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Unaudited condensed consolidated interim financial results for the reporting period ended 30 June 2016
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
ISIN: ZAE000079810
(Absa, Absa Bank, the Bank or the Company)
Unaudited condensed consolidated interim financial results for the reporting period ended
30 June 2016
Overview of results
Absa Bank Limited (the Bank) is a wholly owned subsidiary of Barclays Africa Group Limited (the
Group), which is listed on the exchange operated by the JSE Limited. These unaudited condensed
consolidated interim financial results are published to provide information to the holders of
the Bank’s listed non-cumulative, non-redeemable preference shares.
Commentary relating to the Bank’s unaudited condensed consolidated interim financial results is
included in the Barclays Africa Group Limited unaudited condensed consolidated interim financial
results, as presented to shareholders on 29 July 2016.
Basis of presentation
The Bank’s unaudited condensed consolidated interim financial results have been prepared in
accordance with the recognition and measurement requirements of International Financial Reporting
Standards (IFRS), interpretations issued by the IFRS Interpretations Committee (IFRS-IC), the South
African Institute of Chartered Accountants’ 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 audited annual
consolidated financial statements.
The Bank’s unaudited condensed consolidated interim financial results 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, 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 and offsetting of financial assets and liabilities.
Accounting policies
The accounting policies applied in preparing the unaudited condensed consolidated interim financial
statements are the same as those in place for the reporting period ended 31 December 2015, except for
business portfolio changes between segments. Refer to note 14.
Events after the reporting period
The directors are not aware of any events occurring between the reporting date of 30 June 2016 and
the date of authorisation of these unaudited condensed consolidated interim financial results as
defined in IAS 10 - Events after the Reporting Period (IAS 10).
On behalf of the Board
W E Lucas-Bull M Ramos
Chairman Chief Executive Officer
Johannesburg
29 July 2016
Declaration of preference share dividend number 21
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 10,50%.
Notice is hereby given that preference dividend number 21, equal to 70% of the average prime rate for
1 March 2016 to 31 August 2016, per Absa Bank preference share has been declared for the period 1 March 2016
to 31 August 2016. The dividend is payable on Monday, 12 September 2016, to shareholders of the Absa Bank
preference shares recorded in the register of members of the Company at the close of business on Friday,
9 September 2016.
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 2016 to
31 August 2016 would indicatively be 3 696,57534 cents per Absa Bank preference share.
The dividend will be subject to dividend 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.
- The local dividend tax rate is fifteen per centum (15%).
- The gross local dividend amount is 3 696,57534 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
3 142,08904 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 Tuesday, 6 September 2016
Shares commence trading ex dividend Wednesday, 7 September 2016
Record date Friday, 9 September 2016
Payment date Monday, 12 September 2016
Share certificates may not be dematerialised or rematerialised between 7 September 2016 and
9 September 2016, both dates inclusive.
On 12 September 2016, 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 also be credited on 12 September 2016.
On behalf of the Board
N R Drutman
Company Secretary
Johannesburg
29 July 2016
Absa Bank Limited is a company domiciled in South Africa. Its registered office is 7th Floor, Barclays
Towers West, 15 Troye Street, Johannesburg, 2001.
Condensed consolidated salient features
for the reporting period ended
30 June 31 December
2016 2015 2015
Statement of comprehensive income (Rm)
Revenue 24 467 22 391 46 076
Operating expenses 13 115 12 717 26 390
Profit attributable to ordinary equity holders 4 452 4 677 9 726
Headline earnings(1) 4 641 4 655 9 657
Statement of financial position
Loans and advances to customers (Rm) 620 901 577 466 602 002
Total assets (Rm) 947 241 859 143 936 141
Deposits due to customers (Rm) 557 940 546 128 560 650
Loans to deposits and debt securities ratio (%) 88,4 86,9 87,4
Financial performance (%)
Return on average equity 16,1 17,1 17,6
Return on average assets 1,00 1,10 1,11
Return on average risk-weighted assets 1,90 2,05 2,03
Non-performing loans (NPLs) ratio on loans and
advances to customers and banks(2) 3,4 3,0 3,0
Operating performance (%)
Net interest margin on average interest-bearing assets 3,89 3,84 3,91
Credit loss ratio on gross loans and advances to customers and banks 1,17 0,83 0,79
Credit loss ratio on net loans and advances to customers 1,31 0,93 0,89
Non-interest income as % of revenue 41,1 40,5 40,3
Cost-to-income ratio 53,6 56,8 57,3
Jaws 6,14 (0,61) (0,33)
Effective tax rate, excluding indirect taxation 27,4 27,4 26,7
Share statistics (million) (including “A” ordinary shares)
Number of ordinary shares in issue 420,1 396,2 412,8
Weighted average number of ordinary shares in issue 413,2 396,2 401,5
Weighted average diluted number of ordinary shares in issue 413,2 396,2 401,5
Share statistics (cents)
Headline earnings per ordinary share 1 123,2 1 174,9 2 405,2
Diluted headline earnings per ordinary share 1 123,2 1 174,9 2 405,2
Basic earnings per ordinary share 1 077,4 1 180,5 2 422,4
Diluted basic earnings per ordinary share 1 077,4 1 180,5 2 422,4
Dividends per ordinary share relating to income for the
reporting period - 631,07 2 365,6
Dividend cover (times) - 1,9 1,0
Net asset value per ordinary share 14 181 13 820 13 537
Tangible net asset value per ordinary share 13 746 13 435 13 037
Capital adequacy (%)
Absa Bank Limited 14,0 13,0 13,6
Common Equity Tier 1 (%)
Absa Bank Limited 10,8 10,0 10,3
Notes
(1) After allowing for R168m (30 June 2015: R159m, 31 December 2015: R321m) profit attributable to preference
equity holders.
(2) The calculation of the NPLs ratio has been changed to also include loans and advances to banks. Based on
the previous methodology the NPLs ratio would be 3,7% (30 June 2015: 3,4%; 31 December 2015: 3,3%).
