Wrap Text
Unaudited condensed consolidated financial results
for the interim reporting period ended 30 June 2014.
Absa Bank Limited
Authorised financial services and
registered credit provider (NCRCP7)
Registration number: 1986/004794/06
Incorporated in the Republic of South Africa
JSE share code: ABSP and ABMN
ISIN: ZAE000079810
(Absa, Absa Bank, the Bank or the Company)
Unaudited condensed consolidated financial results
for the interim reporting period ended 30 June 2014.
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
Consolidated salient features
30 June Change 31 December
2014 2013(1) % 2013(1)
Statement of comprehensive income (Rm)
Revenue 21 430 20 316 5 42 122
Operating expenses 12 101 11 029 10 23 560
Profit attributable to ordinary equity holder 4 093 4 025 2 8 439
Headline earnings(2) 4 040 3 970 2 8 266
Statement of financial position
Loans and advances to customers (Rm) 542 481 519 592 4 534 040
Total assets (Rm) 811 115 794 011 2 791 749
Deposits due to customers (Rm) 505 083 478 521 6 488 371
Loans-to-deposits ratio (%) 88,9 89,2 91,2
Financial performance (%)
Return on average equity 15,6 14,2 15,5
Return on average assets 1,02 1,04 1,08
Return on average risk-weighted assets(3) 1,91 1,96 2,01
Operating performance (%)
Net interest margin on average interest-bearing assets 3,69 3,63 3,64
Impairment losses ratio 1,10 1,31 1,14
Non-performing loans ratio 4,3 5,3 4,5
Non-interest income as a % of revenue 42,4 43,4 44,1
Cost-to-income ratio 56,5 54,3 55,9
JAWS (4,2) (3,3) (6,4)
Effective tax rate, excluding indirect taxation 29,0 26,5 27,3
Share statistics (million)
(including “A” ordinary shares)
Number of ordinary shares in issue 387,5 378,8 383,1
Weighted average number of ordinary shares in issue 385,1 378,8 379,1
Diluted weighted average number of ordinary shares in issue 385,1 378,8 379,1
Share statistics (cents)
Headline earnings per ordinary share 1 049,1 1 048,0 0 2 180,4
Diluted headline earnings per ordinary share 1 049,1 1 048,0 0 2 180,4
Basic earnings per ordinary share 1 062,8 1 062,6 0 2 226,1
Diluted basic earnings per ordinary share 1 062,8 1 062,6 0 2 226,1
Dividend per ordinary share relating to income for the reporting period 1 231,7 2 233,4 (45) 3 251,7
Dividend cover (times) 0,9 0,5 0,7
Net asset value per ordinary share 13 400 14 905 (10) 13 721
Tangible net asset value per ordinary share 13 053 14 588 (11) 13 381
Capital adequacy (%)
Absa Bank Limited 13,9 16,8 15,6
Common Equity Tier 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.
(3)For the calculation of RoRWA the RWA of the Bank as at 30 June 2013 and 31 December 2013 are restated to reflect
the reporting changes as included within note 24.
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 18 313 18 823 (3) 21 087
Statutory liquid asset portfolio 63 589 66 902 (5) 62 055
Loans and advances to banks 63 297 57 120 11 45 953
Trading portfolio assets 75 606 82 530 (8) 78 864
Hedging portfolio assets 2 498 3 567 (30) 3 344
Other assets 12 747 13 690 (7) 9 299
Current tax assets 17 6 >100 15
Non-current assets held for sale 1 414 1 655 (75) 1 857
Loans and advances to customers 2 542 481 519 592 4 534 040
Loans to Group companies 15 612 13 803 13 19 247
Investment securities 5 467 6 345 (14) 5 220
Investments in associates and joint ventures 767 642 19 694
Investment properties 243 229 6 240
Property and equipment 8 692 7 886 10 8 504
Goodwill and intangible assets 1 346 1 201 12 1 303
Deferred tax assets 26 20 30 27
Total assets 811 115 794 011 2 791 749
Liabilities
Deposits from banks 62 532 53 282 17 65 827
Trading portfolio liabilities 43 136 54 700 (21) 50 710
Hedging portfolio liabilities 2 512 2 505 0 2 391
Other liabilities 20 102 22 001 (9) 11 640
Provisions 1 048 606 73 1 362
Current tax liabilities - 312 (100) 151
Non-current liabilities held for sale 1 - 185 (100) 175
Deposits due to customers 5 505 083 478 521 6 488 371
Debt securities in issue 6 104 974 104 197 1 97 179
Borrowed funds 7 14 108 15 657 (10) 15 762
Deferred tax liabilities 1 049 891 18 922
Total liabilities 754 544 732 857 3 734 490
Equity
Capital and reserves
Attributable to equity holders:
Ordinary share capital 303 303 - 303
Ordinary share premium 14 465 12 465 16 13 465
Preference share capital 1 1 - 1
Preference share premium 4 643 4 643 - 4 643
Retained earnings 33 202 39 625 (16) 34 506
Other reserves 3 955 4 067 (3) 4 291
56 569 61 104 (7) 57 209
Non-controlling interest 2 50 (96) 50
Total equity 56 571 61 154 (7) 57 259
Total liabilities and equity 811 115 794 011 2 791 749
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
Note Rm Rm % Rm
Net interest income 12 342 11 496 7 23 565
Interest and similar income 8.1 26 540 24 600 8 50 095
Interest expense and similar charges 8.2 (14 198) (13 104) (8) (26 530)
Non-interest income 9 088 8 820 3 18 557
Net fee and commission income 7 170 6 991 3 14 421
Fee and commission income 9.1 7 759 7 525 3 15 486
Fee and commission expense 9.2 (589) (534) (10) (1 065)
Gains and losses from banking and trading activities 9.3 1 786 1 569 14 3 491
Gains and losses from investment activities 9.4 2 1 100 6
Other operating income 130 259 (50) 639
Total income 21 430 20 316 5 42 122
Impairment losses on loans and advances 3.1 (2 942) (3 307) 11 (5 881)
Operating income before operating expenditure 18 488 17 009 9 36 241
Operating expenses 10 (12 101) (11 029) (10) (23 560)
Other expenses (486) (381) (28) (794)
Other impairments 11 (31) (1) >(100) 1
Indirect taxation (455) (380) (20) (795)
Share of post-tax results of associates and joint ventures 73 81 (10) 132
Operating income before income tax 5 974 5 680 5 12 019
Taxation expense (1 734) (1 507) (15) (3 284)
Profit for the reporting period 4 240 4 173 2 8 735
Profit attributable to:
Ordinary equity holder 4 093 4 025 2 8 439
Preference equity holders 147 146 1 294
Non-controlling interest - 2 (100) 2
4 240 4 173 2 8 735
Earnings per share
Basic earnings per ordinary share (cents) 1 062,8 1 062,6 0 2 226,1
Diluted basic earnings per ordinary share (cents) 1 062,8 1 062,6 0 2 226,1
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)
Rm Rm % Rm
Profit for the reporting period 4 240 4 173 2 8 735
Other comprehensive income
Other comprehensive income that will never be reclassified to profit or loss: 14 2 >100 (19)
Movement in retirement benefit fund assets and liabilities 14 2 >100 (19)
Increase/(decrease) in retirement benefit surplus 20 3 >100 (26)
Deferred tax (6) (1) >(100) 7
Other comprehensive income that is or may be reclassified to profit or loss: (390) (1 425) 73 (1 248)
Foreign exchange differences on translation of foreign operations 79 200 (61) 488
Movement in cash flow hedging reserve (252) (1 712) 85 (1 826)
Fair value gains/(losses) arising during the reporting period 321 (1 472) >100 (907)
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 (217) 87 >(100) 90
Fair value (losses)/gains arising during the reporting period (306) 117 >(100) 112
Amortisation of government bonds - release to profit or loss 3 4 (25) 10
Deferred tax 86 (34) >100 (32)
Other comprehensive losses, net of tax (376) (1 423) 74 (1 267)
Total comprehensive income for the reporting period 3 864 2 750 41 7 468
Total comprehensive income attributable to:
Ordinary equity holder 3 717 2 602 43 7 172
Preference equity holders 147 146 1 294
Non-controlling interest - 2 (100) 2
3 864 2 750 41 7 468
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
attributable Non-
to equity controlling Total
holders interest equity
Rm Rm Rm
Balance at the beginning of the reporting period 57 209 50 57 259
Total comprehensive income for the reporting period 3 864 - 3 864
Profit for the reporting period 4 240 - 4 240
Other comprehensive income (376) - (376)
Dividends paid during the reporting period (refer to note 13) (5 483) - (5 483)
Shares issued 1 000 - 1 000
Purchase of Barclays Africa Group Limited shares in respect of
equity-settled share-based (2) - (2)
payment schemes
Movement in share-based payment reserve (19) - (19)
Value of employee services (19) - (19)
Share of post-tax results of associates and joint ventures - - -
Transfer from retained earnings (73) - (73)
Transfer to associates’ and joint ventures’ reserve 73 - 73
Disposal of subsidiary(2) - (48) (48)
Balance at the end of the reporting period 56 569 2 56 571
30 June
2013(1)
Capital and
reserves
attributable Non-
to equity controlling Total
holders interest equity
Rm Rm Rm
Balance at the beginning of the reporting period 60 864 48 60 912
Total comprehensive income for the reporting period 2 748 2 2 750
Profit for the reporting period 4 171 2 4 173
Other comprehensive income (1 423) - (1 423)
Dividends paid during the reporting period (refer to note 13) (2 439) - (2 439)
Purchase of Barclays Africa Group Limited shares in respect of
equity-settled share-based (71) - (71)
payment schemes
Movement in share-based payment reserve 2 - 2
Transfer from share-based payment reserve (32) - (32)
Transfer to retained earnings 32 - 32
Value of employee services 2 - 2
Share of post-tax results of associates and joint ventures - - -
Transfer from retained earnings (81) - (81)
Transfer to associates’ and joint ventures’ reserve 81 - 81
Balance at the end of the reporting period 61 104 50 61 154
Notes
(1)All movements are reflected net of taxation.
(2)The Bank’s 85% shareholding in Abseq Properties (Pty) Limited was sold as part of a sales transaction with
Growthpoint Properties Ltd. The transaction was effective on 2 January 2014, and the subsidiary has
been derecognised from the statement of financial position.
Condensed consolidated statement of changes in equity
for the reporting period ended
31 December
2013(1)(2)
Capital and
reserves
attributable Non-
to equity controlling Total
holders interest equity
Rm Rm Rm
Balance at the beginning of the reporting period 60 864 48 60 912
Total comprehensive income for the reporting period 7 466 2 7 468
Profit for the reporting period 8 733 2 8 735
Other comprehensive income (1 267) - (1 267)
Dividends paid during the reporting period (refer to note 13) (12 046) - (12 046)
Shares issued 1 000 - 1 000
Purchase of Barclays Africa Group Limited shares in respect
of equity-settled share-based payment schemes (74) - (74)
Movement in share-based payment reserve (1) - (1)
Transfer from share-based payment reserve (33) - (33)
Transfer to retained earnings 33 - 33
Value of employee services (1) - (1)
Share of post-tax results of associates and joint ventures - - -
Transfer from retained earnings (132) - (132)
Transfer to associates’ and joint ventures’ reserve 132 - 132
Balance at the end of the reporting period 57 209 50 57 259
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.
