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Audited condensed consolidated financial results
for the reporting period ended 31 December 2013
Absa Bank Limited
Authorised financial services and
registered credit provider (NCRCP7)
Registration number: 1986/004794/06
Incorporated in the Republic of South Africa
JSE share code: ABSP and ABMN
ISIN: ZAE000079810
(Absa, Absa Bank, the Bank or the Company)
Audited condensed consolidated financial results
for the reporting period ended 31 December 2013.
A full set of audited annual consolidated financial statements is available from 11 February 2014
on request at the registered address of the Bank.
These audited condensed consolidated financial results were prepared by Barclays Africa Group Financial Control under
the direction and supervision of the Financial Director, D W P Hodnett CA(SA).
Date of publication: 11 February 2014
Consolidated salient features
Change
2013 2012(1) %
Statement of comprehensive income (Rm)
Revenue 42 122 39 765 6
Operating expenses 23 560 20 979 12
Profit attributable to ordinary equity holder 8 439 7 203 17
Headline earnings(2) 8 266 7 356 12
Statement of financial position
Loans and advances to customers (Rm) 534 040 510 316 5
Total assets (Rm) 789 371 763 920 3
Deposits due to customers (Rm) 488 371 467 744 4
Loans-to-deposits ratio (%) 91,2 89,1
Financial performance (%)(3)
Return on average equity 15,5 13,5
Return on average assets 1,08 0,96
Return on average risk-weighted assets 1,98 1,90
Operating performance (%)
Net interest margin on average interest-bearing
assets(3) 3,64 3,54
Impairment losses on loans and advances as a %
of average loans and advances 1,14 1,60
to customers(3)
Non-performing loans as a % of gross loans and
advances to customers(3) 4,5 5,7
Non-interest income as a % of revenue 44,1 45,0
Cost-to-income ratio 55,9 52,8
JAWS (6,4) 4,8
Effective tax rate, excluding indirect taxation 27,3 26,1
Share statistics (million)
(including “A” ordinary shares)
Number of ordinary shares in issue 383,1 378,8
Weighted average number of ordinary shares in
issue 379,1 375,3
Diluted weighted average number of ordinary shares
in issue 379,1 375,3
Share statistics (cents)
Headline earnings per ordinary share 2 180,4 1 960,0 11
Diluted headline earnings per ordinary share 2 180,4 1 960,0 11
Basic earnings per ordinary share 2 226,1 1 919,3 16
Diluted earnings per ordinary share 2 226,1 1 919,3 16
Dividend per ordinary share relating to income for
the reporting period 3 251,7 1 568,3 >100
Dividend cover (times) 0,7 1,2
Net asset value per ordinary share 13 721 14 842 (8)
Tangible net asset value per ordinary share 13 381 14 535 (8)
Capital adequacy (%)(3)
Absa Bank Limited 15,6 17,5
Off-statement of financial position (Rm)
Assets under management and administration 37 378 27 158 38
Notes
(1)Restated, refer to note 23 for reporting changes.
(2)After allowing for R294 million (2012: R295 million) profit attributable to preference equity holders.
(3)These ratios are unaudited.
Condensed consolidated statement of financial position
as at 31 December
2013 2012(1) 2011(1)
(Audited) (Audited) Change (Audited)
Note Rm Rm % Rm
Assets
Cash, cash balances and balances with central banks 21 087 20 435 3 19 505
Statutory liquid asset portfolio 62 055 63 020 (2) 57 473
Loans and advances to banks 45 302 42 407 7 55 872
Trading portfolio assets 77 137 82 416 (6) 79 674
Hedging portfolio assets 3 344 5 439 (39) 4 299
Other assets 9 299 11 134 (16) 11 320
Current tax assets 15 34 (56) 84
Non-current assets held for sale 1 1 857 1 438 29 35
Loans and advances to customers 2 534 040 510 316 5 487 344
Loans to Group companies 19 247 10 956 76 5 728
Investment securities 5 220 6 589 (21) 8 387
Investments in associates and joint ventures 694 562 23 412
Investment properties 240 331 (27) 1 840
Property and equipment 8 504 7 653 11 7 268
Goodwill and intangible assets 1 303 1 160 12 700
Deferred tax assets 27 30 (10) 61
Total assets 789 371 763 920 3 740 002
Liabilities
Deposits from banks 64 100 43 085 49 44 769
Trading portfolio liabilities 50 059 47 889 5 49 232
Hedging portfolio liabilities 2 391 3 855 (38) 2 456
Other liabilities 11 640 14 569 (20) 10 503
Provisions 1 362 1 394 (2) 1 457
Current tax liabilities 151 58 >100 255
Non-current liabilities held for sale 1 175 177 (1) -
Deposits due to customers 5 488 371 467 744 4 432 269
Debt securities in issue 6 97 179 104 923 (7) 126 657
Borrowed funds 7 15 762 17 907 (12) 14 051
Deferred tax liabilities 922 1 407 (34) 1 064
Total liabilities 732 112 703 008 4 682 713
Equity
Capital and reserves
Attributable to equity holders:
Ordinary share capital 303 303 - 303
Ordinary share premium 13 465 12 465 8 11 465
Preference share capital 1 1 - 1
Preference share premium 4 643 4 643 - 4 643
Retained earnings 34 506 38 011 (10) 37 114
Other reserves 4 291 5 441 (21) 3 605
57 209 60 864 (6) 57 131
Non-controlling interest 50 48 4 158
Total equity 57 259 60 912 (6) 57 289
Total liabilities and equity 789 371 763 920 3 740 002
Note
(1)Restated, refer to note 23 for reporting changes.
Condensed consolidated statement of comprehensive income
for the reporting period ended 31 December
2013 2012(1) Change
(Audited) (Audited)
Note Rm Rm %
Net interest income 23 565 21 876 8
Interest and similar income 8.1 50 095 48 515 3
Interest expense and similar charges 8.2 (26 530) (26 639) 0
Impairment losses on loans and advances 3.1 (5 881) (8 022) 27
Net interest income after impairment losses on loans
and advances 17 684 13 854 28
Non-interest income 18 557 17 889 4
Net fee and commission income 14 421 13 673 5
Fee and commission income 9.1 15 486 14 890 4
Fee and commission expense 9.2 (1 065) (1 217) 12
Gains and losses from banking and trading activities 9.3 3 491 3 651 (4)
Gains and losses from investment activities 9.4 6 20 (70)
Other operating income 639 545 17
Operating income before operating expenditure 36 241 31 743 14
Operating expenditure (24 354) (21 858) (11)
Operating expenses 10.1 (23 560) (20 979) (12)
Other impairments 10.2 1 (344) >100
Indirect taxation (795) (535) (49)
Share of post-tax results of associates and joint ventures 132 240 (45)
Operating profit before income tax 12 019 10 125 19
Taxation expense (3 284) (2 643) (24)
Profit for the reporting period 8 735 7 482 17
Profit attributable to:
Ordinary equity holder 8 439 7 203 17
Preference equity holders 294 295 (0)
Non-controlling interest 2 (16) >100
Earnings per share: 8 735 7 482 17
Basic earnings per share (cents per share) 2 226,1 1 919,3 16
Diluted earnings per share (cents per share) 2 226,1 1 919,3 16
Note
(1)Restated, refer to note 23 for reporting changes.
Condensed consolidated statement of comprehensive income
for the reporting period ended 31 December
2013 2012(1)
(Audited) (Audited) Change
Note Rm Rm %
Profit for the reporting period 8 735 7 482 17
Other comprehensive income
Items that will not be reclassified to the profit or loss
component of the statement of comprehensive income
Movement in retirement benefit fund assets and liabilities (19) (43) >(100)
Decrease in retirement benefit surplus (26) (61) (57)
Deferred tax 7 18 (61)
Total items that will not be reclassified to the profit or loss component (19) (43) >(100)
of the statement of comprehensive income
Items that are or may be subsequently reclassified to the
profit or loss component of the statement of comprehensive income
Foreign exchange differences on translation of foreign operations 488 183 >100
Movement in cash flow hedging reserve (1 826) 405 >(100)
Fair value (losses)/gains arising during the reporting period (907) 2 650 >(100)
Amount removed from other comprehensive income and recognised in
the profit or loss component of the statement of comprehensive income (1 629) (2 088) 22
Deferred tax 710 (157) >100
Movement in available-for-sale reserve 90 1 101 (92)
Fair value gains arising during the reporting period 112 1 524 (93)
Amortisation of government bonds - release to profit or loss component of the
statement of comprehensive income 10 10 -
Deferred tax (32) (433) 93
Total items that are or may be subsequently reclassified to the profit or loss
component of the statement of comprehensive income (1 248) 1 689 >(100)
Total comprehensive income for the reporting period 7 468 9 128 (18)
Total comprehensive income attributable to:
Ordinary equity holder 7 172 8 849 (19)
Preference equity holders 294 295 (0)
Non-controlling interest 2 (16) >100
7 468 9 128 (18)
Note
(1)Restated, refer to note 23 for reporting changes.
Condensed consolidated statement of changes in equity
for the reporting period ended 31 December
2013
(Audited)
Capital and
reserves
attributable Non-
to equity controlling Total
holders interest equity
Rm Rm Rm
Balance at the beginning of the reporting period 60 864 48 60 912
Total comprehensive income for the reporting period 7 466 2 7 468
Profit for the reporting period 8 733 2 8 735
Other comprehensive income (1 267) - (1 267)
Dividends paid during the reporting period (12 046) - (12 046)
Shares issued 1 000 - 1 000
Purchase of Barclays Africa Group Limited shares in
respect of equity-settled share-based payment schemes (74) - (74)
Movement in share-based payment reserve (1) - (1)
Transfer from share-based payment reserve (33) - (33)
Transfer to retained earnings 33 - 33
Value of employee services (1) - (1)
Share of post-tax results of associates and joint ventures - - -
Transfer from retained earnings (132) - (132)
Transfer to associates’ and joint ventures’ reserve 132 - 132
Balance at the end of the reporting period 57 209 50 57 259
2012(1)
(Audited)
Capital and
reserves
attributable Non-
to equity controlling Total
holders interest equity
Rm Rm Rm
Balance at the beginning of the reporting period as
previously reported 57 234 158 57 392
Restatements(1) (103) - (103)
Restated balance at the beginning of the reporting period 57 131 158 57 289
Total comprehensive income for the reporting period 9 144 (16) 9 128
Profit for the reporting period 7 498 (16) 7 482
Other comprehensive income 1 646 - 1 646
Dividends paid during the reporting period (6 217) - (6 217)
Shares issued 1 000 - 1 000
Purchase of Barclays Africa Group Limited shares in respect
of equity-settled share-based payment schemes (211) - (211)
Movement in share-based payment reserve 17 - 17
Transfer from share-based payment reserve (110) - (110)
Transfer to retained earnings 110 - 110
Value of employee services 17 - 17
Share of post-tax results of associates and joint ventures - - -
Transfer from retained earnings (240) - (240)
Transfer to associates’ and joint ventures’ reserve 240 - 240
Increase in the interest of non-controlling equity holders - 35 35
Release of non-controlling interest arising from disposal of business - (129) (129)
Restated balance at the end of the reporting period 60 864 48 60 912
Notes
(1)Restated, refer to note 23 for reporting changes.
(2)All movements are reflected net of taxation.
Condensed consolidated statement of cash flows
for the reporting period ended 31 December
2013 2012(1)
(Audited) (Audited) Change
Note Rm Rm %
Net cash generated from operating activities 15 764 1 784 >100
Net cash (utilised)/generated in investing activities (1 037) 1 132 >(100)
Net cash utilised in financing activities (13 006) (1 928) >(100)
Net increase in cash and cash equivalents 1 721 988 74
Cash and cash equivalents at the beginning of the reporting period 1 8 786 7 798 13
Cash and cash equivalents at the end of the reporting period 2 10 507 8 786 20
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) 8 094 7 226 12
Loans and advances to banks(3) 692 572 21
8 786 7 798 13
2. Cash and cash equivalents at the end of the reporting period
Cash, cash balances and balances with central banks(2) 8 665 8 094 7
Loans and advances to banks(3) 1 842 692 >100
10 507 8 786 20
Notes
(1)Restated, 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 Bank and are a component of other advances within
loans and advances to banks on the statement of financial position.
1. Non-current assets and non-current liabilities held for sale
During the reporting period, the Bank effected the following transfers to non-current assets and non-current
liabilities held for sale:
- Through the Retail and Business Banking (“RBB”) segment
-In the Commercial Property Finance Equity (“CPF Equity”) division, investment properties in two of its
wholly-owned subsidiaries, with a total carrying value of R193 million, were transferred to non-current assets held for
sale. The disposal of these properties is expected to take place during the 2014 reporting period.
