Wrap Text
Interim results for the six months ended 30 June 2017
Barclays Africa Group Limited
Unaudited condensed consolidated interim financial results
For the reporting period ended 30 June 2017
Profit and dividend announcement
Salient features
- Barclays Africa Group disclosed standard IFRS financial results together with a normalised view, which
adjusts for the financial consequences of separating from Barclays PLC.
- Diluted HEPS increased 5% to 899,7 cents, while normalised diluted HEPS grew 7% to 917,7 cents.
- Declared a 3% higher interim DPS of 475 cents.
- South Africa Banking headline earnings grew 6% to R6,0bn, Rest of Africa Banking rose 19% to R1,5bn and
WIMI decreased 8% to R0,6bn.
- RoE stable at 16,1%, while normalised RoE increased to 16,8%.
- Normalised revenue decreased 1% to R36,0bn and operating expenses grew 3% to R20,0bn.
- Normalised pre-provision profit declined 6% to R16,0bn.
- Credit impairments fell 27% to R3,8bn, resulting in a 0,96% credit loss ratio from 1,29%.
- Barclays Africa Group Limited’s normalised Common Equity Tier 1 (CET1) ratio of 12,1% remains above regulatory
requirements and our board target range.
- NAV per ordinary share rose 17% to 12 644 cents, or 4% to 11 261 cents on a normalised basis.
Overview of results
With the process of separating from Barclays PLC under way, including receipt of the R12bn settlement contribution
from Barclays PLC in June 2017, Barclays Africa Group Limited (BAGL) has started both IFRS compliant financial results
and a normalised view. The latter adjusts for the consequences of the separation and better reflects the Group’s
underlying performance. It will present normalised results for all future periods where the financial impact of
separation is considered to be material. Normalisation will adjust for the following items: endowment income on
Barclays PLC’s R12bn separation contribution (1H17: R46m); hedging revenue linked to separation activities
(1H17: R238m); operating expenses (1H17: R460m) such as change spend, including depreciation, amortisation
and impairment (1H17: R325m on Barclays.Net), and Transitional Services Agreement costs; plus the tax impact
of the aforementioned (1H17: R111m). In total, these adjustments added R152m to normalised group headline
earnings during the period under review. Since normalisation occurs at a group level, it does not affect
divisional disclosures.
On a normalised basis, BAGL’s headline earnings grew 7% to R7 770m from R7 252m and diluted HEPS rose 7% to 917,7
cents from 856,7 cents. The Group’s normalised RoE increased to 16,8% from 16,1% and its return on assets increased to
1,40% from 1,29%. Net interest income and non-interest income both declined 1%. The Group’s net interest margin (on average
interest-bearing assets) reduced to 4,93% from 5,01%. Loans and advances to customers grew 2% to R729bn, while deposits
due to customers increased 3% to R696bn. With operating expenses increasing 3%, the normalised cost-to-income ratio
increased to 55,6% from 53,4%, and pre-provision profit decreased 6% to R16,0bn. Rand strength reduced the Group’s revenue
by 3% and headline earnings by 4%. In constant currency, pre-provision profit declined 3%. Credit impairments fell 27%
to R3,8bn, resulting in a 0,96% credit loss ratio from 1,29%. The ratio of NPLs to gross loans and advances improved to
3,7% from 3,8%, and portfolio provisions increased to 76 basis points (bps) of performing loans from 72 bps. The Group’s
NAV per share increased 4% to 11 261 cents on a normalised basis.
Excluding normalisation, BAGL’s headline earnings increased 5% to R7 618m from R7 252m and diluted HEPS rose 5% to
899,7 cents. The Group’s RoE was stable at 16,1% and its return on assets increased to 1,37% from 1,29%. Net interest
income declined 1% and non-interest income was flat, resulting in 1% lower total revenue. Operating expenses grew 5%,
increasing the cost to income ratio to 56,4% from 53,4%, and pre-provision profit decreased 7% to R15,8bn. The Group’s
NAV per share increased 17% to 12 644 cents, reflecting Barclay PLC’s R12bn separation contribution in equity.
South African Banking headline earnings increased 6% to R5 969m. Within this, RBB SA headline earnings fell 9% due to
negative operating Jaws. Retail Banking fell 10% to R3 092m, while Business Banking decreased 5% to R1 113m. CIB grew
76%, given 81% lower credit impairments. Corporate rose 35% to R558m and Investment Banking increased 105% to R1 206m.
Rest of Africa Banking headline earnings grew 19%, or 50% in constant currency. RBB Rest of Africa declined 18% to
R336m as a result of the strong Rand, while CIB Rest of Africa rose 30%, reflecting positive operating Jaws and lower
credit impairments. WIMI’s headline earnings decreased 8% to R574m, largely due to higher claims on two natural disasters.
South Africa’s headline earnings grew 2% to R6 149m, and Rest of Africa rose 19% to R1 469m, to account for 19% of
group earnings from 17%.
Operating environment
The global economy and markets were generally well supported in the first half. US monetary policy continued on its
gradually tightening trajectory, and the evolution of the UK’s new relationship with the EU remained at an early stage.
South Africa’s economy shrank 0,7% on an annualised basis in the first quarter, pulling the economy into recession.
Credit rating agencies downgraded South Africa’s sovereign ratings in response to this economic slowdown, concerns over
governance and financial performance in state-owned enterprises, and greater uncertainty in economic policy. Though
there is evidence of agriculture recovering in many parts of the country from the drought conditions that persisted in late
2015 and much of 2016, other sectors of the economy are taking strain. Household incomes are under pressure, with a poor
job market and weak consumer confidence contributing to weak underlying demand. Business sector surveys continue to
point to very weak confidence and a concern over the lack of clarity on economic policy. The prime rate was flat in the
first half, as the Reserve Bank balanced a better inflation outlook with concern of the potential that the downgrade of the
country’s credit ratings could trigger higher inflation. Economic performance in the Group’s presence markets in the
rest of Africa was mixed, with generally improving outcomes in countries like Ghana, Mozambique and Uganda and somewhat
weaker trends in countries like Kenya, Zambia and Botswana.
Group performance
Statement of financial position
Total assets decreased marginally to R1 138bn at 30 June 2017, due to 24% lower loans and advances to banks. On a
normalised basis, excluding the R12bn contribution from Barclays PLC, total assets declined 1% to R1 126bn.
Loans and advances to customers
Net loans and advances to customers increased 2% to R729bn, or 3% on a constant currency basis. South African Banking
loans rose 3% to R644bn. Retail Banking South Africa’s loans grew 1% to R377bn, reflecting 6% growth in Vehicle and
Asset Finance (VAF) and 3% higher Personal Loans, while Home Loans and Card declined 1% and 3% respectively. Business
Banking South Africa’s loans rose 7% to R62bn. CIB South Africa’s loans grew 6% to R205bn. Rest of Africa Banking loans
decreased 4% to R79bn, despite increasing 8% in constant currency.
Funding
The Group’s liquidity position remains strong. Deposits due to customers grew 3% to R696bn. The Group’s loans to
deposit and debt securities was flat at 87,1%. Deposits due to customers constituted 78,6% of total funding from 75,2%,
due to a reduction in deposits from banks. Retail Banking South Africa maintained its leading market share and increased
deposits 7% to R181bn. Business Banking South Africa’s deposits grew 2% to R109bn. CIB’s deposits grew 4% to R183bn,
including 8% higher cheque account deposits. Rest of Africa Banking deposits decreased 3% to R120bn, despite increasing
9% in constant currency including CIB growing 14%.
Net asset value
The Group’s NAV rose 17% to R107bn and its NAV per share grew 17% to 12 644 cents. On a normalised basis, both
increased 4%. During the half it generated profits of R7,4bn, from which it paid R4,8bn in ordinary dividends.
Its foreign currency translation reserve reduced from R2,4bn to R1,8bn.
Capital to risk-weighted assets
Group risk-weighted assets (RWAs) increased 4% to R725bn at 30 June 2017, due to increased credit risk RWAs. The Group
remains well capitalised, comfortably above minimum regulatory requirements. The Group’s CET1 and Tier 1 capital
adequacy ratios were 13,7% and 14,0% respectively (from 12,1% and 12,6%). On a normalised basis, its CET1 was 12,1%.
The Group generated 1,0% of CET1 capital internally during the period. Its total normalised capital adequacy ratio was
14,5%. Declaring a 3% higher DPS of 475 cents on a dividend cover of 1,9 times took into account the difficult and
volatile macro economy, the Group’s strong capital position, internal capital generation, strategy and growth plans.
Statement of comprehensive income
Net interest income
Net interest income decreased 1% to R20 837m (or R20 791m on a normalised basis) from R21 093m, while average
interest-bearing assets grew 1%. Normalised net interest income grew 3% in constant currency, excluding the impact of
the strong Rand.
The Group’s net interest margin (to average interest-bearing assets) narrowed to 4,93% from 5,01%. Loan pricing had a
5 bps negative impact, primarily due to the impact of lower National Credit Act (NCA) caps on unsecured retail
portfolios in South Africa and a suspended interest on NPL. Loan composition reduced the Group’s margin by 3 bps,
due to a higher proportion of CIB loans.
The Group’s deposit margin declined 1 bp, as higher wholesale liquidity premiums and the negative mix impact of
increased wholesale funding offset improved pricing in Business Banking and Corporate.
Higher South African interest rates resulted in a 7 bps greater endowment benefit on deposits and equity. Despite
releasing R97m to the income statement, the benefit from structural hedging declined 3 bps. Rest of Africa reduced
the Group margin by 4 bps, reflecting regulatory caps in Kenya and its lower weighting in the overall composition
due to the stronger Rand.
South Africa’s net interest margin narrowed to 4,47% from 4,50% and Rest of Africa’s decreased to 7,15% from 7,29%.
Non-interest income
Non-interest income was largely flat at R15 487m from R15 415m to account for 43% of total revenue. On a normalised
basis, excluding a R238m separation-related hedging gain, non-interest income declined 1% to R15 249m. On a constant
currency basis, normalised non-interest income increased 1%.
Net fee and commission income grew 3% to R10 618, which represented 68% of total non-interest revenue. Electronic
banking fees and commissions increased 3% to R2 512m and cheque accounts rose 11% to R2 391m. Credit cards fees and
commissions fell 1% to R1 256m and savings accounts decreased 4% to R1 067m. Card merchant income grew 5% to R889m.
Investment, markets execution and investment banking fees increased 195% to R357m. Retail Banking South Africa fees
and commissions increased 3% to R6 128m.
Net trading declined 2% to R2 646m, reflecting a reduction in South Africa trading revenue and the effect of the
strong Rand.
Within other operating income, there was a R320m foreign currency translation reserve gain from the group’s London
branch in the first half of 2016, which did not recur. This item was excluded from headline earnings.
South Africa Banking’s non-interest income grew 3% to R10 452m, 69% of the Group total. Retail Banking South Africa
increased 4% to R6 512m, as Transactional and Deposits grew 2% and Card 3%, including 10% growth in acquiring volumes.
Business Banking’s non-interest income grew 4% to R1 832m, composed of 9% growth excluding equities and 48% lower
equities non-interest income due to reduced revaluation gains in the portfolio. CIB South Africa was flat at
R2 108m, with Corporate up 16% and the Investment Bank down 6% due to lower Markets revenue.
Rest of Africa Banking’s non-interest income declined 7% to R2 469m due to the strong Rand, which outweighed 9% growth
in constant currency. CIB Rest of Africa increased 3% to R1 214m, or 21% in constant currency, given strong growth in
trading revenue. RBB Rest of Africa fell 14% to R1 257m, or by 1% in constant currency, due to lower fees on
transactional accounts.
WIMI’s non-interest revenue was flat at R2 509m, despite Life Insurance net premium income growing 5%, as Short-term
Insurance net premium income declined 9%.
Non-interest income in South Africa grew 2% to R12 828m, or 83% of the total, while Rest of Africa fell 5% to
R2 659m, despite growing 10% in constant currency.
Impairment losses on loans and advances
Group credit impairments decreased 27% to R3 773m from R5 197m, producing a 0,96% credit loss ratio from 1,29% of
customer loans and loans to banks. Credit impairments included collection costs of R142m.
Group NPLs decreased 4% to R30 252m, or 3,7% of gross loans and advances from 3,8% (and 3,9% at 31 December 2016).
Total NPL coverage was largely flat at 43,5% from 43,8%. Total balance sheet provisions decreased 2% to R19 067m.
Portfolio provisions increased 4% to R5 908m, constituting 0,76% of total performing loans from 0,72%.
This includes 11% higher macroeconomic impairments of R1 457m.
South Africa Banking credit impairments decreased 28% to R3 124m, resulting in a 0,91% credit loss ratio from
1,28%. RBB South Africa’s charge fell 9% to R2 911m.
Retail Banking credit impairments declined 6% to R2 716m, improving its credit loss ratio to 1,39% from 1,48%.
Home Loans’ charge reduced 8% to R466m, a 0,41% credit loss ratio from 0,44%. Mortgage NPL cover reduced to 20,9%
from 21,9%, reflecting an improved legal portfolio construct, while its performing loan portfolio provision was
flat at 0,55%. Vehicle and Asset Finance’s credit impairments decreased 6% to R477m, reducing its credit loss
ratio to 1,01% from 1,13%. Card credit impairments decreased 12% to R1 141m, due to a reduction in the store
card book and lower early arrears, resulting in a 5,38% credit loss ratio from 5,95%. Personal Loans credit
impairments rose 10%, reflecting stricter write off criteria, which increased its credit loss ratio to 6,23%
from 5,85%.
Business Banking South Africa credit impairments fell 41% to R195m, reflecting lower early arrears across all its
portfolios and improved collection capabilities. Its credit loss ratio decreased to 0,62% from 1,12%.
