statements of SIVL, SIAML, SIPML, SEL and SNL whose businesses were considered significant have been consolidated in the group financial statements. However, the bank disposed off its investment in Britex Nigeria Ltd during the year under review, while the financial records of RB Resources Ltd have not been consolidated in the group financial statements as it is the opinion of the directors that the balances are immaterial to the group. 12 months ended 9 months ended 31 December 2008 31 December 2007 Group Bank Group Bank N’000 N’000 N’000 N’000 2. INTEREST INCOME Analysis by type: Loans and advances 23,911,214 23,604,188 8,784,071 8,642,217 Treasury bills 3,711,380 3,711,380 1,682,852 1,682,852 Foreign accounts 1,207,001 1,207,001 505,838 505,838 Interbank placements 5,103,044 5,103,044 1,127,890 1,044,639 Government stocks and bonds 7,040,734 6,976,294 3,671,367 3,621,971 40,973,373 40,601,907 15,772,018 15,497,517 Analysis by source: Bank 8,963,805 8,963,805 2,934,827 2,851,576 Non bank 32,009,568 31,638,102 12,837,191 12,645,941 40,973,373 40,601,907 15,772,018 15,497,517 Analysis by geographical location: Domestic 39,766,372 39,394,906 15,266,180 14,991,679 External 1,207,001 1,207,001 505,838 505,838 40,973,373 40,601,907 15,772,018 15,497,517 Notes to the consolidated financial statements Annual financial statements
  • 55. 108 109 12 months ended 9 months ended 31 December 2008 31 December 2007 Group Bank Group Bank N’000 N’000 N’000 N’000 6. TAX Payable At 1 January 5,640,502 3,612,948 2,212,558 1,334,981 Income tax charge 2,098,898 850,001 2,885,945 1,652,656 Tax paid (1,945,629) (1,222,558) (675,553) (541,618) Transfers arising from merger – – 979,428 979,428 Prior years’ under provision 27,658 – 238,124 187,501 At 31 December 5,821,429 3,240,391 5,640,502 3,612,948 Charge Current tax 1,778,280 649,012 2,712,705 1,540,925 Information technology levy 146,269 105,427 – – Education tax 174,349 95,562 173,240 111,731 Income tax charge 2,098,898 850,001 2,885,945 1,652,656 Prior years’ under provisions 27,658 – 238,124 187,501 Deferred tax charge / (write-back) - (Note 7) 194,626 185,620 (349,347) (353,076) Charge for the year 2,321,182 1,035,621 2,774,722 1,487,081 Withholding tax charge 311,283 292,258 367,558 367,558 Effective tax charge for the year 2,632,465 1,327,879 3,142,280 1,854,639 7. DEFERRED TAX At 1 January 441,654 51,107 780,262 382,142 Transfer arising from merger – – 22,041 22,041 (Write-back)/charge for the year - (Note 6) 194,626 185,620 (349,347) (353,076) Prior year adjustment on revaluation of securities 26,581 – – – Write-back on revaluation of securities (284,394) – (11,302) – At 31 December 378,467 236,727 441,654 51,107 The net deferred tax liability is attributable to: Excess on depreciation charge over capital allowances 264,082 236,727 144,684 51,107 Revaluation surplus on securities 114,385 – 296,970 – 378,467 236,727 441,654 51,107 8. DIVIDEND In line with the provisions of Statement of Accounting Standard No. 23 (SAS 23) issued by the Nigerian Accounting Standards Board and effective 1 June 2006, a proposed dividend is accounted for after it has been approved by the shareholders at the annual general meeting. Consequently, it is recorded as a charge against the distributable reserve in the year of payment as shown in note 25. The board of directors has proposed a dividend of 40kobo per share, amounting to N7.5 billion for the year ended 31 December 2008 on the issued share capital of 18.75 billion ordinary shares of 50kobo each subject to the approval by the shareholders at the next annual general meeting. Dividend paid for the nine months ended 31 December 2007 was 25kobo per share on the issued share capital of 18.75 billion ordinary shares of 50kobo each, amounting to N4.7 billion. Notes to the consolidated financial statements 12 months ended 9 months ended 31 December 2008 31 December 2007 Group Bank Group Bank N’000 N’000 N’000 N’000 5. OPERATING EXPENSES Staff costs - (Note 29a) 10,425,590 8,902,163 4,660,159 3,967,374 Directors’ emoluments - (Note 29b ) 553,010 507,655 259,748 223,269 Auditor’s remuneration 130,000 94,600 88,870 61,870 Other operating expenses 10,440,661 8,712,123 3,664,164 2,971,748 Payment to employees and suppliers 21,549,261 18,216,541 8,672,941 7,224,261 Depreciation on fixed assets - (Note 19) 1,433,223 1,256,052 771,336 669,539 Total operating expenses 22,982,484 19,472,593 9,444,277 7,893,800 Analysis by geographical location: Paid in Nigeria 22,376,325 18,866,434 9,341,413 7,790,936 Paid outside Nigeria 606,159 606,159 102,864 102,864 22,982,484 19,472,593 9,444,277 7,893,800 Other operating expenses: Training, travel accomodation 1,343,794 1,182,204 300,344 260,179 Rent, rates, lights power 328,904 281,544 266,901 241,312 Insurance 916,009 899,927 435,378 418,538 Repairs maintenance 427,196 359,200 554,601 526,430 Stationery, postages communication 672,221 578,890 324,254 258,902 Advertisements business promotions 1,720,096 1,597,538 461,288 330,686 Security, legal other professional fees 2,857,646 2,302,381 516,003 307,921 Corporate expenses 466,874 422,345 341,471 341,471 Local tax and levies 142,389 142,389 196,879 187,904 Loss on sale of fixed assets 517,476 504,410 – – Bank charges 132,370 132,370 21,662 15,888 Other administrative expenses 915,686 308,925 245,383 82,517 10,440,661 8,712,123 3,664,164 2,971,748 Annual financial statements
  • 56. 110 111 Annual financial statements 12 months ended 9 months ended 31 December 2008 31 December 2007 Group Bank Group Bank N’000 N’000 N’000 N’000 12. SHORT TERM INVESTMENTS Treasury bills 13,101,072 13,101,072 47,562,687 47,562,687 Underwriting commitments: - Cornerstone Insurance Plc – – 97,692 97,692 - GTBank GDR – – 772,493 772,493 - Diamond Bank GDR 439,919 439,919 4,035,087 4,035,087 Commercial papers 1,007,818 – – – Total - short term investments 14,548,809 13,540,991 52,467,959 52,467,959 13 LONG TERM INVESTMENTS i Quoted securities: Portfolio of listed securities - Cost: N4.2billion (31 December 2007:N4.11 billion) 2,765,979 – 3,687,275 – ii Equity investments in unquoted securities: Virgin Nigeria Airways Limited - 850,000 ordinary class B shares of N1 each - (Bank: 250,000; IVL: 600,000) 297,500 87,500 297,500 87,500 Smartcard Nigeria Plc - 12,299,442 ordinary shares of N1 each. 23,019 23,019 23,019 23,019 First Securities Discount House Limited - 77,378,670 ordinary shares of N1 each. 24,483 24,483 24,483 24,483 Nigeria Interbank Settlement System Plc - 105,400,582 ordinary shares of N1 each. 105,401 105,101 105,401 105,101 450,403 240,103 450,403 240,103 iii Investment in government securities: Federal Government of Nigeria (FGN) bonds 71,159,769 69,565,340 62,531,491 61,552,842 2nd Lagos State Government bond - 2005/2009 102,000 102,000 Nigerian promissory note 24,518 24,518 21,245 21,245 71,184,287 69,589,858 62,654,736 61,676,087 iv Investment in subsidiary companies: Stanbic IBTC Ventures Ltd (100%) – 500,000 – 500,000 Stanbic IBTC Asset Management Ltd (100%) – 710,000 – 10,000 Stanbic IBTC Pension Managers Ltd (70.59%) – 564,706 – – Stanbic Equities Ltd (93.6%) – 43,000 – 43,000 Stanbic Nominees Ltd (100%) – 100 – 100 RB Resources Ltd (100%) 1,000 1,000 1,000 1,000 1,000 1,818,806 1,000 554,100 v Investment in small medium scale industries: Direct investments: - Britex Nigeria Ltd – – 107,000 107,000 - Frezone Plant Fabrication Int’l Ltd 120,000 120,000 120,000 120,000 - Tinapa Business Resort Ltd 500,000 500,000 500,000 500,000 - Credit Reference Company 50,000 50,000 112,000 112,000 - Onward Paper Mills Ltd 385,487 385,487 258,000 258,000 - CR Services Ltd 86,988 86,988 1,142,475 1,142,475 1,097,000 1,097,000 9 EARNINGS PER SHARE Earnings per share (actual) is calculated by dividing the profit after tax by the number of shares in issue during the period, while earnings per share (basic) is calculated by using the weighted average number of shares in issue during the period as the denominator. Earnings per share (adjusted) is calculated by using the number of shares outstanding as at the balance sheet date as a common denominator for all years, while earnings per share (diluted) is calculated by adjusting the number of shares in issue during the period with the effects of all potential ordinary shares. 