- Through the Head office and Other segment
-A number of assets classified as property and equipment within Corporate Real Estate Services have been identified
as held for sale. These assets have a total carrying value of R209 million. The disposal of the property and equipment
is due to take place during 2014.
2. Loans and advances to customers
2013 2012(1)
(Audited) (Audited) Change
Rm Rm %
Cheque accounts 31 179 31 619 (1)
Corporate overdrafts and specialised finance loans 5 729 5 121 12
Credit cards 30 178 27 051 12
Foreign currency loans 21 076 12 152 73
Instalment credit agreements 65 836 60 364 9
Gross advances 80 235 72 999 10
Unearned finance charges (14 399) (12 635) (14)
Reverse repurchase agreements 3 893 4 698 (17)
Loans to associates and joint ventures 12 039 10 094 19
Microloans 1 962 1 846 6
Mortgages 272 163 278 200 (2)
Other advances(2) 2 895 3 231 (10)
Overnight finance 14 082 18 862 (25)
Personal and term loans 29 037 29 638 (2)
Preference shares 8 955 6 352 41
Wholesale overdrafts 47 772 34 086 40
Gross loans and advances to customers 546 796 523 314 4
Impairment losses on loans and advances (refer to note 3) (12 756) (12 998) 2
534 040 510 316 5
Notes
(1)Restated, 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
2013
(Audited)
Retail Business
Banking Banking
South South
Reconciliation of allowance for impairment losses on loans Africa Africa CIBW Other(1) Total
and advances to customers Rm Rm Rm Rm Rm
Balance at the beginning of the reporting period(1) 9 556 2 667 650 125 12 998
Net present value unwind on non-performing book (refer to note 8.1) (695) (153) ( 3) - (851)
Amounts written off (4 918) (1 171) (109) - (6 198)
Impairment raised - identified 5 548 939 49 (15) 6 521
Impairment raised - unidentified 85 106 95 - 286
Balance at the end of the reporting period 9 576 2 388 682 110 12 756
2012(2)
(Audited)
Retail Business
Banking Banking
South South
Reconciliation of allowance for impairment losses on loans Africa Africa CIBW Other Total
and advances to customers Rm Rm Rm Rm Rm
Balance at the beginning of the reporting period 8 659 2 038 566 125 11 388
Net present value unwind on non-performing book (refer to note 8.1) (955) (60) (5) - (1 020)
Exchange difference - - 3 - 3
Amounts written off (5 082) (966) (36) - (6 084)
Impairment raised - identified 6 763 1 689 108 - 8 560
Impairment raised - unidentified 172 (35) 14 - 151
Balance at the end of the reporting period 9 557 2 666 650 125 12 998
2013 2012(1)
(Audited) (Audited) Change
Rm Rm %
3.1 Statement of comprehensive income charge
Impairments raised during the reporting period 6 807 8 711 (22)
Identified impairments 6 521 8 560 (24)
Unidentified impairments 286 151 89
Recoveries of loans and advances previously written off(3) (926) (689) (34)
5 881 8 022 (27)
Notes
(1)Includes Head office, inter-segment eliminations and other.
(2)Restated, refer to note 23 for reporting changes.
(3)Includes collection costs of R120 million (2012: R133 million).
4. Performing and non-performing loans
2013
(Unaudited)
Performing loans Non-performing loans
Coverage Coverage Net total
Exposure Impairment ratio Exposure Impairment ratio exposure
Loans and advances to customers Rm Rm % Rm Rm % Rm
RBB 390 360 2 743 0,70 23 973 9 221 38,5 402 369
Retail Banking South Africa 331 273 2 366 0,71 18 993 7 210 38,0 340 690
Cheque accounts 2 006 31 1,54 96 56 58,3 2 015
Credit cards 18 853 181 0,96 1 472 980 66,6 19 164
Edcon portfolio 8 753 297 3,39 1 103 893 81,0 8 666
Instalment credit agreements 63 156 286 0,45 1 359 629 46,3 63 600
Loans to associates and joint ventures 10 287 - - - - - 10 287
Mortgages 214 167 1 305 0,61 13 541 3 763 27,8 222 640
Personal and term loans 14 051 266 1,89 1 422 889 62,5 14 318
Business Banking South Africa 59 087 377 0,64 4 980 2 011 40,4 61 679
Cheque accounts 16 709 137 0,82 863 361 41,8 17 075
Commercial property finance 29 906 125 0,42 2 844 1 235 43,4 31 390
Instalment credit agreements 975 4 0,41 115 102 88,7 984
Loans to associates and joint ventures 559 - - - - - 559
Term loans 10 938 111 1,01 1 158 313 27,0 11 671
Corporate, Investment Banking and Wealth (CIBW) 131 415 229 0,17 787 453 57,6 131 520
Head Office, inter-segment eliminations and Other 261 110 42,15 - - - 151
522 036 3 082 0,59 24 760 9 674 39,1 534 040
2012(1)
(Unaudited)
Performing loans Non-performing loans
Coverage Coverage Net total
Exposure Impairment ratio Exposure Impairment ratio exposure
Loans and advances to customers Rm Rm % Rm Rm % Rm
RBB 380 899 1 904 0,50 29 128 10 319 35,4 397 804
Retail Banking South Africa 320 034 1 484 0,46 23 528 8 073 34,3 334 005
Cheque accounts 1 868 4 0,21 96 68 70,8 1 892
Credit cards 15 856 269 1,70 1 389 825 59,4 16 151
Edcon portfolio 9 806 102 1,04 - - - 9 704
Instalment credit agreements 56 715 293 0,52 1 790 895 50,0 57 317
Loans to associates and joint ventures 8 393 - - - - - 8 393
Mortgages 213 622 804 0,38 18 798 5 353 28,5 226 263
Personal and term loans 13 774 12 0,08 1 455 932 64,1 14 285
Business Banking South Africa 60 865 420 0,69 5 600 2 246 40,1 63 799
Cheque accounts 17 571 95 0,54 859 337 39,2 17 998
Commercial property finance 30 770 229 0,74 3 222 1 340 41,6 32 423
Instalment credit agreements 1 307 12 0,92 443 298 67,3 1 440
Loans to associates and joint ventures 627 - - - - - 627
Term loans 10 590 84 0,79 1 076 271 25,2 11 311
CIBW 111 908 154 0,14 879 496 56,4 112 137
Head Office, inter-segment eliminations and Other 500 125 25,00 - - - 375
493 307 2 183 0,44 30 007 10 815 36,0 510 316
Note
(1)Restated, refer to note 23 for reporting changes.
5. Deposits due to customers
2013 2012(1)
(Audited) (Audited) Change
Rm Rm %
Call deposits 52 829 56 648 (7)
Cheque account deposits 139 226 139 857 (0)
Credit card deposits 1 914 1 938 (1)
Fixed deposits 132 678 124 832 6
Foreign currency deposits 14 108 9 723 45
Notice deposits 56 349 55 728 1
Other deposits(2) 2 194 1 983 11
Repurchase agreements with non-banks 1 208 1 503 (20)
Savings and transmission deposits 87 865 75 532 16
488 371 467 744 4
Notes
(1)Restated, refer to note 23 for reporting changes.
(2)Includes partnership contributions received, deposits due on structured deals, preference investments
on behalf of customers and unclaimed deposits.
6. Debt securities in issue
2013 2012(1)
(Audited) (Audited) Change
Rm Rm %
Credit linked notes 8 155 9 800 (17)
Floating rate notes 44 718 52 639 (15)
Negotiable certificates of deposit 20 821 17 926 16
Other debt securities in issue 11 7 57
Promissory notes 935 1 561 (40)
Structured notes and bonds 1 006 1 098 (8)
Senior notes 21 533 21 892 (2)
97 179 104 923 (7)
Note
(1)Restated, refer to note 23 for reporting changes.
7. Borrowed funds
2013 2012
(Audited) (Audited) Change
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
8,80% 7 March 2019 1 725 1 725 -
8,10% 27 March 2020 2 000 2 000 -
10,28% 3 May 2022 600 600 -
8,295% 21 November 2023 1 188 1 188 -
Three-month JIBAR + 2,10% 3 May 2022 400 400 -
Three-month JIBAR + 1,95% 21 November 2022 1 805 1 805 -
Three-month JIBAR + 2,05% 21 November 2023 2 007 2 007 -
CPI-linked notes, fixed at the following coupon rates:
6,25% 31 March 2018 - 1 886 (100)
6,00% 20 September 2019 3 000 3 000 -
5,50% 7 December 2028 1 500 1 500 -
Accrued interest 1 472 1 462 1
Fair value adjustment 65 334 (81)
15 762 17 907 (12)
8. Net interest income
2013 2012(1)
(Audited) (Audited) Change
Rm Rm %
8.1 Interest and similar income
Interest and similar income is earned from:
Cash, cash balances and balances with central banks 12 19 (37)
Fair value adjustments on hedging instruments 3 803 (185) >100
Investment securities 47 117 (60)
Loans and advances to banks 785 839 (6)
Loans and advances to customers 42 580 41 126 4
Cheque accounts 2 633 2 677 (2)
Corporate overdrafts and specialised finance loans 123 484 (75)
Credit cards 4 649 2 660 75
Foreign currency loans 363 218 67
Instalment credit agreements 5 804 5 536 5
Interest on impaired financial assets (refer to note 3) 851 1 020 (17)
Loans to associates and joint ventures 657 494 33
Microloans 454 477 (5)
Mortgages 19 255 20 611 (7)
Other loans and advances(2) 718 220 >100
Overnight finance 786 814 (3)
Personal and term loans 3 097 3 228 (4)
Preference shares 484 485 (0)
Wholesale overdrafts 2 706 2 202 23
Other interest income(3) 1 130 1 015 11
Statutory liquid asset portfolio 1 738 5 584 (69)
50 095 48 515 3
Notes
(1)Restated, refer to note 23 for the reporting changes.
(2)Includes items such as interest on factored debtors’ books.
(3)Includes items such as overnight interest on contracts for differences as well as inter-segment
eliminations between “interest and similar income” and “gains and losses from banking and trading
activities”.
2013 2012(1)
(Audited) (Audited) Change
Rm Rm %
8.2 Interest expense and similar charges
Interest expense and similar charges are paid on:
Borrowed funds 1 316 1 352 (3)
Debt securities in issue 5 733 8 234 (30)
Deposits due to customers 20 104 17 834 13
Call deposits 2 799 2 863 (2)
Cheque account deposits 3 065 3 172 (3)
Credit card deposits 8 9 (11)
Fixed deposits 8 486 6 884 23
Foreign currency deposits 348 73 >100
Notice deposits 2 913 2 469 18
Other deposits due to customers 195 219 (11)
Savings and transmission deposits 2 290 2 145 7
Deposits from banks 1 012 1 227 (18)
Call deposits 363 677 (46)
Fixed deposits 649 517 26
Other deposits from banks - 33 (100)
Fair value adjustments on hedging instruments 500 (998) >100
Interest incurred on finance leases 19 51 (63)
Other interest expense(2) (2 154) (1 061) >(100)
26 530 26 639 (0)
Notes
(1)Restated, refer to note 23 for the reporting changes.
(2)Includes items such as inter-segment eliminations between ‘interest and similar income’, ‘interest expense and
similar charges’ and ‘gains and losses from banking and trading activities’.
9. Non-interest income
2013 2012(1)
(Audited) (Audited) Change
Rm Rm %
9.1 Fee and commission income
Asset management and other related fees 97 62 56
Consulting and administration fees 171 136 26
Credit-related fees and commissions 12 414 12 021 3
Cheque accounts 3 546 3 539 0
Credit cards(2) 929 428 >100
Electronic banking 4 099 4 068 1
Other credit-related fees and commissions(3) 1 556 1 516 3
Savings accounts 2 284 2 470 (8)
Insurance commission received 485 465 4
Investment banking fees 255 252 1
Merchant income 1 973 1 843 7
Other fee and commission income 50 81 (38)
Trust and other fiduciary services 41 30 37
Portfolio and other management fees 22 20 10
Trust and estate income 19 10 90
15 486 14 890 4
9.2 Fee and commission expense
Cheque processing fees (150) (161) 7
Other fee and commission expenses (658) (670) 2
Transaction-based legal fees (115) (206) 44
Trust and other fiduciary service fees - (56) 100
Valuation fees (142) (124) (15)
(1 065) (1 217) 12
Net fee and commission income 14 421 13 673 5
Notes
(1)Restated, 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.