CIB South Africa credit impairments decreased 81% to R213m from R1 101m. The first half 2016 base included two large
single name exposures and increased portfolio provisions. Its credit loss ratio reduced to 0,18% from a high prior year
base of 0,97%. CIB’s watchlists continue to improve, with reduced early and late stage arrears.
Rest of Africa Banking credit impairments decreased 31%, or 21% in constant currency, to R638m from R928m. Its credit
loss ratio decreased to 1,38% from 1,68%. RBB Rest of Africa’s charge fell 19%, or 6% in constant currency, to R522m
reflecting an improved portfolio construct and increased focus on collections. CIB Rest of Africa’s credit impairments
decreased 59%, or 54% in constant currency, off a high base that included an adjustment to emergence periods and some
specific exposures.
Operating expenses
Group operating expenses grew 5% to R20 498m from R19 487m, resulting in a 56,4% cost-to-income ratio from 53,4%.
On a normalised basis, excluding R460m of separation-related costs, expenses increased 3% to R20 038m and the
cost-to-income ratio was 55,6%. Normalised operating expenses increased 6% in constant currency, adjusting for
the stronger Rand.
Staff costs grew 4% and accounted for 55% of total expenses. Salaries rose 3% or 5% in constant currency excluding
Barclays PLC separation costs. Bonuses increased 13%, while deferred cash and share-based payments grew 24% as new
schemes were introduced.
Non-staff costs grew 6%, with property-related costs flat at R1 654m and depreciation up 14% to R937m. Total IT spend
grew 7% to R3 836m and constituted 19% of Group expenses. Professional fees increased 23% to R1 015m, due entirely to
separation-related consultancy and IT development costs, since business as usual professional fees fell 5%. Marketing grew
29% to R785m, including an element of separation costs, plus retail product campaigns and the Group’s Shared Growth
initiative. Amortisation of intangible assets increased 11% due to investment in digital, data and automation capabilities.
South Africa Banking costs grew 6% to R14 435m. RBB South Africa increased 7%, reflecting continued investment in
frontline staff, marketing campaigns and retail product launches, and in digital and channels. CIB South Africa expenses
grew below inflation at 4%, as efficiency initiatives allowed continued investment in technology, which increased 15%.
Rest of Africa Banking expenses decreased 11% due to the strong Rand. Its costs increased 3% in constant currency,
with CIB growing 8% and RBB rising 2%. Rest of Africa Banking’s cost-to-income ratio improved from 58,9% to 55,8%,
which is similar to the 55,0% of South Africa Banking.
Other expenses decreased 12% to R1 120m, reflecting 40% lower ‘other impairments’ to R376m and 15% higher indirect
taxation of R744m. On a normalised basis, other expenses decreased 38%, excluding a R325m computer software impairment
on Barclays.Net, which the Group will no longer use following the separation from Barclays PLC.
Taxation
The Group’s taxation expense increased 3% to R3 080m, slightly less than the 4% growth in pre-tax profit, resulting in
a 28,0% effective tax rate from 28,3%. Adjusting for the R111m effect of separation, taxation rose 6% to R3 191m on a
normalised basis.
Segment performance
The Group’s segmental disclosure has changed to align with how the banking operations are now run along geographic
rather than divisional lines.
South Africa Banking
Headline earnings grew 6% to R5 969m, due to 28% lower credit impairments, as its pre-provision profit declined 5% to
R11 795m. Revenue grew 1% to R26 230m, with non-interest income increasing 3%. Costs grew 6% to R14 435m, which
increased the cost-to-income ratio to 55,0% from 52,3%. The credit loss ratio improved to 0,91% from 1,28%, as all the
divisions improved. South Africa Banking constituted 74% of total normalised headline earnings (excluding the Group
centre) and generated an RoRC of 20,8%.
Retail Banking South Africa
Headline earnings decreased 10% to R3 092m, as pre-provision profits declined 7%, partially offset by 6% lower credit
impairments. Transactional and Deposits earnings dropped 14% to R1 204m, given negative operating Jaws as costs grew
11%. Home Loans’ earnings fell 9% to R764m, largely due to 5% lower net interest income as loans declined 1% and its
margin narrowed because of increased interest suspended. Card earnings decreased 7%, reflecting 3% lower loans and
margin compression as a result of the reduced NCA caps.
Vehicle and Asset Finance earnings rose 5%, largely due to 6% loan growth and 6% lower credit impairments. Personal
Loans earnings fell 16%, given 10% higher credit impairments and margin pressure due to the NCA caps. Retail Banking
South Africa accounted for 38% of total earnings, excluding the Group centre.
Business Banking South Africa
Headline earnings declined 5% to R1 113m, due to negative operating Jaws. Higher funding costs reduced net interest
income and costs grew 9%, reflecting continued investment in frontline staff and systems. Credit impairments dropped 41%.
Business Banking South Africa generated 14% of overall earnings excluding the Group centre.
CIB South Africa
Headline earnings increased 76% to R1 764m, largely due to an 81% reduction in credit impairments off a high base.
Pre-provision profits grew 6% as 5% revenue growth exceeded 4% higher costs. Corporate earnings grew 35% to R558m due to
11% revenue growth and 54% lower credit impairments. Investment Bank earnings increased 105% to R1 206m, largely due to
83% lower credit impairments. CIB South Africa accounted for 22% of total earnings excluding the Group centre.
Rest of Africa Banking
Headline earnings grew 19%, or 50% in constant currency, to R1 512m, due to positive operating Jaws and 31% lower
credit impairments. Pre-provision profit increased 1%, or 20% in constant currency, to R3 391m. Revenue fell 6% to
R7 670m, masking 10% growth in constant currency. While costs fell 11% to R4 279m, it increased 3% in constant
currency, still well below inflation across the portfolio. Its cost-to- income ratio declined to 55,8% from 58,9%.
Credit impairments fell 31% to R638m, resulting in a 1,38% credit loss ratio from 1,68%. Rest of Africa Banking
accounted for 19% of total earnings excluding the Group centre and generated a 17,4% RoE from 13,5%.
RBB Rest of Africa
Headline earnings fell 18% to R336m, although it increased 5% in constant currency. Revenue declined 15%, or 1% in
constant currency reflecting margin pressure due to regulatory changes in Kenya and 12% lower loans (down 1% in constant
currency). Costs fell 12% (increased 2% in constant currency), resulting in a 70,9% cost-to-income ratio from 68,9%.
Credit impairments decreased 19% (6% in constant currency), improving its credit loss ratio to 2,49% from 2,72%.
RBB Rest of Africa contributed 4% of total earnings excluding the Group centre.
CIB Rest of Africa
Headline earnings grew 30% to R1 206m, or 60% in constant currency. Revenue grew 9% (or 28% in constant currency)
to exceed 6% lower costs (up 8% in constant currency) and produced 19% higher pre-provision profits. Its cost-to-income
ratio fell to 35,0% from 40,5%. Credit impairments dropped 59% (54% in constant currency), resulting in a 0,60% credit
loss ratio from 1,34%. CIB Rest of Africa contributed 15% of total earnings excluding the Group centre.
WIMI
Headline earnings decreased 8% to R574m, with continuing business lines declining 6%. South African earnings from
continuing lines decreased 4% to R616m, while the losses in Rest of Africa increased 48% to R43m. Gross operating income
from continuing lines grew 1% to R3 061m, while costs rose 5% to R1 668m. Life insurance earnings were flat at R384m,
impacted by a decrease in single premium investment fees, higher claims and new business strain. WIMI’s earnings were
also flat at R234m, although its assets under management grew 4% to R295bn. Short-term insurance earnings in South Africa
declined 15% to R82m, reflecting claims on two natural disasters. Excluding these events, its underwriting margin improved
to 7,4%. WIMI’s return on equity declined to 19,3% from 21,1% and it generated 7% of total earnings excluding the Group
centre.
Prospects
The economic cycle is currently more consistent across major economies than it has been for some time, providing some
confidence that the favourable global economic backdrop is likely to continue in the near term. For 2017 as a whole the
global economy is expected to grow by 3,8%, slightly faster than in recent years.
We have cut our GDP growth forecast for South Africa to just 0,3% in 2017, on a par with 2016’s outcome. Inflation,
already well within the Reserve Bank’s target, is likely to moderate further as the weak economic environment heightens
price competition among retailers and a bumper harvest in staple commodities helps bring food inflation down further.
Responding to this combination of a weaker economy and a more comfortable inflation performance, the prime rate was reduced
by 25 bps in July, the first rate cut in five years. We currently see potential for another 25 bps rate cut in September,
which our stuctural hedging programme will provide some protection against. Key risks facing South Africa in the second
half include heightened political and policy uncertainty in the run up to the ruling party’s December elective conference,
the potential for the country’s sovereign credit rating to be downgraded further, and for weak business and consumer
confidence to lead to a longer, more protracted recession. For the Group’s Rest of Africa economies the outlook looks
somewhat stronger and for the full year GDP is expected to expand by 5,3% in 2017, slightly ahead of 2016’s growth.
Against this backdrop, and barring any unforeseen regulatory and macroeconomic developments, we continue to expect
low to mid-single digit loan growth, with CIB growing faster than RBB and South Africa below the Rest of Africa in
constant currency. The Group’s net interest margin is expected to decline slightly this year. Slower revenue growth,
in part due to regulatory changes, is likely to produce negative Jaws near-term, despite continued cost management.
However, the Group’s credit loss ratio should improve in 2017, in part due to the large single name provision in
the base, while the reduction in retail early delinquencies in South Africa also bodes well. The Group’s CET1 ratio
is likely to remain above board targets and its normalised RoE should be broadly similar to 2016’s. While separating
from Barclays PLC will impact our near-term returns, we still believe that our stated longer-term targets currently
remain appropriate for our group. Lastly, we continue to expect that the Group’s dividend cover is likely to
increase slightly in the medium term.
Basis of presentation
The Group’s unaudited condensed 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 Group’s most recent audited annual consolidated financial statements.
The accounting policies applied in preparing the unaudited condensed consolidated interim financial results comply
with IAS 34 Interim Financial Reporting, except for internal reclassifications and business portfolio changes. Refer to
note 15.
The preparation of financial information requires the use of estimates and assumptions about future conditions. Use of
available information and application of judgement are inherent in the formation of estimates. The accounting policies
that are deemed critical to the Group’s results and financial position, in terms of the materiality of the items to
which the policies are applied, and which involve a high degree of judgement including the use of assumptions and
estimation, are impairment of loans and advances, 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 and long-term insurance contracts and
offsetting of financial assets and liabilities.
Accounting policies
The accounting policies applied in preparing the unaudited condensed consolidated interim financial results are the
same as those in place for the reporting period ended 31 December 2016 except for the adoption of the own credit exemption
of IFRS 9 Financial Instruments (IFRS 9), changes to the Group’s operating segments and business portfolio changes
between operating segments. Refer to note 15 for further information.
Standards issued not yet effective
IFRS 9 Financial Instruments
IFRS 9 replaces IAS 39 Financial Instruments: Recognition and Measurement with effect from 1 January 2018 and is
expected to have a significant impact on how the group accounts for its financial instruments. IFRS 9 includes requirements
for the classification and measurement of financial assets and liabilities, impairment of financial assets and hedge
accounting.
Based on analysis performed to date, the Group does not expect the effects of the new classification and measurement
requirements under IFRS 9 to have a significant impact, although the final measure of impact is dependent on the
Statement of Financial Position composition on the date of initial adoption. The requirements of IFRS 9 relating to the
presentation of gains and losses on financial liabilities designated at fair value were adopted during the current reporting
period. As a result, the effects of changes in those liabilities’ credit risk are presented in other comprehensive income
with the remaining effect presented in profit or loss. In accordance with the transitional requirements of IFRS 9,
comparatives have not been restated.
The impairment requirements will lead to significant changes in the accounting for financial instruments. The
introduction of the revised impairment model is expected to have a material financial impact, with impairment charges
expected to be more volatile in the future.
The Group has a jointly accountable risk and finance implementation and governance programme with representation from
all impacted departments. The parallel run of IFRS 9 and IAS 39 impairment models commenced in February 2017, which
includes model, process and output validation, testing, calibration and analysis.The key focus of the programme is on
finalising processes, governance and controls in preparation for initial application in 2018. It will not be practical to
disclose reliable financial impact estimates until the implementation programme and validation and testing are further
advanced.
The Group expects to exercise the accounting policy choice to continue IAS 39 hedge accounting and is therefore not
planning to change existing hedge accounting application. It will, however, implement the revised hedge accounting
disclosures required by the related amendments to Financial Instruments: Disclosures (IFRS 7).
The Group will not restate comparatives on initial application of IFRS 9 on 1 January 2018 but will provide detailed
transitional disclosures in accordance with the amended requirements of IFRS 7. Any change in the carrying value of
financial instruments and related taxation upon initial application of IFRS 9 will be recognised in equity.
Based on the current requirements of Basel III, the expected increase in the accounting impairment provision would
reduce Common Equity Tier 1 (CET1) capital but this impact would be partially mitigated by the ‘excess of expected losses
over impairment’ included in the CET1 calculation. The Basel Committee on Banking Supervision (BCBS) has provided
national discretion to country regulators to consider transitional rules which may mitigate or spread capital impacts
from 1 January 2018. IFRS 9 is considered in the Group capital planning.
IFRS 15 Revenue from contracts with customers
Implementation efforts performed to date indicate that the adoption of IFRS 15 is not expected to have a significant
impact on the financial results of the group.
Normalised financial results as a consequence of Barclays PLC separation
On 1 March 2016, Barclays PLC announced its intention to sell down its 62,3% interest in the Group. A comprehensive
separation programme was initiated to focus on the future state of Barclays PLC, the Group and possible interaction
between the companies to ensure that the Group can operate as an independent and sustainable group without the involvement
of Barclays PLC.
