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Unaudited condensed consolidated financial results
for the interim reporting period ended 30 June 2013
Absa Group Limited
Unaudited condensed consolidated financial results
for the interim reporting period ended 30 June 2013
Absa Group Limited
Authorised financial services and
registered credit provider (NCRCP7)
Registration number: 1986/003934/06
Incorporated in the Republic of South Africa
JSE share code: ASA and BGA
Issuer code: AMAGB
ISIN: ZAE000067237 and ZAE000174124
(Absa, Absa Group, the Group or the Company)
Unaudited condensed consolidated financial results
for the interim reporting period ended 30 June 2013
These unaudited condensed consolidated financial
results were prepared by Absa Group Financial
Reporting under the direction and supervision of the
Group Financial Director, D W P Hodnett CA(SA).
Date of publication: 30 July 2013
Consolidated salient features
30 June 31 December
2013 2012(1) Change 2012(1)
%
Statement of comprehensive income (Rm)
Headline earnings(2) 4 663 4 313 8 8 738
Profit attributable to ordinary equity holders 4 701 4 170 13 8 324
Statement of financial position
Total assets (Rm) 841 333 812 647 4 812 586
Loans and advances to customers (Rm) 539 343 505 730 7 527 328
Deposits due to customers (Rm) 490 394 458 344 7 477 853
Loans-to-deposits ratio (%) 90,4 86,9 90,2
Financial performance (%)
Return on average equity 14,0 13,7 13,5
Return on average assets 1,15 1,10 1,08
Return on average risk-weighted assets 2,10 2,07 2,06
Operating performance (%)
Net interest margin on average interest-bearing assets 3,91 3,88 3,79
Impairment losses on loans and advances as % of average loans and advances 1,35 1,62 1,63
to customers
Non-performing loans as % of gross loans and advances to customers 5,4 6,4 5,8
Non-interest income as % of total operating income 47,6 48,7 48,9
Cost-to-income ratio 54,9 54,7 55,1
Effective tax rate, excluding indirect taxation 27,4 29,0 27,9
Share statistics (million)
Number of ordinary shares in issue 718,2 718,2 718,2
Number of ordinary shares in issue (excluding treaury shares) 717,7 717,2 717,7
Weighted average number of ordinary shares in issue 717,7 717,5 717,6
Diluted weighted average number of ordinary shares in issue 718,5 719,3 719,2
Share statistics (cents)
Headline earnings per share 649,7 601,1 8 1 217,7
Diluted headline earnings per share 649,0 599,6 8 1 215,0
Basic earnings per share 655,0 581,2 13 1 160,0
Diluted earnings per share 654,3 579,7 13 1 157,4
Dividends per ordinary share relating to income for the reporting period 350 315 11 684
Dividend cover (times) 1,9 1,9 1,8
Special dividend per ordinary share 708 - 100 -
Net asset value per share 9 431 8 934 6 9 317
Tangible net asset value per share 9 072 8 639 5 8 960
Capital adequacy (%)(3)
Absa Group 16,6 16,9 17,4
Absa Bank 16,8 16,6 17,5
Off-statement of financial position (Rm)
Assets under management and administration
Financial Services 205 173 176 945 16 197 682
Money market 60 226 58 182 4 57 824
Non-money market 144 947 118 763 22 139 858
Corporate, Investment Bank and Wealth (CIBW) 58 654 42 796 37 49 268
Notes
(1) Refer to note 23 for reporting changes.
(2) After allowing for R146 million (30 June 2012: R140 million; 31 December 2012: R295 million) profit
attributable to preference equity holders of Absa Bank Limited.
(3) These ratios have been impacted by the implementation of Basel III. Refer to pages 103 to 118 of the
Groups interim financial results booklet for further information.
Condensed consolidated statement of financial position
as at
30 June 31 December
2013 2012(1) Change 2012(1)
Note Rm Rm % Rm
Assets
Cash, cash balances and balances with central banks 26 315 26 032 1 26 547
Statutory liquid asset portfolio 66 902 60 061 11 63 020
Loans and advances to banks 56 307 58 044 (3) 44 651
Trading portfolio assets 81 780 96 867 (16) 87 317
Hedging portfolio assets 3 567 4 868 (27) 5 439
Other assets 20 996 19 930 5 14 189
Current tax assets 561 702 (20) 303
Non-current assets held for sale 1 4 314 6 >100 4 052
Loans and advances to customers 2 539 343 505 730 7 527 328
Reinsurance assets 769 1 010 (24) 1 003
Investment securities 27 028 25 974 4 25 624
Investments in associates and joint ventures 642 373 72 569
Investment properties 1 125 2 699 (58) 1 220
Property and equipment 8 696 7 781 12 8 397
Goodwill and intangible assets 2 571 2 115 22 2 561
Deferred tax assets 417 455 (8) 366
Total assets 841 333 812 647 4 812 586
Liabilities
Deposits from banks 44 110 25 917 70 36 184
Trading portfolio liabilities 56 549 60 446 (6) 51 684
Hedging portfolio liabilities 2 505 3 251 (23) 3 855
Other liabilities 25 531 30 139 (15) 18 412
Provisions 868 1 136 (24) 1 681
Current tax liabilities 490 246 99 58
Non-current liabilities held for sale 1 1 495 - 100 1 480
Deposits due to customers 5 490 394 458 344 7 477 853
Debt securities in issue 6 106 235 123 786 (14) 106 779
Liabilities under investment contracts 19 261 20 219 (5) 18 768
Policyholder liabilities under insurance contracts 3 506 3 239 8 3 550
Borrowed funds 7 15 657 14 268 10 17 907
Deferred tax liabilities 1 068 1 549 (31) 1 595
Total liabilities 767 669 742 540 3 739 806
Equity
Capital and reserves
Attributable to ordinary equity holders:
Share capital 1 435 1 434 0 1 435
Share premium 4 467 4 572 (2) 4 604
Retained earnings 58 922 55 341 6 56 889
Other reserves 2 860 2 725 5 3 941
67 684 64 072 6 66 869
Non-controlling interest - ordinary shares 1 336 1 391 (4) 1 267
Non-controlling interest - preference shares 4 644 4 644 - 4 644
Total equity 73 664 70 107 5 72 780
Total liabilities and equity 841 333 812 647 4 812 586
Note
(1) Refer to note 23 for reporting changes.
Condensed consolidated statement of comprehensive income
for the reporting period ended
30 June 31 December
2013 2012(1) Change 2012(1)
Note Rm Rm % Rm
Net interest income 12 503 11 853 5 23 992
Interest and similar income 8.1 25 445 25 725 (1) 50 599
Interest expense and similar income 8.2 (12 942) (13 872) 7 (26 607)
Impairment losses on loans and advances 3.1 (3 546) (4 107) 14 (8 478)
Net interest income after impairment
losses on loans and advances 8 957 7 746 16 15 514
Non-interest income 11 342 11 268 1 22 964
Net fee and commission income 7 800 7 581 3 15 507
Fee and commission income 9.1 9 010 8 785 3 17 936
Fee and commission expense 9.2 (1 210) (1 204) (0) (2 429)
Net insurance premium income 2 760 2 757 0 5 618
Net insurance claims and benefits paid (1 356) (1 360) 0 (2 719)
Changes in investment and insurance
contract liabilities (1 194) (875) (36) (1 707)
Gains and losses from banking and
trading activities 9.3 1 584 1 917 (17) 3 778
Gains and losses from investment activities 9.4 1 358 908 50 1 736
Other operating income 390 340 15 751
Operating income before operating expenditure 20 299 19 014 7 38 478
Operating expenditure (13 572) (12 988) (4) (26 700)
Operating expenses 10.1 (13 094) (12 643) (4) (25 881)
Other impairments 10.2 (12) (11) (9) (113)
Indirect taxation (466) (334) (40) (706)
Share of post-tax results of associates
and joint ventures 79 35 >100 249
Operating profit before income tax 6 806 6 061 12 12 027
Taxation expense (1 862) (1 760) (6) (3 355)
Profit for the reporting period 4 944 4 301 15 8 672
Other comprehensive income
Items that will not be reclassified to the profit
and loss component of the statement of
comprehensive income:
Movement in retirement benefit fund assets
and liabilities 60 (12) >100 (84)
Increase/(decrease) in retirement benefit surplus 3 (17) >100 (61)
Decrease/(increase) in retirement benefit deficit 75 - 100 (59)
Deferred tax (18) 5 >(100) 36
Total items that will not be reclassified to the profit
and loss component of the statement of comprehensive
income 60 (12) >100 (84)
Items that are or may be reclassified subsequently to the
profit and loss component of the statement of
comprehensive income:
Foreign exchange differences on translation of foreign
operations 454 32 >100 140
Movement in cash flow hedging reserve (1 707) 286 >(100) 405
Fair value (losses)/gains arising during the
reporting period (1 467) 1 409 >(100) 2 650
Amount removed from other comprehensive income
and recognised in the profit and loss component of
the statement of comprehensive income (906) (1 012) 10 (2 088)
Deferred tax 666 (111) >100 (157)
Movement in available-for-sale reserve 75 370 (80) 1 109
Fair value gains arising during the reporting period 105 510 (79) 1 532
Amortisation of government bonds - release to the
profit and loss component of the statement of
comprehensive income 4 5 (20) 10
Deferred tax (34) (145) 77 (433)
Total items that are or may be reclassified subsequently
to the profit and loss component of the statement of
comprehensive income (1 178) 688 >(100) 1 654
Total comprehensive income for the reporting period 3 826 4 977 (23) 10 242
Profit attributable to:
Ordinary equity holders 4 701 4 170 13 8 324
Non-controlling interest - ordinary shares 97 (9) >100 53
Non-controlling interest - preference shares 146 140 4 295
4 944 4 301 15 8 672
Total comprehensive income attributable to:
Ordinary equity holders 3 525 4 851 (27) 9 901
Non-controlling interest - ordinary shares 155 (14) >100 46
Non-controlling interest - preference shares 146 140 4 295
3 826 4 977 (23) 10 242
Earnings per share:
Basic earnings per share (cents) 655,0 581,2 13 1 160,0
Diluted earnings per share (cents) 654,3 579,7 13 1 157,4
Note
(1) Refer to note 23 for reporting changes.
Condensed consolidated statement of changes in equity
for the reporting period ended
30 June
2013
Capital and
reserves Non- Non-
attributable controlling controlling
to ordinary interest - interest -
equity ordinary preference Total
holders shares shares equity
Rm Rm Rm Rm
Balance at the beginning of the reporting period 66 869 1 267 4 644 72 780
Total comprehensive income for the reporting period 3 525 155 146 3 826
Profit for the reporting period 4 701 97 146 4 944
Other comprehensive income (1 176) 58 - (1 118)
Dividends paid during the reporting period (2 645) (50) (146) (2 841)
Purchase of Group shares in respect of equity-settled share-based
payment schemes (71) - - (71)
Elimination of the movement in treasury shares held by Group entities (99) - - (99)
Movement in share-based payment reserve 6 - - 6
Transfer from share-based payment reserve (34) - - (34)
Transfer to share capital and share premium 34 - - 34
Value of employee services 6 - - 6
Movement in foreign insurance subsidiary regulatory reserve - - - -
Transfer from retained earnings (2) - - (2)
Transfer to foreign insurance subsidiary regulatory reserve 2 - - 2
Movement in general credit risk reserve - - - -
Transfer from retained earnings (102) - - (102)
Transfer to general credit risk reserve 102 - - 102
Share of post-tax results of associates and joint ventures - - - -
Transfer from retained earnings (79) - - (79)
Transfer to associates and joint ventures reserve 79 - - 79
Acquisition of non-controlling interest and related transaction costs(1) 99 (36) - 63
Balance at the end of the reporting period 67 684 1 336 4 644 73 664
Note
(1)During the current reporting period the Group increased its percentage shareholding in National Bank of
Commerce Limited (NBC) from 55% to 66%. This increased shareholding was driven by a rights issue made by NBC.
The Group exercised its rights, together with a portion of the rights relating to non-controlling shareholders.
The shareholders that did not take up their portion of the rights issue were granted a one-year option to acquire
such shares from Absa.
30 June
2012(1)
Capital and
reserves Non- Non-
attributable controlling controlling
to ordinary interest - interest -
equity ordinary preference Total
holders shares shares equity
Rm Rm Rm Rm
Balance at the beginning of the reporting period as previously reported 62 308 1 453 4 644 68 405
Restatements (103) - - (103)
Restated balance at the beginning of the reporting period 62 205 1 453 4 644 68 302
Total comprehensive income for the reporting period 4 851 (14) 140 4 977
Profit for the reporting period 4 170 (9) 140 4 301
Other comprehensive income 681 (5) - 676
Dividends paid during the reporting period (2 810) (103) (140) (3 053)
Purchase of Group shares in respect of equity-settled share-based
payment schemes (192) - - (192)
Elimination of the movement in treasury shares held by Group entities (10) - - (10)
Movement in share-based payment reserve 28 - - 28
Transfer from share-based payment reserve (98) - - (98)
Transfer to share capital and share premium 98 - - 98
Value of employee services 28 - - 28
Movement in foreign insurance subsidiary regulatory reserve - - - -
Transfer from retained earnings (8) - - (8)
Transfer to foreign insurance subsidiary regulatory reserve 8 - - 8
Movement in general credit risk reserve - - - -
Transfer to retained earnings 2 - - 2
Transfer from general credit risk reserve (2) - - (2)
Movement in insurance contingency reserve(2) - - - -
Transfer to retained earnings 324 - - 324
Transfer from insurance contingency reserve (324) - - (324)
Share of post-tax results of associates and joint ventures - - - -
Transfer from retained earnings (35) - - (35)
Transfer to associates and joint ventures reserve 35 - - 35
Increase in the interest of non-controlling equity holders - 55 - 55
Restated balance at the end of the reporting period 64 072 1 391 4 644 70 107
Notes
(1)Refer to note 23 for reporting changes.
(2)This reserve is no longer required due to a change in the Financial Services Board regulations.