2013 2012(1)
(Audited) (Audited) Change
Rm Rm %
9.3 Gains and losses from banking and trading activities
Net gains on investments 320 192 67
Debt instruments designated at fair value through profit or loss 163 179 (9)
Equity instruments designated at fair value through profit or loss 167 23 >100
Available-for-sale unwind from reserves (10) (10) -
Net trading result 3 031 3 537 (14)
Net trading income excluding the impact of hedge accounting 3 269 3 515 (7)
Ineffective portion of hedges (238) 22 >(100)
Cash flow hedges (234) 45 >(100)
Fair value hedges (4) (23) 83
Other gains/(losses) 140 (78) >100
3 491 3 651 (4)
Net trading income excluding the impact of hedge accounting 3 269 3 515 (7)
Gains/(losses) on financial instruments designated at fair value through profit or loss 1 326 (750) >100
Net gains on financial assets designated at fair value through profit or loss 142 1 292 (89)
Net gains/(losses) on financial liabilities designated at fair value through
profit or loss 1 184 (2 042) >100
Gains on financial instruments held for trading 1 943 4 265 (54)
Other gains/(losses) 140 (78) 100
Gains/(losses) on financial instruments designated at fair value through profit or loss 7 (142) >100
Gains on financial instruments held for trading 133 64 >100
Note
(1)Restated, refer to note 23 for reporting changes.
2013 2012
(Audited) (Audited) Change
Rm Rm %
9.4 Gains and losses from investment activities
Available-for-sale unwind from reserves 4 2 100
Net losses on investments (1) - (100)
Other investment gains(1) 3 18 (83)
6 20 (70)
Note
(1)Includes gains and losses from instruments designated at fair value through profit or loss.
10. Operating expenditure
2013 2012(1)
(Audited) (Audited) Change
Rm Rm %
10.1 Operating expenses
Amortisation of intangible assets 210 143 47
Auditors’ remuneration 189 148 28
Cash transportation 597 591 1
Depreciation 1 191 1 155 3
Equipment costs 175 177 (1)
Information technology(2) 1 760 1 930 (9)
Investment properties charges - change in fair value - 162 (100)
Marketing costs 1 125 958 17
Operating lease expenses on properties 887 916 (3)
Other operating costs(3) 1 812 675 >100
Printing and stationery 212 185 15
Professional fees(2) 1 257 677 86
Property costs 1 216 1 435 (15)
Staff costs 12 248 11 190 9
Bonuses 1 180 824 43
Other staff costs(4) 526 385 36
Salaries and current service costs on post-retirement benefits 9 913 9 367 6
Share-based payments 387 431 (10)
Training costs 242 183 32
Telephone and postage 681 637 7
23 560 20 979 12
Notes
(1)Restated, refer to note 23 for reporting changes.
(2)‘Information technology’ and ‘Professional fees’ include research and development costs
totalling R246 million (2012: R113 million).
(3)Includes fraud losses, travel and entertainment costs, as well as administration fees related
to the Edcon portfolio.
(4)Includes recruitment costs, membership fees to professional bodies, staff parking,
study assistance, staff relocation and refreshment costs.
2013 2012
(Audited) (Audited) Change
Rm Rm %
10.2 Other impairments
Financial instruments (4) 258 >(100)
Other 3 86 (97)
Computer software development costs - 68 (100)
Goodwill - 18 (100)
Repossessed properties 3 - 100
(1) 344 >(100)
11. Headline earnings
2013 2012(1)
(Audited) (Audited) Net(2)
Gross Net(2) Gross Net(2) change
Rm Rm Rm Rm %
Headline earnings is determined as follows:
Profit attributable to ordinary equity holder 8 439 7 203 17
Total headline earnings adjustment: (173) 153 >(100)
IFRS 3 - Goodwill impairment - - 18 18 (100)
IFRS 5 - Gains and losses on disposal of non-current
assets held for sale (171) (138) - - (100)
IAS 16 and IAS 36 - Loss/(profit) on disposal and impairments
of property and equipment 20 14 (80) (62) >100
IAS 28 and IFRS 11 - Headline earnings component of share of
post-tax results of associates and joint ventures - - (1) (1) -
IAS 36 and IAS 38 - Loss on disposal and impairment of intangible assets - - 68 49 100
IAS 39 - Release of available-for-sale reserves 10 7 10 7 -
IAS 39 - Disposal and impairment of available-for-sale assets (3) (2) - - -
IAS 40 - Change in fair value of investment properties (60) (54) 162 142 >(100)
Headline earnings/Diluted headline earnings(3) 8 266 7 356 12
Headline earnings per share (cents) 2 180,4 1 960,0 11
Diluted headline earnings per share (cents)(3) 2 180,4 1 960,0 11
Notes
(1)Restated, refer to note 23 for reporting changes.
(2)The net amounts is reflected after taxation and non-controlling interest.
(3)There are currently no instruments in issue that will have a dilutive impact on the profit
attributable to the ordinary equity holder.
12. Dividends per share
2013 2012
(Audited) (Audited) Change
Rm Rm %
Dividends declared to ordinary equity holder
Interim dividend (30 July 2013: 2 233,4 cents) (27 July 2012: 695,5 cents) 8 459 2 602 >100
Special dividend (4 December 2013: 264,0 cents) (27 September 2012: 267,3 cents) 1 000 1 000 -
Final dividend (11 February 2014: 754,3 cents) (12 February 2013: 605,5 cents) 2 890 2 293 (100)
12 349 5 895 60
Dividends declared to preference equity holders
Interim dividend (30 July 2013: 2 999,4521 cents) (27 July 2012: 3 134,6575 cents) 148 155 (5)
Final dividend (11 February 2014: 2 979,3151 cents) (12 February 2013: 2 950,5479 cents) 147 146 1
295 301 (2)
Dividends paid to ordinary equity holder
Final dividend (12 February 2013: 605,5 cents) (10 February 2012: 620,1 cents) 2 293 2 320 (1)
Interim dividend (30 July 2013: 2 233,4 cents) (27 July 2012: 695,5 cents) 8 459 2 602 >100
Special dividend (4 December 2013: 264,0 cents) (27 September 2012: 267,3 cents) 1 000 1 000 -
Dividends paid to preference equity holder
Final dividend (12 February 2013: 2 950,5479 cents) (10 February 2012: 2 827,2329 cents) 146 140 4
Interim dividend (30 July 2013: 2 999,4521 cents) (27 July 2012: 3 134,6575 cents) 148 155 (5)
12 046 6 217 94
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 Bank’s ultimate parent company is Barclays Bank PLC, which owns 62,3% (2012: 55,5%) of the ordinary shares in the
Barclays Africa Group Limited. The remaining 37,7% (2012: 44,5%) of the shares are widely held on the Johannesburg Stock
Exchange Limited (JSE).
The following are defined as related parties of the Bank:
- key management personnel (refer to note 14.1 and 14.2);
- the ultimate parent company (refer to note 14.3);
- fellow subsidiaries, associates and joint venture of the ultimate parent company (refer to note 14.4);
- the parent company (refer to note 14.5);
- fellow subsidiaries; associates and joint ventures of the parent company (refer to note 14.6);
- subsidiaries and consolidated structured entities;
- 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 Bank; and
- children and/or dependants and spouses or partners of the individuals referred to above.
Balances and transactions between the Bank and its subsidiaries have been eliminated on consolidation and are not
disclosed in this note.
14.1 Balances and transactions with key management personnel
IAS 24 Related Party Disclosures (“IAS 24”) requires the identification of key management personnel, who are
individuals responsible for planning, directing and controlling the activities of the entity, including directors. Key management
personnel are defined as executive and non-executive directors and members of the Executive Committee (“Exco”).
Entities controlled by key management personnel are also considered to be related parties.
A number of banking and insurance transactions are entered into with key management personnel in the normal course of
business under terms that are no more favourable than those arranged with third parties. These include loans, deposits
and foreign currency transactions. The related party transactions, outstanding balances at the end of the reporting
period, and related expenses and income with related parties for the reporting period are as follows:
2013 2012
(Audited) (Audited) Change
Rm Rm %
Balances
Loans 37 455 (91)
Deposits 11 15 (27)
Guarantees issued by the Group 84 103 (18)
Other investments 34 40 (15)
Transactions
Interest income 4 45 (91)
Interest expense 1 1 -
Loans include mortgages, asset finance transactions, overdraft and other credit facilities. Loans to
key management personnel are provided on the same terms and conditions as loans to employees of the
Group, including interest rates and collateral requirements.
Loans to key management personnel of Rnil (2012: Rnil) were written off as irrecoverable. Loans to entities
controlled by key management personnel of Rnil (2012: Rnil) were written off as irrecoverable.
2013 2012
(Audited) (Audited) Change
Rm Rm %
14.2 Key management personnel compensation
Directors
Post-employment benefit contributions 1 1 -
Salaries and other short-term benefits 28 30 (7)
Share-based payments 26 32 (19)
Termination benefits - 12 100
55 75 (27)
Other key management personnel
Post-employment benefit contributions 3 2 50
Salaries and other short-term benefits 77 65 18
Share-based payments 50 49 2
130 116 12
14.3 Balances and transactions with ultimate parent company(1), (2)
2013 2012
(Audited) (Audited) Change
Rm Rm %
Balances
Loans and advances to banks 13 720 20 698 (34)
Derivative assets 19 040 14 310 33
Nominal value of derivative assets 1 227 157 1 399 103 (12)
Other assets 1 244 896 39
Investment securities 534 584 (9)
Deposits from banks (18 986) (8 963) >(100)
Derivative liabilities (17 232) (13 842) (24)
Nominal value of derivative liabilities (997 710) (1 213 065) 18
Other liabilities (102) (59) (73)
Transactions
Interest and similar income (215) (204) 5
Interest expense and similar charges 50 106 (53)
Net fee and commission income - (18) 100
Gains and losses from banking and trading activities 274 (158) >100
Other operating income (70) (36) (94)
Operating expenditure 40 12 >100
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
ultimate parent company.
Notes
(1)Debit amounts are shown as positive, credit amounts are shown as negative.
(2)The Bank's ultimate parent company is Barclays Bank PLC, which has a majority equity interest in Barclays
Africa Group Limited.
2013 2012(1)
(Audited) (Audited) Change
Rm Rm %
14.4 Balances and transactions with fellow subsidiaries, associates
and joint ventures of the ultimate parent company(2), (3)
Balances
Loans and advances to banks 207 221 (6)
Derivative assets - 37 (100)
Nominal value of derivative assets 2 650 947 >100
Other assets 157 74 >100
Deposits from banks (939) (1 016) 8
Derivative liabilities (18) 5 >(100)
Nominal value of derivative liabilities (2 132) (521) >(100)
Other liabilities (318) 61 >(100)
Transactions
Net fee and commission income (25) (7) >(100)
Other operating income - (3) 100
Operating expenditure 12 100 (88)
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 ultimate parent company.
Notes
(1)Restated, refer to note 23 for reporting changes.
(2)Debit amounts are shown as positive, credit amounts are shown as negative.
(3)Fellow subsidiaries, associates and joint ventures are those entities of Barclays Bank PLC.
2013 2012
(Audited) (Audited) Change
Rm Rm %
14.5 Balances and transactions with the parent company(1), (2)
Balances
Other assets - 64 (100)
Deposits from banks (507) (708) 28
Transactions
Dividend paid 11 752 5 921 (98)
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.
2013 2012(1)
(Audited) (Audited) Change
Rm Rm %
14.6 Balances and transactions with fellow subsidiaries(2), (3)
Balances
Cash, cash balances and balances with central banks (1) - (100)
Loans and advances to banks 196 82 >100
Trading and hedging portfolio assets 2 476 27 >100
Loans to Group companies 19 247 10 956 75
Deposits from banks (3 921) (3 455) (13)
Debt securities in issue (41) (242) 83
Transactions
Interest and similar income (773) (476) (63)
Interest and similar expense 439 615 29
Net fee and commission income (458) (418) (10)
Gains and losses from banking and trading activities (1 115) 1 905 >(100)
Gains and losses from investing activities 1 - 100
Other operating income (19) (32) 41
Operating expenditure 57 412 86
Notes
(1)Restated, refer to note 23 for reporting changes.
(2)Debit amounts are shown as positive, credit amounts are shown as negative.
(3)Balances and transactions between the bank and its subsidiaries have been eliminated on consolidation and are not disclosed in this note.
15. Assets under management and administration
2013 2012
(Audited) (Audited) Change
Rm Rm %
Alternative asset management and exchange-traded funds 29 934 20 665 45
Portfolio management 6 147 5 942 3
Unit trusts 1 297 551 >100
37 378 27 158 38
16. Financial guarantee contracts
2013 2012
(Audited) (Audited) Change
Rm Rm %
Financial guarantee contract(1) 3 790 176 >100
Note
(1)Financial guarantee contracts represent contracts where the Bank undertakes to make specified payments to a
counterparty, should the counterparty suffer a loss as a result of a specified debtor defaulting on payment in
accordance with the terms of the debt instrument. Represents the maximum off-statement of financial position exposure.