Barclays PLC disposed of 12,2% and 33,7% of the Group's shares on 5 May 2016 and 1 June 2017, respectively. Barclays PLC
has forward-sold 7% of the afore-mentioned 33,7% shares to the Public Investment Corporation (PIC), with transfer pending
receipt by PIC of regulatory approvals in Kenya, Mauritius and the Seychelles. Barclays PLC has agreed to contribute a
further 1,5% of the Group's shares to a Broad-Based Black Economic Empowerment (BBBEE) scheme which will be implemented
in due course, leaving Barclays PLC with a residual holding of 14,9%.
As part of its divestment Barclays PLC contributed £765 million to the Group in June 2017, primarily in recognition of
the investments required for the Group to separate from Barclays PLC. This contribution will be invested primarily in
rebranding, technology and separation-related projects and it is expected that it will neutralise the capital and cash
flow impact of separation investments on the Group over time.
The separation process will have an impact on the Group’s financial results for the next few years, most notably by
increasing the capital base in the near-term and generating endowment revenue thereon, with increased costs over time as
the separation investments are concluded. International Financial Reporting Standards (IFRS) requires that the Barclays
PLC contribution be recognised directly in equity, while the subsequent investment expenditure (including the
depreciation or amortisation of capitalised assets), will be recognised in profit or loss. The afore-mentioned will result
in a disconnect between underlying business performance and the IFRS financial results during the separation period.
Normalised financial results will therefore also be disclosed while the underlying business performance is materially
different from the IFRS financial results. The extent of normalisation will be limited to the Barclays PLC contributions.
Adjustments are included under Barclays separation financial results” on page 12. The normalised results have been
presented for illustrative purposes only, and the information presented is the responsibility of the Group’s directors.
Events after the reporting period
The directors are not aware of any events after the reporting date of 30 June 2017 and the date of authorisation of
these consolidated financial statements (as defined per IAS 10 Events after the Reporting Period ("IAS 10")).
On behalf of the Board
W E Lucas-Bull M Ramos
Group Chairman Chief Executive Officer
Johannesburg
27 July 2017
Declaration of interim ordinary dividend number 62
Shareholders are advised that an ordinary dividend of 475 cents per ordinary share was declared on 28 July 2017, for
the period ended 30 June 2017. The interim ordinary dividend is payable to shareholders recorded in the register of
members of the Company at the close of business on 8 September 2017. The directors of Barclays Africa Group Limited confirm
that the Group will satisfy the solvency and liquidity test immediately after completion of the dividend distribution.
The dividend will be subject to local dividend withholding tax at a rate of 20%. 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 twenty per cent (20%).
- The gross local dividend amount is 475 cents per ordinary share for shareholders exempt from the dividend tax.
- The net local dividend amount is 380 cents per ordinary share for shareholders liable to pay for the dividend tax.
- Barclays Africa Group Limited currently has 847 750 679 ordinary shares in issue (includes 680 929 treasury shares).
- Barclays Africa Group Limited’s income tax reference number is 9150116714.
In compliance with the requirements of Strate, the electronic settlement and custody system used by JSE Limited, the
following salient dates for the payment of the dividend are applicable:
Last day to trade cum dividend Tuesday, 5 September 2017
Shares commence trading ex dividend Wednesday, 6 September 2017
Record date Friday, 8 September 2017
Payment date Monday, 11 September 2017
Share certificates may not be dematerialised or rematerialised between Wednesday, 6 September 2017 and
Friday, 8 September 2017, both dates inclusive. On Monday, 11 September 2017, 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 Monday,
11 September 2017.
On behalf of the Board
N R Drutman
Group Company Secretary
Johannesburg
28 July 2017
Barclays Africa Group Limited is a company domiciled in South Africa. Its registered office is 7th Floor,
Barclays Towers West, 15 Troye Street, Johannesburg, 2001.
Condensed consolidated salient features
30 June 31 December
2017 2016 2016
Statement of comprehensive income (Rm)
Income 36 324 36 508 72 394
Operating expenses 20 498 19 487 39 956
Profit attributable to ordinary equity holders 7 391 7 019 14 708
Headline earnings (1) 7 618 7 252 14 980
Statement of financial position
Loans and advances to customers (Rm) 728 985 715 209 720 309
Total assets (Rm) 1137 876 1 142 469 1 101 023
Deposits due to customers (Rm) 696 362 676 968 674 865
Loans to deposits and debt securities ratio (%) 87,1 87,1 88,4
Financial performance (%)
Return on Equity (RoE) 16,1 16,1 16,6
Return on Average Assets (RoA) 1,37 1,29 1,34
Return on risk-weighted assets (RoRWA) 2,18 2,08 2,14
Non-performing loans (NPL) ratio on gross loans and advances 3,73 3,84 3,94
Operating performance (%)
Net interest margin on average interest bearing assets 4,93 4,97 4,92
Credit loss ratio on gross loans and advances to customers and banks 0,96 1,29 1,08
Credit loss ratio on net loans and advances to customers 1,05 1,48 1,23
Non-interest income as percentage of total income 42,6 42,2 42,0
Cost-to-income ratio 56,4 53,4 55,2
Jaws (5,69) 5,11 1,64
Effective tax rate 28,0 28,3 26,9
Share statistics (million)
Number of ordinary shares in issue 847,8 847,8 847,8
Number of ordinary shares in issue (excluding treasury shares) 847,1 846,9 846,7
Weighted average number of ordinary shares in issue 846,5 846,5 846,5
Diluted weighted average number of ordinary shares in issue 846,7 846,5 846,6
Share statistics (cents)
Headline earnings per ordinary share 899,9 856,7 1 769,6
Diluted headline earnings per ordinary share 899,7 856,7 1 769,4
Basic earnings per ordinary share 873,1 829,2 1 737,5
Diluted basic earnings per ordinary share 872,9 829,2 1 737,3
Dividend per ordinary share relating to income for the reporting period 475 460 1 030
Dividend cover (times) 1,9 1,9 1,7
NAV per ordinary share 12 644 10 788 10 980
Tangible NAV per ordinary share 12 206 10 359 10 501
Capital adequacy (%)
Barclays Africa Group Limited 16,1 14,6 14,8
Absa Bank Limited 17,4 14,0 15,1
Common Equity Tier 1 (%)
Barclays Africa Group Limited 13,7 12,1 12,1
Absa Bank Limited 14,1 10,8 11,6
Note
(1) After allowing for R180m (30 June 2016: R168m; 31 December 2016: R351m) profit attributable to preference
equity holders.
Condensed consolidated salient normalised features
30 June 31 December
2017 2016 2016
Statement of comprehensive income (Rm)
Income 36 040 36 508 72 394
Operating expenses 20 038 19 487 39 956
Profit attributable to ordinary equity holders 7 781 7 019 14 708
Headline earnings (1) 7 770 7 252 14 980
Statement of financial position
Total assets (Rm) 1126 057 1 142 469 1 101 023
Financial performance (%)
Return on Equity (RoE) 16,8 16,1 16,6
Return on Average Assets (RoA) 1,40 1,29 1,34
Return on risk-weighted assets (RoRWA) 2,22 2,08 2,14
Operating performance (%)
Net interest margin on average interest bearing assets 4,93 5,01 4,95
Non-interest income as percentage of total income 42,3 42,2 42,0
Cost-to-income ratio 55,6 53,4 55,2
Jaws (4,11) 5,11 1,64
Effective tax rate 27,7 28,3 26,9
Share statistics (million)
Number of ordinary shares in issue 847,8 847,8 847,8
Number of ordinary shares in issue (excluding treasury shares) 847,1 846,9 846,7
Weighted average number of ordinary shares in issue 846,5 846,5 846,5
Diluted weighted average number of ordinary shares in issue 846,7 846,5 846,6
Share statistics (cents)
Headline earnings per ordinary share 917,9 856,7 1 769,6
Diluted headline earnings per ordinary share 917,7 856,7 1 769,4
Basic earnings per ordinary share 919,2 829,2 1 737,5
Diluted basic earnings per ordinary share 919,0 829,2 1 737,3
Dividend cover (times) 1,9 1,9 1,7
NAV per ordinary share 11 261 10 788 10 980
Tangible NAV per ordinary share 10 823 10 359 10 501
Capital adequacy (%)
Barclays Africa Group Limited 14,5 14,6 14,8
Absa Bank Limited 15,2 14,0 15,1
Common Equity Tier 1 (%)
Barclays Africa Group Limited 12,1 12,1 12,1
Absa Bank Limited 11,9 10,8 11,6
(1) Note
Condensed consolidated normalised reconciliation
Unadjusted IFRS Adjustments Normalised
Group for Barclays Group
Performance separation performance
Reconciliation of normalised to IFRS results 30 June 2017
Statement of comprehensive income (Rm)
Net interest income 20 837 (46) 20 791
Non - interest income 15 487 (238) 15 249
Total income 36 324 (284) 36 040
Impairment losses on loans and advances (3 773) - (3 773)
Operating expenses (20 498) 460 (20 038)
Other operating expenses (1 041) 325 (716)
Operating profit before income tax 11 012 501 11 513
Tax expenses (3 080) (111) (3 191)
Profit for the reporting period 7 932 390 8 322
Profit attributable to:
Ordinary equity holders 7 391 390 7 781
Non-controlling interest - ordinary shares 361 - 361
Non-controlling interest - preference shares 180 - 180
7 932 390 8 322
Headline earnings 7 618 152 7 770
Operating performance (%)
Net interest margin on average interest-bearing assets 4,93 n/a 4,93
Credit loss ratio on gross loans and advances to customers and banks 0,96 n/a 0,96
Non-interest income as % of income 42,6 n/a 42,3
Income growth (1) n/a (1)
Operating expenses growth 3 n/a 3
Cost-to-income ratio 56,4 n/a 55,6
Statement of financial position (Rm)
Loans and advances to customers 728 985 - 728 985
Loans and advances to banks 63 451 - 63 451
Investment securities 115 834 - 115 834
Other assets 229 606 (11 819) 217 787
Total assets 1 137 876 (11 819) 1 126 057
Deposits due to customers 696 362 - 696 362
Debt securities in issue 140 192 - 140 192
Other liabilities 184 991 (104) 184 887
Total liabilities 1 021 545 (104) 1 021 441
Equity 116 331 (11 715) 104 616
Total equity and liabilities 1 137 876 (11 819) 1 126 057
Key performance ratios (%)
RoRWA 2,18 n/a 2,22
RoA 1,37 n/a 1,40
RoE 16,1 n/a 16,8
Dividend cover (times) 1,9 n/a 1,9
Capital adequacy 16,1 n/a 14,5
Common Equity Tier 1 13,7 n/a 12,1
Barclays separation financial results
'Net interest income’ includes the endowment benefit received on the Barclays PLC investment, while foreign exchange
hedging gains linked to the separation activities have been disclosed as 'non-interest income'. 'Operating expenses'
includes R460m professional fees, information technology costs, marketing and salary costs incurred during the
reporting period. 'Other operating expenses' reflects the impairment of an intangible asset utilised by CIB.
