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Unaudited condensed consolidated financial results
for the interim reporting period ended 30 June 2014.
Barclays Africa Group Limited
(formerly known as Absa Group Limited)
Authorised financial services and
registered credit provider (NCRCP7)
Registration number: 1986/003934/06
Incorporated in the Republic of South Africa
JSE share code: BGA
ISIN: ZAE000174124
(Barclays Africa Group, BAGL or the Group)
These unaudited 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: 30 July 2014
The term Barclays Africa or the Group refers to Barclays Africa Group Limited together with its subsidiaries.
Unaudited condensed consolidated financial results
for the interim reporting period ended 30 June 2014.
Consolidated salient features
30 June 31 December
2014 2013(1) Change 2013(1)
%
Statement of comprehensive income (Rm)
Revenue 30 684 28 573 7 59 406
Operating expenses 17 297 15 872 9 33 420
Profit attributable to ordinary equity holders 6 166 5 593 10 11 981
Headline earnings(2) 6 110 5 554 10 11 843
Statement of financial position
Loans and advances to customers (Rm) 614 642 583 632 5 605 337
Total assets (Rm) 977 803 953 895 3 961 977
Deposits due to customers (Rm) 597 555 570 692 5 588 011
Loans-to-deposits ratio (%) 87,4 86,2 88,3
Financial performance (%)
Return on average equity 16,1 14,3 15,5
Return on average assets 1,27 1,22 1,29
Return on average risk-weighted assets(3) 2,14 2,04 2,12
Operating performance (%)
Net interest margin on average interest-bearing assets 4,56 4,45 4,48
Impairment losses ratio 1,18 1,35 1,20
Non-performing loans ratio 4,6 5,3 4,7
Non-interest income as % of revenue 44,0 45,1 45,5
Cost-to-income ratio 56,4 55,5 56,3
JAWS (1,6) (1,4) (2,1)
Effective tax rate, excluding indirect taxation 29,2 28,9 28,9
Share statistics (million)(4)
Number of ordinary shares in issue 847,8 847,8 847,8
Number of ordinary shares in issue (excluding treasury shares) 846,9 847,2 847,3
Weighted average number of ordinary shares in issue (excluding
treasury shares) 847,5 847,0 847,3
Diluted weighted average number of ordinary shares in issue
(excluding treasury shares) 847,8 848,6 848,0
Share statistics (cents)(4)
Headline earnings per ordinary share 720,9 655,7 10 1 397,7
Diluted headline earnings per ordinary share 720,7 654,5 10 1 396,6
Basic earnings per ordinary share 727,6 660,3 10 1 414,0
Diluted basic earnings per ordinary share 727,3 659,1 10 1 412,9
Dividend per ordinary share relating to income for the reporting
period 400 350 14 820
Dividend cover (times) 1,8 1,9 (5) 1,7
Special dividend per ordinary share - 708 (100) 708
Net asset value per ordinary share 9 261 9 442 (2) 9 125
Tangible net asset value per ordinary share 8 887 9 076 (2) 8 754
Capital adequacy (%)
Barclays Africa Group Limited(5) 14,6 16,6 15,6
Absa Bank Limited 13,9 16,8 15,6
Common Equity Tier 1 (%)(5)
Barclays Africa Group Limited 11,8 12,5 12,1
Absa Bank Limited 10,1 12,2 11,0
Notes
(1) Restated, refer to note 24 for reporting changes. Additional disclosures for 30 June 2013 and 31 December 2013 have
been restated where applicable.
(2) After allowing for R147m (30 June 2013: R146m; 31 December 2013: R294m) profit attributable to preference equity
holders of Absa Bank Limited.
(3) For the calculation of RoRWA the RWA of the Group as at 30 June 2013 are restated to include the RWA of Barclays
Africa Limited as if they had always been a part of the Group’s RWA. This does not alter any submissions made to the
SARB.
(4) Share metrics per ordinary shares include the ordinary shares issued on 31 July 2013 for the acquisition of
Barclays Africa Limited as if the ordinary shares had always been in issue. The provision of these metrics does not impact the
legal effective date of the ordinary share issue.
(5) This ratio has not been restated for Barclays Africa acquisition.
Condensed consolidated statement of financial position
as at
30 June 31 December
2014 2013(1) Change 2013(1)
Note Rm Rm % Rm
Assets
Cash, cash balances and balances with central banks 44 589 46 020 (3) 50 130
Statutory liquid asset portfolio 63 589 66 902 (5) 62 055
Loans and advances to banks 87 254 88 340 (1) 80 622
Trading portfolio assets 86 577 85 398 1 88 761
Hedging portfolio assets 2 512 3 581 (30) 3 357
Other assets 19 462 25 285 (23) 15 829
Current tax assets 532 870 (39) 529
Non-current assets held for sale 1 1 290 4 314 (70) 4 814
Loans and advances to customers 2 614 642 583 632 5 605 337
Reinsurance assets 736 769 (4) 870
Investment securities 39 913 33 227 20 33 083
Investments in associates and joint ventures 775 642 21 694
Investment properties 778 1 125 (31) 1 089
Property and equipment 10 689 10 033 7 10 679
Goodwill and intangible assets 3 168 3 101 2 3 141
Deferred tax assets 1 297 656 98 987
Total assets 977 803 953 895 3 961 977
Liabilities
Deposits from banks 64 768 53 319 21 70 791
Trading portfolio liabilities 46 155 59 468 (22) 52 128
Hedging portfolio liabilities 2 512 2 505 0 2 391
Other liabilities 28 886 29 626 (2) 19 775
Provisions 1 951 1 731 13 2 460
Current tax liabilities 167 661 (75) 173
Non-current liabilities held for sale 1 504 1 495 (66) 1 651
Deposits due to customers 5 597 555 570 692 5 588 011
Debt securities in issue 6 105 509 106 269 (1) 97 829
Liabilities under investment contracts 24 700 19 261 28 19 773
Policyholder liabilities under insurance contracts 2 574 3 506 (27) 3 958
Borrowed funds 7 14 889 16 503 (10) 16 525
Deferred tax liabilities 1 351 1 169 16 1 311
Total liabilities 891 521 866 205 3 876 776
Equity
Capital and reserves
Attributable to ordinary equity holders:
Share capital 1 694 1 694 - 1 695
Share premium 4 509 4 871 (7) 4 474
Retained earnings 66 814 67 699 (1) 64 701
Other reserves 5 412 5 730 (6) 6 447
78 429 79 994 (2) 77 317
Non-controlling interest - ordinary shares 3 209 3 052 5 3 240
Non-controlling interest - preference shares 4 644 4 644 - 4 644
Total equity 86 282 87 690 (2) 85 201
Total liabilities and equity 977 803 953 895 3 961 977
Note
(1)Restated, refer to note 24 for reporting changes. Additional disclosures for 30 June 2013 and 31 December 2013 have
been restated where applicable.
Condensed consolidated statement of comprehensive income
for the reporting period ended
30 June 31 December
2014 2013(1) Change 2013(1)
Note Rm Rm % Rm
Net interest income 17 197 15 695 10 32 351
Interest and similar income 8.1 31 850 29 351 9 60 232
Interest expense and similar charges 8.2 (14 653) (13 656) (7) (27 881)
Non-interest income 13 487 12 878 5 27 055
Net fee and commission income 9 259 8 919 4 18 554
Fee and commission income 9.1 10 683 10 280 4 21 348
Fee and commission expense 9.2 (1 424) (1 361) (5) (2 794)
Net insurance premium income 2 991 2 760 8 5 686
Net claims and benefits paid on insurance contracts (1 506) (1 356) (11) (2 819)
Changes in investment and insurance contract liabilities (765) (1 194) 36 (2 457)
Gains and losses from banking and trading activities 9.3 2 385 1 991 20 4 361
Gains and losses from investment activities 9.4 926 1 358 (32) 2 831
Other operating income 197 400 (51) 899
Total income 30 684 28 573 7 59 406
Impairment losses on loans and advances 3.1 (3 568) (3 836) 7 (6 987)
Operating income before operating expenditure 27 116 24 737 10 52 419
Operating expenses 10 (17 297) (15 872) (9) (33 420)
Other expenses (583) (480) (21) (1 033)
Other impairments 11 (25) (13) (92) (33)
Indirect taxation (558) (467) (19) (1 000)
Share of post-tax results of associates and joint ventures 71 79 (10) 130
Operating income before income tax 9 307 8 464 10 18 096
Taxation expense (2 714) (2 450) (11) (5 222)
Profit for the reporting period 6 593 6 014 10 12 874
Profit attributable to:
Ordinary equity holders 6 166 5 593 10 11 981
Non-controlling interest - ordinary shares 280 275 2 599
Non-controlling interest - preference shares 147 146 1 294
6 593 6 014 10 12 874
Earnings per share(2)
Basic earnings per ordinary share (cents) 727,6 660,3 10 1 414,0
Diluted basic earnings per ordinary share (cents) 727,3 659,1 10 1 412,9
Notes
(1)Restated, refer to note 24 for reporting changes. Additional disclosures for 30 June 2013 and 31 December 2013 have
been restated where applicable.
(2)Share metrics per ordinary shares include the ordinary shares issued on 31 July 2013 for the acquisition of Barclays
Africa Limited as if the ordinary shares had always been in issue. The provision of these metrics does not impact the
legal effective date of the ordinary share issue.
Condensed consolidated statement of comprehensive income
for the reporting period ended
30 June 31 December
2014 2013(1) Change 2013(1)
Rm Rm % Rm
Profit for the reporting period 6 593 6 014 10 12 874
Other comprehensive income
Other comprehensive income that will never be reclassified to profit or loss 40 (95) >100 (324)
Movement in retirement benefit fund assets and liabilities 40 (95) >100 (324)
Increase/(decrease) in retirement benefit surplus 20 (152) 100 (92)
Decrease/(increase) in retirement benefit deficit 21 75 (72) (229)
Deferred tax (1) (18) 94 (3)
Other comprehensive income that is or may be reclassified to profit or loss (1 190) 780 >(100) 1 271
Foreign exchange differences on translation of foreign operations (726) 2 287 >(100) 2 986
Movement in cash flow hedging reserve (253) (1 707) 85 (1 822)
Fair value gains/(losses) arising during the reporting period 320 (1 467) >100 (903)
Amount transferred from other comprehensive income to profit or loss (671) (906) 26 (1 629)
Deferred tax 98 666 (85) 710
Movement in available-for-sale reserve (211) 200 >(100) 107
Fair value (losses)/gains arising during the reporting period (333) 220 >(100) 131
Amortisation of government bonds - release to profit or loss 3 4 (25) 10
Deferred tax 119 (24) >100 (34)
Other comprehensive (losses)/income, net of tax (1 150) 685 >(100) 947
Total comprehensive income for the reporting period 5 443 6 699 (19) 13 821
Total comprehensive income attributable to:
Ordinary equity holders 5 062 5 936 (15) 12 610
Non-controlling interest - ordinary shares 234 617 (62) 917
Non-controlling interest - preference shares 147 146 1 294
5 443 6 699 (19) 13 821
Note
(1)Restated, refer to note 24 for reporting changes. Additional disclosures for 30 June 2013 and 31 December 2013 have
been restated where applicable.
Condensed consolidated statement of changes in equity
for the reporting period ended
30 June
2014(1)
Capital and
reserves Non- Non-
attributable controlling controlling
to ordinary interest - interest -
equity ordinary preference Total
holders shares shares equity
Rm Rm Rm Rm
Balance at the beginning of the reporting period 77 317 3 240 4 644 85 201
Total comprehensive income for the reporting period 5 062 234 147 5 443
Profit for the reporting period 6 166 280 147 6 593
Other comprehensive income (1 104) (46) - (1 150)
Dividends paid during the reporting period (refer to note 13) (3 981) (217) (147) (4 345)
Purchase of Group shares in respect of equity-settled share-based
payment schemes (40) - - (40)
Elimination of the movement in treasury shares held by Group entities 53 - - 53
Movement in share-based payment reserve 18 - - 18
Transfer from share-based payment reserve (21) - - (21)
Transfer to share capital and share premium 21 - - 21
Value of employee services 18 - - 18
Movement in foreign insurance subsidiary regulatory reserve - - - -
Transfer from retained earnings (4) - - (4)
Transfer to foreign insurance subsidiary regulatory reserve 4 - - 4
Movement in general credit risk reserve - - - -
Transfer from retained earnings (29) - - (29)
Transfer to credit risk reserve 29 - - 29
Share of post-tax results of associates and joint ventures - - - -
Transfer from retained earnings (71) - - (71)
Transfer to associates’ and joint ventures’ reserve 71 - - 71
Disposal of subsidiary(2) - (48) - (48)
Balance at the end of the reporting period 78 429 3 209 4 644 86 282
Notes
(1)All movements are reflected net of taxation.
(2)The Group’s 85% shareholding in Abseq Properties (Pty) Ltd was sold as part of a sales transaction with
Growthpoint Properties Limited. The transaction was effective on 2 January 2014, therefore the subsidiary has
been derecognised from the statement of financial position.
Condensed consolidated statement of changes in equity
for the reporting period ended
30 June
2013 (1) (2)
Capital and
reserves Non- Non-
attributable controlling controlling
to ordinary interest - interest -
equity ordinary preference Total
holders shares shares equity
Rm Rm Rm Rm
Balance at the beginning of the reporting period as previously reported 66 869 1 267 4 644 72 780
Restatements 10 227 1 438 - 11 665
Restated balance at the beginning of the reporting period 77 096 2 705 4 644 84 445
Total comprehensive income for the reporting period 5 936 617 146 6 699
Profit for the reporting period 5 593 275 146 6 014
Other comprehensive income 343 342 - 685
Dividends paid during the reporting period (refer to note 13) (2 645) (234) (146) (3 025)
Accounting adjustments related to business combinations under
common control(3) (328) - - (328)
Purchase of Group shares in respect of equity-settled share-based
payment schemes (71) - - (71)
Elimination of the movement in treasury shares held by Group entities (99) - - (99)
Movement in share-based payment reserve 6 - - 6
Transfer from share-based payment reserve (34) - - (34)
Transfer to share capital and share premium 34 - - 34
Value of employee services 6 - - 6
Movement in foreign insurance subsidiary regulatory reserve - - - -
Transfer from retained earnings (2) - - (2)
Transfer to foreign insurance subsidiary regulatory reserve 2 - - 2
Movement in general credit risk reserve - - - -
Transfer from retained earnings (71) - - (71)
Transfer to general credit risk reserve 71 - - 71
Share of post-tax results of associates and joint ventures - - - -
Transfer from retained earnings (79) - - (79)
Transfer to associates’ and joint ventures’ reserve 79 - - 79
Acquisition of non-controlling interest and related-transaction costs(4) 99 (36) - 63
Balance at the end of the reporting period 79 994 3 052 4 644 87 690
Notes
(1)All movements are reflected net of taxation.
(2)Restated, refer to note 24 for reporting changes. Additional disclosures for 30 June 2013 and 31 December 2013 have
been restated where applicable.
(3)The excess of the purchase price over Barclays Africa Group Limited’s share of the net assets of Barclays Africa
Limited, acquired on 31 July 2013, has been accounted for as a deduction against share premium. The purchase price was
applied retrospectively, resulting in the deemed excess of the purchase price over the historical carrying values of the
underlying net assets of Barclays Africa Limited being similarly included within share premium. This application, has
resulted in a net movement recognised in share premium for each retrospective reporting period to date of acquisition.
(4)The Group increased its shareholding in National Bank of Commerce Limited (Tanzania) (“NBC”) from 55% to 66%. This
increased shareholding was driven by a rights issue made by NBC. The Group exercised its rights, together with a portion of
the rights relating to non-controlling shareholders. The shareholders that did not take up their portion of the rights
issue were granted a one-year option to acquire these shares from Barclays Africa Group Limited.
Condensed consolidated statement of changes in equity
for the reporting period ended
31 December
2013(1)
Capital and
reserves Non- Non-
attributable controlling controlling
to ordinary interest - interest -
equity ordinary preference Total
holders shares shares equity
Rm Rm Rm Rm
Balance at the beginning of the reporting period 77 096 2 705 4 644 84 445
Total comprehensive income for the reporting period 12 610 917 294 13 821
Profit for the reporting period 11 981 599 294 12 874
Other comprehensive income 629 318 - 947
Dividends paid during the reporting period (refer to note 13) (11 602) (346) (294) (12 242)
Accounting adjustments related to business combinations under
common control(2) (443) - - (443)
Purchase of Group shares in respect of equity-settled share-based
payment schemes (76) - - (76)
Elimination of the movement in treasury shares held by Group entities (279) - - (279)
Movement in share-based payment reserve 11 - - 11
Transfer from share-based payment reserve (38) - - (38)
Transfer to share capital and share premium 38 - - 38
Value of employee services 11 - - 11
Movement in general credit risk reserve - - - -
Transfer from retained earnings (220) - - (220)
Transfer to general credit risk reserve 220 - - 220
Movement in foreign insurance subsidiary regulatory reserve - - - -
Transfer from retained earnings (3) - - (3)
Transfer to foreign insurance subsidiary regulatory reserve 3 - - 3
Share of post-tax results of associates and joint ventures - - - -
Transfer from retained earnings (130) - - (130)
Transfer to associates’ and joint ventures’ reserve 130 - - 130
Acquisition of non-controlling interest and related-transaction costs(3) 99 (36) - 63
Transaction costs related to shares issued on the acquisition of
Barclays Africa Limited (99) - - (99)
Balance at the end of the reporting period 77 317 3 240 4 644 85 201
Notes
(1)All movements are reflected net of taxation.