Condensed consolidated statement of cash flows
for the reporting period ended
30 June 31 December
2014 2013 Change 2013
Note Rm Rm % Rm
Net cash generated from operating activities 3 137 3 543 (11) 15 764
Net cash utilised in investing activities (1 042) (714) (46) (1 037)
Net cash utilised in financing activities (6 210) (4 396) (41) (13 006)
Net (decrease)/increase in cash and cash equivalents (4 115) (1 567) >(100) 1 721
Cash and cash equivalents at the beginning of the reporting period 1 10 507 8 786 20 8 786
Effect of exchange rate movements on cash and cash equivalents (3) - (100) -
Cash and cash equivalents at the end of the reporting period 2 6 389 7 219 (11) 10 507
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(1) 8 665 8 094 7 8 094
Loans and advances to banks(2) 1 842 692 >100 692
10 507 8 786 20 8 786
2. Cash and cash equivalents at the end of the reporting period
Cash, cash balances and balances with central banks(1) 5 174 5 527 (6) 8 665
Loans and advances to banks(2) 1 215 1 692 (28) 1 842
6 389 7 219 (11) 10 507
Notes
(1)Includes coins and bank notes, which are part of “Cash, cash balances and balances with central banks”.
(2)Includes call advances, which are used as working capital by the Bank 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, Retail and Business Banking (“RBB”) disposed of investment properties in the
Commercial Property Finance Equity (“CPF Equity”) division with a total carrying value of R1 255m.
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 31 923 28 416 12 30 178
Foreign currency loans 17 946 16 384 10 21 076
Instalment credit agreements 68 185 63 026 8 65 836
Gross advances 82 970 76 133 9 80 235
Unearned finance charges (14 785) (13 107) (13) (14 399)
Reverse repurchase agreements 5 188 6 309 (18) 3 893
Loans to associates
and joint ventures 12 341 10 719 15 12 039
Microloans 2 121 1 897 12 1 962
Mortgages 271 432 275 053 (1) 272 163
Other advances(1) 2 999 3 140 (4) 2 895
Overdrafts 30 288 31 849 (5) 31 179
Overnight finance 17 529 17 355 1 14 082
Personal and term loans 28 395 28 201 1 29 037
Preference shares 9 652 6 613 46 8 955
Wholesale overdrafts 51 080 38 816 32 47 772
Gross loans and advances
to customers 555 793 532 775 4 546 796
Impairment losses on loans
and advances (refer to note 3) (13 312) (13 183) (1) (12 756)
542 481 519 592 4 534 040
Note
(1)Includes customer liabilities under acceptances, working capital solutions and collateralised loans.
3. Impairment losses on loans and advances
30 June
2014
Reconciliation of allowance for impairment
losses on loans and advances to customers
Retail Business
Banking Banking CIB WIMI Other Total
Rm Rm Rm Rm Rm Rm
Balance at the beginning
of the reporting period 9 680 2 283 489 193 111 12 756
Net present value unwind on
non-performing book (refer to note 8.1) (264) (78) - - - (342)
Amounts written-off (1 960) (413) - (40) - (2 413)
Impairment raised - identified 2 521 372 (1) 17 - 2 909
Impairment raised - unidentified 338 19 35 10 - 402
Balance at the end of the reporting period 10 315 2 183 523 180 111 13 312
30 June
2013
Reconciliation of allowance for impairment
losses on loans and advances to customers
Retail Business
Banking Banking CIB WIMI Other Total
Rm Rm Rm Rm Rm Rm
Balance at the beginning of
the reporting period 9 865 2 357 459 191 125 12 997
Net present value unwind on
non-performing book (refer to note 8.1) (375) (73) - (2) - (450)
Amounts written-off (2 337) (640) (46) (13) (5) (3 041)
Impairment raised - identified 3 129 458 (12) 14 (2) 3 587
Impairment raised - unidentified 72 (11) (4) 33 - 90
Balance at the end of the
reporting period 10 354 2 091 397 223 118 13 183
31 December
2013
Reconciliation of allowance for impairment
losses on loans and advances to customers
Retail Business
Banking Banking CIB WIMI Other Total
Rm Rm Rm Rm Rm Rm
Balance at the beginning of
the reporting period 9 865 2 357 459 191 125 12 997
Net present value unwind on
non-performing book (refer to note 8.1) (695) (153) - (3) - (851)
Amounts written-off (5 201) (887) (53) (56) - (6 197)
Impairment raised - identified 5 625 861 20 29 (14) 6 521
Impairment raised - unidentified 86 105 63 32 - 286
Balance at the end of the
reporting period 9 680 2 283 489 193 111 12 756
30 June 31 December
2014 2013 Change 2013
Rm Rm % Rm
3.1 Statement of comprehensive income charge
Impairments raised during
the reporting period 3 311 3 677 (10) 6 807
Identified impairments 2 909 3 587 (19) 6 521
Unidentified impairments 402 90 >100 286
Recoveries of loans and advances
previously written-off(1) (369) (370) - (926)
2 942 3 307 (11) 5 881
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
Coverage Coverage Net total
Exposure Impairment ratio Exposure Impairment ratio exposure
Loans and advances to customers Rm Rm % Rm Rm % Rm
RBB 395 034 3 045 0,77 23 377 9 453 40,44 405 913
Retail Banking 336 515 2 557 0,76 18 727 7 758 41,43 344 927
Credit cards 28 136 639 2,27 3 788 2 728 72,02 28 557
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 214 501 1 279 0,60 11 743 3 236 27,56 221 729
Other loans and advances 296 - - - - - 296
Overdrafts 2 214 26 1,17 112 71 63,39 2 229
Personal and term loans 13 921 282 2,03 1 610 1 044 64,84 14 205
Business Banking 58 519 488 0,83 4 650 1 695 36,45 60 986
Loans to associates and
joint ventures 269 - - - - - 269
Mortgages (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
CIB 123 847 385 0,31 354 138 39,98 123 678
WIMI 10 511 42 0,40 318 138 40,45 10 649
Head Office and
other operations 2 352 111 4,72 - - - 2 241
531 744 3 583 0,67 24 049 9 729 40,46 542 481
30 June
2013
Performing loans Non-performing loans
Coverage Coverage Net total
Exposure Impairment ratio Exposure Impairment ratio exposure
Loans and advances to customers Rm Rm % Rm Rm % Rm
RBB 384 536 2 162 0,56 27 558 10 283 37,31 399 649
Retail Banking 325 984 1 821 0,56 22 513 8 533 37,90 338 143
Credit cards 26 551 338 1,27 1 865 1 299 69,65 26 779
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 213 764 907 0,42 17 058 5 132 30,09 224 783
Other loans and advances 310 - - - - - 310
Overdrafts 1 971 27 1,37 102 74 72,55 1 972
Personal and term loans 13 836 105 0,76 1 476 955 64,70 14 252
Business Banking 58 552 341 0,58 5 045 1 750 34,69 61 506
Loans to associates
and joint ventures 665 - - - - - 665
Mortgages (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
CIB 108 696 53 0,05 391 344 87,98 108 690
WIMI 10 877 53 0,49 419 170 40,57 11 073
Head Office and other operations 298 118 39,60 - - - 180
504 407 2 386 0,47 28 368 10 797 38,06 519 592
31 December
2013
Performing loans Non-performing loans
Coverage Coverage Net total
Exposure Impairment ratio Exposure Impairment ratio exposure
Loans and advances to customers Rm Rm % Rm Rm % Rm
RBB 390 758 2 910 0,74 23 574 9 053 38,40 402 369
Retail Banking 332 632 2 536 0,76 18 709 7 144 38,18 341 661
Credit cards 27 700 571 2,06 2 479 1 769 71,36 27 839
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 214 406 1 304 0,61 13 302 3 704 27,85 222 700
Other loans and advances 253 - - - - - 253
Overdrafts 2 006 31 1,55 96 56 58,33 2 015
Personal and term loans 13 850 340 2,45 1 370 884 64,53 13 996
Business Banking 58 126 374 0,64 4 865 1 909 39,24 60 708
Loans to associates
and joint ventures 559 - - - - - 559
Mortgages (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
CIB 120 402 113 0,09 722 376 52,08 120 635
WIMI 10 740 33 0,31 339 160 47,20 10 886
Head Office and other operations 261 111 42,53 - - - 150
522 161 3 167 0,61 24 635 9 589 38,92 534 040
5. Deposits due to customers
30 June 31 December
2014 2013 Change 2013
Rm Rm % Rm
Call deposits 64 328 51 711 24 52 829
Cheque account deposits 142 270 147 132 (3) 139 226
Credit card deposits 1 834 1 807 1 1 914
Fixed deposits 132 708 128 557 3 132 678
Foreign currency deposits 13 212 9 780 35 14 108
Notice deposits 50 999 55 406 (8) 56 349
Other deposits(1) 2 025 2 142 (5) 2 194
Repurchase agreements with non-banks 2 163 3 813 (43) 1 208
Savings and transmission deposits 95 544 78 173 22 87 865
505 083 478 521 6 488 371
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) 44 718
Negotiable certificates of deposit 27 807 23 374 19 20 821
Other debt securities in issue 381 7 >100 11
Promissory notes 1 039 833 25 935
Senior notes 23 552 20 876 13 21 533
Structured notes and bonds 580 543 7 1 006
104 974 104 197 1 97 179
7. Borrowed funds
30 June 31 December
2014 2013 Change 2013
Rm Rm % Rm
Subordinated callable notes
The subordinated debt instruments listed
below qualify as secondary capital in terms
of the Banks Act, No 94 of 1990 (as amended).