Condensed consolidated statement of financial position
30 June 31 December
2017 2016 2016
Note Rm Rm Rm
Assets
Cash, cash balances and balances with central banks 45 078 47 734 50 006
Investment securities 115 834 101 563 114 315
Loans and advances to banks 63 451 83 663 49 789
Trading portfolio assets 101 554 111 651 96 236
Hedging portfolio assets 2 278 1 455 1 745
Other assets 36 091 37 275 25 542
Current tax assets 536 1 714 894
Non-current assets held for sale 1 2 601 1 623 823
Loans and advances to customers 2 728 985 715 209 720 309
Reinsurance assets 814 814 985
Investments linked to investment contracts 19 131 19 910 18 816
Investments in associates and joint ventures 1 144 1 005 1 065
Investment property 268 894 478
Property and equipment 15 044 13 336 14 643
Goodwill and intangible assets 3 714 3 635 4 049
Deferred tax assets 1 353 988 1 328
Total assets 1 137 876 1 142 469 1 101 023
Liabilities
Deposits from banks 49 290 77 927 53 192
Trading portfolio liabilities 42 564 53 020 47 429
Hedging portfolio liabilities 1 478 2 357 2 064
Other liabilities 38 082 37 085 27 696
Provisions 1 974 2 126 3 005
Current tax liabilities - 94 244
Non-current liabilities held for sale 1 114 9 9
Deposits due to customers 696 362 676 968 674 865
Debt securities in issue 140 192 144 522 139 714
Liabilities under investment contracts 29 918 28 019 29 198
Policyholder liabilities under insurance contracts 4 495 4 506 4 469
Borrowed funds 3 15 963 13 548 15 673
Deferred tax liabilities 1 113 1 613 1 185
Total liabilities 1 021 545 1 041 794 998 743
Equity
Capital and reserves
Attributable to ordinary equity holders:
Share capital 1 694 1 694 1 693
Share premium 12 868 4 412 4 467
Retained earnings 87 799 78 078 81 604
Other reserves 4 750 7 180 5 293
107 111 91 364 93 057
Non-controlling interest - ordinary shares 4 576 4 667 4 579
Non-controlling interest - preference shares 4 644 4 644 4 644
Total equity 116 331 100 675 102 280
Total liabilities and equity 1 137 876 1 142 469 1 101 023
Condensed consolidated statement of comprehensive income
30 June 31 December
2017 2016 2016
Note Rm Rm Rm
Net interest income 20 837 21 093 42 003
Interest and similar income 42 938 42 559 85 114
Interest expense and similar charges (22 101) (21 466) (43 111)
Non-interest income 15 487 15 415 30 391
Net fee and commission income 10 618 10 305 20 723
Fee and commission income 12 084 11 859 23 972
Fee and commission expense (1 466) (1 554) (3 249)
Net insurance premium income 3 250 3 516 6 986
Net claims and benefits incurred on insurance contracts (1 694) (1 869) (3 691)
Changes in investment and insurance contract liabilities (558) (422) (493)
Gains and losses from banking and trading activities 3 104 2 989 5 691
Gains and losses from investment activities 448 277 51
Other operating income 319 619 1 124
Total income 36 324 36 508 72 394
Impairment losses on loans and advances (3 773) (5 197) (8 751)
Operating income before operating expenditure 32 551 31 311 63 643
Operating expenditure (20 498) (19 487) (39 956)
Other expenses (1 120) (1 272) (2 120)
Other impairments 4 (376) (624) (690)
Indirect taxation (744) (648) (1 430)
Share of post-tax results of associates and joint ventures 79 55 115
Operating profit before income tax 11 012 10 607 21 682
Taxation expense (3 080) (2 997) (5 835)
Profit for the reporting period 7 932 7 610 15 847
Profit attributable to:
Ordinary equity holders 7 391 7 019 14 708
Non-controlling interest - ordinary shares 361 423 788
Non-controlling interest - preference shares 180 168 351
7 932 7 610 15 847
Earnings per share:
Basic earnings per share (cents) 873,1 829,2 1 737,5
Diluted earnings per share (cents) 872,9 829,2 1 737,3
30 June 31 December
2017 2016 2016
Rm Rm Rm
Profit for the reporting period 7 932 7 610 15 847
Other comprehensive income
Items that will not be reclassified to profit or loss (31) (41) (220)
Changes in own credit risk on liabilities measured at FVTPL (26) - -
Fair value losses arising from changes in own
credit risk during the reporting period (26) - -
Movement in retirement benefit fund assets and liabilities (5) (41) (220)
Decrease in retirement benefit surplus (6) (11) (120)
Increase/(decrease) in retirement benefit deficit 2 (28) (141)
Deferred tax (1) (2) 41
Items that are or may be subsequently reclassified to profit or loss (414) (641) (2 942)
Movement in foreign currency translation reserve (675) (2 327) (4 529)
Differences in translation of foreign operations (623) (2 007) (4 209)
Gains released to profit or loss (52) (320) (320)
Movement in cash flow hedging reserve 518 1 568 1 726
Fair value gains arising during the reporting period 874 2 399 2 721
Amount removed from other comprehensive income and
recognised in profit or loss (157) (221) (321)
Deferred tax (199) (610) (674)
Movement in available-for-sale reserve (257) 118 (139)
Fair value (losses)/gains during the reporting period (349) 130 (197)
Release to profit or loss 18 - (3)
Deferred tax 74 (12) 61
Total comprehensive income for the reporting period 7 487 6 928 12 685
Total comprehensive income attributable to:
Ordinary equity holders 7 036 6 487 11 931
Non-controlling interest - ordinary shares 271 273 403
Non-controlling interest - preference shares 180 168 351
7 487 6 928 12 685
Condensed consolidated statement of changes in equity
30 June
2017
General
Number of Total credit-
ordinary Share Share Retained other risk
shares capital premium earnings reserves reserve
'000 Rm Rm Rm Rm Rm
Balance at the beginning of the
reporting period 846 675 1 693 4 467 81 604 5 293 757
Total comprehensive income - - - 7 360 (324) -
Profit for the period - - - 7 391 - -
Other comprehensive income - - - (31) (324) -
Dividends paid - - - (4 832) - -
Purchase of Group shares in respect of
equity-settled share-based payment arrangements - - (525) 26 - -
Elimination of the movement in treasury
shares held by Group entities 395 1 (14) - - -
Movement in share-based payment reserve - - 525 - (268) -
Transfer from share-based payment reserve - - 525 - (525) -
Value of employee services - - - - 276 -
Deferred tax - - - - (19) -
Movement in general credit-risk reserve - - - 30 (30) (30)
Share of post-tax results of associates
and joint ventures - - - (79) 79 -
Disposal of non-controlling interest(1) - - - - - -
Barclays separation(2) - - 8 415 31 690 - -
Balance at the end of the reporting period 847 070 1 694 12 868 87 799 4 750 727
Condensed consolidated statement of changes in equity (continued)
30 June
2017
Foreign
Foreign insurance Share- Associates
Available- Cash flow currency subsidiary based and joint
for-sale hedging translation regulatory payment ventures'
reserves reserve reserve reserve reserve reserve
Rm Rm Rm Rm Rm Rm
Balance at the beginning of the
reporting period 377 (144) 2 353 6 892 1 052
Total comprehensive income (313) 518 (529) - - -
Profit for the period - - - - - -
Other comprehensive income (313) 518 (529) - - -
Dividends paid - - - - - -
Purchase of Group shares in respect of
equity-settled share-based payment arrangements - - - - - -
Elimination of the movement in treasury
shares held by Group entities - - - - - -
Movement in share-based payment reserve - - - - (268) -
Transfer from share-based payment reserve - - - - (525) -
Value of employee services - - - - 276 -
Deferred tax - - - - (19) -
Movement in general credit-risk reserve - - - - - -
Share of post-tax results of associates
and joint ventures - - - - - 79
Disposal of non-controlling interest(1) - - - - - -
Barclays separation(2) - - - - - -
Balance at the end of the reporting period 64 374 1 824 6 624 1 131
Condensed consolidated statement of changes in equity (continued)
30 June
2017
Capital and
reserves Non- Non-
attributable controlling controlling
to ordinary interest - interest -
equity ordinary preference Total
holders shares shares equity
Rm Rm Rm Rm
Balance at the beginning of the
reporting period 93 057 4 579 4 644 102 280
Total comprehensive income 7 036 271 180 7 487
Profit for the period 7 391 361 180 7 932
Other comprehensive income (355) (90) - (445)
Dividends paid (4 832) (243) (180) (5 255)
Purchase of Group shares in respect of
equity-settled share-based payment arrangements (499) - - (499)
Elimination of the movement in treasury
shares held by Group entities (13) - - (13)
Movement in share-based payment reserve 257 (8) - 249
Transfer from share-based payment reserve - (8) - (8)
Value of employee services 276 - - 276
Deferred tax (19) - - (19)
Movement in general credit-risk reserve - - - -
Share of post-tax results of associates
and joint ventures - - - -
Disposal of non-controlling interest(1) - (23) - (23)
Barclays separation(2) 12 105 - - 12 105
Balance at the end of the reporting period 107 111 4 576 4 644 116 331
Notes
(1) The Group disposed of its controlling stake in a non-core subsidiary which was classified as held for sale.
(2) As part of its divestment, Barclays PLC contributed R12.1bn in recognition of the investments required for the group
to separate from Barclays PLC, the majority of this contribution meets the definition of a transaction with a
shareholder and in terms of IAS 1 Presentation of Financial statements, was recognised in equity on the date that the Group became
entitled to the contribution.
Condensed consolidated statement of changes in equity (continued)
30 June
2016
General
Number of Total credit-
ordinary Share Share Retained other risk
shares capital premium earnings reserves reserve
'000 Rm Rm Rm Rm Rm
Balance at the beginning of the
reporting period 845 725 1 691 4 250 75 785 7 566 727
Total comprehensive income - - - 6 979 (492) -
Profit for the period - - - 7 019 - -
Other comprehensive income - - - (40) (492) -
Dividends paid - - - (4 648) - -
Purchase of Group shares in respect of
equity-settled share-based
payment arrangements - - (229) 28 - -
Elimination of the movement in treasury
shares held by Group entities 1 146 3 96 - - -
Movement in share-based payment reserve - - 229 - 40 -
Transfer from share-based payment reserve - - 229 - (229) -
Value of employee services - - - - 261 -
Deferred tax - - - - 8 -
Movement in general credit-risk reserve - - - (29) 29 29
Movement in foreign insurance subsidiary
regulatory reserve - - - 18 (18) -
Share of post-tax results of associates
and joint ventures - - - (55) 55 -
Acquisition of a subsidiary(1,2) - - 66 - - -
Balance at the end of the
reporting period 846 871 1 694 4 412 78 078 7 180 756
Condensed consolidated statement of changes in equity (continued)
30 June
2016
Foreign
Foreign insurance Share- Associates
Available- Cash flow currency subsidiary based and joint
for-sale hedging translation regulatory payment ventures'
reserves reserve reserve reserve reserve reserve
Rm Rm Rm Rm Rm Rm
Balance at the beginning of the
reporting period 560 (1 870) 6 461 22 729 937
Total comprehensive income 82 1 568 (2 142) - - -
Profit for the period - - - - - -
Other comprehensive income 82 1 568 (2 142) - - -
Dividends paid - - - - - -
Purchase of Group shares in respect
of equity-settled - - - - - -
share-based payment arrangements
Elimination of the movement in
treasury shares held by Group entities - - - - - -
Movement in share-based payment reserve - - - - 40 -
Transfer from share-based payment reserve - - - - (229) -
Value of employee services - - - - 261 -
Deferred tax - - - - 8 -
Movement in general credit-risk reserve - - - - - -
Movement in foreign insurance
subsidiary regulatory reserve - - - (18) - -
Share of post-tax results of associates
and joint ventures - - - - - 55
Acquisition of a subsidiary(1,2) - - - - - -
Balance at the end of the
reporting period 642 (302) 4 319 4 769 992
Condensed consolidated statement of changes in equity (continued)
30 June
2016
Capital and
reserves Non- Non-
attributable controlling controlling
to ordinary interest - interest -
equity ordinary preference Total
holders shares shares equity
Rm Rm Rm Rm
Balance at the beginning of the
reporting period 89 292 4 711 4 644 98 647
Total comprehensive income 6 487 273 168 6 928
Profit for the period 7 019 423 168 7 610
Other comprehensive income (532) (150) - (682)
Dividends paid (4 648) (342) (168) (5 158)
Purchase of Group shares in respect
of equity-settled (201) - - (201)
share-based payment arrangements
Elimination of the movement in
treasury shares held by Group entities 99 - - 99
Movement in share-based payment reserve 269 - - 269
Transfer from share-based payment reserve - - - -
Value of employee services 261 - - 261
Deferred tax 8 - - 8
Movement in general credit-risk reserve - - - -
Movement in foreign insurance subsidiary
regulatory reserve - - - -
Share of post-tax results of associates
and joint ventures - - - -
Acquisition of a subsidiary(1,2) 66 25 - 91
Balance at the end of the
reporting period 91 364 4 667 4 644 100 675
Condensed consolidated statement of changes in equity (continued)
30 December
2016
General
Number of Total credit-
ordinary Share Share Retained other risk
shares capital premium earnings reserves reserve
'000 Rm Rm Rm Rm Rm
Balance at the beginning of
the reporting period 845 725 1 691 4 250 75 785 7 566 727
Total comprehensive income - - - 14 496 (2 565) -
Profit for the period - - - 14 708 - -
Other comprehensive income - - - (212) (2 565) -
Dividends paid - - - (8 536) - -
Purchase of Group shares in respect
of equity-settled - - (409) (12) - -
share-based payment arrangements
Elimination of the movement in
treasury shares held by Group entities 950 2 151 - - -
Movement in share-based payment reserve - - 409 - 163 -
Transfer from share-based payment reserve - - 409 - (409) -
Value of employee services - - - - 495 -
Conversion from cash-settled to
equity-settled schemes - - - - 37 -
Deferred tax - - - - 40 -
Movement in general credit-risk reserve - - - (30) 30 30
Movement in foreign insurance subsidiary
regulatory reserve - - - 16 (16) -
Share of post-tax results of associates
and joint ventures - - - (115) 115 -
Acquisition of a subsidiary(1,2) - - 66 - - -
Balance at the end of the reporting period 846 675 1 693 4 467 81 604 5 293 757
Condensed consolidated statement of changes in equity (continued)
30 December
2016
Foreign
Foreign insurance Share- Associates'
Available- Cash flow currency subsidiary based and joint
for-sale hedging translation regulatory payment ventures'
reserves reserve reserve reserve reserve reserve
Rm Rm Rm Rm Rm Rm
Balance at the beginning of
the reporting period 560 (1 870) 6 461 22 729 937
Total comprehensive income (183) 1 726 (4 108) - - -
Profit for the period - - - - - -
Other comprehensive income (183) 1 726 (4 108) - - -
Dividends paid - - - - - -
Purchase of Group shares in respect
of equity-settled - - - - - -
share-based payment arrangements
Elimination of the movement in
treasury shares held by Group entities - - - - - -
Movement in share-based payment reserve - - - - 163 -
Transfer from share-based payment reserve - - - - (409) -
Value of employee services - - - - 495 -
Conversion from cash-settled to
equity-settled schemes - - - - 37 -
Deferred tax - - - - 40 -
Movement in general credit-risk reserve - - - - - -
Movement in foreign insurance
subsidiary regulatory reserve - - - (16) - -
Share of post-tax results of associates
and joint ventures - - - - - 115
Acquisition of a subsidiary(1,2) - - - - - -
Balance at the end of the
reporting period 377 (144) 2 353 6 892 1 052
Condensed consolidated statement of changes in equity (continued)
30 December
2016
Capital and
reserves Non- Non-
attributable controlling controlling
to ordinary interest - interest -
equity ordinary preference Total
holders shares shares equity
Rm Rm Rm Rm
Balance at the beginning of
the reporting period 89 292 4 711 4 644 98 647
Total comprehensive income 11 931 403 351 12 685
Profit for the period 14 708 788 351 15 847
Other comprehensive income (2 777) (385) - (3 162)
Dividends paid (8 536) (562) (351) (9 449)
Purchase of Group shares in respect
of equity-settled (421) - - (421)
share-based payment arrangements
Elimination of the movement in treasury
shares held by 153 - - 153
Group entities
Movement in share-based payment reserve 572 2 - 574
Transfer from share-based payment reserve - - - -
Value of employee services 495 2 - 497
Conversion from cash-settled to
equity-settled schemes 37 - - 37
Deferred tax 40 - - 40
Movement in general credit-risk reserve - - - -
Movement in foreign insurance
subsidiary regulatory reserve - - - -
Share of post-tax results of associates
and joint ventures - - - -
Acquisition of a subsidiary(1,2) 66 25 - 91
Balance at the end of the
reporting period 93 057 4 579 4 644 102 280
Notes
(1) The excess of the purchase price over the Group's share of net assets of Barclays Africa Limited, acquired on
31 July 2013, was accounted for as a deduction against share premium. The sale and purchase agreement between the
Group and Barclays Bank PLC allowed for the purchase price to be adjusted for certain items and in June 2016 an
agreement was reached on the final purchase price adjustment. As a result Barclays Bank PLC paid R66m to the Group,
which was recognised in equity , in line with the accounting of the original transaction.