(2)The excess of the purchase price over Barclays Africa Group Limited’s share of the net assets of Barclays Africa
Limited, acquired on 31 July 2013, has been accounted for as a deduction against share premium. The purchase price was
applied retrospectively, resulting in the deemed excess of the purchase price over the historical carrying values of the
underlying net assets of Barclays Africa Limited being similarly included within share premium. This application, has
resulted in a net movement recognised in share premium for each retrospective reporting period to date of acquisition.
(3)The Group increased its shareholding in National Bank of Commerce Limited (Tanzania) (“NBC”) from 55% to 66%. This
increased shareholding was driven by a rights issue made by NBC. The Group exercised its rights, together with a portion of
the rights relating to non-controlling shareholders. The shareholders that did not take up their portion of the rights
issue were granted a one-year option to acquire these shares from Barclays Africa Group Limited.
Condensed consolidated statement of cash flows
for the reporting period ended
30 June 31 December
2014 2013(1) Change 2013(1)
Note Rm Rm % Rm
Net cash generated from operating activities 6 753 5 248 29 18 035
Net cash utilised in investing activities (5 390) (2 379) (100) (1 841)
Net cash utilised in financing activities (5 840) (5 112) (14) (14 616)
Net (decrease)/increase in cash and cash equivalents (4 477) (2 243) (100) 1 578
Cash and cash equivalents at the beginning of the reporting period 1 15 854 13 985 13 13 985
Effect of exchange rate movements on cash and cash equivalents (166) (342) 51 291
Cash and cash equivalents at the end of the reporting period 2 11 211 11 400 (2) 15 854
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) 12 653 11 085 14 11 085
Loans and advances to banks(3) 3 201 2 900 10 2 900
15 854 13 985 13 13 985
2. Cash and cash equivalents at the end of the reporting period
Cash, cash balances and balances with central banks(2) 8 497 8 292 2 12 653
Loans and advances to banks(3) 2 714 3 108 (13) 3 201
11 211 11 400 (2) 15 854
Notes
(1)Restated, refer to note 24 for reporting changes. Additional disclosures for 30 June 2013 and 31 December 2013 have
been restated where applicable.
(2)Includes coins and bank notes, which are part of “Cash, cash balances and balances with central banks”.
(3)Includes call advances, which are used as working capital by the Group and are a component of other advances within
“Loans and advances to banks”.
Condensed notes to the consolidated financial results
for the reporting period ended
1. Non-current assets and non-current liabilities held for sale
During the current reporting period the Group affected the following changes to non-current assets and non-current
liabilities held for sale:
- Retail and Business Banking (“RBB”) transferred investment properties in the Commercial Property Finance Equity (“CPF
Equity”) division with a total carrying value of R312m to non-current assets held for sale. The disposal of these
properties is expected to take place in the third quarter of 2014. The CPF Equity division also disposed of investment
properties with a total carrying value of R1 321m.
- Wealth, Investment Management and Insurance (“WIMI”) transferred a fund with a net carrying value of R956m out of
non-current assets and non-current liabilities held for sale.
2. Loans and advances to customers
30 June 31 December
2014 2013 Change 2013
Rm Rm % Rm
Corporate overdrafts and specialised finance loans 6 714 4 997 34 5 729
Credit cards 39 761 35 309 13 37 500
Foreign currency loans 19 290 17 799 8 22 760
Instalment credit agreements 69 040 63 974 8 66 764
Gross advances 83 825 77 081 9 81 248
Unearned finance charges (14 785) (13 107) (13) (14 484)
Reverse repurchase agreements 5 188 6 309 (18) 3 893
Loans to associates and joint ventures 12 354 10 719 15 12 039
Microloans 2 458 2 046 20 2 192
Mortgages 273 104 280 665 (3) 276 253
Other advances(1) 21 480 19 469 10 20 742
Overdrafts 33 608 34 917 (4) 34 768
Overnight finance 17 529 17 365 1 14 083
Personal and term loans 70 190 60 913 15 67 954
Preference shares 9 641 6 602 46 8 945
Wholesale overdrafts 51 072 38 812 32 47 764
Gross loans and advances to customers 631 429 599 896 5 621 386
Impairment losses on loans and advances (refer to note 3) (16 787) (16 264) (3) (16 049)
614 642 583 632 5 605 337
Note
(1)Includes customer liabilities under acceptances, working capital solutions and collateralised loans.
3. Impairment losses on loans and advances
30 June
2014
Retail Business
Banking Banking RBB
South South Rest of
Reconciliation of allowance for impairment losses Africa Africa Africa CIB WIMI Other Total
on loans and advances to customers Rm Rm Rm Rm Rm Rm Rm
Balance at the beginning of the reporting period 10 418 2 283 2 365 680 193 110 16 049
Net present value unwind on non-performing book
(refer to note 8.1) (265) (78) - - - - (343)
Exchange differences - - (30) - - - (30)
Amounts written-off (2 039) (413) (322) (72) (40) 1 (2 885)
Impairment raised - identified 2 810 372 331 37 17 - 3 567
Impairment raised - unidentified 338 19 33 29 10 - 429
Balance at the end of the reporting period 11 262 2 183 2 377 674 180 111 16 787
30 June
2013
Retail Business
Banking Banking RBB
South South Rest of
Reconciliation of allowance for impairment losses Africa Africa Africa CIB WIMI Other Total
on loans and advances to customers Rm Rm Rm Rm Rm Rm Rm
Balance at the beginning of the reporting period 10 466 2 357 1 968 651 210 125 15 777
Net present value unwind on non-performing book
(refer to note 8.1) (376) (73) - - - - (449)
Exchange differences - - 137 - - - 137
Amounts written-off (2 477) (640) (288) (67) (19) (5) (3 496)
Impairment raised - identified 3 303 458 397 8 14 (2) 4 178
Impairment raised - unidentified 72 (11) 26 (3) 33 - 117
Balance at the end of the reporting period 10 988 2 091 2 240 589 238 118 16 264
31 December
2013
Retail Business
Banking Banking RBB
South South Rest of
Reconciliation of allowance for impairment losses Africa Africa Africa CIB WIMI Other Total
on loans and advances to customers Rm Rm Rm Rm Rm Rm Rm
Balance at the beginning of the reporting period 10 466 2 357 1 968 651 210 125 15 777
Net present value unwind on non-performing book
(refer to note 8.1) (697) (153) - - (1) - (851)
Exchange differences - - 422 - - - 422
Amounts written-off (5 479) (887) (726) (210) (101) (1) (7 404)
Impairment raised - identified 6 040 861 645 169 53 (14) 7 754
Impairment raised - unidentified 88 105 56 70 32 - 351
Balance at the end of the reporting period 10 418 2 283 2 365 680 193 110 16 049
3.1 Statement of comprehensive income charge
30 June 31 December
2014 2013 Change 2013
Rm Rm % Rm
Impairments raised during the reporting period 3 996 4 295 (7) 8 105
Identified impairments 3 567 4 178 (15) 7 754
Unidentified impairments 429 117 >100 351
Recoveries of loans and advances previously written-off(1) (428) (459) (7) (1 118)
3 568 3 836 (7) 6 987
Note
(1)Includes collection costs of R94m (30 June 2013: R118m; 31 December 2013: R120m).
4. Performing and non-performing loans
30 June
2014
Performing loans Non-performing loans
Impair- Coverage Impair- Coverage Net total
Exposure ment ratio Exposure ment ratio exposure
Loans and advances to customers Rm Rm % Rm Rm % Rm
RBB 442 547 3 773 0,85 27 897 12 049 43,19 454 622
Retail Banking South Africa 348 400 2 762 0,79 20 001 8 500 42,50 357 139
Credit cards 34 494 783 2,27 4 643 3 344 72,02 35 010
Instalment credit agreements 66 479 331 0,50 1 474 679 46,07 66 943
Loans to associates and joint ventures 10 968 - - - - - 10 968
Mortgages 218 109 1 301 0,60 11 941 3 218 26,95 225 531
Other loans and advances 302 - - - - - 302
Overdrafts 2 214 26 1,17 112 71 63,39 2 229
Personal and term loans 15 834 321 2,03 1 831 1 188 64,88 16 156
Business Banking South Africa 58 519 488 0,83 4 650 1 695 36,45 60 986
Loans to associates and joint ventures 269 - - - - - 269
Mortgage (including commercial property finance) 28 835 183 0,63 2 514 993 39,50 30 173
Overdrafts 18 059 192 1,06 999 409 40,94 18 457
Term loans 11 356 113 1,00 1 137 293 25,77 12 087
RBB Rest of Africa 35 628 523 1,47 3 246 1 854 57,12 36 497
CIB 148 958 280 0,19 1 010 394 39,01 149 294
WIMI 10 511 42 0,40 318 138 43,40 10 649
Head Office and other operations 188 111 59,04 - - - 77
602 204 4 206 0,70 29 225 12 581 43,05 614 642
30 June
2013
Performing loans Non-performing loans
Impair- Coverage Impair- Coverage Net total
Exposure ment ratio Exposure ment ratio exposure
Loans and advances to customers Rm Rm % Rm Rm % Rm
RBB 430 146 3 046 0,71 30 727 12 273 39,94 445 554
Retail Banking South Africa 337 742 1 932 0,57 23 441 9 056 38,63 350 195
Credit cards 32 467 414 1,28 2 280 1 588 69,65 32 745
Instalment credit agreements 60 751 444 0,73 2 012 1 073 53,33 61 246
Loans to associates and joint ventures 8 801 - - - - - 8 801
Mortgages 217 843 924 0,42 17 384 5 246 30,18 229 057
Other loans and advances 335 5 1,49 - - - 330
Overdrafts 1 971 27 1,37 102 74 72,55 1 972
Personal and term loans 15 574 118 0,76 1 663 1 075 64,64 16 044
Business Banking South Africa 58 552 341 0,58 5 045 1 750 34,69 61 506
Loans to associates and joint ventures 665 - - - - - 665
Mortgage (including commercial property finance) 29 424 156 0,53 2 893 1 064 36,78 31 097
Overdrafts 18 047 98 0,54 951 356 37,43 18 544
Term loans 10 416 87 0,84 1 201 330 27,48 11 200
RBB Rest of Africa 33 852 773 2,28 2 241 1 467 65,46 33 853
CIB 125 799 186 0,15 453 403 88,96 125 663
WIMI 12 040 50 0,42 464 188 40,52 12 266
Head Office and other operations 267 118 44,19 - - - 149
568 252 3 400 0,60 31 644 12 864 40,65 583 632
31 December
2013
Performing loans Non-performing loans
Impair- Coverage Impair- Coverage Net total
Loans and advances Exposure ment ratio Exposure ment ratio exposure
to customers Rm Rm % Rm Rm % Rm
RBB 437 763 3 431 0,78 28 098 11 635 41,41 450 795
Retail Banking South Africa 344 474 2 730 0,79 19 680 7 688 39,07 353 736
Credit cards 33 900 699 2,06 3 034 2 165 71,36 34 070
Instalment credit agreements 64 130 290 0,45 1 462 731 50,00 64 571
Loans to associates and joint ventures 10 287 - - - - - 10 287
Mortgages 218 256 1 327 0,61 13 541 3 763 27,79 226 707
Other advances 262 - - - - - 262
Overdrafts 2 006 31 1,55 96 56 58,33 2 015
Personal and term loans 15 633 383 2,45 1 547 973 62,90 15 824
Business Banking South Africa 58 126 374 0,64 4 865 1 909 39,24 60 708
Loans to associates and joint ventures 559 - - - - - 559
Mortgage (including commercial property finance) 29 906 125 0,42 2 844 1 235 43,42 31 390
Overdrafts 16 710 137 0,82 863 361 41,83 17 075
Term loans 10 951 112 1,02 1 158 313 27,03 11 684
RBB Rest of Africa 35 163 327 0,93 3 553 2 038 57,36 36 351
CIB 143 366 237 0,17 851 443 52,06 143 537
WIMI 10 739 33 0,31 339 160 47,20 10 885
Head Office and other operations 230 110 47,83 - - - 120
592 098 3 811 0,64 29 288 12 238 41,79 605 337
5. Deposits due to customers
30 June 31 December
2014 2013 Change 2013
Rm Rm % Rm
Call deposits 64 204 51 736 24 52 843
Cheque account deposits 178 722 183 704 (3) 174 686
Credit card deposits 1 834 1 807 1 1 914
Fixed deposits 159 055 158 018 1 168 054
Foreign currency deposits 16 294 12 682 28 17 456
Notice deposits 50 999 55 406 (8) 56 349
Other deposits(1) 11 183 10 664 5 11 139
Repurchase agreements with non-banks 2 163 3 813 (43) 1 208
Savings and transmission deposits 113 101 92 862 22 104 362
597 555 570 692 5 588 011
Note
(1)Includes partnership contributions received, deposits due on structured deals, preference investments on behalf of
customers and unclaimed deposits.
6. Debt securities in issue
30 June 31 December
2014 2013 Change 2013
Rm Rm % Rm
Credit-linked notes 7 897 9 451 (16) 8 155
Floating rate notes 43 718 49 113 (11) 44 719
Liabilities arising from securitised structured entities 496 2 372 (79) 495
Negotiable certificates of deposit 27 599 23 040 20 20 494
Other debt securities in issue 152 7 >100 11
Promissory notes 1 039 833 25 935
Senior notes 23 552 20 876 13 21 533
Structured notes and bonds 1 056 577 83 1 487
105 509 106 269 (1) 97 829
7. Borrowed funds
30 June 31 December
2014 2013 Change 2013
Rm Rm % Rm
Subordinated callable notes issued by Absa Bank Limited
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 (100) 1 725
8,10% 27 March 2020 2 000 2 000 - 2 000
10,28% 3 May 2022 600 600 - 600
8,295% 21 November 2023 1 188 1 188 - 1 188
Three-month JIBAR + 2,10% 3 May 2022 400 400 - 400
Three-month JIBAR + 1,95% 21 November 2022 1 805 1 805 - 1 805
Three-month JIBAR + 2,05% 21 November 2023 2 007 2 007 - 2 007
CPI-linked notes, fixed at the following coupon rates:
6,00% 20 September 2019 3 000 3 000 - 3 000
5,50% 7 December 2028 1 500 1 500 - 1 500
Subordinated callable notes issued by other subsidiaries
Bank of Botswana certificates rate + 0,85% 30 October 2014 121 116 4 120
Ninety-one day Kenyan Government Treasury
Bill rate + 0,60%(1) 19 November 2014 122 115 6 121
Ninety-one day Zambian Government Treasury
Bill rate + 2,00%(1) 9 May 2015 85 91 (7) 96
One-hundred and eighty-two day Kenyan
Government Treasury Bill rate + 1,00% 14 July 2015 90 86 5 90
11,50% 14 July 2015 153 146 5 153
One-hundred and eighty-two day Zambian
Government Treasury Bill rate + 2,50% (capped at 13,00% overall) 18 May 2016 85 91 (7) 96
United States dollar three-month LIBOR + 1,00%(1) 31 March 2018 70 66 6 69
Accrued interest 1 678 1 493 12 1 490
Fair value adjustment (15) 74 >(100) 65
14 889 16 503 (10) 16 525
Note
(1)These subordinated notes are non-qualifying in terms of Basel III. All other subordinated notes qualify as Tier 2
capital in terms of Basel III.
