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Audited summary consolidated financial results
for the reporting period ended 31 December 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)
Audited summary consolidated financial results for the reporting period ended 31 December 2014
These audited summary consolidated financial results were prepared by Barclays Africa Group Financial Reporting under
the direction and supervision of the Deputy Chief Executive Officer and Group Financial Director, D W P Hodnett CA(SA).
Date of publication: 3 March 2015
Overview of results
Absa Bank Limited (“the Bank”) is a wholly owned subsidiary of Barclays Africa Group Limited, which is listed on JSE
Limited. These summary consolidated financial results are published to provide information to holders of the Bank’s
listed non-cumulative, non-redeemable preference shares.
Commentary relating to the Bank’s summary consolidated financial results is included in the Barclays Africa Group
Limited results, as presented to shareholders on 3 March 2015.
Basis of presentation
The Bank’s annual financial results have been prepared in accordance with the recognition and measurement requirements
of International Financial Reporting Standards (“IFRS”), interpretations issued by the IFRS Interpretations Committee,
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 information disclosed in the SENS is derived from the information contained in the audited annual consolidated
financial statements and does not contain full or complete disclosure details. Any investment decisions by shareholders
should be based on consolidation of the audited annual consolidated financial statements available on request. The
presentation and disclosure complies with International Accounting Standard (IAS) 34.
The preparation of financial information requires the use of estimates and assumptions about future conditions. Use of
available information and application of judgement are inherent in the formation of estimates. The accounting policies
that are deemed critical to the Bank’s results and financial position, in terms of the materiality of the items to which
the policy is applied, and which involve a high degree of judgement including the use of assumptions and estimation are
impairment of loans and advances, goodwill impairment, fair value measurements, impairment of available-for-sale financial
assets, consolidation of structured or sponsored entities, post-retirement benefits, provisions, income taxes, share-based
payments, liabilities arising from claims made under short-term insurance contracts, liabilities arising from claims made
under life insurance contracts and offsetting of financial assets and liabilities.
Accounting policies
The accounting policies applied in preparing the audited summary consolidated annual 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
- Implementation of amended IFRS standards specifically IAS 32 Offsetting Financial Assets and Financial Liabilities.
Auditors’ report
Ernst & Young Inc. and PricewaterhouseCoopers Inc., the Bank’s independent auditors, have audited the consolidated
annual financial statements of the Bank from which management prepared the summary consolidated financial results. The
auditors have expressed an unqualified audit opinion on the consolidated annual financial statements. The summary
consolidated financial results comprise the summary consolidated statement of financial position at 31 December 2014, summary
consolidated statement of comprehensive income, summary consolidated statement of changes in equity and summary consolidated
statement of cash flows for the year then ended, and selected explanatory notes, excluding items not indicated as
audited. The audit report of the consolidated annual financial statements is available for inspection at the Bank’s
registered office.
The summary consolidated financial results are extracted from audited information, but is not itself audited. The
directors take full responsibility for the preparation of the summary consolidated financial results and the financial
information has been correctly extracted from the underlying consolidated annual financial statements.
Events after the reporting period
The directors are not aware of any events occurring between the reporting date of 31 December 2014 and the date of
authorisation of these summary consolidated financial results as defined in IAS 10 Events after the reporting period.
On behalf of the board
W E Lucas-Bull M Ramos
Chairman Chief Executive Officer
Johannesburg
3 March 2015
Declaration of preference share dividend number 18
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 18, equal to 70% of the average prime rate for 1 September 2014
to 28 February 2015, per Absa Bank preference share has been declared for the period 1 September 2014 to 28 February 2015.
The dividend is payable on Monday, 30 March 2015, to shareholders of the Absa Bank preference shares recorded in the register
of members of the Company at the close of business on Friday, 27 March 2015.
The directors of Absa Bank confirm that the Bank will satisfy the solvency and liquidity test immediately after
completion of the dividend distribution.
Based on the current prime rate, the preference dividend payable for the period 1 September 2014 to 28 February 2015
would indicatively be 3 210,89041 cents per Absa Bank preference share.
The dividend will be subject to dividends withholding tax at a rate of 15% that was introduced on 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 R158 773 361 of STC credits (equivalent to 3 210,89041 cents per preference share),
therefore no dividend 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 3 210,89041 cents per preference share for shareholders exempt from the dividend tax.
- The net local dividend for shareholders of 3 210,89041 cents per preference share will not be subject to withholding
tax at a rate of 15%.
- 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, 20 March 2015
Shares commence trading ex dividend Monday, 23 March 2015
Record date Friday, 27 March 2015
Payment date Monday, 30 March 2015
Share certificates may not be dematerialised or rematerialised between Monday, 23 March 2015 and Friday, 27 March 2015,
both dates inclusive. On Monday, 30 March 2015, 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, 30 March 2015.
On behalf of the board
N R Drutman
Company Secretary
Johannesburg
3 March 2015
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.