Condensed consolidated statement of financial position
as at
30 June 31 December
2016 2015 2015
Note Rm Rm Rm
Assets
Cash, cash balances and balances with central banks 25 902 23 318 26 101
Investment securities 75 011 62 474 73 065
Loans and advances to banks 62 411 71 267 58 585
Trading portfolio assets 85 853 72 549 116 455
Hedging portfolio assets 1 438 2 092 2 216
Other assets 26 858 25 080 18 840
Current tax assets 1 167 676 410
Non-current assets held for sale 1 369 236 109
Loans and advances to customers 620 901 577 466 602 002
Loans to Group companies 32 980 11 786 23 850
Investments in associates and joint ventures 1 005 901 962
Investment properties 240 263 518
Property and equipment 11 271 9 470 10 955
Goodwill and intangible assets 1 826 1 523 2 029
Deferred tax assets 9 42 44
Total assets 947 241 859 143 936 141
Liabilities
Deposits from banks 82 743 50 744 61 026
Trading portfolio liabilities 49 209 42 150 87 567
Hedging portfolio liabilities 2 357 2 432 4 531
Other liabilities 30 537 26 452 18 306
Provisions 1 166 1 078 1 970
Current tax liabilities 8 17 72
Non-current liabilities held for sale 1 9 - -
Deposits due to customers 557 940 546 128 560 650
Debt securities in issue 144 281 118 346 128 453
Loans from Group companies - 277 -
Borrowed funds 2 13 416 11 026 12 954
Deferred tax liabilities 1 336 1 093 115
Total liabilities 883 002 799 743 875 644
Equity
Capital and reserves
Attributable to equity holders:
Ordinary share capital 304 303 304
Ordinary share premium 22 964 16 465 21 455
Preference share capital 1 1 1
Preference share premium 4 643 4 643 4 643
Retained earnings 33 125 34 697 32 033
Other reserves 3 177 3 289 2 050
64 214 59 398 60 486
Non-controlling interest 25 2 11
Total equity 64 239 59 400 60 497
Total equity and liabilities 947 241 859 143 936 141
Condensed consolidated statement of comprehensive income
for the reporting period ended
30 June 31 December
2016 2015 2015
Note Rm Rm Rm
Net interest income 14 403 13 330 27 524
Interest and similar income 35 626 28 701 60 979
Interest expense and similar charges (21 223) (15 371) (33 455)
Non-interest income 10 064 9 061 18 552
Net fee and commission income 7 881 7 715 15 732
Fee and commission income 8 597 8 342 17 028
Fee and commission expense (716) (627) (1 296)
Gains and losses from banking and trading activities 1 694 1 081 2 097
Gains and losses from investment activities (6) 4 11
Other operating income 495 261 712
Total income 24 467 22 391 46 076
Impairment losses on loans and advances (3 967) (2 615) (5 113)
Operating income before operating expenditure 20 500 19 776 40 963
Operating expenditure (13 115) (12 717) (26 390)
Other expenses (1 063) (473) (999)
Other impairments 3 (583) 17 43
Indirect taxation (480) (490) (1 042)
Share of post-tax results of associates and joint
ventures 58 75 136
Operating profit before income tax 6 380 6 661 13 710
Taxation expense (1 746) (1 825) (3 663)
Profit for the reporting period 4 634 4 836 10 047
Profit attributable to:
Ordinary equity holders 4 452 4 677 9 726
Non-controlling interest 14 - -
Preference equity holders 168 159 321
4 634 4 836 10 047
Earnings per share
Basic earnings per ordinary share (cents) 1 077,4 1 180,5 2 422,4
Diluted basic earnings per ordinary share (cents) 1 077,4 1 180,5 2 422,4
30 June 31 December
2016 2015 2015
Rm Rm Rm
Profit for the reporting period 4 634 4 836 10 047
Other comprehensive income
Items that will not be reclassified to profit or loss: - 3 9
Movement in retirement benefit fund assets and liabilities - 3 9
Increase in retirement benefit surplus - 4 12
Deferred tax - (1) (3)
Items that are or may be subsequently reclassified to profit
or loss: 1 044 (638) (2 429)
Movement in foreign currency translation reserve (452) (2) 126
Differences on translation of foreign operations (132) 88 393
Gains released to profit or loss (320) (90) (267)
Movement in cash flow hedging reserve 1 568 (616) (2 222)
Fair value gains/(losses) arising during the reporting period 2 390 (207) (2 028)
Amount removed from other comprehensive income and recognised
in profit or loss (212) (648) (1 058)
Deferred tax (610) 239 864
Movement in available-for-sale reserve (72) (20) (333)
Fair value losses arising during the reporting period (101) (45) (678)
Release to profit or loss - 13 210
Deferred tax 29 12 135
Total comprehensive income for the reporting period 5 678 4 201 7 627
Total comprehensive income attributable to:
Ordinary equity holders 5 496 4 042 7 306
Non-controlling interest 14 - -
Preference equity holders 168 159 321
5 678 4 201 7 627
Condensed consolidated statement of changes in equity
for the reporting period ended
30 June 2016
Number of Preference
ordinary Share Share share
shares(1) capital premium capital
’000 Rm Rm Rm
Balance at the beginning of the reporting period 412 798 304 21 455 1
Total comprehensive income for the reporting period - - - -
Profit for the reporting period - - - -
Other comprehensive income - - - -
Dividends paid during the reporting period - - - -
Shares issued 7 266 0 1 500 -
Purchase of Barclays Africa Group Limited shares in
respect of equity-settled share-based payment
arrangements - - 9 -
Movement in share-based payment reserve - - - -
Transfer from share-based payments reserve - - - -
Value of employee services - - - -
Deferred tax - - - -
Share of post-tax results of associates and joint
ventures - - - -
Balance at the end of the reporting period 420 064 304 22 964 1
30 June 2016
Preference Total Available-
share Retained other for-sale
premium earnings reserves reserve
Rm Rm Rm Rm
Balance at the beginning of the reporting period 4 643 32 033 2 050 604
Total comprehensive income for the reporting period - 4 620 1 044 (72)
Profit for the reporting period - 4 620 - -
Other comprehensive income - - 1 044 (72)
Dividends paid during the reporting period - (3 668) - -
Shares issued - - - -
Purchase of Barclays Africa Group Limited shares in
respect of equity-settled share-based payment
arrangements - 198 - -
Movement in share-based payment reserve - - 25 -
Transfer from share-based payments reserve - - (202) -
Value of employee services - - 219 -
Deferred tax - - 8 -
Share of post-tax results of associates and joint
ventures - (58) 58 -
Balance at the end of the reporting period 4 643 33 125 3 177 532
30 June 2016
Foreign Share-
Cash flow currency based
hedging translation Capital payment
reserve reserve reserve reserve
Rm Rm Rm Rm
Balance at the beginning of the reporting period (1 871) 399 1 422 547
Total comprehensive income for the reporting period 1 568 (452) - -
Profit for the reporting period - - - -
Other comprehensive income 1 568 (452) - -
Dividends paid during the reporting period - - - -
Shares issued - - - -
Purchase of Barclays Africa Group Limited shares in
respect of equity-settled share-based payment
arrangements - - - -
Movement in share-based payment reserve - - - 25
Transfer from share-based payments reserve - - - (202)
Value of employee services - - - 219
Deferred tax - - - 8
Share of post-tax results of associates and joint
ventures - - - -
Balance at the end of the reporting period (303) (53) 1 422 572
30 June 2016
Non-
control-
Associates’ Total equity ling
and joint attributable interest -
ventures’ to ordinary ordinary Total
reserve equity holders shares equity
Rm Rm Rm Rm
Balance at the beginning of the reporting period 949 60 486 11 60 497
Total comprehensive income for the reporting period - 5 664 14 5 678
Profit for the reporting period - 4 620 14 4 634