12 months ended 9 months ended 31 December 2008 31 December 2007 Group Bank Group Bank N’000 N’000 N’000 N’000 Profit after tax (N’000) 11,994,430 9,214,802 7,849,848 6,941,765 Number of shares (in thousands) 18,750,000 18,750,000 18,750,000 18,750,000 Weighted average number of shares (in thousands) 18,750,000 18,750,000 11,048,497 11,048,497 Diluted number of shares (in thousands) 18,750,000 18,750,000 18,750,000 18,750,000 Earnings per share (EPS) - basic 64 k 49 k 71 k 63 k Earnings per share (EPS) - diluted 64 k 49 k 42 k 37 k There was no change in the number of shares in issue during the year. Consequently, the weighted average number of shares is the same as absolute number of shares in issue, and outstanding at year end. 10. CASH AND SHORT TERM FUNDS Coins and bank notes 3,122,729 2,976,775 2,205,831 2,203,872 Settlement / Clearing accounts 2,209,533 2,209,533 1,936,895 1,936,895 Balances with Central Bank of Nigeria 6,254,375 6,254,375 8,895,085 8,895,085 11,586,637 11,440,683 13,037,811 13,035,852 Cash and balances with Central Bank include N1.89 billion (31 December 2007 : N3.03 billion) that is not available for use by the group. These balances comprises cash reserve requirements held with Central Bank of Nigeria (CBN). The settlement/clearing account balances represent cheques/funds awaiting payment through the settlement system. The correponding liability is included in deposit liabilities (Note 20) and other liabilities (Note 22) as applicable. 11. DUE FROM OTHER BANKS Balances due from banks in Nigeria 31,312,699 31,359,125 8,352,181 573,770 Balances due from banks outside Nigeria 23,204,554 23,204,554 14,448,900 14,448,900 Interbank - commercial papers (CPs) 6,555,940 6,563,758 34,582,000 34,582,000 Interbank - placements 50,519,066 49,031,066 22,195,604 22,195,604 111,592,259 110,158,503 79,578,685 71,800,274 Interbank CPs are reported net of CPs sold amounting to N670.29 million (31 December 2007: N37.55 billion), which is disclosed in Note 27c. Also included in balances held with banks outside Nigeria is an amount of N11.12 billion (31 December 2007: N5.43 billion) representing customer deposits on account of letters of credit transactions. The corresponding liability is included in other liabilities (Note 22). Notes to the consolidated financial statements
  • 57. 112 113 12 months ended 9 months ended 31 December 2008 31 December 2007 Group Bank Group Bank N’000 N’000 N’000 N’000 14. LOANS AND ADVANCES Overdrafts 28,145,286 28,145,286 27,508,559 27,679,644 Commercial papers bankers acceptances 30,676,772 30,676,772 13,551,046 13,551,046 Term loans 48,777,964 49,389,979 48,667,520 48,667,520 Other loans 1,189,153 1,189,153 1,302,697 1,302,697 108,789,175 109,401,190 91,029,822 91,200,907 Loan loss provision - (Note 15) (10,390,902) (10,390,902) (11,565,217) (11,565,217) 98,398,273 99,010,288 79,464,605 79,635,690 Analysis by maturity: Maturing under 1 month 41,896,877 41,896,877 21,487,033 21,487,033 Maturing between 1 to 3 months 37,069,479 37,069,479 5,528,078 5,528,078 Maturing between 3 to 6 months 10,008,059 10,008,059 8,186,984 8,186,984 Maturing between 6 to 12 months 6,686,352 6,686,352 30,076,660 30,076,660 Maturing after 12 months 13,128,408 13,740,423 25,751,067 25,922,152 108,789,175 109,401,190 91,029,822 91,200,907 Analysis by security: Secured against real estate 6,651,068 6,651,068 5,925,221 5,925,221 Otherwise secured 71,654,283 71,654,283 84,773,401 84,944,486 Unsecured 30,483,824 31,095,839 331,200 331,200 108,789,175 109,401,190 91,029,822 91,200,907 Analysis by performance: Performing 93,251,460 93,863,475 79,867,678 80,038,763 Non-performing - substandard 1,430,425 1,430,425 161,151 161,151 Non-performing - doubtful 9,639,071 9,639,071 1,197,689 1,197,689 Non-performing - lost 4,468,219 4,468,219 9,803,304 9,803,304 108,789,175 109,401,190 91,029,822 91,200,907 Commercial papers (CPs)/bankers acceptances (BAs) are reported net of CPs sold amounting to N15.704 billion (31 December 2007: N3.94 billion), which is disclosed in note 27c. Other loans relate to various categories of staff loans. 12 months ended 9 months ended 31 December 2008 31 December 2007 Group Bank Group Bank N’000 N’000 N’000 N’000 Through: African Capital Alliance - (SME Partnership): - Vic Lawrence Associates 2,493 2,493 2,493 2,493 - Oakwood Park Ltd – – 13,681 13,681 - ACCAT Nig Ltd 11,050 11,050 11,050 11,050 - De Haastrup Communications 5,786 5,786 5,786 5,786 - Alvac Co Ltd 64,885 64,885 4,177 4,177 - Medicare Investment Services Ltd 7,166 7,166 7,166 7,166 - Midi Holdings 6,196 6,196 6,196 6,196 - S B Ince Ltd 4,651 4,651 4,651 4,651 - Accion International Ltd 35,150 35,150 24,545 24,545 - Frezone Plant Fabrication Int’l Ltd 25,696 25,696 25,696 25,696 - Nigerian Starch Mills 28,202 28,202 28,202 28,202 - Falcongaz Ltd 148,158 148,158 26,988 26,988 - Obital Track and Fleet Ltd 9,740 9,740 9,740 9,740 - Impex World Wide Ltd 3,419 3,419 3,419 3,419 - Weltex Ltd 19,488 19,488 19,488 19,488 372,080 372,080 193,278 193,278 Through: First SMI Investment Company Ltd: - Emel VGC Hospital 39,600 39,600 39,600 39,600 - Charnel House Ltd 21,800 21,800 21,800 21,800 61,400 61,400 61,400 61,400 1,575,955 1,575,955 1,351,678 1,351,678 Total long term investments 75,977,624 73,224,722 68,145,092 63,821,968 Quoted securities are quoted on the Nigerian Stock Exchange and have been valued at the market prices on the exchange as at 31 December 2008. Market value of same securities as at 30th April 2009 was N2.30 billion. Until December 2008, SIVL had a 70.59% equity holding in Stanbic IBTC Pension Managers Limited (“SIPML”). In December 2008, the shareholding of SIVL in SIPML which reflect a net asset value of N1.62 billion was acquired by the bank for a total purchase consideration of N564.7 million. In the consolidated financial statement, the resulting negative goodwill of N1.05 billion for Stanbic IBTC group had been offset by a corresponding loss amount on disposal by SIVL as disclosed in Note 36. During the year under review, the authorised share capital of SIAML was increased to 1 billion units from 300 million units. Consequently, 700 million units of shares valued at N700 million were issued, fully subscribed and paid for by the bank. Investment in Federal Government bonds included N20.8 billion bonds pledged by the bank with Standard Bank Plc (‘SBL’) under a repurchase agreement. The liability to SBL is included under ‘Due to other banks’ (Note 21). The financial records of RB Resources limited have not been consolidated in the group financial statements as it is the opinion of the directors that the balances are immaterial to the group. Notes to the consolidated financial statements Annual financial statements