31 December
2012(1)
Capital and
reserves Non- Non-
attributable controlling controlling
to ordinary interest - interest -
equity ordinary preference Total
holders shares shares equity
Rm Rm Rm Rm
Balance at the beginning of the reporting period as previously reported 62 308 1 453 4 644 68 405
Restatements (103) - - (103)
Restated balance at the beginning of the reporting period 62 205 1 453 4 644 68 302
Total comprehensive income for the reporting period 9 901 46 295 10 242
Profit for the reporting period 8 324 53 295 8 672
Other comprehensive income 1 577 (7) - 1 570
Dividends paid during the reporting period (5 069) (138) (295) (5 502)
Purchase of Group shares in respect of equity-settled share-based
payment schemes (211) - - (211)
Elimination of the movement in treasury shares held by Group entities 30 - - 30
Movement in share-based payment reserve 13 - - 13
Transfer from share-based payment reserve (110) - - (110)
Transfer to share capital and share premium 110 - - 110
Value of employee services 13 - - 13
Movement in foreign insurance subsidiary regulatory reserve
Transfer from retained earnings (13) - - (13)
Transfer to foreign insurance subsidiary regulatory reserve 13 - - 13
Movement in general credit risk reserve - - - -
Transfer from retained earnings (54) - - (54)
Transfer to credit risk reserve 54 - - 54
Movement in insurance contingency reserve(2) - - - -
Transfer to retained earnings 324 - - 324
Transfer from insurance contingency reserve (324) - - (324)
Share of post-tax results of associates and joint ventures - - - -
Transfer from retained earnings (249) - - (249)
Transfer to associates and joint ventures reserve 249 - - 249
Increase in the interest of non-controlling equity holders - 35 - 35
Disposal of interest in subsidiary without loss of control - (129) - (129)
Restated balance at the end of the reporting period 66 869 1 267 4 644 72 780
Notes
(1)Refer to note 23 for reporting changes.
(2)This reserve is no longer required due to a change in the Financial Services Board regulations.
Condensed consolidated statement of cash flows
for the reporting period ended
30 June 31 December
2013 2012(1) Change 2012(1)
Note Rm Rm % Rm
Net cash generated/(utilised) from operating activities 3 314 (2 659) >100 5 423
Net cash (utilised)/generated in investing activities (1 114) 1 830 >(100) (1 728)
Net cash utilised in financing activities (4 784) (3 160) (51) (2 045)
Net (decrease)/increase in cash and cash equivalents (2 584) (3 989) 35 1 650
Cash and cash equivalents at the beginning of the reporting period 1 11 716 10 068 16 10 068
Effect of exchange rate movements on cash and cash equivalents (1) 1 >(100) (2)
Cash and cash equivalents at the end of the reporting period 2 9 131 6 080 50 11 716
Notes to the condensed consolidated statement of cash flows
1. Cash and cash equivalents at the beginning of the
reporting period
Cash, cash balances and balances with central banks(2) 8 816 7 893 12 7 893
Loans and advances to banks(3) 2 900 2 175 33 2 175
11 716 10 068 16 10 068
2.Cash and cash equivalents at the end of the
reporting period
Cash, cash balances and balances with central banks(2) 6 023 4 776 26 8 816
Loans and advances to banks(3) 3 108 1 304 >100 2 900
9 131 6 080 50 11 716
Notes
(1)Refer to note 23 for reporting changes.
(2)Includes coins and bank notes which are part of cash, cash balances and balances with central banks on the
statement of financial position.
(3)Includes call advances, which are used as working capital of the Group and are a component of other
advances within loans and advances to banks on the statement of financial position.
Condensed notes to the consolidated financial results
as at
1. Non-current assets and non-current liabilities held for sale
During the previous reporting period, the Group effected the following transfers to non-current assets and non-current liabilities held for sale,
which remain within this category during the current reporting period:
Retail and Business Banking (RBB) segment:
In theCommercial Property Finance Equity n(CPF Equity) division, net assets in one of its subsidiaries, totalling R294 million, as well as one
of its property equity investments with a carrying value of R25 million. Legal transfer is expected to take place during the fourth quarter
of 2013.
In the CPF Equity division, property and equipment with a carrying value of R22 million and a contract for the sale of The Pivot Office Park,
with a carrying value of R66 million, was also concluded with legal transfer expected to take place before the fourth quarter of 2013
(previously classified as investment property).
Financial Services segment:
Net assets totalling R46 million in Absa Insurance Risk Management Services Limited, a subsidiary of Absa Insurance Company Limited. The disposal
of the subsidiary is due to take place during the fourth quarter of 2013.
Net assets totalling R223 million in the Absa Property Equity Fund (APEF). Managements intention is to dispose of further units in the APEF such
that the Group no longer has control over the APEF.
Gross assets and liabilities totalling R1,7 billion and R1,7 billion, respectively in the General Fund. This transfer is as a result of the
amalgamation of the General Fund with the Absa Select Equity Fund and is currently pending approval from the Financial Services Board.
An investment in One Commercial Investment Holdings Cell Captive with a net asset value of R59 million from investments in associates
and joint ventures.
During the current reporting period, the Group effected the following disposal from non-current assets held for sale:
RBB segment:
The investment in Sekunjalo Investments Limited, with a carrying value of R20 million. The investment was subsequently sold in January 2013.
During the current reporting period, the Group effected the following transfers to non-current assets and non-current liabilities held for sale:
RBB segment:
In the CPF Equity division, an investment property in one of its subsidiaries, with a carrying value of R190 million. Legal transfer is expected
to take place during the fourth quarter of 2013.
Head office, inter-segment eliminations and Other segment:
Two properties with a carrying value of R16 million in the Corporate Real Estate division, currently in the process of being auctioned, with
legal transfer expected to take place on conclusion of the transaction. Legal transfer is expected to take place during the second quarter of 2014.
2. Loans and advances to customers
30 June 31 December
2013 2012(1) Change 2012(1)
Rm Rm % Rm
Cheque accounts 34 296 36 576 (6) 33 809
Corporate overdrafts and specialised finance loans 4 997 8 126 (39) 5 121
Credit cards 34 783 22 686 53 33 034
Foreign currency loans 17 799 9 591 86 13 143
Instalment credit agreements 63 160 58 509 8 60 489
Gross advances 76 267 70 157 9 73 124
Unearned finance charges (13 107) (11 648) (13) (12 635)
Reverse repurchase agreements 6 309 2 045 >100 4 698
Loans to associates and joint ventures 10 719 8 718 23 10 094
Microloans 2 046 1 876 9 2 002
Mortgages 280 665 287 572 (2) 282 778
Other loans and advances(2) 3 155 3 802 (17) 3 226
Overnight finance 17 365 14 360 21 18 862
Personal and term loans 32 976 29 863 10 33 654
Preference shares 6 602 6 873 (4) 6 342
Wholesale overdrafts 38 812 28 162 38 34 088
Gross loans and advances to customers 553 684 518 759 7 541 340
Impairment losses on loans and advances (refer to note 3) (14 341) (13 029) (10) (14 012)
539 343 505 730 7 527 328
Notes
(1) Refer to note 23 for reporting changes.
(2) Includes customer liabilities under acceptances, working capital solutions and collateralised loans.
3. Impairment losses on loans and advances
30 June 31 December
Reconciliation of total impairment losses on loans 2013 2012(1) Change 2012(1)
and advances to customers Rm Rm % Rm
Balance at the beginning of the reporting period 14 012 12 131 16 12 131
Amounts written off during the reporting period (3 187) (2 898) 10 (6 355)
Exchange differences 1 3 (67) (4)
Interest on impaired financial assets (refer to note 8.1) (449) (548) 18 (1 018)
10 377 8 688 19 4 754
Impairments raised during the reporting period 3 964 4 341 (9) 9 258
Balance at the end of the reporting period 14 341 13 029 10 14 012
Comprising:
Identified impairments 13 302 12 284 8 13 040
Unidentified impairments 1 039 745 39 972
14 341 13 029 10 14 012
30 June 31 December
2013 2012(1) Change 2012(1)
Rm Rm % Rm
3.1 Statement of comprehensive income charge
Impairments raised during the reporting period 3 964 4 341 (9) 9 258
Identified impairments 3 879 4 403 (12) 9 100
Unidentified impairments 85 (62) >100 158
Recoveries of loans and advances previously
written off(2) (418) (234) (79) (780)
3 546 4 107 (14) 8 478
Notes
(1) Refer to note 23 for reporting changes.
(2) Includes collection costs of R59 million (30 June 2012: R87 million; 31 December 2012: R188 million).
4. Non-performing loans
30 June
2013
Expected
recoveries Total
Outstanding and fair value Net identified Coverage
balance of collateral exposure impairment ratio
Rm Rm Rm Rm %
RBB 29 082 18 023 11 059 11 059 38,0
Retail Banking 23 241 14 330 8 911 8 911 38,3
Cheque accounts 102 28 74 74 72,6
Credit cards 1 971 639 1 332 1 332 67,6
Edcon portfolio 309 53 256 256 82,8
Instalment credit agreements 1 661 852 809 809 48,7
Microloans 406 113 293 293 72,2
Mortgages 17 384 12 138 5 246 5 246 30,2
Personal loans 1 408 507 901 901 64,0
Business Banking 5 841 3 693 2 148 2 148 36,8
Cheque accounts 1 208 774 434 434 35,9
Commercial asset finance 351 88 263 263 74,9
Commercial property finance 2 893 1 829 1 064 1 064 36,8
Term loans 1 389 1 002 387 387 27,9
CIBW 862 288 574 574 66,6
Financial Services 16 - 16 16 100,0
Non-performing loans 29 960 18 311 11 649 11 649 38,9
Non-performing loans ratio (%) 5,4
30 June
2012(1)
Expected Net
recoveries exposure Total
Outstanding and fair value Net identified Coverage
balance of collateral exposure impairment ratio
Rm Rm Rm Rm %
RBB 32 044 21 862 10 182 10 182 31,8
Retail Banking 28 075 19 331 8 744 8 744 31,1
Cheque accounts 206 72 134 134 65,0
Credit cards 1 937 700 1 237 1 237 63,9
Instalment credit agreements 2 443 1 115 1 328 1 328 54,4
Microloans 389 131 258 258 66,3
Mortgages 21 742 16 823 4 919 4 919 22,6
Personal loans 1 358 490 868 868 63,9
Business Banking 3 969 2 531 1 438 1 438 36,2
Cheque accounts 837 520 317 317 37,9
Commercial asset finance 496 150 346 346 69,8
Commercial property finance 1 865 1 273 592 592 31,7
Term loans 771 588 183 183 23,7
CIBW 985 432 553 553 56,2
Non-performing loans 33 029 22 294 10 735 10 735 32,5
Non-performing loans ratio (%) 6,4
Note
(1) Refer to note 23 for reporting changes.
31 December
2012(1)
Expected
recoveries Total
Outstanding and fair value Net identified Coverage
balance of collateral exposure impairment ratio
Rm Rm Rm Rm %
RBB 30 296 19 319 10 977 10 977 36,2
Retail Banking 24 267 15 595 8 672 8 672 35,7
Cheque accounts 166 61 105 105 63,3
Credit cards 1 842 608 1 234 1 234 66,9
Instalment credit agreements 1 790 895 895 895 50,0
Microloans 410 148 262 262 63,9
Mortgages 18 798 13 445 5 353 5 353 28,5
Personal loans 1 261 438 823 823 65,3
Business Banking 6 029 3 724 2 305 2 305 38,2
Cheque accounts 1 016 661 355 355 34,9
Commercial asset finance 443 146 297 297 67,0
Commercial property finance 3 222 1 882 1 340 1 340 41,6
Term loans 1 348 1 035 313 313 23,2
CIBW 1 167 510 657 657 56,3
Financial Services 20 - 20 20 100,0
Non-performing loans 31 483 19 829 11 654 11 654 37,0
Non-performing loans ratio (%) 5,8
Note
(1) Refer to note 23 for reporting changes.
5. Deposits due to customers
30 June 31 December
2013 2012(1) Change 2012(1)
Rm Rm % Rm
Call deposits 51 736 47 553 9 56 667
Cheque account deposits 152 155 139 671 9 143 861
Credit card deposits 1 807 1 823 (1) 1 938
Fixed deposits 129 584 122 755 6 125 800
Foreign currency deposits 12 682 9 305 36 12 253
Notice deposits 55 406 47 083 18 55 728
Other deposits(2) 2 230 2 625 (15) 2 133
Repurchase agreements with non-banks 3 813 12 432 (69) 1 503
Savings and transmission deposits 80 981 75 097 8 77 970
490 394 458 344 7 477 853
Note
(1) Refer to note 23 for reporting changes.
(2) Includes partnership contributions received, deposits due on structure deals, preference investments on
behalf of customers and unclaimed deposits.
6. Debt securities in issue
30 June 31 December
2013 2012(1) Change 2012(1)
Rm Rm % Rm
Credit linked notes 9 451 10 169 (7) 9 800
Floating rate notes 49 113 63 981 (23) 52 638
Liabilities arising from securitised
special purpose entities 2 372 4 219 (44) 2 391
Negotiable certificates of deposit 23 040 21 372 8 17 575
Other debt securities in issue 7 - 100 7
Promissory notes 833 1 316 (37) 1 378
Structured notes and bonds 543 1 253 (57) 1 098
Senior notes 20 876 21 476 (3) 21 892
106 235 123 786 (14) 106 779
Note
(1) Refer to note 23 for reporting changes.
7.Borrowed funds
30 June 31 December
2013 2012 Change 2012
Rm Rm % Rm
Subordinated callable notes
The subordinated debt instruments listed below qualify as secondary capital
in terms of the Banks Act, No 94 of 1990 (as amended).
Interest rate Final maturity date
8,75% 1 September 2017 - 1 500 (100) -
8,80% 7 March 2019 1 725 1 725 - 1 725
8,10% 27 March 2020 2 000 2 000 - 2 000
10,28% 3 May 2022 600 600 - 600
8,295% 21 November 2023 1 188 - 100 1 188
Three-month JIBAR + 2,10% 3 May 2022 400 400 - 400
Three-month JIBAR + 1,95% 21 November 2022 1 805 - 100 1 805
Three-month JIBAR + 2,05% 21 November 2023 2 007 - 100 2 007
CPI-linked notes, fixed at the following coupon rates:
6,25% 31 March 2018 - 1 886 (100) 1 886
6,00% 20 September 2019 3 000 3 000 - 3 000
5,50% 7 December 2028 1 500 1 500 - 1 500
Accrued interest 1 358 1 339 1 1 462
Fair value adjustment 74 318 (77) 334
15 657 14 268 10 17 907
8. Net-interest income
30 June 31 December
2013 2012(1) Change 2012(1)
Rm Rm % Rm
8.1 Interest and similar income
Interest and similar income is earned from:
Cash, cash balances and balances with central banks 100 81 23 166
Fair value adjustments on hedging instruments 521 660 (21) 1 331
Investment securities 74 112 (34) 202
Loans and advances to banks 426 391 9 865
Other loans and advances to banks 354 364 (3) 771
Reverse repurchase agreements 72 27 >100 94
Loans and advances to customers 21 930 22 196 (1) 43 327
Cheque accounts 1 588 1 427 11 3 034
Corporate overdrafts and specialised finance loans 136 309 (56) 387
Credit cards 2 738 1 592 72 3 593
Foreign currency loans 189 124 52 288
Instalment credit agreements 2 852 2 788 2 5 550
Interest on impaired financial assets (refer to note 3) 449 548 (18) 1 018
Loans to associates and joint ventures 304 232 31 494
Microloans 246 247 (0) 505
Mortgages 9 832 10 684 (8) 20 986
Other loans and advances to customers(2) 123 675 (82) 307
Overnight finance 400 397 1 814
Personal and term loans 1 749 1 871 (7) 3 661
Preference shares 229 259 (12) 485
Wholesale overdrafts 1 095 1 043 5 2 205
Other interest income(3) 195 182 7 542
Statutory liquid asset portfolio 2 199 2 103 5 4 166
25 445 25 725 (1) 50 599
Notes
(1) Refer to note 23 for reporting changes.