Other comprehensive income - 1 044 - 1 044
Dividends paid during the reporting period - (3 668) - (3 668)
Shares issued - 1 500 - 1 500
Purchase of Barclays Africa Group Limited shares in
respect of equity-settled share-based payment
arrangements - 207 - 207
Movement in share-based payment reserve - 25 - 25
Transfer from share-based payments reserve - (202) - (202)
Value of employee services - 219 - 219
Deferred tax - 8 - 8
Share of post-tax results of associates and joint
ventures 58 - - -
Balance at the end of the reporting period 1 007 64 214 25 64 239
30 June 2015
Number of Preference
ordinary Share Share share
shares(1) capital premium capital
’000 Rm Rm Rm
Balance at the beginning of the reporting period 396 151 303 16 465 1
Total comprehensive income for the reporting period - - - -
Profit for the reporting period - - - -
Other comprehensive income - - - -
Dividends paid during the reporting period - - - -
Purchase of Barclays Africa Group Limited shares in
respect of equity-settled share-based payment
arrangements - - - -
Movement in share-based payment reserve: Value of
employee services - - - -
Share of post-tax results of associates and joint
ventures - - - -
Balance at the end of the reporting period 396 151 303 16 465 1
30 June 2015
Preference Total Available-
share Retained other for-sale
premium earnings reserves reserve
Rm Rm Rm Rm
Balance at the beginning of the reporting period 4 643 33 713 3 799 937
Total comprehensive income for the reporting period - 4 839 (638) (20)
Profit for the reporting period - 4 836 - -
Other comprehensive income - 3 (638) (20)
Dividends paid during the reporting period - (3 775) - -
Purchase of Barclays Africa Group Limited shares in
respect of equity-settled share-based payment
arrangements - (5) - -
Movement in share-based payment reserve: Value of
employee services - - 53 -
Share of post-tax results of associates and joint
ventures - (75) 75 -
Balance at the end of the reporting period 4 643 34 697 3 289 917
30 June 2015
Foreign Share-
Cash flow currency based
hedging translation Capital payment
reserve reserve reserve reserve
Rm Rm Rm Rm
Balance at the beginning of the reporting period 351 273 1 422 3
Total comprehensive income for the reporting period (616) (2) - -
Profit for the reporting period - - - -
Other comprehensive income (616) (2) - -
Dividends paid during the reporting period - - - -
Purchase of Barclays Africa Group Limited shares in
respect of equity-settled share-based payment
arrangements - - - -
Movement in share-based payment reserve: Value of - - - 53
employee services
Share of post-tax results of associates and joint
ventures - - - -
Balance at the end of the reporting period (265) 271 1 422 56
30 June 2015
Non-
control-
Associates’ Total equity ling
and joint attributable interest -
ventures’ to ordinary ordinary Total
reserve equity holders shares equity
Rm Rm Rm Rm
Balance at the beginning of the reporting period 813 58 924 2 58 926
Total comprehensive income for the reporting period - 4 201 - 4 201
Profit for the reporting period - 4 836 - 4 836
Other comprehensive income - (635) - (635)
Dividends paid during the reporting period - (3 775) - (3 775)
Purchase of Barclays Africa Group Limited shares in
respect of equity-settled share-based payment
arrangements - (5) - (5)
Movement in share-based payment reserve: Value of - 53 - 53
employee services
Share of post-tax results of associates and joint
ventures 75 - - -
Balance at the end of the reporting period 888 59 398 2 59 400
Notes
All movements are reflected net of taxation.
(1) Includes ordinary and “A” ordinary shares.
31 December 2015
Number of Preference
ordinary Share Share share
shares(1) capital premium capital
’000 Rm Rm Rm
Balance at the beginning of the reporting period 396 151 303 16 465 1
Total comprehensive income for the reporting period - - - -
Profit for the reporting period - - - -
Other comprehensive income - - - -
Dividends paid during the reporting period - - - -
Shares issued 16 647 1 5 000 -
Purchase of Barclays Africa Group Limited shares in
respect of equity-settled share-based payment
arrangements - - (10) -
Movement in share-based payment reserve - - - -
Value of employee services - - - -
Conversion from cash-settled to equity-settled schemes - - - -
Deferred tax - - - -
Share of post-tax results of associates and joint
ventures - - - -
Disposal of interest in subsidiary - - - -
Acquisition of subsidiary - - - -
Balance at the end of the reporting period 412 798 304 21 455 1
31 December 2015
Preference Total Available-
share Retained other for-sale
premium earnings reserves reserve
Rm Rm Rm Rm
Balance at the beginning of the reporting period 4 643 33 713 3 799 937
Total comprehensive income for the reporting period - 10 056 (2 429) (333)
Profit for the reporting period - 10 047 - -
Other comprehensive income - 9 (2 429) (333)
Dividends paid during the reporting period - (11 437) - -
Shares issued - - - -
Purchase of Barclays Africa Group Limited shares in
respect of equity-settled share-based payment
arrangements - (154) - -
Movement in share-based payment reserve - - 544 -
Value of employee services - - 209 -
Conversion from cash-settled to equity-settled schemes - - 372 -
Deferred tax - - (37) -
Share of post-tax results of associates and joint
ventures - (136) 136 -
Disposal of interest in subsidiary - (9) - -
Acquisition of subsidiary - - - -
Balance at the end of the reporting period 4 643 32 033 2 050 604
31 December 2015
Foreign Share-
Cash flow currency based
hedging translation Capital payment
reserve reserve reserve reserve
Rm Rm Rm Rm
Balance at the beginning of the reporting period 351 273 1 422 3
Total comprehensive income for the reporting period (2 222) 126 - -
Profit for the reporting period - - - -
Other comprehensive income (2 222) 126 - -
Dividends paid during the reporting period - - - -
Shares issued - - - -
Purchase of Barclays Africa Group Limited shares in
respect of equity-settled share-based payment
arrangements - - - -
Movement in share-based payment reserve - - - 544
Value of employee services - - - 209
Conversion from cash-settled to equity-settled schemes - - - 372
Deferred tax - - - (37)
Share of post-tax results of associates and joint
ventures - - - -
Disposal of interest in subsidiary - - - -
Acquisition of subsidiary - - - -
Balance at the end of the reporting period (1 871) 399 1 422 547
31 December 2015
Non-
control-
Associates’ Total equity ling
and joint attributable interest -
ventures’ to ordinary ordinary Total
reserve equity holders shares equity
Rm Rm Rm Rm
Balance at the beginning of the reporting period 813 58 924 2 58 926
Total comprehensive income for the reporting period - 7 627 - 7 627
Profit for the reporting period - 10 047 - 10 047
Other comprehensive income - (2 420) - (2 420)
Dividends paid during the reporting period - (11 437) - (11 437)
Shares issued - 5 001 - 5 001
Purchase of Barclays Africa Group Limited shares in
respect of equity-settled share-based payment
arrangements - (164) - (164)
Movement in share-based payment reserve - 544 - 544
Value of employee services - 209 - 209
Conversion from cash-settled to equity-settled schemes - 372 - 372
Deferred tax - (37) - (37)
Share of post-tax results of associates and joint
ventures 136 - - -
Disposal of interest in subsidiary - (9) - (9)
Acquisition of subsidiary - - 9 9
Balance at the end of the reporting period 949 60 486 11 60 497
Note
(1) Includes ordinary and “A” ordinary shares.