  • 58. 114 115 12 months ended 9 months ended 31 December 2008 31 December 2007 Group Bank Group Bank N’000 N’000 N’000 N’000 15. LOAN LOSS PROVISIONS IIS a) General provision At 1 January 1,024,167 1,024,167 558,486 558,486 Additional provision – – 231,204 231,204 Charge-offs – – (15,877) (15,877) Transfer arising from merger – – 250,354 250,354 Provision no longer required (64,061) (64,061) – – At 31 December 960,106 960,106 1,024,167 1,024,167 b) Specific provision At 1 January 7,314,033 7,314,033 5,616,157 5,616,157 Additional provision 5,899,212 5,899,212 2,099,220 2,099,220 Recoveries / provision no longer required (1,294,290) (1,294,290) (648,511) (648,511) Charge-offs (3,815,795) (3,815,795) (159,174) (159,174) Reclassifications – – 345,187 345,187 Transfer arising from merger – – 61,154 61,154 At 31 December 8,103,160 8,103,160 7,314,033 7,314,033 c) Interest in suspense At 1 January 3,227,017 3,227,017 2,166,056 2,166,056 Recognised during the year 1,274,250 1,274,250 1,878,671 1,878,671 Reclassification - specific provision – – (345,187) (345,187) Write-back arising from recoveries (200,222) (200,222) (344,041) (344,041) Charge-offs (2,973,409) (2,973,409) (160,381) (160,381) Transfers arising from merger – – 31,899 31,899 At 31 December 1,327,636 1,327,636 3,227,017 3,227,017 Summary - General provision 960,106 960,106 1,024,167 1,024,167 - Specific provision 8,103,160 8,103,160 7,314,033 7,314,033 - Interest in suspense 1,327,636 1,327,636 3,227,017 3,227,017 Total provision 10,390,902 10,390,902 11,565,217 11,565,217 16. PROVISION FOR LOSSES Analysed as follows: Additional provision on loan losses: - Specific provision 5,899,212 5,899,212 2,099,220 2,099,220 - General provision – – 231,204 231,204 Recoveries /provision no longer required: - Specific provision (1,294,290) (1,294,290) (648,511) (648,511) - General provision (64,061) (64,061) - - Net charge on loans and advances 4,540,861 4,540,861 1,681,913 1,681,913 Additional provision on finance lease: - General provision 24,723 24,723 – – Recoveries / provision no longer required: - Specific provision (22,782) (22,782) – – Net charge on finance leases 1,941 1,941 – – (Writeback)/provision for other asset losses 477,033 661,984 361,770 361,770 Total provisions made for losses 5,019,835 5,204,786 2,043,683 2,043,683 12 months ended 9 months ended 31 December 2008 31 December 2007 Group Bank Group Bank N’000 N’000 N’000 N’000 17. ADVANCES UNDER FINANCE LEASES Gross investment 5,146,000 5,146,000 2,367,933 2,367,933 Unearned income (840,825) (840,825) (336,770) (336,770) 4,305,175 4,305,175 2,031,163 2,031,163 Loan loss provision (43,627) (43,627) (41,686) (41,686) 4,261,548 4,261,548 1,989,477 1,989,477 Analysis by performance: - Performing 4,305,175 4,305,175 1,947,368 1,947,368 - Non-performing – – 83,795 83,795 4,305,175 4,305,175 2,031,163 2,031,163 Analysis by maturity: Current 897,228 897,228 690,122 690,122 Non-current 3,407,947 3,407,947 1,341,040 1,341,040 Net finance leases 4,305,175 4,305,175 2,031,162 2,031,162 Movement in lease provision: At 1 January - Performing 18,904 18,904 10,453 10,453 - Non-performing 22,782 22,782 – – 41,686 41,686 10,453 10,453 Transfer arising from merger: - Performing – – 8,451 8,451 - Non-performing – – 22,782 22,782 Additional provision / (writeback) : - Performing 24,723 24,723 – – - Non-performing (22,782) (22,782) – – At 31 December - Performing 43,627 43,627 18,904 18,904 - Non-performing – – 22,782 22,782 43,627 43,627 41,686 41,686 The finance lease balance as at 31 December 2007 includes a prior year adjustment of N345.38 million, which relates to lease facilities that have previously been disclosed as operating leases. Consequently, the prior year balance have been restated. Notes to the consolidated financial statements Annual financial statements
  • 59. 116 117 BANK Cost: At 1 January 2008 5,468,746 1,170,621 1,824,611 1,056,990 1,429,524 10,950,42 Additions 203,048 910,309 290,444 659,715 6,314,433 8,377,949 Transfers 32,271 148,265 10,960 104,204 (295,700) – Disposals (421,632) (110,238) (153,957) (266,077) – (951,904) At 31 December 2008 5,282,433 2,118,957 1,972,058 1,554,832 7,448,257 18,376,537 Depreciation: At 1 January 2008 827,028 361,118 783,279 634,020 – 2,605,445 Charge for the year 207,748 363,818 437,445 247,041 – 1,256,052 Eliminated on disposals (244,219) (12,562) (44,649) (88,530) – (389,960) At 31 December 2008 790,557 712,374 1,176,075 792,531 – 3,471,537 Net book amount: At 31 December 2008 4,491,876 1,406,583 795,983 762,301 7,448,257 14,905,000 Net book amount: At 31 December 2007 4,641,718 809,503 1,041,332 422,970 1,429,524 8,345,046 The bank carried out physical verification of asset during the year under review. Consequently, assets with a cost of N412.25 million were written off on account of damage and obsolescence. The related depreciation provision amounted to N162.74 million, thus resulting in a net write off of N249.51million. This has been included in the loss on disposal of assets. Work in progress represents construction costs in respect of new branches and offices. On completion of construction, the related amounts are transferred to other categories of property and equipment. GROUP Land Motor fittings Computer Work-in Building vehicles equipment equipment progress Total N’000 N’000 N’000 N’000 N’000 N’000 Cost: At 1 January 2008 5,468,746 1,349,962 1,899,949 1,336,462 1,429,524 11,484,643 Additions 203,048 1,033,892 312,108 799,473 6,447,235 8,795,756 Transfers 32,271 148,265 10,960 104,204 (295,700) – Disposals (421,632) (141,949) (154,582) (267,765) – (985,928) At 31 December 2008 5,282,433 2,390,170 2,068,435 1,972,374 7,581,059 19,294,471 Depreciation: At 1 January 2008 827,028 414,020 812,573 769,353 – 2,822,974 Charge for the year 207,748 422,484 454,493 348,497 – 1,433,222 Eliminated on disposals (244,219) (30,130) (35,893) (84,389) – (394,631) At 31 December 2008 790,557 806,374 1,231,173 1,033,461 – 3,861,565 Net book amount: At 31 December 2008 4,491,876 1,583,796 837,262 938,913 7,581,059 15,432,906 Net book amount: At 31 December 2007 4,641,718 935,942 1,087,376 567,109 1,429,524 8,661,669 12 months ended 9 months ended 31 December 2008 31 December 2007 Group Bank Group Bank N’000 N’000 N’000 N’000 18. OTHER ASSETS Accrued interest and fees receivable 5,147,375 5,142,442 962,164 962,164 Prepaid interest 2,541,694 2,179,130 158,334 158,334 Prepaid expenses 4,501,478 3,464,879 727,059 666,009 Uninvested SMEEIS commitments 239,365 443,311 111,703 454,874 Due from subsidiary companies – 1,641,819 – 2,476,645 Due from Standard Bank Group (SBG) 270,963 270,963 669,869 669,869 Deposit for underwriting commitment – – 7,500,000 7,500,000 WHT recoverable 808,143 808,143 584,717 570,096 Deposit for shares – – 616,395 – Open buy back treasury bills holdings with banks 1,500,000 1,500,000 – – Due from custody clients – – 574,793 – Deposit with failed banks 381,773 381,773 381,773 381,773 Sundry receivables 1,752,896 1,045,221 874,494 798,511 Gain on hedged forward exchange contracts 4,188,186 4,188,186 – – 21,331,873 21,065,867 13,161,301 14,638,275 Provision for other known losses (1,876,531) (1,876,531) (1,399,498) (1,214,547) 19,455,342 19,189,336 11,761,803 13,423,728 The deposit with failed banks relate to the principal and accrued interest on placements made by legacy Regent Bank Plc with three distressed banks, namely; Societe Generale Bank (N233.77 million), AFEX Bank (N20.85 million) and Gulf Bank (N127.16 million). Full provision for these balances is included in provision for other assets. The uninvested SMEEIS commitments relate to amounts invested through fund managers which are yet to be disbursed. These include SIVL - N203.94 million (31 December 2007: N343.07 million), SME Partnership - N182.52 million (31 December 2007: N98.04 million), and First SMI - N13.75 million (31 December 2007: N13.75 million). Furniture, 19. FIXED ASSETS Notes to the consolidated financial statements Annual financial statements