(2) Includes items such as interest on factored debtors books.
(3) Includes items such as inter-segment eliminations between interest and similar income, interest expense and
similar charges, gains and losses from banking and trading activities and gains and losses from investment
activities.
30 June 31 December
2013 2012(1) Change 2012(1)
Rm Rm % Rm
8.2 Interest expense and similar charges
Interest expense and similar charges are paid on:
Borrowed funds 661 708 (7) 1 352
Debt securities in issue 2 928 4 246 (31) 8 392
Deposits due to customers 9 154 9 325 (2) 18 043
Call deposits 1 359 1 446 (6) 2 881
Cheque account deposits 1 548 1 767 (12) 3 174
Credit card deposits 4 139 (97) 9
Fixed deposits 3 497 3 481 0 6 992
Foreign currency deposits 88 40 >100 114
Notice deposits 1 459 1 195 22 2 471
Other deposits due to customers 140 140 0 228
Savings and transmission deposits 1 059 1 117 (5) 2 174
Deposits from banks 234 229 2 577
Call deposits 135 164 (18) 450
Fixed deposits 94 45 >100 103
Other deposits from banks 5 20 (75) 24
Fair value adjustments on hedging instruments 606 (337) >100 (998)
Interest incurred on finance leases 12 30 (60) 51
Other interest expense(2) (653) (329) (98) (810)
12 942 13 872 (7) 26 607
Notes
(1) Refer to note 23 for reporting changes.
(2) Includes items such as inter-segment eliminations between interest and similar income, interest expense and
similar charges, gains and losses from banking and trading activities and gains and losses from investment
activities.
Condensed notes to the consolidated financial results
for the reporting period ended
9.Non-interest income
30 June 31 December
2013 2012(1) Change 2012(1)
Rm Rm % Rm
9.1 Fee and commission income
Asset management and other related fees 86 34 >100 158
Consulting and administration fees 258 257 0 566
Credit-related fees and commissions 6 141 6 125 0 12 404
Cheque accounts 1 779 1 790 (1) 3 589
Credit cards(2) 350 224 56 617
Electronic banking 1 997 1 996 0 4 068
Other credit-related fees and commissions(3) 855 892 (4) 1 642
Savings accounts 1 160 1 223 (5) 2 488
Insurance commission received 616 452 36 1 077
Investment banking fees 123 104 18 252
Merchant income 1 027 948 8 2 013
Other fee and commission income 102 80 28 224
Pension fund payment services(4) - 122 (100) 122
Trust and other fiduciary services 657 663 (1) 1 120
Portfolio and other management fees 531 546 (3) 870
Trust and estate income 126 117 8 250
9 010 8 785 3 17 936
9.2 Fee and commission expense
Cheque processing fees (75) (81) 7 (161)
Insurance commission paid (484) (447) (8) (945)
Other fee and commission expense (477) (392) (22) (914)
Transaction-based legal fees (67) (112) 40 (209)
Trust and other fiduciary service fees (36) (114) 68 (73)
Valuation fees (71) (58) (22) (127)
(1 210) (1 204) (0) (2 429)
Net fee and commission income 7 800 7 581 3 15 507
Notes
(1) Refer to note 23 for reporting changes.
(2) Includes acquiring and issuing fees.
(3) Includes service, credit-related fees and commissions on mortgage loans and foreign exchange transactions.
(4) During the previous reporting period, the net fee and commission income for AllPay reduced significantly
due to the termination of the South African Social Security Agency contract.
30 June 31 December
2013 2012(1) Change 2012(1)
Rm Rm % Rm
9.3 Gains and losses from banking and trading activities
Net (losses)/gains on investments (22) 151 >(100) 93
Debt instruments designated at fair value
through profit or loss 75 71 6 179
Equity instruments designated at fair value
through profit or loss (93) 85 >(100) (76)
Available-for-sale unwind from reserves (4) (5) 20 (10)
Net trading result(2) 1 540 1 776 (13) 3 674
Net trading income excluding the impact of
hedge accounting 1 619 1 756 (8) 3 652
Ineffective portion of hedges (79) 20 >(100) 22
Cash flow hedges (83) 19 >(100) 45
Fair value hedges 4 1 >100 (23)
Other gains/(losses)(2) 66 (10) >100 11
1 584 1 917 (17) 3 778
Net trading income excluding the impact of
hedge accounting 1 619 1 756 (8) 3 652
Gains/(losses) on financial instruments
designated at fair value 535 (410) >100 (857)
through profit or loss
Net gains on financial assets designated at
fair value through profit or loss 320 285 12 1 129
Net gains/(losses) on financial liabilities
designated at fair value through profit or loss 215 (695) >100 (1 986)
Gains on financial instruments held for trading 1 084 2 166 (50) 4 509
Other gains/(losses) 66 (10) >100 11
Losses on financial instruments designated at
fair value through profit or loss (5) (51) 90 (52)
Gains on financial instruments held for trading 71 41 73 63
Notes
(1) Refer to note 23 for reporting changes.
(2) In order to provide for improved disclosure, certain revenue streams have been reclassified from other to
net trading results.
30 June 31 December
2013 2012(1) Change 2012(1)
Rm Rm % Rm
9.4 Gains and losses from investment activities
Available-for-sale unwind from reserves 1 1 0 2
Net gains on investments from insurance activities 1 345 867 55 1 686
Policyholder - insurance contracts 95 125 (24) 329
Policyholder - investment contracts 1 129 626 80 1 086
Shareholder funds(2) 121 116 4 271
Other gains 12 40 (70) 48
1 358 908 50 1 736
Net gains on investments from insurance activities 1 345 867 55 1 686
Gains on financial instruments designated at fair
value through profit or loss 1 346 867 55 1 687
Losses on financial instruments held for trading (1) - (100) (1)
10. Operating expenditure
30 June 31 December
2013 2012(1) Change 2012(1)
Rm Rm % Rm
10.1 Operating expenses
Amortisation of intangible assets 174 132 32 255
Auditors remuneration 102 99 3 177
Cash transportation 336 377 (11) 646
Depreciation 724 683 6 1 303
Equipment costs 135 197 (31) 287
Information technology 1 042 1 154 (10) 2 134
Investment property charges - change in fair value 5 154 (97) 408
Marketing costs 486 355 37 1 024
Operating lease expenses on properties 563 545 3 1 058
Other operating expenses(2) 958 757 26 1 887
Other property costs 132 198 (33) 399
Printing and stationery 113 110 3 220
Professional fees 578 271 >100 860
Property costs 578 640 (10) 1 270
Staff costs 6 776 6 537 4 13 159
Bonuses 425 425 - 985
Current service costs on post-retirement benefits 395 363 9 721
Other staff costs(3) 266 255 4 470
Salaries 5 335 5 177 3 10 308
Share-based payments 223 221 1 463
Training costs 132 96 38 212
Telephone and postage 392 434 (10) 794
13 094 12 643 4 25 881
Notes
(1) Refer to note 23 for reporting changes.
(2) Includes fraud losses, travel and entertainment costs.
(3) Includes recruitment costs, membership fees to professional bodies, staff parking, redundancy fees,
study assistance, staff relocation and refreshment costs.
30 June 31 December
2013 2012 Change 2012
Rm Rm % Rm
10.2 Other impairments
Financial instruments - amortised cost instruments 4 9 (56) 6
Other impairments 8 2 >100 107
Computer software development costs - - - 89
Goodwill - 18 (100) 18
Investments in associates and joint ventures 6 - 100 -
Repossessed properties 2 (16) >100 0
11. Headline earnings
30 June 31 December
2013 2012(1) Net(2) 2012(1)
Gross Net(2) Gross Net(2) Change Gross Net(2)
Rm Rm Rm Rm % Rm Rm
Headline earnings is determined as follows:
Profit attributable to ordinary equity holders 4 701 4 170 13 8 324
Total headline earnings adjustment: (38) 143 >(100) 414
IFRS 3 - Goodwill impairment - - 18 18 (100) 18 18
IAS 16 - Loss/(profit) on disposal of property 3 3 (40) (32) >100 (81) (63)
and equipment
IAS 28 and IFRS 11 - Headline earnings component
of share of post-tax results of associates and
joint ventures - - - - - (1) (1)
IAS 28 and IFRS 11 - Impairment of investments in
associates and joint ventures 6 6 - - 100 - -
IAS 36 and IAS 38 - Loss on disposal and impairment
of intangible assets 0 0 - - 100 92 65
IAS 39 - Release of available-for-sale reserves 4 3 5 3 0 10 7
IAS 40 - Change in fair value of investment properties (56) (50) 154 154 >(100) 408 388
Headline earnings 4 663 4 313 8 8 738
Diluted headline earnings(3) 4 663 4 313 8 8 738
Headline earnings per share (cents) 649,7 601,1 8 1 217,7
Diluted headline earnings per share (cents) 649,0 599,6 8 1 215,0
12. Dividends per share
30 June 31 December
2013 2012 Change 2012
Rm Rm % Rm
Dividends declared to ordinary equity holders
Interim dividend (30 July 2013: 350 cents)
(27 July 2012: 315 cents) (1,2) 2 514 2 262 11 2 262
Dividends paid on treasury shares - interim(1,3) - (3) 100 (3)
Special dividend (30 July 2013: 708 cents)(2) 5 085 - 100 -
Final dividend (12 February 2013: 369 cents)(1) - - - 2 650
Dividends paid on treasury shares - final(1,3) - - - (5)
7 599 2 259 >100 4 904
Dividends declared to non-controlling preference equity holders
Interim dividend (30 July 2013: 2 999,4521 cents)
(27 July 2012: 3 134,6575 cents) 148 155 (5) 155
Final dividend (12 February 2013: 2 950,5479 cents) - - - 146
148 155 (5) 301
Notes
(1) The Group has capital commitments in respect of computer equipment and property development. Management is confident that future net
revenue and funding will be sufficient to cover these commitments.
(2) The operating lease commitments comprise a number of separate operating leases in relation to property and equipment, none of which
is individually significant to the Group. Leases are negotiated for an average term of three to five years and rentals are
renegotiated annually.
(3) The Group has sponsorship commitments in respect of sports, arts and culture. Certain sponsorship agreements expire in 2013 and are
under review by management for renewal in the foreseeable future.
13. Acquisitions and disposals of businesses
Acquisitions and disposals
There were no interests acquired/disposed of during the current reporting period.
14. Related parties
The following are defined as related parties of the Group:
-the parent company;
-fellow subsidiaries, associates and joint venture of the parent company;
-subsidiaries;
-associates, joint ventures and retirement benefit fund;
-an entity controlled/jointly controlled or significantly influenced by any individual referred to above;
-post-employment benefit plans for the benefit of employees or any entity that is a related party of the Group; and
-children and/or dependants and spouses or partners of the individuals referred to above.
14.1 Balances and transactions with parent company1
The Groups parent company is Barclays Bank PLC, which owns 55,5% (30 June 2012 and 31 December 2012: 55,5%)
of the ordinary shares in Absa Group Limited. The remaining 44,5% (30 June 2012 and 31 December 2012: 44,5%)
of the shares are widely held on the Johannesburg Stock Exchange (JSE).
Balances
Loans and advances to banks 21 567 35 795 (40) 20 698
Derivative assets 19 491 12 685 54 14 310
Nominal value of derivative assets 1 096 263 694 589 58 1 399 103
Other assets 2 229 4 025 (45) 896
Investment securities 533 584 (9) 584
Deposits from banks (14 856) (8 391) (77) (8 968)
Derivative liabilities (17 461) (12 299) (42) (13 842)
Nominal value of derivative liabilities 829 843 552 403 50 1 213 065
Other liabilities (2 125) (3 510) 39 (59)
Transactions
Interest and similar income (141) (82) (72) (204)
Interest expense and similar charges 34 51 (33) 106
Net fee and commission income (9) (9) 0 (18)
Gains and losses from banking and trading activities 66 (152) >100 (158)
Other operating income (7) (23) 70 (37)
Operating expenditure 43 (28) >100 (12)
Dividends paid 1 471 1 563 (6) 2 819
Trade balances must be settled in accordance with market conventions applicable to the underlying transaction. Non-trade
balances must be settled by the close of the month immediately following the month in which the transaction occurred. Further,
settlement must be made in the currency required by the ultimate parent company. In exceptional cases it may be impractical or
inefficient to settle balances monthly. In such cases, the unsettled balances must be explicitly agreed to on a monthly basis
in writing and full settlement must be made at least quarterly.
There were no bad debt expenses and provisions for bad debts that related to balances and transactions with the parent company.
14. Related parties
14.2 Balances and transactions with fellow subsidiaries, associates and joint ventures of the parent company (1,2)
(continued)
30 June 31 December
2013 2012 Change 2012
Rm Rm % Rm
Balances
Loans and advances to banks 190 47 >100 221
Derivative assets 39 195 (80) 37
Nominal value of derivative assets 1 146 4 375 (74) 947
Other assets 175 83 >100 87
Deposits from banks (905) (764) (18) (1 016)
Derivative liabilities 0 7 (99) 5
Nominal value of derivative liabilities 1 723 948 82 521
Other liabilities (131) (120) (9) (61)
Transactions
Interest and similar income - - - -
Net fee and commission income (3) (4) 25 (7)
Other operating income - - - 126
Operating expenditure (110) 72 >(100) (3)
Trade balances must be settled in accordance with market conventions applicable to the underlying transaction. Non-trade
balances must be settled by the close of the month immediately following the month in which the transaction occurred. Further,
settlement must be made in the currency required by the fellow subsidiary, associate or joint venture receiving the settlement.
In exceptional cases it may be impractical or inefficient to settle balances monthly. In such cases, the unsettled balances must
be explicitly agreed to on a monthly basis in writing, and full settlement must be made at least quarterly.
There were no bad debt expenses and provisions for bad debts that related to balances and transactions with the fellow subsidiaries,
associates and joint ventures of the parent company.
Notes
(1) Debit amounts are shown as positive, credit amounts are shown as negative.
(2) Fellow subsidiaries, associates and joint ventures are those entities of Barclays Bank PLC.