Condensed consolidated statement of cash flows
for the reporting period ended
30 June 31 December
2016 2015 2015
Note Rm Rm Rm
Net cash generated from operating activities 1 581 2 841 12 055
Net cash utilised in investing activities (1 439) (1 055) (3 594)
Net cash utilised in financing activities (1 730) (3 280) (4 101)
Net (decrease)/increase in cash and cash equivalents (1 588) (1 494) 4 360
Cash and cash equivalents at the beginning of the
reporting period 1 14 374 10 014 10 014
Cash and cash equivalents at the end of the reporting
period 2 12 786 8 520 14 374
Notes to the 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) 8 607 8 777 8 777
Loans and advances to banks(2) 5 767 1 237 1 237
14 374 10 014 10 014
2. Cash and cash equivalents at the end of the
reporting period
Cash, cash balances and balances with central banks(1) 7 683 6 811 8 607
Loans and advances to banks(2) 5 103 1 709 5 767
12 786 8 520 14 374
Notes
(1) Includes coins and bank notes.
(2) Includes call advances, which are used as working capital for the Bank.
Condensed notes to the consolidated financial results
for the reporting period ended
1. Non-current assets and non-current liabilities held for sale
The following changes to non-current assets and non-current liabilities held for sale were effected during
the current financial reporting period:
- Retail and Business Banking (RBB) transferred a subsidiary with a total carrying value of R357m to non-
current assets and non-current liabilities held for sale. The Commercial Property Finance (CPF) Equity
division disposed of an investment security previously classified as non-current assets held for sale
with a total carrying value of R15m.
- Head Office disposed of Property and Equipment with a carrying value of R92m.
2. Borrowed funds
During the reporting period the significant movements in borrowed funds were as follows: R231m
(30 June 2015: R2 500m; 31 December 2015: R4 500m) of subordinated notes were issued and Rnil
(30 June 2015: R2 000m; 31 December 2015: R2 000m) were redeemed.
3. Other impairments
30 June 31 December
2016 2015 2015
Rm Rm Rm
(Reversal)/impairment raised on financial instruments - (17) (43)
Other 583 - -
Intangible assets(1) 583 - -
583 (17) (43)
4. Headline earnings
30 June
2016 2015
Gross Net(2) Gross Net(2)
Rm Rm Rm Rm
Headline earnings is determined as follows:
Profit attributable to ordinary equity holders 4 452 4 677
Total headline earnings adjustment: 189 (22)
IAS 16 - Profit on disposal of property and equipment (44) (32) (7) (5)
IAS 21- Recycled foreign currency translation reserve (320) (297) (90) (90)
IAS 38 - Impairment of intangible assets 583 583 - -
IAS 39 - Release of available-for-sale reserves - - 101 73
IAS 40 - Change in fair value of investment properties (84) (65) - -
Headline earnings/diluted headline earnings 4 641 4 655
Headline earnings per share (cents)/diluted headline
earnings per share (cents) 1 123,2 1 174,9
31 December
2015
Gross Net(2)
Rm Rm
Headline earnings is determined as follows:
Profit attributable to ordinary equity holders 9 726
Total headline earnings adjustment: (69)
IAS 16 - Profit on disposal of property and equipment (17) (12)
IAS 21- Recycled foreign currency translation reserve (267) (267)
IAS 38 - Impairment of intangible assets - -
IAS 39 - Release of available-for-sale reserves 210 151
IAS 40 - Change in fair value of investment properties 73 59
Headline earnings/diluted headline earnings 9 657
Headline earnings per share (cents)/diluted headline
earnings per share (cents) 2 405,2
Notes
(1) The impairment of intangible assets was incurred in RBB and Head Office. The impairment in RBB
(R283m) was mainly due to the impact of the interest rate outlook on the fair value of customer
list. The impairment in Head Office (R300m) is due to a decision to fully impair costs spent on
our Virtual Bank work even though we continue to explore opportunities in this regard.
(2) The net amounts are reflected after taxation.
5. Dividends per share
30 June 31 December
2016 2015 2015
Rm Rm Rm
Dividends declared to ordinary equity holders
Interim dividend (29 July 2015: 631,07 cents) - 2 500 2 500
Special dividend (20 June 2016: 363,37 cents)
(30 September 2015: 745,15 cents) 1 500 - 5 000
(31 July 2015: 504,86 cents)
Final dividend (1 March 2016: 484,49896 cents) - - 2 000
1 500 2 500 9 500
Dividends declared to preference equity holders
Interim dividend (29 July 2016: 3 696,57534 cents)
(29 July 2015: 3 282,8082 cents) 183 162 162
Final dividend (1 March 2016: 3 395,47945 cents)
(3 March 2015: 3 210,8904 cents) - - 168
183 162 330
Dividends paid to ordinary equity holders
Final dividend (1 March 2016: 484,49896 cents)
(3 March 2015: 912,78268 cents) 2 000 3 616 3 616
Interim dividend (29 July 2015: 631,07 cents) - - 2 500
Special dividend (20 June 2016: 206,43 cents)
(30 September 2015: 745,15 cents) 1 500 - 5 000
(31 July 2015: 504,86 cents)
3 500 3 616 11 116
Dividends paid to preference equity holders
Final dividend (1 March 2016: 3 395,47945 cents)
(3 March 2015: 3 210,8904 cents) 168 159 159
Interim dividend (29 July 2015: 3 282,8082 cents) - - 162
168 159 321
6. Acquisitions and disposals of businesses and other similar transactions
6.1 Acquisitions and disposals of businesses during the current reporting period
There were no acquisitions or disposals of businesses during the current reporting period.
6.2 Acquisitions and disposals of businesses during the previous reporting period
The Bank purchased additional shares in a non-core joint venture which resulted in an increase in
the Bank’s effective shareholding from 50% to 67%. The profit share that the Bank is entitled to is 74%.
The acquisition occurred on 18 November 2015. A bargain purchase amount of R4m was recognised in the
statement of comprehensive income.
2015
Fair value
recognised on
acquisition
Rm
Consideration at November 2015:
Cash 14
Total consideration 14
Recognised amounts of identifiable assets acquired and liabilities assumed
Other assets 5
Investment properties 292
Other liabilities (1)
Deferred tax liabilities (4)
Loans from subsidiaries (176)
Loans from Absa Group companies (90)
Total identifiable net assets 26
Total non-controlling interest (8)
Goodwill/(bargain purchase) (4)
Total 14
A summary of the total net cash outflow and cash and cash equivalents related to acquisitions and
disposals of businesses and other similar transactions is included below:
30 June 31 December
2016 2015 2015
Rm Rm Rm
Summary of net cash outflow due to acquisitions - - 14
There were no disposals of businesses during the previous reporting period.
7. Related parties
The ultimate holding company, Barclays Bank Plc, sold 12,2% of its Barclays Africa Group Limited
shareholding for R13,1bn on 5 May 2016, leaving the Barclays Plc shareholding at 50,1%.
8. Financial guarantee contracts
30 June 31 December
2016 2015 2015
Rm Rm Rm
Financial guarantee contracts 58 96 24
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.
9. Commitments
30 June 31 December
2016 2015 2015
Rm Rm Rm
Authorised capital expenditure
Contracted but not provided for 1 294 1 333 591
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 859 813 758
Later than one year and no later than five years 2 117 1 865 1 742
Later than five years 1 300 1 324 956
4 276 4 002 3 456
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 147 213 147
Later than one year and no later than five years 177 536 177
324 749 324
The Bank has sponsorship commitments in respect of sports,
arts and culture.