(2) The Group acquired a 75% controlling stake in Absa Instant Life (Pty) Ltd which resulted in a R25m increase in
non-controlling interest.
Condensed consolidated statement of cash flows
30 June 31 December
2017 2016 2016
Note Rm Rm Rm
Net cash generated from operating activities 1 076 4 701 6 962
Net cash utilised in investing activities (1 455) (1 779) (4 201)
Net cash generated by/(utilised in) financing activities(3) 6 721 (5 136) (7 509)
Net increase/(decrease) in cash and cash equivalents 6 342 (2 214) (4 748)
Cash and cash equivalents at the beginning of the reporting period 1 17 734 21 366 21 366
Effect of foreign exchange rate movements on cash and cash equivalents 57 (198) 1 116
Cash and cash equivalents at the end of the reporting period 2 24 133 18 954 17 734
Notes to the condensed consolidated statement of cash flows
1. Cash and cash equivalents at the beginning of the reporting period
Cash, cash balances and balances with central banks(1) 13 141 12 899 12 899
Loans and advances to banks(2) 4 593 8 467 8 467
17 734 21 366 21 366
2. Cash and cash equivalents at the end of the reporting period
Cash, cash balances and balances with central banks(1) 10 924 10 644 13 141
Loans and advances to banks(2) 13 209 8 310 4 593
24 133 18 954 17 734
Notes
(1) Includes coins and bank notes.
(2) Includes call advances, which are used as working capital by the Group.
(3) Included in net cash generated by financing activities is R12,1bn that has been received from Barclays PLC in
recognition of the investments required for the Group to separate from Barclays PLC.
Condensed notes to the consolidated financial results
1. Non-current assets and non-current liabilities held for sale
The following movements in non-current assets and non-current liabilities held for sale were effected during the
current financial reporting period:
- Retail Banking South Africa transferred a subsidiary with total assets of R1 391m to non-current assets held for
sale. The Commercial Property Finance (CPF) Equity division in Business Banking South Africa disposed of a
subsidiary with assets of R372m and liabilities of R26m out of non-current assets and non-current liabilities
held for sale respectively.
- CIB South Africa transferred investment securities with a carrying value of R467m to non-current assets held for
sale.
- WIMI transferred a subsidiary with assets of R233m and liabilities of R114m to non-current assets and non-current
liabilities held for sale respectively.
The following movements in non-current assets and non-current liabilities held for sale were effected during the
previous financial reporting period:
- The CPF Equity division in Business Banking South Africa transferred investment properties with a total carrying
value of R456m and a subsidiary with total assets of R367m and total liabilities of R9m to non-current assets and
non-current liabilities held for sale. It further disposed of an investment security and investment property with
a carrying value of R15m and R64m respectively.
- Head Office, Treasury and other operations in South Africa disposed of property and equipment with a carrying value
of R94m.
- WIMI transferred a consolidated structured entity with assets of R245m and liabilities of R233m out of non-current
assets and non-current liabilities held for sale. This was done following a reassessment by management of the time
expected to be taken to effect disposal.
- CIB South Africa transferred investment securities with a carrying value of R1 136m out of non-current assets held
for sale. This was done following a change in management intention with regards to disposal.
2. Loans and advances
30 June 2017
Performing loans Non-performing loans
Exposure Impairment Coverage ratio Exposure Impairment Coverage ratio Net total exposure
Loans and advances Rm Rm % Rm Rm % Rm
South Africa Banking 634 040 4 802 0,76 25 152 10 539 41,90 643 851
RBB South Africa(2) 429 739 4 198 0,98 23 548 9 922 42,14 439 167
Retail Banking South Africa 368 494 3 354 0,91 20 484 8 806 42,99 376 818
Credit cards 34 386 776 2,26 5 403 3 882 71,85 35 131
Instalment credit agreements 73 472 759 1,03 2 221 1 052 47,37 73 882
Loans to associates and
joint ventures 20 707 - - - - - 20 707
Mortgages 216 062 1 195 0,55 10 216 2 132 20,87 222 951
Other loans and advances 698 - - - - - 698
Overdrafts 4 575 60 1,31 286 171 59,79 4 630
Personal and term loans 18 594 564 3,03 2 358 1 569 66,54 18 819
Business Banking South Africa 61 245 844 1,38 3 064 1 116 36,42 62 349
Mortgages (including CPF) 25 802 168 0,65 1 501 533 35,51 26 602
Overdrafts 19 367 425 2,19 853 390 45,72 19 405
Term loans 16 076 251 1,56 710 193 27,18 16 342
CIB South Africa 204 301 604 0,30 1 604 617 38,47 204 684
Rest of Africa Banking 77 610 1 085 1,40 4 972 2 559 51,47 78 938
WIMI 5 430 12 0,22 128 61 47,6 5 485
Head Office, Treasury and other
operations in South Africa 720 9 1,25 - - - 711
Loans and advances to customers 717 800 5 908 0,82 30 252 13 159 43,50 728 985
Loans and advances to banks 63 451 - - - - - 63 451
781 251 5 908 0,76 30 252 13 159 43,50 792 436
30 June 2016(1)
Performing loans Non-performing loans
Exposure Impairment Coverage ratio Exposure Impairment Coverage ratio Net total exposure
Loans and advances Rm Rm % Rm Rm % Rm
South Africa Banking 616 372 4 621 0,75 25 353 10 734 42,34 626 370
RBB South Africa(2) 423 821 3 910 0,92 22 792 9 538 41,85 433 165
Retail Banking South Africa 366 715 3 158 0,86 19 586 8 390 42,84 374 753
Credit cards 35 312 779 2,21 5 442 3 842 70,60 36 133
Instalment credit agreements 72 598 640 0,88 1 977 809 40,92 73 126
Loans to associates and
joint ventures 16 615 - - - - - 16 615
Mortgages 220 315 1 211 0,55 9 684 2 117 21,86 226 671
Other loans and advances 470 - - - - - 470
Overdrafts 3 337 40 1,20 201 128 63,68 3 370
Personal and term loans 18 068 488 2,70 2 282 1 494 65,47 18 368
Business Banking South Africa 57 106 752 1,32 3 206 1 148 35,81 58 412
Mortgages (including CPF) 23 286 171 0,74 1 524 556 36,48 24 058
Overdrafts 19 200 354 1,84 895 396 44,25 19 345
Term loans 14 645 227 1,55 787 196 24,90 15 009
CIB South Africa 192 551 711 0,37 2 561 1 196 46,70 193 205
Rest of Africa Banking 79 912 1 002 1,25 5 970 3 006 50,35 81 874
WIMI 5 876 42 0,71 86 25 29,07 5 895
Head Office, Treasury and other
operations in South Africa 1 071 1 0,09 - - - 1 070
Loans and advances to customers 703 231 5 666 0,81 31 409 13 765 43,83 715 209
Loans and advances to banks 83 662 - - - - - 83 662
786 893 5 666 0,72 31 409 13 765 43,83 798 871
30 December 2016(1)
Performing loans Non-performing loans
Exposure Impairment Coverage ratio Exposure Impairment Coverage ratio Net total exposure
Loans and advances Rm Rm % Rm Rm % Rm
South Africa Banking 626 143 4 707 0,75 25 719 11 001 42,77 636 154
RBB South Africa(2) 424 565 4 063 0,96 23 454 9 817 41,86 434 139
Retail Banking South Africa 366 861 3 290 0,90 20 166 8 655 42,92 375 082
Credit cards 34 802 728 2,09 5 423 3 883 71,60 35 614
Instalment credit agreements 73 530 735 1,00 2 085 925 44,36 73 955
Loans to associates
and joint ventures 18 933 - - - - - 18 933
Mortgages 216 955 1 213 0,56 10 029 2 109 21,03 223 662
Other loans and advances 510 - - - - - 510
Overdrafts 3 923 54 1,38 220 142 64,55 3 947
Personal and term loans 18 208 560 3,08 2 409 1 596 66,25 18 461
Business Banking South Africa 57 704 773 1,34 3 288 1 162 35,34 59 057
Mortgages (including CPF) 24 081 158 0,66 1 567 536 34,21 24 954
Overdrafts 18 307 366 2,00 929 421 45,32 18 449
Term loans 15 316 249 1,63 792 205 25,88 15 654
CIB South Africa 201 578 644 0,32 2 265 1 184 52,27 202 015
Rest of Africa Banking 76 548 1 246 1,63 5 262 2 687 51,06 77 877
WIMI 5 615 14 0,25 116 57 49,14 5 660
Head Office, Treasury and other
operations in South Africa 622 4 0,64 - - - 618
Loans and advances to customers 708 928 5 971 0,84 31 097 13 745 44,20 720 309
Loans and advances to banks 49 790 - - - - - 49 790
758 718 5 971 0,79 31 097 13 745 44,20 770 099
Notes
(1) These numbers have been restated, refer to the reporting changes overview in note 15.
(2) Disclosure is provided on a product level.
3. Borrowed funds
During the reporting period the significant movements in borrowed funds were as follows: R1 142m (30 June 2016: R231m;
31 December 2016: R2 381m) of subordinated notes were issued and R1 000m (30 June 2016: R173m; 31 December 2016:
R178m) were redeemed.
4. Other impairments
30 June 31 December
2017 2016 2016
Rm Rm Rm
Reversal of impairment on financial instruments - (1) (4)
Other 376 625 694
Goodwill - - 34
Intangible assets(1) 376 583 618
Investments in associates and joint ventures - 42 42
376 624 690
Note
(1) The impairment incurred during the current reporting period mainly relates to computer software, Barclays.Net.
Following the separation from Barclays PLC the software will no longer be used. The prior period impairments
relate to an acquired customer list which was fully impaired following an adjustment to the interest rate
outlook for the related business and impairment of costs previously spent on the Virtual Bank initiative.
In calculating the impairment to be recognised, the value in use was based on a discounted cash flow methodology.
5. Headline earnings
30 June 31 December
2017 2016 2016
Gross Net(1) Gross Net(1) Gross Net(1)
Rm Rm Rm Rm Rm Rm
Headline earnings are determined as follows:
Profit attributable to ordinary equity
holders of the Group 7 391 7 019 14 708
Total headline earnings adjustment: 227 233 272
IFRS 3 - Goodwill impairment - - - - 34 34
IFRS 5 - Gains on disposal of non-currents
assets held for sale (7) (5) - - (31) (25)
IAS 16 - Profit on disposal of property and equipment (28) (23) (47) (34) (29) (21)
IAS 21 - Recycled foreign currency translation reserve 52 52 (320) (297) (320) (297)
IAS 28 - Impairment of investments in
associates and joint ventures - - 42 34 42 34
IAS 36 - Impairment of intangible assets 376 274 583 583 618 610
IAS 39 - Release of available-for-sale reserves 18 12 - - (3) (2)
IAS 40 - Change in fair value of investment properties (95) (78) (65) (53) (70) (61)
IAS 40 - Profit on disposal of investment property (5) (5) - - - -
Headline earnings/diluted headline earnings 7 618 7 252 14 980
Headline earnings per share (cents) 899,9 856,7 1 769,6
Diluted headline earnings per share (cents) 899,7 856,7 1 769,4
Note
(1) The net amount is reflected after taxation and non-controlling interest.
6. Dividends per share
30 June 31 December
2017 2016 2016
Rm Rm Rm
Dividends declared to ordinary equity holders
Interim dividend (28 July 2017: 475 cents)
(29 July 2016: 460 cents) 4 027 3 900 3 900
Final dividend (23 February 2017: 570 cents) - - 4 832
4 027 3 900 8 732
Dividends declared to ordinary equity holders (net of treasury shares)(1)
Interim dividend (28 July 2017: 475 cents)(29 July 2016: 460 cents) 4 024 - 3 888
Final dividend (23 February 2017: 570 cents) - - 4 820
4 024 - 8 708
Dividends declared to non-controlling preference equity holders
Interim dividend (29 July 2016: 3 696,57534 cents) - 183 183
Final dividend (23 February 2017: 3644,79452 cents) - - 180
- 183 363
Dividends paid to ordinary equity holders (net of treasury shares)
Final dividend (10 April 2017: 570 cents) (1 March 2016: 550 cents) 4 832 4 648 4 648
Interim dividend (29 July 2016: 460 cents) - - 3 888
4 832 4 648 8 536
Dividends paid to non-controlling preference equity holders
Final dividend (10 April 2017: 3644,79452 cents)
(1 March 2016: 3395,47945 cents) 180 168 168
Interim dividend (29 July 2016: 3696,57534 cents) - - 183
180 168 351
Note
(1) The dividends paid on treasury shares are calculated on payment date.
7. Acquisitions and disposals of businesses and other similar transactions
7.1.1 Acquisitions of businesses during the current reporting period
There were no acquisitions of businesses during the current reporting period.
7.1.2 Disposals of businesses during the current reporting period
Apart from non-current assets/liabilities held for sale disposed of (refer note to 1) no other disposals of
businesses occurred during the current reporting period.