Condensed notes to the consolidated financial results
as at
15. Assets under management and administration
30 June 31 December
2013 2012 Change 2012
Rm Rm % Rm
Alternative asset management and exchange-traded funds 51 039 36 773 39 41 957
Deceased estates 2 182 2 258 (3) 2 012
Other assets under management and administration 13 704 11 155 23 12 995
Participation bond schemes 1 287 2 533 (49) 2 184
Portfolio management 45 374 28 161 61 44 222
Private equity 811 762 6 819
Trusts 3 967 3 508 13 3 783
Unit trusts 145 463 134 591 8 138 978
263 827 219 741 20 246 950
16. Financial guarantee contracts
30 June 31 December
2013 2012 Change 2012
Rm Rm % Rm
Financial guarantee contracts1 96 157 (39) 146
Note
(1) Financial guarantee contracts represent contracts where the Group undertakes to make specified payments to a counterparty, should the
counterparty suffer a loss as a result of a specified debtor failing to make payment when due in accordance with the terms of a debt
instrument. This amount represents the maximum exposure, which is not necessarily the measurement recognised in the statement of
financial position in accordance with International Financial Reporting Standards (IFRS).
17. Commitments
30 June 31 December
2013 2012 Change 2012
Rm Rm % Rm
Authorised capital expenditure
Contracted but not provided for1 942 970 (3) 578
Operating lease payments due2
No later than one year 1 018 1 048 (3) 936
Later than one year and no later than five years 1 515 1 899 (20) 1 948
Later than five years 193 382 (49) 365
2 726 3 330 (18) 3 249
Sponsorship payments due3
No later than one year 225 104 >100 289
Later than one year and no later than five years 755 260 >100 884
980 364 >100 1 173
Notes
(1) The Group has capital commitments in respect of computer equipment and property development. Management is confident that future net
revenue and funding will be sufficient to cover these commitments.
(2) The operating lease commitments comprise a number of separate operating leases in relation to property and equipment, none of which
is individually significant to the Group. Leases are negotiated for an average term of three to five years and rentals are
renegotiated annually.
(3) The Group has sponsorship commitments in respect of sports, arts and culture. Certain sponsorship agreements expire in 2013 and are
under review by management for renewal in the foreseeable future.
18. Contingencies
30 June 31 December
2013 2012 Change 2012
Rm Rm % Rm
Guarantees(1) 17 204 14 158 22 16 217
Irrevocable debt facilities(2) 48 408 44 842 8 46 483
Irrevocable equity facilities(2) 510 538 (5) 543
Letters of credit 4 254 5 513 (23) 6 670
Other contingencies 6 4 50 6
70 382 65 055 8 69 919
Notes
(1) Guarantees include performance and payment guarantee contracts.
(2) Irrevocable facilities are commitments to extend credit where the Group does not have the right
to terminate the facilities by written notice. Commitments generally have fixed expiry dates. Since
commitments may expire without being drawn upon, the total contract amounts do not necessarily
represent future cash requirements.
19. Segment reporting
30 June 31 December
2013 2012(1) Change 2012(1)
Rm Rm % Rm
19.1 Headline earnings contribution by segment
RBB 2 901 1 954 48 4 392
Retail Banking 2 119 1 447 46 3 472
Home Loans 156 (623) >100 (992)
Vehicle and Asset Finance 523 377 39 847
Card 896 811 10 1 888
Personal Loans 148 253 (42) 587
Retail Bank 413 588 (30) 1 127
AllPay (17) 41 >(100) 15
Business Banking 782 507 54 920
CIBW 1 206 1 301 (7) 2 710
Head office, inter-segments eliminations and Other (115) 417 >(100) 371
Enterprise Functions 29 152 (81) 443
Group Treasury (81) 76 >(100) 122
Consolidation Centre (63) 189 >(100) (194)
Total banking 3 992 3 672 9 7 473
Financial Services 671 641 5 1 265
Headline earnings 4 663 4 313 8 8 738
Note
(1) Refer to note 23 for reporting changes.
30 June 31 December
2013 2012(1) Change 2012(1)
Rm Rm % Rm
19.2 Total revenue2 by segment
RBB 17 760 16 714 6 34 149
Retail Banking 13 625 12 723 7 26 120
Home Loans 1 905 2 052 (7) 4 210
Vehicle and Asset Finance 1 619 1 478 10 3 052
Card 3 485 2 493 40 5 458
Personal Loans 938 1 005 (7) 2 010
Retail Bank 5 676 5 535 3 11 222
AllPay 2 160 (99) 168
Business Banking 4 135 3 991 4 8 029
CIBW 4 238 4 109 3 8 529
Head office, inter-segments eliminations and Other (259) 324 >(100) 247
Enterprise Functions (120) 136 >(100) 160
Group Treasury (108) 139 >(100) 243
Consolidation Centre (31) 49 >(100) (156)
Total banking 21 739 21 147 3 42 925
Financial Services 2 106 1 974 7 4 031
Total revenue 23 845 23 121 3 46 956
Notes
(1) Refer to note 23 for reporting changes.
(2) Revenue includes net interest income and non-interest income.
Condensed notes to the consolidated financial results
19. Segment reporting (continued)
30 June 31 December
2013 2012(1) Change 2012(1)
Rm Rm % Rm
19.3 Internal total revenue2 by segment
RBB (4 530) (4 979) 9 (9 286)
Retail Banking (5 256) (5 589) 6 (10 665)
Home Loans (5 682) (6 285) 10 (12 082)
Vehicle and Asset Finance (1 755) (1 733) (1) (3 453)
Card (693) (429) (62) (860)
Personal Loans (254) (278) 9 (523)
Retail Bank 3 123 3 123 0 6 235
AllPay 5 13 (62) 18
Business Banking 726 610 19 1 379
CIBW 6 206 5 507 13 10 393
Head office, inter-segments eliminations and Other (1 451) (320) >(100) (669)
Enterprise Functions (132) 60 >(100) 54
Group Treasury (509) (544) 6 (924)
Consolidation Centre (810) 164 >(100) 201
Total banking 225 208 8 438
Financial Services (225) (208) (8) (438)
Total internal revenue - - - -
Notes
(1) Refer to note 23 for reporting changes.
(2) Revenue includes net interest income and non-interest income.
30 June 31 December
2013 2012(1) Change 2012(1)
Rm Rm % Rm
19.4 Total assets by segment
RBB 611 447 587 082 4 611 699
Retail Banking 521 280 497 182 5 522 094
Home Loans 224 203 229 609 (2) 227 138
Vehicle and Asset Finance 75 402 68 630 10 72 391
Card 44 174 30 843 43 43 659
Personal Loans 13 409 12 960 3 13 318
Retail Bank 163 935 155 082 6 165 401
AllPay 157 58 \>100 187
Business Banking 90 167 89 900 0 89 605
CIBW 511 632 478 360 7 473 453
Head office, inter-segments eliminations and Other (314 381) (284 048) (11) (303 486)
Enterprise Functions 8 187 7 056 16 7 971
Group Treasury 95 780 98 875 (3) 96 568
Consolidation Centre (418 348) (389 979) (7) (408 025)
Total banking 808 698 781 394 3 781 666
Financial Services 32 635 31 253 4 30 920
Total assets 841 333 812 647 4 812 586
Note
(1) Refer to note 23 for reporting changes.
19. Segment reporting (continued)
30 June 31 December
2013 20121 Change 20121
Rm Rm % Rm
19.5 Total liabilities by segment
RBB 604 876 582 986 4 604 537
Retail Banking 516 232 493 667 4 516 104
Home Loans 223 759 230 020 (3) 227 919
Vehicle and Asset Finance 74 135 67 560 10 70 850
Card 42 460 29 630 43 41 099
Personal Loans 13 261 12 707 4 12 731
Retail Bank 162 619 153 809 6 163 411
AllPay (2) (59) 97 94
Business Banking 88 644 89 319 (1) 88 433
CIBW 507 958 474 215 7 467 835
Head office, inter-segments eliminations and Other (372 985) (341 089) (9) (358 788)
Enterprise Functions 8 148 6 856 19 7 512
Group Treasury 39 366 44 653 (12) 43 925
Consolidation Centre (420 499) (392 598) (7) (410 225)
Total banking 739 849 716 112 3 713 584
Financial Services 27 820 26 428 5 26 222
Total liabilities 767 669 742 540 3 739 806
20. Fair value of financial instruments
The table below summarises the carrying amounts and fair values of those financial instruments not held at fair value:
30 June
2013
Carrying Fair
Value Value
Rm Rm
Financial assets
Balances with other central banks 1 851 1 851
Balances with the South African Reserve Bank (SARB) 13 290 13 290
Coins and bank notes 6 023 6 023
Money market assets 1 229 1 229
Cash, cash balances and balances with central banks 22 393 22 393
Loans and advances to banks 42 521 42 521
Other assets 18 887 18 887
Retail Banking 350 479 350 512
Cheque accounts 2 464 2 464
Credit cards 32 841 32 841
Instalment credit agreements 59 943 59 810
Loans to associates and joint ventures 8 801 8 801
Microloans 1 674 1 752
Mortgages 229 322 229 410
Other advances 330 330
Personal loans and term loans 15 104 15 104
Business Banking 63 387 63 260
Cheque accounts 18 717 18 717
Commercial asset finance 10 346 10 353
Commercial property finance 23 194 23 060
Term loans 11 130 11 130
CIBW 106 090 110 655
Other and inter-segment eliminations 1 253 1 253
Loans and advances to customers - net of impairment
losses on loans and advances 521 209 521 115
Investment securities 644 644
Total 605 654 605 560
Financial liabilities
Deposits from banks 33 758 33 758
Other liabilities 22 213 22 213
Call deposits 51 736 51 736
Cheque account deposits 152 040 152 040
Credit card deposits 1 809 1 807
Fixed deposits 112 919 112 919
Foreign currency deposits 12 682 12 682
Notice deposits 55 406 55 406
Other deposits 1 809 1 809
Saving and transmission deposits 80 981 80 981
Deposits due to customers 469 380 469 380
Debt securities in issue 94 562 94 562
Borrowed funds 11 699 11 699
Total 631 612 631 612
21.Fair value hierarchy disclosures
21.1 Valuation methodology
The table below shows the Groups financial instruments that are recognised and subsequently
measured at fair value and are analysed by valuation techniques. The classification of instruments
is based on the lowest level input that is significant to the fair value measurement in its entirety.
A description of the nature of the techniques used to calculate valuations based on observable inputs
and valuations based on unobservable inputs is set out in the table below:
30 June
2013
Valuations
with Valuations Valuations
reference to based on based on
observable observable unobservable
prices inputs inputs
Level 1 Level 2 Level 3
Recurring fair value measurements Rm Rm Rm
Available-for-sale financial assets 43 106 39 50
Cash, cash balances and balances with central banks 787 - -
Statutory liquid asset portfolio 40 177 - -
Investment securities 2 142 39 50
Available-for-sale financial assets in a
fair value hedging relationship
Statutory liquid asset portfolio 26 722 - -
Financial assets designated at fair value
through profit or loss 13 110 28 068 13 430
Cash, cash balances and balances with central banks 2 637 498 -
Statutory liquid asset portfolio - 3 -
Loans and advances to banks - 13 786 -
Other assets - 9 16
Loans and advances to customers - 6 700 6 830
Investment securities 10 473 7 072 6 584
Financial assets held for trading 25 285 57 547 991
Derivative assets - 47 879 105
Trading portfolio assets 25 285 6 077 886
Hedging portfolio assets - 3 567 -
Investment securities - 24 -
Total financial assets 108 223 85 654 14 471
Financial liabilities designated at fair value
through profit or loss - 46 272 6 742
Deposits from banks - 10 352 -
Other liabilities - 23 -
Deposits due to customers - 14 307 6 707
Debt securities in issue - 2 329 35
Liabilities under investment contracts - 19 261 -
Financial liabilities held for trading 6 959 51 767 328
Derivative liabilities 13 49 262 328
Trading portfolio liabilities 6 946 - -
Hedging portfolio liabilities - 2 505 -
Total financial liabilities 6 959 98 039 7 070
21.1.1 Fair value measurement and valuation processes
The Group has an established control framework with respect to the measurement of fair values. The framework
includes a valuation committee and an Independent Valuation Control (IVC) team, where IVC are independent of
front office management.
The valuation committee is responsible for overseeing the valuation control process and will therefore consider
the appropriateness of valuation techniques and inputs for fair value measurement.
IVC independently verifies the results of trading and investment operations and all significant fair value
measurements. IVC sources independent data from various external sources as well as internal risk areas when
performing independent price verification for all fair value positions. IVC assesses and documents the inputs
obtained from independent sources to measure fair value to support conclusions that such valuations are in
accordance with IFRS and internal valuation policies.
The valuation committee which comprises representatives from senior management will formally approve valuation
policies and any changes to valuation methodologies. Significant valuation issues are reported to the Group Audit
and Compliance Committee.
21.1.2 Significant transfers between the levels
During the reporting period debt securities in issue to the value of R225 million were transfered from level 3
to level 2, refer to 21.4, as the maturity period of the underlying securities is less than five years and as
such all of the unobservable inputs have now become observable. Transfers between the levels of this nature are
only effected dependent on the observability of the unobservable inputs.
21.2 Valuations based on observable inputs
Valuations based on observable inputs include:
Level 1
Financial instruments valued with reference to unadjusted quoted prices for identical assets or liabilities in
active markets where the quoted price is readily available and the price represents actual and regularly occurring
market transactions on an
arms length basis.
An active market is one in which transactions occur with sufficient volume and frequency to provide pricing
information on an ongoing basis.
This category includes highly liquid government and other bonds, active listed equities, exchange-traded commodities
and exchange-traded derivatives.
Level 2
Financial instruments valued using inputs other than quoted prices as described above for level 1 but which are
- observable for the asset or liability, either directly or indirectly, such as:
- quoted price for similar assets or liabilities in an active market;
- quoted price for identical or similar assets or liabilities in inactive markets;
- valuation model using observable inputs; and
- valuation model using inputs derived from/corroborated by observable market data.
This category includes certain African government bills, private equity investments, loans and advances, investments
in debt instruments, commodity derivatives, credit derivatives, equity derivatives, foreign exchange derivatives,
interest rate derivatives, repurchase agreements, deposits and debt securities.
21.3 Valuations based on unobservable inputs
Valuations based on unobservable inputs include:
Level 3
Financial instruments valued using inputs that are not based on observable market data (unobservable data) such as
an entitys own assumptions about assumptions of market participants in pricing the asset or liability.
This category includes certain private equity investments, loans and advances, investments in debt instruments, credit
derivatives, equity derivatives, foreign exchange derivatives, interest rate derivatives, repurchase agreements, deposits
and debt securities.