8. Net interest income
30 June 31 December
2014 2013 Change 2013
Rm Rm % Rm
8.1 Interest and similar income
Interest and similar income is earned from:
Cash, cash balances and balances with central banks 157 100 57 245
Fair value adjustments on hedging instruments 350 521 (33) 3 803
Investment securities 964 1 013 (5) 2 072
Loans and advances to banks 811 750 8 1 292
Loans and advances to customers 27 111 24 643 10 50 697
Overdrafts 1 656 1 588 4 3 143
Corporate overdrafts and specialised finance loans 166 136 22 123
Credit cards 3 016 2 738 10 5 697
Foreign currency loans 224 189 19 275
Instalment credit agreements 3 231 2 867 13 5 841
Interest on impaired financial assets (refer to note 3) 343 449 (24) 851
Reverse repurchase agreements - - - 12
Loans to associates and joint ventures 391 304 29 657
Microloans 227 246 (8) 478
Mortgages 10 114 9 832 3 19 642
Other loans and advances(1) 155 206 (25) 927
Overnight finance 354 400 (12) 786
Personal and term loans 4 971 4 364 14 9 073
Preference shares 295 229 29 484
Wholesale overdrafts 1 968 1 095 80 2 708
Other interest income(2) 40 125 (68) 385
Statutory liquid asset portfolio 2 417 2 199 10 1 738
31 850 29 351 9 60 232
8.2 Interest expense and similar charges
Interest expense and similar charges are paid on:
Borrowed funds (654) (682) 4 (1 358)
Debt securities in issue (3 332) (2 938) (13) (5 850)
Deposits due to customers (10 841) (9 761) (11) (21 568)
Call deposits (1 713) (1 359) (26) (2 813)
Cheque account deposits (1 607) (1 574) (2) (3 120)
Credit card deposits (4) (4) - (8)
Fixed deposits (3 661) (3 497) (5) (8 566)
Foreign currency deposits (102) (88) (16) (424)
Notice deposits (1 452) (1 459) 0 (2 916)
Other deposits due to customers (565) (584) 3 (1 103)
Savings and transmission deposits (1 737) (1 196) (45) (2 618)
Deposits from banks (393) (264) (49) (590)
Call deposits (197) (165) (19) (315)
Fixed deposits (201) (94) >(100) (274)
Other deposits from banks 5 (5) >100 (1)
Fair value adjustments on hedging instruments 138 (606) >100 (500)
Interest incurred on finance leases - (12) 100 (19)
Other interest expense(3) 429 607 (29) 2 004
(14 653) (13 656) (7) (27 881)
Net interest income 17 197 15 695 10 32 351
Notes
(1)Includes items such as interest on factored debtors books.
(2)Includes items such as overnight interest on contracts for difference as well as inter-segment eliminations between
”interest and similar income”, “interest expense and similar charges”, “gains and losses from banking and trading
activities” and “gains and losses from investment activities”.
(3)Includes items such as inter-segment eliminations between “interest and similar income”, “interest expense and
similar charges”, “gains and losses from banking and trading activities” and “gains and losses from investment activities”.
9. Non-interest income
30 June 31 December
2014 2013 Change 2013
Rm Rm % Rm
9.1 Fee and commission income
Asset management and other related fees 61 86 (29) 160
Consulting and administration fees 361 258 40 661
Credit-related fees and commissions 7 590 7 354 3 15 145
Cheque accounts 1 853 1 779 4 3 598
Credit cards(1) 667 585 14 1 226
Electronic banking 2 000 2 010 0 4 129
Other credit-related fees and commissions(2) 1 974 1 820 8 3 889
Savings accounts 1 096 1 160 (6) 2 303
Insurance commission received 594 648 (8) 1 315
Investment banking fees 150 123 22 255
Merchant income 1 113 1 042 7 2 197
Other fee and commission income 105 112 (6) 203
Trust and other fiduciary services 709 657 8 1 412
Portfolio and other management fees 578 531 9 1 144
Trust and estate income 131 126 4 268
10 683 10 280 4 21 348
9.2 Fee and commission expense
Cheque processing fees (67) (75) 11 (150)
Insurance commission paid (521) (484) (8) (1 001)
Other fee and commission expenses (680) (628) (8) (1 298)
Transaction-based legal fees (60) (67) 10 (115)
Trust and other fiduciary service fees (28) (36) 22 (88)
Valuation fees (68) (71) 4 (142)
(1 424) (1 361) (5) (2 794)
Net fee and commission income 9 259 8 919 4 18 554
Notes
(1)Includes acquiring and issuing fees.
(2)Includes service and credit-related fees and commissions on mortgage loans and foreign exchange transactions.
30 June 31 December
2014 2013 Change 2013
Rm Rm % Rm
9.3 Gains and losses from banking and trading activities
Net (losses)/gains on investments (6) (30) 80 312
Debt instruments designated at fair value through profit or loss 3 75 (96) 181
Equity instruments designated at fair value through profit or loss (6) (94) 94 141
Available-for-sale unwind from reserves (3) (11) 73 (10)
Net trading result 2 334 1 903 23 3 854
Net trading income excluding the impact of hedge accounting 2 532 1 982 28 4 092
Ineffective portion of hedges (198) (79) >(100) (238)
Cash flow hedges (175) (83) >(100) (234)
Fair value hedges (23) 4 >(100) (4)
Other gains 57 118 (52) 195
2 385 1 991 20 4 361
Net trading income excluding the impact of hedge accounting 2 532 1 982 28 4 092
(Losses)/gains on financial instruments designated at fair value
through profit or loss (770) 535 >(100) 1 126
Net (losses)/gains on financial assets designated at fair value
through profit or loss (799) 320 >(100) 125
Net gains on financial liabilities designated at fair value
through profit or loss 29 215 (87) 1 001
Gains on financial instruments held for trading 3 302 1 447 >100 2 966
Other gains 57 118 (52) 195
Gains on financial instruments designated at fair value through
profit or loss 6 47 (87) 135
Gains on financial instruments held for trading 7 71 (90) 60
Other 44 - 100 -
30 June 31 December
2014 2013 Change 2013
Rm Rm % Rm
9.4 Gains and losses from investment activities
Available-for-sale unwind from reserves - 1 (100) 4
Net gains on investments from insurance activities 909 1 345 (32) 2 803
Policyholder - insurance contracts 230 95 >100 337
Policyholder - investment contracts 535 1 129 (53) 2 181
Shareholder funds 144 121 19 285
Other gains 17 12 42 24
926 1 358 (32) 2 831
Net gains on investments from insurance activities 909 1 345 (32) 2 803
Gains on financial instruments designated at fair value through profit
or loss 911 1 346 (32) 2 805
Other (2) (1) (100) (2)
10. Operating expenditure
30 June 31 December
2014 2013 Change 2013
Rm Rm % Rm
Administration fees 460 615 (25) 791
Amortisation of intangible assets 243 218 11 470
Auditors’ remuneration 132 116 14 259
Cash transportation 415 373 11 715
Depreciation 799 871 (8) 1 641
Equipment costs 180 190 (5) 391
Information technology 1 155 1 079 7 2 078
Investment properties charges - change in fair value 12 5 >100 33
Marketing costs 589 534 10 1 355
Operating lease expenses on properties 699 682 2 1 309
Other operating expenses(1) 1 033 767 35 2 122
Printing and stationery 140 145 (3) 310
Professional fees 689 676 2 1 578
Property costs 1 104 860 28 1 692
Staff costs 9 108 8 228 11 17 593
Bonuses 606 545 11 1 679
Other staff costs(2) 343 436 (21) 1 203
Salaries and current service costs on post-retirement benefits 7 707 6 869 12 13 942
Share-based payments 303 226 34 428
Training costs 149 152 (2) 341
Telephone and postage 539 513 5 1 083
17 297 15 872 9 33 420
Notes
(1)Includes fraud losses, travel and entertainment costs.
(2)Includes recruitment costs, membership fees to professional bodies, staff parking, redundancy fees, study
assistance, staff relocation.
11. Other impairments
30 June 31 December
2014 2013 Change 2013
Rm Rm % Rm
Financial instruments 9 4 >100 28
Other 16 9 78 5
Equipment 16 - 100 -
Investments in associates and joint ventures - 6 (100) 2
Repossessed properties - 3 (100) 3
25 13 92 33
12. Headline earnings
30 June 31 December
2014 2013 2013
Gross Net(1) Gross Net(1) Net Gross Net(1)
change
Headline earnings Rm Rm Rm Rm % Rm Rm
Headline earnings is determined as follows:
Profit attributable to ordinary equity holders 6 166 5 593 10 11 981
Total headline earnings adjustment: (56) (39) 44 (138)
IFRS 5 - Gains and losses on disposal of
non-current assets held for sale (42) (34) - - (100) (171) (138)
IAS 16 - (Profit)/loss on disposal of property and equipment (16) (13) 3 3 >(100) 5 4
IAS 27 - (Profit)/loss on disposal of subsidiary (44) (35) - - (100) 8 8
IAS 36 - Impairment of investments in associates and joint ventures - - 6 6 (100) 2 2
IAS 36 - Impairment of property and equipment 16 12 - - 100 - -
IAS 36 and IAS 38 - Loss on disposal and impairment of intangible assets - - - - - 1 -
IAS 39 - Release of available-for-sale reserves 3 2 3 2 - 10 7
IAS 39 - Disposal and impairment of available-for-sale assets - - - - - 6 4
IAS 40 - Change in fair value of investment properties 12 12 (56) (50) >100 (29) (25)
6 110 5 554 10 11 843
Note
(1)The net amount is reflected after taxation and non-controlling interest.
13. Dividends per share
30 June 31 December
2014 2013 Change 2013
Rm Rm % Rm
Dividends declared to ordinary equity holders
Interim dividend (30 July 2014: 400 cents) (30 July 2013: 350 cents) 3 391 2 514 35 2 514
Dividend paid on treasury shares - interim(1) - (2) 100 (2)
Special dividend (30 July 2013: 708 cents)(2) - 5 085 (100) 5 085
Dividend paid on treasury shares - special(1) - (10) 100 (10)
Final dividend (11 February 2014: 470 cents) - - - 3 984
Dividend paid on treasury shares - final(1) - - - (3)
3 391 7 587 (55) 11 568
Dividends declared to non-controlling preference equity holders
Interim dividend (30 July 2014: 3 197,4658 cents) (30 July 2013: 2 999,4521 cents) 158 148 7 148
Final dividend (11 February 2014: 2 979,3151 cents) - - - 147
158 148 7 295
Dividends paid to ordinary equity holders
Final dividend (11 February 2014: 470 cents) (12 February 2013: 369 cents) 3 984 2 650 50 2 650
Dividend paid on treasury shares - final(1) (3) (5) (40) (5)
Interim dividend (30 July 2013: 350 cents) - - - 2 967
Dividend paid on treasury shares - interim(1) - - - (2)
Special dividend (30 July 2013: 708 cents)(2) - - - 6 002
Dividend paid on treasury shares - special(1) - - - (10)
3 981 2 645 51 11 602
Dividends paid to non-controlling preference equity holders
Final dividend (11 February 2014: 2 979,3151 cents) 147 146 1 146
(12 February 2013: 2 950,5479 cents)
Interim dividend (30 July 2013: 2 999,4521 cents) - - - 148
147 146 1 294
Notes
(1)The dividends paid on treasury shares are calculated on payment date.
(2)Dividend amount was calculated on the number of shares in issue. It excluded the shares that were issued on 31 July
2013 for consideration of the acquisition of Barclays Africa Limited.
14. Acquisitions and disposals of businesses and other similar transactions
Acquisitions of businesses during the current reporting period
There were no acquisitions of businesses during the current reporting period.
Disposals of business during the current reporting period
The Group disposed of its investment in an 85% owned subsidiary, Abseq Properties Proprietary Limited on 1 January
2014. This disposal resulted in a non-headline earnings profit of R44m for the Group.
Other similar transactions - additional interest in subsidiaries
There were no acquisitions or disposals of additional interest in subsidiaries during the current reporting period.
15. Related parties
Barclays Bank PLC owns 62,3% (30 June 2013: 55,5%; 31 December 2013: 62,3%) of the ordinary shares in the Group. The
remaining 37,7% (30 June 2013: 44,5%; 31 December 2013: 37,7%) of the shares are widely held on the Johannesburg Stock Exchange
Limited (“JSE”).
The following are defined as related parties of the Group:
- key management personnel;
- the parent company;
- fellow subsidiaries, associates and joint venture of the parent company;
- subsidiaries and consolidated structured entities;
- associates, joint ventures and retirement benefit funds;
- an entity controlled/jointly controlled or significantly influenced by any individual referred to above;
- post-employment benefit plans for the benefit of employees or any entity that is a related party of the Group; and
- children and/or dependants and spouses or partners of the individuals referred to above.
30 June 31 December
2014 2013 Change 2013
Rm Rm % Rm
15.1 Balances and transactions with parent company(1)
Balances
Loans and advances to banks 53 155 46 274 15 39 223
Derivative assets 20 790 22 551 (8) 20 402
Other assets 879 3 829 (77) 1 608
Investment securities 464 533 (13) 534
Deposits from banks (25 415) (23 331) 9 (24 130)
Derivative liabilities (18 262) (20 292) (10) (17 883)
Other liabilities (358) (3 074) (88) (187)
Borrowed funds (70) (66) 6 (69)
Transactions
Interest and similar income 25 (297) >(100) (343)
Interest expense and similar charges (229) 64 >(100) 65
Net fee and commission income (218) 3 >(100) 6
Gains and losses from banking and trading activities 178 66 >100 274
Other operating income (27) (7) >100 (71)
Operating expenditure/recovered expenses (44) 21 >(100) 48
Dividends paid 2 483 1 471 69 7 469
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 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 or provisions for bad debts that related to balances and transactions with the parent
company.
Note
(1)Debit amounts are presented as positive, credit amounts are presented as negative.
30 June 31 December
2014 2013 Change 2013
Rm Rm % Rm
15.2 Balances and transactions with fellow subsidiaries,
associates and joint ventures of the parent company(1),(2)
Balances
Loans and advances to banks 1 575 3 451 (54) 1 514
Derivative assets 146 40 >100 316
Other assets 134 357 (62) 284
Deposits from banks (584) (1 123) (48) (1 753)
Derivative liabilities (139) - (100) (18)
Other liabilities (291) (281) 4 (313)
Transactions
Interest and similar income (1) - (100) (1)
Net fee and commission income (17) (14) (21) (30)
Other operating income - - - 56
Operating expenditure/recovered expenses (9) (208) (96) 2
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 or joint ventures of the parent company.
Notes
(1)Debit amounts are presented as positive, credit amounts are presented as negative.
(2)Fellow subsidiaries, associates and joint ventures are those related entities of Barclays Bank PLC.
16. Assets under management and administration
30 June 31 December
2014 2013 Change 2013
Rm Rm % Rm
Alternative asset management and exchange-traded funds 85 141 51 039 67 72 840
Deceased estates 2 507 2 182 15 2 559
Other assets under management and administration 15 277 13 704 11 14 383
Participation bond schemes - 1 287 (100) -
Portfolio management 40 109 45 374 (12) 46 203
Private equity - 811 (100) -
Trusts 2 205 3 967 (44) 4 472
Unit trusts 120 007 145 463 (17) 123 318
265 246 263 827 1 263 775
17. Financial guarantee contracts
30 June 31 December
2014 2013 Change 2013
Rm Rm % Rm
Financial guarantee contracts(1) 78 96 (19) 78
Note
(1)Financial guarantee contracts represent contracts where the Group undertakes to make specified payments to
a counterparty, should the counterparty suffer a loss as a result of a specified debtor failing to make payment
when due in accordance with the terms of a debt instrument. This amount represents the maximum exposure, which
is not necessarily the measurement recognised in the statement of financial position in accordance with
International Financial Reporting Standards (“IFRS”).
18. Commitments
30 June 31 December
2014 2013 Change 2013
Rm Rm % Rm
Authorised capital expenditure(1)
Contracted but not provided for 739 942 (22) 745
Operating lease payments due(2)
No later than one year 798 1 018 (22) 847
Later than one year and no later than five years 1 253 1 515 (17) 1 521
Later than five years 178 193 (8) 296
2 229 2 726 (18) 2 664
Sponsorship payments due(3)
No later than one year 273 225 21 272
Later than one year and no later than five years 468 755 (38) 541
741 980 (24) 813
Notes
(1)The Group has capital commitments in respect of computer equipment and property development. Management is
confident that future net revenue and funding will be sufficient to cover these commitments.
(2)The operating lease commitments comprise a number of separate operating leases in relation to property and
equipment, none of which is individually significant to the Group. Leases are negotiated for an average term
of three to five years and rentals are renegotiated annually.
(3)The Group has sponsorship commitments in respect of sports, arts and culture.
19. Contingencies
30 June 31 December
2014 2013 Change 2013
Rm Rm % Rm
Guarantees(1) 24 991 20 518 22 21 215
Irrevocable debt facilities(2),(3) 76 735 83 094 (8) 83 037
Irrevocable equity facilities(3) 387 510 (24) 400
Letters of credit 6 196 4 555 36 6 402
Other contingencies 5 040 9 119 (45) 5 674
113 349 117 796 (4) 116 728
Legal proceedings
The Group is engaged in various litigation proceedings involving claims by and against it, which arise in the ordinary
course of business. The Group does not expect the ultimate resolution of any proceedings, to which the Group is party,
to have a significant adverse effect on the financial statements of the Group. Provision is made for all liabilities
which are expected to materialise.
Income taxes
The Group is subject to income taxes in numerous jurisdictions and the calculation of the Group’s tax charge and
worldwide provisions for income taxes necessarily involves a degree of estimation and judgement. There are many
transactions and calculations for which the ultimate tax treatment is uncertain or in respect of which the relevant
tax authorities may have indicated disagreement with the Group’s treatment and accordingly the final tax charge cannot
be determined until resolution has been reached with the relevant tax authority. The Group recognises liabilities for
anticipated tax audit issues based on estimates of whether additional taxes will be due after taking into account
external advice where appropriate. Where the final tax outcome of these matters is different from the amounts that were
initially recorded, such differences will impact the current and deferred income tax assets and liabilities in the
reporting period in which such determination is made. These risks are managed in accordance with the Group’s Tax
Risk Framework.
Notes
(1)Guarantees include performance and payment guarantee contracts.