10. Contingencies
30 June 31 December
2016 2015 2015
Rm Rm Rm
Guarantees 29 665 29 980 31 266
Irrevocable debt facilities 127 962 131 453 138 807
Letters of credit 4 996 7 121 6 319
Other contingencies 6 12 21
162 629 168 566 176 413
Guarantees include performance and payment guarantee contracts.
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 other legal, competition and regulatory matters. It is subject to legal
proceedings by and against the Bank which arise in the ordinary course of business from time to time,
including (but not limited to) disputes in relation to contracts, securities, debt collection, consumer
credit, fraud, trusts, client assets, competition, data protection, money laundering, employment,
environmental and other statutory and common law issues.
The Bank is also subject to enquiries and examinations, requests for information, audits, investigations
and legal and other proceedings by regulators, governmental and other public bodies in connection with
(but not limited to) consumer protection measures, compliance with legislation and regulation,
wholesale trading activity and other areas of banking and business activities in which the Bank is
or has been engaged.
At the present time, the Bank does not expect the ultimate resolution of any of these other matters
to have a material adverse effect on its financial position. However, in light of the uncertainties
involved in such matters and the matters specifically described in this note, there can be no assurance
that the outcome of a particular matter or matters will not be material to the Bank’s results of
operations or cash flow for a particular period, depending on, amongst other things, the amount
of the loss resulting from the matter(s) and the amount of income otherwise reported for the
reporting period.
The Bank has not disclosed the contingent liabilities associated with these matters either because
they cannot reasonably be estimated or because such disclosure could be prejudicial to the outcome
of the matter. 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 expert 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
30 June 31 December
2016 2015(1) 2015(1)
Rm Rm Rm
11.1 Headline earnings contribution by segment
RBB 4 312 4 081 8 611
Corporate and Investment Banking (CIB) 960 1 128 2 339
Wealth (56) (63) (93)
Head Office, Treasury and other operations (575) (491) (1 200)
4 641 4 655 9 657
30 June 31 December
2016 2015(1) 2015(1)
Rm Rm Rm
11.2 Total income by segment
RBB 19 745 18 477 38 142
CIB 4 876 4 125 8 651
Wealth 232 211 447
Head Office, Treasury and other operations (386) (422) (1 164)
24 467 22 391 46 076
Note
(1) Operational changes, management changes and associated changes to the way in which the chief
operational decision maker (CODM) views the performance of each business segment, have resulted
in the reallocation of earnings, assets and liabilities between operating segments. For details
on the business portfolio changes, refer to note 14.
30 June 31 December
2016 2015(1) 2015(1)
Rm Rm Rm
11.3 Total internal revenue by segment
RBB (4 614) (4 092) (7 889)
CIB (1 617) 1 213 54
Wealth 14 18 43
Head Office, Treasury and other operations 6 367 4 167 10 733
150 1 306 2 941
30 June 31 December
2016 2015(1) 2015(1)
Rm Rm Rm
11.4 Total assets by segment
RBB 701 282 679 336 704 774
CIB 503 526 410 476 489 328
Wealth 6 537 5 429 5 770
Head Office, Treasury and other operations (264 104) (236 098) (263 731)
947 241 859 143 936 141
30 June 31 December
2016 2015(1) 2015(1)
Rm Rm Rm
11.5 Total liabilities by segment
RBB 695 788 674 282 694 836
CIB 501 676 408 340 485 590
Wealth 6 582 5 491 5 851
Head Office, Treasury and other operations (321 044) (288 370) (310 633)
883 002 799 743 875 644
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. For details on the business portfolio changes, refer
to note 14.
12. Assets and liabilities not held at fair value
30 June
2016 2015
Carrying Carrying
value Fair value value Fair value
Rm Rm Rm Rm
Financial assets
Balances with the South African Reserve Bank 18 183 18 183 16 485 16 485
Coins and bank notes 7 683 7 683 6 812 6 812
Money market assets 36 36 21 21
Cash, cash balances and balances with central banks 25 902 25 902 23 318 23 318
Loans and advances to banks 36 217 36 217 45 783 45 783
Other assets 25 499 25 499 23 687 23 687
Retail Banking 362 339 361 860 359 076 358 540
Credit cards 28 494 28 494 29 376 29 376
Instalment credit agreements 73 126 72 351 72 921 72 296
Loans to associates and joint ventures 16 615 16 615 14 163 14 163
Mortgages 224 020 224 215 225 551 225 579
Other loans and advances 460 460 331 331
Overdrafts 3 370 3 370 2 442 2 442
Personal and term loans 16 254 16 355 14 292 14 353
Business Banking 66 480 66 480 63 219 63 246
Mortgages (including CPF) 32 149 32 149 30 200 30 227
Overdrafts1 19 322 19 322 18 703 18 703
Term loans1 15 009 15 009 14 316 14 316
RBB Rest of Africa 19 19 21 21
CIB 160 123 160 123 126 527 126 527
Wealth 5 895 5 895 5 117 5 117
Head Office, Treasury and other operations 1 097 1 097 2 939 2 939
Loans and advances to customers - net of
impairment losses 595 953 595 474 556 899 556 390
Loans from Group companies 32 980 32 988 11 786 11 786
Total assets 716 551 716 080 661 473 660 964
Financial liabilities
Deposits from banks 57 502 57 502 33 789 33 789
Other liabilities 28 314 28 314 23 965 23 962
Call deposits 57 305 57 305 61 215 61 215
Cheque account deposits 151 876 151 876 159 891 159 891
Credit card deposits 1 865 1 865 1 889 1 889
Fixed deposits 115 150 115 563 113 376 113 734
Foreign currency deposits 30 097 30 097 26 877 26 877
Notice deposits 58 516 58 528 48 706 48 713
Other deposits 2 109 2 109 2 002 2 002
Saving and transmission deposits 123 297 123 297 113 716 113 716
Deposits due to customers 540 215 540 640 527 672 528 037
Debt securities in issue 138 090 138 328 111 106 111 466
Loans to Group companies - - 277 277
Borrowed funds 13 416 13 689 11 026 11 392
Total liabilities 777 537 778 473 707 835 708 923
Note (1)
R542m of overdrafts were reallocated to term loans (30 June 2015: R674m; 31 December 2015: R554m) to
align to the way the products are utilised by the customers.
31 December 2015
Carrying
value Fair value
Rm Rm
Financial assets
Balances with the South African Reserve Bank 17 459 17 459
Coins and bank notes 8 607 8 607
Money market assets 34 34
Cash, cash balances and balances with central banks 26 100 26 100
Loans and advances to banks 34 257 34 257
Other assets 17 354 17 354
Retail Banking 362 303 361 273
Credit cards 29 515 29 515
Instalment credit agreements 72 860 71 798
Loans to associates and joint ventures 16 176 16 176
Mortgages 225 431 225 441
Other loans and advances 343 343
Overdrafts 2 819 2 819
Personal and term loans 15 159 15 181
Business Banking 63 412 63 440
Mortgages (including CPF) 30 730 30 742
Overdrafts1 17 605 17 621
Term loans1 15 077 15 077
RBB Rest of Africa 22 22
CIB 140 796 140 796
Wealth 5 350 5 350
Head Office, Treasury and other operations 696 696
Loans and advances to customers - net of impairment losses 572 579 571 577
Loans from Group companies 23 850 23 958
Total assets 674 140 673 246
Financial liabilities
Deposits from banks 44 394 44 394
Other liabilities 16 346 16 250
Call deposits 72 130 72 130
Cheque account deposits 150 842 150 842
Credit card deposits 2 002 2 002
Fixed deposits 118 278 118 390
Foreign currency deposits 26 168 26 168
Notice deposits 48 954 48 963
Other deposits 1 943 1 943
Saving and transmission deposits 122 522 122 522
Deposits due to customers 542 839 542 960
Debt securities in issue 121 730 119 153
Loans to Group companies - -
Borrowed funds 12 954 13 323
Total liabilities 738 263 736 080
Note (1)
R542m of overdrafts were reallocated to term loans (30 June 2015: R674m; 31 December 2015: R554m) to
align to the way the products are utilised by the customers.