  • 60. 118 119 12 months ended 9 months ended 31 December 2008 31 December 2007 Group Bank Group Bank N’000 N’000 N’000 N’000 23. LONG TERM LOANS On-lending facilities: Standard Bank Group – – 25,058,554 25,058,554 International Finance Corporation (IFC) 1,443,036 1,443,036 1,563,041 1,563,041 DEG-Deutsche Investitions-und Entwicklungsgesellschaft mbh 168,137 168,137 354,253 354,253 European Investment Bank 491,869 491,869 557,364 557,364 FMO - Nederland Development Finance Company 10,098,316 10,098,316 – – 12,201,358 12,201,358 27,533,212 27,533,212 The bank’s dollar denominated on-lending credit obtained from the IFC expires on or after 15 December 2012 and has a rate of 3% above 3 month LIBOR; the euro/dollar denominated facility from DEG expires on or after 15 October 2009 and has rate of 3.25% above 6 month Euribor, while the dollar denominated facility from European Investment Bank expires on or after 31 March 2012 and has a rate of 2.5% above 3 month LIBOR. The on-lending dollar denominated loan obtained from Nederland Development Finance Company (FMO) expires on or after 15 January 2015, and has a rate of 2.5% above 6 month LIBOR. 24. SHARE CAPITAL Authorised: 20 billion ordinary shares of 50k each (31 December 2007: 20 billion ordinary shares of 50k each) 10,000,000 10,000,000 10,000,000 10,000,000 Issued and fully paid - ordinary shares of 50k each: At 1 January 2008 9,375,000 9,375,000 6,250,000 6,250,000 Share exchange arising from merger – – 3,125,000 3,125,000 At 31 December 2008 9,375,000 9,375,000 9,375,000 9,375,000 12 months ended 9 months ended 31 December 2008 31 December 2007 Group Bank Group Bank N’000 N’000 N’000 N’000 20. DEPOSITS, CURRENT AND OTHER ACCOUNTS Demand 69,636,987 73,288,144 50,011,793 51,076,272 Term 25,602,400 25,602,400 20,547,069 20,547,069 Negotiable certificates of deposit 988 988 831,882 831,882 95,240,375 98,891,532 71,390,744 72,455,223 Analysis by maturity: Maturing within 1 month 27,888,664 31,539,821 27,459,409 28,523,888 Maturing between 1 to 3 months 5,597,334 5,597,334 9,579,559 9,579,559 Maturing between 3 to 6 months 7,729,651 7,729,651 4,526,195 4,526,195 Maturing between 6 to 12 months 8,272,856 8,272,856 5,135,355 5,135,355 Maturing over 12 months 45,751,870 45,751,870 24,690,226 24,690,226 95,240,375 98,891,532 71,390,744 72,455,223 21. DUE TO OTHER BANKS Standard Bank Group 65,320,065 65,320,065 65,972,892 65,972,892 Interbank takings 16,734,662 16,734,662 – – Balances due to banks in Nigeria - current accounts 52 52 483,675 37,489 Balances due to banks outside Nigeria - current accounts 146,858 146,858 841,556 841,556 82,201,637 82,201,637 67,298,123 66,851,937 22. OTHER LIABILITIES Liability on refinanced letters of credit 2,871,106 2,871,106 3,839,598 3,839,598 Liability on cash-backed letters of credit 11,123,705 11,123,705 5,431,302 5,431,302 Interest payable 3,650,465 3,650,465 1,666,671 1,666,669 Accrued expenses 5,599,297 5,599,297 2,656,926 2,625,162 Unearned income 3,498,455 3,440,774 1,834,734 1,806,214 Application monies received 30,888,627 30,888,627 21,590,730 21,103,360 Due to asset management clients 8,101,965 8,101,965 23,905,694 19,721,287 Drafts/bankers’ cheques payable 2,351,600 2,615,921 2,773,177 2,773,177 Collections/remittances payable 2,257,997 2,257,997 1,705,908 1,311,701 Other payables 3,690,469 1,792,918 1,379,702 1,315,364 74,033,686 72,342,775 66,784,442 61,593,834 Notes to the consolidated financial statements Annual financial statements
  • 61. 120 121 Investment Share Statutory Retained in SMEEIS premium Capital Revaluation Special Reserves reserve earnings reserve reserve reserve reserve reserve total N’000 N’000 N’000 N’000 N’000 N’000 N’000 N’000 GROUP At 1 January 2008 7,480,109 8,024,101 1,038,690 47,468,928 341,000 1,835,387 – 66,188,215 Increaseinsubsidiaryshareholding – – – – (212,156) – – (212,156) On revaluation of securities – – – – – (1,562,668) – (1,562,668) Dividend paid – (4,687,500) – – – – – (4,687,500) From profit and loss account 2,938,672 8,625,478 – – – – – 11,564,150 At 31 December 2008 10,418,781 11,962,079 1,038,690 47,468,928 128,844 272,719 – 71,290,041 At 1 April 2007 5,306,886 6,361,516 1,038,690 20,553,806 290,000 1,394,322 9,750,390 44,695,610 Reinstatement of special reserve – – – – – – 36,834,878 36,834,878 Impairment of goodwill – (46,585,268) – – – – – (46,585,268) Losses written off – 46,585,268 – – – – (46,585,268) – On revaluation of securities – – – – – 452,367 – 452,367 From share exchange (merger) – – – 26,915,122 – – – 26,915,122 Transfer arising from merger 10,824 (9,840) – – 51,000 – – 51,984 Transfer from deferred tax – – – – – (11,302) – (11,302) Dividend paid – (3,750,000) – – – – – (3,750,000) From profit and loss account 2,162,399 5,422,425 – – – – – 7,584,824 At 31 December 2007 7,480,109 8,024,101 1,038,690 47,468,928 341,000 1,835,387 - 66,188,215 BANK At 1 January 2008 7,371,375 6,835,356 1,038,690 47,468,928 – 332,384 – 63,046,733 On revaluation of securities – – – – – (332,384) – (332,384) Dividend paid – (4,687,500) – – – – – (4,687,500) From profit and loss account 2,764,441 6,450,361 – – – – – 9,214,802 At 31 December 2008 10,135,816 8,598,217 1,038,690 47,468,928 – – – 67,241,651 At 1 April 2007 5,288,845 5,726,121 1,038,690 20,553,806 – – 9,750,390 42,357,852 Reinstatement of special reserve – – – – – – 36,834,878 36,834,878 Impairment of goodwill – (46,585,268) – – – – (46,585,268) Losses written off – 46,585,268 – – – (46,585,268) – On revaluation of securities – – – – – 332,384 – 332,384 From share exchange (merger) – – – 26,915,122 – – – 26,915,122 Dividend paid – (3,750,000) – – – – – (3,750,000) From profit and loss account 2,082,530 4,859,235 – – – – – 6,941,765 At 31 December 2007 7,371,375 6,835,356 1,038,690 47,468,928 – 332,384 - 63,046,733 In 2006, the bank obtained the approval of shareholders at an extraordinary general meeting and the sanction of the Federal High Court, in pursuant to Part V of the Companies and Allied Matters Act, to create a special reserve from the balance of its share premium account for the purpose of writing off the goodwill of N9.75 billion that arose from its acquisition of Chartered Bank and Regent Bank during the year ended 31 March 2006. Accordingly, the goodwill of N9.75 billion was set off against the special reserve account. Similarly, in 2007, the bank obtained the approval of shareholders at an extraordinary general meeting to create a special reserve from the balance of its share premium account for the purpose of writing off the goodwill of N36.83 billion that arose from its acquisition of Stanbic Bank during the nine month’s ended 31 December 2007. The sanction of the Federal High Court was subsequently obtained and, accordingly, the goodwill of N36.83 billion was set off against the special reserve account. In line with a directive from Nigerian Accounting Standards Board (NASB), the bank has reinstated the goodwill and tested same for impairment in compliance with the provisions of Statement of Accounting Standard No. 26 on Accounting for Business Combinations. With effect from 1 January 2008, the Nigerian Accounting Standard Board introduced the Statement of Accounting Standard No. 26 on Accounting for Business Combinations and was respectively applied to all business combinations entered into on or after 1 January 2005. The effect of this Standard on the bank is that the goodwill which arose from the business combinations in 2006 and 2007 and which had been written off against a special reserve is now required to be reinstated and tested for impairment. In compliance with this standard, goodwill arising from the business combinations has been reinstated and tested for impairment. Consequently, the amounts previously written off against the special reserve accounts totalling N46.58 billion were reinstated. Goodwill is allocated to cash generating units for the purpose of impairment testing. The goodwill amount of N46.58 billion was tested for impairment, found to be fully impaired as at 31 December 2007 and written off against the revenue reserve account. The bank’s shareholders, based on recommendation of the Board of Directors at its extra ordinary general meeting held on the 24 February 2009, approved a write off of the resultant loss via the capital reduction process specified in Companies and Allied Matters Act. This capital reduction was sanctioned by the Federal High Court on 19th March 2009. 12 months ended 9 months ended 31 December 2008 31 December 2007 Group Bank Group Bank N’000 N’000 N’000 N’000 26. MINORITY INTEREST At 1 January 455,209 – 184,122 – Dividend paid (80,000) – – – Increase in shareholding in subsidiary company (94,084) – – – Transfer arising from merger – – 6,063 – Share of current year profit of subsidiary company 430,279 – 265,024 – At 31 December 711,404 – 455,209 – Notes to the consolidated financial statements 25. RESERVES Annual financial statements