Interest rate Final maturity date
8,80% 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
Accrued interest 1 623 1 358 20 1 472
Fair value adjustment (15) 74 >(100) 65
14 108 15 657 (10) 15 762
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 3 6 (50) 12
Fair value adjustments on hedging instruments 350 521 (33) 3 803
Investment securities 40 24 67 47
Loans and advances to banks 522 426 23 785
Loans and advances to customers 22 597 20 663 9 42 580
Overdrafts 1 418 1 331 7 2 633
Corporate overdrafts and specialised
finance loans 166 136 22 123
Credit cards 2 416 2 238 8 4 649
Foreign currency loans 187 154 21 363
Instalment credit agreements 3 214 2 847 13 5 804
Interest on impaired financial assets
(refer to note 3) 342 450 (24) 851
Loans to associates and joint ventures 391 304 29 657
Microloans 207 234 (12) 454
Mortgages 9 957 9 628 3 19 255
Other loans and advances(1) 21 101 (79) 718
Overnight finance 354 400 (12) 786
Personal and term loans 1 661 1 517 9 3 097
Preference shares 295 229 29 484
Wholesale overdrafts 1 968 1 094 80 2 706
Other interest income(2) 611 761 20 1 130
Statutory liquid asset portfolio 2 417 2 199 10 1 738
26 540 24 600 8 50 095
8.2 Interest expense and similar charges
Interest expense and similar charges
are paid on:
Borrowed funds (629) (661) 5 (1 316)
Debt securities in issue (3 302) (2 856) (16) (5 733)
Deposits due to customers (10 038) (9 035) (11) (20 104)
Call deposits (1 710) (1 351) (27) (2 799)
Cheque account deposits (1 569) (1 547) (1) (3 065)
Credit card deposits (4) (4) - (8)
Fixed deposits (3 627) (3 452) (5) (8 486)
Foreign currency deposits (59) (52) (13) (348)
Notice deposits (1 449) (1 458) 1 (2 913)
Other deposits due to customers (60) (132) 55 (195)
Savings and transmission deposits (1 560) (1 039) (50) (2 290)
Deposits from banks (579) (483) (20) (1 012)
Call deposits (191) (188) (2) (363)
Fixed deposits (388) (291) (33) (649)
Other deposits from banks - (4) 100 -
Fair value adjustments on
hedging instruments 138 (606) >100 (500)
Interest incurred on finance leases - (12) 100 (19)
Other interest expense(3) 212 549 (61) 2 154
(14 198) (13 104) (8) (26 530)
Net interest income 12 342 11 496 7 23 565
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 41 47 (13) 97
Consulting and administration fees 75 34 >100 171
Credit-related fees and commissions 6 188 6 089 2 12 414
Cheque accounts 1 826 1 752 4 3 546
Credit cards(1) 506 444 14 929
Electronic banking 1 984 1 997 (1) 4 099
Other credit-related fees and commissions(2) 784 746 5 1 556
Savings accounts 1 088 1 150 (5) 2 284
Insurance commission received 251 239 5 485
Investment banking fees 150 123 22 255
Merchant income 998 935 7 1 973
Other fee and commission income 30 40 (25) 50
Trust and other fiduciary services 26 18 44 41
Portfolio and other management fees 19 9 >100 23
Trust and estate income 7 9 (22) 18
7 759 7 525 3 15 486
9.2 Fee and commission expense
Cheque processing fees (67) (75) 11 (150)
Other fee and commission expenses (394) (325) (21) (658)
Transaction-based legal fees (60) (63) 5 (115)
Valuation fees (68) (71) 4 (142)
(589) (534) (10) (1 065)
Net fee and commission income 7 170 6 991 3 14 421
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 (loss)/gains on investments (77) (14) >(100) 320
Debt instruments designated at fair
value through profit or loss 3 58 (95) 163
Equity instruments designated at fair
value through profit or loss (77) (68) (13) 167
Available-for-sale unwind from reserves (3) (4) 25 (10)
Net trading result 1 812 1 519 19 3 031
Net trading income excluding the impact
of hedge accounting 2 010 1 598 26 3 269
Ineffective portion of hedges (198) (79) >(100) (238)
Cash flow hedges (175) (83) >(100) (234)
Fair value hedges (23) 4 >(100) (4)
Other gains 51 64 (20) 140
1 786 1 569 14 3 491
Net trading income excluding the impact
of hedge accounting 2 010 1 598 26 3 269
(Losses)/gains on financial instruments
designated at fair value through profit or loss (661) 648 >(100) 1 326
Net (loss)/gains on financial assets designated
at fair value through profit or loss (799) 336 >(100) 142
Net gains on financial liabilities designated
at fair value through profit or loss 138 312 (56) 1 184
Gains on financial instruments held for trading 2 671 950 >100 1 943
Other gains 51 64 (20) 140
Gains/(losses) on financial instruments designated
at fair value through profit or loss - (6) 100 7
Gains on financial instruments held for trading 7 70 (90) 133
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/(losses) on investments 1 - 100 (1)
Other investment gains 1 - 100 3
2 1 100 6
10. Operating expenditure
30 June 31 December
2014 2013 Change 2013
Rm Rm % Rm
Administration fees 441 458 (4) 717
Amortisation of intangible assets 110 100 10 210
Auditors’ remuneration 99 81 22 189
Cash transportation 347 318 9 597
Depreciation 583 649 (10) 1 199
Equipment costs 82 86 (5) 175
Information technology 998 923 8 1 760
Investment properties charges -
change in fair value 1 - 100 -
Marketing costs 484 440 10 1 125
Operating lease expenses on properties 521 524 (1) 970
Other operating costs(1) 275 139 98 980
Printing and stationery 90 93 (3) 212
Professional fees 545 499 9 1 257
Property costs 859 643 34 1 232
Staff costs 6 324 5 760 10 12 256
Bonuses 434 362 20 1 180
Other staff costs(2) 89 236 (62) 534
Salaries and current service costs on
post-retirement benefits 5 406 4 842 12 9 913
Share-based payments 278 204 36 387
Training costs 117 116 1 242
Telephone and postage 342 316 8 681
12 101 11 029 10 23 560
Notes
(1)Includes fraud losses, travel and entertainment costs.
(2)Includes recruitment costs, membership fees to professional bodies, staff parking, study assistance and staff relocation costs.
11. Other impairments
30 June 31 December
2014 2013 Change 2013
Rm Rm % Rm
Financial instruments - (2) 100 (4)
Other 31 3 >(100) 3
Equipment 13 - 100 -
Repossessed properties - 3 (100) 3
Other 18 - 100 -
31 1 >(100) (1)
12. Headline earnings
30 June 30 June 31 December
2014 2013 Net 2013
Gross Net(1) Gross Net(1) change Gross Net(1)
Rm Rm Rm Rm % Rm Rm
Headline earnings is determined as follows:
Profit attributable to ordinary equity holder 4 093 4 025 2 8 439
Total headline earnings adjustment: (53) (55) (4) (173)
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 (12) (10) (5) (5) 100 20 14
IAS 27 - Profit on disposal
of subsidiaries (44) (35) - - (100) - -
IAS 36 - Impairment of property and
equipment 13 8 - - 100 - -
IAS 36 - Impairment of subsidiary 18 15 - - 100 - -
IAS 39 - Release of available-for-sale
reserves 3 2 4 3 (33) 10 7
IAS 39 - Disposal and impairment of
available-for-sale assets - - - - - (3) (2)
IAS 40 - Change in fair value of investment properties 1 1 (60) (53) >100 (60) (54)
4 040 3 970 2 8 266
Note
(1)The net amounts are 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 holder
Interim dividend (30 July 2014: 593,35 cents)
(30 July 2013: 2 233,4 cents) 2 299 8 459 (73) 8 459
Special dividend (8 April 2014: 638,38 cents)
(4 December 2013: 264,0 cents) 2 446 - 100 1 000
Final dividend (11 February 2014: 754,3 cents) - - - 2 890
4 745 8 459 (44) 12 349
Dividends declared to 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 holder
Final dividend (11 February 2014: 754,3 cents)
(12 February 2013: 605,5 cents) 2 890 2 293 26 2 293
Interim dividend (30 July 2013: 2 233,4 cents) - - - 8 459
Special dividend (8 April 2014: 638,38 cents)
(4 December 2013: 264,0 cents) 2 446 - 100 1 000
Dividends paid to preference equity holders
Final dividend (11 February 2014: 2 979,3151 cents) 147 146 1 146
Interim dividend (30 July 2013: 2 999,4521 cents) - - - 148
5 483 2 439 >100 12 046
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.
Disposal of businesses during the current reporting period
Absa Bank Limited disposed of its investment in a wholly-owned subsidiary, Ngwenya River Estate Proprietary Limited on
7 April 2014 to Diluculo Property Trading Proprietary Limited, which is a wholly-owned subsidiary of Barclays Africa
Group Limited. Ngwenya River Estate Proprietary Limited is now consolidated directly into Barclays Africa Group Limited.
Absa Bank 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 Bank.
Other similar transactions - additional interest in subsidiaries
There were no acquisitions or disposals on additional interest in subsidiaries during the current reporting period.
15. Related parties
The Bank’s ultimate parent company is Barclays Bank PLC, which owns 62,3% (30 June 2013: 55,5%; 31 December 2013:
62,3%) of the ordinary shares in the Barclays Africa Group Limited. The remaining 37,7% (30 June 2013: 44,5%; 31 December:
37,7%) of the shares are widely held on the Johannesburg Stock Exchange Limited (“JSE”).
The following are defined as related parties of the Bank:
- key management personnel;
- the ultimate parent company (refer to note 15.1);
- fellow subsidiaries, associates and joint venture of the ultimate parent company (refer to note 15.2);
- the parent company (refer to note 15.3);
- fellow subsidiaries; associates and joint ventures of the parent company (refer to note 15.4);
- 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 Bank; and
- children and/or dependants and spouses or partners of the individuals referred to above.
The "Group"refers to Barclays Africa Group Limited and its subsidiaries.
Balances and transactions between the Bank and its subsidiaries have been eliminated on consolidation and are not
disclosed in this note.
15.1 Balances and transactions with ultimate parent company(1),(2)
30 June 31 December
2014 2013 Change 2013
Rm Rm % Rm
Balances
Loans and advances to banks 35 722 21 552 66 13 622
Derivative assets 20 790 22 533 (8) 20 452
Other assets 507 2 086 (76) 1 244
Investment securities 464 533 (13) 534
Deposits from banks (21 978) (18 840) 17 (21 320)
Derivative liabilities (18 262) (20 259) (10) (17 901)
Other liabilities (358) (2 051) (83) (102)
Transactions
Interest and similar income (130) (141) 8 (215)
Interest expense and similar charges 6 34 (82) 50
Net fee and commission income - (9) 100 -
Gains and losses from banking
and trading activities 178 66 >100 274
Other operating income (27) (7) >100 (70)
Operating expenditure/recovered expenses (44) 43 >(100) 40
Trade balances must be settled in accordance with market conventions applicable to the underlying transaction.
Non-trade balances must be settled by the close of the month immediately following the month in which the transaction occurred.
Further settlement must be made in the currency required by the ultimate parent company. In exceptional cases it may be impractical or
inefficient to settle balances monthly. In such cases, the unsettled balances must be explicitly agreed to on a monthly basis in writing
and full settlement must be made at least quarterly.
There were no bad debt expenses or provisions for bad debts that related to balances and transactions with the ultimate parent company.
Notes
(1)Debit amounts are presented as positive, credit amounts are presented as negative.
(2)The Bank’s ultimate parent company is Barclays Bank PLC, which has a majority equity interest in Barclays Africa
Group Limited.