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 Barclays Africa 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 the 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 the portfolio, complexity
of the model, whether the model is market standard and to what extent it incorporates all known
risk factors. All models and model valuation adjustments are subject to review on at least an
annual basis.
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.
30 June
2016
Recurring fair value Level 1 Level 2 Level 3 Total
measurements Rm Rm Rm Rm
Financial assets
Investment securities 52 606 18 541 3 864 75 011
Loans and advances to banks - 26 194 - 26 194
Trading and hedging portfolio assets 20 616 62 375 2 894 85 885
Debt instruments 19 557 6 100 2 169 27 826
Derivative assets - 51 001 725 51 726
Commodity derivatives - 205 - 205
Credit derivatives - 122 294 416
Equity derivatives - 1 311 - 1 311
Foreign exchange derivatives - 16 322 - 16 322
Interest rate derivatives - 33 041 431 33 472
Equity instruments 1 059 - - 1 059
Money market assets - 5 274 - 5 274
Other assets - - 17 17
Loans and advances to customers - 18 007 6 941 24 948
Total financial assets 73 222 125 117 13 716 212 055
Financial liabilities
Deposits from banks - 25 241 - 25 241
Trading and hedging portfolio liabilities 1 645 49 585 336 51 566
Derivative liabilities - 49 585 336 49 921
Commodity derivatives - 161 - 161
Credit derivatives - 334 150 484
Equity derivatives - 1 735 - 1 735
Foreign exchange derivatives - 13 390 - 13 390
Interest rate derivatives - 33 965 186 34 151
Short positions 1 645 - - 1 645
Deposits due to customers 119 16 685 921 17 725
Debt securities in issue 354 5 067 770 6 191
Total financial liabilities 2 118 96 578 2 027 100 723
Non-financial assets
Commodities 1 406 - - 1 406
Investment properties - - 240 240
Non-recurring fair value measurements
Non-current assets held for sale(1) - - 369 369
Non-current liabilities held
for sale(1) - - 9 9
30 June
2015
Recurring fair value Level 1 Level 2 Level 3 Total
measurements Rm Rm Rm Rm
Financial assets
Investment securities 42 875 17 871 1 728 62 474
Loans and advances to banks - 25 484 - 25 484
Trading and hedging portfolio assets 19 576 51 970 1 271 72 817
Debt instruments 18 209 8 396 872 27 477
Derivative assets 376 39 267 399 40 042
Commodity derivatives - 197 - 197
Credit derivatives - 224 111 335
Equity derivatives 11 1 480 45 1 536
Foreign exchange derivatives - 6 410 3 6 413
Interest rate derivatives 365 30 956 240 31 561
Equity instruments 930 - - 930
Money market assets 61 4 307 - 4 368
Other assets - - 17 17
Loans and advances to customers 3 19 839 725 20 567
Total financial assets 62 454 115 164 3 741 181 359
Financial liabilities
Deposits from banks - 16 948 7 16 955
Trading and hedging portfolio liabilities 2 327 41 835 420 44 582
Derivative liabilities - 41 835 420 42 255
Commodity derivatives - 216 - 216
Credit derivatives - 173 129 302
Equity derivatives - 2 419 183 2 602
Foreign exchange derivatives - 5 771 7 5 778
Interest rate derivatives - 33 256 101 33 357
Short positions 2 327 - - 2 327
Deposits due to customers 94 7 673 10 689 18 456
Debt securities in issue 2 5 172 2 066 7 240
Total financial liabilities 2 423 71 628 13 182 87 233
Non-financial assets
Commodities 1 824 - - 1 824
Investment properties - - 263 263
Non-recurring fair value measurements
Non-current assets held for sale(1) - - 236 236
Non-current liabilities held
for sale(1) - - - -
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
2015
Recurring fair value Level 1 Level 2 Level 3 Total
measurements Rm Rm Rm Rm
Financial assets
Cash, cash balances and balances with
central banks - 1 - 1
Investment securities 46 507 25 273 1 285 73 065
Loans and advances to banks - 22 219 2 109 24 328
Trading and hedging portfolio assets 20 083 95 168 1 415 116 666
Debt instruments 18 674 7 957 897 27 528
Derivative assets - 79 235 518 79 753
Commodity derivatives - 223 - 223
Credit derivatives - 885 23 908
Equity derivatives - 2 118 43 2 161
Foreign exchange derivatives - 26 996 - 26 996
Interest rate derivatives - 49 013 452 49 465
Equity instruments 1 409 - - 1 409
Money market assets - 7 976 - 7 976
Other assets - - 17 17
Loans and advances to customers 3 21 909 7 511 29 423
Total financial assets 66 593 164 570 12 337 243 500
Financial liabilities
Deposits from banks - 16 625 7 16 632
Trading and hedging portfolio
liabilities 1 242 90 640 216 92 098
Derivative liabilities - 90 640 216 90 856
Commodity derivatives - 440 - 440
Credit derivatives - 879 14 893
Equity derivatives - 3 768 57 3 825
Foreign exchange derivatives - 28 193 - 28 193
Interest rate derivatives - 57 360 145 57 505
Short positions 1 242 - - 1 242
Deposits due to customers 110 15 144 2 557 17 811
Debt securities in issue 678 5 421 624 6 723
Total financial liabilities 2 030 127 830 3 404 133 264
Non-financial assets
Commodities 2 005 - - 2 005
Investment properties - - 518 518
Non-recurring fair value measurements
Non-current assets held for sale(1) - - 109 109
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 Discounted cash flow models Underlying price of market traded
balances 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 Spot price of physical or futures,
and/or option pricing, interest rates and/or volatility
futures pricing and/or
exchange traded fund
(ETF) models
Credit derivatives Discounted cash flow and/or Interest rate, recovery rate,
credit default swap models credit spread and/or quanto ratio
Equity derivatives Discounted cash flow, option Spot price, interest rate,
pricing and/or futures volatility and/or dividend stream
pricing models
Foreign exchange derivatives Discounted cash flow and/or Spot price, interest rate and/or
option pricing models volatility
Interest rate derivatives Discounted cash flow and/or Interest rate curves, repurchase
option pricing models agreement curves, money market curves
and/or volatility
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 Underlying price of the market traded
price. Other items: discounted instruments interest rate curves
cash flow models
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 Discounted cash flow models Underlying price of the market
other liabilities 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
is set out below:
30 June
2016
Trading and
hedging Loans and Loans and
portfolio Other advances to advances to
assets assets customers banks
Rm Rm Rm Rm
Opening balance at the beginning of
the reporting period 1 415 17 7 511 2 109
Net interest income - - 167 -
Gains and losses from banking and
trading activities 192 - - -
Gains and losses from investment activities - - (10) -
Purchases 1 334 - 1 962 -
Sales (47) - (2 689) (2 109)
Transferred to assets(1) - - - -
Closing balance at the end of the
reporting period 2 894 17 6 941 -
30 June
2016
Total
Investment Investment assets
securities properties at fair value
Rm Rm Rm
Opening balance at the beginning of
the reporting period 1 285 518 12 855
Net interest income 30 - 197
Gains and losses from banking and trading
activities - - 192
Gains and losses from investment activities 9 78 77
Purchases 2 714 - 6 010
Sales (174) - (5 019)
Transferred to assets(1) - (356) (356)
Closing balance at the end of the reporting period 3 864 240 13 956
30 June
2015
Trading and
hedging Loans and Loans and
portfolio Other advances to advances to
assets assets customers banks
Rm Rm Rm Rm
Opening balance at the beginning of
the reporting period 1 151 17 4 731 -
Net interest income - - - -
Gains and losses from banking and trading
activities - - (16) -
Gains and losses from investment activities - - - -
Purchases 132 - - -
Sales (4) - (3 990) -
Movement in/(out) of level 3 (8) - - -
Closing balance at the end of the
reporting period 1 271 17 725 -
30 June
2015
Total
Investment Investment assets
securities properties at fair value
Rm Rm Rm
Opening balance at the beginning of
the reporting period 2 316 252 8 467
Net interest income 38 - 38
Gains and losses from banking and trading
activities - - (16)
Gains and losses from investment activities (7) 11 4
Purchases - - 132
Sales (619) - (4 613)
Movement in/(out) of level 3 - - (8)
Closing balance at the end of the
reporting period 1 728 263 4 004
Note
(1) Transfer to non-current assets held for sale.