  • 62. 122 123 29. EMPLOYEES AND DIRECTORS a) Employees 12 months ended 9 months ended 31 December 2008 31 December 2007 Group Bank Group Bank N’000 N’000 N’000 N’000 The average number of persons employed by the bank are: Number Number Number Number Executive directors 4 4 4 3 Management 305 276 199 169 Non-management 1,350 1,063 999 899 1,659 1,343 1,202 1,071 Staff costs for the above persons (excluding executive directors): N’000 N’000 N’000 N’000 Salaries and wages 10,003,172 8,571,396 4,468,596 3,801,184 Retirement benefit - Pension (Note 28) 358,059 300,343 114,815 99,780 Retirement benefit - ESBS (Note 28) 64,359 30,424 76,748 66,410 10,425,590 8,902,163 4,660,159 3,967,374 The number of employees of the bank, including executive directors, who received emoluments in the following ranges were: Number Number Number Number Below N1,000,001 70 58 136 130 N1,000,001 - N2,000,000 109 60 427 352 N2,000,001 - N3,000,000 798 671 232 223 N3,000,001 - N4,000,000 228 183 112 109 N4,000,001 - N5,000,000 74 43 61 53 N5,000,001 - N6,000,000 48 37 48 44 N6,000,001 and above 332 291 186 160 1,659 1,343 1,202 1,071 b) Directors The remuneration paid to the directors of the bank was: N’000 N’000 N’000 N’000 Fees and sitting allowances 141,623 141,443 73,557 71,155 Executive compensation 409,240 364,065 183,061 148,984 550,863 505,508 256,618 220,139 Directors’ other expenses 2,147 2,147 3,130 3,130 553,010 507,655 259,748 223,269 Fees and other emoluments disclosed above include amounts paid to: (i) the chairman 30,683 30,683 5,772 5,772 (ii) the highest paid director 106,342 106,342 50,668 50,668 Notes to the consolidated financial statements 27. CONTINGENT LIABILITIES AND COMMITMENTS a) Legal proceedings As at 31 December 2008, there were 116 outstanding legal external proceedings with claims amounting to N807 million (31 December 2007: N4.15 billion). Appropriate provisions have been made based on the probability of losses arising from these proceedings. The credit related pieces have been provided for in line with prudential guidelines. b) Capital commitments As at the balance sheet date, the group had a capital commitment of N2.17 billion in respect of various construction work being undertaken on branch extension, and revamping project (31 December 2007: N10.20 million). c) Credit related commitments In the normal course of business the bank is a party to financial instruments with off-balance sheet risk. These instruments are issued to meet the credit and other financial requirements of customers. The contractual amounts of the off-balance sheet financial instruments are: 12 months ended 9 months ended 31 December 2008 31 December 2007 Group Bank Group Bank N’000 N’000 N’000 N’000 Guaranteed commercial papers - interbank 670,289 670,289 37,552,238 37,552,238 Guaranteed commercial papers - own clients 15,703,503 15,703,503 3,938,509 3,938,509 Performance bonds, guarantees and indemnities 7,591,660 7,591,660 1,948,165 1,948,165 Fiduciary deposits/Letters of credit 26,895,188 26,895,188 12,820,360 12,820,360 50,860,640 50,860,640 56,259,272 56,259,272 As at balance sheet date, there were no outstanding related party off-balance sheet transactions 28. RETIREMENT BENEFITS The group operates a defined contribution pension scheme in line with the provisions of the Pension Reform Act. Contributions are based on the sum that consists of employees’ basic salary, housing and transport allowance in the ratio 7.5% by the employee and 7.5% by the employer. The amount contributed by the employer and remitted to the Pension Fund Administrators during the period was N358.06 million (31 December 2007: N114.82 million). The group also contributed 5% of the sum that consisted of employees’ basic, housing and transport allowance towards an end of service benefit scheme (ESBS). This contribution, which was applicable to the staff of legacy IBTC Chartered Bank PLC, only, was discontinued during the year, after due consultations with the National Pension Commission. The amount contributed by the employer during the period was N64.36 million (31 December 2007: N76.75 million). The group’s contributions to these schemes are charged to the profit and loss account in the period to which they relate. Contributions to the ESBS are managed by SIPML on behalf of the beneficiary staff as “voluntary pension contributions” in line with the provisions of the Pension Reform Act. Consequently, the group has no legal or constructive obligations to pay further contributions if the funds do not hold sufficient assets to meet the related obligations to employees. Annual financial statements
  • 63. 124 125 Related party items Standard Bank Group SIAML SIVL SIPML SEL Relationship to the bank Fellow susidiaries Subsidiary Subsidiary Subsidiary Subsidiary N’000 N’000 N’000 N’000 N’000 Deposit balances 65,320,065 4,003,578 402,273 181,117 60,010 Account receivables 270,963 944,340 728,351 7,500 – Account Payables – – 3,559 9,333 – Intern Glass Industries Limited 0001675 16028 Director B.I. Mahtani Overdraft 28-Nov-08 29-Dec-08 35,000 28,256 Performing 19.50% Warehouse stock and debenture on assets (upstamping and TWA in progress) 1,739,000 Automotive Component Industries Limited 0002637 40146 Director Lt. Gen. Wushishi (Rtd) Overdraft 30-May-06 19-Apr-08 20,000 19,884 Performing 19.50% Debenture on fixed and 344,000 floating assets but stamped at 88,000 UAC of Nigeria Plc 0000752 321582 Director Lt. Gen. Wushishi (Rtd) Overdraft 7-Oct-08 31-Mar-09 200,000 184,631 Performing 19.50% Clean lending (negative pledge) N/A Presco Plc 4474 174370 Chairman A.N.A Peterside OON Term loan 1-Oct-08 31-Dec-11 491,869 454,033 Performing 9.15% Fixed and floating asset N/A Presco Plc 4474 174370 Chairman A.N.A Peterside OON Overdraft 16-Jul-08 30-Jun-11 681,050 49,250 Performing 9.15% Letter of comfort N/A Various Staff – Staff Staff Loans – – – – 2,638,585 Performing Various Various N/A (b) OTHER RELATED PARTY ITEMS Significant transaction balances involving the bank and related parties are as detailed below: Total - Insider related credits 1,427,919 3,374,639 30. RELATED PARTY TRANSACTIONS The bank is controlled by Stanbic Africa Holding Limited which is incorporated in the United kingdom. The ultimate parent of the group is Standard Bank Group Limited incorporated in South Africa. The bank manages the operations of SIAML and SIPML under the terms of management and advisory services agreements for a fee. Included in loans and advances is an amount of N3.37billion (31 December 2007 : N1.36 billion) representing credit facilities to staff, shareholders and companies in which some directors have interests. These facilities were granted at rates and terms comparable to other facilities in the bank’s portfolio. There were no non-performing insider related credit as at balance sheet date. The balances in the accounts as at 31 December 2008 are as stated below: (a) SCHEDULE OF INSIDER RELATED CREDITS Name of Borrower CRMS Borrowers’ Code Number RC/S R/B R/NID Relationship Name of related party Loan type Date granted Expiry date Approved credit limit N’000 Outstanding N’000 Status Int. Rate Security nature Security value N’000 Perfected security Notes to the consolidated financial statements Annual financial statements
