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Interim results for the six months ended 30 June 2017 - ABSP
Absa Bank Limited
Unaudited condensed consolidated interim financial results
for the reporting period ended 30 June 2017.
Authorised financial services and registered credit provider (NCRCP7)
Registration number: 1986/004794/06
Incorporated in the Republic of South Africa
JSE share code: ABSP
ISIN: ZAE000079810
(Absa, Absa Bank, the Bank or the Company)
These unaudited condensed consolidated financial results were prepared by Barclays Africa Group Financial Control
under the direction and Supervision of the Barclays Africa Group Limited Financial Director, J P Quinn CA(SA).
Profit and dividend announcement
Overview of results
Absa Bank Limited (the Bank) is a wholly owned subsidiary of Barclays Africa Group Limited (the Group), which is
listed on the exchange operated by the JSE Limited. These unaudited condensed consolidated financial results are
published to provide information to holders of the Bank’s listed non-cumulative, non-redeemable preference shares.
Commentary relating to the Bank’s unaudited condensed consolidated interim financial results is included in the
Barclays Africa Group Limited results, as presented to shareholders on 28 July 2017.
Basis of presentation
The Bank’s 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
Johannesburg Stock Exchange (JSE) Listings Requirements and the requirements of the Companies Act. The principal
accounting policies applied are set out in the Bank’s most recent audited annual consolidated financial statements.
The Bank’s unaudited condensed consolidated interim financial results comply with IAS 34 Interim Financial Reporting
(IAS 34).
The preparation of financial information requires the use of estimates and assumptions about future conditions. Use of
available information and application of judgement are inherent in the formation of estimates. The accounting policies
that are deemed critical to the Bank’s results and financial position, in terms of the materiality of the items to which
the policies are applied, and which involve a high degree of judgement including the use of assumptions and estimation,
are impairment of loans and advances, goodwill impairment, fair value measurements, impairment of available-for-sale
financial assets, consolidation of structured or sponsored entities, post-retirement benefits, provisions, income taxes,
share-based payments, liabilities arising from claims made under short 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 and business portfolio changes which have been presented on the reporting changes overview. Refer to note 15.
Standards issued not yet effective
IFRS 9 Financial Instruments
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 Bank account for 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 Bank 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 (SOFP) balance sheet 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 Bank 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 Bank 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 Bank 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 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 Bank capital planning.
IFRS15 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 Bank.
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 Bank’s holding Company,
Barclays Africa Group Limited (BAGL/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 BAGL 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 £765m to BAGL 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" below. The
normalised results have been presented for illustrative purposes only and that information is of the responsibility
of the 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
Chairman Chief Executive Officer
Johannesburg
27 July 2017
Declaration of preference share dividend number 23
Absa Bank non-cumulative, non-redeemable preference shares (Absa Bank preference shares)
The Absa Bank preference shares have an effective coupon rate of 70% of Absa Bank’s prevailing prime overdraft lending
rate (prime rate).
Absa Bank’s current prime rate is 10,25%.
Notice is hereby given that preference dividend number 23, equal to 70% of the average prime rate for 1 March 2017 to
31 August 2017, per Absa Bank preference share has been declared for the period 1 March 2017 to 31 August 2017. The
dividend is payable on Monday, 11 September 2017, to shareholders of the Absa Bank preference shares recorded in the
register of members of the Company at the close of business on Friday, 8 September 2017.
The directors of Absa Bank confirm that the Bank will satisfy the solvency and liquidity test immediately after
completion of the dividend distribution.
Based on the current prime rate, the preference dividend payable for the period 1 March 2017 to 31 August 2017 would
indicatively be 3 705,20548 cents per Absa Bank preference share.
The dividend will be subject to dividends withholding tax at a rate of 20%. In accordance with paragraphs 11.17(a)(i)
to (ix) 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 centum (20%).
- The gross local dividend amount is 3 685,06849 cents per preference share for shareholders exempt from the dividend
tax.
- The net local dividend for shareholders subject to withholding tax at a rate of 20% amounts to 2 948,05479 cents per
preference share.
- Absa Bank currently has 4 944 839 preference shares in issue.
- Absa Bank’s income tax reference number is 9575117719.
In compliance with the requirements of Strate, the electronic settlement and custody system used by JSE Limited, the
following salient dates for the payment of the dividend are applicable:
Last day to trade cum dividend Tuesday, 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
Company Secretary
Johannesburg
28 July 2017
Absa Bank Limited is a company domiciled in South Africa. Its registered office is the 7th Floor, Barclays Towers
West, 15 Troye Street, Johannesburg, 2001.
Condensed consolidated salient features
30 June 31 December
2017 2016 2016
Statement of comprehensive income (Rm)
Revenue 24 806 24 467 48 801
Operating expenses 14 696 13 115 27 525
Profit attributable to ordinary equity holders 4 546 4 452 9 568
Headline earnings(1) 4 805 4 641 9 778
Statement of financial position
Loans and advances to customers (Rm) 638 552 620 901 630 646
Total assets (Rm) 948 523 947 241 918 311
Deposits due to customers (Rm) 577 925 557 940 564 812
Loans-to-deposits ratio (%) 89,0 88,4 89,5
Financial performance (%)
Return on average equity 14,3 16,1 16,3
Return on average assets 1,04 1,00 1,06
Return on average risk-weighted assets 1,96 1,90 1,96
Non-performing loans (NPLs) ratio on gross loans and advances 3,3 3,4 3,0
Operating performance (%)
Net interest margin on average interest bearing assets 3,93 3,99 4,02
Credit loss ratio on gross loans and advances to customers and banks 0,81 1,17 0,93
Credit loss ratio on net loans and advances to customers 0,88 1,31 1,04
Non-interest income as % of total revenue 41,6 41,1 41,0
Cost-to-income ratio 59,2 53,6 56,4
Jaws (10,67) 6,14 1,62
Effective tax rate, excluding indirect taxation 27,4 27,4 25,9
Share statistics (million)
Number of ordinary shares in issue 448,3 420,1 431,3
Weighted average number of ordinary shares in issue 433,1 413,2 417,7
Diluted weighted average number of ordinary shares in issue 433,1 413,2 417,7
Share statistics (cents)
Headline earnings per ordinary share 1 109,4 1 123,2 2 340,9
Diluted headline earnings per ordinary share 1 109,4 1 123,2 2 340,9
Basic earnings per ordinary share 1 049,6 1 077,4 2 290,6
Diluted basic earnings per ordinary share 1 049,6 1 077,4 2 290,6
Dividend per ordinary share relating to income for the reporting period 892,3 - 1 169,4
Dividend cover (time) 1,2 - 2,0
Net asset value per ordinary share 17 659 14 181 14 984
Tangible net asset value per ordinary share 17 176 13 746 14 442
Capital adequacy (%)
Absa Bank Limited 17,4 14,0 15,0
Common Equity Tier 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 normalised salient features
30 June 31 December
2017 2016 2016
Statement of comprehensive income (Rm)
Revenue 24 522 24 467 48 801
Operating expenses 14 236 13 115 27 525
Profit attributable to ordinary equity holders 4 936 4 452 9 568
Headline earnings 4 957 4 641 9 778
Statement of financial position
Total assets (Rm) 936 703 947 241 918 311
Financial performance (%)
Return on average equity 15,1 16,1 16,3
Return on average assets 1,08 1,00 1,06
Return on risk-weighted assets 2,02 1,90 1,96
Operating performance (%)
Non-interest income as percentage of total revenue 41,2 41,1 41,0
Cost-to-income ratio 58,1 53,6 56,4
Jaws (8,32) 6,14 1,62
Effective tax rate, excluding indirect taxation 27,0 27,4 25,9
Share statistics (million)
Number of ordinary shares in issue 448,3 420,1 431,3
Weighted average number of ordinary shares in issue 433,1 413,2 417,6
Diluted weighted average number of ordinary shares in issue 433,1 413,2 417,6