Summary consolidated statement of financial position
as at 31 December
2014 2013(1)
(Audited) (Audited)
Note Rm Rm
Assets
Cash, cash balances and balances with central banks 21 419 21 087
Investment securities 70 618 67 275
Loans and advances to banks 47 599 45 953
Trading portfolio assets 78 572 78 864
Hedging portfolio assets 2 335 3 344
Other assets 9 311 9 299
Current tax assets 17 15
Non-current assets held for sale 1 250 1 857
Loans and advances to customers 554 521 534 926
Loans to Group companies 17 740 19 247
Investments in associates and joint ventures 839 694
Investment properties 252 240
Property and equipment 9 137 8 504
Goodwill and intangible assets 1 422 1 303
Deferred tax assets 29 27
Total assets 814 061 792 635
Liabilities
Deposits from banks 54 104 65 827
Trading portfolio liabilities 44 580 50 710
Hedging portfolio liabilities 2 577 2 391
Other liabilities 13 809 11 640
Provisions 1 857 1 362
Current tax liabilities 65 151
Non-current liabilities held for sale 1 - 175
Deposits due to customers 521 656 489 257
Debt securities in issue 105 015 97 179
Borrowed funds 2 10 535 15 762
Deferred tax liabilities 937 922
Total liabilities 755 135 735 376
Equity
Capital and reserves
Attributable to equity holders:
Ordinary share capital 303 303
Ordinary share premium 16 465 13 465
Preference share capital 1 1
Preference share premium 4 643 4 643
Retained earnings 33 713 34 506
Other reserves 3 799 4 291
58 924 57 209
Non-controlling interest 2 50
Total equity 58 926 57 259
Total equity and liabilities 814 061 792 635
Note
(1) Restated, refer to note 14 for reporting changes.
Summary consolidated statement of comprehensive income
for the reporting period ended 31 December
2014 2013
(Audited) (Audited)
Note Rm Rm
Net interest income 25 928 23 565
Interest and similar income 54 810 50 095
Interest expense and similar charges (28 882) (26 530)
Non-interest income 18 400 18 557
Net fee and commission income 14 775 14 421
Fee and commission income 15 964 15 486
Fee and commission expense (1 189) (1 065)
Gains and losses from banking and trading activities 2 698 3 491
Gains and losses from investment activities 4 6
Other operating income 923 639
Total income 44 328 42 122
Impairment losses on loans and advances (5 110) (5 881)
Operating income before operating expenditure 39 218 36 241
Operating expenses (25 309) (23 560)
Other expenses (1 186) (794)
Other impairments 3 (418) 1
Indirect taxation (768) (795)
Share of post-tax results of associates and joint ventures 147 132
Operating profit before income tax 12 870 12 019
Taxation expense (3 570) (3 284)
Profit for the reporting period 9 300 8 735
Profit attributable to:
Ordinary equity holder 8 995 8 439
Preference equity holders 305 294
Non-controlling interest - 2
9 300 8 735
Earnings per share
Basic earnings per share (cents) 2 324,9 2 226,1
Diluted basic earnings per share (cents) 2 324,9 2 226,1
Summary consolidated statement of comprehensive income
for the reporting period ended 31 December
2014 2013
(Audited) (Audited)
Rm Rm
Profit for the reporting period 9 300 8 735
Other comprehensive income
Items that will not be reclassified to profit or loss:
Movement in retirement benefit fund assets and liabilities 2 (19)
Increase/(decrease) in retirement benefit surplus 3 (26)
Deferred tax (1) 7
Total items that will not be reclassified to profit or loss 2 (19)
Items that are or may be subsequently reclassified
to profit or loss:
Movement in foreign currency translation reserve (327) 488
Differences on translation of foreign operations 70 488
Gains released to profit or loss (397) -
Movement in cash flow hedging reserve (253) (1 826)
Fair value gains/(losses) arising during the reporting period 1 092 (907)
Amount removed from other comprehensive income and
recognised in profit or loss (1 443) (1 629)
Deferred tax 98 710
Movement in available-for-sale reserve (37) 90
Fair value (losses)/gains arising during the reporting period (98) 112
Amortisation of government bonds - release to profit or loss 44 10
Deferred tax 17 (32)
Total items that are or may be subsequently reclassified
to profit or loss (617) (1 248)
Total comprehensive income for the reporting period 8 685 7 468
Total comprehensive income attributable to:
Ordinary equity holder 8 380 7 172
Preference equity holders 305 294
Non-controlling interest - 2
8 685 7 468
Summary consolidated statement of changes in equity
for the reporting period ended 31 December
2014(1)
(Audited)
Total
equity
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 8 685 - 8 685
Profit for the reporting period 9 300 - 9 300
Other comprehensive income (615) - (615)
Dividends paid during the reporting period (refer to note 5) (9 940) - (9 940)
Shares issued 3 000 - 3 000
Purchase of Barclays Africa Group Limited shares in
respect of equity-settled share-based payment arrangements (8) - (8)
Movement in share-based payment reserve (22) - (22)
Transfer from share-based payment reserve - - -
Transfer to retained earnings - - -
Value of employee services (22) - (22)
Share of post-tax results of associates and joint ventures - - -
Transfer from retained earnings (147) - (147)
Transfer to associates’ and joint ventures’ reserve 147 - 147
Disposal of subsidiary(2) - (48) (48)
Balance at the end of the reporting period 58 924 2 58 926
2013(1)
(Audited)
Total
equity
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 5) (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 arrangements (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) The Bank sold its 85% shareholding in a non-core subsidiary on 2 January 2014 and the subsidiary
has been derecognised.
Summary consolidated statement of cash flows
for the reporting period ended 31 December
2014 2013(1)
(Audited) (Audited)
Note Rm Rm
Net cash generated from operating activities 12 859 17 338
Net cash utilised in investing activities (2 179) (2 611)
Net cash utilised in financing activities (11 173) (13 006)
Net (decrease)/increase in cash and cash equivalents (493) 1 721
Cash and cash equivalents at the beginning of the reporting period 1 10 507 8 786
Cash and cash equivalents at the end of the reporting period 2 10 014 10 507
Notes to the summary consolidated statement of cash flows
1. Cash and cash equivalents at the beginning of the reporting period
Cash, cash balances and balances with central banks(2) 8 665 8 094
Loans and advances to banks(3) 1 842 692
10 507 8 786
2. Cash and cash equivalents at the end of the reporting period
Cash, cash balances and balances with central banks(2) 8 777 8 665
Loans and advances to banks(3) 1 237 1 842
10 014 10 507
Notes
(1) Restated, refer to note 14 for reporting changes.