  • 64. 126 127 34. LIQUIDITY RISK Maturities of assets and liabilities - bank 31 December 2008 0 - 30 days 1 - 6 months 6 - 12 months 1 - 5 years Over 5 years Total N’000 N’000 N’000 N’000 N’000 N’000 ASSETS Cash and short term funds 5,186,309 6,254,374 – – – 11,440,683 Due from other banks 41,613,148 34,657,227 – 33,888,128 – 110,158,503 Short term investments 4,030,760 1,487,104 3,373,649 4,649,478 – 13,540,991 Loans and advances 36,797,275 34,163,805 9,223,581 6,162,245 12,663,382 99,010,288 Advances under finance leases 526,798 34,335 119,119 208,004 3,373,292 4,261,548 Other assets 404,000 9,813,768 8,279,656 691,912 – 19,189,336 Long term investments – – – 73,224,722 – 73,224,722 Fixed assets – – – 5,961,999 8,943,001 14,905,000 Total assets 88,558,290 86,410,613 20,996,005 124,786,488 24,979,675 345,731,071 LIABILITIES Deposits, current and other accounts 31,539,821 13,326,985 8,272,856 45,751,870 – 98,891,532 Due to other banks 18,879,253 17,169,297 14,161,387 31,991,700 – 82,201,637 Tax payable – – – 3,418,330 – 3,418,330 Other liabilities 21,195,117 5,222,707 11,123,705 34,801,246 – 72,342,775 Deferred taxation – – – 236,727 – 236,727 Long term loans – – – 12,201,358 – 12,201,358 Total liabilities 71,614,191 35,718,989 33,557,948 128,401,231 – 269,292,359 Net liquidity gap 16,944,099 50,691,624 (12,561,943) (3,614,743) 24,979,675 76,616,651 31 December 2007 Total assets 91,012,096 81,635,998 104,710,280 22,519,902 4,641,718 304,519,994 Total liabilities 38,128,043 92,122,721 49,572,951 52,274,546 - 232,098,261 Net liquidity gap 52,884,053 (10,486,723) 55,137,329 (29,754,644) 4,641,718 72,421,733 Maturities of risk assets and deposit liabilities - bank 31 December 2008 0 - 30 days 1 - 3 months 3 - 6 months 6-12 months Over 12 months Total N’000 N’000 N’000 N’000 N’000 N’000 ASSETS Investments 4,030,760 292,263 1,194,842 3,373,649 77,874,200 86,765,714 Loans and advances 36,797,275 34,163,805 9,223,581 6,162,245 12,663,382 99,010,288 Advances under finance leases 526,798 34,335 119,119 208,004 3,373,292 4,261,548 Other assets 404,000 3,643,236 6,170,532 8,279,656 691,912 19,189,336 Total risk assets 41,758,833 38,133,639 16,708,074 18,023,554 94,602,786 209,226,886 LIABILITIES Deposits, current and other accounts 31,539,821 5,597,334 7,729,651 8,272,856 45,751,870 98,891,532 Net liquidity gap - 31 December 2008 10,219,012 32,536,305 8,978,423 9,750,698 48,850,915 110,335,355 Net liquidity gap - 31 December 2007 (287,154) 13,089,623 16,354,015 68,038,081 (6,219,033) 90,975,532 The tables above analyse assets and liabilities of the bank into relevant maturity groupings based on the remaining period at balance sheet date to the contractual maturity date. The matching and controlled mismatching of the maturities and interest rates of assets and liabilities is fundamental to the management of the bank. It is unusual to be completely matched since business transacted is often of uncertain terms and of different types. An unmatched position potentially enhances profitability, but can also increase the risk of losses. 31. CONTRAVENTION OF BANKS AND OTHER FINANCIAL INSTITUTIONS ACT (1991) AND CENTRAL BANK OF NIGERIA CIRCULARS The bank was penalised by the Central Bank of Nigeria (CBN) during the year for the following infractions: - Acquisition of landed property prior to obtaining CBN approval (fine: N2 million) - Non-inclusion of certain clients’ CRMS numbers in the bank’s CBN return (fine : N2 million) 32. COMPARATIVES Where necessary, comparative figures have been adjusted to conform with changes in presentation in the current year. In accordance with the newly established accounting standards on businesss consolidation (SAS 26), there was a change in accounting policy on goodwill. This resulted in the reinstatement of goodwill and share premium through special reserve account, as well as the impairment of goodwill through prior year reserve is disclosed in Note 24. 33. POST BALANCE SHEET EVENTS The shareholders at an extra-ordinary general meeting of the bank held on 24 February 2009 approved, subject to the sanction of the Federal High Court, and with effect from 31 December 2007, the write off of N46.58 billion loss on the revenue reserve account via the capital reduction process specified in Companies and Allied Matters Act. This capital reduction was sanctioned by the Federal High Court on 19th March 2009. Notes to the consolidated financial statements Annual financial statements
  • 65. 128 129 35. STATEMENT ON SEGMENTAL REPORTING The directors confirm that the consolidated financial statement complies with the information reported to the bank’s board of directors, and top management for the purposes of evaluating units’ past performance as it relates to performance of the bank and its subsidiaries during the period. The group is structured on the basis of products and services, and the segments have been identified on this basis. The principal business units in the group are as follows: Business Units: Personal Business Banking (PBB) Corporate Investment Banking (CIB) Wealth SEGMENT REPORT The group’s operations by major operating segment during the current financial year is contained below. CIB PBB Wealth Eliminations Group N’000 N’000 N’000 N’000 N’000 Revenue - Derived from external customers 38,889,322 13,420,140 8,931,051 – 61,240,514 - Derived from other business segments 845,603 958,040 39,099 (1,842,742) – Total revenue 39,734,925 14,378,180 8,970,150 (1,842,742) 61,240,514 Total cost - Interest expense 16,791,195 1,900,263 (41,059) (39,099) 18,611,300 - Risk and other asset provisions 4,319,455 885,331 (184,951) – 5,019,835 - Other operating expenses 10,825,163 7,238,880 6,722,084 (1,803,643) 22,982,484 Total cost 31,935,813 10,024,474 6,496,073 (1,842,742) 46,613,619 Profit before tax 7,799,111 4,353,706 2,474,077 – 14,626,895 Tax (638,469) (618,096) (1,375,899) – (2,632,465) Profit after tax 7,160,642 3,735,610 1,098,178 – 11,994,430 Segment asset 261,938,462 85,169,325 12,882,227 (8,736,615) 351,253,398 Segment liabilities 205,020,044 63,682,783 8,093,033 (6,918,909) 269,876,953 Net asset 56,918,418 21,486,542 4,789,195 (1,817,706) 81,376,445 All transactions between business units were conducted at an arms length basis. Internal charges and transfer pricing adjustments are reflected in the performance of each segment. The bank operates in a single geographical location, thus no segmentation based on geographical location is presented in these financial statements. 12 months ended 31 December 2008 Banking and other financial services to individual customers and small-to-medium-sized enterprises. Mortgage lending – Provides residential accommodation loans to individual customers. Installment sale and finance leases – Comprises two main areas, instalment finance in the consumer market, mainly vehicles, and secondly, finance of vehicles and equipment in the business market. Card products – Provides credit and debit card facilities for individuals and businesses. Transactional and lending products – Transactions in products associated withthe various points of contact channels such as ATMs, Internet, telephone banking and branches. This includes deposit taking activities, electronic banking, cheque accounts and other lending products. Commercial and investment banking services to larger corporates, financial institutions and international counterparties in Nigeria and other emerging markets. Global markets – Includes foreign exchange, fixed income, derivatives and equities, trading businesses, securitisation and money market funding units. Transactional products and services – Includes corporate lending and transactional banking businesses, custodial services, trade finance business. Investment Banking – Includes equity investment and advisory businesses, project finance, structured lending, debt origination, resource banking and property related lending. The wealth group is made up of the bank’s subsidiaries, whose activities involve investment management, stockbroking activities, portfolio management, unit trust/ funds management, and pension asset management and administration. Notes to the consolidated financial statements Annual financial statements