In determining the value of level 3 financial instruments, the following are the principal inputs that can require judgement:
(i) Volatility
Volatility is a key input in the valuation of options across all asset classes. For some asset classes, volatility is
unobservable.
(ii) Basis risk
Basis risk is a key input in the valuation of cross currency swaps. For some currency pairs or maturities, basis risk is
unobservable.
(iii) Credit spreads
Credit spreads are key inputs in the valuation of credit default swaps, credit linked notes and debt instruments or liabilities. For
some issuers or tenors, credit spreads are unobservable.
(iv) Yield curves
Yield curves are key inputs in the valuation of certain debt instruments. For some debt instruments, yield curves are unobservable.
(v) Future earnings and marketability discounts
Future earnings and marketability discounts are key inputs in the valuation of certain private equity investments. Forecast earnings
and marketability discounts are unobservable for some investments.
(vi) Comparator multiples
Comparator multiples and point of difference applied to chosen multiples are key inputs in the valuation of certain private equity
investments. Price earnings multiples and point of difference applied to chosen multiples are unobservable for some investments.
(vii) Discount rates
Discount rates are key inputs in the valuation of certain private equity investments. Discount rates are unobservable for some
investments.
Judgemental inputs on valuation of principal instruments
The following summary sets out the principal instruments whose valuation may involve judgemental inputs:
Debt securities and treasury as well as other eligible bills
These instruments are valued, based on quoted market prices from an exchange, dealer, broker, industry group or pricing service, where
available. Where unavailable, fair value is determined by reference to quoted market prices for similar instruments or, in the case of
certain mortgage-backed securities, valuation techniques using inputs derived from observable market data and, where relevant,
assumptions in respect of unobservable inputs.
Equity instruments
Equity instruments are valued, based on quoted market prices from an exchange, dealer, broker, industry group or pricing service, where
available. Where unavailable, fair value is determined by reference to quoted market prices for similar instruments or by using valuation
techniques using inputs derived from observable market data, and, where relevant, assumptions in respect of unobservable inputs.
Also included in equity instruments are non-public investments, which include investments in venture capital organisations. The fair value
of these investments is determined using appropriate valuation methodologies which, dependent on the nature of the investment, may include
discounted cash flow analysis, enterprise value comparisons with similar companies and price:earnings comparisons. For each investment, the
relevant methodology is applied consistently over time.
Derivatives
Derivative contracts can be exchange-traded or traded OTC. OTC derivative contracts include forward, swap and option contracts related to
interest rates, bonds, foreign currencies, credit spreads, equity prices and commodity prices or indices on these instruments. Fair values
of derivatives are obtained from quoted market prices, dealer price quotations, discounted cash flow and option pricing models.
Loans and advances
Loans and advances are valued using discounted cash flow models, applying either market rates, where applicable, or, where the counterparty
is a bank, rates currently offered by other financial institutions for placings with similar characteristics.
Deposits, debt securities in issue and borrowed funds or issuances with similar characteristics. Where these instruments include embedded
derivatives, the embedded derivative component is valued using the methodology for derivatives as detailed above.
Deposits, debt securities in issue and borrowed funds
Deposits, debt securities in issue and borrowed funds are valued using discounted cash flow models, applying rates currently offered for
issuances with similar characteristics. Where these instruments include embedded derivatives, the embedded derivative component is valued
using the methodology for derivatives as detailed above.
21.4 Movements on financial instruments subsequently measured at fair value using valuations based on unobservable inputs (Level 3)
A reconciliation of the opening balances to closing balances for all movements on level 3 financial instruments per IAS 39 Financial
Instruments: Recognition and Measurement (IAS 39) classification is set out below:
30 June
2013
Financial
assets Total
Available- designated financial
for-sale at fair value Financial assets
financial through assets held excluding
assets profit or loss for trading derivatives
Financial assets Rm Rm Rm Rm
Opening balance at the beginning of the reporting period 42 12 837 873 13 752
Movement in other comprehensive income - 116 - 116
Net interest income - 487 - 487
Gains and losses from banking and trading activities - (122) 13 (109)
Gains and losses from investment activities - (65) - (65)
Purchases - 250 - 250
Sales (1) (3) - (4)
Settlements - (70) - (70)
Transferred to assets/liabilities 9 - - 9
Closing balance at the end of the reporting period 50 13 430 886 14 366
30 June
2013
Financial
liabilities Total
designated financial
at fair value Financial liabilities
through liabilities including
profit held for net
or loss trading derivatives
Financial liabilities Rm Rm Rm
Opening balance at the beginning of the reporting period 7 859 (5) 7 854
Net interest income - 26 26
Gains and losses from banking and trading activities (956) 170 (786)
Purchases - (1) (1)
Issues 65 - 65
Transferred to liabilities - 33 33
Movement out of Level 3 (225) - (225)
Closing balance at the end of the reporting period 6 743 223 6 966
21.5 Unrealised gains and losses on level 3 positions
The total unrealised gains and losses for the reporting period on level 3 positions held at the reporting date per
IAS 39 classification are set out below:
30 June
2013
Financial Financial
assets liabilities Financial
designated designated held for
at fair at fair value trading
value through liabilities
through profit held for
profit or loss or loss trading
Rm Rm Rm
Net interest income 55 - -
Gains and losses from banking and trading activities 210 (690) 24
265 (690) 24
Note
(1) Refer to note 21.3 for details of unobservable parameters.
21.6 Sensitivity analysis of valuations using unobservable inputs
As part of the Groups risk management processes, stress tests are applied on the significant unobservable parameters to generate a range
of potentially possible alternative valuations. The financial instruments that most impact this sensitivity analysis are those within the
more illiquid and/or structured portfolios. The stresses are applied independently and do not take account of any cross correlation between
separate asset classes that would reduce the overall effect on the valuations.
A significant parameter has been deemed to be one which may result in a change in the fair value asset or liability of more than 10%. This
is demonstrated by the following sensitivity analysis, which includes a reasonable range of possible outcomes:
30 June
2013
Potential effect Potential effect
recorded in profit recorded directly
and loss in equity
Significant
unobservable Un- Un-
parameters(1) Favourable favourable Favourable favourable
Rm Rm Rm Rm
Loans and advances i, iii, iv, vii 60 88 - -
Net derivatives i, ii, iv, vii 325 284 - -
Structured notes and deposits vii 500 500 - -
885 872 - -
Instrument Positive/(negative)
variance in
Parameter parameters
Credit derivatives Credit spreads 100/(100) bps
Equity derivatives Volatilities 10/(10)%
Foreign currency options Volatilities 10/(10)%
Foreign currency swaps and foreign interest rate products Basis risk and yield curve 100/(100) bps
Loans and advances designated at fair value through profit or loss Credit spreads 100/(100) bps
Private equity Future earnings and marketability discount 15/(15)%
Comparator multiples
Discount rates
Structured notes and deposits designated at fair value through profit or loss Yield curve 100/(100) bps
Note
1 Includes derivative assets.
Condensed notes to the consolidated financial results
as at
21. Fair value hierarchy disclosures (continued)
21.7 Measurement of financial instruments at Level 2
The table below sets out information about the valuation techniques used at the
end of the reporting period in measuring financial instruments categorised as
level 2 in the fair value hierarchy.
Category of asset/liability
Available-for-sale financial assets
Investment securities
Types of financial instruments included
Equity investments, bonds and index linked bonds
Valuation echniques applied
Discounted cash flow
Significant observable inputs
The underlying price of the market traded instrument
Category of asset/liability
Financial assets designated at fair value through profit or loss
Statutory liquid asset portfolio
Types of financial instruments included
Reverse repurchase agreements
Valuation techniques applied
Discounted cash flow
Significant observable inputs
Observable market related interest rates related to the underlying instruments
Category of asset/liability
Financial assets designated at fair value through profit or loss
Loans and advances to banks
Types of financial instruments included
Loans and advances and repurchase agreements
Valuation techniques applied
Discounted cash flow
Significant observable inputs
Interest rate curves, money market curves
Category of asset/liability
Financial assets designated at fair value through profit or loss
Other assets
Types of financial instruments included
Current assets relating to investment contracts as well as sundry
receivables designated at fair value
Valuation techniques applied
Listed equity - is valued at the last market bid price. Unlisted
equity is valued at par. Other items are valued utilising discounted cash flow models.
Significant observable inputs
The underlying price of the market traded instrument
Category of asset/liability
Financial assets designated at fair value through profit or loss
Loans and advances to customers
Types of financial instruments included
Loans and advances and repurchase agreements
Valuation techniques applied
Discounted cash flow
Significant observable inputs
Interest rate curves, money market curves
Category of asset/liability
Financial assets designated at fair value through profit or loss
Investment securities
Types of financial instruments included
Listed and unlisted equity and debt instruments, listed and unlisted preference shares,
bonds and debt instruments, linked insurance policies with other insurance companies, and
structured deposits
Valuation techniques applied
Listed equity - is valued at the last market bid price. Unlisted equity is valued at par. Other
items are valued utilising discounted cash flow models.
Significant observable inputs
The underlying price of the market traded instrument
Category of asset/liability Financial assets held for trading
Trading and hedging portfolio assets1
Types of financial instruments included
Swaps, index linked swaps, exchange traded notes, exchange traded funds, options, futures, currency swaps,
credit default swaps, contracts for difference, variance swaps, forward rate agreements, Caps & Floors,
non-derivative money market assets, listed and unlisted equity and debt instruments
Valuation techniques applied
Discounted cash flows, net asset value models, asian arithmetic fix, price curve models, Black-Scholes
models, hazard rate models,
underlying spot models, synthetic underlying forward models, digital Black-Scholes skew models, forward start
Black-Scholes models, PDE Local Volatility - Continuous Barrier, PDE Local Volatility -
Discrete Trinomial Barrier, PDE Local Volatility - Window Trinomial Barrier, and the Black-Derman-Toy model.
Significant observable inputs
- Swaps, index linked swaps, forward rate agreements: interest rate curves;
- Non-derivative money market assets: interest rate curves, money market curves;
- Currency swaps: interest rate curves, basis curves;
- Exchange traded funds, exchange traded notes, futures, contracts for difference, listed and unlisted equity and
debt instruments: Listed price on the exchange or interest rate curves and the
underlying price of the market traded instrument;
- Options, variance swaps, Caps&Floors: interest rates, volatility, underlying prices (if applicable eg.
stock of FX rates);
- Credit default swaps: interest rates, credit spreads
Condensed notes to the consolidated financial results
as at
21. Fair value hierarchy disclosures (continued)
21.7 Measurement of financial instruments at Level 2 (continued)
Category of asset/liability
Financial liabilities designated at fair value through profit or loss
Deposits from banks
Types of financial instruments included
Fixed deposits, foreign currency deposits and repurchase agreements
Valuation techniques applied
Discounted cash flow
Significant observable inputs
Interest rate curves and money market curves
Category of asset/liability
Financial liabilities designated at fair value through profit or loss
Deposits due to customers
Types of financial instruments included
Bills, repurchase agreements with non-banks, BuySellBack agreements,
floating rate notes, deposits, certificates of
deposit, commercial paper and other money market instruments
Valuation techniques applied
Discounted cash flow
Significant observable inputs
Interest rate curves and money market curves
Category of asset/liability
Financial liabilities designated at fair value through profit or loss
Debt securities in issue
Types of financial instruments included
Bonds and index linked bonds
Valuation techniques applied
Discounted cash flow
Significant observable inputs
The underlying price of the market traded instrument and interest rate curves
Category of asset/liability
Financial liabilities designated at fair value through profit or loss
Liabilities under investment contracts
Types of financial instruments included
Various linked assets such as promissory notes, structured deposits,
collective investment schemes etc.
Valuation techniques applied
Discounted cash flow
Significant observable inputs
The underlying price of the market traded instrument and interest rate curves
Category of asset/liability
Financial liabilities designated at fair value through profit or loss
Other liabiliites
Types of financial instruments included
Current liabilities under investment contracts as well as sundry payables
designated at fair value through profit and loss
Valuation techniques applied
Discounted cash flow
Significant observable inputs
The underlying price of the market traded instrument, as well as interest rate
curves and money market curves
Note
(1) Includes derivative liabilities.
21. Fair value hierarchy disclosures (continued)
21.8 Measurement of financial instruments at Level 3
The table below sets out information about significant unobservable inputs used
at the end of the reporting period in measuring financial instruments categorised
as Level 3 in the fair value hierarchy.
Category of asset/liability
Available-for-sale financial assets
Investment securities
Types of financial instruments included
Unlisted equity investments
Valuation techniques applied
Dividend yield
Significant unobservable inputs
Growth rates Dividend cover ratio
Range of estimates utilised for the unobservable inputs
8% - 12%
4,0 - 4,4
Fair value measurement sensitivity to the unobservable inputs
Significant increases in any of the unobservable inputs in isolation would
result in higher fair values.
Category of asset/liability
Financial assets designated at fair value through profit or loss
Loans and advances to customers
Types of financial instruments included
Wholesale overdrafts, preference shares, foreign currency loans, commercial
property financing loans.
Valuation techniques applied
Discounted cash flow, and dividend yield models
Significant unobservable inputs
Credit ratings
Range of estimates utilised for the unobservable inputs
Credit spreads vary between 1.35 and 7,5%
Fair value measurement sensitivity to the unobservable inputs
The sensitivity of the fair value measurement is dependent on the unobservable
inputs. Significant changes to the unobservable inputs in isolation will have
either a positive or negative impact on the fair value.
Category of asset/liability
Financial assets designated at fair value through profit or loss
Investment securities
Types of financial instruments included
Listed and unlisted equity and debt instruments.
Valuation techniques applied
Discounted cash flows, third party valuations, Earnings before interest, tax,
depreciation and amortisation (EBITDA) multiples, income capitalisation
valuations, net asset value models
Significant unobservable inputs
Weighted average cost of capital, EBITDA multiples, liquidity discounts,
minority discounts, capitalisation rates
Range of estimates utilised for the unobservable inputs
Discount rates between 9,7% and 18%, multiples between 5,5 and 6,1
Fair value measurement sensitivity to the unobservable inputs
The sensitivity of the fair value measurement is dependent on the unobservable
inputs. Significant changes to the unobservable inputs in isolation will have
either a positive or negative impact on the fair value.