Share statistics (cents)
Headline earnings per ordinary share 1 144,5 1 123,2 2 340,9
Diluted headline earnings per ordinary share 1 144,5 1 123,2 2 340,9
Basic earnings per ordinary share 1 139,7 1 077,4 2 290,6
Diluted basic earning per ordinary share 1 139,7 1 077,4 2 290,6
NAV per ordinary share 15 046 14 181 14 984
Tangible NAV per ordinary share 14 563 13 746 14 442
Capital adequacy (%)
Absa Bank Limited 15,2 14,0 15,0
Common Equity Tier 1 (%)
Absa Bank Limited 11,9 10,8 11,6
Condensed consolidated normalised reconciliation
Adjustments for
Unadjusted Barclays
IFRS Bank separation Normalised Bank
performance 30 June 2017 performance
Reconciliation of normalised to IFRS results
Statement of comprehensive income (Rm)
Net interest income 14 475 (46) 14 429
Non-interest income 10 331 (238) 10 093
Total income 24 806 (284) 24 522
Impairment losses on loans and advances (2 779) - (2 779)
Operating expenses (14 696) 460 (14 236)
Other operating expenses (821) 325 (496)
Operating profit before income tax 6 510 501 7 011
Tax expenses (1 783) 111 (1 894)
Profit for the reporting period 4 727 390 5 117
Profit attributable to:
Ordinary equity holders 4 546 390 4 936
Non-controlling interest - ordinary shares (1) - (1)
Non-controlling interest - preference shares (180) - (180)
4 365 390 4 755
Headline earnings 4 805 152 4 957
Operating performance (%)
Net interest margin on average interest-bearing assets 3,93 n/a 3,93
Credit loss ratio 0,82 n/a 0,82
Non-interest income as % of income 41,6 n/a 41,2
Income growth 1,4 n/a 0,2
Operating expenses growth 12,0 n/a 8,5
Cost-to-income ratio 59,2 n/a 58,1
Statement of financial position (Rm)
Loans and advances to customers 638 552 - 638 552
Loans and advances to banks 50 824 - 50 824
Investment securities 81 876 - 81 876
Other assets 177 270 (11 819) 165 451
Total assets 948 523 (11 819) 936 703
Deposits due to customers 577 925 - 577 925
Debt securities in issue 139 906 - 139 906
Other liabilities 146 878 (105) 146 773
Total liabilities 864 710 (105) 864 605
Equity 83 813 (11 715) 72 098
Total equity and liabilities 948 523 (11 819) 936 703
Key performance ratios (%)
RoRWA 1,96 n/a 2,02
RoA 1,04 n/a 1,08
RoE 14,3 n/a 15,1
Capital adequacy 17,4 n/a 15,2
Common Equity Tier 1 14,1 n/a 11,9
Barclays separation financial results
‘Net interest income’ includes the endowment benefit received on the Barclays PLC investment, while hedging gains have
been disclosed as ‘non-interest income’. Professional fees incurred on separation activities have been recognised in
‘Operating expenses’. The Barclays.net impairment of R325m is included in ‘Operating expense’.
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 26 346 25 902 28 252
Investment securities 81 876 75 011 84 174
Loans and advances to banks 50 824 62 411 39 296
Trading portfolio assets 74 961 85 853 74 389
Hedging portfolio assets 2 270 1 438 1 734
Other assets 29 225 26 858 16 645
Current tax assets 386 1 167 616
Non-current assets held for sale 1 1 391 369 367
Loans and advances to customers 2 638 552 620 901 630 646
Loans to Group Companies 26 117 32 980 25 794
Investments in associates and joint ventures 1 144 1 005 1 065
Investment property - 240 222
Property and equipment 13 222 11 271 12 726
Goodwill and intangible assets 2 168 1 826 2 339
Deferred tax assets 41 9 46
Total assets 948 523 947 241 918 311
Liabilities
Deposits from banks 56 475 82 743 60 148
Trading portfolio liabilities 39 680 49 209 42 503
Hedging portfolio liabilities 1 470 2 357 2 054
Other liabilities 31 207 30 537 21 150
Provisions 1 233 1 166 2 060
Current tax liabilities - 8 4
Non-current liabilities held for sale - 9 9
Deposits due to customers 577 925 557 940 564 812
Debt securities in issue 139 906 144 281 139 573
Borrowed funds 3 15 930 13 416 15 679
Deferred tax liabilities 884 1 336 1 020
Total liabilities 864 710 883 002 849 012
Equity
Capital and reserves
Attributable to ordinary equity holders:
Ordinary Share capital 304 304 304
Ordinary Share premium 36 880 22 964 24 964
Preference share capital 1 1 1
Preference share premium 4 643 4 643 4 643
Retained earnings 38 642 33 125 36 099
Other reserves 3 341 3 177 3 262
83 811 64 214 69 273
Non-controlling interest - ordinary shares 2 25 26
Total equity 83 813 64 239 69 299
Total liabilities and equity 948 523 947 241 918 311
Condensed consolidated statement of comprehensive income
30 June 31 December
2017 2016 2016
Note Rm Rm Rm
Net interest income 14 475 14 403 28 809
Interest and similar income 35 820 35 626 69 894
Interest expense and similar charges (21 345) (21 223) (41 085)
Non-interest income 10 331 10 064 19 992
Net fee and commission income 8 429 7 881 16 168
Fee and commission income 9 076 8 597 17 628
Fee and commission expense (647) (716) (1 460)
Gains and losses from banking and trading activities 1 752 1 694 2 969
Gains and losses from investment activities - (6) 2
Other operating income 150 495 853
Total Income 24 806 24 467 48 801
Impairment losses on loans and advances (2 779) (3 967) (6 408)
Operating income before operating expenditure 22 027 20 500 42 393
Operating expenditure (14 696) (13 115) (27 525)
Other expenses (900) (1 063) (1 575)
Other impairments 4 (326) (583) (577)
Indirect taxation (574) (480) (998)
Share of post-tax results of associates and joint ventures 79 58 118
Operating profit before income tax 6 510 6 380 13 411
Taxation expense (1 783) (1 746) (3 477)
Profit for the reporting period 4 727 4 634 9 934
Profit attributable to:
Ordinary equity holders 4 546 4 452 9 568
Non-controlling interest 1 14 15
Preference equity holders 180 168 351
4 727 4 634 9 934
Earnings per share:
Basic earnings per share (cents per share) 1 049,6 1 077,4 2 290,6
Diluted earnings per share (cents per share) 1 049,6 1 077,4 2 290,6
Profit for the reporting period 4 727 4 634 9 934
Other comprehensive income
Items that will not be reclassified to the profit or loss (19) - (12)
Changes in own credit risk on liabilities measured at FVTPL (13) - -
Fair value (losses)/gains arising from changes in own credit
risk during the reporting period (13) - -
Movement in retirement benefit fund assets and liabilities (6) - (12)
Decrease in retirement benefit surplus (5) - (17)
Deferred tax (1) - 5
Items that are or may be subsequently reclassified to profit
or loss 215 1 044 928
Movement in foreign currency translation reserve 54 (452) (453)
Differences in translation of foreign operations 54 (132) (133)
Gains released to profit or loss - (320) (320)
Movement in cash flow hedging reserve 519 1 568 1 726
Fair value gains arising during the reporting period 876 2 390 2 714
Amount removed from other comprehensive income and recognised
in the profit or loss (157) (212) (314)
Deferred tax (200) (610) (674)
Movement in available-for-sale reserve (358) (72) (345)
Fair value (losses)/gains arising during the reporting period (515) (101) (475)
Release to the profit or loss 18 - (3)
Deferred tax 139 29 133
Total comprehensive income for the reporting period 4 923 5 678 10 850
Total comprehensive income attributable to:
Ordinary equity holders 4 742 5 496 10 484
Non-controlling interest 1 14 15
Preference equity holders 180 168 351
4 923 5 678 10 850
Condensed consolidated statement of changes in equity
30 June 2017
Number of Preference Preference
ordinary Share Share share share
shares(1) capital premium capital premium
’000 Rm Rm Rm Rm
Balance at the beginning of the reporting period 431 318 304 24 964 1 4 643
Total comprehensive income for the reporting period - - - - -
Profit for the reporting period - - - - -
Other comprehensive income - - - - -
Dividends paid during the reporting period - - - - -
Shares issued 16 983 - 3 500 - -
Purchase of Barclays Africa Group Limited shares in respect
of equity-settled share-based payment arrangements - - - - -
Elimination of movement in treasury shares held by Group entities - - - - -
Transfer of vesting options - - - - -
Movement in share-based payment reserve - - - - -
Transfer from share-based payment reserve - - - - -
Value of employee services - - - - -
Conversion from cash-settled schemes - - - - -
Deferred tax - - - - -
Share of post-tax results of associates and joint ventures - - - - -
Disposal of non-controlling interest and related transaction costs(2) - - - - -
Barclays Separation(3) - - 8 416 - -
Balance at the end of the reporting period 448 301 304 36 880 1 4 643
Condensed consolidated statement of changes in equity continued
30 June 2017
Cash Foreign
Total Available- flow currency
Retained other for-sale hedging translation
earnings reserves reserve reserve reserve
Rm Rm Rm Rm Rm
Balance at the beginning of the reporting period 36 099 3 262 259 (145) (54)
Total comprehensive income for the reporting period 4 707 215 (358) 519 54
Profit for the reporting period 4 726 - - - -
Other comprehensive income (19) 215 (358) 519 54
Dividends paid during the reporting period (5 780) - - - -
Shares issued - - - - -
Purchase of Barclays Africa Group Limited shares in respect of