(2) Includes coins and bank notes, which are part of “Cash, cash balances and balances with central banks”.
(3) Includes call advances, which are used as working capital by the Bank and are a component of other
advances within “Loans and advances to banks”.
Summary notes to the consolidated financial results
for the reporting period ended 31 December
1. Non-current assets and non-current liabilities held for sale
The following transfers to non-current assets held for sale were effected:
- Retail and Business Banking (“RBB”) transferred investment securities and investment properties with a carrying
value of R29m (2013: R4m) and Rnil (2013: R193m) respectively.
- The Head Office and other operations segment transferred property and equipment with a carrying value of R3m (2013: R209m).
The fair value adjustment of investment securities relating to assets within RBB was classified as held for sale
during 2012. At the reporting date, these investment securities remain classified as non-current assets held for sale as the
delay of the disposal is as a consequence of events outside the Bank’s control. The Bank remains, however, committed to
dispose of the asset in 2015.
All the above assets are expected to be disposed of in 2015.
The Commercial Property Finance (“CPF”) Equity division in RBB disposed of a non-core subsidiary with investment
property with a carrying value of R1 315m (2013: Rnil). The remaining disposals of non-current assets and liabilities held
for sale occurred in RBB, Wealth and Head Office and other operations segments. The profit on disposal of the non-current
assets held for sale has been recognised in Other operating income in the statement of comprehensive income.
2. Borrowed funds
During the reporting period, R500m (2013: Rnil) of subordinated notes were issued and R4 725m (2013: R1 886m) were redeemed.
3. Other impairments
2014 2013
(Audited) (Audited)
Rm Rm
Financial instruments 17 (4)
Other 401 3
Goodwill 1 -
Intangible assets 127 -
Investments in associates and joint ventures 2 -
Property and equipment 253 -
Repossessed properties - 3
Other 18 -
418 (1)
4. Headline earnings
2014 2013
(Audited) (Audited)
Gross Net(1) Gross Net(1)
Rm Rm Rm Rm
Headline earnings is determined as follows:
Profit attributable to ordinary equity holder 8 995 8 439
Total headline earnings adjustment: (208) (173)
IFRS 3 - Goodwill impairment 1 1 - -
IFRS 5 - Gains on disposal of non-current assets held for sale (105) (94) (171) (138)
IAS 16 - (Profit)/loss on disposal of property and equipment (16) (13) 20 14
IAS 21 - Recycled foreign currency translation reserve (397) (397) - -
IAS 27 - Profit on disposal of subsidiaries (44) (35) - -
IAS 28 - Impairment of investment in associates and joint ventures 2 2 - -
IAS 36 - Other impairment 18 15 - -
IAS 36 - Impairment of intangible assets 127 91 - -
IAS 36 - Impairment of property and equipment 253 183 - -
IAS 39 - Release of available-for-sale reserves 44 31 10 7
IAS 39 - Disposal and impairment of available-for-sale assets - - (3) (2)
IAS 40 - Change in fair value of investment properties 8 8 (60) (54)
Headline earnings/diluted headline earnings 8 787 8 266
Headline earnings per share (cents)/diluted headline earnings (cents) 2 271,1 2 180,4
Note
(1) The net amounts are reflected after taxation and non-controlling interest.
5. Dividends per share
2014 2013
(Audited) (Audited)
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
Special dividend (5 December 2014: 516,1 cents) (8 April 2014: 638,38 cents)
(4 December 2013: 264,0 cents) 4 446 1 000
Final dividend (3 March 2015: 912,78268 cents) (11 February 2014: 754,3 cents) 3 616 2 890
10 361 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
Final dividend (3 March 2015: 3 210,8904 cents) (11 February 2014: 2 979,3151 cents) 159 147
317 295
Dividends paid to ordinary equity holder
Final dividend (11 February 2014: 754,3 cents) (12 February 2013: 605,5 cents) 2 890 2 293
Interim dividend (30 July 2014: 593,35 cents) (30 July 2013: 2 233,4 cents) 2 299 8 459
Special dividend (5 December 2014: 516,1 cents) (8 April 2014: 638,38 cents)
(4 December 2013: 264,0 cents) 4 446 1 000
9 635 11 752
Dividends paid to preference equity holders
Final dividend (11 February 2014: 2 979,3151 cents) (12 February 2013: 2 950,5479 cents) 147 146
Interim dividend (30 July 2014: 3 197,4658 cents) (30 July 2013: 2 999,4521 cents) 158 148
305 294
6. 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 and previous reporting periods.
7. Related parties
There were no one-off significant transactions in the normal course of business, with related parties of the Bank
during the reporting period.
8. Financial guarantee contracts
2014 2013
(Audited) (Audited)
Rm Rm
Financial guarantee contracts 96 96
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 off-statement of financial position exposure.
During the current reporting period all financial guarantee contracts were reassessed and as a consequence the disclosure has been refined.
The comparatives have been restated accordingly from R3bn to R96m.
9. Commitments
2014 2013
(Audited) (Audited)
Rm Rm
Authorised capital expenditure
Contracted but not provided for 576 175
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.