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 ultimate parent company(1),(2)
Balances
Loans and advances to banks 795 2 898 (73) 955
Derivative assets 145 40 >100 316
Other assets 49 183 (73) 157
Deposits from banks (5) - 100 (333)
Derivative liabilities (139) - 100 -
Other liabilities (130) (164) (21) (318)
Transactions
Net fee and commission income (15) (3) >100 (25)
Operating expenditure/recovered expenses (52) (110) (53) 12
Trade balances must be settled in accordance with market conventions applicable to the underlying transaction.
Non-trade balances must be settled by the close of the month immediately following the month in which the transaction occurred.
Further, settlement must be made in the currency required by the fellow subsidiary, associate or joint venture receiving the settlement.
In exceptional cases it may be impractical or inefficient to settle balances monthly. In such cases, the unsettled balances must be
explicitly agreed to on a monthly basis in writing, and full settlement must be made at least quarterly.
There were no bad debt expenses and provisions for bad debts that related to balances and transactions with the fellow subsidiaries,
associates and joint ventures of the ultimate parent company.
30 June 31 December
2014 2013 Change 2013
Rm Rm % Rm
15.3 Balances and transactions with the parent company(1)
Balances
Deposits from banks (2 051) (480) >(100) (507)
Transactions
Dividend paid 5 336 2 293 >100 11 752
Note
(1)Debit amounts are shown as positive, credit amounts are shown as negative.
30 June 31 December
2014 2013 Change 2013
Rm Rm % Rm
15.4 Balances and transactions with fellow
subsidiaries(1),(2)
Balances
Cash, cash balances and balances with
central banks 1 - 100 (1)
Loans and advances to banks 188 - 100 196
Trading and hedging portfolio assets - 947 >(100) 2 476
Loans to Group companies (3) 17 745 13 803 29 19 247
Deposits from banks (2 540) (3 561) (29) (3 921)
Trading and hedging portfolio liabilities (7) - >100 -
Debt securities in issue (79) (43) (84) (41)
Transactions
Interest and similar income (590) (584) 1 (773)
Interest and similar expense 447 335 33 439
Net fee and commission income (228) (217) (5) (458)
Gains and losses from banking and
trading activities (1 302) (336) >(100) (1 115)
Gains and losses from investing activities (1) - (100) 1
Other operating income (12) (12) - (19)
Operating expenditure/recovered expenses (219) (252) 13 57
(1)Debit amounts are shown as positive, credit amounts are shown as negative.
(2)Balances and transactions between the Bank and its subsidiaries have been eliminated on consolidation and are not disclosed in this note.
(3)During the current reporting period, certain financial assets were reclassified from available-for-sale to loans and receivables, as they
are no longer traded on an active market.
16. Assets under management and administration
30 June 31 December
2014 2013 Change 2013
Rm Rm % Rm
Alternative asset management and exchange-traded funds 41 459 22 100 88 29 934
Portfolio management 3 621 5 670 (36) 6 147
Unit trusts 1 769 1 134 56 1 297
46 849 28 904 62 37 378
17. Financial guarantee contracts
30 June 31 December
2014 2013 Change 2013
Rm Rm % Rm
Financial guarantee contract(1) 3 620 408 >100 3 643
Note
(1)Financial guarantee contracts represent contracts where the Bank undertakes to make specified payments to a counterparty,
should the counterparty suffer a loss as a result of a specified debtor 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 203 437 (54) 175
Operating lease payments due(2)
No later than one year 772 988 (22) 820
Later than one year and no later than five years 1 215 1 445 (16) 1 417
Later than five years 178 193 (8) 230
2 165 2 626 (18) 2 467
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 Bank has capital commitments in respect of computer equipment and property development.
Management is confident that future net revenue and funding will be sufficient to cover these commitments.
(2)The operating lease commitments comprise a number of separate operating leases in relation to property and equipment,
none of which is individually significant to the Bank. Leases are negotiated for an average term of three to five years
and rentals are renegotiated annually.
(3)The Bank has sponsorship commitments in respect of sports, arts and culture.
19. Contingencies
30 June 31 December
2014 2013 Change 2013
Rm Rm % Rm
Guarantees(1) 19 073 16 196 18 15 862
Irrevocable debt facilities(2),(3) 73 937 80 148 (8) 79 470
Irrevocable equity facilities(3) - 510 (100) -
Letters of credit 4 938 3 798 30 5 666
Other contingencies 3 6 (50) 3
97 951 100 658 (3) 101 001
Legal proceedings
The Bank is engaged in various litigation proceedings involving claims by and against it, which arise in the ordinary
course of business. The Bank does not expect the ultimate resolution of any proceedings, to which the Bank is party, to
have a significant adverse effect on the financial statements of the Bank. Provision is made for all liabilities which
are expected to materialise.
Income taxes
The Bank is subject to income taxes in numerous jurisdictions and the calculation of the Bank’s tax charge and
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 Bank’s treatment and accordingly the final tax charge cannot be determined until
resolution has been reached with the relevant tax authority. The Bank 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 Bank’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 disclosed as contingent liabilities. Comparative numbers
were restated (30 June 2013: R32,2bn; 31 December 2013: R32,7bn).
(3)Irrevocable facilities are commitments to extend credit where the Bank 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 3 264 3 089 6 6 642
Retail Banking 2 461 2 365 4 5 099
Home Loans 801 287 >100 1 001
Vehicle and Asset Finance 535 516 4 1 095
Card 629 804 (22) 1 802
Personal Loans 146 135 8 359
Transactional and deposits 1 303 1 336 (2) 2 950
Other (953) (713) (34) (2 108)
Business Banking 803 724 11 1 543
CIB 1 164 1 093 6 2 455
WIMI 3 (35) >100 (40)
Head Office and other operations (391) (177) >(100) (791)
Total headline earnings 4 040 3 970 2 8 266
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 17 313 16 798 3 34 168
Retail Banking 13 204 12 805 3 25 950
Home Loans 2 030 2 081 (2) 3 981
Vehicle and Asset Finance 1 748 1 672 5 3 280
Card 3 104 2 859 9 6 074
Personal Loans 954 938 2 1 892
Transactional and deposits 5 334 5 247 2 10 762
Other 34 8 >100 (39)
Business Banking 4 109 3 993 3 8 218
CIB 4 139 3 610 15 8 103
WIMI 258 225 15 473
Head Office and other operations (280) (317) 12 (622)
Total income 21 430 20 316 5 42 122
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 (4 261) (4 141) (3) (8 199)
Retail Banking (5 391) (4 941) (9) (10 076)
Home Loans (5 998) (5 408) (11) (11 075)
Vehicle and Asset Finance (2 137) (1 796) (19) (3 749)
Card (500) (510) 2 (913)
Personal Loans (271) (254) (7) (504)
Transactional and deposits 3 694 3 185 16 6 733
Other (179) (158) (13) (568)
Business Banking 1 130 800 41 1 877
CIB 6 259 6 555 (5) 12 384
WIMI (150) (161) 7 (326)
Head Office and other operations (152) (1 438) 89 (1 933)
Total internal income 1 696 815 >100 1 926
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 61 438 586 477 4 615 424
Retail Banking 520 566 504 124 3 521 990
Home Loans 216 362 219 453 (1) 217 526
Vehicle and Asset Finance 85 415 77 303 10 83 637
Card 41 527 36 644 13 39 517
Personal Loans 13 418 13 391 0 13 400
Transactional and deposits 143 001 134 676 6 142 227
Other 20 843 22 657 (8) 25 683
Business Banking 90 872 82 353 10 93 434
CIB 495 023 494 487 0 478 600
WIMI 11 446 11 875 (4) 11 679
Head Office and other operations (306 792) (298 828) (3) (313 954)
Total assets 811 115 794 011 2 791 749
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 607 264 582 684 4 608 052
Retail Banking 517 224 501 040 3 516 166
Home Loans 215 530 219 110 (2) 216 469
Vehicle and Asset Finance 84 006 76 093 10 81 846
Card 40 898 35 841 14 37 715
Personal Loans 13 272 13 256 0 13 040
Transactional and deposits 141 689 133 344 6 139 283
Other 21 829 23 396 (7) 27 813
Business Banking 90 040 81 644 10 91 886
CIB 493 056 492 987 0 475 465
WIMI 11 443 11 909 (4) 11 718
Head Office and other operations (357 219) (354 723) (1) (360 745)
Total liabilities 754 544 732 857 3 734 490
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 following table summarises the carrying amounts and fair values of those financial 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 the South African Reserve Bank (“SARB”) 13 126 13 126 13 290 13 290
Coins and bank notes 5 174 5 174 5 528 5 528
Money market assets 13 13 5 5
Cash, cash balances and balances with central banks 18 313 18 313 18 823 18 823
Loans and advances to banks 52 234 52 234 43 334 43 334
Other assets 11 480 11 480 12 272 12 272
Retail Banking 344 927 344 927 338 143 338 143
Credit cards 28 557 28 557 26 779 26 779
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 221 729 221 729 224 783 224 783
Other loans and advances 296 296 310 310
Overdrafts 2 229 2 229 1 972 1 972
Personal and term loans 14 205 14 205 14 252 14 252
Business Banking 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
CIB 113 767 113 442 96 028 96 028
WIMI 10 649 10 649 11 073 11 073
Head Office and other operations 2 213 2 213 131 131
Loans and advances to customers - net of impairment losses 531 815 531 490 506 064 506 064
Loan to Group companies 15 612 15 180 13 803 13 803
Total assets 629 454 628 697 594 296 594 296
Financial liabilities
Deposits from banks 44 017 44 017 39 430 39 430
Other liabilities 17 889 17 889 19 894 19 894
Call deposits 64 328 64 328 51 711 51 711
Cheque account deposits 142 167 142 167 147 016 147 016
Credit card deposits 1 834 1 834 1 807 1 807
Fixed deposits 116 079 116 079 111 892 111 892
Foreign currency deposits 13 212 13 212 9 780 9 780
Notice deposits 50 999 50 999 55 406 55 406
Other deposits 1 754 1 754 1 722 1 722
Savings and transmission deposits 95 544 95 544 78 173 78 173
Deposits due to customers 485 917 485 917 457 507 457 507
Debt securities in issue 100 521 100 742 101 791 101 791
Borrowed funds 14 108 14 539 15 627 16 211
Total liabilities 662 452 663 104 634 249 634 833
31 December
2013
Carrying Fair
value value
Rm Rm
Balances with the South African Reserve Bank (“SARB”) 12 417 12 417
Coins and bank notes 8 665 8 665
Money market assets 5 5
Cash, cash balances and balances with central banks 21 087 21 087
Loans and advances to banks 39 813 39 813
Other assets 8 080 8 080
Retail Banking 341 661 341 498
Credit cards 27 839 27 839
Instalment credit agreements 64 571 64 268
Loans to associates and joint ventures 10 287 10 287
Mortgages 222 700 222 764
Other loans and advances 253 253
Overdrafts 2 015 2 015
Personal and term loans 13 996 14 072
Business Banking 60 036 60 106
Loans to associates and joint ventures 559 559
Mortgages (including commercial property finance) 30 718 30 788
Overdrafts 17 075 17 075
Term loans 11 684 11 684
CIB 110 796 104 993
WIMI 10 886 10 886
Head Office and other operations 115 115
Loans and advances to customers - net of impairment losses 523 494 517 598
Loans to Group companies 19 247 19 340
Total assets 611 721 605 918
Financial liabilities
Deposits from banks 53 560 50 348
Other liabilities 9 557 9 095
Call deposits 52 829 52 829
Cheque account deposits 139 146 139 145
Credit card deposits 1 914 1 914
Fixed deposits 116 420 116 462
Foreign currency deposits 14 108 14 108
Notice deposits 56 349 56 349
Other deposits 1 877 1 877
Savings and transmission deposits 87 865 87 865
Deposits due to customers 470 508 470 549
Debt securities in issue 93 595 93 596
Borrowed funds 15 762 16 308
Total liabilities 642 982 639 896
22. Assets and liabilities held at fair value
22.1 Fair value measurement and valuation processes
Financial assets and financial liabilities
The Bank has an established control framework with respect to the measurement of fair values. The framework includes a
Valuation Committee and an Independent Valuation Control team (“IVC”), which is independent from the front office.