(2)During the reporting period, terms and conditions associated with unutilised customer facilities were reviewed and
confirmed to be irrevocable in nature. These facilities are now disclosed as contingent liabilities. Comparative numbers
were also restated (30 June 2013: R32,8bn; 31 Dec 2013: R33,4bn).
(3)Irrevocable facilities are commitments to extend credit where the Group does not have the right to immediately
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.
20. Segment reporting
30 June 31 December
2014 2013(1) Change 2013(1)
Rm Rm % Rm
20.1 Headline earnings contribution by segment
RBB 3 847 3 514 9 7 618
Retail Banking South Africa 2 555 2 349 9 5 160
Home Loans 799 154 >100 872
Vehicle and Asset Finance 547 538 2 1 130
Card 720 896 (20) 1 980
Personal Loans 146 135 8 359
Transactional and deposits 1 303 1 336 (2) 2 950
Other (960) (710) (35) (2 131)
Business Banking South Africa 824 693 19 1 492
RBB Rest of Africa 468 472 (1) 966
Corporate and Investment Bank 1 903 1 535 24 3 348
WIMI 688 691 (0) 1 420
Head Office and other operations (328) (186) (76) (543)
Total headline earnings 6 110 5 554 10 11 843
Note
(1)Operational changes, management changes and associated changes to the way in which the Chief Operating Decision Maker
(“CODM”) views the performance of each business segment, have resulted in the reallocation of earnings, assets and
liabilities between operating segments.
30 June 31 December
2014 2013(1) Change 2013(1)
Rm Rm % Rm
20.2 Total income by segment
RBB 22 438 21 211 6 43 684
Retail Banking South Africa 14 129 13 443 5 27 417
Home Loans 2 045 1 905 6 3 815
Vehicle and Asset Finance 1 765 1 692 4 3 319
Card 3 974 3 616 10 7 656
Personal Loans 954 938 2 1 892
Transactional and deposits 5 334 5 247 2 10 762
Other 57 45 27 (27)
Business Banking South Africa 4 148 3 996 4 8 265
RBB Rest of Africa 4 161 3 772 10 8 002
CIB 6 093 5 272 16 11 430
WIMI 2 476 2 355 5 4 880
Head Office and other operations (323) (265) (22) (588)
Total income 30 684 28 573 7 59 406
Note
(1)Operational changes, management changes and associated changes to the way in which the Chief Operating Decision
Maker (“CODM”) views the performance of each business segment, have resulted in the reallocation of earnings,
assets and liabilities between operating segments.
30 June 31 December
2014 2013(1) Change 2013(1)
Rm Rm % Rm
20.3 Total internal income by segment
RBB (4 842) (4 530) (7) (8 534)
Retail Banking South Africa (5 730) (5 398) (6) (10 860)
Home Loans (6 126) (5 682) (8) (11 482)
Vehicle and Asset Finance (2 129) (1 789) (19) (3 736)
Card (721) (693) (4) (1 291)
Personal Loans (271) (254) (7) (504)
Transactional and deposits 3 694 3 185 16 6 733
Other (177) (165) (7) (580)
Business Banking South Africa 1 123 777 45 1 837
RBB Rest of Africa (235) 91 > (100) 489
CIB 5 422 6 366 (15) 11 512
WIMI (377) (386) 2 (804)
Head Office and other operations (203) (1 450) 86 (2 174)
Total internal income - - - -
Note
(1)Operational changes, management changes and associated changes to the way in which the Chief Operating
Decision Maker (“CODM”) views the performance of each business segment, have resulted in the reallocation
of earnings, assets and liabilities between operating segments.
30 June 31 December
2014 2013(1) Change 2013(1)
Rm Rm % Rm
20.4 Total assets by segment
RBB 701 202 678 600 3 739 219
Retail Banking South Africa 533 753 517 355 3 535 125
Home Loans 220 418 224 200 (2) 221 870
Vehicle and Asset Finance 85 592 77 592 10 83 943
Card 49 844 44 174 13 47 312
Personal Loans 13 418 13 391 0 13 400
Transactional and deposits 143 001 134 676 6 142 227
Other 21 480 23 322 (8) 26 373
Business Banking South Africa 92 313 83 872 10 94 770
RBB Rest of Africa 75 136 77 373 (3) 109 324
CIB 549 540 544 886 1 535 820
WIMI 47 529 44 595 7 44 890
Head Office and other operations (320 468) (314 186) (2) (357 952)
Total assets 977 803 953 895 3 961 977
Note
(1)Operational changes, management changes and associated changes to the way in which the Chief Operating Decision
Maker (“CODM”) views the performance of each business segment, have resulted in the reallocation of earnings, assets and
liabilities between operating segments.
30 June 31 December
2014 2013(1) Change 2013(1)
Rm Rm % Rm
20.5 Total liabilities by segment
RBB 684 230 659 671 4 717 823
Retail Banking South Africa 528 783 512 380 3 527 328
Home Loans 219 486 223 759 (2) 220 710
Vehicle and Asset Finance 84 046 76 132 10 81 890
Card 48 143 42 460 13 44 499
Personal Loans 13 272 13 256 0 13 040
Transactional and deposits 141 689 133 344 6 139 283
Other 22 147 23 429 (5) 27 906
Business Banking South Africa 91 274 83 202 10 93 302
RBB Rest of Africa 64 173 64 089 0 97 193
CIB 541 922 540 385 0 527 762
WIMI 42 354 39 692 7 39 888
Head Office and other operations (376 985) (373 543) (1) (408 697)
Total liabilities 891 521 866 205 3 876 776
Note
(1)Operational changes, management changes and associated changes to the way in which the Chief Operating Decision
Maker (“CODM”) views the performance of each business segment, have resulted in the reallocation of earnings, assets and
liabilities between operating segments.
21. Assets and liabilities not held at fair value
The table below summarises the carrying amounts and fair values of those assets and liabilities not held at fair
value:
30 June
2014 2013
Carrying Carrying
value Fair value value Fair value
Rm Rm Rm Rm
Financial assets
Balances with other central banks 8 406 8 406 7 038 7 038
Balances with the South African Reserve Bank ("SARB") 13 126 13 126 13 290 13 290
Coins and bank notes 8 496 8 496 8 292 8 292
Money market assets 38 38 1 229 1 229
Cash, cash balances and balances with central banks 30 066 30 066 29 849 29 849
Loans and advances to banks 76 192 76 192 74 554 74 554
Other assets 17 013 17 013 22 731 22 731
Retail Banking South Africa 357 139 357 139 350 195 350 195
Credit cards 35 010 35 010 32 745 32 745
Instalment credit agreements 66 943 66 943 61 246 61 246
Loans to associates and joint ventures 10 968 10 968 8 801 8 801
Mortgages 225 531 225 531 229 057 229 057
Other loans and advances 302 302 330 330
Overdrafts 2 229 2 229 1 972 1 972
Personal and term loans 16 156 16 156 16 044 16 044
Business Banking South Africa 60 259 60 259 60 689 60 689
Loans to associates and joint ventures 269 269 665 665
Mortgages (including commercial property finance) 29 446 29 446 30 280 30 280
Overdrafts 18 457 18 457 18 544 18 544
Term loans 12 087 12 087 11 200 11 200
RBB Rest of Africa 36 497 36 497 33 853 33 853
CIB 139 384 139 062 112 999 112 999
WIMI 10 649 10 649 12 266 12 266
Head Office and other operations 49 49 100 100
Loans and advances to customers - net of impairment losses 603 977 603 655 570 102 570 102
Investment securities - - 644 644
Total assets 727 248 726 926 697 880 697 880
Financial liabilities
Deposits from banks 49 263 49 263 42 886 42 886
Other liabilities 24 480 24 480 25 535 25 535
Call deposits 64 204 64 204 51 736 51 736
Cheque account deposits 178 654 178 654 183 587 183 587
Credit card deposits 1 834 1 834 1 807 1 807
Fixed deposits 142 425 142 425 141 354 141 354
Foreign currency deposits 16 294 16 294 12 682 12 682
Notice deposits 50 999 50 999 55 406 55 406
Other deposits 10 911 10 911 10 244 10 244
Savings and transmission deposits 113 101 113 101 92 862 92 862
Deposits due to customers 578 422 578 422 549 678 549 678
Debt securities in issue 101 364 101 584 103 905 103 905
Borrowed funds 14 889 15 320 16 503 16 211
Total liabilities 768 418 769 069 738 507 738 215
31 December
2013
Carrying
value Fair value
Rm Rm
Financial assets
Balances with other central banks 7 350 7 350
Balances with the SARB 12 417 12 417
Coins and bank notes 12 652 12 652
Money market assets 1 939 1 939
Cash, cash balances and balances with central banks 34 358 34 358
Loans and advances to banks 74 482 74 482
Other assets 13 486 13 486
Retail Banking South Africa 353 736 353 574
Credit cards 34 070 34 070
Instalment credit agreements 64 571 64 268
Loans to associates and joint ventures 10 287 10 287
Mortgages 226 707 226 772
Other loans and advances 262 262
Overdrafts 2 015 2 015
Personal and term loans 15 824 15 900
Business Banking South Africa 60 036 60 206
Loans to associates and joint ventures 559 559
Mortgages(including commercial property finance) 30 718 30 888
Overdrafts 17 075 17 075
Term loans 11 684 11 684
RBB Rest of Africa 36 351 36 351
CIB 133 698 127 894
WIMI 10 885 10 885
Head Office and other operations 83 83
Loans and advances to customers - net of impairment losses 594 789 588 993
Investment securities 726 726
Total assets 717 841 712 045
Financial liabilities
Deposits from banks 61 471 58 259
Other liabilities 15 778 15 310
Call deposits 52 843 52 843
Cheque account deposits 174 606 174 606
Credit card deposits 1 914 1 914
Fixed deposits 151 797 151 837
Foreign currency deposits 17 456 17 456
Notice deposits 56 349 56 351
Other deposits 10 822 10 822
Savings and transmission deposits 104 362 104 362
Deposits due to customers 570 149 570 191
Debt securities in issue 94 286 94 324
Borrowed funds 16 525 17 069
Total liabilities 758 209 755 153
22. Assets and liabilities held at fair value
22.1 Fair value measurement and valuation processes
Financial assets and financial liabilities
The Group has an established control framework with respect to the measurement of fair values. The framework includes
a Valuation Committee and an Independent Valuation Control team (“IVC”), which is independent from the front office.
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.
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 independently verifies the results of trading and investment operations and all significant fair value
measurements. They source independent data from external independent parties, as well as internal risk areas when performing
independent price verification for all financial instruments held at fair value. They also assess and document the inputs
obtained from external independent sources to measure the fair value which supports conclusions that valuations are
performed in accordance with International Financial Reporting Standards (“IFRS”) and internal valuation policies.
Investment properties
The fair value of investment properties is determined based on the most appropriate methodology applicable to the
specific property. Methodologies include the market comparable approach that reflects recent transaction prices for similar
properties, discounted cash flows and income capitalisation methodologies. In estimating the fair value of the
properties, the highest and best use of the properties is taken into account.
Where possible the fair value of the Group’s investment properties is determined through valuations performed by
external independent valuators. When the Group’s internal valuations are different to that of the external independent
valuers, detailed procedures are performed to substantiate the differences, whereby the IVC verifies the procedures performed
by front office and considers the appropriateness of any differences to external independent valuations.
22.2 Fair value hierarchy levels
Level 1
This includes assets and liabilities which are 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.
An active market is one in which transactions occur with sufficient volume and frequency to provide pricing
information on an ongoing basis. This category includes highly liquid government and other bonds, active listed equities,
exchange-traded commodities and exchange-traded derivatives.
Level 2
This comprises assets and liabilities valued using inputs other than quoted prices as described in the afore-mentioned
for Level 1 but which are observable for the asset or liability, either directly or indirectly, such as:
- quoted price for similar assets or liabilities in an active market;
- quoted price for identical or similar assets or liabilities in inactive markets;
- valuation model using observable inputs; and
- valuation model using inputs derived from/corroborated by observable market data.
This category includes certain African government bills, private equity investments, loans and advances, investments
in debt instruments, commodity derivatives, credit derivatives, equity derivatives, foreign exchange derivatives,
interest rate derivatives, repurchase agreements, deposits and debt securities.
Level 3
This comprises 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.
This category includes certain private equity investments, loans and advances, investments in debt instruments, credit
derivatives, equity derivatives, foreign exchange derivatives, interest rate derivatives, repurchase agreements,
deposits and debt securities.
22.3 Fair value hierarchy
The table below shows the Group’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 input
that is significant to the fair value measurement in its entirety.
30 June
2014 2013
Recurring fair value Level 1 Level 2 Level 3 Total Level 1 Level 2 Level 3 Total
measurements Rm Rm Rm Rm Rm Rm Rm Rm
Financial assets
Cash, cash balances and balances with central banks 6 350 8 173 - 14 523 9 669 6 502 - 16 171
Statutory liquid asset portfolio 63 589 - - 63 589 66 899 3 - 66 902
Loans and advances to banks - 11 062 - 11 062 - 13 786 - 13 786
Trading and hedging portfolio assets 31 645 54 429 1 175 87 249 25 564 60 876 991 87 431
Debt instruments 20 855 4 397 870 26 122 17 286 4 175 597 22 058
Derivative assets 62 45 293 305 45 660 9 54 575 105 54 689
Commodity derivatives 53 309 - 362 - 854 - 854
Credit derivatives - 230 48 278 - 255 1 256
Equity derivatives 9 1 334 - 1 343 - 1 135 2 1 137
Foreign exchange derivatives - 7 982 4 7 986 9 13 119 24 13 152
Interest rate derivatives - 35 438 253 35 691 - 39 212 78 39 290
Equity instruments 10 728 81 - 10 809 3 692 888 129 4 709
Money market assets - 4 658 - 4 658 4 577 1 238 160 5 975
Other assets 30 6 16 52 - 9 16 25
Loans and advances to customers 5 5 236 5 424 10 665 - 6 700 6 830 13 530
Investment securities 24 178 11 786 3 949 39 913 16 040 9 909 6 634 32 583
Total financial assets 125 797 90 692 10 564 227 053 118 172 97 785 14 471 230 428
Financial liabilities
Deposits from banks - 15 505 - 15 505 - 10 433 - 10 433
Trading and hedging portfolio liabilities 5 460 42 751 456 48 667 6 960 54 685 328 61 973
Derivative liabilities 340 42 751 456 43 547 14 54 685 328 55 027
Commodity derivatives 30 261 - 291 - 349 - 349
Credit derivatives - 214 39 253 - 346 2 348
Equity derivatives - 1 690 318 2 008 - 1 670 8 1 678
Foreign exchange derivatives 308 4 458 2 4 768 14 12 812 70 12 896
Interest rate derivatives 2 36 128 97 36 227 - 39 508 248 39 756
Short positions 5 120 - - 5 120 6 946 - - 6 946
Other liabilities 30 28 - 58 - 23 - 23
Deposits due to customers 68 12 833 6 232 19 133 - 14 307 6 707 21 014
Debt securities in issue 59 4 067 19 4 145 - 2 329 35 2 364
Liabilities under investment contracts - 24 700 - 24 700 - 19 261 - 19 261
Total financial liabilities 5 617 99 884 6 707 112 208 6 960 101 038 7 070 115 068
Non-financial assets
Investment properties - - 778 778 - - 1 125 1 125
Trading and hedging
portfolio assets
Commodities 1 840 - - 1 840 1 548 - - 1 548
Non-recurring fair value
measurements
Non-current assets held for sale(1) - - 1 290 1 290 2 172 1 162 980 4 314
Non-current liabilities held for sale(1) - - 504 504 883 158 454 1 495
Note
(1)Includes certain items classified in terms of the requirements of IFRS 5 which are measured in terms of their
respective standards.
31 December
2013
Level 1 Level 2 Level 3 Total
Recurring fair value measurements Rm Rm Rm Rm
Financial assets
Cash, cash balances and balances with central banks 7 976 7 796 - 15 772
Statutory liquid asset portfolio 62 055 - - 62 055
Loans and advances to banks - 6 140 - 6 140
Trading and hedging portfolio assets 36 263 53 738 1 037 91 038
Debt instruments 24 049 530 873 25 452
Derivative assets - 48 523 164 48 687
Commodity derivatives - 253 - 253
Credit derivatives - 258 11 269
Equity derivatives - 760 - 760
Foreign exchange derivatives - 7 053 39 7 092
Interest rate derivatives - 40 199 114 40 313
Equity instruments 12 176 77 - 12 253
Money market assets 38 4 608 - 4 646
Other assets - - 16 16
Loans and advances to customers - 4 071 6 477 10 548
Investment securities 21 232 7 156 3 969 32 357
Total financial assets 127 526 78 901 11 499 217 926
Financial liabilities
Deposits from banks - 9 320 - 9 320
Trading and hedging portfolio liabilities 3 741 50 229 549 54 519
Derivative liabilities - 50 229 549 50 778
Commodity derivatives - 161 - 161
Credit derivatives - 478 45 523
Equity derivatives - 1 607 306 1 913
Foreign exchange derivatives - 7 755 57 7 812
Interest rate derivatives - 40 228 141 40 369
Short positions 3 741 - - 3 741
Other liabilities - 36 - 36
Deposits due to customers - 10 724 7 138 17 862
Debt securities in issue - 3 508 35 3 543
Liabilities under investment contracts - 19 773 - 19 773
Total financial liabilities 3 741 93 590 7 722 105 053
Non-financial assets
Investment properties - - 1 089 1 089
Trading and hedging portfolio assets
Commodities 1 080 - - 1 080
Non-recurring fair value measurements
Non-current assets held for sale(1) 2 424 1 297 1 093 4 814
Non-current liabilities held for sale(1) 975 175 501 1 651
Note
(1) Includes certain items classified in terms of the requirements of IFRS 5 which are measured in terms of their
respective standards.