Operating lease payments due
No later than one year 856 820
Later than one year and no later than five years 1 631 1 417
Later than five years 709 230
3 196 2 467
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.
Sponsorship payment due
No later than one year 282 272
Later than one year and no later than five years 307 541
589 813
The Bank has sponsorship commitments in respect of sports, arts and culture.
10. Contingencies
2014 2013
(Audited) (Audited)
Rm Rm
Guarantees 28 076 15 862
Irrevocable debt facilities 114 614 116 357
Letters of credit 3 756 5 666
Other contingencies 7 3
146 453 137 888
Guarantees includes performance and payment guarantee contracts.
During the reporting period, terms and conditions associated with unutilised customer facilities were reviewed and
confirmed to be irrevocable in nature. These facilities are now disclosed as contingent liabilities and comparative numbers
have been restated from R46bn to R116bn.
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.
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.
Regulatory matters
The scale of regulatory change remains challenging and the global financial crisis is resulting in a significant
tightening of regulation and changes to regulatory structures globally, especially for companies that are deemed to be of
systemic importance. Concurrently, there is continuing political and regulatory scrutiny of the operation of the banking
and consumer credit industries globally which, in some cases, is leading to increased regulation. The nature and impact of
future changes in the legal framework, policies and regulatory action cannot currently be fully predicted and are
beyond the Bank’s control, but especially in the area of banking regulation, are likely to have an impact on the Bank’s
businesses and earnings.
The Bank is continuously evaluating its compliance programmes and controls in general. As a consequence of these
compliance programmes and controls, including monitoring and review activities, the Bank has also adopted appropriate
remedial and/or mitigating steps, where necessary or advisable, and made disclosures on material findings as and when
appropriate.
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.
11. Segment reporting
2014 2013(1)
(Audited) (Audited)
Rm Rm
11.1 Headline earnings contribution by segment
RBB 7 308 6 642
Corporate and Investment Bank (“CIB”) 2 406 2 455
Wealth (10) (40)
Head Office and other operations (917) (791)
Total headline earnings 8 787 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.
2014 2013(1)
(Audited) (Audited)
Rm Rm
11.2 Total income revenue by segment
RBB 35 488 34 168
CIB 8 535 8 103
Wealth 545 473
Head Office and other operations (240) (622)
Total income 44 328 42 122
Note
(1) Operational changes, management changes and associated changes to the way in which the CODM views the performance of each
business segment, have resulted in the reallocation of earnings, assets and liabilities between operating segments.
2014 2013(1)
(Audited) (Audited)
Rm Rm
11.3 Total internal revenue by segment
RBB (8 612) (8 199)
CIB 13 119 12 384
Wealth (291) (326)
Head Office and other operations (920) (1 933)
Total internal income 3 296 1 926
Note
(1) Operational changes, management changes and associated changes to the way in which the CODM views the performance of each
business segment, have resulted in the reallocation of earnings, assets and liabilities between operating segments.
2014 2013(1)
(Audited) (Audited)
Rm Rm
11.4 Total assets by segment
RBB 661 057 630 765
CIB 480 395 478 600
Wealth 11 259 11 679
Head Office and other operations (338 650) (328 409)
Total assets 814 061 792 635
Note
(1) Operational changes, management changes and associated changes to the way in which the CODM views the performance of each
business segment, have resulted in the reallocation of earnings, assets and liabilities between operating segments.
2014 2013(1)
(Audited) (Audited)
Rm Rm
11.5 Total liabilities by segment
RBB 652 951 623 393
CIB 477 149 475 465
Wealth 11 268 11 718
Head Office and other operations (386 233) (375 200)
Total liabilities 755 135 735 376
Note
(1) Operational changes, management changes and associated changes to the way in which the CODM views the performance of each
business segment, have resulted in the reallocation of earnings, assets and liabilities between operating segments.
12. 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:
2014 2013(1)
(Audited) (Audited)
Carrying Carrying
value Fair value value Fair value
Rm Rm Rm Rm
Financial assets
Balances with the South African Reserve Bank (“SARB”) 12 621 12 621 12 417 12 417
Coins and bank notes 8 777 8 777 8 665 8 665
Money market assets 21 21 5 5
Cash, cash balances and balances with central banks 21 419 21 419 21 087 21 087
Loans and advances to banks 27 076 27 021 39 813 39 813
Other assets 7 914 8 203 8 080 8 080
Retail Banking 350 040 349 612 342 547 342 386
Credit cards 29 338 29 338 27 830 27 830
Instalment credit agreements 70 557 69 995 64 571 64 268
Loans to associates and joint ventures 13 012 13 012 10 287 10 287
Mortgages 220 522 220 565 223 526 223 592
Other loans and advances 404 404 253 253
Overdrafts 2 222 2 222 2 015 2 015
Personal and term loans 13 985 14 076 14 065 14 141
Business Banking 60 863 60 861 60 036 60 206
Loans to associates and joint ventures 305 305 559 559
Mortgages (including CPF) 29 856 29 852 30 718 30 888
Overdrafts 18 083 18 063 17 075 17 075
Term loans 12 619 12 641 11 684 11 684
CIB 121 674 120 745 110 796 104 993
Wealth 10 507 10 507 10 885 10 885
Head Office and other operations 542 542 115 115
Loans and advances to customers - net of impairment losses 543 626 542 267 524 379 518 585
Loans to Group companies 17 740 21 762 19 247 19 340
Total assets 617 775 620 672 612 606 606 905
Financial liabilities
Deposits from banks 34 495 35 834 53 560 50 348
Other liabilities 11 316 11 322 9 557 9 095
Call deposits 56 986 56 986 52 829 52 830
Cheque account deposits 146 568 146 568 140 032 140 031
Credit card deposits 1 932 1 932 1 914 1 914
Fixed deposits 114 646 115 371 116 420 116 462
Foreign currency deposits 21 723 21 723 14 108 14 114
Notice deposits 49 764 49 843 56 349 56 348
Other deposits 1 972 1 972 1 877 1 877
Saving and transmission deposits 108 849 108 849 87 865 87 865
Deposits due to customers 502 440 503 244 471 394 471 441
Debt securities in issue 99 735 100 100 93 595 93 596
Borrowed funds 10 535 10 885 15 762 16 308
Total liabilities 658 521 661 385 643 868 640 788
Note
(1) Restated, refer to note 14 for reporting changes.