A reconciliation of the opening balances to closing balances for all movements on Level 3 assets
is set out below:
31 December
2015
Trading and
hedging Loans and Loans and
portfolio Other advances to advances to
assets assets customers banks
Rm Rm Rm Rm
Opening balance at the beginning of the
reporting period 1 151 17 4 731 -
Net interest income - - 488 -
Gains and losses from banking and trading
activities 331 - - -
Gains and losses from investment activities - - - (18)
Purchases 16 - 5 108 2 127
Sales (83) - (2 816) -
Movement in other comprehensive income - - - -
Closing balance at the end of the
reporting period 1 415 17 7 511 2 109
31 December
2015
Total
Investment Investment assets
securities properties at fair value
Rm Rm Rm
Opening balance at the beginning of the
reporting period 2 316 252 8 467
Net interest income 78 - 566
Gains and losses from banking and trading
activities - - 331
Gains and losses from investment activities 14 4 -
Purchases 14 294 7 559
Sales (1 172) (32) (4 103)
Movement in other comprehensive income 35 - 35
Closing balance at the end of the
reporting period 1 285 518 12 855
A reconciliation of the opening balances to closing balances for all movements on Level 3
liabilities is set out below:
30 June
2016
Trading and
hedging
Deposits portfolio Deposits due
from Bank liabilities to customers
Rm Rm Rm
Opening balance at the beginning of the
reporting period 7 216 2 557
Net interest income - - 70
Gains and losses from banking and trading
activities - 131 -
Issues - - 1 958
Settlements (7) (11) (689)
Movement out of Level 3 - - (2 975)
Closing balance at the end of the
reporting period - 336 921
Debt Total
securities liabilities
in issue at fair value
Rm Rm
Opening balance at the beginning of the
reporting period 624 3 404
Net interest income 28 98
Gains and losses from banking and trading
activities - 131
Issues 142 2 100
Settlements (24) (731)
Movement out of Level 3 - (2 975)
Closing balance at the end of the
reporting period 770 2 027
30 June
2015
Trading and
hedging
Deposits portfolio Deposits due
from Bank liabilities to customers
Rm Rm Rm
Opening balance at the beginning of the
reporting period - 320 5 530
Net interest income - - -
Gains and losses from banking and trading
activities - 147 282
Issues 7 - -
Settlements - (5) 4 877
Movement out of Level 3 - (42) -
Closing balance at the end of the
reporting period 7 420 10 689
Debt Total
securities liabilities
in issue at fair value
Rm Rm
Opening balance at the beginning of the
reporting period 42 5 892
Net interest income - -
Gains and losses from banking and trading
activities (168) 261
Issues - 7
Settlements 2 192 7 064
Movement out of Level 3 - (42)
Closing balance at the end of the
reporting period 2 066 13 182
31 December
2015
Trading and
hedging
Deposits portfolio Deposits due
from Bank liabilities to customers
Rm Rm Rm
Opening balance at the beginning of the
reporting period - 320 5 530
Net interest income - - -
Gains and losses from banking and trading
activities - (21) -
Gains and losses from investment activities - - 132
Issues 7 - 3 112
Settlements - (83) (3 265)
Movement out of Level 3 - - (2 952)
Closing balance at the end of the
reporting period 7 216 2 557
Debt Total
securities liabilities
in issue at fair value
Rm Rm
Opening balance at the beginning of the
reporting period 42 5 892
Net interest income - -
Gains and losses from banking and trading
activities - (21)
Gains and losses from investment activities 172 304
Issues 410 3 529
Settlements - (3 348)
Movement out of Level 3 - (2 952)
Closing balance at the end of the
reporting period 624 3 404
13.6.1 Significant transfers between levels
During the current reporting period, it was determined that significant transfers between
levels of the liabilities at fair value occurred.
Transfers out of Level 3 and into Level 2 arise where the maturities on debt securities
decreased to less than 5 years.
Transfers have been reflected as if they had taken place at the beginning of the year.
In the previous reporting period transfers out of level 3 and into level 2 arose where
unobservable inputs became observable and/or unobservable inputs were no longer considered
to be significant to the valuation of an instrument.