equity-settled share-based payment arrangements 5 - - - -
Elimination of movement in treasury shares held by Group entities - - - - -
Transfer of vesting options - - - - -
Movement in share-based payment reserve - (215) - - -
Transfer from share-based payment reserve - (425) - - -
Value of employee services - 229 - - -
Conversion from cash-settled schemes - - - - -
Deferred tax - (19) - - -
Share of post-tax results of associates and joint ventures (79) 79 - - -
Disposal of non-controlling interest and related transaction costs(2) - - - - -
Barclays Separation(3) 3 690 - - - -
Balance at the end of the reporting period 38 642 3 341 (99) 374 -
Condensed consolidated statement of changes in equity continued
30 June 2017
Associates’ Total Non-
Share and attributable controlling
based Joint to ordinary interest-
Capital payment ventures’ equity ordinary Total
reserve reserve reserve holders shares equity
Rm Rm Rm Rm Rm Rm
Balance at the beginning of the reporting period 1 422 713 1 067 69 273 26 69 299
Total comprehensive income for the reporting period - - - 4 922 1 4 923
Profit for the reporting period - - - 4 726 1 4 727
Other comprehensive income - - - 196 - 196
Dividends paid during the reporting period - - - (5 780) - (5 780)
Shares issued - - - 3 500 - 3 500
Purchase of Barclays Africa Group Limited shares in respect of
equity-settled share-based payment arrangements - - - 5 - 5
Elimination of movement in treasury shares held by Group entities - - - - - -
Transfer of vesting options - - - - - -
Movement in share-based payment reserve - (215) - (215) - (215)
Transfer from share-based payment reserve - (425) - (425) - (425)
Value of employee services - 229 - 229 - 229
Conversion from cash-settled schemes - - - - - -
Deferred tax - (19) - (19) - (19)
Share of post-tax results of associates and joint ventures - - 79 - - -
Disposal of non-controlling interest and related
transaction costs(2) - - - - (25) (25)
Barclays Separation(3) - - - 12 106 - 12 106
Balance at the end of the reporting period 1 422 498 1 146 83 811 2 83 813
Notes
All movements are reflected net of taxation.
(1) This includes ordinary shares and ‘A’ ordinary shares.
(2) The Group disposed of its controlling stake in a non-core subsidiary which was classified as held for sale.
(3) As part of the Barclays PLC divestment, the Bank issued share capital to Barclays PLC for R8,4bn and
received R3,7bn in cash. The resultant cash received 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 Bank
became entitled to cash.
Condensed consolidated statement of changes in equity continued
30 June 2016
Number of Preference Preference
ordinary Share Share share share
shares(1) capital premium capital premium
’000 Rm Rm Rm Rm
Balance at the beginning of the reporting period 412 798 304 21 455 1 4 643
Total comprehensive income for the reporting period - - - - -
Profit for the period - - - - -
Other comprehensive income - - - - -
Dividends paid during the reporting period - - - - -
Shares issued 7 266 - 1 500 - -
Purchase of Barclays Africa Group Limited shares
in respect of equity-settled share-based payment arrangements - - 9 - -
Movement in share-based payment reserve - - - - -
Transfer from share-based payment reserve - - - - -
Conversion from cash-settled to equity-settled Schemes - - - - -
Deferred tax - - - - -
Share of post-tax results of associates and joint ventures - - - - -
Balance at the end of the reporting period 420 064 304 22 964 1 4 643
Condensed consolidated statement of changes in equity continued
30 June 2016
Cash Foreign
Total Available- flow currency
Retained other for-sale hedging translation
earnings reserves reserve reserve reserve
Rm Rm Rm Rm Rm
Balance at the beginning of the reporting period 32 033 2 050 604 (1 871) 399
Total comprehensive income for the reporting period 4 620 1 044 (72) 1 568 (452)
Profit for the period 4 620 - - - -
Other comprehensive income - 1 044 (72) 1 568 (452)
Dividends paid during the reporting period (3 668) - - - -
Shares issued - - - - -
Purchase of Barclays Africa Group Limited shares
in respect of equity-settled share-based payment arrangements 198 - - - -
Movement in share-based payment reserve - 25 - - -
Transfer from share-based payment reserve - (202) - - -
Conversion from cash-settled to equity-settled Schemes - 219 - - -
Deferred tax - 8 - - -
Share of post-tax results of associates and joint ventures (58) 58 - - -
Balance at the end of the reporting period 33 125 3 177 532 (303) (53)
Condensed consolidated statement of changes in equity continued
30 June 2016
Associates’ Total Non-
Share and attributable controlling
based Joint to ordinary interest-
Capital payment ventures’ equity ordinary Total
reserve reserve reserve holders shares equity
Rm Rm Rm Rm Rm Rm
Balance at the beginning of the reporting period 1 422 547 949 60 486 11 60 497
Total comprehensive income for the
reporting period - - - 5 664 14 5 678
Profit for the period - - - 4 620 14 4 634
Other comprehensive income - - - 1 044 - 1 044
Dividends paid during the reporting period - - - (3 668) - (3 668)
Shares issued - - - 1 500 - 1 500
Purchase of Barclays Africa Group Limited
shares in respect of equity-settled
share-based payment arrangements - - - 207 - 207
Movement in share-based payment reserve - 25 - 25 - 25
Transfer from share-based payment reserve - (202) - (202) - (202)
Conversion from cash-settled
to equity-settled Schemes - 219 - 219 - 219
Deferred tax - 8 - 8 - 8
Share of post-tax results of
associates and joint ventures - - 58 - - -
Balance at the end of the reporting period 1 422 572 1 007 64 214 25 64 239
Condensed consolidated statement of changes in equity continued
31 December 2016
Number of Preference Preference
ordinary Share Share share share
shares(1) capital premium capital premium
’000 Rm Rm Rm Rm
Balance at the beginning of the reporting period 412 798 304 21 455 1 4 643
Total comprehensive income for the reporting period - - - - -
Profit for the period for the reporting period - - - - -
Other comprehensive income - - - - -
Dividends paid during the reporting period - - - - -
Shares issued 18 520 - 3 500 - -
Purchase of Barclays Africa Group Limited shares in respect of
equity-settled share-based payment arrangements - - 9 - -
Transfer of vesting options - - - - -
Movement in share-based payment reserve - - - - -
Value of employee services - - - - -
Conversion from cash-settled to equity-settled Schemes - - - - -
Deferred tax - - - - -
Share of post-tax results of associates and joint ventures - - - - -
Balance at the end of the reporting period 431 318 304 24 964 1 4 643
Condensed consolidated statement of changes in equity continued
31 December 2016
Cash Foreign
Total Available- flow currency
Retained other for-sale hedging translation
earnings reserves reserve reserve reserve
Rm Rm Rm Rm Rm
Balance at the beginning of the reporting period 32 033 2 050 604 (1 871) 399
Total comprehensive income for the reporting period 9 907 928 (345) 1 726 (453)
Profit for the period for the reporting period 9 919 - - - -
Other comprehensive income (12) 928 (345) 1 726 (453)
Dividends paid during the reporting period (5 851) - - - -
Shares issued - - - - -
Purchase of Barclays Africa Group Limited shares in respect of
equity-settled share-based payment arrangements (198) - - - -
Transfer of vesting options 326 - - - -
Movement in share-based payment reserve - 166 - - -
Transfer from share-based payment reserve - (315) - - -
Value of employee services - 411 - - -
Conversion from cash-settled to equity-settled Schemes - 30 - - -
Deferred tax - 40 - - -
Share of post-tax results of associates and joint ventures (118) 118 - - -
Balance at the end of the reporting period 36 099 3 262 259 (145) (54)
Condensed consolidated statement of changes in equity continued
31 December 2016
Associates’ Total Non-
Share and attributable controlling
based Joint to ordinary interest-
Capital payment ventures’ equity ordinary Total
reserve reserve reserve holders shares equity
Rm Rm Rm Rm Rm Rm
Balance at the beginning of the reporting period 1 422 547 949 60 486 11 60 497
Total comprehensive income for the reporting period - - - 10 835 15 10 850
Profit for the period for the reporting period - - - 9 919 15 9 934
Other comprehensive income - - - 916 - 916
Dividends paid during the reporting period - - - (5 851) - (5 851)
Shares issued - - - 3 500 - 3 500
Purchase of Barclays Africa Group Limited shares in respect
of equity-settled share-based payment arrangements - - - (198) - (198)
Transfer of vesting options - - - 335 - 335
Movement in share-based payment reserve - 166 - 166 - 166
Transfer from share-based payment reserve - (315) - (315) - (315)
Value of employee services - 411 - 411 - 411
Conversion from cash-settled to equity-settled Schemes - 30 - 30 - 30
Deferred tax - 40 - 40 - 40
Share of post-tax results of associates and joint ventures - - 118 - - -
Balance at the end of the reporting period 1 422 713 1 067 69 273 26 69 299
Note
All movements are reflected net of taxation.