13. Assets and liabilities held at fair value
13.1 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.
13.2 Fair value measurements
Valuation inputs
IFRS 13 requires an entity to classify fair values measured and/or disclosed according to a hierarchy that reflects
the significance of observable market inputs. The three levels of the fair value hierarchy are defined as follows:
Quoted market prices - Level 1
Fair values are classified as Level 1 if they have been determined using observable prices in an active market. Such
fair values are determined 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.
Valuation technique using observable inputs - Level 2
Fair values classified as Level 2 have been determined using models for which inputs are observable in an active market.
A valuation input is considered observable if it can be directly observed from transactions in an active market, or if
there is compelling external evidence demonstrating an executable exit price.
Valuation technique using significant unobservable inputs - Level 3
Fair values are classified as Level 3 if their determination incorporates significant inputs that are not based on
observable market data (unobservable inputs). An input is deemed significant if it is shown to contribute more than 10% to
the fair value of an item. Unobservable input levels are generally determined based on observable inputs of a similar
nature, historical observations or other analytical techniques.
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 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.
The fair value of amortised cost deposits repayable on demand is considered to be equal to their carrying value. For
other financial liabilities at amortised cost the disclosed fair value approximates the carrying value because the
instruments are short-term in nature or have interest rates that reprice frequently.
13.3 Fair value adjustments
The main valuation adjustments required to arrive at a fair value are described as follows:
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 unless the relevant mid prices are reflective of the appropriate exit price as a practical expedient given the
nature of the underlying instruments. 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, 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.
13.4 Fair value hierarchy
The following table 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.
Recurring fair value 2014 2013(1)
measurements (Audited) (Audited)
Level 1 Level 2 Level 3 Total Level 1 Level 2 Level 3 Total
Rm Rm Rm Rm Rm Rm Rm Rm
Financial assets
Investment securities 48 973 19 329 2 316 70 618 64 962 - 2 313 67 275
Loans and advances to banks - 20 523 - 20 523 - 6 140 - 6 140
Trading and hedging portfolio assets 25 061 52 995 1 151 79 207 24 383 55 708 1 037 81 128
Debt instruments 24 433 4 743 870 30 046 23 929 174 873 24 976
Derivative assets 2 42 347 281 42 630 - 48 451 164 48 615
Commodity derivatives 2 348 - 350 - 324 - 324
Credit derivatives - 284 91 375 - 258 11 269
Equity derivatives - 1 011 29 1 040 - 802 - 802
Foreign exchange derivatives - 8 327 1 8 328 - 8 587 39 8 626
Interest rate derivatives - 32 377 160 32 537 - 38 480 114 38 594
Equity instruments 626 321 - 947 454 77 - 531
Money market assets - 5 584 - 5 584 - 7 006 - 7 006
Other assets - - 17 17 - - 16 16
Loans and advances to customers 4 6 160 4 731 10 895 - 4 070 6 477 10 547
Total financial assets 74 038 99 007 8 215 181 260 89 345 65 918 9 843 165 106
Financial liabilities
Deposits from banks - 19 609 - 19 609 - 12 267 - 12 267
Trading and hedging portfolio
liabilities 2 795 44 042 320 47 157 2 472 50 087 542 53 101
Derivative liabilities - 44 042 320 44 362 - 50 087 542 50 629
Commodity derivatives - 308 - 308 - 290 - 290
Credit derivatives - 324 39 363 - 350 45 395
Equity derivatives - 1 296 198 1 494 - 1 720 306 2 026
Foreign exchange derivatives - 9 931 7 9 938 - 8 123 49 8 172
Interest rate derivatives - 32 183 76 32 259 - 39 604 142 39 746
Short positions 2 795 - - 2 795 2 472 - - 2 472
Deposits due to customers 80 13 606 5 530 19 216 - 10 725 7 138 17 863
Debt securities in issue 2 5 236 42 5 280 - 3 549 35 3 584
Total financial liabilities 2 877 82 493 5 892 91 262 2 472 76 628 7 715 86 815
Non-financial assets
Investment properties - - 252 252 - - 240 240
Trading and hedging portfolio assets
Commodities 1 700 - - 1 700 1 080 - - 1 080
Non-recurring fair value measurements
Non-current assets held for sale(2) - - 250 250 101 1 296 460 1 857
Non-current liabilities held for sale(2) - - - - - 175 - 175
Notes
(1) Restated, refer to note 14 for reporting changes.
(2) Includes certain items classified in terms of the requirements of IFRS which are measured in terms of their respective standards.