Category of asset/liability
Financial assets held for trading
Trading and hedging portfolio assets1
Types of financial instruments included
Swaps, index linked swaps, options, currency swaps, credit default swaps, variance swaps
Valuation techniques applied
Discounted cash flows, Asian arithmetic fix, price curve models, Black-Scholes models,
hazard rate models, digital black scholes skew models, forward start Black- scholes
models and the Black-Derman-Toy model
Significant unobservable inputs
Various unobservable inputs are utilised dependent on the model and instrument valued,
these include ZAR-SWAP tenor spread curves, ZAR-REAL less than one year, single stock
option volatilities, South African currency curves after two years, Credit spreads,
quanto ratios, recovery rates, underlying equity volatility for certain stocks
Range of estimates utilised for the unobservable inputs
ZAR-SWAP tenor spread curves: range of spreads over ZAR-SWAP - 0,49% to 0,1%
ZAR-REAL less than 1 year: 0 to 1,8%
Single stock option volatilities: 19.6% to 58.9%
Equity option volatilities: 14.5% to 43.5%
Some African currency basis curves after 2 years: -3.2% to 0.9%
Credit spreads (includes untested curves that are subject to other controls): 0,1% to 6%
Quanto ratios, recovery rates
Fair value measurement sensitivity to the unobservable inputs
The sensitivity of the fair value measurement is dependent on the unobservable inputs.
Significant changes to the unobservable inputs in isolation will have either a positive
or negative impact on the fair value.
Note
(1) Includes derivative liabilities.
21. Fair value hierarchy disclosures (continued)
21.8 Measurement of financial instruments at Level 3
Category of asset/liability
Financial liabilities designated at fair value through profit or loss
Deposits due to customers
Types of financial instruments included
Bills, repurchase agreements with
non-banks, BuySellBack agreements, floating rate notes, deposits,
certificates of deposit, commercial paper and other money market
instruments
Valuation techniques applied
Discounted cash flow
Significant unobservable inputs
ZAR MM funding spread greater than 5 years
Range of estimates utilised for the unobservable inputs
0,85% to 1,2%
Fair value measurement sensitivity to the unobservable inputs
The sensitivity of the fair value measurement is dependent on the
unobservable inputs. Significant changes to the unobservable inputs
in isolation will have either a positive or negative impact on the fair value.
Category of asset/liability
Financial liabilities designated at fair value through profit or loss
Debt securities in issue
Types of financial instruments included
Bonds, index linked bonds and Private equity debt
Valuation techniques applied
Discounted cash flow
Significant unobservable inputs
Credit spread
Range of estimates utilised for the unobservable inputs
10 to 20 basis points
Fair value measurement sensitivity to the unobservable inputs
The sensitivity of the fair value measurement is dependent on the unobservable
inputs. Significant changes to the unobservable inputs in isolation will have
either a positive or negative impact on the fair value.
Category of asset/liability
Financial liabilities held for trading
Trading and hedging portfolio liabilities1
Types of financial instruments included
Swaps, index linked swaps, options, futures, currency swaps, credit default swaps,
variance swaps, forward rate agreements, Caps & Floors
Valuation techniques applied
Discounted cash flows, asian arithmetic fix, Black-Scholes models, hazard rate
models, forward start Black-Scholes models, and the Black-Derman-Toy model
Significant unobservable inputs
ZAR-REAL less than 1 year, ZAR-SWAP tenor spread curves, some single stock option
volatilities, South African currency curves after 2 years, Credit spreads, quanto
ratios, recovery rates, underlying equity volatilities for some stocks are unobservable
Range of estimates utilised for the unobservable inputs
ZAR-SWAP tenor spread curves: Range of spreads over ZAR-SWAP - 0,49% to 0,1%
ZAR-REAL less than 1 year: 0 to 1,8%
Single stock option volatilities: 19,6% to 58,9%
Equity pption volatilities: 14,5% to 43,5%
Some African currency basis curves after 2 years: -3,2% to 0.9%
Credit spreads (includes untested curves that are subject to other controls): 0,1% to 6%
Quanto ratios, recovery rates
Fair value measurement sensitivity to the unobservable inputs
The sensitivity of the fair value measurement is dependent on the unobservable inputs.
Significant changes to the unobservable inputs in isolation will have either a positive or
negative impact on the fair value.
21.9 Unrecognised gains/(losses) as a result of the use of valuation models using unobservable inputs
The amount that has yet to be recognised in the statement of comprehensive income that relates to the
difference between the transaction price (the fair value at initial recognition) and the amount that
would have arisen had valuation models using unobservable inputs been used on initial recognition,
less amounts subsequently recognised, is as follows:
30 June
2013
Rm
Opening balance at the beginning of the reporting period (93)
New transactions 11
Amounts recognised in the profit and loss component of the
statement of comprehensive income during the reporting period (7)
Net losses at the end of the reporting period (89)
Note
(1) Includes derivative assets.
models, and the Black-Derman-
ZAR-REAL less than 1 year: 0 to 1,8%
Toy model
Single stock option volatilities: 19,6% to 58,9%
21.9 Unrecognised gains/(losses) as a result of the use of valuation models using unobservable inputs
The amount that has yet to be recognised in the statement of comprehensive income that relates to the
difference between the transaction price (the fair value at
initial recognition) and the amount that would have arisen had valuation models using unobservable
inputs been used on initial recognition, less amounts subsequently
recognised, is as follows:
30 June
2013
Rm
Opening balance at the beginning of the reporting period (93)
New transactions 11
Amounts recognised in the profit and loss component of
the statement of comprehensive income during the reporting period (7)
Net losses at the end of the reporting period (89)
Note
1 Includes derivative assets.
23. Reporting changes
Accounting policy changes due to new IFRS
IFRS 10 and IAS 19R became effective for annual periods beginning on or after 1 January 2013 and
result in restatement of the Groups results for the reporting period ended 31 December 2011 and
2012, as well as the interim reporting period ended 30 June 2012. The 2012 restatements reflect the
application of both IFRS 10 and IAS 19R. No restatement has been effected for IFRS 10 in the 2011
reporting period, in line with the transitional provisions of the standard.
IFRS 10
IFRS 10 replaces the requirements of IAS 27 Consolidated and Separate Financial Statements and SIC
12 Consolidation - Special Purpose Entities. The standard introduces new criteria to determine
whether entities in which the Group has interests should be consolidated. Implementation of this new
standard results in the Group consolidating a small number of entities that were previously not
consolidated and deconsolidating a small number of entities that were previously consolidated.
IAS 19R
IAS 19R amends the requirements of IAS 19 Employee Benefits. The standard introduces a number of
changes relating to defined benefit plans, including the elimination of the corridor approach and
the removal of the recognition of expected returns on plan assets within profit or loss in favour of
interest income on plan assets being recognised in profit or loss at the rate used to discount the
pension fund obligation. The difference between net interest income recognised in profit or loss and
expected return on plan assets is recognised in other comprehensive income. Furthermore, the
revised standard stipulates that the interest cost on reserves owing to members of the plan is to be
included in profit or loss. The revised standard also introduces enhanced disclosures relating to defined
benefit plans, clarifies the accounting for termination benefits and modifies the classification of
items between short-term and long-term employee benefits.
For the Absa Group, the main impacts of implementing IAS 19R were the removal of the recognition
of expected returns on plan assets within profit or loss in favour of interest income on plan assets
being recognised in profit or loss at the rate used to discount the pension fund obligation and the
recognition of interest cost on reserves owing to members in profit or loss. In addition some
benefits previously classified as short-term benefits are reclassified as long-term benefits.
Collection costs
From 1 January 2013 the Group elected to change its accounting policy for certain collection
costs to better align with Barclays PLC internal accounting policies.
Costs incurred in the follow up and collection of outstanding and overdue balances, previously
recognised as part of operating expenses and fee expenses, within net fee and commission income, have
been reclassified to recoveries within the impairment losses on loans and advances line in the
statement of comprehensive income.
To ensure comparability, the comparative reporting periods have been restated.
For more information on the financial reporting changes that have impacted the financial results
of the comparative reporting periods of the Group, refer to pages 120 to 140 of the Groups interim
financial results booklet.
Impact of accounting policy changes on the Group's results
Condensed consolidated statement of comprehensive income for the reporting period ended
30 June 2012
As Change in
previously accounting
reported policy IFRS 10 IAS 19R Restated
Rm Rm Rm Rm Rm
Net interest income 11 909 - (56) - 11 853
Interest and similar income 25 807 - (82) - 25 725
Interest expense and similar charges (13 898) - 26 - (13 872)
Impairment losses on loans and advances (4 020) (87) - - (4 107)
Net interest income after impairment losses
on loans and advances 7 889 (87) (56) - 7 746
Non-interest income 11 174 47 47 - 11 268
Net fee and commission income 7 542 47 (8) - 7 581
Fee and commission income 8 785 - - - 8 785
Fee and commission expense (1 243) 47 (8) - (1 204)
Net insurance premium income 2 757 - - - 2 757
Net insurance claims and benefits paid (1 360) - - - (1 360)
Changes in investment and insurance contract liabilities (618) - (257) - (875)
Gains and losses from banking and trading activities 1 868 - 49 - 1 917
Gains and losses from investment activities 641 - 267 - 908
Other operating income 344 - (4) - 340
Operating income before operating expenditure 19 063 (40) (9) - 19 014
Operating expenditure (13 011) 40 (2) (15) (12 988)
Operating expenses (12 666) 40 (2) (15) (12 643)
Other impairments (11) - - - (11)
Indirect taxation (334) - - - (334)
Share of post-tax results of associates and joint ventures 35 - - - 35
Operating profit before income tax 6 087 - (11) (15) 6 061
Taxation expense (1 767) - 3 4 (1 760)
Profit for the reporting period 4 320 - (8) (11) 4 301
Profit attributable to:
Ordinary equity holders 4 189 - (8) (11) 4 170
Non-controlling interest - ordinary shares (9) - - - (9)
Non-controlling interest - preference shares 140 - - - 140
Profit for the reporting period 4 320 - (8) (11) 4 301
Profit for the reporting period 4 320 - (8) (11) 4 301
Other comprehensive income
Items that will not be reclassified to the profit and
loss component of the statement of comprehensive income
Movement in retirement benefit fund assets and liabilities 27 - - (39) (12)
Increase/(decrease) in retirement benefit surplus 46 - - (63) (17)
Increase in retirement benefit deficit - - - - -
Deferred tax (19) - - 24 5
Total items that will not be reclassified to the profit and
loss component of the statement of comprehensive income 27 - - (39) (12)
Items that are or may be reclassified subsequently
to the profit and loss component of the statement of
comprehensive income
Foreign exchange differences on translation of foreign operation 32 - - - 32
Movement in cash flow hedging reserve 286 - - - 286
Fair value gains arising during the reporting period 1 409 - - - 1 409
Amount removed from other comprehensive income and
recognised in the profit and loss component of the statement
of comprehensive income (1 012) - - - (1 012)
Deferred tax (111) - - - (111)
Movement in available-for-sale reserve 370 - - - 370
Fair value gains arising during the reporting period 510 - - - 510
Amortisation of government bonds - release to the profit and
loss component of the statement of comprehensive income 5 - - - 5
Deferred tax (145) - - - (145)
Total items that are or may be reclassified subsequently 688 - - - 688
to the profit and loss component of the statement of
comprehensive income
Total comprehensive income for the reporting period 5 035 - (8) (50) 4 977
Total comprehensive income attributable to:
Ordinary equity holders 4 909 - (8) (50) 4 851
Non-controlling interest - ordinary shares (14) - - - (14)
Non-controlling interest - preference shares 140 - - - 140
5 035 - (8) (50) 4 977
Condensed consolidated statement of financial position as at 30 June 2012
As Change in
previously accounting
reported policy IFRS 10 IAS 19R Restated
Rm Rm Rm Rm Rm
Assets
Cash, cash balances and balances with central banks 25 620 - 412 - 26 032
Statutory liquid asset portfolio 60 061 - - - 60 061
Loans and advances to banks 58 044 - - - 58 044
Trading portfolio assets 96 768 - 99 - 96 867
Hedging portfolio assets 4 868 - - - 4 868
Other assets 20 112 - 34 (216) 19 930
Current tax assets 703 - (1) - 702
Non-current assets held for sale 6 - - - 6
Loans and advances to customers 506 661 - (931) - 505 730
Reinsurance assets 1 010 - - - 1 010
Investment securities 21 530 - 4 444 - 25 974
Investments in associates and joint ventures 373 - - - 373
Investment properties 2 699 - - - 2 699
Property and equipment 7 781 - - - 7 781
Goodwill and intangible assets 2 115 - - - 2 115
Deferred tax assets 455 - - - 455
Total assets 808 806 - 4 057 (216) 812 647
Liabilities
Deposits from banks 25 827 - 90 - 25 917
Trading portfolio liabilities 60 446 - - - 60 446
Hedging portfolio liabilities 3 251 - - - 3 251
Other liabilities 30 071 - 68 - 30 139
Provisions 1 136 - - - 1 136
Current tax liabilities 247 - (1) - 246
Deposits due to customers 457 880 - 464 - 458 344
Debt securities in issue 125 127 - (1 341) - 123 786
Liabilities under investment contracts 15 427 - 4 792 - 20 219
Policyholder liabilities under insurance contracts 3 239 - - - 3 239
Borrowed funds 14 268 - - - 14 268
Deferred tax liabilities 1 619 - (3) (67) 1 549
Total liabilities 738 538 - 4 069 (67) 742 540
Equity
Capital and reserves
Attributable to ordinary equity holders:
Share capital 1 434 - - - 1 434
Share premium 4 572 - - - 4 572
Retained earnings 55 502 - (12) (149) 55 341
Other reserves 2 725 - - - 2 725
64 233 - (12) (149) 64 072
Non-controlling interest - ordinary shares 1 391 - - - 1 391
Non-controlling interest - preference shares 4 644 - - - 4 644
Total equity 70 268 - (12) (149) 70 107
Total liabilities and equity 808 806 - 4 057 (216) 812 647
Condensed consolidated statement of comprehensive income for the reporting period ended
31 December 2012
As Change in
previously accounting
reported policy IFRS 10 IAS 19R Restated
Rm Rm Rm Rm Rm
Net interest income 24 111 - (119) - 23 992
Interest and similar income 50 766 - (167) - 50 599
Interest expense and similar charges (26 655) - 48 - (26 607)
Impairment losses on loans and advances (8 290) (188) - - (8 478)
Net interest income after impairment
losses on loans and advances 15 821 (188) (119) - 15 514
Non-interest income 22 741 104 119 - 22 964
Net fee and commission income 15 435 104 (32) - 15 507
Fee and commission income 17 936 - - - 17 936