7.2.1 Acquisitions of businesses during the previous reporting period
In order to continue building and shaping the Group's predictive underwriting products, expertise and
technology, the Group acquired a 75% controlling stake in Absa Instant Life Proprietary Limited, previously
known as Instant Life Proprietary Limited. The acquisition of the investment had an effective acquisition
date of 31 March 2016 and is a business combination within the scope of IFRS 3. The acquisition date fair
value of the consideration transferred amounted to R100m.
The non-controlling interest below was measured at their proportionate share of the acquiree's identifiable
net assets. Goodwill of R20m has been recognised and includes, but is not limited to, the insurer's workforce
and the increased market share gained.
From the date of acquisition, Absa Instant Life contributed revenue of R9m to the total income earned by
the Group. If the combination had taken place at the beginning of the year, an additional R5m would have
been generated by the Group, thereby resulting in a total income of R14m. From the date of acquisition, Absa
Instant Life contributed losses after tax of R12m to total profits earned by the Group. If the combination
had taken place at the beginning of the year, losses after tax of an additional R3m would have been incurred
by the Group, thereby resulting in a total loss after tax of R15m.
Instant Life Group
2016
Fair value recognised on
acquisition
Rm Rm
Consideration at date of acquisition:
Cash 100 100
Total consideration 100 100
Recognised amounts of identifiable assets
acquired and liabilities assumed
Loans and advances to banks 6 6
Other assets 14 14
Intangible assets 125 125
Other liabilities (5) (5)
Deferred tax liabilities (32) (32)
Provisions (1) (1)
Total identifiable net assets 107 107
Total Non-Controlling Interest (27) (27)
Goodwill 20 20
Total 100 100
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:
2017 2016
Rm Rm
Summary of net cash outflow due to acquisitions - 100
7.2.2 Disposals of businesses during the previous reporting period
There were no disposals of businesses during the previous reporting period.
8. Related parties
The group holding company, Barclays Bank PLC, sold ordinary Barclays Africa Group shares (representing 12,2%
and 33,7% of issued ordinary share capital) on 5 May 2016 and 1 June 2017 respectively. Barclays Bank PLC
currently holds 139m ordinary Barclays Africa Group shares, of which, 12,7m will be contributed to a Broad-Based
Black Economic Empowerment scheme which will be implemented in due course, leaving a residual holding of 14,9%.
9. Financial guarantee contracts
30 June 31 December
2017 2016 2016
Rm Rm Rm
Financial guarantee contracts 3 58 10
Financial guarantee contracts represent contracts where the Group undertakes to make specified payments to a
counterparty, should the counterparty suffer a loss as a result of a specified debtor failing to make payment
when due in accordance with the terms of a debt instrument. This amount represents the maximum off-statement
of financial position exposure.
10. Commitments
30 June 31 December
2017 2016 2016
Rm Rm Rm
Authorised capital expenditure
Contracted but not provided for(1) 817 1 355 521
The Group has capital commitments in respect of
computer equipment and property development.
Management is confident that future net revenues
and funding will be sufficient
to cover these commitments.
Operating lease payments due
No later than one year 1 336 1 268 1 309
Later than one year and no later than five years 3 173 2 800 2 946
Later than five years 1 096 1 369 1 228
5 605 5 437 5 483
The operating lease commitments comprise a number of separate operating leases in relation to property
and equipment, none of which is individually significant to the Group. Leases are negotiated for an
average term of three to five years and rentals are renegotiated annually.
Note
(1) The presentation of commitments for June 2016 has been revised following the reallocation of an amount of
R726m from 'Commitments' to 'Letters of Credit' (within Contingencies) so as to more appropriately
reflect the substance of the item.
11. Contingencies
30 June 31 December
2017 2016 2016
Rm Rm Rm
Guarantees 36 934 36 239 38 441
Irrevocable debt facilities 140 877 142 247 135 935
Irrevocable equity facilities 121 335 141
Letters of credit(1) 8 543 6 824 8 481
Other 91 4 044 135
186 566 189 689 183 133
(1) The presentation of commitments for June 2016 has been revised following the reallocation of an amount
of R726m from 'Commitments' to 'Letters of Credit' (within Contingencies) so as to more appropriately
reflect the substance of the item.
Guarantees include performance guarantee contracts and payment guarantee contracts.
Irrevocable facilities are commitments to extend credit where the Group does not have the right to terminate the
facilities by written notice. Commitments generally have fixed expiry dates. Since commitments may expire without
being drawn upon, the total contract amounts do not necessarily represent future cash requirements.
Legal proceedings
The Group has been party to proceedings against it during the reporting period, and as at the reporting date the
following material cases are disclosed:
- Pinnacle Point Holdings Proprietary Limited (PPG): New Port Finance Company and the trustees of the Winifred Trust
(the plaintiffs) allege a local bank conducted itself unlawfully, and that Absa Bank Limited (the Bank) was privy
to such conduct. They have instituted proceedings against the Bank for damages for an amount of R1 387m. Although
Pinnacle Point Holding's claim has been withdrawn, the second to fifth plaintiff's claims remain and will proceed
to trial.
- Ayanda Collective Investment Scheme (the Scheme): Absa Capital Investor Services was the trustee of Ayanda
Collective Investment Scheme, in which Corporate Money Managers (CMM) managed a portfolio of assets within the
Scheme. The joint curators of the CMM group of companies and the Altron Pension Fund (an investor in the fund)
allege that the defendants caused damages to them arising from their alleged failure to meet their obligations
in the trust deed together with their statutory obligations set out in the Collective Investment Scheme Act,
in respect of which they seek payment of R1 157m.
- On June 19, 2017, the Public Protector released the final report of her office's investigation into the Bankorp
assistance package provided by the SA Reserve Bank between 1985 and 1995, recommending certain remedial action.
Absa acquired Bankorp in April 1992, for fair value, and had the responsibility of carrying out its existing legal
obligations to the SARB, which were met in full by October 1995. As such, it is Absa's firm position that it has
no continuing obligations in respect of the transaction and accordingly launched an application to review, and
where appropriate set aside, the remedial action recommended in the Public Protector's report. In this respect
Absa will join issue with the SARB and Minister of Finance in applications seeking similar relief, in which
it has also been cited.
The Group is engaged in various other legal, competition and regulatory matters both in South Africa and a number of
other jurisdictions. It is involved in legal proceedings 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 Group 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 Group is or has been engaged.
At the present time, the Group 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 Group'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 Group 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 Group's control, but especially in the area of banking and insurance regulation, are likely to have an impact on
the Group's businesses, systems and earnings.
The Group is continuously evaluating its programmes and controls in general relating to compliance with regulation.
The Group undertakes monitoring, review and assurance activities, and the Group has also adopted appropriate remedial
and/or mitigating steps, where necessary or advisable, and has made disclosures on material findings as and when
appropriate.
Absa Bank Limited, a subsidiary of Barclays Africa Group Limited, identified potentially fraudulent activity by
certain of its customers using advance payments for imports in 2014 and 2015 to effect foreign exchange transfers from South
Africa to beneficiary accounts located in East Asia, UK, Europe and the US. As a result, the Group conducted a review of
relevant activity, processes, systems and controls. The Group is continuing to provide information to relevant
authorities as part of the Group's ongoing cooperation. It is not currently practicable to provide an estimate of the financial
impact of the actions described on the Group or what effect that they might have upon the Group's operating results, cash
flows or financial position in any particular period, if any.
In February 2017 the South African Competition Commission (SACC) referred Barclays Bank PLC, BCI and Absa Bank
Limited, a subsidiary of Barclays Africa Group Limited, among other banks, to the Competition Tribunal to be prosecuted for
breaches of South African antitrust law related to Foreign Exchange trading of South African Rand. The SACC found from its
investigation that between 2007 and 2013 the banks had engaged in various forms of collusive behaviour. Barclays was the
first to bring the conduct to the attention of the SACC under its leniency programme and has cooperated with, and will
continue to cooperate with, the SACC in relation to this matter. The SACC is therefore not seeking an order from the
Tribunal to impose any fine on Barclays Bank PLC, BCI or Absa Bank Limited.
Income taxes
The Group is subject to income taxes in numerous jurisdictions and the calculation of the Group's tax charge and
worldwide provisions for income taxes necessarily involves a degree of estimation and judgement. There may be transactions
and calculations for which the ultimate tax treatment is uncertain or in respect of which the relevant tax authorities may
have indicated disagreement with the Group's treatment and accordingly the final tax charge cannot be determined until
resolution has been reached with the relevant tax authority. The Group recognises liabilities for anticipated tax audit
issues based on estimates of whether additional taxes will be due after taking into account 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. The risks are managed in accordance with the Group's Tax Risk Framework.
12. Segment reporting
30 June 31 December
2017 2016(1) 2016(1)
Rm Rm Rm
12.1 Headline earnings contribution by segment
South Africa Banking 5 969 5 612 11 678
Rest of Africa Banking 1 512 1 266 2 756
WIMI 574 621 1 258
Head Office, Treasury and other operations South Africa (285) (247) (712)
Barclays separation (152) - -
7 618 7 252 14 981
12.2 Total income by segment
South Africa Banking 26 230 25 955 52 209
Rest of Africa Banking 7 670 8 185 16 044
WIMI 2 685 2 693 5 221
Head Office, Treasury and other operations South Africa (545) (325) (1 081)
Barclays separation 284 - -
36 324 36 508 72 394
12.3 Total internal income by segment
South Africa Banking (6 575) (5 770) (14 347)
Rest of Africa Banking (74) (64) (20)
WIMI (154) (120) (382)
Head Office, Treasury and other operations South Africa 6 757 5 955 14 748
Barclays separation 46 - -
- - -
12.4 Total assets by segment
South Africa Banking 1 180 943 1 176 952 1 167 067
Rest of Africa Banking 170 511 168 531 161 481
WIMI 51 132 50 093 51 007
Head Office, Treasury and other operations South Africa (276 556) (253 107) (278 532)
Barclays separation 11 819 - -
1 137 850 1 142 469 1 101 023
12.5 Total liabilities by segment
South Africa Banking 1 167 957 1 165 372 1 149 510
Rest of Africa Banking 149 829 147 047 140 704
WIMI 45 882 44 709 45 691
Head Office, Treasury and other operations South Africa (342 227) (315 334) (337 161)
Barclays separation 104 - -
1 021 545 1 041 794 998 743
Note
(1) Operational changes, management changes and associated changes to the way in which the chief operating
decision maker views the performance of each business segment, have resulted in the reallocation of
earnings, assets and liabilities between operating segments. Refer to Note 15.
13. Assets and liabilities not held at fair value
The following table summarises the carrying amounts and fair value of those assets and liabilities not
held at fair value.
30 June
2017 2016(1)
Carrying Carrying
value Fair value value Fair value
Rm Rm Rm Rm
Financial assets
Balances with other central banks 10 323 10 323 13 032 13 032
Balances with the South African Reserve Bank 18 672 18 672 18 183 18 183
Coins and bank notes 10 924 10 924 10 644 10 644
Money market assets - - 41 41
Cash, cash balances and balances with central banks 39 919 39 919 41 900 41 900
Loans and advances to banks 46 189 46 189 57 469 57 469
Other assets 32 422 32 422 34 156 34 156
South Africa Banking 616 570 616 677 601 425 600 758
RBB South Africa 439 062 439 169 433 029 432 362
Retail Banking South Africa 376 818 376 925 374 752 374 085
Credit cards 35 130 35 130 36 133 36 133
Instalment credit agreements 73 882 73 785 73 126 72 349
Loans to associates and joint ventures 20 707 20 707 16 615 16 615
Mortgages 222 952 222 960 226 671 226 682
Other loans and advances 698 698 469 469
Overdrafts 4 631 4 631 3 370 3 370
Personal and term loans 18 818 19 014 18 368 18 467
Business Banking South Africa 62 244 62 244 58 277 58 277
Mortgages (including CPF) 26 498 26 498 23 926 23 926
Overdrafts 19 403 19 403 19 342 19 342
Term loans 16 343 16 343 15 009 15 009
CIB South Africa 177 508 177 508 168 396 168 396
Rest of Africa Banking 78 937 78 937 81 874 81 874
WIMI 5 485 5 485 5 895 5 895
Head Office, Treasury and other operations
in South Africa 709 709 1 066 1 066
Loans and advances to customers -
net of impairment losses 701 701 701 808 690 260 689 593
Total assets 820 231 820 338 823 785 823 118
Financial liabilities
Deposits from banks 40 086 40 086 59 632 59 632
Other liabilities 33 576 33 576 32 933 32 933
Call deposits 56 100 56 100 57 407 57 407
Cheque account deposits 208 545 208 545 199 461 199 461
Credit card deposits 1 811 1 811 1 865 1 865
Fixed deposits 163 131 163 923 157 863 156 922
Foreign currency deposits 24 305 24 305 31 595 31 595
Notice deposits 63 125 63 138 58 516 58 528
Other deposits 3 456 3 456 6 720 6 720
Saving and transmission deposits 153 058 153 058 145 821 145 821
Deposits due to customers 673 531 674 336 659 248 658 319
Debt securities in issue 135 421 135 421 138 442 138 680
Borrowed funds 15 963 15 963 13 548 13 821
Total liabilities 898 577 899 382 903 803 903 385
The following table summarises the carrying amounts and fair value of those assets and liabilities not held
at fair value.