The Valuation Committee, which comprises representatives from senior management, will formally approve valuation
policies and 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 Bank’s investment properties is determined through valuations performed by
external independent valuators. When the Bank’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 includes assets and liabilities which are 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 consists of 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 Bank’s assets and liabilities that are recognised and subsequently measured at fair value
and are analysed by valuation techniques. The classification of assets and liabilities is based on the lowest level of
input that is significant to the fair value measurement in its entirety.
30 June
2014 2013
Level 1 Level 2 Level 3 Total Level 1 Level 2 Level 3 Total
Recurring fair value measurements Rm Rm Rm Rm Rm Rm Rm Rm
Financial assets
Statutory liquid asset portfolio 63 589 - - 63 589 66 899 3 - 66 902
Loans and advances to banks - 11 063 - 11 063 - 13 786 - 13 786
Trading and hedging portfolio assets 23 627 51 462 1 175 76 264 25 285 58 273 991 84 549
Debt instruments 20 775 3 361 870 25 006 17 029 4 092 597 21 718
Derivative assets 1 879 43 422 305 45 606 - 52 196 105 52 301
Commodity derivatives 52 309 - 361 - 852 - 852
Credit derivatives - 230 48 278 - 242 1 243
Equity derivatives - 1 331 - 1 331 - 1 135 2 1 137
Foreign exchange derivatives 1 826 6 107 4 7 937 - 13 046 24 13 070
Interest rate derivatives 1 35 445 253 35 699 - 36 921 78 36 999
Equity instruments 973 81 - 1 054 3 692 888 129 4 709
Money market assets - 4 598 - 4 598 4 564 1 097 160 5 821
Other assets - - 16 16 - - 16 16
Loans and advances to customers 5 5 237 5 424 10 666 - 6 698 6 830 13 528
Investment securities 3 158 - 2 309 5 467 2 227 - 4 118 6 345
Total financial assets 90 379 67 762 8 924 167 065 94 411 78 760 11 955 185 126
Financial liabilities
Deposits from banks - 18 515 - 18 515 - 13 852 - 13 852
Trading and hedging portfolio liabilities 2 480 42 719 449 45 648 2 300 54 577 328 57 205
Derivative liabilities 361 42 719 449 43 529 - 54 577 328 54 905
Commodity derivatives 29 268 - 297 - 349 - 349
Credit derivatives - 208 39 247 - 313 27 340
Equity derivatives - 1 690 318 2 008 - 1 736 202 1 938
Foreign exchange derivatives 332 4 437 2 4 771 - 12 850 4 12 854
Interest rate derivatives - 36 116 90 36 206 - 39 329 95 39 424
Short positions 2 119 - - 2 119 2 300 - - 2 300
Deposits due to customers 104 12 830 6 232 19 166 - 14 307 6 707 21 014
Debt securities in issue 366 4 068 19 4 453 - 2 371 35 2 406
Total financial liabilities 2 950 78 132 6 700 87 782 2 300 85 107 7 070 94 477
Non-financial assets
Investment properties - - 243 243 - - 229 229
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) - - 414 414 - - 1 655 1 655
Non-current liabilities held for sale(1) - - - - - - 185 185
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
Statutory liquid asset portfolio 62 055 - - 62 055
Loans and advances to banks - 6 140 - 6 140
Trading and hedging portfolio assets 24 383 55 708 1 037 81 128
Debt instruments 23 929 174 873 24 976
Derivative assets - 48 451 164 48 615
Commodity derivatives - 324 - 324
Credit derivatives - 258 11 269
Equity derivatives - 802 - 802
Foreign exchange derivatives - 8 624 39 8 663
Interest rate derivatives - 38 443 114 38 557
Equity instruments 454 77 - 531
Money market assets - 7 006 - 7 006
Other assets - - 16 16
Loans and advances to customers - 4 069 6 477 10 546
Investment securities 2 907 - 2 313 5 220
Total financial assets 89 345 65 917 9 843 165 105
Financial liabilities
Deposits from banks - 12 267 - 12 267
Trading and hedging portfolio liabilities 2 472 50 080 549 53 101
Derivative liabilities - 50 080 549 50 629
Commodity derivatives - 290 - 290
Credit derivatives - 350 45 395
Equity derivatives - 1 607 306 1 913
Foreign exchange derivatives - 8 115 57 8 172
Interest rate derivatives - 39 718 141 39 859
Short positions 2 472 - - 2 472
Deposits due to customers - 10 725 7 138 17 863
Debt securities in issue - 3 549 35 3 584
Total financial liabilities 2 472 76 621 7 722 86 815
Non-financial assets
Investment properties - - 240 240
Trading and hedging portfolio assets
Commodities 1 080 - - 1 080
Non-recurring fair value measurements
Non-current assets held for sale(1) 101 1 296 460 1 857
Non-current liabilities held for sale(1) - 175 - 175
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 Discounted cash flow Underlying price of market traded
with central banks instruments 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 Spot price (physical or futures),
pricing models, futures pricing model, interest rates and/or volatility
ETF model
Credit derivatives Discounted cash flow model, Interest rate, recovery rate,
credit default swap model credit spread and/or quanto
(hazard rate model) ratio
Equity derivatives Discounted cash flow model, Spot price, interest rate,
option pricing models, futures volatility and/or dividend
pricing model stream
Foreign exchange derivatives Discounted cash flow model, Spot price, interest rate
option pricing models and/or volatility
Interest rate derivatives Discounted cash flow model, Interest rate curves, repurchase
option pricing models 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 curves
and/or money market
curves
Investment securities Listed equity - is valued at the Underlying price of the market
last market bid price. Unlisted equity traded instrument
is valued at par.
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
Commodity derivatives
Derivative liabilities Discounted cash flow model, Spot price (physical or futures),
option pricing models, futures interest rates, volatility
pricing model, ETF model
Credit derivatives Discounted cash flow model, Interest rate, recovery rate,
credit default swap model credit spread, quanto ratio
(hazard rate model)
Equity derivatives Discounted cash flow model, Spot price, interest rate,
option pricing models, volatility, dividend stream
futures pricing model
Foreign exchange derivatives Discounted cash flow model, Spot price, interest rate,
option pricing models volatility
Interest rate derivatives Discounted cash flow model, Interest rate curves,
option pricing models repurchase agreement
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 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 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 Basis risk and yield curve 100/(100) bps
interest rate products
Loans and advances designated at fair Credit spreads 100/(100) bps
value through profit or loss
Investment securities (private equity, Future earnings and marketability discounts 15/(15)%
property equity, investments Comparator multiples
and other) Discount rates
Structured notes and deposits Yield curve 100/(100) bps
designated at fair value through
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”). 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 Bank is not a market maker, mid prices are adjusted to bid and offer prices
respectively. Bid-offer adjustments reflect expected close out strategy and, for derivatives, the fact that they are managed
on a portfolio basis. The methodology for determining the bid-offer adjustment for a derivative portfolio will generally
involve netting between long and short positions and the bucketing of risk by strike and term in accordance with
hedging strategy. Bid-offer levels are derived from market sources, such as broker data. For those assets and liabilities
where the Bank is a market maker and has the ability to transact at, or better than, mid-price (which is the case for
certain equity, bond and vanilla derivative markets), the mid-price is used, since the bid-offer spread does not represent a
transaction cost.
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 Bank’s own credit quality, as well as the cost of funding across all asset classes.
Model valuation adjustments
Valuation models are reviewed under the Bank’s model governance framework. This process identifies the assumptions
used and any model limitations (for example, if the model does not incorporate volatility skew). Where necessary, fair
value adjustments will be applied to take these factors into account. Model valuation adjustments are dependent on the size
of portfolio, complexity of the model, whether the model is market standard and to what extent it incorporates all known
risk factors. All models and model valuation adjustments are subject to review on at least an annual basis.