(1) This includes ordinary shares and ‘A’ ordinary shares.
Condensed consolidated statement of cash flows
30 June 31 December
2017 2016 2016
Note Rm Rm Rm
Net cash (utilised in)/generated from operating activities (3 913) 1 581 2 300
Net cash utilised in investing activities (956) (1 439) (4 090)
Net cash generated by/(utilised in) financing activities(3) 10 831 (1 730) (168)
Net increase/(decrease) in cash and cash equivalents 5 962 (1 588) (1 958)
Cash and cash equivalents at the beginning of the reporting period 1 12 416 14 374 14 374
Cash and cash equivalents at the end of the reporting period 2 18 378 12 786 12 416
Notes to the summary consolidated statement of cash flows
1. Cash and cash equivalents at the beginning of the reporting period
Cash, cash balances and balances with central banks(1) 9 662 8 607 8 607
Loans and advances to banks(2) 2 754 5 767 5 767
12 416 14 374 14 374
2. Cash and cash equivalents at the end of the reporting period
Cash, cash balances and balances with central banks(1) 7 673 7 683 9 662
Loans and advances to banks(2) 10 705 5 103 2 754
18 378 12 786 12 416
Notes
(1) Includes coins and bank notes.
(2) Includes call advances, which are used as working capital for the Bank.
(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.
The following movements in non-current assets held for sale were effected during the previous financial reporting
period:
- The CPF Equity division in Business Banking South Africa transferred 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 with a carrying value of R15m.
- Head Office, Treasury and other operations in South Africa disposed of property and equipment with a carrying value
of R94m.
2. Loans and advances
30 June
2017
Performing loans Non-performing loans
Coverage Coverage Net total
Exposure Impairment ratio Exposure Impairment ratio exposure
Rm Rm % Rm Rm % Rm
South Africa Banking 622 352 4 596 0,74 22 956 9 072 39,52 631 640
RBB South Africa 418 064 3 992 0,95 21 352 8 455 39,60 426 969
Retail Banking South Africa 356 819 3 148 0,88 18 288 7 339 40,13 364 620
Credit cards 26 900 622 2,31 3 943 2 875 72,91 27 346
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 213 920 1 211 0,57 10 102 2 118 20,97 220 693
Other loans and advances 687 - - - - - 687
Overdrafts 4 575 40 0,87 286 171 59,79 4 650
Personal and term loans 16 558 516 3,12 1 736 1 123 64,69 16 655
Business Banking South Africa 61 245 844 1,38 3 064 1 116 36,42 62 349
Mortgages (including CPF) 25 803 168 0,65 1 501 533 35,51 26 603
Overdrafts 19 366 425 2,19 853 390 45,72 19 404
Term loans 16 076 251 1,56 710 193 27,18 16 342
CIB South Africa 204 288 604 0,30 1 604 617 38,47 204 671
Rest of Africa Banking 684 - - - - - 684
Wealth 5 430 12 0,22 128 61 47,66 5 485
Head office and other operations in South Africa 752 9 1,20 - - - 743
Loans and advances to customers 629 218 4 617 0,73 23 084 9 133 39,56 638 552
Loans and advances to banks 50 824 - - - - - 50 824
680 042 4 617 0,68 23 084 9 133 39,56 689 376
30 June
2016(1)
Performing loans Non-performing loans
Coverage Coverage Net total
Exposure Impairment ratio Exposure Impairment ratio exposure
Rm Rm % Rm Rm % Rm
South Africa Banking 604 399 4 443 0,74 23 389 9 460 40,45 613 885
RBB South Africa 411 920 3 732 0,91 20 827 8 264 39,68 420 751
Retail Banking South Africa 354 814 2 980 0,84 17 621 7 116 40,38 362 339
Credit cards 27 993 643 2,30 4 117 2 972 72,19 28 495
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 217 744 1 222 0,56 9 585 2 105 21,96 224 002
Other loans and advances 461 - - - - - 461
Overdrafts 3 337 27 0,81 201 128 63,68 3 383
Personal and term loans 16 066 448 2,79 1 741 1 102 63,30 16 257
Business Banking South Africa 57 106 752 1,32 3 206 1 148 35,81 58 412
Mortgages (including CPF) 23 281 171 0,73 1 524 556 36,48 24 078
Overdrafts 19 180 354 1,85 895 396 44,25 19 325
Term loans 14 645 227 1,55 787 196 24,90 15 009
CIB South Africa 192 479 711 0,37 2 562 1 196 46,68 193 134
Rest of Africa Banking 19 - - - - - 19
Wealth 5 876 42 0,71 86 25 29,07 5 895
Head office and other operations in South Africa 1 103 1 0,09 - - - 1 102
Loans and advances to customers 611 397 4 486 0,73 23 475 9 485 40,40 620 901
Loans and advances to banks 62 411 - - - - - 62 411
673 808 4 486 0,67 23 475 9 485 40,40 683 312
Note
(1) These numbers have been restated, refer to the reporting changes overview in note 15.
31 December
2016(1)
Performing loans Non-performing loans
Coverage Coverage Net total
Exposure Impairment ratio Exposure Impairment ratio exposure
Rm Rm % Rm Rm % Rm
South Africa Banking 614 324 4 531 0,74 23 590 9 604 40,71 623 779
RBB South Africa 412 768 3 887 0,94 21 325 8 420 39,48 421 786
Retail Banking South Africa 355 064 3 114 0,88 18 037 7 258 40,24 362 729
Credit cards 27 374 596 2,18 4 001 2 919 72,96 27 860
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 214 610 1 219 0,57 9 920 2 097 21,14 221 214
Other loans and advances 492 - - - - - 492
Overdrafts 3 923 45 1,15 220 142 64,55 3 956
Personal and term loans 16 202 519 3,20 1 811 1 175 64,88 16 319
Business Banking South Africa 57 704 773 1,34 3 288 1 162 35,34 59 057
Mortgages (including CPF) 24 104 158 0,66 1 567 536 34,21 24 977
Overdrafts 18 284 366 2,00 929 421 45,32 18 426
Term loans 15 316 249 1,63 792 205 25,88 15 654
CIB South Africa 201 556 644 0,32 2 265 1 184 52,27 201 993
Rest of Africa Banking 557 - - - - - 557
Wealth 5 615 14 0,25 116 57 49,14 5 660
Head office and other operations in South Africa 654 4 0,61 - - - 650
Loans and advances to customers 621 150 4 549 0,73 23 706 9 661 40,75 630 646
Loans and advances to banks 39 296 - - - - - 39 296
660 446 4 549 0,69 23 706 9 661 40,75 669 942
Note
(1) These numbers have been restated, refer to the reporting changes overview in note 15.