Fee and commission expense (2 501) 104 (32) - (2 429)
Net insurance premium income 5 618 - - - 5 618
Net insurance claims and benefits paid (2 719) - - - (2 719)
Changes in investment and insurance
contract liabilities (980) - (727) - (1 707)
Gains and losses from banking and trading activities 3 670 - 108 - 3 778
Gains and losses from investment activities 963 - 773 - 1 736
Other operating income 754 - (3) - 751
Operating income before operating expenditure 38 562 (84) - - 38 478
Operating expenditure (26 693) 84 (10) (81) (26 700)
Operating expenses (25 874) 84 (10) (81) (25 881)
Other impairments (113) - - - (113)
Indirect taxation (706) - - - (706)
Share of post-tax results of associates and
joint ventures 249 - - - 249
Operating profit before income tax 12 118 - (10) (81) 12 027
Taxation expense (3 377) - - 22 (3 355)
Profit for the reporting period 8 741 - (10) (59) 8 672
Profit attributable to:
Ordinary equity holders 8 393 - (10) (59) 8 324
Non-controlling interest - ordinary shares 53 - - - 53
Non-controlling interest - preference shares 295 - - - 295
8 741 - (10) (59) 8 672
Profit for the reporting period 8 741 - (10) (59) 8 672
Other comprehensive income
Items that will not be reclassified to the profit and
loss component of the statement of comprehensive income
Movement in retirement benefit fund assets and liabilities (242) - - 158 (84)
Decrease in retirement benefit surplus (279) - - 218 (61)
Increase in retirement benefit deficit (59) - - - (59)
Deferred tax 96 - - (60) 36
Total items that will not be reclassified to the profit and
loss component of the statement of comprehensive income (242) - - 158 (84)
Items that are or may be reclassified subsequently
to the profit and loss component of the statement of
comprehensive income
Foreign exchange differences on translation of foreign operation 140 - - - 140
Movement in cash flow hedging reserve 405 - - - 405
Fair value gains arising during the reporting period 2 650 - - - 2 650
Amount removed from other comprehensive income and recognised
in the profit and
loss component of the statement of comprehensive income (2 088) - - - (2 088)
Deferred tax (157) - - - (157)
Movement in available-for-sale reserve 1 109 - - - 1 109
Fair value gains arising during the reporting period 1 532 - - - 1 532
Amortisation of government bonds - release to the profit and
loss component of the statement of comprehensive income 10 - - - 10
Deferred tax (433) - - - (433)
Total items that are or may be reclassified subsequently 1 654 - - - 1654
to the profit and loss component of the statement
of comprehensive income
Total comprehensive income for the reporting period 10 153 - (10) 99 10 242
Total comprehensive income attributable to:
Ordinary equity holders 9 812 - (10) 99 9 901
Non-controlling interest - ordinary shares 46 - - - 46
Non-controlling interest - preference shares 295 - - - 295
10 153 - (10) 99 10 242
Condensed consolidated statement of financial position as at 31 December 2012
As Change in
previously accounting
reported policy IFRS 10 IAS 19R Restated
Rm Rm Rm Rm Rm
Assets
Cash, cash balances and balances with central banks 26 221 - 326 - 26 547
Statutory liquid asset portfolio 63 020 - - - 63 020
Loans and advances to banks 44 649 - 2 - 44 651
Trading portfolio assets 87 203 - 114 - 87 317
Hedging portfolio assets 5 439 - - - 5 439
Other assets 14 189 - - - 14 189
Current tax assets 304 - (1) - 303
Non-current assets held for sale 4 052 - - - 4 052
Loans and advances to customers 528 191 - (863) - 527 328
Reinsurance assets 1 003 - - - 1 003
Investment securities 20 555 - 5 069 - 25 624
Investments in associates and joint ventures 569 - - - 569
Investment properties 1 220 - - - 1 220
Property and equipment 8 397 - - - 8 397
Goodwill and intangible assets 2 561 - - - 2 561
Deferred tax assets 366 - - - 366
Total assets 807 939 - 4 647 - 812 586
Liabilities
Deposits from banks 36 035 - 149 - 36 184
Trading portfolio liabilities 51 684 - - - 51 684
Hedging portfolio liabilities 3 855 - - - 3 855
Other liabilities 18 215 - 197 - 18 412
Provisions 1 681 - - - 1 681
Current tax liabilities 59 - (1) - 58
Non-current liabilities held for sale 1 480 - - - 1 480
Deposits due to customers 477 427 - 426 - 477 853
Debt securities in issue 108 044 - (1 265) - 106 779
Liabilities under investment contracts 13 609 - 5 159 - 18 768
Policyholder liabilities under insurance contracts 3 550 - - - 3 550
Borrowed funds 17 907 - - - 17 907
Deferred tax liabilities 1 599 - (4) - 1 595
Total liabilities 735 145 - 4 661 - 739 806
Equity
Capital and reserves
Attributable to ordinary equity holders:
Share capital 1 435 - - - 1 435
Share premium 4 604 - - - 4 604
Retained earnings 56 903 - (14) - 56 889
Other reserves 3 941 - - - 3 941
66 883 - (14) - 66 869
Non-controlling interest - ordinary shares 1 267 - - - 1 267
Non-controlling interest - preference shares 4 644 - - - 4 644
Total equity 72 794 - (14) - 72 780
Total liabilities and equity 807 939 - 4 647 - 812 586
Profit and dividend announcement
30 June 2013
Salient features
-Diluted headline earnings per share (diluted HEPS) increased 8% to 649,0 cents.
-Pre-provision profit increased 3% to R10,8 billion.
-Declared an 11% higher ordinary dividend per share (DPS) of 350 cents.
-Declared a special DPS of 708 cents.
-Revenue grew 3% to R23,8 billion.
-Net interest margin on average interest-bearing assets increased to 3,91% from 3,88%.
-Non-interest income increased 1% to R11,3 billion and accounted for 48% of total revenue.
-Contained operating expenses growth to 4%, increasing our cost-to-income ratio to 54,9% from 54,7%.
-Loans and advances to customers grew 7% to R539,3 billion, while deposits due to customers increased 7% to R490,4 billion.
-Credit impairments decreased 14% to R3,5 billion, resulting in a 1,35% credit loss ratio from 1,62%.
-RoE increased to 14,0% from 13,7%.
-RoRWA increased to 2,10% and RoA increased to 1,15% from 2,07% and 1,10% respectively.
-NAV per share grew 6% to 9 431 cents.
-Absa Groups Common Equity Tier 1 capital adequacy ratio was 12,5%, well above regulatory requirements and our Board targets.
Overview of results
Absa Groups headline earnings increased 8% to R4 663 million from R4 313 million, and
attributable profit grew 13% to R4 701 million. Diluted HEPS also increased 8% to 649,0 cents from 599,6 cents.
The Groups RoE improved to 14,0% from 13,7%, slightly above its cost of equity. An interim DPS of
350 cents, and a special DPS of 708 cents were declared after considering regulatory changes, the
Groups strong capital position, strategic plans and near-term business objectives. The dividends are
based on the 847,8 million shares in issue after completing the combination with the Barclays Africa
operations.
Improved credit impairments, particularly in retail mortgages and commercial property finance,
were the main reasons for higher earnings. However, pre-provision profit increased 3% to R10,8 billion,
largely due to continued focus on operating costs while revenue growth remained modest.
RBB headline earnings increased 48%, due to lower credit impairments and continued cost
containment. Financial Services headline earnings increased 5%, while CIBW headline earnings decreased 7%,
due to lower Private Equity valuations and difficult second quarter trading conditions in Markets.
Operating environment
While global growth continued to recover, growth in emerging market economies was somewhat slower
than expected. Central banks provided support by cutting interest rates mostly in emerging markets
and also injecting liquidity into the financial system.
South Africas growth slowed sharply in the first quarter to 0,9% from 2,1% the previous quarter,
on the back of production stoppages in the manufacturing sectors and a generally weaker economic
environment. Growth in household consumption slowed further in the first half, reflecting deteriorating
household balance sheets, a lacklustre job market, subdued confidence, rising inflation and
moderating real wage growth. Consumers demand for credit continued to slow during the period. The rand
exchange rate weakened sharply due to domestic factors, such as industrial action and global risk
aversion.
Group performance
Statement of financial position
Total Group assets increased 4% to R841 billion at 30 June 2013, largely due to 7% growth in loans
and advances to customers and 11% higher statutory liquid assets. Loans and advances to banks
decreased 3%.
Loans and advances to customers
Gross loans and advances to customers increased 7% to R553,7 billion. Retail Bankings gross loans
increased 4%, given 53% growth in credit cards following the Edcon transaction, 9% higher vehicle
asset finance, offset by 2% lower mortgages. Gross Business Banking loans decreased 6%, due to 11%
lower commercial property finance. Gross CIBW loans grew 23%, due to strong growth in foreign currency
loans, reverse repurchase agreements and overnight finance.
The Group maintained its strong liquidity position, growing deposits due to customers 7% or by R32
billion to R490 billion. Its funding tenor also remained robust with an average long-term funding
ratio of 28,2% for the reporting period, up from 25,6% in 2012. Deposits due to customers contributed
76,5% to total funding up from 75,4%, while the proportion of debt securities in issue dropped to
16,6% from 20,3%. Retail Bankings deposits increased 4% to R133 billion to maintain its leading
market share. Business Bankings deposits grew 6%, largely due to 25% growth in investment products.
CIBWs deposits increased 9%, due to 13% growth in fixed deposits, cheque account and notice deposits.
The Groups loans-to-deposits ratio increased to 90,4% from 86,9%.
Net asset value
The Groups NAV increased 6% to R67,7 billion, as the Group generated retained earnings of R2,1
billion in the first half. Absa Groups NAV per share grew 6% to 9 431 cents.
Capital to risk-weighted assets
The Groups risk-weighted assets (RWAs) increased 7% to R457,5 billion from R426,5 billion as at
30 June 2012 due to 7% growth in loans and advances to customers and implementing Basel III from 1
January 2013. The Group maintained its strong capital levels, which remain above Board targets and
regulatory requirements. Absa Groups Common Equity Tier 1 and Tier 1 capital adequacy ratios
(including unappropriated profits) were slightly lower at 12,5% and 13,5% respectively (from 13,2% and
14,3%). The Groups total capital ratio decreased to 16,6% from 16,9%. The interim DPS of 350 cents and
special dividends of 708 cents are well considered, based on the Groups strong capital position,
internal capital generation, strategy and growth plans. With solid free cash flow generation, our
leverage remains low at 12,2 times.
Statement of comprehensive income
Net interest income
Net interest income increased 5% to R12 503 million from R11 853 million, and average
interest-bearing assets grew 5%. The net interest margin increased to 3,91% from 3,88%, largely due to the
acquisition of the Edcon portfolio in November 2012. The Groups deposit margin decreased and the
contributions from the hedging and endowment were lower.
Impairment losses on loan and advances
Impairments declined 14% to R3 546 million from R4 107 million, resulting in a lower credit loss
ratio of 1,35% from 1,62%. Unidentified impairments and identified impairments for performing loans
increased 14% to R2,7 billion, which amounts to 0,51% of performing loans from 0,46% at 31 December
2012.
Retail Bankings credit impairments decreased 11% to R3,0 billion, improving its credit loss ratio
to 1,77% from 2,04%. As expected, the credit loss ratio for secured loans improved, while those of
unsecured loans increased off a low base.
Home Loans credit impairments decreased 53% to R1,1 billion from R2,4 billion following last
years elevated base. Mortgages non-performing loan (NPL) coverage increased to 30,2% from 22,6%. The
mortgage legal portfolio decreased 5% to R13,7 billion. Vehicle and Asset Finances (VAF) credit loss
ratio improved to 1,11% from 1,24%, reflecting reduced trade centre stock due to a focus on
collections.
With consumers under pressure, Personal Loans credit loss ratio increased to 7,17% from 6,14%.
Cards charge increased substantially to R835 million from R220 million, as the Edcon portfolio with a
credit loss ratio of 9,56% added R440 million. The credit impairment on the remaining Card book
grew 80% to R395 million, which represents a 3,31% credit loss ratio from 2,04%.
Business Bankings credit impairments decreased 22% to R430 million improving its credit loss
ratio to 1,33% from 1,65%, largely due to lower impairments in the African operations and commercial
property finance.
Total NPLs improved 9%, or by R3,1 billion to R29,6 billion since 30 June 2012. Retail Bankings
NPLs fell 17% to R22,2 billion. The total NPL cover improved to 38,9% from 32,5%, with increases in
mortgages and personal loans in particular. NPLs as a percent of customer loans and advances improved
to 5,4% from 6,4% at 30 June 2012 and 5,8% at 31 December 2012.
Non-interest income
Non-interest income increased 1% to R11 342 million from R11 268 million. Net fee and commission
income rose 3%, as flat electronic banking fees and lower cheque and savings account fees dampened
56% higher credit card fees due to acquiring the Edcon portfolio, 36% growth in insurance commission
received and 18% higher investment banking fees.
Retail Bankings non-interest income was slightly lower at R5,4 billion, in part due to the loss
of AllPays social grants payment contract in 2012. Excluding AllPay, non-interest income grew 2%,
with 17% growth in Home Loans and 18% in VAF. Retail Bankings net fee and commission income declined
3% to R5,1 billion, reflecting changing customer behaviour, price changes, customer attrition and
AllPays lower contribution.
Business Bankings net fee and commission income increased 5%, despite lower debit order fees and
cheque payment volumes. Electronic banking fees increased 8% on 2% higher electronic payment
volumes.
CIBWs non-interest income increased 2%, mainly due to a 3% increase in Markets net trading
results despite difficult trading conditions in the second quarter and lower Private Equity revaluations.
Financial Services revenue grew 7% to R2,1 billion, driven by 8% growth in net Life Insurance
premium income and 16% higher assets under management in Investments, which offset higher
weather-related crop claims.
Operating expenses
Operating expenses increased 4% to R13 094 million (30 June 2012: R12 643 million). The Groups
cost-to-income ratio increased marginally to 54,9% from 54,7%.
Staff costs grew 4% to R6,8 billion, reflecting 3% higher salary costs and 38% growth in staff
training costs, together with a continued focus on operational efficiencies. Non-staff expenses grew
3%, due to 37% higher marketing costs and a 26% rise in other operating expenses. The former reflects
the renewal of certain sponsorship rights and timing of marketing costs and are expected to be
similar to 2012 levels. The Group is making progress in optimising property costs, which fell 10% to R578
million. Telephone and postage costs also declined 10% to R392 million and cash transportation
costs decreased 11% to R336 million. The change in fair value charge for investment properties decreased
from R154 million to
R5 million, with an additional fair value gain recognised in other operating income.
Total information technology-related spend was flat at R2,6 billion and accounted for 20% of the
Group's costs. Amortisation of intangible assets increased 32% to R174 million, reflecting prior
period spend on our digital and mobile platforms. Our professional fees more than doubled to R578
million, due to project delivery including our branch transformation, increased regulatory requirements
and costs of R49 million relating to the Barclays Africa transaction.