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 and loss trading derivatives
Assets Rm Rm Rm Rm
Opening balance at the beginning of the reporting period 66 8 980 873 9 919
Movement in other comprehensive income - - - -
Net interest income - 91 - 91
Gains and losses from banking and trading activities - (471) (3) (474)
Gains and losses from investment activities - (26) - (26)
Purchases - 297 - 297
Settlements - (931) - (931)
Movement in/(out) of Level 3 - (14) - (14)
Closing balance at the end of the reporting period 66 7 926 870 8 862
30 June
2014
Financial
liabilities Total
designated Financial financial
at fair value liabilities liabilities
through held for excluding 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 (282) (262) (544)
Settlements (715) - (715)
Issues 65 - 65
Movement out of Level 3 - 21 21
Closing balance at the end of the reporting period 6 251 144 6 395
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 39 10 710 873 11 622
Movement in other comprehensive income 114 - - 114
Net interest income - 486 - 486
Gains and losses from banking and trading activities - (161) (20) (181)
Gains and losses from investment activities - (83) - (83)
Purchases - 244 - 244
Sales - (103) - (103)
Settlements - (62) - (62)
Transferred to/(from) liabilities 9 - 33 42
Closing balance at the end of the reporting period 162 11 031 886 12 079
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 39 10 710 873 11 622
Movement in other comprehensive income 27 - - 27
Net interest income - 334 55 389
Other income - 39 - 39
Gains and losses from banking and trading activities - (560) (360) (920)
Gains and losses from investment activities - (257) - (257)
Purchases - 795 13 808
Sales - (846) - (846)
Settlements - (1 557) - (1 557)
Transferred to/(from) liabilities - 322 55 377
Movement in/(out) of Level 3 - - 237 237
Closing balance at the end of the reporting period 66 8 980 873 9 910
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 (334) 173 (161)
Gains and losses from investing activities (1) - (1)
Purchases 27 - 27
Issues 424 (3) 421
Settlements (1 149) - (1 149)
Transferred from/(to) assets 322 55 377
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 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
become 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 Bank’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% of 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
Potential effect recorded Potential effect recorded
in profit or loss directly in equity
Significant Favourable/ Favourable/
unobservable (Unfavourable) (Unfavourable)
parameters Rm Rm
Loans and advances to Volatility, credit spreads, 5/(168) -/-
customers yield curves, discount rates
Investment securities Yield curves, future earnings -/(0) -/-
and marketability discount,
comparator multiples
Other assets Volatility, credit spreads -/(0) -/-
Trading and hedging Volatility, credit spreads 44/- -/-
portfolio assets
Investment properties Investment properties -/- -/-
Trading and hedging Credit spreads 281/(284) -/-
portfolio liabilities
Deposits due to customers Yield curves 500/(500) -/-
830/(952) -/-
30 June
2013
Potential effect recorded Potential effect recorded
in profit or loss directly in equity
Significant Favourable/ Favourable/
unobservable (Unfavourable) (Unfavourable)
parameters Rm Rm
Loans and advances to Volatility, credit spreads, 60/(88) -/-
customers yield curves, discount rates
Investment securities Yield curves, future earnings 325/(284) -/-
and marketability discount, -/- -/-
comparator multiples -/- -/-
Other assets Volatility, credit spreads
Trading and hedging
portfolio assets Volatility, credit spreads -/- -/-
Investment properties Investment properties -/- -/-
Trading and hedging Credit spreads
portfolio liabilities
Deposits due to customers Yield curves 560/(500) -/-
945/(872) -/-
31 December
2013
Potential effect recorded Potential effect recorded
in profit or loss directly in equity
Significant Favourable/ Favourable/
unobservable (Unfavourable) (Unfavourable)
parameters Rm Rm
Trading and hedging Volatility, credit spreads, 43/(43) -/-
portfolio assets yield curves, discount rates
Other assets Yield curves, future 2/(2) -/-
earnings and marketability 1 202/(159) -/-
discount, comparator
multiples 204/(204) -/-
Loans and advances Volatility, credit spreads 1/(1) -/-
to customers 13/(5) -/-
Investment securities Volatility, credit spreads
Investment properties Investment properties 221/(220) -/-
Trading and hedging Credit spreads
portfolio liabilities
Deposits due to customers Yield curves 1 686/(634) -/-
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.
Range of estimates
utilised for the
Category of asset/liability Valuation techniques applied Significant unobservable inputs unobservable inputs(1)
Loans and advances to customers Discounted cash flow, and dividend Credit ratings Credit spreads vary
yield models between 1,35%
and 7,5%
Investment securities Discounted cash flows, third-party Weighted average cost of capital, Discount rates between
valuations,earnings before interest, EBITDA multiples, liquidity discounts, 9,7% and 18%, multiples
tax, depreciation minority discounts, between 5,5 and 6,1
and amortisation capitalisation rates
(“EBITDA”) multiples, income
capitalisation valuations, net asset
value models
Trading and hedging portfolio assets
Debt instruments Discounted cash flows Credit spreads used in the calculation 0,9% to 3,5%
of the counterparty
credit risk
adjustment
Derivative assets
Credit derivatives Discounted cash flow model, Illiquid credit curves, recovery rates, 0% to 3,5%
credit default swap model 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 -2,5% to 1,7%
option pricing models >1 year
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)
Deposits due to customers Discounted cash flow ZAR MM funding spread 0,85% to 1,2%
greater than 5 years
Debt securities in issue Discounted cash flow Credit spread 10 to 20 bps
Trading and hedging
portfolio liabilities
Derivatives liabilities
Credit derivatives Discounted cash flow model, credit Illiquid credit curves, recovery rates, 0% to 3,5%
default swap model (hazard rate model) quanto ratio
Equity derivatives Discounted cash flow model, Volatility, dividend streams >3 years 16,9% to 37,2%
option pricing models, 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 years, repurchase
agreement curves
>1 year)
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.
Range of estimates
utilised for the unobservable
Category of asset/liability Valuation techniques applied Significant unobservable inputs inputs(1)
Investment properties Discounted cash flow Estimates of periods in which 2 to 7 years
rental units will be disposed of
Selling price escalations 0% to 6%
per year
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 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 third-party credit enhancements.
23. Offsetting financial assets and financial liabilities
In accordance with Financial Instruments: Presentation (“IAS 32”), the Bank 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 Bank 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 Bank’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 Related amounts not set off
statement of financial position
Net Amounts
amounts not
reported subject to Total
on the enforceable per
statement Offsetting netting statement
Gross Amounts of financial financial Financial Net arrange- of financial
amounts set off(1) position(2) instruments collateral(3) amount ments(4) position(5)
Rm Rm Rm Rm Rm Rm Rm Rm
Derivative financial assets 43 651 - 43 651 (36 462) (4 502) 2 687 1 954 45 605
Reverse repurchase agreements and other
similar secured lending agreements 41 512 (15 109) 26 403 - (26 403) - - 26 403
Total assets 85 163 (15 109) 70 054 (36 462) (30 905) 2 687 1 954 72 008
Derivative financial liabilities (41 066) - (41 066) 36 462 5 011 407 (2 462) (43 528)
Repurchase agreements and other similar
secured borrowing agreements (21 592) - (21 592) - 21 592 - - (21 592)
Total liabilities (62 658) - (62 658) 36 462 26 603 407 (2 462) (65 120)
Notes
(1)Amounts offset for reverse repurchase agreements relate to a short sale financial liability of R15 109m (30 June
2013: R11 425m; 31 December 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 in the statement of financial position.
(3)Financial collateral excludes over collateralisation and amounts, which are measured at fair value and are in
excess of the net statement of financial position exposure.
(4)In certain jurisdictions a contractual right of set-off is subject to uncertainty under 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 on 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 Related amounts not set off
statement of financial position
Net Amounts
amounts not
reported subject to Total
on the enforceable per
statement Offsetting netting statement
Gross Amounts of financial financial Financial Net arrange- of financial
amounts set off(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 2 787 54 633
Reverse repurchase agreements and
other similar secured lending agreements 43 348 (11 425) 31 923 - (31 923) - - 31 923
Total assets 95 194 (11 425) 83 769 (40 818) (39 581) 3 370 2 787 86 556
Derivative financial liabilities (51 203) - (51 203) 40 818 4 416 (5 969) (3 703) (54 906)
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) (3 703) (73 173)
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 relate to a short sale financial liability of R15 109m (30 June
2013: R11 425m; 31 December 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 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 in the statement of financial position.
(4)Financial collateral excludes over-collateralisation and amounts, which are measured at fair value and are in
excess of the net statement of financial position exposure.
(5)In certain jurisdictions a contractual right of set-off is subject to uncertainty under the laws of the
jurisdiction and therefore netting is not applied and the amounts are classed
as not subject to legally enforceable netting arrangements.
(6)Total per statement of financial position is the sum of “net amounts reported in the statement of financial
position”, which includes “amounts subject to enforceable netting arrangements” and “amounts not subject to enforceable netting
arrangements”.
31 December
2013(1)
Amounts subject to enforceable netting arrangements
Effects of netting on Related amounts not set off
statement of financial position
Net Amounts
amounts not
reported subject to Total
on the enforceable per
statement Offsetting netting statement
Gross Amounts of financial financial Financial Net arrange- of financial
amounts set off(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 2 277 48 615
Reverse repurchase agreements and
other similar secured lending agreements 36 515 (14 419) 22 096 - (22 096) - 515 22 611
Total assets 82 853 (14 419) 68 434 (37 580) (27 804) 3 050 2 792 71 226
Derivative financial liabilities (46 935) (46 935) 37 580 907 (8 448) (3 693) (50 628)
Repurchase agreements and other similar
secured borrowing agreements (18 263) - (18 263) - 18 263 - 60 (18 203)
Total liabilities (65 198) - (65 198) 37 580 19 170 (8 448) (3 633) (68 831)
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 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 in the statement of financial position.
(4)Financial collateral excludes over collateralisation and amounts, which are measured at fair value and are in
excess of the net statement of financial position exposure.
(5)In certain jurisdictions a contractual right of set-off is subject to uncertainty under the laws of the
jurisdiction and therefore netting is not applied and the amounts are classed as not subject to legally enforceable netting
arrangements.
(6)Total per statement of financial position is the sum of “net amounts reported in the statement of financial
position”, which includes “amounts not subject to enforceable netting arrangements” and “amounts not subject to enforceable
netting arrangements”.
24. Reporting changes
The financial reporting changes that impact the comparative reporting period of the Bank’s results for the reporting
periods ended 30 June 2013 and 31 December 2013 are driven by:
1. Changes in internal accounting policies.
2. The implementation of amended International Financial Reporting Standards (“IFRS”), specifically amendments to IAS 32,
relating to offsetting of financial assets and financial liabilities. All other amendments to IFRS, and new
interpretations, effective for the current reporting period had no significant impact on the Bank’s reported results.
1. Internal accounting policy changes
The Bank elected to make the internal accounting policy changes set out below, involving classification of items
between statement of comprehensive income lines. These have no impact on the net earnings of the Bank. To ensure
comparability, the comparative reporting period has been restated.
- The Bank elected to change its accounting policy for certain ‘association costs’, defined as costs incurred through
the Bank’s association with leading inter-change agents resulting in a reclassification of certain costs from ‘operating
expenses’ to ‘net fee and commission income’.
- The Bank changed its disclosure of accounting for 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’.
2. Accounting policy changes due to amended IFRS
The amendments to IAS 32 became effective for reporting periods beginning on or after 1 January 2014 and result in
restatement of the Bank’s results for the reporting periods ended 31 December 2012 and 2013 as well as the interim
reporting period ended 30 June 2013.