17. Commitments
2013 2012
(Audited) (Audited) Change
Rm Rm %
Authorised capital expenditure
Contracted but not provided for(1) 175 208 (16)
Operating lease payments due(2)
No later than one year 820 893 (8)
Later than one year and no later than five years 1 417 1 816 (22)
Later than five years 230 303 (24)
2 467 3 012 (18)
Sponsorship payments due(3)
No later that one year 272 289 (6)
Later than one year and no later than five years 541 884 (39)
813 1 173 (31)
Notes
(1)The Bank 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 Bank. Leases are negotiated for an average term of three to five years and rentals
are renegotiated annually.
(3)The Bank has sponsorship commitments in respect of sports, arts and culture. Certain sponsorships expired in 2013 and are under
review by management for renewal in the foreseeable future.
18. Contingencies
2013 2012
(Audited) (Audited) Change
Rm Rm %
Guarantees(1) 15 862 15 540 2
Irrevocable debt facilities(2) 46 679 46 191 1
Irrevocable equity facilities(2) - 543 (100)
Letters of credit 5 666 5 894 (4)
Other contingencies 3 6 (50)
68 210 68 174 0
Notes
(1)Guarantees include performance and payment guarantee contracts.
(2)Irrevocable facilities are commitments to extend credit where the Bank 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
2013 2012(1)
(Audited) (Audited) Change
Rm Rm %
19.1 Headline earnings contribution by segment
RBB 6 641 4 338 53
Retail Banking South Africa 4 879 3 404 43
Home Loans 1 005 (1 078) >100
Vehicle and Asset Finance 1 093 820 33
Card 1 802 1 733 4
Personal Loans 385 587 (34)
Retail Bank 594 1 342 (56)
Business Banking South Africa 1 762 934 89
CIBW 2 492 2 546 (2)
Head office, inter-segment eliminations and Other (791) 545 >(100)
Total banking 8 342 7 429 12
Financial Services(2) (76) (73) (4)
Headline earnings 8 266 7 356 12
Notes
(1)Restated, refer to note 23 for reporting changes.
(2)Shareholders’ expenses previously retained at bank level now charged to the business.
2013 2012(1)
(Audited) (Audited) Change
Rm Rm %
19.2 Total revenue(2) by segment
RBB 34 156 31 818 7
Retail Banking South Africa 25 826 23 816 8
Home Loans 3 981 4 080 (2)
Vehicle and Asset Finance 3 169 3 022 5
Card 6 074 3 956 54
Personal Loans 1 892 2 010 (6)
Retail Bank 10 710 10 748 (0)
Business Banking South Africa 8 330 8 002 4
CIBW 8 576 7 788 10
Head office, inter-segment eliminations and Other (610) 159 >(100)
Total revenue 42 122 39 765 6
Notes
(1)Restated, refer to note 23 for reporting changes.
(2)Revenue includes net interest income and non-interest income.
2013 2012(1)
(Audited) (Audited) Change
Rm Rm %
19.3 Internal total revenue(2) by segment
RBB (8 201) (8 998) 9
Retail Banking South Africa (10 017) (10 421) 4
Home Loans (11 075) (12 092) 8
Vehicle and Asset Finance (3 688) (3 463) (6)
Card (913) (519) (76)
Personal Loans (504) (523) 4
Retail Bank 6 163 6 176 (0)
Business Banking South Africa 1 816 1 423 28
CIBW 12 058 8 444 43
Head office, inter-segment eliminations and Other (1 931) (1 040) (86)
Total internal revenue 1 926 (1 594) >100
Notes
(1)Restated, refer to note 23 for reporting changes.
(2)Revenue includes net interest income and non-interest income.
2013 2012(1)
(Audited) (Audited) Change
Rm Rm %
19.4 Total assets by segment
RBB 615 471 590 159 4
Retail Banking South Africa 518 381 504 208 3
Home Loans 217 532 222 419 (2)
Vehicle and Asset Finance 80 284 72 115 11
Card 39 517 36 842 7
Personal Loans 13 436 13 318 1
Retail Bank 167 612 159 514 5
Business Banking South Africa 97 090 85 951 13
CIBW 487 902 462 144 6
Head office, inter-segment eliminations and Other (314 002) (288 282) (9)
Total banking 789 371 764 021 3
Financial Services - (101) 100
Total assets 789 371 763 920 3
Note
(1)Restated, refer to note 23 for reporting changes.
2013 2012(1)
(Audited) (Audited) Change
Rm Rm %
19.5 Total liabilities by segment
RBB 608 100 585 281 4
Retail Banking South Africa 512 955 500 318 3
Home Loans 216 471 223 432 (3)
Vehicle and Asset Finance 78 673 70 799 11
Card 37 715 35 109 7
Personal Loans 13 051 12 731 3
Retail Bank 167 045 158 247 6
Business Banking South Africa 95 145 84 963 12
CIBW 484 729 459 235 6
Head office, inter-segments eliminations and Other (360 793) (341 480) (6)
Total banking 732 036 703 036 4
Financial Services 76 (28) >(100)
Total liabilities 732 112 703 008 4
Note
(1)Restated, refer to note 23 for reporting changes.
20. Assets and liabilities not held at fair value
The table below summarises the carrying amounts and fair values of those financial assets and liabilities
not held at fair value:
2013 2012(1)
(Audited) (Audited)
Carrying Fair Carrying Fair
value value value value
Rm Rm Rm Rm
Financial assets
Balances with the South African Reserve Bank (SARB) 12 417 12 417 12 338 12 338
Coins and bank notes 8 665 8 665 8 094 8 094
Money market assets 5 5 3 3
Cash, cash balances and balances with central banks 21 087 21 087 20 435 20 435
Loans and advances to banks 39 162 39 162 32 678 32 678
Other assets 8 080 8 080 9 873 9 873
Retail Banking South Africa 340 690 340 527 334 005 341 296
Cheque accounts 2 015 2 015 1 892 1 892
Credit cards 27 830 27 830 25 855 25 855
Instalment credit agreements 63 600 63 297 57 317 58 693
Loans to associates and joint ventures 10 287 10 287 8 393 8 393
Mortgages 222 640 222 704 226 263 232 088
Personal and term loans 14 318 14 394 14 285 14 285
Business Banking South Africa 60 971 61 041 62 780 65 468
Cheque accounts 17 075 17 075 17 998 17 998
Commercial property finance 30 682 30 752 31 404 34 092
Instalment credit agreements 984 984 1 440 1 440
Loans to associates and joint ventures 559 559 627 627
Term loans 11 671 11 671 11 311 11 311
CIBW 121 682 115 879 101 219 101 219
Head office, inter-segment eliminations and Other 151 151 375 375
Loans and advances to customers - net of impairment losses 523 494 517 598 498 379 508 268
Loans to Group companies 19 247 19 340 10 956 10 956
Total assets 611 070 605 267 572 321 582 210
Financial liabilities
Deposits from banks 51 833 48 621 28 109 28 111
Other liabilities 9 557 9 095 12 522 12 522
Call deposits 52 830 52 830 56 648 56 648
Cheque account deposits 139 146 139 145 139 795 139 795
Credit card deposits 1 914 1 914 1 938 1 938
Fixed deposits 116 420 116 462 107 733 108 174
Foreign currency deposits 14 108 14 108 9 723 9 723
Notice deposits 56 348 56 348 55 728 55 935
Other deposits 1 877 1 877 1 558 1 558
Savings and transmission deposits 87 865 87 865 75 532 75 532
Deposits due to customers 470 508 470 549 448 655 449 303
Debt securities in issue 93 595 93 596 101 482 101 482
Borrowed funds 15 762 16 308 17 129 18 414
Total liabilities 641 255 638 169 607 897 609 832
Note
(1)Restated, refer to note 23 for reporting changes.
21. Fair value hierarchy disclosures
21.1 Valuation methodology
The table below shows the Bank’s assets and liabilities that are recognised and subsequently measured at fair value
and are analysed by valuation techniques. The classification of assets and liabilities is based on the lowest level of
input that is significant to the fair value measurement in its entirety.
2013
(Audited)
Valuations
with Valuations Valuations
reference to based on based on un-
observable observable observable
prices inputs inputs
Level 1(1) Level 2(1) Level 3(2) Total
Recurring fair value measurements Rm Rm Rm Rm
Financial assets
Statutory liquid asset portfolio 62 055 - - 62 055
Loans and advances to banks - 6 140 - 6 140
Trading and hedging portfolio assets 24 382 53 982 1 037 79 401
Debt instruments 23 928 174 873 24 975
Derivative assets - 46 725 164 46 889
Commodity derivatives - 242 - 242
Credit derivatives - 258 11 269
Equity derivatives - 729 - 729
Foreign exchange derivatives - 7 016 39 7 055
Interest rate derivatives - 38 480 114 38 594
Equity instruments 454 77 - 531
Money market assets - 7 006 - 7 006
Other assets - - 16 16
Loans and advances to customers - 4 069 6 477 10 546
Investment securities 2 907 - 2 313 5 220
Total financial assets 89 343 64 191 9 843 163 377
Financial liabilities
Deposits from banks - 12 267 - 12 267
Trading and hedging portfolio liabilities 2 472 49 436 542 52 450
Derivative liabilities - 49 436 542 49 978
Commodity derivatives - 149 - 149
Credit derivatives - 350 45 395
Equity derivatives - 1 607 306 1 913
Foreign exchange derivatives - 7 745 49 7 794
Interest rate derivatives - 39 585 142 39 727
Short positions 2 472 - - 2 472
Deposits due to customers - 10 725 7 138 17 863
Debt securities in issue - 3 549 35 3 584
Total financial liabilities 2 472 75 977 7 715 86 164
Non-financial assets
Investment properties - - 240 240
Trading and hedging portfolio assets
Commodities 1 080 - - 1 080
Non-recurring fair value measurements
Non-current assets held for sale 101 1 297 460 1 857
Non-current liabilities held for sale - 175 - 175
Notes
(1)The nature of the valuation techniques is summarised in note 21.2.
(2)The nature of the valuation techniques is summarised note 21.3
2012
(Audited)
Valuations
with Valuations Valuations
reference to based on based on un-
observable observable observable
prices inputs inputs
Level 1(1) Level 2(1) Level 3(2) Total
Recurring fair value measurements Rm Rm Rm Rm
Financial assets
Statutory liquid asset portfolio 63 017 3 - 63 020
Loans and advances to banks - 9 729 - 9 729
Trading and hedging portfolio assets 24 106 62 283 952 87 341
Debt instruments 23 742 - 873 24 615
Derivative assets 1 52 169 79 52 249
Commodity derivatives 1 604 - 605
Credit derivatives - 152 43 195
Equity derivatives - 964 5 969
Foreign exchange derivatives - 5 813 1 5 814
Interest rate derivatives - 44 636 30 44 666
Equity instruments 362 141 - 503
Money market assets 1 9 973 - 9 974
Other assets - - 16 16
Loans and advances to customers - 5 523 6 414 11 937
Investment securities 2 601 - 3 988 6 589
Total financial assets 89 724 77 538 11 370 178 632
Financial liabilities
Deposits from banks - 14 976 - 14 976
Trading and hedging portfolio liabilities 1 131 50 539 74 51 744
Derivative liabilities 5 50 539 74 50 618
Commodity derivatives - 174 - 174
Credit derivatives - 158 24 182
Equity derivatives - 1 756 26 1 782
Foreign exchange derivatives - 5 610 - 5 610
Interest rate derivatives 5 42 841 24 42 870
Short positions 1 126 - - 1 126
Deposits due to customers - 11 417 7 672 19 089
Debt securities in issue - 3 254 187 3 441
Borrowed funds 778 - - 778
Total financial liabilities 1 909 80 186 8 651 90 746
Non-financial assets
Investment properties - - 331 331
Trading and hedging portfolio assets
Commodities 514 - - 514
Non-recurring fair value measurements
Non-current assets held for sale 20 - 1 418 1 438
Non-current liabilities held for sale - - 177 177
Notes
(1)The nature of the valuation techniques is summarised in note 21.2.
(2)The nature of the valuation techniques is summarised in note 21.3.
The Bank 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, which is 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.
The IVC team independently verifies the results of trading and investment operations and all significant fair value
measurements. The team 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.
Investment properties
Where possible the fair value of the Bank’s investment property has been determined on the basis of a valuation
carried out on the respective dates by independent valuators not related to the business. Where the Bank’s internal valuations
are different to that of the external valuers, detailed procedures are performed to substantiate any differences. The
IVC independently verifies the procedures performed by front office and considers the appropriateness of any differences
to external valuations. The fair value was determined based on the most appropriate methodology applicable to the
relevant investment property. Methodologies include the market comparable approach that reflects recent transaction prices for
similar properties, discounted cash flows and income capitalisation methodologies. In estimating that fair value of the
properties, the highest and best use of the properties is taken into account.
21.1.2 Significant transfers between levels
During the reporting period trading portfolio assets to the value of R237 million as well as trading portfolio
liabilities of R165 million were transferred from Level 2 to Level 3. The transfers relate to equity securities for which there
are no longer a quoted price in an active market and for which the significant inputs to determine the fair value have
become unobservable.