  • 66. 130 131 36. CONDENSED FINANCIAL STATEMENT FOR THE GROUP Profit and loss acount Bank SIAML SIVL SEL SIPML Consolidation entries Eliminations Group Total N’000 N’000 N’000 N’000 N’000 N’000 N’000 Operating income 35,220,060 3,895,743 4,660,389 572,566 123,199 (1,842,743) 42,629,214 Operating expenses (19,472,593) (2,802,258) (3,354,686) (98,829) (150,859) 2,896,741 (22,982,484) Risk and other asset provisions (5,204,786) 184,951 – – – – (5,019,835) Profit before tax 10,542,681 1,278,436 1,305,703 473,737 (27,660) 1,053,999 14,626,895 Tax (1,327,879) (494,554) (681,898) (155,793) 27,660 – (2,632,465) Profit after tax 9,214,802 783,882 623,805 317,944 – 1,053,999 11,994,430 Balance sheet Assets: Cash and short term funds 11,440,683 43 402,236 846,846 1,108 (1,104,280) – 11,586,637 Due from banks 110,158,503 4,253,579 – – 244,710 1,582,445 (4,646,979) 111,592,259 Short term investments 13,540,991 – – – 1,469,944 (462,127) – 14,548,809 Loans and advances to customers 99,010,288 – – – – – (612,015) 98,398,273 Advances under finance lease 4,261,548 – – – – – – 4,261,548 Other assets 19,189,336 873,621 13,570 12,663 1,169,233 (143,166) (1,659,915) 19,455,342 Long term investments 73,224,722 710,514 2,965,464 300 900,920 (6,590) (1,817,706) 75,977,624 Fixed assets 14,905,000 154,133 - 4,455 235,600 133,718 – 15,432,906 345,731,071 5,991,890 3,381,270 864,264 4,021,515 – (8,736,615) 351,253,398 Liabilities: Customer deposits 98,891,532 1,183,543 – 66,564 – (254,286) (4,646,979) 95,240,375 Due to other banks 82,201,637 – 612,015 – – – (612,015) 82,201,637 Tax payable 3,240,391 1,201,616 272,595 159,040 939,501 8,285 – 5,821,428 Other liabilities 72,342,770 1,530,380 736,596 59,685 788,906 235,263 (1,659,915) 74,033,686 Deferred tax 236,727 23,397 – 854 – 117,490 378,467 Long term loans 12,201,358 – – –- – – – 12,201,358 Equity and reserves 76,616,651 2,052,956 1,760,064 578,121 2,293,113 (106,752) (1,817,706) 81,376,447 345,731,071 5,991,892 3,381,270 864,264 4,021,520 – (8,736,615) 351,253,398 Cash flows Net cash flow from operating activities 35,843,615 (2,395,881) 340,335 520,342 1,824,075 (436,155) (4,679,282) 31,017,048 Net cash flow from investing activities (13,522,816) 491,570 (54,327) – (1,634,498) (348,874) 252,036 (14,816,909) Net cash flow from financing activities (20,019,354) (900,045) 407,066 – (200,000) 612,979 – (20,099,354) Net movement in cash and cash equivalents 2,301,445 (2,804,356) 693,074 520,342 (10,423) (172,050) (4,427,246) (3,899,215) At start of year 132,398,814 7,057,978 (290,836) 326,504 256,241 430,482 – 140,179,183 At end of year 134,700,258 4,253,622 402,238 846,846 245,818 258,432 (4,427,246) 136,279,968 2,301,444 (2,804,356) 693,074 520,342 (10,423) (172,050) (4,427,246) (3,899,215) Included in the elimination amount is the negative goodwill of N1.05 billion resulting from the purchase by the bank of 70.59% shareholding of SIVL in SIPML in December 2008. Notes to the consolidated financial statements Annual financial statements
  • 67. 132 133 Statement of value added 12 months ended 9 months ended 31 December 2008 31 December 2007 Group Bank Group Bank N’000 % N’000 % N’000 % N’000 % Gross earnings 61,240,514 53,872,418 28,651,036 24,731,949 Interest paid: - local (17,717,012) (17,758,070) (4,391,378) (4,218,493) - foreign (894,288) (894,288) (1,779,570) (1,779,570) (18,611,300) (18,652,358) (6,170,948) (5,998,062) Administrative overhead: - local (9,964,502) (8,200,565) (3,650,169) (2,930,752) - foreign (606,159) (606,159) (102,864) (102,864) (10,570,661) (8,806,724) (3,753,033) (3,033,616) Provision for losses (5,019,835) (5,204,786) (2,043,683) (2,043,683) Value added 27,038,718 100 21,208,550 100 16,683,372 100 13,656,588 100 Distribution Employees and Directors Salaries and benefits 10,978,600 40 9,409,818 43 4,919,907 29 4,190,643 31 Government Taxation 2,632,465 10 1,327,878 7 3,142,280 19 1,854,639 13 The Future Asset replacement (depreciation) 1,433,223 1,256,052 771,336 669,539 Expansion (retained in the business) 11,994,430 9,214,802 7,849,848 6,941,766 13,427,653 50 10,470,854 50 8,621,185 52 7,611,305 56 27,038,718 100 21,208,550 100 16,683,372 100 13,656,588 100 Annual financial statements
  • 68. 134 135 Five year consolidated financial summary 31-Mar-2007 31-Mar-2006 31-Mar-2005 Group Bank Group Bank Group Bank N’000 N’000 N’000 N’000 N’000 N’000 10,831,864 10,831,345 6,256,812 6,256,364 903,478 903,478 46,873,035 46,090,031 12,217,077 12,165,525 9,336,703 7,948,288 22,083,263 22,071,763 28,131,366 27,996,366 9,481,161 9,481,161 36,606,845 35,590,358 48,274,519 50,067,653 12,492,336 13,487,436 313,960 313,960 852,583 852,583 – – 3,014,009 4,876,534 2,976,000 3,545,130 697,535 1,710,620 24,865,929 21,181,905 9,066,920 4,660,416 5,388,987 210,000 484,062 484,062 75,833 75,833 102,083 102,083 9,750,390 9,750,390 9,750,390 9,750,390 – – 6,217,470 5,958,062 5,374,736 5,204,454 748,733 724,598 161,040,827 157,148,408 122,976,236 120,574,714 39,151,016 34,567,664 6,250,000 6,250,000 6,028,604 6,028,604 2,935,492 2,935,492 44,695,610 42,357,852 36,425,130 35,237,266 12,718,734 11,339,723 – – 2,411,442 2,411,442 1,174,197 1,174,197 184,122 – 126,390 – 208,000 – 68,031,030 72,896,047 55,492,311 57,073,332 10,163,238 10,885,811 5,840,078 5,840,015 – – – – 2,212,558 1,334,981 2,008,650 1,552,150 1,077,148 800,632 27,438,315 22,478,519 16,729,363 14,762,115 7,859,812 4,715,372 780,262 382,142 416,702 172,161 357,395 59,437 5,608,852 5,608,852 3,337,644 3,337,644 2,657,000 2,657,000 161,040,827 157,148,408 122,976,236 120,574,714 39,151,016 34,567,664 5,687,715 5,687,715 3,900,173 1,367,860 2,377,939 2,377,939 15,877,304 12,990,610 8,862,585 8,164,014 5,004,828 4,250,440 (8,442,422) (6,805,878) (3,195,848) (2,745,764) (1,683,533) (1,237,890) 7,434,882 6,184,732 5,666,737 5,418,250 3,321,295 3,012,550 (1,672,741) (822,032) (1,679,354) (1,294,230) (876,662) (654,395) 5,762,141 5,362,700 3,987,383 4,124,020 2,444,633 2,358,155 – – – – (1,174,197) (1,174,197) 5,762,141 5,362,700 3,987,383 4,124,020 1,270,436 1,183,958 58 59 67 70 47 46 27 26 31 31 40 41 24 24 43 45 32 39 54 49 87 88 123 124 19 19 14 14 1 1 46 k 43 k 33 k 34 k 42 k 40 k 47 k 44 k 56 k 57 k 55 k 54 k 31 k 29 k 32 k 33 k 20 k 19 k 46 k 43 k 32 k 33 k 39 k 37 k 30 k 30 k 20 k 20 k 20 k 20 k 931 874 783 729 100 100 12 months ended 9 months ended 31 December 2008 31 December 2007 Group Bank Group Bank N’000 N’000 N’000 N’000 ASSETS EMPLOYED Cash and short term funds 11,586,637 11,440,683 13,037,811 13,035,852 Due from other banks 111,592,259 110,158,503 79,578,685 71,800,274 Short term investments 14,548,809 13,540,991 52,467,959 52,467,959 Loans and advances 98,398,273 99,010,288 79,464,605 79,635,690 Advances under finance leases 4,261,548 4,261,548 1,989,477 1,989,477 Other assets 19,455,342 19,189,336 11,761,803 13,423,728 Long term investments 75,977,624 73,224,722 68,145,092 63,821,968 Equipment on lease – – – – Goodwill – – – – Fixed assets 15,432,906 14,905,000 8,661,669 8,345,046 351,253,398 345,731,071 315,107,101 304,519,994 FINANCED BY Share capital 9,375,000 9,375,000 9,375,000 9,375,000 Reserves 71,290,041 67,241,651 66,188,215 63,046,733 Proposed dividend – – – – Minority interest 711,404 – 455,209 – Deposits, current and other accounts 95,240,375 98,891,532 71,390,744 72,455,223 Due to other banks 82,201,637 82,201,637 67,298,123 66,851,937 Tax payable 5,821,429 3,240,391 5,640,502 3,612,948 Other liabilities 74,033,686 72,342,775 66,784,442 61,593,834 Deferred tax 378,467 236,727 441,654 51,107 Long term loans 12,201,358 12,201,358 27,533,212 27,533,212 351,253,398 345,731,071 315,107,101 304,519,994 Acceptances and guarantees 50,860,640 50,860,640 56,259,272 56,259,272 PROFIT AND LOSS ACCOUNT Net operating income 42,629,214 35,220,060 22,480,088 18,733,887 Operating expenses and provisions (28,002,319) (24,677,379) (11,487,960) (9,937,482) Profit before taxation 14,626,895 10,542,681 10,992,128 8,796,404 Taxation (2,632,465) (1,327,879) (3,142,280) (1,854,639) Profit after taxation 11,994,430 9,214,802 7,849,848 6,941,765 Proposed dividend – – – – Transfer to reserves 11,994,430 9,214,802 7,849,848 6,941,765 STATISTICAL INFORMATION Gross interest margin % 55 54 61 61 Shareholders’ funds as a % of total assets 23 22 24 24 % Loans and overdrafts/total assets 28 29 25 26 % Loans and overdrafts/deposits 103 100 111 110 % Provision/Loans and overdrafts 10 9 13 13 Earnings per share (EPS) - actual 64 k 49 k 42 k 37 k Earnings per share (EPS) - basic 64 k 49 k 71 k 63 k Earnings per share (EPS) - adjusted 64 k 49 k 42 k 37 k Earnings per share (EPS) - diluted 64 k 49 k 42 k 37 k Dividend per share (DPS) - actual – – 25 k 25 k Average number of employees 1,659 1,343 1,202 1,071 Annual financial statements