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: Rnil, 31 December 2016: Rnil)
were redeemed.
4. Other impairments
30 June 31 December
2017 2016 2016
Rm Rm Rm
Reversal of impairments on financial instruments - - (13)
Intangible assets (1) 326 583 590
326 583 577
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 Bank 4 546 4 452 9 568
Total headline earnings adjustment: 259 189 210
IFRS 5 - Gains on disposal of non-current assets held for sale (7) (5) - - - -
IAS 16 - Profit on disposal of property and equipment (5) (4) (44) (32) (22) (16)
IAS 21 - Recycled foreign currency translation reserve 52 52 (320) (297) (320) (297)
IAS 36 - Impairment of intangible assets 326 238 583 583 590 590
IAS 39 - Release of available-for-sale reserves 18 12 - - (3) (2)
IAS 40 - Change in fair value of investment properties (37) (29) (84) (65) (84) (65)
IAS 40 - Profit on disposal of investment property (5) (5) - - - -
Headline earnings/diluted headline earnings 4 805 4 641 9 778
Headline earnings per share/diluted headline earnings per share (cents) 1 109,4 1 123,2 2 340,9
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: 892,25702 cents) 4 000 - -
Special Dividend (30 June 2017: 780,72490 cents) (6 December 2016: 476,12 cents)
(10 June 2016: 363,37 cents) 3 500 1 500 3 500
Final Dividend (23 February 2017: 486,88017 cents)(1 March 2016: 484,49896 cents) - - 2 100
7 500 1 500 5 600
Dividends declared to preference equity holders
Interim dividend (28 July 2017: 3685,06849 cents) (29 July 2016: 3696,57534 cents) 182 183 183
Final dividend (23 February 2017: 3644,79452 cents)(1 March 2016: 3395,47945 cents) - - 180
182 183 363
Dividends paid to ordinary equity holders
Final dividend (10 April 2017: 1249,15983 cents) (1 March 2016: 484,49896 cents) 5 600 2 000 2 000
Special dividend (30 June 2017: 780,72490 cents) (6 December 2016: 476,12 cents)
(10 June 2016: 363,37 cents) 3 500 1 500 3 500
9 100 3 500 5 500
Dividends paid to preference equity holders
Final dividend (10 April: 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 net amount is reflected after taxation.
7. Acquisitions and disposals of businesses and other similar transactions
7.1 Acquisitions and disposals of businesses during the current reporting period
Apart from non-current assets/liabilities held for sale disposed of (refer to note 1) there were no other disposals
or acquisitions of businesses during the current reporting period.
7.2 Acquisitions and disposals of businesses during the previous reporting period
There were no acquisitions or disposals of businesses during the previous reporting period.
8. Related parties
Absa Bank is a wholly owned subsidiary of Barclays Africa Group. Barclays Bank PLC, the holding company of Barclays
Africa Group, 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 Bank undertakes to make specified payments to a counterparty,
should the counterparty suffer a loss as a result of a specified debtor failing to make payment when due in accordance
with the terms of a debt instrument. This amount represents the maximum off-statement of financial position exposure.
10. Commitments
30 June 31 December
2017 2016 2016
Rm Rm Rm
Authorised capital expenditure
Contracted but not provided for 767 1 294 509
The Bank 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 971 859 947
Later than one year and no later than five years 2 524 2 117 2 367
Later than five years 1 068 1 300 1 195
4 563 4 276 4 509
The operating lease commitments comprise a number of separate operating leases in relation to property and equipment,
none of which is individually significant to the Bank. Leases are negotiated for an average term of three to five years
and rentals are renegotiated annually.
11. Contingencies
30 June 31 December
2017 2016 2016
Rm Rm Rm
Guarantees 29 182 29 665 30 469
Irrevocable debt facilities 126 605 127 962 122 958
Letters of credit 4 481 4 996 4 645
Other contingencies 91 6 135
160 359 162 629 158 207
Guarantees include performance guarantee contracts and payment guarantee contracts.
Irrevocable facilities are commitments to extend credit where the Bank 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 Bank 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 Bank 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 Bank 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 Bank is also subject to enquiries and examinations, requests for information, audits, investigations and legal and
other proceedings by regulators, governmental and other public bodies in connection with (but not limited to) consumer
protection measures, compliance with legislation and regulation, wholesale trading activity and other areas of banking
and business activities in which the Bank is or has been engaged.
At the present time, the Bank does not expect the ultimate resolution of any of these other matters to have a material
adverse effect on its financial position. However, in light of the uncertainties involved in such matters and the
matters specifically described in this note, there can be no assurance that the outcome of a particular matter or matters
will not be material to the Bank’s results of operations or cash flow for a particular period, depending on, amongst other
things, the amount of the loss resulting from the matter(s) and the amount of income otherwise reported for the
reporting period.
The Bank has not disclosed the contingent liabilities associated with these matters either because they cannot reasonably
be estimated or because such disclosure could be prejudicial to the outcome of the matter. Provision is made for all
liabilities which are expected to materialise.
Regulatory matters
The scale of regulatory change remains challenging and the global financial crisis is resulting in a significant
tightening of regulation and changes to regulatory structures globally, especially for companies that are deemed
to be of systemic importance. Concurrently, there is continuing political and regulatory scrutiny of the operation
of the banking and consumer credit industries globally which, in some cases, is leading to increased regulation.
The nature and impact of future changes in the legal framework, policies and regulatory action cannot currently be
fully predicted and are beyond the Bank’s control, but especially in the area of banking and insurance regulation,
are likely to have an impact on the Bank’s businesses, systems and earnings.
The Bank is continuously evaluating its programmes and controls in general relating to compliance with regulation. The
Bank undertakes monitoring, review and assurance activities, and the Bank 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 Bank conducted a review
of relevant activity, processes, systems and controls. The Bank is continuing to provide information to relevant authorities
as part of the Bank’s ongoing cooperation. It is not currently practicable to provide an estimate of the financial impact
of the actions described on the Bank or what effect that they might have upon the Bank’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 Bank is subject to income taxes in numerous jurisdictions and the calculation of the Bank’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 Bank’s treatment and accordingly the final tax charge cannot be determined until
resolution has been reached with the relevant tax authority. The Bank recognises liabilities for anticipated tax audit
issues based on estimates of whether additional taxes will be due after taking into account expert external advice where
appropriate. Where the final tax outcome of these matters is different from the amounts that were initially recorded, such
differences will impact the current and deferred income tax asset and liabilities in the reporting period which such
determination is made. These risks are managed in accordance with the Bank’s Tax Risk Framework.
12. Segment reporting
30 June 31 December
2017 2016 2016(1)
Rm Rm Rm
12.1 Headline earnings contribution by segment
South Africa Banking 5 827 5 411 11 245
Rest of Africa Banking 5 (1) 7
Wealth (167) (126) (261)
Head Office, Treasury and other operations in South Africa (708) (643) (1 213)
Barclays separation (152) - -
Total headline earnings 4 805 4 641 9 778
30 June 31 December
2017 2016 2016(1)
Rm Rm Rm
12.2 Total income by segment
South Africa Banking 24 959 24 621 49 442
Rest of Africa Banking 5 (2) 6
Wealth 215 231 448
Head Office, Treasury and other operations in South Africa (656) (383) (1 095)
Barclays separation 283 - -
Total income 24 806 24 467 48 801
Note
(1) Operational changes, management changes and associated changes to the way in which the Chief Operating
Decision Maker CODM views the performance of each business segment, have resulted in the reallocation
of earnings, assets and liabilities between operating segments. For details on the business portfolio
changes refer to note 15.