22.4 Measurement of assets and liabilities categorised at Level 2
The following table presents information about the valuation techniques used in measuring assets and liabilities
categorised as Level 2 in the fair value hierarchy.
Category of asset/liability Valuation techniques applied Significant observable inputs
Cash, cash balances and balances with Discounted cash flow Underlying price of market traded instruments
central banks and/or interest rates
Loans and advances to banks Discounted cash flow Interest rate and/or money market curves
Trading and hedging portfolio assets
Debt instruments Discounted cash flow Underlying price of market traded instruments
and/or interest rates
Derivative assets
Commodity derivatives Discounted cash flow model, option pricing models, Spot price (physical or futures),
futures pricing model, ETF model interest rates and/or volatility
Credit derivatives Discounted cash flow model, credit Interest rate, recovery rate, credit spread,
default swap model (hazard rate model) and/or quanto ratio
Equity derivatives Discounted cash flow model, option pricing models, Spot price, interest rate, volatility
futures pricing model and/or dividend stream
Foreign exchange derivatives Discounted cash flow model, option pricing models Spot price, interest rate and/or volatility
Interest rate derivatives Discounted cash flow model, option pricing models Interest rate curves, repurchase agreement
curves, money market curves and/or volatility
Equity instruments Net asset value Underlying price of market traded instruments
Money market assets Discounted cash flow Money market rates and interest rates
Loans and advances to customers Discounted cash flow Interest rate and/or money market curves
Investment securities Listed equity - is valued at the last market Underlying price of the market
bid price. Unlisted equity is valued at par. traded instrument
Other items are valued utilising discounted
cash flow models
Deposits from banks Discounted cash flow Interest rate curves and/or money market curves
Trading and hedging portfolio liabilities
Derivative liabilities
Commodity derivatives Discounted cash flow model, option Spot price (physical or futures),
pricing models, futures pricing model, interest rates, volatility
ETF model
Credit derivatives Discounted cash flow model, credit Interest rate, recovery rate, credit spread,
default swap model (hazard rate model) quanto ratio
Equity derivatives Discounted cash flow model, option Spot price, interest rate, volatility,
pricing models, futures pricing model dividend stream
Foreign exchange derivatives Discounted cash flow model, option Spot price, interest rate, volatility
pricing models
Interest rate derivatives Discounted cash flow model, option Interest rate curves, repurchase agreement
pricing models curves, money market curves, volatility
Other liabilities Discounted cash flow Underlying price of the market traded instrument,
interest rate curves and/or money market curves
Deposits due to customers Discounted cash flow Interest rate curves and/or money market curves
Debt securities in issue Discounted cash flow Underlying price of the market traded instrument
and/or interest rate curves
Liabilities under investment contracts Discounted cash flow Underlying price of the market traded instrument
and/or interest rate curves
22.5 Measurement of assets and liabilities at Level 3
In determining the value of Level 3 financial instruments, the following are the principal inputs that can require judgement:
(i) Volatility
Volatility is a key input in the valuation of options across all asset classes. For some asset classes, volatility is unobservable.
(ii) Basis risk
Basis risk is a key input in the valuation of cross currency swaps. For some currency pairs or maturities, basis risk is unobservable.
(iii) Credit spreads
Credit spreads are key inputs in the valuation of credit default swaps, credit linked notes and debt instruments or liabilities. For
some issuers or tenors, credit spreads are unobservable.
(iv) Yield curves
Yield curves are key inputs in the valuation of certain debt instruments. For some debt instruments, yield curves are unobservable.
(v) Future earnings and marketability discounts
Future earnings and marketability discounts are key inputs in the valuation of certain private equity investments. For some investments,
forecast earnings and marketability discounts are unobservable.
(vi) Comparator multiples
Comparator multiples and point of difference applied to chosen multiples are key inputs in the valuation of certain private equity
investments. For some investments price earnings multiples and point of difference applied to chosen multiples are unobservable.
(vii) Discount rates
Discount rates are key inputs in the valuation of certain private equity investments. For some investments discount rates are unobservable.
(viii) Investment properties
The significant inputs for the valuation of investment properties include but are not limited to estimates of periods in which rental
units will be disposed of, selling prices per unit, selling price escalations per year, rental income per unit, rental escalations per
year, expense ratios, vacancy rates, income capitalisation rates, and risk adjusted discount rates.
Sensitivity analysis of valuations using unobservable inputs
The following table reflects how the unobservable parameters were changed in order to evaluate the sensitivities of
Level 3 assets and liabilities:
Positive/(negative) variance
Instrument Parameter applied to 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 Future earnings and 15/(15)%
and other) marketability discounts
Comparator multiples
Discount rates
Structured notes and deposits designated at fair value through Yield curve 100/(100) bps
profit or loss
Judgemental inputs on valuation of principal instruments
The following summary sets out the principal instruments whose valuation may involve judgemental inputs:
Debt securities and treasury and other eligible bills
These instruments are valued, based on quoted market prices from an exchange, dealer, broker, industry group or
pricing service, where available. Where unavailable, fair value is determined by reference to quoted market prices
for similar instruments or, in the case of certain mortgage-backed securities, valuation techniques using inputs
derived from observable market data, and, where relevant, assumptions in respect of unobservable inputs.
Equity instruments
Equity instruments are valued, based on quoted market prices from an exchange, dealer, broker, industry group or
pricing service, where available. Where unavailable, fair value is determined by reference to quoted market prices for
similar instruments or by using valuation techniques using inputs derived from observable market data, and, where relevant,
assumptions in respect of unobservable inputs.
Also included in equity instruments are non-public investments, which include investments in venture capital
organisations. The fair value of these investments is determined using appropriate valuation methodologies which, dependent on
the nature of the investment, may include discounted cash flow analysis, enterprise value comparisons with similar
companies and price:earnings comparisons. For each investment, the relevant methodology is applied consistently over time.
Derivatives
Derivative contracts can be exchange-traded or traded Over The Counter (“OTC”) derivatives. OTC derivative contracts
include forward, swap and option contracts related to interest rates, bonds, foreign currencies, credit spreads, equity
prices and commodity prices or indices on these instruments. Fair values of derivatives are obtained from quoted market
prices, dealer price quotations, discounted cash flow and option pricing models.
Loans and advances
The disclosed fair value of loans and advances to banks and customers is determined by discounting contractual cash
flows. Discount factors are determined using the relevant forward base rates (as at valuation date) plus the originally
priced spread. Where a significant change in credit risk has occurred, an updated spread is used to reflect valuation date
pricing. Behavioural cash flow profiles, instead of contractual cash flow profiles, are used to determine expected cash
flows where contractual cash flow profiles would provide an inaccurate fair value.
Deposits, debt securities in issue and borrowed funds
Deposits, debt securities in issue and borrowed funds are valued using discounted cash flow models, applying rates
currently offered for issuances with similar characteristics. Where these instruments include embedded derivatives, the
embedded derivative component is valued using the methodology for derivatives as detailed above.
22.6 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 Group 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 Group 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.
Uncollateralised derivative adjustments
A fair value adjustment is incorporated into uncollateralised derivative valuations to reflect the impact on fair
value of counterparty credit risk, the Group’s own credit quality, as well as the cost of funding across all asset classes.
Model valuation adjustments
Valuation models are reviewed under the Group’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 the 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.
22.7 Reconciliation of Level 3 assets and liabilities
A reconciliation of the opening balances to closing balances for all movements on Level 3 assets and liabilities is
set out below:
30 June
2014
Financial
assets Total
Available- designated Financial financial
for-sale at fair value assets assets
financial through held for excluding
assets profit or loss trading derivatives
Assets Rm Rm Rm Rm
Opening balance at the beginning of the reporting period 114 11 440 870 12 424
Net interest income - 91 - 91
Gains and losses from banking and trading activities - - 4 4
Gains and losses from investment activities (34) 3 - (31)
Purchases - 312 4 316
Sales - (50) - (50)
Settlements - (1 709) - (1 709)
Transferred to/(from) liabilities - - 6 6
Movement in/(out) of Level 3 - - (14) (14)
Closing balance at the end of the reporting period 80 10 087 870 11 037
30 June
2014
Financial
liabilities Total
designated Financial financial
at fair value liabilities liabilities
through held for including net
profit or loss trading derivatives
Liabilities Rm Rm Rm
Opening balance at the beginning of the reporting period 7 173 385 7 558
Net interest income 10 - 10
Gains and losses from banking and trading activities (217) (261) (478)
Gains and losses from investment activities - - -
Purchases - - -
Sales - - -
Issues - - -
Movements in other comprehensive income - - -
Settlements (715) - (715)
Transferred (to)/from assets - 6 6
Movement in/(out) of Level 3 - 21 21
Closing balance at the end of the reporting period 6 251 151 6 402
30 June
2013
Financial
assets Total
Available- designated financial
for-sale at fair value Financial assets
financial through assets held excluding
assets profit or loss for trading derivatives
Assets Rm Rm Rm Rm
Opening balance at the beginning of the reporting period 42 14 086 873 15 001
Movement in other comprehensive income 116 - - 116
Net interest income - 487 - 487
Gains and losses from banking and trading activities - (122) (20) (142)
Gains and losses from investment activities - (65) - (65)
Purchases - 250 - 250
Sales (1) (127) - (128)
Settlements - (70) - (70)
Transferred to/(from) liabilities 9 - 33 42
Closing balance at the end of the reporting period 166 14 439 886 15 491
30 June
2013
Financial
liabilities Total
designated Financial financial
at fair value liabilities liabilities
through held for including net
profit or loss trading derivatives
Liabilities Rm Rm Rm
Opening balance at the beginning of the reporting period 7 875 (5) 7 870
Net interest income 26 - 26
Gains and losses from banking and trading activities (1 008) 194 (814)
Purchases - 1 1
Issues 65 - 65
Transferred from/(to) assets 9 33 42
Settlements (225) - (225)
Closing balance at the end of the reporting period 6 742 223 6 965
31 December
2013
Financial
assets Total
Available- designated Financial financial
for-sale at fair value assets assets
financial through held for excluding
assets profit or loss trading derivatives
Assets Rm Rm Rm Rm
Opening balance at the beginning of the reporting period 42 14 086 873 15 001
Movement in other comprehensive income 20 - - 20
Net interest income - (115) 55 (60)
Other income - 58 - 58
Gains and losses from banking and trading activities 13 (307) (363) (657)
Gains and losses from investment activities - (70) - (70)
Purchases 29 2 214 13 2 256
Sales - (3 216) - (3 216)
Issues - 5 - 5
Settlements - (1 566) - (1 566)
Transferred to/(from) liabilities 10 298 55 363
Movement in/(out) of Level 3 - 53 237 290
Closing balance at the end of the reporting period 114 11 440 870 12 424
31 December
2013
Financial
liabilities Total
designated Financial financial
at fair value liabilities liabilities
through held for including net
profit or loss trading derivatives
Liabilities Rm Rm Rm
Opening balance at the beginning of the reporting period 7 875 (5) 7 870
Net interest income 9 - 9
Gains and losses from banking and trading activities (307) 166 (141)
Gains and losses from investing activities (1) - (1)
Purchases 27 7 34
Issues 427 (3) 424
Settlements (1 165) - (1 165)
Transfer from/(to) liabilities 308 55 363
Movement out of Level 3 - 165 165
Closing balance at the end of the reporting period 7 173 385 7 558
22.7.1 Significant transfers between levels
During the previous reporting period trading and portfolio assets to the value of R237m as well as trading portfolio
liabilities of R165m 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 significant inputs to determine the fair value have been
unobservable.
22.8 Unrealised gains and losses on Level 3 assets and liabilities
The total unrealised gains and losses for the reporting period on Level 3 assets and liabilities held at the reporting
date per IAS 39 Financial Instruments, Recognition and Measurement (“IAS 39”) classification are set out below:
30 June
2014
Financial
Financial assets liabilities
Available- Financial designated at designated at Financial
for-sale assets fair value fair value liabilities
financial held for through profit through profit held for
assets trading or loss or loss trading
Rm Rm Rm Rm Rm
Gains and losses from banking and trading activities - 60 (188) - (23)
30 June
2013
Financial
Financial assets liabilities
Available- Financial designated at designated at Financial
for-sale assets fair value fair value liabilities
financial held for through profit through profit held for
assets trading or loss or loss trading
Rm Rm Rm Rm Rm
Net interest income - - 55 - -
Gains and losses from banking and trading activities - - 210 (690) 24
31 December
2013
Financial
Financial assets liabilities
Available- Financial designated at designated at Financial
for-sale assets fair value fair value liabilities
financial held for through profit through profit held for
assets trading or loss or loss trading
Rm Rm Rm Rm Rm
Gains and losses from banking and trading activities - - 201 - -
22.9 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.
A significant parameter has been deemed to be one which may result in a charge to the profit or loss section of the
statement of comprehensive income, or a change in the fair value asset or liability of more than 10% or the underlying
value of the affected item. This is demonstrated by the following sensitivity analysis which includes a reasonable range of
possible outcomes:
30 June
2014
Significant Potential effect recorded Potential effect recorded
unobservable parameters in profit or loss directly in equity
Favourable/(Unfavourable) Favourable/(Unfavourable)
Rm Rm
Deposits due to customers Yield curves -/- -/-
Investment properties Investment properties 80/(80) -/-
Investment securities Yield curves, future earnings
and marketability discount,
comparator multiples 1 272/(1 273) (5)/4
Loans and advances customers Volatility, credit spreads, 71/(80) -/-
yield curves, discount rates
Other assets Volatility, credit spreads 2/(2) -/-
Trading and hedging portfolio assets Volatility, credit spreads -/- -/-
Trading and hedging portfolio liabilities Credit spreads 21/(4) -/-
1 446/(1 439) (5)/4
30 June
2013
Significant Potential effect recorded Potential effect recorded
unobservable parameters in profit or loss directly in equity
Favourable/(Unfavourable) Favourable/(Unfavourable)
Rm Rm
Deposits due to customers Yield curves 560/(500) -/(-)
Investment properties Investment properties -/- -/-
Investment securities Yield curves, future earnings
and marketability discount,
comparator multiples 325/(284) -/(-)
Loans and advances customers Volatility, credit spreads, 60/(88) -/(-)
yield curves, discount rates
Other assets Volatility, credit spreads -/- -/-
Trading and hedging portfolio assets Volatility, credit spreads -/- -/-
Trading and hedging portfolio liabilities Credit spreads -/- -/-
945/(872) -/(-)
31 December
2013
Significant Potential effect recorded Potential effect recorded
unobservable parameters in profit or loss directly in equity
Favourable/(Unfavourable) Favourable/(Unfavourable)
Rm Rm
Deposits due to customers Yield curves 224/223 -/-
Investment securities Investment properties 355/355 -/-
Investment properties Yield curves, future earnings
and marketability discount,
comparator multiples 2/2 -/-
Loans and advances to customers Volatility, credit spreads,
yield curves, discount rates 1 202/159 -/-
Other assets Volatility, credit spreads 2/2 -/-
Trading and hedging portfolio assets Volatility, credit spreads 43/43 -/-
Trading and hedging portfolio liabilities Credit spreads 13/5 -/-
1 841/789 -/-
22.10 Measurement of 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 assets and liabilities categorised as Level 3 in the fair value hierarchy.