13.5 Measurement of assets and liabilities categorised at Level 2
The following table presents information about the valuation techniques and significant observable inputs 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 models Underlying price of market traded
with central banks instruments and/or interest rates
Loans and advances to banks Discounted cash flow models Interest rate and/or money market curves
Trading and hedging portfolio assets
and liabilities
Debt instruments Discounted cash flow models Underlying price of market traded
instruments and/or interest rates
Derivative assets
Commodity derivatives Discounted cash flow and/or option pricing, Spot price of physical or futures,
futures pricing and/or Exchange Traded Fund interest rates and/or volatility
(“etf”) models
Credit derivatives Discounted cash flow and/or credit Interest rate, recovery rate, credit spread
default swap models and/or quanto ratio
Equity derivatives Discounted cash flow, option pricing Spot price, interest rate, volatility
and/or futures pricing models and/or dividend stream
Foreign exchange derivatives Discounted cash flow and/or option Spot price, interest rate and/or volatility
pricing models
Interest rate derivatives Discounted cash flow and/or option Interest rate curves, repurchase agreement
pricing models curves, money market curves and/or volatility
Equity instruments Net asset value Underlying price of market traded instruments
Money market assets Discounted cash flow models Money market rates and/or interest rates
Loans and advances to customers Discounted cash flow models Interest rate curves and/or money market curves
Investment securities Listed equity: market bid price. Other items: Underlying price of the market traded
discounted cash flow models instruments interest rate curves
Deposits from banks Discounted cash flow models Interest rate curves and/or money market curves
Deposits due to customers Discounted cash flow models Interest rate curves and/or money market curves
Debt securities in issue and other liabilities Discounted cash flow models Underlying price of the market traded instrument
and/or interest rate curves
13.6 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:
2014
(Audited)
Trading and
hedging Loans and
portfolio Other advances to Investment Investment Total assets
assets assets customers securities properties at fair value
Rm Rm Rm Rm Rm Rm
Opening balance at the beginning of the reporting period 1 037 16 6 477 2 313 240 10 083
Movement in other comprehensive income - - - 5 - 5
Net interest income - 1 373 69 - 443
Gains and losses from banking and trading activities 173 - (29) (7) 137
Gains and losses from investment activities - - 2 (83) 12 (69)
Purchases - - 143 9 - 152
Sales (37) - (620) (9) - (666)
Settlements - - (1 615) - - (1 615)
Transferred to/(from) assets - - - - - -
Movement in/(out) of Level 3 (22) - - 19 - (3)
Closing balance at the end of the reporting period 1 151 17 4 731 2 316 252 8 467
2013(1)
(Audited)
Trading and
hedging Loans and
portfolio Other advances to Investment Investment Total assets
assets assets customers securities properties at fair value
Rm Rm Rm Rm Rm Rm
Opening balance at the beginning of the reporting period 952 16 6 414 3 988 331 11 701
Movement in other comprehensive income - - - 20 - 20
Net interest income 55 - 345 (11) - 389
Other income - - - - 39 39
Gains and losses from banking and trading activities (165) - 204 (203) - (164)
Gains and losses from investment activities - - (99) (218) 60 (257)
Purchases 13 - 762 20 - 795
Sales - - (44) (704) - (748)
Issues - - - 5 - 5
Settlements - - (978) (579) - (1 557)
Transferred to/(from) assets (55) - (127) (5) (190) (377)
Movement in/(out) of Level 3 237 - - - - 237
Closing balance at the end of the reporting period 1 037 16 6 477 2 313 240 10 083
Note
(1) Restated, refer to note 14 for reporting changes.
2014
(Audited)
Trading and
hedging Debt Total
portfolio Deposits due securities liabilities
liabilities to customers in issue at fair value
Rm Rm Rm Rm
Opening balance at the beginning of the reporting period 542 7 138 35 7 715
Movement in other comprehensive income (8) - - (8)
Net interest income - 1 1 2
Gains and losses from banking and trading activities (62) (1 501) 6 (1 557)
Sales (75) - - (75)
Settlements - (81) - (81)
Movement in/(out) of Level 3 (77) (27) - (104)
Closing balance at the end of the reporting period 320 5 530 42 5 892
2013(1)
(Audited)
Trading and
hedging Debt Total
portfolio Deposits due securities liabilities
liabilities to customers in issue at fair value
Rm Rm Rm Rm
Opening balance at the beginning of the reporting period 74 7 672 187 7 933
Net interest income - 9 - 9
Gains and losses from banking and trading activities 306 153 (152) 307
Gains and losses from investment activities - (1) - (1)
Purchases - 27 - 27
Sales (3) 427 - 424
Settlements - (1 149) - (1 149)
Movement in/(out) of Level 3 165 - - 165
Closing balance at the end of the reporting period 542 7 138 35 7 715
Note
(1) Restated, refer to note 14 for reporting changes.
13.6.1 Significant transfers between levels
During the current reporting period, it was determined that significant transfers between levels of the assets and
liabilities held at fair value occurred. Treasury bills of R18,5bn have been transferred from level 1 to level 2, as these
are held in an inactive market.
During the prior 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 the significant inputs to determine the fair value have
become unobservable.
Transfers have been reflected as if they had taken place at the beginning of the reporting period.