31 December
2016(1)
Carrying
value Fair value
Rm Rm
Financial assets
Balances with other central banks 13 395 13 395
Balances with the South African Reserve Bank 18 552 18 552
Coins and bank notes 13 141 13 141
Money market assets 38 38
Cash, cash balances and balances with central banks 45 126 45 126
Loans and advances to banks 29 932 29 827
Other assets 22 120 22 188
South Africa Banking 612 081 611 974
RBB South Africa 434 033 433 926
Retail Banking South Africa 375 082 374 973
Credit cards 35 614 35 614
Instalment credit agreements 73 955 73 650
Loans to associates and joint ventures 18 933 18 933
Mortgages 223 662 223 674
Other loans and advances 510 510
Overdrafts 3 947 3 947
Personal and term loans 18 461 18 645
Business Banking South Africa 58 951 58 953
Mortgages (including CPF) 24 849 24 851
Overdrafts 18 448 18 448
Term loans 15 654 15 654
CIB South Africa 178 048 178 048
Rest of Africa Banking 77 877 77 877
WIMI 5 660 5 660
Head Office, Treasury and other operations in South Africa 615 615
Loans and advances to customers - net of impairment losses 696 233 696 126
Total assets 793 411 793 267
Financial liabilities
Deposits from banks 44 107 44 107
Other liabilities 23 600 23 584
Call deposits 62 426 62 426
Cheque account deposits 200 367 200 367
Credit card deposits 1 906 1 906
Fixed deposits 153 295 153 358
Foreign currency deposits 24 825 24 825
Notice deposits 59 358 59 371
Other deposits 3 189 3 189
Saving and transmission deposits 152 378 152 378
Deposits due to customers 657 744 657 820
Debt securities in issue 134 197 134 197
Borrowed funds 15 673 15 893
Total liabilities 875 321 875 601
Note
(1) These numbers have been restated, refer to Note 15, "Reporting changes overview."
14. Assets and liabilities held at fair value
14.1 Fair value measurement and valuation processes
Financial assets and financial liabilities
The Group has an established control framework with respect to the measurement of fair values. The
framework includes a Traded Risk and Valuations Committee and an Independent Valuation Control team (IVC),
which is independent from the front office.
The Traded Risk and Valuations Committee, which comprises representatives from senior management, will formally
approve valuation policies and any changes to valuation methodologies. Significant valuation issues are reported to the
Barclays Africa Group Audit and Compliance Committee.
The Traded Risk and Valuations Committee is responsible for overseeing the valuation control process and will
therefore consider the appropriateness of valuation techniques and inputs for fair value measurement.
The IVC team independently verifies the results of trading and investment operations and all significant fair value
measurements. 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 IFRS and internal valuation policies.
Investment properties
The fair value of investment properties is determined based on the most appropriate methodology applicable to the
specific property. Methodologies include the market comparable approach that reflects recent transaction prices for similar
properties, discounted cash flows and income capitalisation methodologies. In estimating the fair value of the
properties, the highest and best use of the properties is taken into account.
Where possible the fair value of the Group's investment properties is determined through valuations performed by
external independent valuators.
When the Group's internal valuations are different to that of the external independent valuers, detailed procedures
are performed to substantiate the differences, whereby the IVC team verifies the procedures performed by the front office
and considers the appropriateness of any differences to external independent valuations.
14.2 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 are classified as Level 2 if they 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 disclosed fair value of loans and advances to banks and customers is determined by discounting contractual cash
flows. Discount factors are determined using the relevant forward base rates (as at valuation date) plus the originally
priced spread. Where a significant change in credit risk has occurred, an updated spread is used to reflect valuation date
pricing. Behavioural cash flow profiles, instead of contractual cash flow profiles, are used to determine expected cash
flows where contractual cash flow profiles would provide an inaccurate fair value.
Deposits, debt securities in issue and borrowed funds
Deposits, debt securities in issue and borrowed funds are valued using discounted cash flow models, applying rates
currently offered for issuances with similar characteristics. Where these instruments include embedded derivatives, the
embedded derivative component is valued using the methodology for derivatives as detailed above.
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.
14.3 Fair value adjustments
The main valuation adjustments required to arrive at a fair value are described below:
Bid-offer valuation adjustments
For assets and liabilities where the Group is not a market maker, mid prices are adjusted to bid and offer prices
respectively. Bid-offer adjustments reflect expected close out strategy and, for derivatives, the fact that they are managed
on a portfolio basis. The methodology for determining the bid-offer adjustment for a derivative portfolio will
generally involve netting between long and short positions and the bucketing of risk by strike and term in accordance with
hedging strategy. Bid-offer levels are derived from market sources, such as broker data. For those assets and liabilities
where the firm is a market maker and has the ability to transact at, or better than, mid-price (which is the case for
certain equity, bond and vanilla derivative markets), the mid-price is used, since the bid-offer spread does not represent a
transaction cost.
Uncollateralised derivative adjustments
A fair value adjustment is incorporated into uncollateralised derivative valuations to reflect the impact on fair
value of counterparty credit risk, the Group's own credit quality, as well as the cost of funding across all asset classes.
Model valuation adjustments
Valuation models are reviewed under the Group's model governance framework. This process identifies the assumptions
used and any model limitations (for example, if the model does not incorporate volatility skew). Where necessary, fair
value adjustments will be applied to take these factors into account. Model valuation adjustments are dependent on the size
of 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.
14.4 Fair value hierarchy
The following table shows the Group's assets and liabilities that are recognised and subsequently measured at fair value
and are analysed by valuation techniques. The classification of assets and liabilities is based on the lowest level input
that is significant to the fair value measurement in its entirety.
30 June 2017
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 2 071 3 088 - 5 159
Investment securities 57 345 52 208 6 281 115 834
Loans and advances to banks - 16 812 450 17 262
Trading and hedging portfolio assets 43 617 56 750 1 787 102 154
Debt instruments 21 501 6 327 1 390 29 218
Derivative assets - 41 035 177 41 212
Commodity derivatives - 554 - 554
Credit derivatives - 17 164 181
Equity derivatives - 1 315 13 1 328
Foreign exchange derivatives - 7 486 - 7 486
Interest rate derivatives - 31 663 - 31 663
Equity instruments 20 120 - - 20 120
Money market assets 1 996 9 388 220 11 604
Other assets - 2 4 6
Loans and advances to customers - 22 622 4 662 27 284
Investments linked to investment
contracts 16 794 2 337 - 19 131
Total financial assets 119 827 153 819 13 184 286 830
Financial liabilities
Deposits from banks - 9 204 - 9 204
Trading and hedging portfolio
liabilities 8 034 35 554 454 44 042
Derivative liabilities - 35 554 454 36 008
Commodity derivatives - 601 - 601
Credit derivatives - 9 188 197
Equity derivatives - 1 285 51 1 336
Foreign exchange derivatives - 8 151 - 8 151
Interest rate derivatives - 25 508 215 25 723
Short positions 8 034 - - 8 034
Other liabilities - 12 - 12
Deposits due to customers 149 21 772 910 22 831
Debt securities in issue 36 4 251 484 4 771
Liabilities under investment contracts - 29 918 - 29 918
Total financial liabilities 8 219 100 711 1 848 110 778
Non-financial assets
Commodities 1 678 - - 1 678
Investment properties - - 268 268
Non-recurring fair value measurements
Non-current assets held for sale(1) - - 2 601 2 601
Non-current liabilities held for sale(1) - - 114 114
30 June 2016
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 2 458 3 376 - 5 834
Investment securities 61 166 34 308 6 089 101 563
Loans and advances to banks - 26 194 - 26 194
Trading and hedging portfolio assets 42 991 65 814 2 895 111 700
Debt instruments 20 036 8 420 2 169 30 625
Derivative assets - 51 656 726 52 382
Commodity derivatives - 194 - 194
Credit derivatives - 122 294 416
Equity derivatives - 1 330 - 1 330
Foreign exchange derivatives - 16 982 1 16 983
Interest rate derivatives - 33 028 431 33 459
Equity instruments 22 911 - - 22 911
Money market assets 44 5 738 - 5 782
Other assets - 7 62 69
Loans and advances to customers - 18 008 6 941 24 949
Investments linked to investment
contracts 17 037 2 873 - 19 910
Total financial assets 123 652 150 580 15 987 290 219
Financial liabilities
Deposits from banks - 18 295 - 18 295
Trading and hedging portfolio
liabilities 4 830 50 210 337 55 377
Derivative liabilities - 50 210 337 50 547
Commodity derivatives - 151 - 151
Credit derivatives - 327 150 477
Equity derivatives - 1 735 - 1 735
Foreign exchange derivatives - 14 042 1 14 043
Interest rate derivatives - 33 955 186 34 141
Short positions 4 830 - - 4 830
Other liabilities - 10 170 180
Deposits due to customers 119 16 680 921 17 720
Debt securities in issue 243 5 067 770 6 080
Liabilities under investment contracts - 28 019 - 28 019
Total financial liabilities 5 192 118 281 2 198 125 671
Non-financial assets
Commodities 1 406 - - 1 406
Investment properties - - 894 894
Non-recurring fair value measurements
Non-current assets held for sale(1) - - 1 623 1 623
Non-current liabilities held for sale(1) - - 9 9
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 2016
Level 1 Level 2 Level 3 Total
Recurring fair value measurements Rm Rm Rm Rm
Financial Assets
Cash, cash balances and balances
with central banks 2 388 2 492 - 4 880
Investment securities 60 051 50 906 3 358 114 315
Loans and advances to banks - 19 286 571 19 857
Trading and hedging portfolio assets 33 572 61 419 1 505 96 496
Debt instruments 15 689 6 740 1 324 23 753
Derivative assets - 46 717 181 46 898
Commodity derivatives - 797 - 797
Credit derivatives - 70 114 184
Equity derivatives - 1 540 67 1 607
Foreign exchange derivatives - 15 221 - 15 221
Interest rate derivatives - 29 089 - 29 089
Equity instruments 17 883 - - 17 883
Money market assets - 7 962 - 7 962
Other assets - 4 5 9
Loans and advances to customers - 19 186 4 890 24 076
Investments linked to investment contracts 16 335 2 481 - 18 816
Total financial assets 112 346 155 774 10 329 278 449
Financial Liabilities
Deposits from banks - 9 085 - 9 085
Trading and hedging portfolio liabilities 6 508 42 677 308 49 493
Derivative liabilities - 42 677 308 42 985
Commodity derivatives - 875 - 875
Credit derivatives - 137 101 238
Equity derivatives - 1 306 60 1 366
Foreign exchange derivatives - 14 173 - 14 173
Interest rate derivatives - 26 186 147 26 333
Short positions 6 508 - - 6 508
Other liabilities - 4 41 45
Deposits due to customers 154 15 828 1 139 17 121
Debt securities in issue 261 4 652 604 5 517
Liabilities under investment contracts - 29 055 - 29 055
Total financial liabilities 6 923 101 301 2 092 110 316
Non-financial assets
Commodities 1 485 - - 1 485
Investment properties - - 478 478
Non-recurring fair value measurements
Non-current assets held for sale(1) - - 823 823
Non-current liabilities held for sale(1) - - 9 9
Note
(1) Includes certain items classified in terms of the requirements of IFRS 5 which are measured in terms of their
respective standards.
14.5 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
with central banks Discounted cash flow models Underlying price of market traded
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 Discount cash flow models Underlying price of market traded
instruments and interest rates
Derivatives
Commodity derivatives Discounted cash flow model, option pricing, Spot price of physical or futures,
futures pricing and/or Exchange interest rates and/or volatility
Traded Fund (ETF) models
Credit derivatives Discounted cash flow and/or option pricing models Interest rate, recovery rate, credit
spread and/or quanto ratio
Equity derivatives Discounted cash flow model, 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 pricing models Spot price, interest rate and/or volatility
Interest rate derivatives Discounted cash flow and/or option pricing models Interest rate curves, repurchase 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 and/or money market curves
Investment securities and investments
linked to investment contracts Listed equity: market bid price. Other items: Underlying price of the market traded
discounted cash flow models instrument and/or 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
14.6 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:
30 June 2017
Trading
and Loans and Loans and Investments
hedging advances advances linked to Total assets
portfolio Other to to Investment Investment investment at fair
assets assets customers banks securities properties contracts value
Rm Rm Rm Rm Rm Rm Rm Rm
Opening balance at the beginning
of the reporting period 1 505 5 4 890 571 3 358 478 - 10 807
Net interest income - - 51 - 10 - - 61
Other income - - - - - (2) - (2)
Gains and losses from banking
and trading activities (2) - - - - - - (2)
Gains and losses from investment
activities - - - (51) 12 - - (39)
Purchases 534 - 618 - 2 803 22 - 3 977
Sales (250) (1) (897) (70) (560) (230) - (2 008)
Movement in/(out) of Level 3 - - - - 658 - - 658
Closing balance at the end of
the reporting period 1 787 4 4 662 450 6 281 268 - 13 452
30 June 2016
Trading
and Loans and Loans and Investments
hedging advances advances linked to Total assets
portfolio Other to to Investment Investment investment at fair
assets assets customers banks securities properties contracts value
Rm Rm Rm Rm Rm Rm Rm Rm
Opening balance at the beginning
of the reporting period 1 418 25 7 511 2 109 3 966 1 264 - 16 293
Net interest income - 488 167 85 30 - 573 1 343
Gains and losses from banking
and trading activities 192 - - - - - 323 515
Gains and losses from
investment activities - - (10) - 11 45 92 138
Purchases 1 332 37 1 962 - 3 209 15 7 784 14 339
Sales (47) (2 816) (2 689) (2 109) (1 127) - - (8 788)
Movement in other
comprehensive income - - - 35 - - 35 70
Transferred to/(from)
assets/liabilities - - - - - (430) - (430)
Closing balance at the
end of the reporting period 2 895 (2 266) 6 941 120 6 089 894 8 807 23 480
30 December 2016
Trading
and Loans and Loans and Investments
hedging advances advances linked to Total assets
portfolio Other to to Investment Investment investment at fair
assets assets customers banks securities properties contracts value
Rm Rm Rm Rm Rm Rm Rm Rm
Opening balance at the beginning
of the reporting period 1 418 25 7 511 2 109 3 966 1 264 - 16 293
Net interest income - - 297 - 56 - - 353
Other income - - - - - 17 - 17
Gains and losses from banking
and trading activities 112 - - (140) (1 079) - - (1 107)
Gains and losses from investment
activities - - - - 106 - - 106
Purchases 1 308 (3) - 70 543 28 - 1 946
Sales (1 333) (17) (1 956) (1 468) (233) (83) - (5 090)
Movement in other
comprehensive income - - - - (80) - - (80)
Transferred to/(from)
assets/liabilities - - - - 1 136 (748) - 388
Movement out of Level 3 - - (962) - (1 057) - - (2 019)
Closing balance at the
end of the reporting period 1 505 5 4 890 571 3 358 478 - 10 807
30 June 2017
Trading and
hedging Deposits Debt Total
Deposits portfolio Other due to securities liabilities at
from banks liabilities liabilities customers in issue fair value
Rm Rm Rm Rm Rm Rm
Opening balance at the
beginning of the
reporting period - 308 41 1 139 604 2 092
Gains and losses from banking
and trading activities - 146 - - - 146
Issues - - - 295 - 295
Settlements - - (41) (540) (120) (701)
Movement in/(out) of Level 3 - - - 16 - 16
Closing balance at the end
of the reporting period - 454 - 910 484 1 848
30 June 2016
Trading and
hedging Deposits Debt Total
Deposits portfolio Other due to securities liabilities at
from banks liabilities liabilities customers in issue fair value
Rm Rm Rm Rm Rm Rm
Opening balance at the
beginning of the
reporting period 7 217 5 2 557 624 3 410
Net interest income - - - 70 28 98
Gains and losses from banking
and trading activities - 132 - - - 132
Issues - - 165 1 958 142 2 265
Settlements (7) (12) - (689) (24) (732)
Movement in/(out) of Level 3 - - - (2 975) - (2 975)
Closing balance at the end
of the reporting period - 337 170 921 770 2 198
30 December 2016
Trading and
hedging Deposits Debt Total
Deposits portfolio Other due to securities liabilities at
from banks liabilities liabilities customers in issue fair value
Rm Rm Rm Rm Rm Rm
Opening balance at the
beginning of the
reporting period 7 217 5 2 557 624 3 410
Net interest income - - - - - -
Gains and losses from banking
and trading activities - 91 - - - 91
Gains and losses from
investment activities - - - 139 (9) 130
Issues - - 36 1 953 - 1 989
Settlements (7) - - (3 510) (11) (3 528)
Movement in/(out) of Level 3 - - - - - -
Closing balance at the
end of the reporting period - 308 41 1 139 604 2 092
14.6.1 Significant transfers between levels
During the 2017 and 2016 reporting periods, transfers between levels occurred because of changes in the observability
of valuation inputs, in some instances owing to changes in the level of market activity. Transfers have been reflected
as if they had taken place at the beginning of the year.