  • 69. 136 137 Other information Other information • Management team • Branch network 137
  • 70. 138 139 Management team Other information Nimi Akinkugbe Private client services Ayo Adio Operations distribution Abas Alhassan Internal audit Abimbola Ashiru Corporate affairs Yinka Ayo - Osibogun Credit governance Leye Babatunde Information technology Chukuka Chukuma Project structured finance Lateef Dabiri Operations support Steve Elusope Finance Eric Fajemisin IBTC Pensions - business development Yemi Faseun Human resources Bashir Gidado IT strategy planning Yemi Kale Research Izehi Kuye Marketing Gbola Lala Information technology Nene Lawani Management information credit Louis Lehma IT IT Integration Sola Mahoney Financial institutions
  • 71. 140 141 Management team Other information Babayo Saidu Distribution relationship banking Olumide Oyetan Stanbic IBTC Asset Management Limited Anne Rinu Premises management Andrew Mashanda Transactional products and services Binta Max - Gbinije Business banking Mike McMullen Project management Patrick Mgbenwelu Project Finance Olawande Muoyo Transactional products and services Tunde Obidare IBC GMO back office Biyi Olagbami CIB credit Lloyd Onaghinon Private equity Benjamin Osho PBB credit Akeem Oyewale Stanbic IBTC Equities Limited Yewande Sadiku Corporate finance Segun Sanni Investor services Alubani Sibanda Corporate banking Warren Smith Vehicle asset finance Jon Smit PBB distribution Kunle Sonola CIB Coverage and distribution Dele Sotubo Stanbic IBTC Equities Limited Joyce Uredi Private banking Delein Van Schalkwyk Operations Jaco Viljoen PBB products
  • 72. 142 143 ABIA STATE 1. Aba Main Branch 7 Aba-Owerri Road PMB 7477, Aba Tel: 082-227144, 226369 Fax: 082-222622 2. Aba Market Branch 7 Duru Road Off Cemetary Road, Aba Tel: 082- 227868, 225231 Fax: 082-220369 ADAMAWA STATE 3. Yola Branch 1 Muhammed Mustapha Way Jimeta, Yola Tel: 075-627008 Fax: 085-627564 AKWA IBOM STATE 4. Uyo Branch 65B Nwaniba Road, Uyo Tel: 085-204319, 204006 Fax: 085-204178 ANAMBRA STATE 5. Onitsha Branch 13 Bright Street, Onitsha Tel: 046-410111 Fax: 046-2708887 BAUCHI STATE 6. Bauchi Branch 16 Yandoka Road, Bauchi Tel: 077-546475 Fax: 077-546454 BORNO STATE 7. Maiduguri Branch 38 Baga Road, Maiduguri Tel: 076-230560, 236105 Fax: 076-230562 BENUE STATE 8. Makurdi Branch 12 Ali Akilu Road, Makurdi Tel: 044-534712, 534709 Fax: 044-534707 CROSS RIVER STATE 9. Calabar Branch 71 Ndidem Usang Iso Road,Calabar Tel: 087-239171 Fax: 087-239134 DELTA STATE 10. Warri Branch 98 Effurun-Warri Road Tel: 053-254481, 256902 Fax: 053-256903 EDO STATE 11. Benin City Branch 71 Akpakpava Street, Benin Tel: 052-467072, 467172 Fax: 052-255652 ENUGU STATE 12. Enugu Branch 252 Ogui Road Ebeano Housing Estate, Enugu Tel: 042-254806 Fax: 042-254381 FEDERAL CAPITAL TERRITORY (ABUJA) 13. Garki Branch (Area 3) Plot 437 No. 8 Langtang Close Off Tafawa Balewa Way Tel: 09-2340667 Fax: 09-2342012 14. Garki Branch (Area 7) Plot 593 Ringim Close, Garki P.M.B 337, Abuja Tel: 09-2346232, 2346234 Fax: 09-2344456 15. Maitama Branch Plot 2777 Cadastral Zone A6 Maitama District, Abuja P.M.B. 337, Abuja Tel: 09-4134487, 4137406 Fax: 09-4134485 16. 75 Ralph Sodeinde Street, Central Business District, Abuja, FCT. Tel: 09-4613751, 09-4613753 IMO STATE 17. Owerri Branch 8 Wethedral Road, Owerri Tel: 083-231170 Fax: 083-234143 KADUNA STATE 18. Kaduna Branch 14 Ahmadu Bello Way P.O.Box 10113, Kaduna Tel: 062-247662, 247658 Fax: 062-247662 19. Zaria Branch 9 Kaduna Road, Zaria Tel: 069-333301, 333302 Fax: 069-335300 KANO STATE 20. Kano Branch 13E Bello Road P.O.Box 3507, Kano Tel: 064-639896, 639897 Fax: 064-634106 21. 3, Bank Road, Kano Tel: 064 – 646984 – 9 Fax: 208210 KASTINA STATE 22. Kastina Branch 193 IBB Way, Kastina Tel: 065-432884, 430255 Fax: 065-431387 KWARA STATE 23. Ilorin Branch 11 Unity Road, Ilorin Tel: 031-742138 Fax: 031-229564 LAGOS STATE 24. Head Office Branch I.B.T.C. Place Walter Carrington Crescent P.O. Box 71707, Victoria Island-Lagos Tel: 01-2626520, 2712400 Fax: 01-2626541, 2626542 25. Plot 1321 Karimu Kotun Street, Victoria Island, Lagos. Tel: 01-4488890 26. 43 Opebi Road, Ikeja, Lagos. Tel: 01-4482034,01-4482035 27. Idejo Branch Plot 1712 Idejo Street Victoria Island, Lagos Tel: 01-2620382, 2701484 Fax: 01-2701480 28. Adetokunbo Ademola Branch 76 Adetokunbo Ademola Street Victoria Island, Lagos Tel: 01-2701174, 2702096 Fax: 01-2702098 29. Afribank Branch Churchgate Building PC 30 Afribank Street, Victoria Island Tel: 01-2703482, 2618603 Fax: 01-2629455 30. Muri Okunola Branch Plot 226A Muri Okunola Street Victoria Island Annex Tel: 01-2701415, 2701417 Fax: 01-2701597 Branch network 31. Awolowo Road Branch 85 Awolowo Road, Ikoyi Tel: 01-2707482, 2707483 Fax: 01-2707480 32. Martins Street Branch 19 Martins Street, Lagos Island Tel: 01-2640312, 2640316 Fax: 01-2640311 33. Nnamdi Azikiwe Street Branch 106 Nnamdi Azikiwe Street Lagos Island Tel: 01-8151647, 2640380 Fax: 01-2640381 34. Offin Road Branch 25 Offin Road, Apongbon Tel: 01-2711780, 2711781 Fax: 01-2711783 35. Idumagbo Branch 61 Idumagbo Avenue Tel: 01-2640449, 2646780 Fax: 01-2640049 36. Yinka Folawiyo Plaza Branch 38 Warhouse Road, Apapa Tel: 01-2707784, 2707782 Fax: 01-2707780 37. Warehouse Road Branch, Apapa 10/12 Warehouse Road, Apapa Tel: 01-2716213, 5458748 Fax: 01-5451909 38. Allen Avenue Branch 80 Allen Avenue, Ikeja Tel: 01-2707667, 2707668 Fax: 01-2707706 39. Toyin Street Branch 36A Toyin Street, Ikeja Tel: 01-2715458, 2715459 Fax: 01-4974354 40. Oba Akran Avenue Branch 20 Oba Akran Avenue, Ikeja Tel: 01-2707941, 2707942 Fax: 01-2700915 41. Alausa Branch Elephant House, Alausa - Ikeja Tel: 01 2708713, 2708714 Fax: 01 2708715 42. M/M Airport Road Branch Muritala Mohammed Airport Tel: 01-2711441 Fax: 01-2711440 43. Surulere Branch 39 Adeniran Ogunsanya Street Tel: 01-2703123, 2703124 Fax: 01-2703122 44. Alaba Branch H48/H49 Alaba Int’l Market, Ojo Tel: 01-2814301 Fax: 01-2814302 45. Trade Fair Branch Obasanjo Hall/Hall 2 ASPAMDA Plaza International Trade Fair Complex Tel: 01-7739961, 3426704 46. Balogun Business Association Branch Plaza 3A Portion C Opposite Sokoto Plaza Trade Fair Complex Tel: 01-3455420, 3455421 47. NPA Branch Account Block Nigerian Port Authority Wharf Road, Apapa Tel: 01-2708886, 2708887 Fax:01-2708885 48. Tincan Island Branch Suite 7 27 Container Complex Apapa Tel: 01-7747294, 8712195 49. Block I 194, Road 5, Ikota Shopping Mall, Ajah. Lagos. 50. 220 Herbert Macaulay Road, Yaba. Lagos NIGER STATE 51. Minna Branch Paiko Road, Minna Tel: 066-223528 Fax: 066-222231 OGUN STATE 52. Abeokuta Branch 2A Lantoro Road, Isale-Ake Abeokuta Tel: 039-244753 Fax: 039-242736 ONDO STATE 53. Akure Branch Great Nigeria Insurance House Owo/Ado Ekiti Road, Akure Tel: 034-234250, 241535 Fax: 034-243252 OSUN STATE 54. Ile-Ife Branch 5 Obalufon-Lagere Road Beside Catholic Church Lagere Junction, Ile-Ife Tel: 036-231103 Fax: 036-233560 OYO STATE 55. Gbagi Branch 15 Jimoh Odutola Street Ogunpa/Dugbe, Ibadan Tel: 02-2412172, 2412458 Fax: 02-2412910 56. Iwo Branch Baloon House, Iwo Road Ibadan Tel: 02-8108293 Fax: 02-8108292 57. Ibadan Main Branch UCH- Secretariat Road By Total Garden, Ibadan Tel: 02-2411902, 2411920 Fax: 02-2412171 PLATEAU STATE 58. Jos Branch 34 Ahmadu Bello Way, Jos Tel: 073-458568, 458570 Fax: 073- 458569 RIVERS STATE 59. 133A, Olu Obasanjo Road, GRA Port Harcourt Tel: 084 – 231113, 463046, 235413 Fax: 46304750. 60. P/H Airport Branch International Airport, Port Harcourt Tel: 084-231927, 785874 61. Olu Obasanjo Branch 58 Olu Obasanjo Road Port Harcourt Tel: 084-230247 Fax: 080-230515 62. Trans Amadi Branch 7 Trans Amadi Road P.M.B 11511, Port Harcourt Tel: 084-237543, 237541 Fax: 084-233136 SOKOTO STATE 63. Sokoto Branch 8 Maiduguri Road P.M.B. 2375, Sokoto Tel: 060-239629 Fax: 060-239628 Other information
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