13.7 Unrealised gains and losses on Level 3 assets and liabilities
The total unrealised gains and losses for the reporting period on Level 3 positions held at the reporting date are set
out below:
2014
(Audited)
Trading and
hedging Loans and Non-current
portfolio advances to Investment Investment assets held Total assets
assets customers securities properties for sale at fair value
Rm Rm Rm Rm Rm Rm
Gains and losses from banking and
trading activities 79 (28) - - - 51
2013
(Audited)
Trading and
hedging Loans and Non-current
portfolio advances to Investment Investment assets held Total assets
assets customers securities properties for sale at fair value
Rm Rm Rm Rm Rm Rm
Gains and losses from banking and
trading activities 337 (136) - - - 201
2014
(Audited)
Trading and
hedging Debt Total
portfolio Other Deposits due securities liabilities at
liabilities liabilities to customers in issue fair value
Rm Rm Rm Rm Rm
Gains and losses from banking and
trading activities (116) - - - (116)
2013
(Audited)
Trading and
hedging Debt Total
portfolio Other Deposits due securities liabilities at
liabilities liabilities to customers in issue fair value
Rm Rm Rm Rm Rm
Gains and losses from banking and
trading activities (311) - 1 - (310)
13.8 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.
The following table reflects how the unobservable parameters were changed in order to evaluate the sensitivities of Level 3 assets and liabilities:
Significant unobservable parameter Positive/(negative) variance applied to parameters
Credit spreads 100/(100) bps
Volatilities 10/(10)%
Basis curves 100/(100) bps
Yield curves and repo curves 100/(100) bps
Future earnings and marketability discounts 15/(15) %
Funding spreads 100/(100) bps
A significant parameter has been deemed to be one which may result in a charge to the profit or loss 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:
2014
Potential effect Potential effect
recorded recorded
in profit or loss directly in equity
Favourable/ Favourable/
Significant (Unfavourable) (Unfavourable)
unobservable parameters Rm Rm
Deposits due to customers BAGL/Absa funding spread -/- -/-
Investment securities Yield curves, future earnings 131/131 -/-
and marketability discount,
comparator multiples
Loans and advances to customers Credit spreads 1 037/23 -/-
Other assets Volatility, credit spreads 3/3 -/-
Trading and hedging portfolio assets -/- -/-
Trading and hedging portfolio liabilities Volatility, credit spreads, 34/34 -/-
basis curves, yield curves,
repo curves,
funding spreads
1 205/191 -/-
2013
Potential effect Potential effect
in recorded recorded
in profit or loss directly in equity
Favourable/ Favourable/
Significant (Unfavourable) (Unfavourable)
unobservable parameters Rm Rm
Deposits due to customers BAGL/Absa funding spread 224/223 -/-
Investment securities Yield curves, future earnings 204/204 -/-
and marketability discount,
comparator multiples
Investment properties Selling price per unit, 1/1 -/-
selling price escalations,
rental income per unit, rental
escalations per year, expense
ratios, vacancy rate, income
capitalisation rate and risk
client rates
Loans and advances to customers Credit spreads 1 202/159 -/-
Other assets Volatility, credit spreads 2/2 -/-
Trading and hedging portfolio assets Volatility, credit spreads, 43/43 -/-
dividend stream, basis curves
yield curves, repo curves
Trading and hedging portfolio liabilities Volatility, credit spreads, 13/5 -/-
basis curves, yield curves,
repo curves
1 686/634 -/-
13.9 Measurement of assets and liabilities at Level 3
The following table presents information about the valuation techniques and significant unobservable inputs used in measuring assets and liabilities categorised
as Level 3 in the fair value hierarchy:
2014 2013
Category of asset/liability Valuation techniques applied Significant unobservable inputs Range of estimate utilised
for the unobservable inputs
Loans and advances Discounted cash flow, and/or Credit spreads 0,96% to 3,99% 1,35% to 7,5%
to customers dividend yield models
Investment Discounted cash flow models, Risk adjusted yield curves, Discount rates between Discount rates
securities third-party valuations, earnings future earnings, marketability 9,1% and 17,9%, between 9,7% and
multiples and/or income discounts and/or comparator comparable multiples 18%, comparator
capitalisation valuations multiples between 5 and 6 multiples between
5,5 and 6,1
Trading and hedging portfolio
assets and liabilities
Debt instruments Discounted cash flow models Credit spreads 0,9% to 3,5% 0,9% to 3,5%
Derivative assets
Credit derivatives Discounted cash flow, credit Credit spreads, recovery rates 0% to 13,45% 0% to 3,5%
default swap (hazard rate)
models
Equity derivatives Discounted cash flow, option Volatility and/or dividend 18,16% to 48,20% 16,9% to 37,2%
pricing and/or futures pricing streams (greater than 3 years)
models
Foreign exchange Discounted cash flow and/or African basis curves (greater -10,74% to 6,53% -2,5% to 1,7%
derivatives option pricing models than 1 year)
Interest rate Discounted cash flow and/or Real yield curves (less than -1,56% to 10,04% -1,5% to 8,3%
derivatives option pricing models 2 years), repo curves
funding spreads
Deposits due to Discounted cash flow models BAGL funding spreads 0,85% to 1,2% 0,85% to 1,2%
customers (greater than 5 years)
Debt securities in Discounted cash flow models ZAR-MM-Funding (greater 1,28% to 1,38% 0,1% to 0,2%
issue than 5 years)
Investment Discounted cash flow models Estimates of periods in which 2 to 7 years 2 to 7 years
properties rental units will be disposed of
Annual selling price escalations 0% to 6% 0% to 6%
Annual rental escalations 0% to 10% 0% to 10%
Expense ratios 22% to 75% 22% to 75%
Vacancy rates 2% to 15% 2% to 15%
Income capitalisation rates 10% to 12% 10% to 12%
Risk adjusted discount rates 14% to 16% 14% to 16%
For those assets or liabilities held at amortised cost and disclosed in levels 2 and 3 in the fair value hierarchy,
the discounted cash flow valuation technique is used. Interest rates and money market curves are considered unobservable
inputs for items which mature after five years. However, if the items mature in less than five years, these inputs are
considered observable.