14.7 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 2017
Trading and Trading and
hedging Loans and hedging
portfolio advances to Investment Total portfolio Total
assets customers securities assets liabilities liabilities
Rm Rm Rm Rm Rm Rm
Gains and losses from banking
and trading activities 65 43 44 152 136 136
30 June 2016
Trading and Trading and
hedging Loans and hedging
portfolio advances to Investment Total portfolio Total
assets customers securities assets liabilities liabilities
Rm Rm Rm Rm Rm Rm
Gains and losses from banking
and trading activities 109 46 34 189 - -
30 December 2016
Trading and Trading and
hedging Loans and hedging
portfolio advances to Investment Total portfolio Total
assets customers securities assets liabilities liabilities
Rm Rm Rm Rm Rm Rm
Gains and losses from banking
and trading activities 3 35 29 67 86 86
14.8 Sensitivity analysis of valuations using unobservable inputs
As part of the Group's risk management processes, stress tests are applied on the significant unobservable parameters to
generate a range of 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 financial 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 profit or loss, or a change in the
fair value asset or liability by more than 10% or the underlying value of the affected item. This is demonstrated
by the following sensitivity analysis which includes reasonable range of possible outcomes:
30 June 2017
Potential effect recorded Potential effect recorded
in profit or loss directly in equity
Significant unobservable parameters Favourable/(Unfavourable) Favourable/(Unfavourable)
Rm Rm
Deposits due to customers BAGL/Absa funding spread -/- -/-
Investment securities and Risk adjustment yield
investments linked to curves, future earnings and
investment contracts marketability discount 40/(62) 129/(125)
Loans and advances to Credit spreads 90/(88) -/-
customers
Other assets Volatility, Credit spreads -/- -/-
Volatility, credit spreads,
Trading and hedging basis curves, yield curves,
portfolio assets repo curves, funding spreads 153/(153) -/-
Volatility, credit spreads,
Trading and hedging basis curves, yield curves,
portfolio liabilities repo curves, funding spreads 39/(39) -/-
Other liabilities Volatility, credit spreads -/- -/-
322/(342) 129/(125)
30 June 2016
Potential effect recorded Potential effect recorded
in profit or loss directly in equity
Significant unobservable parameters Favourable/(Unfavourable) Favourable/(Unfavourable)
Rm Rm
Deposits due to customers BAGL/Absa funding spread -/- -/-
Investment securities and Risk adjustment yield curves,
investments inked to future earnings and marketability
linvestment contracts discount 12/(12) 110/(105)
Loans and advances
to customers Credit spreads 103/(101) -/-
Other assets Volatility, credit spreads -/- -/-
Volatility, credit spreads,
Trading and hedging basis curves, yield curves,
portfolio assets repo curves, funding spreads 90/(90) -/-
Volatility, credit spreads,
Trading and hedging basis curves, yield curves,
portfolio liabilities repo curves, funding spreads 11/(11) -/-
Other liabilities Volatility, credit spreads -/- -/-
216/(214) 110/(105)
30 December 2016
Potential effect recorded Potential effect recorded
in profit or loss directly in equity
Significant unobservable parameters Favourable/(Unfavourable) Favourable/(Unfavourable)
Rm Rm
Deposits due to BAGL/Absa funding spread -/- -/-
customers
Investment securities Risk adjustment yield curves,
and investments linked future earnings and marketability
to investment contracts discount 34/(36) 94/(100)
Loans and advances to
customers Credit spreads 72/(71) -/-
Other assets Volatility, credit spreads -/- -/-
Volatility, credit spreads,
Trading and hedging basis curves, yield curves,
portfolio assets repo curves, funding spreads 175/(175) -/-
Trading and hedging Volatility, credit spreads,
portfolio liabilities basis curves, yield curves,
repo curves, funding spreads 20/(20) -/-
Other liabilities Volatility, credit spreads -/- -/-
301/(302) 94/(100)
14.9 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:
30 June 31 December
2017 2016 2016
Category of Valuation techniques Significant unobservable Range of estimates
asset/liability applied inputs utilised for the unobservable inputs
Loans and advances Discounted cash flow and/or Credit spreads (0,1%) to 2,10% 0,96% to 3,99% 0,5% to 5%
to customers dividend yield models
Investment securities Discounted cash flow models, Risk adjusted yield Discount rate of Discount rates Discount rate of
and investments linked third-party valuations, curves, future earnings, 13%, comparator between 9,5% and 13%, comparator
to investment earnings multiples marketability discounts multiples between 13,25%, comparator multiples between
contracts and/or incomes and/or comparator 5 and 10,5 multiples between 5 and 10,5
capitalisation valuation multiples 5 and 10,5
Trading and hedging
portfolio assets
and liabilities
Debt instruments Discounted cash flow models Credit spreads 0,07% to 27,5% 0,9% to 3,5% 1,2% to 11,2%
Derivative assets
Credit derivatives Discounted cash flow Credit spreads, (0,3%) to 38,3% 0,0% to 23,67% 0,0% to 40%
and/ or credit default recovery rates
swap (hazard rate) models and/or quanto ratio
Equity derivatives Discounted cash flow, Volatility and/or 16,6% to 21% 0,0% to 81,20% 17,82% to 67,71%
option pricing and/or dividend streams
futures pricing models (greater than 3 years)
Foreign exchange Discounted cash flow African basis curves (12,2%) to 3,27% (6,0%) to 24,99% (16,6%) to 13,1%
derivatives and/ or option pricing (greater than 1 year)
models
Interest rate Discounted cash flow Real yield curves (0,1%) to 8,33% (0,67%) to 7,9% 0,31% to 3,38%
derivatives and/ or option pricing (greater than 1 year),
models repurchase agreement
curves (greater than
1 year),funding spreads
Deposits due to Discounted cash Barclays Africa Group (0,1%) to 2,10% 0,0% to 2,15% (0,27%) to 2,13%
customers flow models Limited's funding spreads
(greater than 5 years)
Debt securities Discounted cash Funding curves (greater (0,1%) to 1,55% (0,16%) to 3,5% (0,27%) to 2,13%
in issue flow models than 5 years)
Investment Discounted cash Estimates of periods
properties flow models in which rental units
will be disposed of 1 to 10 years 1 to 10 years 1 to 10 years
Annual selling price
escalations 1% to 6% 0% to 7% 1% to 7%
Annual rental escalations 1% to 7% 0% to 10% 1% to 7%
Expense ratios 25% to 50% 26,35% to 44% 25% to 50%
Vacancy rates 1% to 7% 1% to 18% 1% to 7%
Income capitalisation
rates 10% to 11% 8% to 11% 10% to 11%
Risk adjusted discount
rates 14% 9,5% to 14% 14%
For assets or liabilities held at amortised cost and disclosed in levels 2 or 3 of 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 5 years. However, if the items mature in less than 5 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.
14.10 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
2017 2016 2016
Rm Rm Rm
Opening balance at the beginning of the reporting period (139) (105) (105)
New transactions 17 (20) (64)
Amounts recognised in profit or loss during the reporting period (18) 17 30
Closing balance at the end of the reporting period (140) (108) (139)
14.11 Third-party credit enhancements
There were no significant liabilities measured at fair value and issued with inseparable third-party
credit enhancements.
15. Reporting changes overview
15.1 Accounting policy changes
The Group made the following accounting policy changes as a result of new and amended standards of IFRS,
which had no impact on the previously reported earnings of the Group:
- The requirements of IFRS 9 relating to the presentation of gains and losses on financial liabilities designated at
fair value were adopted during the current reporting period. As a result, the effects of changes in those liabilities'
credit risk are presented in other comprehensive income with the remaining effect presented in profit or loss.
In accordance with the transitional requirements of IFRS 9, comparatives have not been restated.
- All other amendments to IFRS, and new interpretations, effective for the current reporting period had no significant
impact on the Group's reported results.
15.2 Changes in reportable segments
The following business portfolio changes have impacted the financial results for the comparative period. None of the
restatements have impacted the overall financial position or net earnings of the Group:
- Barclays PLC disposed of 12.2% and 33.7% of the Group's shares on 5 May 2016 and 1 June 2017, respectively. As part of
its divestment Barclays PLC contributed £765m to the Group in June 2017, primarily in recognition of the
investments required for the Group to separate from Barclays PLC. This contribution will be invested primarily in rebranding,
technology and separation-related projects and it is expected that it will neutralise the capital and cash flow impact of
separation investments on the Group over time. The separation process will increase the capital base of the Group in
the near-term and generate endowment revenue thereon, with increased costs over time as the separation investments are
concluded. The Group has therefore included an additional reportable segment, 'Barclays separation' in its segment
results.
- In the second half of 2016, the Group revised its operating model with 'geography' and 'customer' as primary
dimensions, creating a platform for increased focus and dedicated management capacity: South Africa Banking, Rest of Africa
Banking and WIMI (historically reporting was by customer only i.e. RBB, CIB and WIMI). The reporting changes to financial
disclosures were implemented from 1 January 2017.
- The Group refined its cost allocation methodology, resulting in the restatement of operating expenses between and
within segments.
- Commercial Property Finance (CPF) customers with loan balances exceeding R40m were moved from Retail and Business
Banking (RBB) to Corporate and Investment Banking (CIB) to reflect the Group's customer segmentation and coverage model.
Barclays Africa Group Limited
Incorporated in the Republic of South Africa
Registration number: 1986/003934/06
Authorised financial services and registered credit provider (NCRCP7)
JSE share code: BGA
ISIN: ZAE000174124
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
Group Company Secretary
Nadine Drutman
Telephone: +27 11 350 5347
Head of Financial Control
John Annandale
Telephone: +27 11 350 3496
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 Group shares to questions@computershare.co.za
Please direct other queries regarding the Group to groupsec@barclaysafrica.com
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 11 772 3000
ey.com/ZA/en/Home
KPMG Inc
Telephone: +27 11 647 7111
kpmg.com/ZA/en/Home
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
equitysponsor@absacapital.com
Significant banking subsidiaries
Information on the entity and the products and services provided (including banking, insurance
and investments) can be found at:
Absa Bank Limited absa.co.za
Barclays Bank of Botswana Limited barclays.co.bw
Barclays Bank of Ghana Limited gh.barclays.com/
Barclays Bank of Kenya Limited barclays.co.ke
Barclays Bank Mauritius Limited barclays.mu
Barclays Bank Mozambique SA barclays.co.mz/eng
Barclays Bank Seychelles Limited barclays.sc
Barclays Bank Tanzania Limited barclays.co.tz
Barclays Bank of Uganda Limited barclays.co.ug
Barclays Bank Zambia Plc zm.barclays.com/
National Bank of Commerce Limited nbctz.com
Representative offices
Absa Namibia Pty Limited absanamibia.com.na
Absa Capital Representative Office
Nigeria Limited cib.absa.co.za
Date: 28/07/2017 07:05:00 Produced by the JSE SENS Department. The SENS service is an information dissemination service administered by the JSE Limited ('JSE').
The JSE does not, whether expressly, tacitly or implicitly, represent, warrant or in any way guarantee the truth, accuracy or completeness of
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