21.2 Valuation techniques using observable inputs
Level 1
Assets and liabilities 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 arm’s length basis.
Level 2
Assets and liabilities 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.
21.3 Valuation techniques using unobservable inputs
Level 3
Assets and liabilities valued using inputs that are not based on observable market data (unobservable data) such as an
entity’s own assumptions of market participants in pricing the asset or liability.
21.4 Fair value adjustments
The main valuation adjustments required to arrive at a fair value are described below:
Bid-offer valuation adjustments
For assets and liabilities where the Bank is not a market maker, mid prices are adjusted to bid and offer prices
respectively. Bid-offer adjustments reflect expected close out strategy and, for derivatives, the fact that they are
managed on a portfolio basis. The methodology for determining the bid-offer adjustment for a derivative portfolio will
generally involve netting between long and short positions and the bucketing of risk by strike and term in accordance
with hedging strategy. Bid-offer levels are derived from market sources, such as broker data. For those assets and
liabilities where the Bank is a market maker and has the ability to transact at, or better than, mid-price (which is
the case for certain equity, bond and vanilla derivative markets), the mid-price is used, since the bid-offer spread
does not represent a transaction cost.
Model valuation adjustments
Valuation models are reviewed under the Bank’s model governance framework. This process identifies the assumptions
used and any model limitations (for example, if the model does not incorporate volatility skew). Where necessary, fair
value adjustments will be applied to take these factors into account. Model valuation adjustments are dependent on the size
of portfolio, complexity of the model, whether the model is market standard and to what extent it incorporates all known
risk factors. All models and model valuation adjustments are subject to review on at least an annual basis.
21.5 Third-party credit enhancements
There were no significant liabilities measured at fair value and issued with inseparable third-party credit
enhancements.
21.6 Movements on assets and liabilities 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 assets and liabilities is
set out below:
2013
(Audited)
Trading and
hedging Loans and
portfolio Other advances to Investment Investment Total assets
assets assets customers securities Properties at fair value
Rm Rm Rm Rm Rm Rm
Opening balance at the beginning of the
reporting period 952 16 6 414 3 988 331 11 701
Movement in other comprehensive income - - - 20 - 20
Net interest income 55 - 345 (11) - 389
Other Income - - - - 39 39
Gains and losses from banking and trading activities (165) - 204 (203) - (164)
Gains and losses from investment activities - - (99) (218) 60 (257)
Purchases 13 - 762 20 - 795
Sales - - (44) (704) - (748)
Issues - - - 5 - 5
Settlements - - (978) (579) - (1 557)
Transferred to/(from) assets (55) - (127) (5) (190) (377)
Movement in/(out) of Level 3(1) 237 - - - - 237
Closing balance at the end of the reporting period 1 037 16 6 477 2 313 240 10 083
2012
(Audited)
Trading and
hedging Loans and
portfolio Other advances to Investment Investment Total assets
assets assets customers securities properties at fair value
Rm Rm Rm Rm Rm Rm
Opening balance at the beginning of the
reporting period 1 072 16 6 821 6 184 1 840 15 933
Movement in other comprehensive income - - - - - -
Net interest income (10) - 11 32 - 33
Other income - - - - (154) (154)
Gains and losses from banking and trading activities 70 - 741 175 - 986
Gains and losses from investment activities - - - (215) - (215)
Purchases 33 - 630 114 - 777
Sales (46) - (869) (2 083) (43) (3 041)
Issues 39 - 154 - - 193
Settlements (102) - (1 074) (108) - (1 284)
Transferred to/(from) assets - - - (111) (1 312) (1 423)
Movement in/(out) of Level 3 (104) - - - - (104)
Closing balance at the end of the reporting period 952 16 6 414 3 988 331 11 701
Note
(1)Transfers into Level 3 principally relates to equity securities for which there are no longer a quoted price in an
active market and for which the significant inputs to determine fair value is unobservable.
21.6 Movements on assets and liabilities subsequently measured at fair value using valuations based on unobservable
inputs (Level 3) (continued)
A reconciliation of the opening balances to closing balances for all movements on Level 3 assets and liabilities is
set out below:
2013
(Audited)
Trading and
hedging Debt Total
portfolio Deposits due securities liabilities
liabilities to customers in issue at fair value
Rm Rm Rm Rm
Opening balance at the beginning of the reporting period 74 7 672 187 7 933
Movement in other comprehensive income - - - -
Net interest income - 9 - 9
Other Income - - - -
Gains and losses from banking and trading activities 306 153 (152) 307
Gains and losses from investment activities - (1) - (1)
Purchases - 27 - 27
Sales (3) 427 - 424
Issues - - - -
Settlements - (1 149) - (1 149)
Transferred to/(from) liabilities - - - -
Movement in/(out) of Level 3(1) 165 - - 165
Closing balance at the end of the reporting period 542 7 138 35 7 715
2012
(Audited)
Trading and
hedging Debt Total
portfolio Deposits due securities liabilities
liabilities to customers in issue at fair value
Rm Rm Rm Rm
Opening balance at the beginning of the reporting period 199 7 612 209 8 020
Movement in other comprehensive income - - - -
Net interest income - - - -
Other income - - - -
Gains and losses from banking and trading activities 1 735 7 743
Gains and losses from investment activities - - - -
Purchases 27 - - 27
Sales - - - -
Issues 3 920 - 923
Settlements (6) (1 595) (29) (1 630)
Transferred to/(from) liabilities - - - -
Movement in/(out) of Level 3 (150) - - (150)
Closing balance at the end of the reporting period 74 7 672 187 7 933
Note
(1)Transfers into Level 3 principally relates to equity securities for which there are no longer a quoted price in an
active market and for which the significant inputs to determine fair value is unobservable.
21.7 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 are set
out below:
2013
(Audited)
Trading and
hedging Loans and Non-current
portfolio Other advances to Investment Investment assets held Total assets
assets assets customers securities properties for sale at fair value
Rm Rm Rm Rm Rm Rm Rm
Gains and losses from banking and
trading activities 337 - (136) - - - 201
2012
(Audited)
Trading and
hedging Loans and Non-current
portfolio Other advances to Investment Investment assets held Total assets
assets assets customers securities properties for sale at fair value
Rm Rm Rm Rm Rm Rm Rm
Net interest income - - 29 7 - - 36
Gains and losses from banking and
trading activities 30 - 437 316 - - 783
Gains and losses from investment
activities - - - (215) - - (215)
30 - 466 108 - - 604
2013
(Audited)
Trading and
hedging Debt Total
portfolio Other Deposits due securities liabilities at
liabilities liabilities to customers in issue fair value
Rm Rm Rm Rm Rm
Gains and losses from banking and
trading activities (311) - 1 - (310)
2012
(Audited)
Trading and
hedging Debt Total
portfolio Other Deposits due securities liabilities at
liabilities liabilities to customers in issue fair value
Rm Rm Rm Rm Rm
Gains and losses from banking and
trading activities (1) - (735) - (736)
21.8 Unrecognised (losses)/gains 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:
2013 2012
(Audited) (Audited)
Rm Rm
Opening balance at the beginning of the reporting period (93) (51)
New transactions 17 38
Amounts recognised in the profit and loss component of the
statement of comprehensive income (9) (80)
during the reporting period
Closing balance at the end of the reporting period (85) (93)
21.9 Sensitivity analysis of valuations using unobservable inputs
As part of the Group’s risk management processes, stress tests are applied on the significant unobservable parameters
to generate a range of potentially possible alternative valuations. The assets and liabilities that most impact this
sensitivity analysis are those with 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.
Potential effect recorded Potential effect recorded
in profit or loss directly in equity
Favourable Unfavourable Favourable Unfavourable
Rm Rm Rm Rm
Trading and hedging portfolio assets 43 43 - -
Other assets 2 2 - -
Loans and advances to customers 1 202 159 - -
Investment securities 122 122 - -
Investment properties 1 1 - -
Trading and hedging portfolio liabilities 13 5 - -
Deposits due to customers 224 223 - -
1 607 555 - -
Potential effect recorded Potential effect recorded
in profit and loss directly in equity
Favourable Unfavourable Favourable Unfavourable
Rm Rm Rm Rm
Trading and hedging portfolio assets 131 123
Loans and advances to customers 245 306 - -
Investment securities 1 527 1 735 5 4
Trading and hedging portfolio liabilities 65 61 - -
Other liabilities 2 2 - -
Deposits due to customers 122 122 - -
Debt securities in issue 59 59 - -
2 151 2 408 5 4
21.9 Sensitivity analysis of valuations using unobservable inputs (continued)
The following table reflects how the unobservable parameters were changed in order to evaluate the sensitivities of
Level 3 assets and liabilities:
Instrument Parameter Positive/(negative) variance
in 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
Investment securities (private equity, property equity, investments
and others) Future earnings and 15/(15)%
marketability discounts
Comparator multiples
Discount rates
Structured notes and deposits designated at fair value through
profit or loss Yield curve 100/(100) bps
Investment properties Selling price per unit 15/15%
Selling price escalations per year
Rental income per unit
Rental escalations per year
Expenses ratios
Vacancy rates
Income capitalisation rates
Risk adjusted rates
21.10 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 Valuation techniques applied Significant observable inputs Fair value of
asset/liability
Rm
Loans and advances to banks Discounted cash flow Interest rate curves, money market curves 6 140
Trading and hedging portfolio
assets
Debt instruments Discounted cash flow Underlying price of market traded 174
instruments and interest rates.
Derivatives assets 46 725
Commodity derivatives Discounted cash flow model, option Spot price (physical or futures),
pricing models, futures pricing model, interest rates, volatility
ETF model 242
Credit derivatives Discounted cash flow model, credit Interest rate, recovery
default swap model (hazard rate model) rate, credit spread, quanto ratio 258
Equity derivatives Discounted cash flow model, option Spot price, interest rate,
pricing models, futures pricing model volatility, dividend stream 729
Foreign exchange derivatives Discounted cash flow model, option Spot price, interest rate,
pricing models volatility 7 016
Interest rate derivatives Discounted cash flow model, option Interest rate curves, repo curves,
pricing models money market curves, volatility 38 480
Equity instruments Net asset value Underlying price of market traded instruments 77
Money market assets Discounted cash flow Money market rates and interest rates 7 006
Loans and advances to customers Discounted cash flow Interest rate curves, money market curves 4 069
Deposits from banks Discounted cash flow Interest rate curves and money market curves 12 267
21.10 Measurement of financial instruments at Level 2
Category of asset/liability Valuation techniques applied Significant observable inputs Fair value of
asset/liability
Rm
Trading and hedging portfolio liabilities
Derivative liabilities 49 436
Commodity derivatives Discounted cash flow model, option Spot price (physical or futures), 149
pricing models, futures pricing model,ETF model interest rates, volatility
Credit derivatives Discounted cash flow model, credit default Interest rate, recovery rate, credit 350
swap model (hazard rate model) spread, quanto ratio
Equity derivatives Discounted cash flow model, option pricing Spot price, interest rate, 1 607
models, futures pricing model volatility, dividend stream
Foreign exchange derivatives Discounted cash flow model, option pricing models Spot price, interest rate, volatility 7 745
Interest rate derivatives Discounted cash flow model, option pricing models Interest rate curves, repo curves, money
market curves, volatility 39 585
Deposits due to customers Discounted cash flow Interest rate curves and money 10 725
market curves
Debt securities in issue Discounted cash flow The underlying price of the market traded
instrument and interest rate curves 3 549
21.11 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.
Fair value
Range of estimates measurement Fair value of
Category of Valuation Significant utilised for the sensitivity to the asset/liability
asset/liability techniques applied unobservable inputs unobservable inputs unobservable inputs Rm
Loans and advances to Discounted cash flow, Credit ratings Credit spreads vary The sensitivity of the 6 477
customers and dividend yield models between 1,35% fair value measurement
and 7,5% 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.
Investment securities Discounted cash flows, Weighted average cost Discount rates The sensitivity of the 2 313
third party valuations, of capital, EBITDA between 9,7% and fair value measurement
earnings before interest, multiples, liquidity 18%, multiples is dependent on the
tax, depreciation and discounts, minority between 5,5 and unobservable inputs.
amortisation (EBITDA) discounts, capitalisation 6,1 Significant changes to
multiples, income rates the unobservable inputs
capitalisation valuations, in isolation will have
net asset value models either a positive or
negative impact on the fair value.
Trading and hedging portfolio assets
Debt instruments Discounted cash flow Credit spreads used 0% to 3,5% The sensitivity of the 873
in the calculation of fair value measurement
the counterparty of is dependent on the
credit risk adjustments unobservable inputs.
Significant changes to
the unobservable inputs
in isolation will have
either a positive or
negative impact on the
fair value.