For debt securities in issue held at amortised cost, a further significant input would be the underlying price of the
market traded instrument.
The sensitivity of the fair value measure is dependent on the unobservable inputs. Significant changes to the
unobservable inputs in isolation will have either a positive or negative impact on fair values.
13.10 Unrecognised (losses)/gains as a result of the use of valuation models using unobservable inputs
The amount that has yet to be recognised in the statement of comprehensive income that relates to the difference between the transaction price 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:
2014 2013
(Audited) (Audited)
Rm Rm
Opening balance at the beginning of the reporting period (55) (71)
New transactions (23) (17)
Amounts recognised in profit and loss during the reporting period 26 33
Closing balance at the end of the reporting period (52) (55)
13.11 Third-party credit enhancements
There were no significant liabilities measured at fair value and issued with inseparable third-party credit
enhancements.
14. Reporting changes overview
The financial reporting changes that have had an impact on the Bank’s results for the comparative reporting period
ended 31 December 2013 include:
- The implementation of amended 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.
- Certain changes in internal accounting policies.
14.1 Accounting policy changes due to amended IFRS
The amendments to IAS 32 provide further application guidance on when the criteria for offsetting would be considered
to be met and became effective for reporting periods beginning on or after 1 January 2014.
The offsetting requirements in IAS 32 have been retained such that a financial asset and liability shall be offset and
the net amount presented in the statement of financial position, only when an entity currently has a legally
enforceable right to set off the recognised amounts, and intends either to settle on a net basis, or to realise the asset and
settle the liability simultaneously. The amendments to IAS 32 provide more application guidance on when the criteria for
offsetting would be considered to be met.
The netting applied to certain financial instruments (i.e. variation margins on certain derivatives as well as certain
hybrid customer products) has been assessed in light of the amendments and it has been determined that netting is no
longer permitted under IFRS.
14.2 Internal accounting policy changes
The Bank elected to make an internal accounting policy change involving the classification of items in the statement
of financial position. Investment securities across the Bank have been appropriately grouped together as “Investment
securities”, following the acquisition of Barclays Africa Limited, with remaining investments linked to investment contracts
being disclosed separately.
This has resulted in the old “statutory liquid asset portfolio” line item in the statement of financial position no
longer being displayed.
This reclassification has no impact on the overall financial position or net earnings of the Bank. To ensure
comparability, the comparative reporting periods have been restated.
14.3 Impact of reporting changes on the Bank’s results
The impact of these changes in the statement of financial position, is as follows:
Summary consolidated statement of financial position as at 31 December 2013
IFRS Internal
As accounting accounting
previously policy policy
reported(1) changes changes Restated
Rm Rm Rm Rm
Assets
Loans and advances to customers 534 040 886 - 534 926
Loans and advances to banks 45 302 651 - 45 953
Trading portfolio assets 77 137 1 727 - 78 864
Statutory liquid asset portfolio 62 055 - (62 055) -
Investment securities 5 220 - 62 055 67 275
Liabilities
Deposits due to customers 488 371 886 - 489 257
Deposits from banks 64 100 1 727 - 65 827
Trading portfolio liabilities 50 059 651 - 50 710
Note
(1) As per financial results published on 11 February 2014.
Administration and contact details
Absa Bank Limited
Incorporated in the Republic of South Africa
Registration number: 1986/004794/06
Authorised financial services and registered credit provider (NCRCP7)
JSE share code: ABSP and ABMN
ISIN: ZAE000079810
Registered office
7th Floor, Barclays Towers West
15 Troye Street, Johannesburg, 2001
PO Box 7735, Johannesburg, 2000
Switchboard: +27 11 350 4000
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 director
W E Lucas-Bull (Chairman)
Executive directors
D W P Hodnett (Deputy Chief Executive Officer and Financial Director),
M Ramos (Chief Executive Officer)
Head of Investor Relations
Alan Hartdegen
Telephone: +27 11 350 2598
Company Secretary
Nadine Drutman
Telephone: +27 11 350 5347
Head of Finance
Jason Quinn
Telephone: +27 11 350 7565
Transfer secretary
Computershare Investor Services (Pty) Ltd
Telephone: +27 11 370 5000
computershare.com/za/
ADR depositary
BNY Mellon
Telephone: +1 212 815 2248
bnymellon.com
Auditors
Ernst & Young Inc.
Telephone: +27 011 772 3000
ey.com/ZA/en/Home
PricewaterhouseCoopers Inc.
Telephone: +27 011 797 4000
pwc.co.za
Sponsors
Lead independent sponsor
J. P. Morgan Equities South Africa (Pty) Ltd
Telephone: +27 11 507 0300
jpmorgan.com/pages/jpmorgan/emea/local/za
Joint sponsor
Absa Bank Limited (Corporate and Investment Bank)
Telephone: +27 11 895 6843
E-mail: equitysponsor@absacapital.com
Queries
Please direct investor relations and annual report queries to groupinvestorrelations@barclaysafrica.com
Please direct media queries to groupmedia@barclaysafrica.com
For all customer and client queries, please go to the relevant country website (see details below) for the local customer contact information
Please direct queries relating to your Barclays Africa Bank shares to questions@computershare.co.za
Please direct other queries regarding the Bank to groupsec@barclaysafrica.com
Date: 03/03/2015 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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