30 June 31 December
2017 2016 2016(1)
Rm Rm Rm
12.3 Total internal income by segment
South Africa Banking (4 321) (6 231) (15 609)
Rest of Africa Banking (22) (1) ( 27)
Wealth 16 13 10
Head Office, Treasury and other operations in South Africa 6 024 6 369 14 164
Barclays separation 46 - -
Total internal income 1 743 150 (1 462)
30 June 31 December
2017 2016 2016(1)
Rm Rm Rm
12.4 Total assets by segment
South Africa Banking 1 143 838 1 153 808 1 143 676
Rest of Africa Banking 696 29 568
Wealth 5 959 6 440 6 112
Head Office, Treasury and other operations in South Africa (190 151) (213 036) (232 045)
Barclays separation (11 819) - -
Total assets 948 523 947 241 918 311
30 June 31 December
2017 2016 2016(1)
Rm Rm Rm
12.5 Total liabilities by segment
South Africa Banking 1 135 188 1 146 390 1 130 424
Rest of Africa Banking 685 25 555
Wealth 6 120 6 555 6 359
Head Office, Treasury and other operations in South Africa (277 388) (269 968) (288 326)
Barclays separation 105 - -
Total liabilities 864 710 883 002 849 012
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 the South African Reserve Bank 18 673 18 673 18 183 18 183
Coins and bank notes 7 673 7 673 7 683 7 683
Money market assets - - 36 36
Cash, cash balances and balances with central banks 26 346 26 346 25 902 25 902
Loans and advances to banks 33 562 33 562 36 217 36 217
Other assets 27 241 27 241 25 499 25 499
South Africa Banking 604 358 604 466 588 942 588 463
RBB South Africa 426 863 426 971 420 616 420 137
Retail Banking South Africa 364 619 364 727 362 339 361 860
Credit cards 27 346 27 346 28 494 28 494
Instalment credit agreements 73 882 73 785 73 126 72 351
Loans to associates and joint ventures 20 707 20 707 16 615 16 615
Mortgages 220 713 220 722 224 020 224 215
Other loans and advances 687 687 460 460
Overdrafts 4 631 4 631 3 370 3 370
Personal and term loans 16 653 16 849 16 254 16 355
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 177 495 177 495 168 326 168 326
Rest of Africa Banking 684 684 19 19
Wealth 5 485 5 485 5 895 5 895
Head Office, Treasury and other operations in South Africa 740 740 1 097 1 097
Loans and advances to customers - net of impairment losses 611 267 611 375 595 953 595 474
Loans to Group companies 26 117 26 117 32 980 32 988
Total assets 724 533 724 641 716 551 716 080
Financial liabilities
Deposits from banks 38 212 38 212 57 502 57 502
Other liabilities 28 872 28 872 28 314 28 314
Call deposits 56 008 56 008 57 305 57 305
Cheque account deposits 157 138 157 138 151 876 151 876
Credit card deposits 1 811 1 811 1 865 1 865
Fixed deposits 121 292 122 084 115 150 115 563
Foreign currency deposits 22 857 22 857 30 097 30 097
Notice deposits 63 125 63 138 58 516 58 528
Other deposits 2 113 2 113 2 109 2 109
Saving and transmission deposits 130 709 130 709 123 297 123 297
Deposits due to customers 555 053 555 858 540 215 540 640
Debt securities in issue 134 957 134 957 138 090 138 328
Borrowed funds 15 930 15 930 13 416 13 689
Total liabilities 773 024 773 829 777 537 778 473
Note
(1) These numbers have been restated, refer to Note 15.
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 the SARB 18 552 18 552
Coins and bank notes 9 662 9 662
Money market assets 38 38
Cash, cash balances and balances with central banks 28 252 28 252
Loans and advances to banks 19 439 19 439
Other assets 14 822 14 895
South Africa Banking 599 707 599 610
RBB South Africa 421 681 421 584
Retail Banking South Africa 362 730 362 621
Credit cards 27 861 27 861
Instalment credit agreements 73 955 73 650
Loans to associates and joint ventures 18 933 18 933
Mortgages 221 225 221 237
Other loans and advances 492 492
Overdrafts 3 947 3 947
Personal and term loans 16 317 16 501
Business Banking South Africa 58 951 58 963
Mortgages (including CPF) 24 849 24 861
Overdrafts 18 448 18 448
Term loans 15 654 15 654
CIB South Africa 178 026 178 026
Rest of Africa Banking 557 557
Wealth 5 660 5 660
Head Office, Treasury and other operations in South Africa 645 645
Loans and advances to customers - net of impairment losses 606 569 606 472
Loans to Group companies 25 794 25 794
Total assets 694 876 694 852
Financial liabilities
Deposits from banks 42 514 42 514
Other liabilities 19 039 19 279
Call deposits 62 270 62 270
Cheque account deposits 152 474 152 474
Credit card deposits 1 906 1 906
Fixed deposits 116 049 116 113
Foreign currency deposits 23 325 23 325
Notice deposits 59 358 59 457
Other deposits 2 059 2 059
Saving and transmission deposits 130 208 130 208
Deposits due to customers 547 649 547 812
Debt securities in issue 133 906 131 329
Borrowed funds 15 679 15 900
Total liabilities 758 787 756 834
14. Assets and liabilities held at fair value
14.1 Fair value measurement and valuation processes
Financial assets and financial liabilities
The Bank has an established control framework with respect to the measurement of fair values. The framework includes
a 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 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 International Financial Reporting Standards (IFRS) and internal
valuation policies.
Investment properties
The fair value of investment properties is determined based on the most appropriate methodology applicable to the
specific property. Methodologies include the market comparable approach that reflects recent transaction prices for
similar properties, discounted cash flows and income capitalisation methodologies. In estimating the fair value of the
properties, the highest and best use of the properties is taken into account.
Where possible, the fair value of the Bank’s investment properties is determined through valuations performed by
external independent valuators. When the Bank’s internal valuations are different to that of the external independent
valuers, detailed procedures are performed to substantiate the differences, whereby the IVC 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.
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 Bank is not a market maker, mid prices are adjusted to bid and offer prices
respectively. Bid-offer adjustments reflect expected close out strategy and, for derivatives, the fact that they are
managed on a portfolio basis. The methodology for determining the bid-offer adjustment for a derivative portfolio will
generally involve netting between long and short positions and the bucketing of risk by strike and term in accordance with
hedging strategy. Bid-offer levels are derived from market sources, such as broker data. For those assets and liabilities
where the 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, as well as the cost of funding across all asset classes.
Model valuation adjustments
Valuation models are reviewed under the Bank’s model governance framework. This process identifies the assumptions
used and any model limitations (for example, if the model does not incorporate volatility skew). Where necessary, fair
value adjustments will be applied to take these factors into account. Model valuation adjustments are dependent on the size
of portfolio, complexity of the model, whether the model is market standard and to what extent it incorporates all known
risk factors. All models and model valuation adjustments are subject to review on at least an annual basis.
14.4 Fair value hierarchy
The following table shows the Bank’s assets and liabilities that are recognised and subsequently measured at fair
value and are analysed by valuation techniques. The classification of assets and liabilities is based on the lowest level
input that is significant to the fair value measurement in its entirety.