Category of asset/liability Valuation techniques applied Significant unobservable inputs Range of estimates utilised
for the unobservable inputs(1)
Loans and advances to customers Discounted cash flow, and Credit ratings Credit spreads vary between
dividend yield models 1,35% and 7,5%
Investment securities Discounted cash flows, Weighted average cost of capital, Discount rates between 9,7%
third-party valuations, EBITDA multiples, liquidity and 18%, multiples between
earnings before interest, discounts, minority discounts, 5,5 and 6,1
tax, depreciation and capitalisation rates
amortisation (“EBITDA”)
multiples, income
capitalisation valuations,
net asset value models
Trading and hedging portfolio assets
Debt instruments Discounted cash flows Credit spreads used in the 0,9% to 3,5%
calculation of the counterparty
credit risk adjustment
Derivative assets
Credit derivatives Discounted cash flow model, Illiquid credit curves, recovery 0% to 3,5%
credit default swap model rates, quanto ratio
(hazard rate model)
Equity derivatives Discounted cash flow model, Volatility, dividend streams 16,9% to 37,2%
option pricing models, > 3 years
futures pricing model
Foreign exchange derivatives Discounted cash flow model, African basis curves > 1 year -2,5% to 1,7%
option pricing models
Interest rate derivatives Discounted cash flow model, Interest rates (ZAR-SWAP-SPREAD -1,5% to 8,3%
option pricing models curves, ZAR-REAL < 1 year,
ZAR-MM-FundingSPR > 5
repurchase agreement curves
> 1 year
Deposits due to customers Discounted cash flow ZAR MM funding spread greater than 0,85% to 1,2%
5 years
Debt securities in issue Discounted cash flow Credit spread 10 to 20 bps
Trading and hedging portfolio liabilities
Derivative liabilities
Credit derivatives Discounted cash flow model, Illiquid credit curves, recovery 0% to 3,5%
credit default swap model rates, quanto ratio
(hazard rate model)
Equity derivatives Discounted cash flow model, Volatility, dividend streams 16,9% to 37,2%
option pricing models, futures > 3 years
pricing model
Foreign exchange derivatives Discounted cash flow model, African basis curves > 1 year -2,5% to 1,7%
option pricing models
Interest rate derivatives Discounted cash flow model, Interest rates (ZAR-SWAP-SPREAD -1,5% to 8,3%
option pricing models curves, ZAR-REAL < 1 year,
ZAR-mm-fundingSPR > 5 years,
repurchase agreement curves
> 1 year)
Note
(1) The sensitivity of the fair value measurement is dependent on the unobservable inputs. Significant changes to the
unobservable inputs in isolation will have either a positive or negative impact
on fair value.
22.11 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.
Category of asset/liability Valuation techniques applied Significant unobservable inputs Range of estimates
utilised for the
unobservable inputs(1)
Investment properties Discounted cash flow Estimates of periods in which rental 2 to 7 years
units will be disposed of
Selling price escalations per year 0% to 6%
Rental escalations per year 0% to 10%
Expense ratios 22% to 75%
Vacancy rates 2% to 15%
Income capitalisation rate 10% to 12%
Risk adjusted discount rates 14% to 16%
22.12 Unrecognised gains/(losses) as a result of the use of valuation models using unobservable inputs
The amount that has yet to be recognised in the statement of comprehensive income that relates to the difference between
the transaction price (the fair value at initial recognition) and the amount that would have arisen had valuation models
using unobservable inputs been used on initial recognition, less amounts subsequently recognised, is as follows:
30 June 31 December
2014 2013 2013
Rm Rm Rm
Opening balance at the beginning of the reporting period (85) (93) (93)
New transactions 4 11 17
Amounts recognised in the profit and loss component of the
statement of comprehensive income during the reporting period (16) (7) (9)
Net losses at the end of the reporting period (97) (89) (85)
22.13 Third-party credit enhancements
There were no significant liabilities measured at fair value and issued with inseparable third-party credit
enhancements.
Note
(1) The sensitivity of the fair value measurement is dependent on the unobservable inputs. Significant changes to the
unobservable inputs in isolation will have either a positive or negative impact on fair value.
23. Offsetting financial assets and financial liabilities
In accordance with IAS 32, the Group reports financial assets and financial liabilities on a net basis on the
statement of financial position, if there is a legally enforceable right to set off the recognised amounts and
there is an intention to settle on a net basis, or an intention to realise the asset and settle the liability
or the financial collateral that mitigates credit risk simultaneously. Where relevant, the Group reports derivative
financial instruments, reverse repurchase agreements, repurchase agreements and other similar secured lending and
borrowing agreements on a net basis. The following table discloses the impact of netting arrangements for financial
assets and liabilities reported on a net basis, as well as potential arrangements that do not meet IAS 32 netting
criteria. The table also indicates those derivative financial instruments, reverse repurchase agreements, repurchase
agreements and other similar lending and borrowing agreements that are subject to enforceable master netting
arrangements. The net amounts disclosed are not intended to represent the Group’s actual credit exposure as a
variety of credit mitigation strategies are employed in addition to netting and collateral arrangements.
30 June
2014
Amounts subject to enforceable netting arrangements
Effects of netting on statement of
financial position Related amounts not set off
Net Amounts not
amounts not subject
reported on to Total
the enforceable per
statement Offsetting netting statement of
Gross Amounts of financial financial Financial Net arrange- 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 43 651 - 43 651 (36 462) (4 502) 2 687 2 014 45 665
Reverse repurchase
agreements and other
similar secured
lending agreements 41 512 (15 109) 26 403 - (26 403) - 554 26 957
Total assets 85 163 (15 109) 70 054 (36 462) (30 905) 2 687 2 568 72 622
Derivative financial
liabilities (41 066) - (41 066) 36 462 5 011 407 (2 480) (43 546)
Repurchase agreements
and other similar
secured borrowing
agreements (21 592) - (21 592) - 21 592 - (63) (21 655)
Total liabilities (62 658) - (62 658) 36 462 26 603 407 (2 543) (65 201)
Notes
(1)Amounts offset for reverse repurchase agreements relates to a short sale financial liability of R15 109m (30 June
2013: R11 425m; 31 December 2013: R14 419m). 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 comprise 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 on the statement of financial position.
(3)Financial collateral excludes over collateralisation 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 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 include “amounts subject to enforceable netting arrangements” and “amounts not subject to enforceable
netting arrangements”.
30 June
2013(1)
Amounts subject to enforceable netting arrangements
Effects of netting on statement of
financial position Related amounts not set off
Net Amounts not
amounts subject to Total
reported on enforceable per
the statement Offsetting netting statement
Gross Amounts of financial financial Financial Net arrange- of financial
amounts set off(2) position(3) instruments collateral(4) amount ments(5) position(6)
Rm Rm Rm Rm Rm Rm Rm Rm
Derivative financial
assets 51 846 - 51 846 (40 818) (7 658) 3 370 2 843 54 689
Reverse repurchase
agreements and other
similar secured
lending agreements 43 348 (11 425) 31 923 - (31 923) - 157 32 080
Total assets 95 194 (11 425) 83 769 (40 818) (39 581) 3 370 3 000 86 769
Derivative financial
liabilities (51 203) - (51 203) 40 818 4 416 (5 969) (3 830) (55 033)
Repurchase agreements
and other similar
secured borrowing
agreements (18 267) - (18 267) - 18 267 - - (18 267)
Total liabilities (69 470) - (69 470) 40 818 22 683 (5 969) (3 830) (73 300)
31 December
2013(1)
Amounts subject to enforceable netting arrangements
Effects of netting on statement of
financial position Related amounts not set off
Net Amounts not
amounts subject to Total
reported on enforceable per
the statement Offsetting netting statement
Gross Amounts of financial financial Financial Net arrange- of financial
amounts set off(2) position(3) instruments collateral(4) amount ments(5) position(6)
Rm Rm Rm Rm Rm Rm Rm Rm
Derivative financial
assets 46 338 - 46 338 (37 580) (5 708) 3 050 2 350 48 688
Reverse repurchase
agreements and other
similar secured
lending agreements 36 515 (14 419) 22 096 - (22 096) - 745 22 841
Total assets 82 853 (14 419) 68 434 (37 580) (27 804) 3 050 3 095 71 529
Derivative financial
liabilities (46 935) - (46 935) 37 580 907 (8 448) (3 842) (50 777)
Repurchase agreements
and other similar
secured borrowing
agreements (18 263) - (18 263) - 18 263 - (312) (18 575)
Total liabilities (65 198) - (65 198) 37 580 19 170 (8 448) (4 154) (69 352)
Offsetting and collateral arrangements
Derivative assets and liabilities
Credit risk is mitigated where possible through netting arrangements, such as the International Swaps and Derivative
Association (“ISDA”) Master Agreement or derivative exchange or clearing counterparty agreements. These arrangements
allow for all the outstanding transactions with the same counterparty to 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, where possible, to mitigate credit risk on the net exposure
between counterparties.
Repurchase and reverse repurchase agreements and other similar secured lending and borrowing
Credit risk is mitigated where possible through netting arrangements such as global master repurchase agreements and
other global master securities lending agreements whereby all outstanding transactions with the same counterparty can
be offset and closed-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)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 margins 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 the above note.
(2)Amounts offset for reverse repurchase agreements relates to a short sale financial liability of R15 109m. (30 June
2013: R11 425m; 31 December 2013: R14 419m). No other significant recognised financial assets and liabilities were offset in
the statement of financial position.
(3)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 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 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 on the statement of financial
position”, which include “amounts subject to enforceable netting arrangements” and “amounts not subject to
enforceable netting arrangements”.
24. Reporting changes
The financial reporting changes have had an impact on the Group’s results for the comparative reporting periods ended
30 June 2013 and 31 December 2013.
1. The acquisition of 100% of the issued ordinary share capital of Barclays Africa Limited, previously a fellow
subsidiary of Barclays Africa Group Limited, with a shared parent company, Barclays Bank PLC. The Group accounted
for this transaction in accordance with the Group’s and Barclays Group’s accounting policy in respect of business
combinations under common control, which resulted in the restatement of the financial results of comparative
reporting periods.
2. Changes in internal accounting policies.
3. The implementation of amended IFRS, specifically amendments to IAS 32, relating to offsetting of financial assets
and liabilities. All other amendments to IFRS, and new interpretations, effective for the current reporting period
had no significant impact on the Group’s reported results.
1. Acquisition of Barclays Africa Limited
In 2012, Absa Group Limited announced its intention to conclude the strategic combination of Barclays’ Africa
operations with the Absa Group Limited operations.
Through the transaction, Absa Group Limited acquired 100% of the issued ordinary share capital of Barclays Africa
Limited, which was settled by the issuance of 129 540 636 Absa Group Limited ordinary shares. This increased
Barclays Bank PLC’s shareholding in the Group from 55,5% to 62,3%. This transaction was concluded on 31 July 2013
and was accompanied by the name change of Absa Group Limited to Barclays Africa Group Limited.
The transaction was a business combination of entities under common control as defined in IFRS 3: Business
Combinations (“IFRS 3”). The Group elected, in accordance with IFRS 3 guidance, and the Group’s and Barclays
Group’s accounting policies, to account for the transaction in terms of predecessor accounting principles.
Accordingly, the Group’s comparative financial results have been restated as if Barclays Africa Limited was
always part of the Barclays Africa Group Limited’s structure.
The effect of this reporting change was included in the reporting changes to Barclays Africa Group Limited’s
comparatives document, published on 2 December 2013.
2. Internal accounting policy changes
The Group made the following internal accounting policy changes, which had no impact on the previously reported
earnings of the Group.
Changes which were included in the reporting changes to Barclays Africa Group Limited’s comparatives document
published on 2 December 2013:
- Certain association costs, defined as costs incurred through the Group’s association with leading inter-change
agents, were reclassified from “Operating expenses” to “Net fee and commission income”.
Changes which became effective after the release of the reporting changes to Barclays Africa Group Limited’s
comparatives document published on 2 December 2013:
- The consolidation entries relating to the acquisition of Barclays Africa Limited which resulted in
reclassification between share premium and retained earnings for the reporting period ended 30 June 2013. This
reclassification has already been accounted for in the Group’s results for the reporting period ended
31 December 2013.
- The Group refined its disclosure of the service fees paid and the share of credit sales received from
Edcon (Pty) Ltd. This resulted in a reclassification between “Operating expenses” and “Net fee and commission
income” for the reporting period ended 30 June 2013.
3. Accounting policy changes due to amended IFRS
The amendments to IAS 32 provide more application guidance on when the criteria for offsetting would be considered
to be met and became effective for reporting periods beginning on or after 1 January 2014.
The offsetting requirements in IAS 32 have been retained such that a financial asset and liability shall be offset
and the net amount presented in the statement of financial position, only when an entity currently has a legally
enforceable right to set off the recognised amounts, and intends either to settle on a net basis, or to realise the
asset and settle the liability simultaneously. The amendments to IAS 32 provide more application guidance on when
the criteria for offsetting would be considered to be met.
The netting applied to certain derivatives has been assessed in light of the amendments and it has been determined
that netting is no longer permitted under IFRS.
Condensed consolidated statement of comprehensive income for the reporting period ended
30 June 2013
Internal Internal
As accounting Barclays Restate- accounting
previously policy Africa ment policy
reported(1) changes Limited document(2) changes Restated
Rm Rm Rm Rm Rm Rm
Net interest income 12 503 - 3 192 15 695 - 15 695
Interest and similar income 25 445 - 3 906 29 351 - 29 351
Interest expense and similar
charges (12 942) - (714) (13 656) - (13 656)
Non-interest income 11 342 (93) 1 419 12 668 210 12 878
Net fee and commission income 7 800 (93) 1 002 8 709 210 8 919
Fee and commission income 9 010 - 1 060 10 070 210 10 280
Fee and commission expense (1 210) (93) (58) (1 361) - (1 361)
Net insurance premium income 2 760 - - 2 760 - 2 760
Net insurance claims and
benefits paid (1 356) - - (1 356) - (1 356)
Changes in investment and
insurance contract liabilities (1 194) - - (1 194) - (1 194)
Gains and losses from banking
and trading activities 1 584 - 407 1 991 - 1 991
Gains and losses from investment
activities 1 358 - - 1 358 - 1 358
Other operating income 390 - 10 400 - 400
Total income 23 845 (93) 4 611 28 363 210 28 573
Impairment losses on loans
and advances (3 546) - (290) (3 836) - (3 836)
Operating income before
operating expenditure 20 299 (93) 4 321 24 527 210 24 737
Operating expenses (13 094) 93 (2 661) (15 662) (210) (15 872)
Other expenses (478) - (2) (480) - (480)
Other impairments (12) - (1) (13) - (13)
Indirect taxation (466) - (1) (467) - (467)
Share of post-tax results of
associates and joint ventures 79 - - 79 - 79
Operating income before income tax 6 806 - 1 658 8 464 - 8 464
Taxation expense (1 862) - (588) (2 450) - (2 450)
Profit for the reporting period 4 944 - 1 070 6 014 - 6 014
Profit attributable to:
Ordinary equity holders 4 701 - 892 5 593 - 5 593
Non-controlling interest
- ordinary shares 97 - 178 275 - 275
Non-controlling interest
- preference shares 146 - - 146 - 146
4 944 - 1 070 6 014 - 6 014
Salient features - operating performance
As Restate-
previously ment
reported(1) document(2) Restated
Net interest margin
on average
interest-bearing assets (%) 3,91 4,46 4,45
Impairment losses ratio (%) 1,35 1,35 1,35
Non-interest income as %
of revenue (%) 47,6 44,7 45,1
Cost-to-income ratio (%) 54,9 55,2 55,5
JAWS (%) (0,5) (3,6) (1,4)
Effective tax rate, excluding
indirect taxation (%) 27,4 28,9 28,9
Headline earnings per
share (cents)(3) 649,7 - 655,7
Diluted headline earnings
per share (cents)(3) 649,0 654,5 654,5
Basic earnings per
share (cents)(4) 655,0 660,2 660,3
Notes
(1)Restated amounts included in either the Reporting changes document published on 18 July 2013 and/or the interim
financial results, published on 30 July 2013.
(2)Restated amounts included in the Reporting changes to Barclays Africa Group Limited’s comparatives published on
2 December 2013.
(3)Share metrics per ordinary share include the ordinary shares issued on 31 July 2013 for the acquisition of
Barclays Africa Limited as if the ordinary shares had always been in issue. The provision of these metrics does
not impact the legal effective date of the ordinary share issue.
(4)The weighted average number of shares calculation has been refined from the number disclosed in the reporting
changes to Barclays Africa Group Limited’s comparatives issued on 2 December 2013.
Condensed consolidated statement of comprehensive income for the reporting period ended
30 June 2013
Internal Internal
As accounting Barclays Restate- accounting
previously policy Africa ment policy
reported(1) changes Limited document(2) changes Restated
Rm Rm Rm Rm Rm Rm
Profit for the reporting period 4 944 - 1 070 6 014 - 6 014
Other comprehensive income
Other comprehensive income that
will never be reclassified to
profit or loss 60 - (155) (95) - (95)
Movement in retirement benefit
fund assets and liabilities 60 - (155) (95) - (95)
Increase/(decrease) in retirement
benefit surplus 3 - (155) (152) - (152)
Decrease in retirement benefit
deficit 75 - - 75 - 75
Deferred tax (18) - - (18) - (18)
Other comprehensive income that
is or may be reclassified to
profit or loss (1 178) - 1 958 780 - 780
Foreign exchange differences on
translation of foreign operations 454 - 1 833 2 287 - 2 287
Movement in cash flow hedging reserve (1 707) - - (1 707) - (1 707)
Fair value losses arising during
the reporting period (1 467) - - (1 467) - (1 467)
Amount transferred from other
comprehensive income to profit
or loss (906) - - (906) - (906)
Deferred tax 666 - - 666 - 666
Movement in available-for-sale
reserve 75 - 125 200 - 200
Fair value gains arising during
the reporting period 105 - 115 220 - 220
Amortisation of government bonds
- release to profit or loss 4 - - 4 - 4
Deferred tax (34) - 10 (24) - (24)
Other comprehensive income, net
of tax (1 118) - 1 803 685 - 685
Total comprehensive income for
the reporting period 3 826 - 2 873 6 699 - 6 699
Total comprehensive income
attributable to:
Ordinary equity holders of
the Group 3 525 - 2 411 5 936 - 5 936
Non-controlling interest
- ordinary shares 155 - 462 617 - 617
Non-controlling interest
- preference shares 146 - - 146 - 146
3 826 - 2 873 6 699 - 6 699
Headline earnings 4 663 - 891 5 554 - 5 554
Notes
(1) Restated amounts included in either the Reporting changes document published on 18 July 2013 and/or the interim financial results, published on 30 July 2013.