The offsetting requirements in IAS 32 have been retained such that a financial asset and a financial liability shall
be offset and the net amount presented in the statement of financial position when, and 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
accounting
As previously policy
reported(1) changes Restated
Rm Rm Rm
Net interest income 11 496 - 11 496
Interest and similar income 24 600 - 24 600
Interest expense and similar charges (13 104) - (13 104)
Non-interest income 8 703 117 8 820
Net fee and commission income 6 874 117 6 991
Fee and commission income 7 315 210 7 525
Fee and commission expense (441) (93) (534)
Gains and losses from banking and trading activities 1 569 - 1 569
Gains and losses from investment activities 1 - 1
Other operating income 259 - 259
Total income 20 199 117 20 316
Impairment losses on loans and advances (3 307) - (3 307)
Operating income before operating expenditure 16 892 117 17 009
Operating expenses (10 912) (117) (11 029)
Other expenses (381) - (381)
Other impairments (1) - (1)
Indirect taxation (380) - (380)
Share of post-tax results of associates and joint ventures 81 - 81
Operating income before income tax 5 680 - 5 680
Taxation expense (1 507) - (1 507)
Profit for the reporting period 4 173 - 4 173
Profit attributable to:
Ordinary equity holder 4 025 - 4 025
Preference equity holders 146 - 146
Non-controlling interest 2 - 2
4 173 - 4 173
Condensed consolidated statement of comprehensive income for the reporting period ended
30 June 2013
As previously
reported(1) Restated
Rm Rm
Profit for the reporting period 4 173 4 173
Other comprehensive income
Other comprehensive income that will never be reclassified to profit or loss 2 2
Movement in retirement benefit fund assets and liabilities 2 2
Increase/(decrease) in retirement benefit surplus 3 3
Deferred tax (1) (1)
Other comprehensive income that is or may be reclassified to profit or loss (1 425) (1 425)
Foreign exchange differences on translation of foreign operations 200 200
Movement in cash flow hedging reserve (1 712) (1 712)
Fair value losses arising during the reporting period (1 472) (1 472)
Amount transferred from other comprehensive income to profit or loss (906) (906)
Deferred tax 666 666
Movement in available-for-sale reserve 87 87
Fair value gains arising during the reporting period 117 117
Amortisation of government bonds - release to profit or loss 4 4
Deferred tax (34) (34)
Other comprehensive income net of tax (1 423) (1 423)
Total comprehensive income for the reporting period 2 750 2 750
Total comprehensive income attributable to:
Ordinary equity holder 2 602 2 602
Preference equity holders 146 146
Non-controlling interest 2 2
2 750 2 750
Note
(1)As per interim financial results, published on 30 July 2013.
Condensed consolidated statement of financial position as at 30 June 2013
IFRS
accounting
As previously Consolidation policy
reported(1) adjustments(2) changes Restated
Rm Rm Rm Rm
Assets
Cash, cash balances and balances with central banks 18 823 - - 18 823
Statutory liquid asset portfolio 66 902 - - 66 902
Loans and advances to banks 54 323 - 2 797 57 120
Trading portfolio assets 79 445 - 3 085 82 530
Hedging portfolio assets 3 567 - - 3 567
Other assets 13 834 (144) - 13 690
Current tax assets 6 - - 6
Non-current assets held for sale 1 655 - - 1 655
Loans and advances to customers 519 592 - - 519 592
Loans to Group companies 13 699 104 - 13 803
Investment securities 6 345 - - 6 345
Investments in associates and joint ventures 642 - - 642
Investment properties 229 - - 229
Property and equipment 7 886 - - 7 886
Goodwill and intangible assets 1 201 - - 1 201
Deferred tax assets 20 - - 20
Total assets 788 169 (40) 5 882 794 011
Liabilities
Deposits from banks 50 197 - 3 085 53 282
Trading portfolio liabilities 51 903 - 2 797 54 700
Hedging portfolio liabilities 2 505 - - 2 505
Other liabilities 22 041 (40) - 22 001
Provisions 606 - - 606
Current tax liabilities 312 - - 312
Non-current liabilities held for sale 185 - - 185
Deposits due to customers 478 521 - - 478 521
Debt securities in issue 104 197 - - 104 197
Borrowed funds 15 657 - - 15 657
Deferred tax liabilities 891 - - 891
Total liabilities 727 015 (40) 5 882 732 857
Equity
Capital and reserves
Attributable to ordinary equity holders:
Ordinary share capital 303 - - 303
Ordinary share premium 12 465 - - 12 465
Preference share capital 1 - - 1
Preference share premium 4 643 - - 4 643
Retained earnings 39 625 - - 39 625
Other reserves 4 067 - - 4 067
61 104 - - 61 104
Non-controlling interest 50 - - 50
Total equity 61 154 - - 61 154
Total liabilities and equity 788 169 (40) 5 882 794 011
Notes
(1)As per interim financial results, published on 30 July 2013.
Condensed consolidated statement of financial position as at 31 December 2013
IFRS
accounting
As previously policy
reported(1) changes Restated
Statement of financial position Rm Rm Rm
Assets
Cash, cash balances and balances with central banks 21 087 - 21 087
Statutory liquid asset portfolio 62 055 - 62 055
Loans and advances to banks 45 302 651 45 953
Trading portfolio assets 77 137 1 727 78 864
Hedging portfolio assets 3 344 - 3 344
Other assets 9 299 - 9 299
Current tax assets 15 - 15
Non-current assets held for sale 1 857 - 1 857
Loans and advances to customers 534 040 - 534 040
Loans to Group companies 19 247 - 19 247
Investment securities 5 220 - 5 220
Investments in associates and joint ventures 694 - 694
Investment properties 240 - 240
Property and equipment 8 504 - 8 504
Goodwill and intangible assets 1 303 - 1 303
Deferred tax assets 27 - 27
Total assets 789 371 2 378 791 749
Liabilities
Deposits from banks 64 100 1 727 65 827
Trading portfolio liabilities 50 059 651 50 710
Hedging portfolio liabilities 2 391 - 2 391
Other liabilities 11 640 - 11 640
Provisions 1 362 - 1 362
Current tax liabilities 151 - 151
Non-current liabilities held for sale 175 - 175
Deposits due to customers 488 371 - 488 371
Debt securities in issue 97 179 - 97 179
Borrowed funds 15 762 - 15 762
Deferred tax liabilities 922 - 922
Total liabilities 732 112 2 378 734 490
Equity
Capital and reserves
Attributable to equity holder:
Ordinary share capital 303 - 303
Ordinary share premium 13 465 - 13 465
Preference share capital 1 - 1
Preference share premium 4 643 - 4 643
Retained earnings 34 506 - 34 506
Other reserves 4 291 - 4 291
57 209 - 57 209
Non-controlling interest 50 - 50
Total equity 57 259 - 57 259
Total liabilities and equity 789 371 2 378 791 749
Note
(1)As per financial results, published on 11 February 2014.
Profit and dividend announcement
30 June 2014
Salient features
- Headline earnings grew 2% to R4,0bn.
- Pre-provision profit increased 0,4% to R9,4bn.
- Return on equity (RoE) improved to 15,6% from 14,2%. Return on risk-weighted assets decreased to 1,91% and return on
assets declined to 1,02% from 1,96% and 1,04% respectively.
- An interim and special dividend declared of 1 231,7 cents.
- Revenue grew 5% to R21,4bn, as net interest income rose 7% to R12,3bn.
- Net interest margin improved to 3,69% from 3,63% of average interest-bearing assets.
- Non-interest income increased 3% to R9,1bn and accounted for 42,4% of total revenue.
- Operating expenses grew 10% to R12,1bn, increasing the cost-to-income ratio to 56,5% from 54,3%.
- Loans and advances to customers grew 4% to R542,5bn, while deposits due to customers rose 6% to R505,1bn.
- Credit impairments declined 11% to R2,9bn, resulting in a 1,10% credit loss ratio from 1,31%, while coverage on
performing loans increased to 67 basis points ("bps") from 47 bps.
- Non-performing loans (NPLs) improved to 4,3% of gross loans and advances to customers from 5,3%.
- Net asset value (NAV) per share declined 10% to 13 400 cents, due to the R1bn special dividend paid in December
2013.
- Absa Bank Limited’s Common Equity Tier 1 (CET1) ratio was 10,1%, well within regulatory requirements and our Board
target.
Overview of results
Absa Bank Limited’s headline earnings increased 2% to R4 040m from R3 970m. The Bank’s RoE improved to 15,6% from 14,2%,
comfortably above its 13,5% cost of equity. Absa Bank Limited declared an interim and special dividend of 1 231,7 cents.
Although the 10% cost growth exceeded 5% higher revenue, pre-provision profit increased 0,4% and was the main driver
of earnings growth. Credit impairments fell 11%, resulting in a 1,10% credit loss ratio, while further strengthening
portfolio provisions to 0,67% of performing loans. A slightly higher effective tax rate of 29,0% and 20% higher indirect
taxation were earnings drags.
Retail and Business Banking (RBB) headline earnings grew 6% to R3,3bn, due principally to 12% lower credit impairments.
Corporate and Investment Bank (CIB) headline earnings increased 6% to R1,2bn.
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.
Bank performance
Statement of financial position
Total assets grew 2% to R811,1bn at 30 June 2014, predominantly due to 4% higher loans and advances to customers.
Loans and advances to customers
Gross loans and advances to customers increased 4% to R555,8bn. Retail Banking’s gross loans rose 2% to R355,2bn, as credit
cards and instalment credit agreements grew 12% and 8% respectively, while mortgages declined 2%, in part due to NPLs
reducing. Business Banking’s gross loans decreased 1% with commercial property finance decreasing 3%. CIB gross loans
increased 14%, given strong growth in corporate overdrafts. Much of CIB’s loan growth occurred in the second half of 2013.
Funding
The Bank maintained its strong liquidity position, growing deposits due to customers 6% to R505,1bn. Debt securities
in issue increased 1% to R105,0bn as floating notes fell 11%. The funding tenor remains robust with a long-term funding
ratio of 25,7% from 27,3% for the reporting period ended 31 December 2013. Deposits due to customers contributed 75,1% to
total funding, while the proportion of debt securities in issue dropped to 15,6% from 16,4%. Retail Banking grew deposits
8% to R138,1bn to maintain its leading market share. Business Banking’s deposits increased 13% to R87,9bn, as its savings
and transmission deposits rose 61%. CIB’s deposits increased 2%, due to 33% growth in call deposits and 36% higher foreign
currency deposits. The Banks’ loans-to-deposits ratio improved to 88,9% from 89,2%.
Net asset value
The Bank’s NAV declined 8% to R51,9bn, predominantly due to the R1bn special dividend paid in December 2013 and a
relatively high payout ratio. NAV per share also decreased 10% to 13 400 cents.
Capital to risk-weighted assets
Bank risk-weighted assets (RWAs) increased 14% annualised this year to R434,1bn at 30 June 2014, driven by 10% higher
credit risk RWAs. Bank capital levels remained strong and within or above both board targets and regulatory requirements. Absa
Bank’s CET1 and Tier 1 capital adequacy ratios were 10,1% and 10,9% respectively (from 11,0% and 12,0% at 31 December
2013). The Bank generated 91 basis points of CET1 internally during the first half. The total capital ratio was 13,9%,
which is above our Board target of 12,0% to 13,5%. Declaring an interim and special dividend of 1 231,7 cents with a
dividend cover of 0,9% was well considered based on the Bank’s strong capital position, internal capital generation, strategy
and growth plans.
Statement of comprehensive income
Net interest income
Net interest income increased 7% to R12 342m from R11 496m, with average interest-bearing assets growing 6%. The net
interest margin improved to 3,69% from 3,63%. 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 increased 18 bps, with R671m released to the statement of comprehensive income. The
cash flow hedging reserve decreased to R0,2bn after tax from R0,6bn in December 2013. Liquidity interest risk management
added 6 bps to the margin.