30 June
2017 2016
Recurring fair value Level 1 Level 2 Level 3 Total Level 1 Level 2 Level 3 Total
measurements Rm Rm Rm Rm Rm Rm Rm Rm
Financial Assets
Investment securities 45 985 31 263 4 628 81 876 52 606 18 541 3 864 75 011
Loans and advances to banks - 16 812 450 17 262 - 26 194 - 26 194
Trading and hedging portfolio assets 23 978 49 787 1 787 75 552 20 616 62 375 2 894 85 885
Debt instruments 21 316 3 220 1 390 25 926 19 557 6 100 2 169 27 826
Derivative assets - 40 511 177 40 688 - 51 001 725 51 726
Commodity derivatives - 554 - 554 - 205 - 205
Credit derivatives - 17 164 181 - 122 294 416
Equity derivatives - 1 302 13 1 315 - 1 311 - 1 311
Foreign exchange derivatives - 6 950 - 6 950 - 16 322 - 16 322
Interest rate derivatives - 31 688 - 31 688 - 33 041 431 33 472
Equity instruments 667 - - 667 1 059 - - 1 059
Money market assets 1 995 6 056 220 8 271 - 5 274 - 5 274
Other assets - - - - - - 17 17
Loans and advances to customers - 22 623 4 662 27 285 - 18 007 6 941 24 948
Total financial assets 69 963 120 485 11 527 201 975 73 222 125 117 13 716 212 055
Financial liabilities
Deposits from banks - 18 263 - 18 263 - 25 241 - 25 241
Trading and hedging portfolio liabilities 5 898 34 798 454 41 150 1 645 49 585 336 51 566
Derivative liabilities - 34 798 454 35 252 - 49 585 336 49 921
Commodity derivatives - 601 - 601 - 161 - 161
Credit derivatives - 3 188 191 - 334 150 484
Equity derivatives - 1 280 51 1 331 - 1 735 - 1 735
Foreign exchange derivatives - 7 372 - 7 372 - 13 390 - 13 390
Interest rate derivatives - 25 542 215 25 757 - 33 965 186 34 151
Short positions 5 898 - - 5 898 1 645 - - 1 645
Deposits due to customers 149 21 813 910 22 872 119 16 685 921 17 725
Debt securities in issue 398 4 067 484 4 949 354 5 067 770 6 191
Total financial liabilities 6 445 78 941 1 848 87 234 2 118 96 578 2 027 100 723
Non-financial assets
Commodities 1 679 - - 1 679 1 406 - - 1 406
Investment properties - - - - - - 240 240
Non-recurring fair value measurements
Non-current assets held for sale(1) - - 1 391 1 391 - - 369 369
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
Rm Rm Rm Rm
Recurring fair value measurements
Financial assets
Investment securities 50 909 32 203 1 062 84 174
Loans and advances to banks - 19 286 571 19 857
Trading and hedging portfolio assets 16 360 56 773 1 505 74 638
Debt instruments 15 417 2 573 1 324 19 314
Derivative assets - 46 570 181 46 751
Commodity derivatives - 794 - 794
Credit derivatives - 70 114 184
Equity derivatives - 1 526 67 1 593
Foreign exchange derivatives - 15 121 - 15 121
Interest rate derivatives - 29 059 - 29 059
Equity instruments 943 - - 943
Money market assets - 7 630 - 7 630
Other assets - - - -
Loans and advances to customers - 19 187 4 890 24 077
Total financial assets 67 269 127 449 8 028 202 746
Financial liabilities
Deposits from banks - 17 634 - 17 634
Trading and hedging portfolio liabilities 1 786 42 464 307 44 557
Derivative liabilities - 42 464 307 42 771
Commodity derivatives - 872 - 872
Credit derivatives - 135 101 236
Equity derivatives - 1 306 59 1 365
Foreign exchange derivatives - 13 996 - 13 996
Interest rate derivatives - 26 155 147 26 302
Short positions 1 786 - - 1 786
Deposits due to customers 154 15 870 1 139 17 163
Debt securities in issue 412 4 651 604 5 667
Total financial liabilities 2 352 80 619 2 050 85 021
Non-financial assets
Commodities 1 485 - - 1 485
Investment properties - - 222 222
Non-recurring fair value measurements
Non-current assets held for sale(1) - - 367 367
Non-current liabilities held for sale(1) - - 9 9
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 Discounted cash flow models Underlying price of market traded
instruments and interest rates
Derivatives
Commodity derivatives Discounted cash flow and/or option pricing, Spot price of physical or futures,
futures pricing and/or exchange traded fund interest rates and/or volatility
(ETF) models
Credit derivatives Discounted cash flow and/or credit Interest rate, recovery rate, credit
default swap models spread and/or quanto ratio
Equity derivatives Discounted cash flow, option pricing Spot price, interest rate, volatility and/or
and/or futures pricing models dividend stream
Foreign exchange derivatives Discounted cash flow and/or option Spot price, interest rate and/or volatility
pricing models
Interest rate derivatives Discounted cash flow and/or option Interest rate curves, repurchase agreement
pricing models curves, money market curves and/or volatility
Money market assets Discounted cash flow models Money market rates and/or interest rates
Loans and advances to customers Discounted cash flow models Interest rate curves and/or money market curves
Investment securities Listed equity: market bid price. Other Underlying price of the market traded instruments
items: discounted cash flow models 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 Loans and Loans and
and hedging Other advances to advances to Investment Investment Total assets
portfolio assets assets customers banks securities properties at fair value
Rm Rm Rm Rm Rm Rm Rm
Opening balance at the beginning of the reporting
period 1 505 - 4 890 571 1 062 222 8 250
Net interest income - - 51 - 10 - 61
Other income - - - - - 9 9
Gains and losses from banking and trading activities (2) - - - - - (2)
Gains and losses from investment activities - - - (51) 2 - (49)
Purchases 534 - 618 - 2 806 - 3 958
Sales (250) - (897) (70) - (231) (1 448)
Movement in/(out) of Level 3 - - - - 748 - 748
Closing balance at the end of the reporting period 1 787 - 4 662 450 4 628 - 11 527
30 June 2016
Trading Loans and Loans and
and hedging Other advances to advances to Investment Investment Total assets
portfolio assets assets customers banks securities properties at fair value
Rm Rm Rm Rm Rm Rm Rm
Opening balance at the beginning of the reporting 1 415 17 7 511 2 109 1 285 518 12 855
period
Net interest income - - 167 - 30 - 197
Gains and losses from banking and trading activities 192 - - - - - 192
Gains and losses from investment activities - - (10) - 9 78 77
Purchases 1 334 - 1 962 - 2 714 - 6 010
Sales (47) - (2 689) (2 109) (174) - (5 019)
Transferred to/(from) assets - - - - - (365) (365)
Closing balance at the end of the reporting period 1 479 17 6 941 - 3 864 231 13 947
31 December 2016
Trading Loans and Loans and
and hedging Other advances to advances to Investment Investment Total assets
portfolio assets assets customers banks securities properties at fair value
Rm Rm Rm Rm Rm Rm Rm
Opening balance at the beginning of the reporting period 1 415 17 7 511 2 109 1 285 518 12 855
Net interest income - - 297 - 56 61 414
Gains and losses from banking and trading activities 116 - - (139) 16 - (7)
Purchases 1 308 - - 70 2 - 1 380
Sales (1334) (17) (1 956) (1 469) (147) (65) (4 988)
Movement in other comprehensive income - - - - 4 - 4
Transferred to/(from) assets - - - - - (292) (292)
Movement out of Level 3 - - (962) - (154) - (1 116)
Closing balance at the end of the reporting period 1 505 - 4 890 571 1 062 222 8 251
30 June 2017
Trading and
Deposits hedging portfolio Deposits due Debt securities Total liabilities
from banks liabilities to customers in issue at fair value
Rm Rm Rm Rm Rm
Opening balance at the beginning of the reporting period - 307 1 139 604 2 050
Gains and losses from banking and trading activities - 147 - - 147
Issues - - 295 - 295
Settlements - - (540) (120) (660)
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
Deposits hedging portfolio Deposits due Debt securities Total liabilities
from banks liabilities to customers in issue at fair value
Rm Rm Rm Rm Rm
Opening balance at the beginning of the reporting period 7 216 2 557 624 3 404
Net interest income - - 70 28 98
Gains and losses from banking and trading activities - 131 - - 131
Issues - - 1 958 142 2 100
Settlements (7) (11) (689) (24) (731)
Movement out of Level 3 - - (2 975) - (2 975)
Closing balance at the end of the reporting period - 336 921 770 2 027
31 December 2016
Trading and
Deposits hedging portfolio Deposits due Debt securities Total liabilities
from banks liabilities to customers in issue at fair value
Rm Rm Rm Rm Rm
Opening balance at the beginning of the reporting period 7 216 2 557 624 3 404
Gains and losses from banking and trading activities - 91 - - 91
Gains and losses from investment activities - - 139 (9) 130
Issues - - 1 953 - 1 953
Settlements (7) - (3 510) (11) (3 528)
Closing balance at the end of the reporting period - 307 1 139 604 2 050
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 hedging Loans and advances Investment Total Trading and hedging Total
portfolio assets to customers securities assets portfolio liabilities liabilities
Rm Rm Rm Rm Rm Rm
Gains and losses from banking 65 43 38 146 136 136
and trading activities
30 June 2016
Trading and hedging Loans and advances Investment Total Trading and hedging Total
portfolio assets to customers securities assets portfolio liabilities liabilities
Rm Rm Rm Rm Rm Rm
Gains and losses from banking 72 46 16 134 - -
and trading activities
31 December 2016
Trading and hedging Loans and advances Investment Total Trading and hedging Total
portfolio assets to customers securities assets portfolio liabilities liabilities
Rm Rm Rm Rm Rm Rm
Gains and losses from banking (22) 39 9 26 (104) (104)
and trading activities
14.8 Sensitivity analysis of valuations using unobservable inputs
As part of the Bank’s risk management processes, stress tests are applied on the significant unobservable parameters
to generate a range of potentially possible alternative valuations. The assets and liabilities that most impact this
sensitivity analysis are those with the more illiquid and/or structured portfolios. The stresses are applied independently
and do not take account of any cross correlation between separate asset classes that would reduce the overall effect on
the valuations.