Derivative assets 164
Credit derivatives Discounted cash flow Illiquid credit curves, 0% to 3,5% The sensitivity of the 11
model, credit default recovery rates, quanto fair value measurement
swap model (hazard rate model) ratio 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.
Foreign exchange Discounted cash flow African basis curves -2,5% to 1,7% The sensitivity of the 39
derivatives model, option pricing models > 1 year 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.
Interest rate Discounted cash flow Interest rates (ZAR-SWAP- -1,5% to 8,3% The sensitivity to the 114
derivatives model, option pricing models SPREAD curves, ZAR-REAL unobservable inputs
>5 years, Repo curves The sensitivity of the
> 1 year) 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.
Deposits due to Discounted cash flow ZAR MM funding spread 0,85% to 1,2% The sensitivity of the 7 138
customers greater than five years 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.
Debt securities Discounted cash flow Credit spread 10 to 20 basis points The sensitivity of the 35
in issue 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.
Trading and hedging portfolio liabilities 542
Derivative liabilities
Credit Discounted cash flow Illiquid credit curves, 0% to 3,5% The sensitivity of the 45
derivatives model, credit default recovery rates, quanto fair value measurement
swap model (hazard ratio is dependent on the
rate model) unobservable inputs.
Significant changes to
the unobservable inputs
in isolation will have
either a positive or
negative impact on the
fair value.
Equity Discounted cash flow Volatility, dividend 16,9% to 37,2% The sensitivity of the 306
derivatives model, option pricing streams > 3 years fair value measurement
models, futures pricing is dependent on the
model unobservable inputs.
Significant changes to
the unobservable inputs
in isolation will have
either a positive or
negative impact on the
fair value.
Foreign exchange Discounted cash flow African basis curves -2,5% to 1,7% The sensitivity of the 49
derivatives model, option pricing > 1 year fair value measurement
models 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.
Interest rate Discounted cash flow Interest rates -1,5% to 8,3% The sensitivity of the 142
derivatives model, option pricing (ZAR-SWAP-SPREAD curves, fair value measurement
models ZAR-REAL > 1 year) is dependent on the
ZAR MM - FundingSPR unobservable inputs.
>5 years, Repo curves Significant changes to
>1 year the unobservable inputs
in isolation will have
either a positive or
negative impact on the
fair value.
21.12 Measurement of non-financial assets and liabilities at Level 3
The table below sets out information about significant unobservable inputs used at the end of the reporting period in
measuring non-financial assets and liabilities categorised as Level 3 in the fair value hierarchy.
Range of estimates Fair value measurement Fair value of
Category of Valuation techniques Significant unobservable utilised for the sensitivity to the asset/liability
asset/liability applied inputs unobservable inputs unobservable inputs Rm
Investment Discounted cash flow Estimates of periods in 2 - 7 years The sensitivity of the 240
properties which rental units will be fair value measurement
disposed of is dependent on the
Selling price escalations 0% to 6% unobservable inputs.
per year Significant changes to
the unobservable inputs
in isolation will have
either a positive or
negative impact on the
fair value.
Expense rates 22% to 15%
Vacancy rates 2% to 15%
Income capitalisation 10% to 12%
Risk adjusted discount rates 14% to 16%
22. Offsetting financial assets and financial liabilities
In accordance with IAS 32 Financial Instruments: Presentation (“IAS 32”), the Bank reports financial assets and
financial liabilities, on a net basis on the statement of financial position only if there is a legally enforceable right to
set off the recognised amounts and there is intention to settle on a net basis, or to realise the asset and settle the
liability simultaneously. Where relevant, the Bank reports derivative financial instruments and reverse repurchase and
repurchase agreements and other similar secured lending and borrowing agreements on a net basis.
The following table shows the impact of netting arrangements on the statement of financial position for recognised
financial assets and liabilities that are reported net on the statement of financial position and those derivative
financial instruments and reverse repurchase and repurchase agreements and other similar lending and borrowing agreements that
are subject to enforceable master netting arrangements or similar agreements which did not qualify for presentation on a
net basis. The table also shows potential netting not recognised on the statement of financial position that results
from arrangements that do not meet all the IAS 32 netting criteria, because there is no intention to net settle or realise
simultaneously, and related financial collateral that mitigates credit risk.
The net amounts presented are not intended to represent the Bank’s actual credit exposure as a variety of credit
mitigation strategies are employed in addition to netting and collateral arrangements.
2013
(Audited)
Amounts subject to enforceable netting arrangements
Effects of netting on statement of financial position Related amounts not set off
Net Amounts
amounts not
reported subject to Total
on the enforceable per
statement Offsetting netting statement
Gross Amounts of financial financial Financial Net arrange- of financial
amounts set off(1) position(2) instruments collateral(3) amount ments(4) position(5)
Rm Rm Rm Rm Rm Rm Rm Rm
Derivative financial assets 46 278 (1 667) 44 611 (37 580) (3 981) 3 050 2 278 46 889
Reverse repurchase agreements and
other similar secured lending 37 031 (14 419) 22 612 - (22 612) - - 22 612
Total assets 83 309 (16 086) 67 223 (37 580) (26 593) 3 050 2 278 69 501
Derivative financial liabilities (46 835) 550 (46 285) 37 580 256 (8 449) (3 693) (49 978)
Repurchase agreements and other similar
secured borrowing (18 204) - (18 204) - 18 204 - - (18 204)
Total liabilities (65 039) 550 (64 489) 37 580 18 460 (8 449) (3 693) (68 182)
Notes
(1)Amounts offset for derivative financial liabilities includes cash collateral netted of R1 117 million (2012:
R2332 million). Amounts offset for reverse repurchase agreements relates to a short sale financial liability of
R14 419 million (2012: R11 424 million). No other significant recognised financial assets and liabilities were
offset in the statement of financial position.
(2)Net amounts reported on the statement of financial position comprises exposure that has been netted on the
statement of financial position in compliance with IAS 32 (net exposure) and exposures that are subject to legally enforceable
netting arrangements but have not been netted in the statement of financial position.
(3)Financial collateral excludes over collateralisation and amounts, which are measured at fair value and are in
excess of the net statement of financial position exposure.
(4)In certain jurisdictions a contractual right of set-off is subject to uncertainty under the laws of the
jurisdiction and therefore netting is not applied and the amounts are classed as not subject to legally enforceable netting
arrangements.
(5)Total per statement of financial position is the sum of Net amounts reported in the statement of financial
position which are subject to enforceable netting arrangements and Amounts not subject to enforceable netting arrangements.
2012(1)
(Audited)
Amounts subject to enforceable netting arrangements
Effects of netting on statement of financial position Related amounts not set off
Net Amounts
amounts not
reported subject to Total
on the enforceable per
statement Offsetting netting statement
Gross Amounts of financial financial Financial Net arrange- of financial
amounts set off(1) position(2) instruments collateral(3) amount ments(4) position(5)
Rm Rm Rm Rm Rm Rm Rm Rm
Derivative financial assets 53 962 (3 997) 49 965 (43 678) (3 152) 3 135 2 284 52 249
Reverse repurchase agreements and other
similar secured lending 30 055 (11 424) 18 631 - (18 631) - - 18 631
Total assets 84 017 (15 421) 68 596 (43 678) (21 783) 3 135 2 284 70 880
Derivative financial liabilities (49 153) 1 666 (47 487) 43 678 169 (3 640) (3 131) (50 618)
Repurchase agreements and other similar
secured borrowing (15 180) - (15 180) - 15 180 - - (15 180)
Total liabilities (64 333) 1 666 (62 667) 43 678 15 349 (3 640) (3 131) (65 798)
Offsetting and collateral arrangements
Derivative assets and liabilities
Credit risk is mitigated where possible through netting agreements, such as the International Swaps and Derivatives
Association (“ISDA”) Master Agreement or derivative exchange or clearing counterparty agreements, whereby all outstanding
transactions with the same counterparty can be offset and close-out netting applied across all outstanding transactions
covered by the agreements if an event of default or other predetermined events occur. Financial collateral (cash and
non-cash) is also obtained, often daily, for the net exposure between counterparties where possible to further mitigate
credit risk.
Repurchase and reverse repurchase agreements and other similar secured lending and borrowing
Credit risk is mitigated where possible through netting agreements such as global master repurchase agreements and
global master securities lending agreements whereby all outstanding transactions with the same counterparty can be offset
and close-out netting applied across all outstanding transactions covered by the agreements if an event of default or
other predetermined events occur. Financial collateral is obtained and typically comprises highly liquid securities which
are legally transferred and can be liquidated in the event of counterparty default.
Notes
(1)Restated, refer to note 23 for reporting changes. Recent developments in considering the impact of the amended IAS
32 offsetting requirements resulted in a change to the approach followed for variation margin on SAFEX and Yield-X
futures and options. The various margin on these contracts are considered a daily settlement of a derivative exposure as
opposed to collateral that is offset against the derivative value. As a result, these contracts are excluded from the scope
of the offsetting requirements in IAS 32 and the IFRS 7 offsetting disclosures. The change in approach has been applied
retrospectively and only impacts the disclosure provided in this note.
(2)Amounts offset for derivative financial liabilities includes cash collateral netted of R2 332 million. Amounts
offset for reverse repurchase agreements relates to a short sale financial liability of R11 424 million. No other
significant recognised financial assets and liabilities were offset on the statement of financial position.
(3)Net amounts reported in the statement of financial position comprises exposure that has been netted in the
statement of financial position in compliance with IAS 32 (net exposure) and exposures that are subject to legally enforceable
netting arrangements but have not been netted on the statement of financial position.
(4)Financial collateral excludes over collateralisation and amounts, which are measured at fair value and are in
excess of the net statement of financial position exposure.
(5)In certain jurisdictions a contractual right of set-off is subject to uncertainty under the laws of the
jurisdiction and therefore netting is not applied and the amounts are classed as not subject to legally enforceable netting
arrangements.
(6)Total per statement of financial position is the sum of Net amounts reported in the statement of financial
position which are subject to enforceable netting arrangements and
Amounts not subject to enforceable netting arrangements.
23. Reporting changes
The financial reporting changes that impact the comparative reporting periods of the Bank’s results for the reporting
period ending 31 December 2013 are driven by:
1.The implementation of new International Financial Reporting Standards (“IFRS”), specifically IFRS 10 Consolidated
Financial Statements(“IFRS 10”) and IAS 19 Employee Benefits (amended 2011) (“IAS 19R”). All other amendments to IFRS
effective for the current reporting period have had no significant impact on the Bank’s reported results.
2.Certain changes in internal accounting policies.
3.Business portfolio changes between operating segments including the allocation of elements of the Head office
segment to business segments.
The implementation of new IFRS impacts the net financial results of the Bank. The changes in the Bank’s internal
accounting policies impacts the individual lines on which the income or costs are accounted for but not the net financial
results of the Bank. The inter-segmental changes for Head office allocations and portfolio changes affect the reported
results of the individual businesses in the segment report, but have no impact on the Bank’s primary statements.
23.1 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 resulted in
restatement of the Bank’s results for the reporting period ended 31 December 2011 and 2012.
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 Bank has
interests should be consolidated.
Implementation of this new standard results in the Bank 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. For the Bank, 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.
23.2 Internal accounting policy changes
The Bank elected to make internal accounting policy changes set out below, involving classification of items between
statement of comprehensive income lines.
These have no impact on the net earnings of the Bank. To ensure comparability, the comparative reporting periods have
been restated.
The Bank elected to change its accounting policy in terms of best practice and to better align with Barclays’ internal
accounting policies interms of:
- "Collection costs" - 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.
- "Association costs", defined as costs incurred through the Bank’s association with leading inter-change agents
resulting in a reclassification of certain costs from "operating expenses" to "net fee and commission income".
23. Reporting changes (continued)
Condensed consolidated statement of financial position as at 31 December 2011
IFRS
accounting
As previously policy
reported(1) changes(2) Restated
Statement of financial position Rm Rm Rm
Assets
Cash, cash balances and balances with central banks 19 505 - 19 505
Statutory liquid asset portfolio 57 473 - 57 473
Loans and advances to banks 55 870 2 55 872
Trading portfolio assets 79 603 71 79 674
Hedging portfolio assets 4 299 - 4 299
Other assets 11 459 (139) 11 320
Current tax assets 84 - 84
Non-current assets held for sale 35 - 35
Loans and advances to customers 488 332 (988) 487 344
Loans to Group companies 7 164 (1 436) 5 728
Investment securities 8 331 56 8 387
Investments in associates and joint ventures 412 - 412
Investment properties 1 840 - 1 840
Property and equipment 7 268 - 7 268
Goodwill and intangible assets 700 - 700
Deferred tax assets 61 - 61
Total assets 742 436 (2 434) 740 002
Liabilities
Deposits from banks 44 702 67 44 769
Trading portfolio liabilities 49 232 - 49 232
Hedging portfolio liabilities 2 456 - 2 456
Other liabilities 10 536 (33) 10 503
Provisions 1 457 - 1 457
Current tax liabilities 255 - 255
Deposits due to customers 431 762 507 432 269
Debt securities in issue 128 051 (1 394) 126 657
Loans from Group companies 1 438 (1 438) -
Borrowed funds 14 051 - 14 051
Deferred tax liabilities 1 104 (40) 1 064
Total liabilities 685 044 (2 331) 682 713
Equity
Capital and reserves
Attributable to equity holder:
Ordinary share capital 303 - 303
Ordinary share premium 11 465 - 11 465
Preference share capital 1 - 1
Preference share premium 4 643 - 4 643
Retained earnings 37 219 (105) 37 114
Other reserves 3 603 2 3 605
57 234 (103) 57 131
Non-controlling interest -ordinary shares 158 - 158
Total equity 57 392 (103) 57 289
Total liabilities and equity 742 436 (2 434) 740 002
Notes
(1)Column refers to the amounts published on 12 February 2013.