(2) Restated amounts included in the Reporting changes to Barclays Africa Group Limited's comparatives published on 2 December 2013.
Condensed consolidated statement of financial position as at 30 June 2013
As Barclays Acquisition Consoli- Accounting
previously Africa accounting dation Restatement policy
reported(1) Limited entries adjustments document(2) changes(3) Restated
Rm Rm Rm Rm Rm Rm Rm
Assets
Cash, cash balances and balances
with central banks 26 315 19 705 - - 46 020 - 46 020
Statutory liquid asset portfolio 66 902 - - - 66 902 - 66 902
Loans and advances to banks 56 307 29 236 - - 85 543 2 797 88 340
Trading portfolio assets 81 780 575 - (42) 82 313 3 085 85 398
Hedging portfolio assets 3 567 14 - - 3 581 - 3 581
Other assets 20 996 4 433 - (144) 25 285 - 25 285
Current tax assets 561 309 - - 870 - 870
Non-current assets held for sale 4 314 - - - 4 314 - 4 314
Loans and advances to customers 539 343 44 289 - - 583 632 - 583 632
Loans to Group companies - 724 - (724) - - -
Reinsurance assets 769 - - - 769 - 769
Investment securities 27 028 6 199 - - 33 227 - 33 227
Investments in associates and
joint ventures 642 - - - 642 - 642
Subsidiaries - - 18 330 (18 330) - - -
Investment properties 1 125 - - - 1 125 - 1 125
Property and equipment 8 696 1 337 - - 10 033 - 10 033
Goodwill and intangible assets 2 571 530 - - 3 101 - 3 101
Deferred tax assets 417 239 - - 656 - 656
Total assets 841 333 107 590 18 330 (19 240) 948 013 5 882 953 895
Liabilities
Deposits from banks 44 110 6 124 - - 50 234 3 085 53 319
Trading portfolio liabilities 56 549 164 - (42) 56 671 2 797 59 468
Hedging portfolio liabilities 2 505 - - - 2 505 - 2 505
Other liabilities 25 531 4 135 - (40) 29 626 - 29 626
Provisions 868 863 - - 1 731 - 1 731
Current tax liabilities 490 171 - - 661 - 661
Non-current liabilities held
for sale 1 495 - - - 1 495 - 1 495
Deposits due to customers 490 394 80 298 - - 570 692 - 570 692
Debt securities in issue 106 235 34 - - 106 269 - 106 269
Liabilities under investment
contracts 19 261 - - - 19 261 - 19 261
Loans from Group companies - 828 - (828) - - -
Policyholder liabilities under
insurance contracts 3 506 - - - 3 506 - 3 506
Borrowed funds 15 657 846 - - 16 503 - 16 503
Deferred tax liabilities 1 068 101 - - 1 169 - 1 169
Total liabilities 767 669 93 564 - (910) 860 323 5 882 866 205
Equity
Capital and reserves
Attributable to ordinary
equity holders:
Share capital 1 435 195 259 (195) 1 694 - 1 694
Share premium 4 467 3 001 18 071 (18 135) 7 404 (2 533) 4 871
Retained earnings 58 922 6 244 - - 65 166 2 533 67 699
Other reserves 2 860 2 870 - - 5 730 - 5 730
67 684 12 310 18 330 (18 330) 79 994 - 79 994
Non-controlling interest
- ordinary shares 1 336 1 716 - - 3 052 - 3 052
Non-controlling interest
- preference shares 4 644 - - - 4 644 - 4 644
Total equity 73 664 14 026 18 330 (18 330) 87 690 - 87 690
Total liabilities and equity 841 333 107 590 18 330 (19 240) 948 013 5 882 953 895
Salient features As
previously Restatement
reported(1) document(2) Restated
Return on average equity (“RoE”) 14,0 14,3 14,3
Return on average assets (“RoA”) 1,15 1,22 1,22
Return on risk-weighted assets (“RoRWA”)(4) 2,10 2,06 2,04
Notes
(1)Restated amounts included in either the Reporting changes document published on 18 July 2013 and/or the interim
financial results, published on 30 July 2013.
(2)Restated amounts included in the Reporting changes to Barclays Africa Group Limited’s comparatives published on
2 December 2013.
(3)Includes internal accounting policy changes and accounting policy changes due to amended IFRS.
(4)The RWA of the Group are restated to include the RWA of Barclays Africa Limited as if they had always been a part
of the Group’s RWA. This does not alter any submissions made to the SARB.
Condensed consolidated statement of comprehensive income for the reporting period ended
31 December 2013
As
previously
reported(1) Restated
Rm Rm
Net interest income 32 351 32 351
Interest and similar income 60 232 60 232
Interest expense and similar charges (27 881) (27 881)
Non-interest income 27 055 27 055
Net fee and commission income 18 554 18 554
Fee and commission income 21 348 21 348
Fee and commission expense (2 794) (2 794)
Net insurance premium income 5 686 5 686
Net insurance claims and benefits paid (2 819) (2 819)
Changes in investment and insurance contract liabilities (2 457) (2 457)
Gains and losses from banking and trading activities 4 361 4 361
Gains and losses from investment activities 2 831 2 831
Other operating income 899 899
Total income 59 406 59 406
Impairment losses on loans and advances (6 987) (6 987)
Operating income before operating expenditure 52 419 52 419
Operating expenses (33 420) (33 420)
Other expenses (1 033) (1 033)
Other impairments (33) (33)
Indirect taxation (1 000) (1 000)
Share of post-tax results of associates and joint ventures 130 130
Operating income before income tax 18 096 18 096
Taxation expense (5 222) (5 222)
Profit for the reporting period 12 874 12 874
Profit attributable to:
Ordinary equity holders 11 981 11 981
Non-controlling interest - ordinary shares 599 599
Non-controlling interest - preference shares 294 294
12 874 12 874
Salient features - operating performance
As
previously
reported(1) Restated
Net interest margin on average interest-bearing assets (%) 4,48 4,48
Impairment losses ratio (%) 1,20 1,20
Non-interest income as % of revenue (%) 45,5 45,5
Cost-to-income ratio (%) 56,3 56,3
JAWS (%) (2,1) (2,1)
Effective tax rate, excluding indirect taxation (%) 28,9 28,9
Headline earnings per share (cents) 1 397,7 1 397,7
Diluted headline earnings per share (cents) 1 412,9 1 412,9
Basic earnings per share (cents) 1 414,0 1 414,0
Note
(1)Financial results for the reporting period ended 31 December 2013, published on 11 February 2014 in the
financial results.
Condensed consolidated statement of comprehensive income for the reporting period ended
31 December 2013
As
previously
reported(1) Restated
Rm Rm
Profit for the reporting period 12 874 12 874
Other comprehensive income
Other comprehensive income that will never be reclassified to profit or loss (324) (324)
Movement in retirement benefit fund assets and liabilities (324) (324)
Decrease in retirement benefit surplus (92) (92)
Increase in retirement benefit deficit (229) (229)
Deferred tax (3) (3)
Other comprehensive income that is or may be reclassified to profit or loss 1 271 1 271
Foreign exchange differences on translation of foreign operations 2 986 2 986
Movement in cash flow hedging reserve (1 822) (1 822)
Fair value losses arising during the reporting period (903) (903)
Amount transferred from other comprehensive income to profit or loss (1 629) (1 629)
Deferred tax 710 710
Movement in available-for-sale reserve 107 107
Fair value gains arising during the reporting period 131 131
Amortisation of government bonds - release to profit or loss 10 10
Deferred tax (34) (34)
Other comprehensive income, net of tax 947 947
Total comprehensive income for the reporting period 13 821 13 821
Total comprehensive income attributable to:
Ordinary equity holders 12 610 12 610
Non-controlling interest - ordinary shares 917 917
Non-controlling interest - preference shares 294 294
13 821 13 821
Headline earnings 11 843 11 843
Note
(1)Financial results for the reporting period ended 31 December 2013 published on 11 February 2014 in the
financial results.
Condensed consolidated statement of financial position as at 31 December 2013
IFRS
As accounting
previously policy
reported(1) changes Restated
Rm Rm Rm
Assets
Cash, cash balances and balances with central banks 50 130 - 50 130
Statutory liquid asset portfolio 62 055 - 62 055
Loans and advances to banks 79 971 651 80 622
Trading portfolio assets 87 034 1 727 88 761
Hedging portfolio assets 3 357 - 3 357
Other assets 15 829 - 15 829
Current tax assets 529 - 529
Non-current assets held for sale 4 814 - 4 814
Loans and advances to customers 605 337 - 605 337
Reinsurance assets 870 - 870
Investment securities 33 083 - 33 083
Investments in associates and joint ventures 694 - 694
Investment properties 1 089 - 1 089
Property and equipment 10 679 - 10 679
Goodwill and intangible assets 3 141 - 3 141
Deferred tax assets 987 - 987
Total assets 959 599 2 378 961 977
Liabilities
Deposits from banks 69 064 1 727 70 791
Trading portfolio liabilities 51 477 651 52 128
Hedging portfolio liabilities 2 391 - 2 391
Other liabilities 19 775 - 19 775
Provisions 2 460 - 2 460
Current tax liabilities 173 - 173
Non-current liabilities held for sale 1 651 - 1 651
Deposits due to customers 588 011 - 588 011
Debt securities in issue 97 829 - 97 829
Liabilities under investment contracts 19 773 - 19 773
Policyholder liabilities under insurance contracts 3 958 - 3 958
Borrowed funds 16 525 - 16 525
Deferred tax liabilities 1 311 - 1 311
Total liabilities 874 398 2 378 876 776
Equity
Capital and reserves
Attributable to ordinary equity holders:
Share capital 1 695 - 1 695
Share premium 4 474 - 4 474
Retained earnings 64 701 - 64 701
Other reserves 6 447 - 6 447
77 317 77 317
Non-controlling interest - ordinary shares 3 240 - 3 240
Non-controlling interest - preference shares 4 644 - 4 644
Total equity 85 201 - 85 201
Total liabilities and equity 959 599 2 378 961 977
Salient features - financial performance
As
previously
reported(1) Restated
% %
Return on average equity 15,5 15,5
Return on average assets 1,29 1,29
Return on average risk-weighted assets 2,12 2,12
Note
(1)Financial results for the reporting period ended 31 December 2013 published on 11 February 2014 in
the financial results.
Profit and dividend announcement
Salient features
Diluted headline earnings per share (“HEPS”) increased 10% to 720,7 cents.
Rest of Africa headline earnings grew 34% to R1,0bn and South Africa increased 6% to R5,1bn.
Barclays Africa Limited acquisition remained earnings enhancing and Rest of Africa generated 30% of total revenue
growth.
Pre-provision profit increased 5% to R13,5bn.
Return on equity (“RoE”) improved to 16,1% from 14,3%. Return on risk-weighted assets increased to 2,14% from
2,04%, while return on assets improved to 1,27% from 1,22%.
The interim ordinary dividend per share (“DPS”) increased 14% to 400 cents.
Revenue grew 7% to R30,7bn, as net interest income rose 10% to R17,2bn.
Net interest margin improved to 4,56% from 4,45% of average interest-bearing assets.
Non-interest income increased 5% to R13,5bn and accounted for 44,0% of total revenue.
Customer attrition slowed, with South African banking customer numbers declining 7% this year to 9,2m, while Rest
of Africa increased 2% to 2,7m.
Operating expenses grew 9% to R17,3bn, increasing the cost-to-income ratio to 56,4% from 55,5%.
Loans and advances to customers grew 5% to R614,6bn, while deposits due to customers rose 5% to R597,6bn.
Credit impairments declined 7% to R3,6bn, resulting in a 1,18% credit loss ratio from 1,35%, while coverage on
performing loans increased to 70 basis points from 60.
Non-performing loans (“NPLs”) improved to 4,6% of gross loans and advances to customers from 5,3%.
Net asset value (“NAV”) per share declined 2% to 9 261 cents, mainly due to the R6bn special dividend paid in
November 2013.
Barclays Africa Group Limited’s Common Equity Tier 1 (“CET1”) ratio was 11,8%, well above regulatory requirements
and our Board target.
Overview of results
Barclays Africa Group Limited’s headline earnings increased 10% to R6 110m from the restated R5 554m after
acquiring Barclays Africa Limited. Diluted HEPS also increased 10% to 720,7 cents from 654,5 cents. The Group’s
RoE improved to 16,1% from 14,3%, comfortably above its 13,5% cost of equity. Barclays Africa declared a 14%
higher ordinary DPS of 400 cents, given its strong CET1 and capital generation.
Although the 9% cost growth exceeded 7% higher revenue, pre-provision profit increased 5% and was the main driver
of earnings growth. Credit impairments fell 7%, resulting in a 1,18% credit loss ratio, while further strengthening
portfolio provisions to 0,7% of performing loans. A slightly higher effective tax rate of 29,2% and 19% higher
indirect taxation were earnings drags.
Retail and Business Banking (“RBB”) headline earnings grew 9% to R3,8bn, due principally to 8% lower credit
impairments. Wealth, Investment Management and Insurance (“WIMI”) headline earnings were steady at R688m, while
Corporate and Investment Bank (“CIB”) headline earnings increased 24% to R1,9bn, with 58% growth outside
South Africa.
Rest of Africa revenue rose 12% to account for 20% of the total. Rest of Africa headline earnings grew 28% in
constant currency, improving its contribution to 17% of total earnings. The Barclays Africa Limited acquisition
was earnings accretive, increasing the Group’s HEPS by 2,3%.
Operating environment
Global growth slowed in the first quarter of 2014 due to lower United States (“US”) gross domestic product (“GDP”)
(largely weather related) and broadly weaker emerging markets. In general, global monetary policy remained
accommodative in the first half.
South Africa’s GDP contracted in the first quarter due to prolonged mining strikes and electricity supply
constraints.
The expenditure side of the economy remained weak with slower growth in consumption and private fixed investment
spending. Household consumption slowed, given stretched balance sheets, lacklustre employment growth, subdued
confidence and rising inflation. Unsecured credit extension to households also slowed further. Following sharp
depreciation in January, the rand recovered somewhat, although risks of further weakening remain.
Growth in the Barclays Africa markets outside South Africa remained resilient in first half, despite some key
economies slowing. This stems variously from idiosyncratic shocks, tighter monetary policy and generally weaker
commodity prices. Fiscal and/or external imbalances are placing currencies under pressure in some of our
larger markets.
Group performance
Statement of financial position
Total assets grew 3% to R977,8bn at 30 June 2014, predominantly due to 5% higher loans and advances to customers
and investment securities rising 20%.
Loans and advances to customers
Gross loans and advances to customers increased 5% to R631,4bn. Retail Banking South Africa’s gross loans rose 2%
to R368,4bn, as credit cards and instalment credit agreements grew 13% and 8% respectively, while mortgages declined
2%, in part due to NPLs reducing. Business Banking South Africa’s gross loans decreased 1% with commercial property
finance decreasing 4%. RBB Rest of Africa’s gross loans increased 8% to R38,9bn or 7% in constant currency, largely
due to growth in personal loans. CIB gross loans increased 19%, given strong growth in foreign currency loans,
corporate overdrafts and Rest of Africa lending. Much of CIB’s loan growth occurred in the second half of 2013.
Funding
The Group maintained its strong liquidity position, growing deposits due to customers 5% to R597,6bn. Debt securities
in issue declined 1% to R105,5bn as floating notes fell 11%. The funding tenure remains robust with a long-term
funding ratio of 23,0% from 24,3% of the reporting period ended 31 December 2013. Deposits due to customers contributed
77,8% to total funding, while the proportion of debt securities in issue dropped to 13,7% from 14,6%. Retail Banking
South Africa grew deposits due to customers 8% to R138,1bn to maintain its leading market share. Business Banking South
Africa’s deposits due to customers increased 13% to R87,9bn, as its savings and transmission deposits rose 61%. CIB’s
deposits increased 3%, due to 6% growth in fixed deposits and 49% higher foreign currency deposits. The Group’s
loans-to-deposits ratio improved to 87,4% from 86,2%.
Net asset value
The Group’s NAV declined 2% to R78,4bn, predominantly due to the R6bn special dividend it paid in November 2013 and
a relatively high payout ratio. NAV per share also decreased 2% to 9 261 cents. However, it grew 1,5% in the first
half, with R6,2bn of profit exceeding R4,0bn in dividends and a R1,1bn fall in reserves.
Capital to risk-weighted assets
Group risk-weighted assets (“RWAs”) increased 12% annualised this year to R595,1bn at 30 June 2014, driven by 15%
higher credit risk RWAs. Group capital levels remained strong and above both Board targets and regulatory
requirements.