The following table reflects how the unobservable parameters were changed in order to evaluate the sensitivities of
Level 3 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 of more than 10% of the underlying value of the affected item. This is demonstrated by the
following sensitivity analysis which includes a reasonable range of possible outcomes:
30 June 2017
Potential effect recorded Potential effect recorded
in profit or loss directly in equity
Significant unobservable Favourable/(Unfavourable) Favourable/(Unfavourable)
parameters Rm Rm
Deposits due to customers BAGL/Absa funding spread -/- -/-
Investment securities Risk adjustment yield curves, future 40/(62) 129/(125)
earnings and marketability discount
Loans and advances to customers Credit spreads 90/(88) -/-
Other assets Volatility, credit spreads -/- -/-
Trading and hedging portfolio Volatility, credit spreads, basis curves, 153/(153) -/-
assets yield curves, repo curves, funding spreads
Trading and hedging portfolio Volatility, credit spreads, basis curves, 39/(39) -/-
liabilities yield curves, repo curves, funding spreads
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 Favourable/(Unfavourable) Favourable/(Unfavourable)
parameters Rm Rm
Deposits due to customers BAGL/Absa funding spread -/- -/-
Investment securities Risk adjustment yield curves, future 12/(12) 37/(36)
earnings and marketability discount
Loans and advances to customers Credit spreads 103/(101) -/-
Other assets Volatility, credit spreads -/- -/-
Trading and hedging portfolio assets Volatility, credit spreads, basis curves, 90/(90) -/-
yield curves, repo curves, funding spreads
Trading and hedging portfolio Volatility, credit spreads, basis curves, 11/(11) -/-
liabilities yield curves, repo curves, funding spreads
Other liabilities Volatility, credit spreads -/- -/-
216/(214) 37/(36)
30 December 2016
Potential effect recorded Potential effect recorded
in profit or loss directly in equity
Significant unobservable Favourable/(Unfavourable) Favourable/(Unfavourable)
parameters Rm Rm
Deposits due to customers BAGL/Absa funding spread -/- -/-
Investment securities Risk adjustment yield curves, future 13/(14) 31/(33)
earnings and marketability discount
Loans and advances to customers Credit spreads 72/(71) -/-
Other assets Volatility, credit spreads -/- -/-
Trading and hedging portfolio Volatility, credit spreads, basis curves, 175/(175) -/-
assets yield curves, repo curves, funding spreads
Trading and hedging portfolio Volatility, credit spreads, basis curves, 36/(36) -/-
liabilities yield curves, repo curves, funding spreads
Other liabilities Volatility, credit spreads -/- -/-
296/(296) 31/(33)
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:
June December
2017 2016 2016
Significant
Category of asset/liability Valuation techniques applied unobservable inputs Range of estimates 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 curves, Discount rate of 13%, Discount rates between Discount rate of
third-party valuations, earnings future earnings marketability comparator multiples 9.5% and 13.25%, 13%,comparator
multiples and/or income discounts and/or comparator between 5 and 10,5 comparator multiples multiples between
capitalisation valuations multiples between 5 and 10,5 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 and/ Credit spreads, (0,3%) to 38,3% 0,0% to 23,67% 0% to 40%
or credit default swap recovery rates and/or
(hazard rate) models quanto ratio
Equity derivatives Discounted cash flow, option Volatility and/or 16,6% to 21% 0,0% to 81,20% 17,82% to 67,71%
pricing and/or futures pricing dividend streams
models (greater than 3 years)
Foreign exchange Discounted cash flow and/ African basis curves (12,2%) to 3,27% (6%) to 24,99% (16,6%) to 13,1%
derivatives or option pricing models (greater than 1 year)
Interest rate Discounted cash flow and/ Real yield curves (less (0,1%) to 8,33% (0,67%) to 7,90% 0,31% to 3,38%
derivatives or option pricing models than 1 year), repurchase
agreement curves (less
than 1 year), funding
spreads
Deposits due to customers Discounted cash flow models Barclays Africa Group (0,1%) to 2,10% 0,0% to 2,15% (0,27%) to 2,13%
Limited’s funding spreads
(greater than 5 years)
Debt securities in issue Discounted cash flow models Funding curves (greater (0,1%) to 1,55% (0,16%) to 3,5% (0,27%) to 2,13%
than 5 years)
Investment Properties Discounted cash flow models Estimates of periods in 1 to 10 years 1 to 10 years 1 to 10 years
which rental units will
be disposed of
Annual selling price 1% to 6% 0% to 7% 1% to 7%
escalations
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 gains/(losses) as a result of the use of valuation models using unobservable inputs
The amount that has yet to be recognised in the statement of comprehensive income that relates to the difference
between the transaction price 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 during the current and previous reporting period.
15. Reporting changes overview
15.1 Accounting policy changes
The Bank 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 Bank:
- 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 bank’s reported results.
15.2 Changes in reportable segments
The following business portfolio changes have impacted the financial results for the comparative periods ended
30 June 2016 and 31 December 2016.
- Barclays PLC disposed of 12,2% and 33,7% of the Bank’s holding Company’s shares on 5 May 2016 and 6 June 2017,
respectively. As part of its divestment Barclays PLC contributed £765 million to the Bank’s holding Company 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 Bank has therefore
included an additional reportable segment, ‘Barclays separation’ in its segment results.
- The Bank 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 Investment Banking (CIB) to reflect the Bank’s customer segmentation and coverage model.
- In the second half of 2016, the Bank 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 Wealth (historically reporting was by customer only i.e. RBB, CIB and Wealth). The reporting
changes to financial disclosures were implemented from 1 January 2017.
Absa Bank Limited
Incorporated in the Republic of South Africa
Registration number: 1986/004794/06
Authorised financial services and registered credit provider (NCRCP7)
JSE share code: ABSP
ISIN: ZAE000079810
Head Investor Relations
Alan Hartdegen
Telephone: +27 11 350 2598
Company Secretary
Nadine Drutman
Telephone: +27 11 350 5347
Head of Financial Control
John Annandale
Telephone: +27 11 350 3496
Transfer secretary
Computershare Investor Services (Pty) Ltd
Telephone: +27 11 370 5000
computershare.com/za/
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
Registered office
7th Floor, Barclays Towers West
15 Troye Street, Johannesburg, 2001
PO Box 7735, Johannesburg, 2000
Switchboard: +27 11 350 4000
barclaysafrica.com
Queries
Please direct investors relations queries to IR@barclaysafrica.com
Please direct media queries to groupmedia@barclaysafrica.com
Please direct queries relating to your Barclays Africa Group shares to questions@computershare.co.za
Please direct other queries regarding the Bank to absa@absa.co.za
Sponsors
Absa Bank Limited (Corporate and Investment Bank)
Telephone: +27 11 895 6843
equitysponsor@absacapital.com
Date: 28/07/2017 07:48:00 Produced by the JSE SENS Department. The SENS service is an information dissemination service administered by the JSE Limited ('JSE').
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