(2)Included in these adjustments is the impact of IAS 19, reflecting a credit to "other assets" of R138 million, a
debit to "deferred tax liabilities" of R39 million and a debit to "retained earnings" of R99 million. The remaining
adjustments relate to the implementation of IFRS 10.
23. Reporting changes (continued)
Condensed consolidated statement of financial position as at 31 December 2012
IFRS
As accounting
previously policy Consolidation
reported(1) changes(2) adjustments(3) Restated
Rm Rm Rm Rm
Assets
Cash, cash balances and balances with central banks 20 435 - - 20 435
Statutory liquid asset portfolio 63 020 - - 63 020
Loans and advances to banks 42 405 2 - 42 407
Trading portfolio assets 82 302 114 - 82 416
Hedging portfolio assets 5 439 - - 5 439
Other assets 11 362 - (228) 11 134
Current tax assets 35 (1) - 34
Non-current assets held for sale 1 438 - - 1 438
Loans and advances to customers 511 179 (863) - 510 316
Loans to Group companies 10 777 (49) 228 10 956
Investment securities 6 363 226 - 6 589
Investment in associates and joint ventures 562 - - 562
Investment properties 331 - - 331
Property and equipment 7 653 - - 7 653
Goodwill and intangible assets 1 160 - - 1 160
Deferred tax assets 30 - - 30
Total assets 764 491 (571) - 763 920
Liabilities
Deposits from banks 42 936 149 - 43 085
Trading portfolio liabilities 47 889 - - 47 889
Hedging portfolio liabilities 3 855 - - 3 855
Other liabilities 14 431 87 (49) 14 569
Provisions 1 394 - - 1 394
Current tax liabilities 59 (1) - 58
Non-current assets held for sale 177 - - 177
Deposits due to customers 467 318 426 - 467 744
Debt securities in issue 106 188 (1 265) - 104 923
Loans from Group companies - (49) 49 -
Borrowed funds 17 907 - - 17 907
Deferred tax liabilities 1 411 (4) - 1 407
Total liabilities 703 565 (557) - 703 008
Equity
Capital and reserves
Attributable to equity holder:
Ordinary share capital 303 - - 303
Ordinary share premium 12 465 - - 12 465
Preference share capital 1 - - 1
Preference share premium 4 643 - - 4 643
Retained earnings 38 025 (14) - 38 011
Other reserves 5 441 - - 5 441
60 878 (14) - 60 864
Non-controlling interest 48 - - 48
Total equity 60 926 (14) - 60 912
Total liabilities and equity 764 491 (571) - 763 920
Notes
(1)Column refers to the amounts published on 12 February 2013.
(2)Included in these adjustments is the impact of IAS 19, reflecting a credit to "other assets" of R138 million, a
debit to "deferred tax liabilities" of R39 million and a debit to "retained earnings" of R99 million. The remaining
adjustments relate to the implementation of IFRS 10.
(3)Adjustments to bring certain balances in Absa Bank Limited in line with fellow subsidiaries as Barclays Africa Group
Limited as a result of the combination of Absa Group Limited and Barclays Africa operations.
23.Reporting changes (continued)
Condensed consolidated statement of comprehensive income for the annual reporting period ended
31 December 2012
IFRS
accounting Accounting
As previously policy policy
reported(1) changes(2) changes Restated
Rm Rm Rm Rm
Net Interest Income 21 995 (119) - 21 876
Interest and similar income 48 682 (167) - 48 515
Interest expense and similar charges (26 687) 48 - (26 639)
Impairment losses on loans and advances (7 918) - (104) (8 022)
Net interest income after impairment losses on loans 14 077 (119) (104) 13 854
and advances
Non-interest income 17 870 105 (86) 17 889
Net fee and commission income 13 759 - (86) 13 673
Fee and commission income 14 890 - - 14 890
Fee and commission expense (1 131) - (86) (1 217)
Gains and losses from banking and trading activities 3 543 108 - 3 651
Gains and losses from investment activities 20 - - 20
Other operating income 548 (3) - 545
Operating income before operating expenditure 31 947 (14) (190) 31 743
Operating expenditure (21 967) (81) 190 (21 858)
Operating expenses (21 088) (81) 190 (20 979)
Other impairments (344) - - (344)
Indirect taxation (535) - - (535)
Share of post-tax results of associates and joint ventures 240 - - 240
Operating profit before income tax 10 220 (95) - 10 125
Taxation expense (2 669) 26 - (2 643)
Profit for the reporting period 7 551 (69) - 7 482
Notes
(1)Column refers to the amounts published on 12 February 2013.
(2)Included in these adjustments is the impact of IAS 19, reflecting a credit to ‘other assets’ of R138 million, a
debit to ‘deferred tax liabilities’ of R39 million and a debit to ‘retained earnings’ of R99 million. The remaining
adjustments relate to the implementation of IFRS 10.
23.Reporting changes (continued)
Condensed consolidated statement of comprehensive income for the annual reporting period ended
31 December 2012 (continued)
IFRS
accounting Accounting
As previously policy policy
reported(1) changes(2) changes Restated
Rm Rm Rm Rm
Profit for the reporting period 7 551 (69) - 7 482
Other comprehensive income
Items that will not be reclassified to the profit or loss
component of the statement of comprehensive income:
Movement in retirement benefit fund assets and liabilities (201) 158 - (43)
Decrease in retirement benefit surplus (279) 218 - (61)
Deferred tax 78 (60) - 18
Total items that will not be reclassified to the profit or
loss component of the statement of comprehensive income (201) 158 - (43)
Foreign exchange differences on translation of foreign operations 183 - - 183
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 or loss component of the statement (2 088) - - (2 088)
of comprehensive income
Deferred tax (157) - - (157)
Movement in available-for-sale reserve 1 101 - - 1 101
Fair value gains arising during the reporting period 1 524 - - 1 524
Amortisation of government bonds - release to profit or loss
component of the statement of comprehensive income 10 - - 10
Deferred tax (433) - - (433)
Total items that will not be reclassified to the profit or
loss component of the statement of comprehensive income 1 689 - - 1 689
Total comprehensive income for the reporting period 9 039 89 - 9 128
Profit attributable to:
Ordinary equity holder 7 272 (69) - 7 203
Preference equity holders 295 - - 295
Non-controlling interest (16) - - (16)
7 551 (69) - 7 482
Total comprehensive income attributable to:
Ordinary equity holder 8 760 89 - 8 849
Preference equity holders 295 - - 295
Non-controlling interest (16) - - (16)
9 039 89 - 9 128
Notes
(1)Column refers to the amounts published on 12 February 2013.
(2)Included in these adjustments is the impact of IAS 19, reflecting a credit to "other assets" of R138 million, a
debit to "deferred tax liabilities" of R39 million and a debit to "retained earnings" of R99 million. The remaining
adjustments relate to the implementation of IFRS 10.
Profit and dividend announcement
31 December 2013
Salient features
- Diluted headline earnings per share (HEPS) increased 11% to 2 180,4 cents.
- Pre-provision profit decreased 2% to R19 billion.
- Return on equity (RoE) increased to 15,5% from 13,5%.
- Declared a cash dividend to preference shareholders of R147,3 million (2 979,3 cents per share).
- Revenue grew 6% to R42 122 million.
- Net interest margin (on average interest-bearing assets) rose to 3,64% from 3,54%.
- Non-interest income increased 4% to R18 557 million and accounted for 44,1% of total revenue.
- Operating expenses grew 12% to R23 560 million, increasing the cost-to-income ratio to 55,9% from 52,8%.
- Loans and advances to customers grew 5% to R534 billion, while deposits due to customers increased 4% to R488
billion.
- Credit impairments declined 27% to R5 881 million, resulting in a 1,14% credit loss ratio, down from 1,60% in 2012.
- Non-performing loans (NPLs) improved to 4,5% of gross loans and advances to customers from 5,7%.
- Return on risk-weighted assets (RoRWA) increased to 1,98% and return on assets (RoA) improved to 1,08% from 1,90%
and 0,96% respectively.
- Net asset value (NAV) per share dropped to 13 721 cents, despite paying R12,0 billion in dividends during the
period.
- Absa Bank’s Common Equity Tier 1 (CET1) capital adequacy ratio was 11,0%, well above regulatory requirements and our
board targets.
Overview of results
Absa Bank Limited’s headline earnings increased 12% to R8 266 million from R7 356 million and attributable profit grew
17% to R8 439 million. Diluted HEPS also increased 11% to 2 180,4 cents from 1 960,0 cents. The Bank’s RoE improved to
15,5% from 13,5%, comfortably above its 13,0% cost of equity. A total cash dividend to preference shareholders of R147,3
million (2 979,3 cents per share) was declared.
Improved credit impairments, particularly in retail mortgages and commercial property finance, was the principal
reason for higher earnings. However, pre-provision profit decreased 2% to R19 billion, as revenue growth improved in the
second half, while remaining below cost growth that included substantial investment spend.
Retail and Business Banking’s (RBB) headline earnings increased 53% to R6 641 million, due largely to lower credit
impairments. Corporate, Investment Bank and Wealth’s (CIBW) headline earnings decreased 2% to R2 492 million.
Operating environment
Global growth recovered steadily in 2013, supported for the first time since the global financial crisis by developed
market economies, while emerging markets’ growth slowed. Central banks maintained their accommodative monetary policy
stance, with some cutting interest rates and others injecting liquidity into the financial system. South Africa’s economic
growth remained modest and uneven, affected largely by subdued global demand and protracted industrial action in key
sectors. Household consumption growth slowed further in 2013, reflecting deteriorating household balance sheets, a
lacklustre job market, subdued confidence, rising inflation and moderating real wage growth. Consumer appetite for credit waned
as credit extension to households slowed from 10,0% at the beginning of 2013 to 5,5% in December. The rand exchange
rate depreciated throughout the year, reaching a low of R/$10.53 in December after starting the year at R/$8.56. The South
African economy looks to have grown by about 2% in 2013.
Bank performance
Statement of financial position
Total Bank assets increased 3% to R789,4 billion at 31 December 2013, largely due to 5% growth in loans and advances
to customers and 7% higher loans and advances to banks.
Loans and advances to customers
Gross loans and advances to customers increased 5% to R546,8 billion. Retail Banking’s gross loans grew 2% to R350,0
billion, given 12% growth in credit cards and 10% higher instalment credit agreements, offset by 2% lower mortgages.
Business Banking’s gross loans decreased 4%, due to 4% lower commercial property finance. CIBW gross loans increased 17%,
given strong growth in foreign currency loans and corporate overdrafts.
Funding
The Bank maintained its strong liquidity position, growing deposits due to customers 4% to R448,4 billion. Debt
securities in issue declined 7% to R97,2 billion. The funding tenor also remained robust with an average long-term funding
ratio of 24,3% for the period, from 26,5% in 2012. Deposits due to customers contributed 75,2% to total funding, while the
proportion of debt securities in issue dropped to 15% from 17%. Retail Banking maintained its leading market share,
increasing deposits 6% to R134,8 billion. Business Banking’s deposits grew 11%, largely due to 57% growth in savings and
transmission deposits. CIBW’s deposits increased 2%, due to 8% growth in fixed deposits. The Bank’s loans-to-deposits ratio
improved to 91,2% from 89,1%.
Net asset value
The Bank’s NAV declined to R52,6 billion, as it generated retained earnings of R15,6 billion in the period, which was
offset by paying R12,0 billion in dividends. The Bank’s NAV per share decreased to 13 721 cents.
Capital to risk-weighted assets
The Bank’s risk-weighted assets were R405,9 billion at 31 December 2013, due to 5% growth in loans and advances to
customers and implementing Basel III from 1 January 2013, partially offset by various RWA optimisation initiatives. Its
capital levels remain above board targets and regulatory requirements. Absa Bank’s CET1 and Tier 1 capital adequacy ratios
were 11,0% and 12,0% respectively. The Bank’s total capital ratio was 15,6%, above our board target of 12,0% to 13,5%.