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:
30 June
2016
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 72 46 16 - - 134
30 June
2015
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 146 (28) - - - 118
31 December
2015
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 96 (28) 48 - - 116
30 June
2016
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 - - - - -
30 June
2015
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 - - - - -
31 December
2015
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 79 - - - 79
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:
30 June
2016
Potential Potential
effect effect
recorded recorded
in profit directly
and loss in equity
Favourable/ Favourable/
Significant (Unfavourable) (Unfavourable)
unobservable parameters Rm Rm
Deposits due to customers BAGL/Absa funding spread -/- -/-
Investment securities and Risks adjustment yield
investments linked to curves, future earnings
investment contracts and marketability
discount 12/12 37/36
Loans and advances to customers Credit spreads 103/101 -/-
Other assets Volatility, credit spreads -/- -/-
Trading and hedging portfolio Volatility, credit spreads,
assets basis curves, yield curves,
repo curves, funding spreads 90/90 -/-
Trading and hedging portfolio Volatility, credit spreads,
liabilities basis curves, yield curves,
repo curves,
funding spreads 11/11 -/-
Other liabilities Volatility, credit spreads -/- -/-
216/214 37/36
30 June
2015
Potential Potential
effect effect
recorded recorded
in profit directly
or loss in equity
Favourable/ Favourable/
Significant (Unfavourable) (Unfavourable)
unobservable parameters Rm Rm
Deposits due to customers BAGL/Absa funding spread -/- -/-
Investment securities Risks adjustment yield
curves, future earnings
and marketability discount,
comparator multiples 132/132 (5)/4
Loans and advances to customers Credit spreads 2/2 -/-
Other assets Volatility, credit spreads 3/3 -/-
Trading and hedging portfolio Volatility, credit spreads -/- -/-
assets
Trading and hedging portfolio Volatility, credit spreads,
liabilities basis curves, yield curves,
repo curves, funding spreads -/- -/-
137/137 (5)/4
31 December
2015
Potential Potential
effect effect
recorded recorded
in profit directly
or loss in equity
Favourable/ Favourable/
Significant (Unfavourable) (Unfavourable)
unobservable parameters Rm Rm
Deposits due to customers BAGL/Absa funding spread -/- -/-
Investment securities Risks adjustment yield
curves, future earnings
and marketability discount,
comparator multiples -/- -/-
Loans and advances to customers Credit spreads 235/246 -/-
Other assets Volatility, credit spreads -/- -/-
Trading and hedging portfolio Volatility, credit spreads 107/107 -/-
assets
Trading and hedging portfolio Volatility, credit spreads,
liabilities basis curves, yield curves,
repo curves,
funding spreads 15/15 -/-
357/368 -/-
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:
Category of asset/ Valuation techniques Significant unobservable
liability applied inputs
Loans and Discounted cash flow and/or Credit spreads
advances to dividend yield models
customers
Investment Discounted cash flow models, Risk adjusted yield
securities third-party valuations, curves, future earnings,
earnings multiples and/or marketability discounts
income capitalisation and/or comparator multiples
valuations
Trading and
hedging portfolio
assets and liabilities
Debt instruments Discounted cash flow models Credit spreads
Derivative assets
Credit derivatives Discounted cash flow and/or Credit spreads, recovery
credit default swap (hazard rates and/or quanto ratio
rate) models
Equity derivatives Discounted cash flow, option Volatility and/or dividend
pricing and/or futures pricing streams (greater than
models 3 years)
Foreign exchange Discounted cash flow and/or African basis curves
derivatives option pricing models (greater than 1 year)
Interest rate Discounted cash flow and/or Real yield curves
derivatives option pricing models (less than 2 years)
Forward curves
Deposits due to Discounted cash flow models Barclays Africa Group
customers Limited’s funding spreads
(greater than 5 years)
Debt securities in Discounted cash flow models Funding curves (greater
issue than 5 years)
Investment Discounted cash flow models Estimates of periods in which
properties rental units will be disposed of
Annual selling price
escalations
Annual rental escalations
Expense ratios
Vacancy ratio
Income capitalisation rates
Risk adjusted discount rates
30 June 31 December
2016 2015 2015
Range of estimates utilised
for the unobservable inputs
0,96% to 3,99% 0,96% to 3,99% 0,96% to 3,99%
Discount rates between Discount rates between Discount rates between
9,5% and 13,25%, 9,1% and 17,9%, 8% and 11,5%,
comparator multiples between comparator multiples comparator multiples
5 and 10,5 between 5 and 6 between 5 and 10,5
0,9% to 3,5% 0,9% to 3,5% 0,9% to 3,5%
0,0% to 23,67% 0,0% to 23,58% 0,0% to 23,64%
0,0% to 81,20% 15,15% to 46,80% 17,82% to 67,71%
(6%) to 24,99% (10,00%) to 13,95% (10,00%) to 10,50%
(0,67%) to 7,90% (2,59%) to 2,47% 0,58% to 4,24%
0,0% to 2,15% 0,85% to 1,2% 1,52% to 2,15%
(0,16%) to 3,5% 1,44% to 1,70% (0,20%) to 3,35%
1 to 10 years 2 to 7 years 1 to 7 years
0% to 7% 0% to 6% 0% to 6%
0% to 10% 0% to 10% 0% to 10%
26,35% to 44% 22% to 75% 26% to 51%
1% to 18% 2% to 15% 1% to 18%
8% to 11% 10% to 12% 8% to 12%
9,5% to 14% 14% to 16% 13% to 14%
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.
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:
30 June 31 December
2016 2015 2015
Rm Rm Rm
Opening balance at the beginning of the reporting period (105) (52) (52)
New transactions (20) (83) (91)
Amounts recognised in profit and loss during the
reporting period 17 28 38
Closing balance at the end of the reporting period (108) (107) (105)
13.11 Third-party credit enhancements
There were no significant liabilities measured at fair value and issued with inseparable
third-party credit enhancements during the current and previous reporting period.
14. Reporting changes overview
The following business portfolio changes have impacted the financial results for the
comparative periods ended 30 June 2015 and 31 December 2015.
- Statutory liquid assets allocations in loan portfolios that were moved from Wealth to
RBB in previous reporting periods were reassessed and resulted in the restatement of
statutory liquid assets between Wealth and RBB.
- The Bank refined its funds transfer pricing and allocation of endowment methodologies,
resulting in restatements between segments.
- The Bank reassessed its cost allocation methodology, resulting in the restatements of
operating expenses between and within segments.
- South African Reserve Bank cash and central exchange balances were moved from CIB to
Head Office, Treasury and other operations.
- Interest rates on internal cash balances were aligned to market-related rates,
resulting in the restatement of interest between CIB and Head Office, Treasury and
Other operations.
- Certain shared services operations that were previously conducted by RBB were
transferred to Head office, Treasury and Other operations, resulting in the restatement
of income and costs.
- Africa Corporate Development (previously reported within CIB Private Equity) was moved
from CIB to Head Office and cheque income and associated costs were moved from CIB to
RBB to better align the ownership of the products and the management thereof.
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
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
Head Investor Relations
Alan Hartdegen
Telephone: +27 11 350 2598
Head of Finance
Jason Quinn
Telephone: +27 11 350 7565
Queries
Please direct investor relations queries to
groupinvestorrelations@barclaysafrica.com
Please direct media queries to groupmedia@barclaysafrica.com
For all customer and client queries, please go to www.absa.co.za for
the local customer contact information
Please direct queries relating to your Absa Bank shares to
questions@computershare.co.za
Please direct other queries regarding the Bank to
absa@absa.co.za
Company Secretary
Nadine Drutman
Telephone: +27 11 350 5347
Transfer secretary
Computershare Investor Services (Pty) Ltd
Telephone: +27 11 370 5000
computershare.com/za/
Sponsors
Absa Bank Limited (Corporate and Investment Bank)
Telephone: +27 11 895 6843
equitysponsor@absacapital.com
Auditors
Ernst & Young Inc.
Telephone: +27 11 772 3000
ey.com/ZA/en/Home
PricewaterhouseCoopers Inc.
Telephone: +27 11 797 4000
pwc.co.za
Date: 29/07/2016 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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