Impairment losses on loans and advances
Credit impairments improved 11% to R2 942m from R3 307m, resulting in a 1,10% credit loss ratio from 1,31%. Total NPL
cover improved further to 40,46% from 38,92% in December 2013. The statement of financial position portfolio provisions
increased 50% to R3,5bn, amounting to 0,67% of performing loans from 0,47% at 30 June 2013. Bank NPLs declined 15% to
R24,0bn or 4,3% of gross customer loans and advances from 5,3%.
Retail Banking’s credit impairments fell 11% to R2,6bn, a 1,52% credit loss ratio from 1,74% as significantly lower
mortgage credit impairments outweighed an expected 59% increase in Card.
Home Loans’ charge decreased 60% to R448m, a 0,45% credit loss ratio, given improved collections processes and the
high quality new business of recent years. Mortgage NPLs fell 31% or by R5,3bn with the legal book improving further. NPL
cover in mortgages decreased to 27,56% from 27,85% in 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 132m from R711m, a 8,26% credit loss ratio from 5,49%. A 5,03% credit loss ratio for the
remainder of 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% (December 2013), in part due to a lower loan book. Personal
Loans’ credit loss ratio declined to 6,94% from 7,17% reflecting improvements in its book mix and collections. Improving
quality in this portfolio is a key focus.
Business Banking’s credit impairments fell 20% to R302m, a 1,00% credit loss ratio, as new defaults declined. CIB’s credit
loss ratio remained low at 0,06%, most of which was portfolio provisions.
Non-interest income
Non-interest income increased 3% to R9 088m from R8 820m to account for 42% of total income.
Net fee and commission income grew 3% to R7,2bn, as credit-related fees and commissions increased 2% to R6,2bn.
Electronic banking fees were flat at R2,0bn, while card fees increased 14% to R506m, merchant income grew 7% to R1,0bn and
Trust and other fiduciary services rose 44% to R26m.
RBB’s non-interest income grew 2% to R6,7bn, 74% of the total. Retail Banking rose 4% to R5,3bn and Business Banking
decreased 2% to R1,4bn. Retail Banking 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 non-interest revenue growth, with electronic banking fees growing 6% partially offset by cash fees of 0,4%.
CIB’s non-interest income increased 8% to R2,3bn. Net fees and commissions decreased 2% with a decrease of 5% in
electronic banking transaction volumes in Corporate. Investment Bank non-interest revenue grew 9% to R1,7bn.
Operating expenses
Operating expenses grew 10% to R12 101m from R11 029m, increasing the Bank’s cost-to-income ratio to 56,5% from 54,3%.
Staff costs rose 10% to R6,3bn to account for 52% of total expenses. Salaries grew 12% due to more senior hires,
awarding entry level staff higher wage increases. Incentives rose 26%, largely due to 36% higher share-based payments. Other
staff costs declined 62%.
Non-staff costs increased 10% to R5,8bn. Property-related costs increased 7,5% to R2,0bn, although these declined
slightly excluding a R190m property dilapidation provision. While marketing costs grew 10% to R484m, direct marketing spend
increased materially across Africa as certain sponsorships were exited. Information technology costs rose 8% to R1,0bn,
as efficiency gains offset the impact of rand depreciation. Investment in systems and processes increased amortisation
10% to R110m, while depreciation declined 10% to R0,6bn due to efficiencies and realigning computer equipment’s useful
lives. Professional fees increased 9% to R545m and communication costs rose 8% to R342m. Other costs increased 96% to
R0,3bn, due to higher fraud and losses charges and outsourcing costs.
RBB and CIB’s operating expenses both increased 7% and 11% respectively to R9,6bn and R2,4bn respectively, while Wealth and
Investment Management grew 1% to R0,2bn. Retail Banking’s costs rose 9%, as it invested in marketing and its multi-channel
programme. Business Banking increased expenses 2%, with continued cost containment and lower property write-downs in the
equity portfolio offsetting growth in staff costs. Wealth and Investment Management’s expense growth reflects investment into
sales capacity and amortisation on new operating systems. CIB kept business as usual costs below inflation, while investing
heavily in systems and people.
Taxation
The Bank’s taxation expense increased 15% to R1 734m, slightly more than the growth in pre-tax profit, which resulted
in a 29,0% effective tax rate (excluding indirect taxation) from 26,5%. Indirect taxation rose 20% to R455m, largely due
to higher Value Added Tax.
Segment performance
Retail Banking
Headline earnings increased 4% to R2 461m due largely to an 11% reduction in credit impairments, as pre-provision
profits declined 3%. Home Loans' earnings grew significantly to R801m, driven by 60% lower credit costs and 16% lower
expenses. Vehicle and Asset Finance's earnings rose 4% to R535m on 11% loan growth and an improved credit loss ratio. Despite 9%
revenue growth exceeding 5% cost growth, Card’s earnings fell 22% to R629m as impairments increased 59% to R1,1bn 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 half. Headline earnings in the Other segment dropped 34% to a R953m loss, primarily attributable to
increased investment on marketing and the multi-channel programme. Retail Banking accounted for almost 56% of Bank headline earnings
excluding head office, eliminations and other central items.
Business Banking
Business Banking headline earnings increased 11% to R803m. Costs grew 2%, slightly below 3% revenue growth, while credit
impairments fell 20% despite higher portfolio provisions. Customer numbers stabilised during the half, with growth in the more
profitable Commercial segment. Business Banking generated 20% of Bank headline earnings.
Corporate and Investment Bank
Headline earnings grew 6% to R1 164m, driven by 15% income growth that was well above the 11% cost growth. Investment
Bank earnings grew 7% to R0,8bn, reflecting 17% revenue growth including 39% higher net interest income. Corporate
earnings grew 6% to R411m, largely due to 16% net interest income growth and containing cost growth to 7%. CIB accounted for
almost 29% of Bank earnings.
Wealth and Investment Management
Wealth and Investment Management earnings increased R3m, as net assets under management increased 62% to R47bn.
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 Unites States. 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.
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.
Basis of presentation
The Bank’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 Bank’s most recent annual consolidated financial statements.
The Bank’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 Bank’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 current year, the Bank revised the estimated useful lives of computer equipment from 3 to 5 years to 4 to 6
years. This revision was done as a result of the requirement of IAS 16 to reassess the useful lives of property, plant
and equipment on an annual basis. This change in useful lives has brought the Bank’s estimated useful lives of computer
equipment in line with the Barclays PLC estimated useful lives for computer equipment. The change in accounting estimate
has been accounted for prospectively in accordance with IAS 8.
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 preference share dividend number 17
Absa Bank non-cumulative, non-redeemable preference shares (Absa Bank preference shares)
The Absa Bank preference shares have an effective coupon rate of 70% of Absa Bank’s prevailing prime overdraft lending
rate (prime rate). Absa Bank’s current prime rate is 9,25%.
Notice is hereby given that preference dividend number 17, equal to 70% of the average prime rate for 1 March 2014 to
31 August 2014, per Absa Bank preference share has been declared for the period 1 March 2014 to 31 August 2014. The dividend is
payable on Monday, 15 September 2014, to shareholders of the Absa Bank preference shares recorded in the register of members of
the Company at the close of business on Friday, 12 September 2014.
The directors of Absa Bank confirm that the Bank will satisfy the solvency and liquidity test immediately after
completion of the dividend distribution.
Based on the current prime rate, the preference dividend payable for the period 1 March 2014 to 31 August 2014 would
indicatively be 3 197,46575 cents per Absa Bank preference share.
The dividend will be subject to the new dividend tax that was introduced with effect from 1 April 2012. In accordance
with paragraphs 11.17(a)(i) to (x) and 11.17(c) of the JSE Listings Requirements, the following additional information
is disclosed:
- The dividend has been declared out of income reserves.
- Absa Bank has utilised R55 447 641 of STC credits (equivalent to 1 121,32348 cents per preference share), therefore
2 076,14227 cents per preference share will be subject to dividend withholding tax payable by preference shareholders.
- The local dividend tax rate is fifteen per centum (15%).
- The gross local dividend amount is 3 197,46575 cents per preference share for shareholders exempt from the dividend
tax.
- The net local dividend for shareholders subject to withholding tax at a rate of 15% amounts to 2 886,04441 cents per
preference share.
- Absa Bank currently has 4 944 839 preference shares in issue.
- Absa Bank’s income tax reference number is 9575117719.
In compliance with the requirements of Strate, the electronic settlement and custody system used by 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 Monday, 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 Monday, 15 September 2014.
On behalf of the Board
N R Drutman
Company Secretary
Johannesburg
30 July 2014
Absa Bank Limited is a company domiciled in South Africa. Its registered office is the 7th Floor, Barclays Towers
West, 15 Troye Street, Johannesburg, 2001.
Administration and contact details
Absa Bank Limited
Authorised financial services and registered credit provider (NCRCP7)
Registration number: 1986/004794/06
Incorporated in the Republic of South Africa
JSE share codes: ABSP and ABMN
ISIN: ZAE000079810
Registered office
7th Floor, Barclays Towers West
15 Troye Street, Johannesburg, 2001
PO Box 7735, Johannesburg, 2000
Telephone: (+27 11) 350 4000
Email: groupsec@barclaysafrica.com
Board of directors
Independent non-executive directors
C Beggs, Y Z Cuba, T Dingaan, S A Fakie, M J Husain, T M Mokgosi-Mwantembe, T S Munday (Lead Independent Director)
Non-executive directors
W E Lucas-Bull (Chairman)
Executive directors
D W P Hodnett (Deputy Chief Executive Officer
and Financial Director), M Ramos (Chief Executive Officer)
Transfer secretary
South Africa
Computershare Investor Services Proprietary Limited
70 Marshall Street, Johannesburg, 2001
PO Box 61051, Marshalltown, 2107
Telephone: (+27 11) 370 5000
Telefax: (+27 11) 370 5271/2
ADR depositary
BNY Mellon
101 Barclay Street, 22W, New York, NY, 10286
Telephone: +1 212 815 2248
Auditors
PricewaterhouseCoopers Inc.
Ernst & Young Inc.
Sponsors
Lead independent sponsor
J. P. Morgan Equities South Africa Proprietary Limited
No 1 Fricker Road, Cnr. Hurlingham Road,
Illovo, Johannesburg, 2196
Private Bag X9936, Sandton, 2146
Telephone: (+27 11) 507 0300
Telefax: (+27 11) 507 0503
Joint sponsor
Absa Bank Limited (acting through its
Corporate and Investment 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
Absa Bank should be directed to the following areas:
Group Investor Relations
A M Hartdegen (Head Investor Relations)
Telephone: (+27 11) 350 2598
Email: investorrelations@barclaysafrica.com
Company Secretary
N R Drutman
Telephone: (+27 11) 350 5347
Email: groupsec@barclaysafrica.com
Other contacts
Group Finance
J P Quinn (Head of Finance)
Telephone: (+27 11) 350 7565
Head office switchboard
Telephone: (+27 11) 350 4000
Website address
www.absa.co.za
Date: 30/07/2014 07:06:00 Produced by the JSE SENS Department. The SENS service is an information dissemination service administered by the JSE Limited ('JSE').
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