Statement of comprehensive income
Net interest income
Net interest income increased 8% to R23 565 million from R21 876 million, and average interest-bearing assets grew 5%.
The net interest margin improved to 3,64% from 3,54%, largely due to including the Edcon portfolio for the full year
and CIBW’s improved margin. The deposit margin decreased due to lower average rates and competition, with the
contributions from hedging and the endowment also declining.
Impairment losses on loans and advances
Credit impairments fell 27% to R5 881 million from R8 022 million, resulting in a lower credit loss ratio of 1,14%
from 1,60%. Total NPL coverage improved further to 39,1% from 36,0%.
RBB’s credit impairment dropped 27% to R5 751 million, a 1,44% credit loss ratio from 2,03%. Retail Banking’s credit
impairments fell 24% to R4 854 million, improving its credit loss ratio to 1,44% from 1,96%. 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 65% to R1 545 million from last year’s elevated R4 453 million. Mortgages NPLs
fell 28% to R13,5 billion, with a material improvement in the legal book. Mortgages coverage increased to 27,8% from
28,5%. Vehicle and Asset Finance’s credit loss ratio improved to 0,80% from 1,08%, reflecting improved collections and
lower NPLs.
Despite consumers remaining under pressure, Personal Loans’ credit loss ratio was well within expectations at 6,23%
from 5,00%, given the focus on existing customers and on further improving this book’s risk profile. Card’s charge
increased to R1 884 million from R1 169 million, as the Edcon portfolio was included for a full year, from just two months in
2012. The credit impairment on the remaining Card book more than doubled to R509 million, which represents a 2.98% credit loss
ratio from 1,25%. The Edcon portfolio’s credit loss ratio increased to 11,86% from 9,56% in the first half, as its NPL cover
improved to 81.0%.
Business Banking’s credit impairments decreased 41% to R897 million, improving its credit loss ratio to 1,43% from
2,36%, largely due to lower commercial property finance provisions off a high base. While CIBW’s charge remained relatively
flat with its credit loss ratio just 0,12%.
Total NPLs have reduced by R5 247 million to 4,5% of gross loans and advances to customers at 31 December 2013 from
5,7% at 31 December 2012. Retail Banking’s NPLs fell 19,3% to R18 993 million.
Non-interest income
Non-interest income increased 4% to R18 557 million from R17 889 million, with stronger growth in the second half. Net
fee and commission income rose 5% to R14 421 million, largely due to 6% higher RBB income, while CIBW increased 3%.
Retail Banking’s non-interest income grew 4% to R10 531 million. Excluding the Edcon portfolio it decreased 1%, due to
fewer transaction accounts and deliberately migrating customers to lower priced Value Bundles. These were partially
offset by strong growth in the Rewards programme, 7% growth in merchant income (to R1 973 million) and 14% growth in Home
Loans’ non-interest revenue.
Business Banking’s non-interest income grew 14% to R3 051 million, predominantly due to a R308 million positive swing
in income from equities following valuation write downs in 2012. Net fee and commission income increased 2% to R2 859
million, reflecting 6% growth in electronic banking fees and 3% in cash fees that outweighed lower cheque payment
volumes.
CIBW’s non-interest income increased 3% to R5 038 million, in part due to the sale of the Custody and Trustee
business, although Corporate electronic banking fees grew 8% and Investment Banking’s growth was strong. CIBW’s net trading
result decreased 8% to R3 094 million, reflecting difficult trading conditions in the second quarter and continued margin
pressure in fixed income and foreign exchange.
Operating expenses
Operating expenses grew 12% to R23 560 million from R20 979 million, which increased the Bank’s cost-to-income ratio
to 55,9% from 52,8%. Excluding the Edcon portfolio, which was included for the full year, total costs grew 8%.
Staff costs increased 9% to R12 248 million to account for 52% of the total. Salaries and current service costs on
post-retirement benefits grew 6%, due to slightly higher headcount and inflationary pressures. Total incentives increased
25%, after a reduction in the previous year and a substantial recovery in RBB earnings.
Non-staff costs increased 15,6% to R11 312 million. Optimising the Bank’s property portfolio reduced property costs by
15% to R1 216 million, while leveraging Barclays’ capabilities and systems, reduced information technology costs 9% to
R1 760 million. Amortisation of intangible assets grew 47%, reflecting increased investment in systems.
Professional fees grew 86% to R1 257 million, which included substantially higher strategic initiative spend on
project delivery and systems. Marketing costs grew 17% as the Bank’s Prosper campaign was launched.
Retail Banking’s operating expenses increased 14%, or 7% when excluding the Edcon portfolio. Business Banking’s costs
fell 2% due to a large decline in its Equities expenses. Excluding this, its costs increased 2%. CIBW’s operating
expenses increased 8% with continued investment in key growth areas.
Taxation
The Bank’s taxation expense increased 24% to R3 284 million, slightly more than the growth in pre-tax profit,
resulting in a 27,3% effective tax rate increase from 26,1% in 2012.
Prospects
We expect a continuation of the recovery in the global economy during 2014 as uncertainty around United States Federal
Reserve tapering diminished, fiscal headwinds abate, and monetary policy gains traction. We expect global GPD to expand
by 3,5% after growth of around 3% in the prior two years. Domestically, although we expect a modest recovery in GPD
growth to 2,7% in 2014, with the key risks being the impact on the consumer of higher inflation and policy rates, the
impact on the economy of labour strikes and the weak rand, and the impact on markets from global monetary policy. We
see low probability of GDP growth accelerating faster without major policy shifts, improved confidence levels,
and/or an alleviation of binding energy and transportation infrastructure constraints.
Basis of presentation
The Bank’s annual financial results have been prepared in accordance with the recognition and measurement requirements
of International Financial Reporting Standards (“IFRS”), interpretations issued by the IFRS Interpretations Committee
(IFRS-IC), the SAICA Financial Reporting Guides as issued by the Accounting Practices Committee and Financial Reporting
Pronouncements as issued by Financial Reporting Standards Council, the JSE Listings Requirements and the requirements of
the Companies Act No 71 of 2008. The principal accounting policies applied are set out in the Bank’s most recent annual
consolidated financial statements.
The information disclosed in this SENS announcement is derived from the information contained in the audited annual
consolidated financial statements and does not contain full or complete disclosure details. Any investment decisions by
shareholders should be based on consideration of the audited annual consolidated financial statements available on
request. The presentation and disclosure complies with International Accounting Standard (IAS) 34.
The preparation of financial information requires the use of estimates and assumptions about future conditions. Use of
available information and application of judgement are inherent in the formation of estimates. The accounting policies
that are deemed critical to the Bank’s 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, consolidation of entities, post-retirement benefits and income taxes.
Accounting policies
The accounting policies applied in preparing the audited consolidated annual financial statements are the same as
those in place for the reporting period ended 31 December 2012. The new and amended standards that became effective for the
first time during the reporting period are specified in note 1.21 of the accounting policies contained in the most
recent annual consolidated financial statements. These changes can be summarised as:
- the implementation of new IFRS standards specifically IFRS 10 Consolidated Financial Statements (“IFRS 10”) and IAS
19 Employee Benefits (amended 2011) (“IAS 19R”); and
- certain changes in internal accounting policies.
Change in accounting estimates
During the current year, the Bank revised the estimated useful lives of computer equipment from 3 to 5 years to 4 to 6
years. This revision was done as a result of the requirement of IAS 16 to reassess the useful lives of property, plant
and equipment on an annual basis. This change in useful lives has brought the Bank’s estimated useful lives of computer
equipment in line with the Barclays Plc estimated useful lives for computer equipment. The change in accounting estimate
has been accounted for prospectively in accordance with IAS 8.
Auditors report
Ernst & Young Inc. and PricewaterhouseCoopers Inc., Absa Bank Limited’s independent auditors, have audited the
consolidated annual financial statements of Absa Bank Limited from which management prepared the condensed consolidated
financial results. The auditors have expressed an unqualified audit opinion on the consolidated annual financial statements.
The condensed consolidated financial results comprise the condensed consolidated statement of financial position at 31
December 2013, condensed consolidated statement of comprehensive income, condensed consolidated statement of changes in
equity and condensed consolidated statement of cash flows for the year then ended, and selected explanatory notes,
excluding items not indicated as audited. The audit report of the consolidated annual financial statements is available for
inspection at Absa Bank Limited’s registered office.
The condensed consolidated financial results are extracted from audited information, but is not itself audited. The directors
take full responsibility for the preparation of the condensed consolidated financial results and the financial information
has been correctly extracted from the underlying consolidated annual financial statements.
Directors' responsibility
This announcement is the responsibility of the directors of Absa Bank Limited and are based on extracts of audited financial
information where relevant.
Events after the reporting period
The directors are not aware of any events occurring between the reporting date of 31 December 2013 and the date of
authorisation of these condensed consolidated financial results as defined in IAS 10 Events after the reporting period.
On behalf of the board
W E Lucas-Bull M Ramos
Group Chairman Chief Executive Officer
Johannesburg
10 February 2014
Declaration of preference share dividend number 16:
Absa Bank non-cumulative, non-redeemable preference shares (Absa Bank preference shares):
The Absa Bank preference shares have an effective coupon rate of 70% of Absa Bank’s prevailing prime overdraft lending
rate (prime rate). Absa Bank’s current prime rate is 9%.
Notice is hereby given that preference dividend number 16, equal to 70% of the average prime rate for 1 September 2013
to 28 February 2014, per Absa Bank preference share has been declared for the period 1 September 2013 to 28 February 2014.
The dividend is payable on Monday, 7 April 2014, to shareholders of the Absa Bank preference shares recorded in the register
of members of the Company at the close of business on Friday, 4 April 2014.
The directors of Absa Bank confirm that the Bank will satisfy the solvency and liquidity test immediately after
completion of the dividend distribution.
Based on the current prime rate, the preference dividend payable for the period 1 September 2013 to 28 February 2014
would indicatively be 2 979,31507 cents per Absa Bank preference share.
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.
- Absa Bank has utilised R63 106 825,00 of STC credits (equivalent to 1 276,21597 cents per preference share),
therefore 1 703,09910 cents will be subject to dividend withholding tax payable by preference shareholders.
- The local dividend tax rate is fifteen per centum (15%).
- The gross local dividend amount is 2 979,31507 cents per preference share for shareholders exempt from the dividend
tax.
- The net local dividend amount is 2 723,85021 cents per preference share for shareholders liable to pay the dividend
tax.
- Absa Bank currently has 4 944 839 preference shares in issue.
- Absa Bank’s income tax reference number is 9575117719.
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, 28 March 2014
Shares commence trading ex dividend Monday, 31 March 2014
Record date Friday, 4 April 2014
Payment date Monday, 7 April 2014
Share certificates may not be dematerialised or rematerialised between Monday, 31 March 2014 and Friday, 4 April 2014,
both dates inclusive. On Monday, 7 April 2014, 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 7 April 2014 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, 7 April 2014.
On behalf of the board
N R Drutman
Company Secretary
Johannesburg
11 February 2014
Absa Bank Limited is a company domiciled in South Africa. Its registered office is the 7th Floor, Barclays Towers West,
15 Troye Street, Johannesburg, 2001.
Administration and contact details
Absa Bank Limited
Authorised financial services and registered credit provider (NCRCP7)
Registration number: 1986/004794/06
Incorporated in the Republic of South Africa
JSE share codes: ABSP and ABMN
ISIN: ZAE000079810
Registered office
7th Floor, Barclays Towers West
15 Troye Street, Johannesburg, 2001
PO Box 7735, Johannesburg, 2000
Telephone: (+27 11) 350 4000
Email: groupsec@barclaysafrica.com
Board of directors
Independent non-executive directors
C Beggs, Y Z Cuba, T Dingaan, S A Fakie, M J Husain, T M Mokgosi-Mwantembe, T S Munday
Non-executive directors
W E Lucas-Bull (Chairman)
Executive directors
D W P Hodnett (Deputy Chief Executive Officer
and Financial Director), M Ramos (Chief Executive Officer)
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@barclaysafrica.com
Company Secretary
N R Drutman
Telephone: (+27 11) 350 5347
Email: groupsec@barclaysafrica.com
Other contacts
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
Date: 11/02/2014 07:06:00 Produced by the JSE SENS Department. The SENS service is an information dissemination service administered by the JSE Limited ('JSE').
The JSE does not, whether expressly, tacitly or implicitly, represent, warrant or in any way guarantee the truth, accuracy or completeness of
the information published on SENS. The JSE, their officers, employees and agents accept no liability for (or in respect of) any direct,
indirect, incidental or consequential loss or damage of any kind or nature, howsoever arising, from the use of SENS or the use of, or reliance on,
information disseminated through SENS.