Retail Bankings operating expenses increased 7%, or 4% excluding the Edcon portfolio. Business
Bankings costs fell 8% due to large declines in its Equities and rest of Africa expenses. Excluding
these, Business Bankings costs declined 2%. CIBWs operating expenses increased 3% while continuing
to invest in key growth areas. Financial Services operating expenses grew 9% due to its expansion
into the rest of Africa and amortisation on new operating systems.
Taxation
The taxation expense increased 6% to R1 862 million, although our effective tax rate decreased to
27,4% from 29,0%. The lower effective rate was mainly due to the withdrawal of secondary tax on
companies.
Segment performance
Retail Banking
Headline earnings increased 46% to R2 119 million from R1 447 million, largely due to lower credit
impairments as Home Loans 53% lower charge outweighed the inclusion of the Edcon portfolio and
higher impairments in unsecured lending. Revenue grew 7%, however, this increased only 96%, excluding
the Edcon portfolio, due to the loss of the AllPay contract, pressure on transaction volumes and
muted growth in loans and advances to customers. Retail Bankings cost-to-income ratio improved to 53,2%
from 53,4% in spite of continued investment spend and low revenue growth.
Home Loans lower operating expenses and credit impairments saw it return to profitability, while
VAFs 10% revenue growth and lower costs generated 39% headline earnings growth. Despite higher
credit impairments, Cards earnings increased 10% after including the Edcon portfolio. Personal Loans
earnings fell 42%, as its revenue decreased 7% and impairments rose 19%. Within Retail Bank, a
division of Retail Banking, earnings fell 30%, given higher impairments and slightly lower non-interest
income.
Business Banking
Business Bankings headline earnings increased 54% to R782 million from R507 million, mainly due
to R290 million decrease in losses from its equities portfolio and rest of Africa operations. Net
interest income remained under pressure due to lower advances and margin compression, although net fee
and commission income grew 5%. Credit impairments improved 22%, particularly in the rest of Africa
and commercial property finance. Operating expenses declined 8%, reducing its cost-to-income ratio to
60,4% from 68,1% and increasing its return on regulatory capital (RoRC) to 19,6% from 10,5%.
CIBW
Headline earnings declined 7% to R1 206 million from R1 301 million, reflecting lower Private
Equity revaluations and difficult trading conditions in Markets in the second quarter.
Net revenue increased 3% with Corporate increasing 14% due to strong growth in corporate debt and
increased volumes in trade products. Investment Banking net revenue increased 31% as client activity
drove higher average loans and advances and increased advisory mandates, together with related fee
income. Markets revenue was flat on the prior period. Private Equity and Infrastructure Investments
revenue declined 76% on lower revaluations of investments. Wealths net revenue fell 19% reflecting
higher unidentified credit impairments and reduced referrals
for large investment market trades. Operating expenses growth was contained to 3%, while investing
in key growth areas. RoRC declined to 16,6% from 19,3%, due to lower earnings and an increase in
market risk risk-weighted assets on implementing Basel III.
Financial Services
Headline earnings grew 5% to R671 million from R641 million. The reporting period saw further
improvement in Life new business volumes, strong net fund inflows in Investments and significant
weather-related crop claims in Insurance. Net operating income also grew 5% to R867 million. Life embedded
value of new business increased 21% to R183 million due to strong new business volumes. Investments
headline earnings increased 36%, given strong net fund inflows of R4,7 billion in 2012 and R6,2
billion this year. Gross insurance premiums increased 10% while net insurance premiums remained
relatively constant. Net premium income for the South African insurance operations declined 3% to R2 434
million due to exiting non-core products that failed to make an adequate contribution to profitability
in 2012 (corporate, commercial fleet and guarantees) and low new business volumes in homeowners
cover and personal lines in the first quarter. Significant weather-related claims for crop cover
resulted in an underwriting loss of R52 million (net of expenses) in this product for the period. The risk
appetite of this product has been reviewed and a number of changes, including pricing, have been
implemented to improve future performance. Net premium income grew 42% in the rest of Africa and net
operating income rose 85% to R37 million. Total operating expenses increased 9%, mainly due to
expansion into the rest of Africa, the amortisation of new operating systems recently implemented and the
consolidation of cell captives following IFRS changes. RoE improved to 28,4% from 27,8%.
Prospects
Fiscal austerity measures across most advanced economies are the main drag facing the global
economy in 2013. Emerging markets are expected to perform better, supported by fiscal stimulus and
monetary easing. Global Gross Domestic Product (GDP) growth is expected to remain subdued at 3,0% in 2013
from around 3,1% last year. We expect sub-Saharan Africa to grow 5,1% this year.
Moderating consumer demand, weak business confidence, infrastructure constraints and continuing
labour market tensions (especially in the mining sector) all point to weak local growth. The current
account deficit will keep weighing on the rand, generating inflationary pressures. Overall, we expect
slower growth of around 2,3% in 2013 from last years 2,5%. The SARB will likely leave the rand to
find its own level and tolerate a temporary breach of consumer price index (CPI) above the 3% - 6%
target band. Our base case for the next upward move in rates is in late 2014.
Against this backdrop, we expect mid-single digit loan growth this year and a broadly stable net
interest margin. We will continue to focus on operating costs, while investing for growth.
Consequently, our cost-to-income ratio is expected to be similar to last years. Our credit loss
ratio is expected to improve materially from last years 1,63%, but remains above our through the
cycle 1,25%. Our RoE is expected to improve from 2012s 13,5%.
Basis of presentation
The Groups interim financial results have been prepared in accordance with the recognition and
measurement requirements of IFRS, Interpretations issued by the IFRS Interpretations Committee, the
going concern principle and using the historical-cost basis, except where specifically indicated
otherwise in the accounting policies contained in the most recent annual consolidated financial
statements.
The Groups unaudited condensed consolidated interim financial statements comply with the
disclosure requirements of International Accounting Standard (IAS) 34 Interim Financial Reporting.
The preparation of financial information requires the use of estimates and assumptions about
future conditions. Use of available information and the application of judgement are inherent in the
formation of estimates. The accounting policies that are deemed critical to the Groups results and
financial position, in terms of the materiality of the items to which the policy is applied, and which
involve a high degree of judgement including the use of assumptions and estimation, are impairment of
loans and advances, goodwill impairment, valuation of financial instruments, impairment of
available-for-sale financial assets, impairment of investments in associates and joint ventures, deferred
tax assets, post-retirement benefits, provisions, share-based payments, liabilities arising from
claims made under short-term insurance contracts, liabilities arising from claims made under life-term
insurance contracts, income taxes and offsetting of financial assets and liabilities.
Accounting policies
The accounting policies applied in preparing the unaudited condensed consolidated interim
financial statements are the same as those in place for the reporting period ended 31 December 2012 except
for:
- new and amended standards that became effective for the first time during the reporting period
as specified in note 1.30 of the accounting policies contained in the most recent annual
consolidated financial statements;
- a change in the Groups internal accounting policy for the classification of collection costs;
and
- inter-segmental changes including allocation of elements of the Head office segment to business
segments and portfolio changes between operating segments.
The above changes were explained in detail in the Absa Group Limited SENS announcement on 18 July
2013. Please refer to that document for further detail.
Events after the reporting period
The directors are not aware of any events occurring between the reporting date of 30 June 2013 and
the date of authorisation of these condensed consolidated financial results as defined in IAS 10
Events after the reporting period.
The necessary conditions and regulatory approvals to conclude the combination of Absa Group
Limited and the Barclays Africa businesses have been fulfilled subsequent to the reporting date. The
fulfilment of these conditions will enable the transaction to be concluded on 31 July 2013.
On behalf of the Board
W E Lucas-Bull M Ramos
Group Chairman Group Chief Executive
Johannesburg
30 July 2013
Declaration of interim ordinary dividend number 54
Shareholders are advised that an interim ordinary dividend of 350 cents per ordinary share was
declared today, 30 July 2013, for the six months ended 30 June 2013. The ordinary dividend is payable
to shareholders recorded in the register of members of the Company at the close of business on 13
September 2013. The directors of Absa Group confirm that the Group will satisfy the solvency and
liquidity test immediately after completion of the dividend distribution.
The dividend will be subject to the new dividend tax that was introduced with effect from 1 April
2012. In accordance with paragraphs 11.17 (a) (i) to (x) and 11.17 (c) of the JSE Listings
Requirements, the following additional information is disclosed:
- The dividend has been declared out of income reserves.
- The Group has utilised R105 956 747,25 of secondary tax on companies (STC) credits (equivalent
to 12,49857 cents per share), which will be distributed to ordinary shareholders through this
interim dividend.
- The local dividend tax rate is fifteen per cent (15%).
- The gross local dividend amount is 350 cents per ordinary share for shareholders exempt from
the dividend tax.
- The net local dividend amount is 299,37479 cents per ordinary share for shareholders liable to
pay for the dividend tax.
- Absa Group currently has 718 210 043 ordinary shares in issue and will have 847 750 379
ordinary shares in issue (includes 465 296 treasury shares) as from 31 July 2013, following the conclusion
of the combination of Absa Group with the Barclays Africa operations.
- Absa Groups income tax reference number is 9150116714.
In compliance with the requirements of Strate, the electronic settlement and custody system used
by the JSE Limited, the following salient dates for the payment of the dividend are applicable:
Last day to trade cum dividend Friday, 6 September 2013
Shares commence trading ex dividend Monday, 9 September 2013
Record date Friday, 13 September 2013
Payment date Monday, 16 September 2013
Share certificates may not be dematerialised or rematerialised between Monday, 9 September 2013
and Friday, 13 September 2013, both dates inclusive. On Monday, 16 September 2013, the dividend will
be electronically transferred to the bank accounts of certificated shareholders who use this
facility.
In respect of those who do not, cheques dated 16 September 2013 will be posted on or about that
date. The accounts of those shareholders who have dematerialised their shares (which are held at their
participant or broker) will be credited on Monday, 16 September 2013.
On behalf of the Board
N R Drutman
Company Secretary
Johannesburg
30 July 2013
Declaration of special ordinary dividend number 1
Shareholders are advised that a special dividend of 708 cents per ordinary share was declared
today, 30 July 2013. The special dividend is payable to shareholders recorded in the register of members
of the Company at the close of business on 22 November 2013. The directors of Absa Group confirm
that the Group will satisfy the solvency and liquidity test immediately after completion of the
dividend distribution.
The dividend will be subject to the new dividend tax that was introduced with effect from 1 April
2012. In accordance with paragraphs 11.17 (a) (i) to (x) and 11.17 (c) of the JSE Listings
Requirements, the following additional information is disclosed:
- The dividend has been declared out of income reserves.
- No STC credits have been utilised with regard to this special dividend.
- The local dividend tax rate is fifteen per cent (15%).
- The gross local dividend amount is 708 cents per ordinary share for shareholders exempt from
the dividend tax.
- The net local dividend amount is 601,80 cents per ordinary share for shareholders liable to pay
for the dividend tax.
- Absa Group currently has 718 210 043 ordinary shares in issue and will have 847 750 379
ordinary shares in issue (includes 465 296 treasury shares) as from 31 July 2013, following the conclusion
of the combination of Absa Group with the Barclays Africa operations.
- Absa Groups income tax reference number is 9150116714.
In compliance with the requirements of Strate, the electronic settlement and custody system used
by the JSE Limited, the following salient dates for the payment of the dividend are applicable
Last day to trade cum dividend Friday, 15 November 2013
Shares commence trading ex dividend Monday, 18 November 2013
Record date Friday, 22 November 2013
Payment date Monday, 25 November 2013
Share certificates may not be dematerialised or rematerialised between Monday, 18 November 2013
and Friday, 22 November 2013, both dates inclusive. On Monday, 25 November 2013, the dividend will be
electronically transferred to the bank accounts of certificated shareholders who use this facility.
In respect of those who do not, cheques dated 25 November 2013 will be posted on or about that
date. The accounts of those shareholders who have dematerialised their shares (which are held at their
participant or broker) will be credited on Monday, 25 November 2013.
On behalf of the Board
N R Drutman
Company Secretary
Johannesburg
30 July 2013
Absa Group Limited is a company domiciled in South Africa. Its registered office is the 7th Floor,
Absa Towers West, 15 Troye Street,
Johannesburg, 2001.
Absa Group Limited
Authorised financial services and registered credit provider (NCRCP7)
Registration number: 1986/003934/06
Incorporated in the Republic of South Africa
JSE share code: ASA and BGA
Issuer code: AMAGB
ISIN: ZAE000067237 and ZAE0001174124
Registered office
7th Floor, Absa Towers West
15 Troye Street, Johannesburg, 2001
PO Box 7735, Johannesburg, 2000
Telephone: (+27 11) 350 4000
Email: groupsec@absa.co.za
Board of directors
Group independent non-executive directors
C Beggs, Y Z Cuba, W E Lucas-Bull (Group Chairman),
M J Husain, P B Matlare, T S Munday, S G Pretorius
Group non-executive directors
P A Clackson(1), R Le Blanc1, A V Vaswani(2)
Group executive directors
D W P Hodnett (Group Financial Director),
M Ramos (Group Chief Executive)
Notes
(1) British
(2) Singaporean
Transfer secretary
South Africa
Computershare Investor Services Proprietary Limited
70 Marshall Street, Johannesburg, 2001
PO Box 61051, Marshalltown, 2107
Telephone: (+27 11) 370 5000
Telefax: (+27 11) 370 5271/2
ADR depositary
BNY Mellon
101 Barclay Street, 22W, New York, NY, 10286
Telephone: +1 212 815 2248
Auditors
PricewaterhouseCoopers Inc.
Ernst & Young Inc.
Sponsors
Lead independent sponsor
J. P. Morgan Equities South Africa Proprietary Limited
No 1 Fricker Road, Cnr. Hurlingham Road,
Illovo, Johannesburg, 2196
Private Bag X9936, Sandton, 2146
Telephone: (+27 11) 507 0300
Telefax: (+27 11) 507 0503
Joint sponsor
Absa Bank Limited (acting through its
Corporate and Investment Bank division)
15 Alice Lane, Sandton, 2196
Private Bag X10056, Sandton, 2146
Telephone (+27 11) 895 6843
Telefax: (+27 11) 895 7809
Shareholder contact information
Shareholder and investment queries about the
Absa Group should be directed to the following areas:
Group Investor Relations
A M Hartdegen (Head Investor Relations)
Telephone: (+27 11) 350 2598
Email: investorrelations@absa.co.za
Company Secretary
N R Drutman
Telephone: (+27 11) 350 5347
Email: groupsec@absa.co.za
Other contacts
Group Communications
M Wanendeya (Head Communications Africa)
Telephone: (+27 11) 350 7207
Email: mwambu.wanendeya@absa.co.za
Group Finance
R Stromsoe (Head: Group Finance)
Telephone: (+27 11) 895 6365
Head office switchboard
Telephone: (+27 11) 350 4000
Website address
www.absa.co.za
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