Barclays Africa Group Limited’s CET1 and Tier 1 capital adequacy ratios were 11,8% and 12,5% respectively (from
12,1% and 13,0% at 31 December 2013). The Group generated 114 basis points of CET1 internally during the first half.
The total capital ratio was 14,6%, which is above our Board target of 12,5% to 14,0%. Declaring an interim DPS of
400 cents, a dividend cover of 1,8 times, was well considered based on the Group’s strong capital position, internal
capital generation, strategy and growth plans.
Statement of comprehensive income
Net interest income
Net interest income increased 10% to R17 197m from R15 695m, with average interest-bearing assets growing 7%. The net
interest margin improved to 4,56% from 4,45%. Loan mix had a positive impact, given a lower proportion of mortgages
and lower funding costs. Higher South African interest rates increased the endowment contribution on deposits and
equity.
The benefit from structural hedging declined 4 bps, with R671m released to statement of comprehensive income. The
cash flow hedging reserve decreased to R0,2bn after tax from R0,6bn as at 31 December 2013. Liquidity interest risk
management added 6 bps to the margin. Although Rest of Africa’s margin remains well above South Africa’s, declining
rates, increased competition and regulatory changes meant it reduced the Group margin by 10 bps.
Impairment losses on loans and advances
Credit impairments improved 7% to R3 568m from R3 836m, resulting in a 1,18% credit loss ratio from 1,35%. Total NPL
cover improved further to 43,05% from 41,79% as at 31 December 2013. Statement of financial position portfolio
provisions increased 24% to R4,2bn, amounting to 0,70% of performing loans from 0,60% at 30 June 2013. Group NPLs
declined 8% to R29,2bn or 4,6% of gross customer loans and advances from 5,3%.
RBB’s credit impairments fell 8% to R3,5bn, a 1,55% credit loss ratio from 1,73%. Retail Banking South Africa’s
charge declined 7% to R2,8bn as significantly lower mortgage credit impairments outweighed an expected 62% increase
in Card off a low base.
Home Loans’ charge decreased 58% to R464m, a 0,45% credit loss ratio, given improved collections processes and the
high quality new business of recent years. Mortgages NPLs fell 31% or by R5,4bn with the legal book improving further.
NPL cover in Mortgages decreased to 26,95% from 27,79% as at 31 December 2013, due to lower loan-to-values in the legal
book. Vehicle and Asset Finance’s credit loss ratio declined to 1,11% from 1,20%, again reflecting improved collections
and high quality origination. NPLs improved to 2,2% and the stock of repossessed vehicles is the lowest in several
years.
Vehicle and Asset Finance’s NPL cover declined to 46,07%, due to accelerating write-offs of aged legal accounts, which
reduced the book’s average age materially.
Card’s charge increased to R1 354m from R835m, a 7,64% credit loss ratio from 5,05%. The Card book is within
expectation, given the operating environment and recent growth seasoning. Within this, the Edcon portfolio’s ratio
rose to 15,01% from 11,86% in 2013, in part due to a natural maturation of the portfolio. Personal Loans’ credit loss
ratio declined to 6,93% from 7,17% reflecting improvements in its book mix and collections. Improving quality in this
portfolio is a key focus.
Business Banking South Africa’s credit impairments fell 20% to R303m, a 1,00% credit loss ratio, as new defaults
declined and improved recoveries. RBB Rest of Africa’s credit impairments fell 13% in constant currency, improving
its credit loss ratio to 2,01% from 2,40%. CIB’s credit loss ratio remained low at 0,09%, most of which were
portfolio provisions.
Non-interest income
Non-interest income increased 5% to R13 487m from R12 878m to account for 44% of total income. Growth of 14% in the
rest of Africa to R2,1bn, in part due to rand depreciation, exceeded South Africa’s 3% rise to R11,4bn.
Net fee and commission income grew 4% to R9,3bn, as credit-related fees and commissions increased 3% to R7,6bn.
Electronic banking fees were flat at R2,0bn, while card fees increased 14% to R667m, merchant income grew 7% to
R1,1bn and Trust and other fiduciary services rose 8% to R709m.
RBB’s non-interest income grew 4% to R8,3bn, 61% of the total. Retail Banking South Africa rose 3% to R5,7bn and
Business Banking South Africa grew 1%, while RBB Rest of Africa increased 14%. Retail Banking South Africa achieved
strong growth in card fees and acquiring volumes that offset lower customer numbers and transactions shifting to
electronic channels and Value Bundles. Transactions migrating to digital channels and lower customer numbers, together
with declining cheque payment volumes industry-wide, also dampened Business Banking South Africa’s non-interest income
growth. With electronic banking fees and cash fees growing 6% and 4% respectively, its non-interest income increased
1% to R1,5bn. RBB Rest of Africa’s non-interest income rose 14% to R1,1bn, assisted by rand depreciation and higher
card volumes that offset pressure on fees.
WIMI’s non-interest income increased 5% to R2,3bn. Growth in net premium income in Life and Short-term insurance,
particularly in the rest of Africa, was partially offset by weather-related claims and higher surrenders and
mortality claims in Life.
CIB’s non-interest income increased 11% to R3,3bn, with 10% growth in South Africa and 15% in the rest of Africa.
Net fees and commissions grew 4% with flat electronic banking transaction volumes in Corporate. Investment Bank
non-interest income grew 14% to R2,4bn, with 39% growth in Investment Banking fees and 17% growth in Markets net
revenue.
Operating expenses
Operating expenses grew 9% to R17 297m from R15 872m, increasing the Group’s cost-to-income ratio to 56,4% from
55,5%. Rand depreciation accounted for 2% or R0,3bn of the growth. Staff costs rose 11% to R9,1bn to account for
53% of total expenses. Salaries grew 12% due to more senior hires, awarding entry level employees higher wage
increases and large inflationary increases in the rest of Africa. Incentives rose 18%, largely due to 34% higher
share-based payments following a 22% first half increase in the Group’s share price. Other staff costs declined 21%,
given Rest of Africa restructuring costs in the first half of 2013.
Non-staff costs increased 7% to R8,2bn. Property-related costs increased 7% to R2,8bn, although these declined
slightly excluding a R190m property dilapidation provision. While marketing costs grew 10% to R589m, actual
marketing spend increased materially across Africa as certain sponsorships were exited. Information technology
(“IT”) costs rose 7% to R1,2bn, as efficiency gains offset the impact of rand depreciation. Investment in systems
and processes increased amortisation 11% to R243m, while depreciation declined 8% to R0,8bn due to efficiencies and
realigning computer equipment’s useful lives. These figures exclude certain IT investments in the Barclays Africa
Limited countries that Barclays PLC is funding in terms of the purchase agreement. Professional fees increased
2% to R689m and communication costs rose 5% to R539m. Other costs increased 35% to R1,0bn, due to higher fraud
and losses charges and outsourcing costs.
In South Africa, RBB and CIB’s operating expenses increased 7% and 10% respectively to R10,0bn and R2,4bn
respectively, while WIMI grew 10% to R1,4bn. Retail Banking SA’s costs rose 9%, as it invested in marketing and
its multi-channel programme. Business Banking South Africa increased expenses 2%, with continued cost containment
and lower property write-downs in the equity portfolio offsetting growth in staff costs. RBB Rest of Africa grew
10%, predominantly due to rand depreciation. WIMI’s expense growth reflects investment into sales capacity,
amortisation on new operating systems and expansion into the rest of Africa. CIB kept business as usual costs
below inflation, while investing heavily in systems and people.
Taxation
The Group’s taxation expense increased 11% to R2 714m, slightly more than the growth in pre-tax profit, which
resulted in a 29,2% effective tax rate (excluding indirect taxation) from 28,9%. Indirect taxation rose 19% to
R558m, largely due to higher value-added tax.
Segment performance
Retail Banking South Africa
Headline earnings increased 9% to R2 555m due largely to a 7% reduction in credit impairments, as pre-provision
profits grew 1%. Home Loans earnings grew significantly to R799m, driven by 58% lower credit costs and 16% lower
expenses.
Vehicle and Asset Finance earnings rose 2% to R547m on 11% loan growth and an improved credit loss ratio. Despite
10% revenue growth exceeding 5% cost growth, Card’s earnings fell 20% to R720m as impairments increased 62% to
R1,4bn and the Edcon portfolio made a R97m loss. Despite modest revenue growth, Personal Loans earnings rose 8%
as credit impairments declined 2%. Transactional and Deposits earnings declined 2% reflecting 1% lower non-interest
revenue. Excluding Sekulula account closures, customer numbers started to stabilise, with 8% growth in the affluent
segment and the middle market flat during the first half. Headline earnings in the “Other” segment dropped 35% to a
R960m loss, primarily attributable to increased investment on marketing and the multi-channel programme. Retail
Banking South Africa accounted for almost 40% of Group headline earnings excluding head office, eliminations and
other central items.
Business Banking South Africa
Business Banking South Africa headline earnings increased 19% to R824m, largely due to 75% lower losses in its
equities portfolio. Costs grew 2%, slightly below 4% revenue growth, while credit impairments fell 20% despite
higher portfolio provisions. Customer numbers stabilised during the first half, with growth in the more
profitable a commercial segment.
Business Banking South Africa generated 13% of Group headline earnings.
Retail and Business Banking Rest of Africa
RBB Rest of Africa headline earnings declined 1% to R468m, predominantly due to a higher effective tax rate, as
profit before tax grew 16% (13% in constant currency). Rand depreciation impacted revenue and costs, which both
increased 10%.
Regulatory changes, including removing early settlement fees and a restriction on certain fee increases, and
lower interest rates dampened revenue growth. Credit impairments declined 13% in constant currency, with an
overall improvement in the quality of the loan book and improved collections. It constituted 8% of Group
earnings.
Corporate and Investment Bank
Headline earnings grew 24% to R1 903m, driven by 16% revenue growth that was well above the 8% cost growth.
Investment Bank earnings grew 30% to R1,1bn, reflecting 20% revenue growth including 44% higher net interest
income. Markets net revenue increased 17% to R2,3bn, with Fixed income and Credit rising 31% and Rest of Africa
25% to offset 2% lower Foreign Exchange and Commodities revenue. Private Equity and Infrastructure Investments
net revenue fell 48% to R30m after the portfolio was materially reduced in the second half of 2013. Corporate
earnings grew 17% to R803m, largely due to 15% net interest income growth and containing cost growth to 7%. CIB
Rest of Africa earnings grew 58% to R580m, while South Africa increased 13% to R1,3bn. CIB accounted for almost
31% of Group earnings and produced a 20,1% RoRC from 18,8%.
Wealth, Investment Management and Insurance
Headline earnings were flat at R688m, accounting for 11% of Group earnings. Life Insurance earnings rose 1% to
R369m, impacted by a non-recurring investment profit of R52m included in the comparative period. Net premium income
increased 9%, with 75% growth in the rest of Africa, while operating costs rose 11%. The embedded value of new business
grew 29% for the Pan African life operations. Wealth and Investments’ earnings increased 11% to R258m, despite net
assets under management declining 6% to R219bn. The decline can be attributed to a fund that was closed and exiting
the administration only multi-manager offering in the second half of 2013. Short-term Insurance earnings increased
11% to R91m, with an increase of 7% in net insurance premium. Despite the increase in earnings the underwriting margins
remain low for South Africa. In Fiduciary Services, Absa Trust continued to generate high returns and Employee Benefits
continued its turnaround.
Distribution made a R49m loss due to investments in its sales capacity and lower sales volumes. WIMI’s Rest of Africa
net operating income grew 27%, while South Africa’s declined by 3%. WIMI’s RoE declined to 23,4% from 24,2%.
Prospects
Following a weak start to 2014, global growth is expected to gain traction in the second half. Better global growth
is likely to be accompanied by higher inflation in some advanced economies and this may place more focus on policy
normalisation in the US. We expect 4% global GDP growth in the second half compared to 2,5% in the first. Domestically,
the growth outlook has deteriorated markedly since the start of the year and we expect growth to decelerate to 1,5%
in 2014 from 1,9% in 2013. We expect stronger growth in the Barclays Africa Group markets beyond South Africa, despite
fiscal and external account challenges in some of the larger economies. However, we believe Rest of Africa growth
could reach 6,3% again in 2014, supported by infrastructure investment and improving global growth prospects.
Against this backdrop, we expect mid-single digit loan growth in South Africa this year, although less than we
initially expected. Our net interest margin should widen, given rising interest rates in South Africa, while our
credit loss ratio is also likely to improve slightly. Continued investment spend will make it difficult to reduce
our cost to income ratio this year. We remain committed to achieving our 18% - 20% RoE target next year.
Basis of presentation
The Group’s interim financial results have been prepared in accordance with the recognition and measurement
requirements of IFRS, interpretations issued by the IFRS Interpretations Committee (“IFRS-IC”), the SAICA Financial
Reporting Guides as issued by the Accounting Practices Committee, Financial Reporting Pronouncements as issued by
the Financial Reporting Standards Council, the JSE Listings Requirements and the requirements of the Companies Act.
The principal accounting policies applied are set out in the Group’s most recent annual consolidated financial
statements.
The Group’s unaudited condensed consolidated interim financial statements comply with IAS 34 - Interim Financial
Reporting (“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 Group’s results and financial position, in terms of the materiality of the
items to which the policies are applied, and which involve a high degree of judgement including the use of assumptions
and estimation are: impairment of loans and advances, valuation of financial instruments, impairment of
available-for-sale financial assets, deferred tax assets, post-retirement benefits, provisions as well as liabilities
arising from claims made under short-term insurance contracts and life insurance contracts.
Accounting policies
The accounting policies applied in preparing the unaudited condensed consolidated interim financial statements
are the same as those in place for the reporting period ended 31 December 2013 except for:
- business portfolio changes between operating segments;
- internal accounting policy changes; and
- accounting policy changes due to amended IFRS.
Change in accounting estimates
During the previous period, the Group 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 Group’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.
Events after the reporting period
The directors are not aware of any events occurring between the reporting date of 30 June 2014 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
30 July 2014
Declaration of interim ordinary dividend number 56
Shareholders are advised that an interim ordinary dividend of 400 cents per ordinary share was declared today,
30 July 2014, for the period ended 30 June 2014. The ordinary dividend is payable to shareholders recorded in
the register of members of the Company at the close of business on 12 September 2014. The directors of Barclays
Africa Group Limited confirm that the Group will satisfy the solvency and liquidity test immediately after
completion of the dividend distribution.
The dividend will be subject to local dividends withholding tax at a rate of 15%. In accordance with paragraphs
11.17(a)(i) to (x) and 11.17(c) of the JSE Listings Requirements, the following additional information is disclosed:
The dividend has been declared out of income reserves.
The local dividend tax rate is fifteen percent (15%).
The gross local dividend amount is 400 cents per ordinary share for shareholders exempt from the dividend tax.
The net local dividend amount is 340 cents per ordinary share for shareholders liable to pay the dividend tax.
Barclays Africa Group Limited currently has 847 750 679 ordinary shares in issue (includes 880 000 treasury shares).
Barclays Africa Group Limited’s income tax reference number is 9150116714.
In compliance with the requirements of Strate, the electronic settlement and custody system used by the JSE Limited,
the following salient dates for the payment of the dividend are applicable:
Last day to trade cum dividend Friday, 5 September 2014
Shares commence trading ex dividend Monday, 8 September 2014
Record date Friday, 12 September 2014
Payment date Monday, 15 September 2014
Share certificates may not be dematerialised or rematerialised between Monday, 8 September 2014 and Friday, 12
September 2014, both dates inclusive. On 15 September 2014 the dividend will be electronically transferred to the
bank accounts of certificated shareholders.
The accounts of those shareholders who have dematerialised their shares (which are held at their participant or
broker) will be credited on 15 September 2014.
On behalf of the Board
N R Drutman
Company Secretary
Johannesburg
30 July 2014
Barclays Africa Group Limited is a company domiciled in South Africa. Its registered office is 7th Floor,
Barclays Towers West, 15 Troye Street, Johannesburg, 2001.
Administration and contact details
Barclays Africa Group Limited
(Formerly known as Absa Group Limited)
Authorised financial services and registered credit provider (NCRCP7)
Registration number: 1986/003934/06
Incorporated in the Republic of South Africa
JSE share code: BGA
ISIN: ZAE000174124
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
Group independent non-executive directors
C Beggs, Y Z Cuba, M J Husain, P B Matlare, T S Munday (Lead Independent Director), S G Pretorius
Group non-executive directors
P A Clackson(1), W E Lucas-Bull (Group Chairman), M S Merson(1), A V Vaswani(2)
Group 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 Banking 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
Barclays Africa 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
Group Company Secretary
N R Drutman
Telephone: (+27 11) 350 5347
Email: groupsec@barclaysafrica.com
Other contacts
Group Finance
J P Quinn (Head of Finance)
Telephone: (+27 11) 350 7565
Head office switchboard
Telephone: (+27 11) 350 4000
Website address
www.barclaysafrica.com
Notes
(1)British
(2)Singaporean
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