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ABSA BANK LIMITED - Barclays Africa Group Limited - Basel III Pillar 3 Disclosure as at 30 September 2017

Release Date: 30/11/2017 11:30
Code(s): ABSP BGA     PDF:  
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Barclays Africa Group Limited - Basel III Pillar 3 Disclosure as at 30 September 2017

BARCLAYS AFRICA GROUP LIMITED                                              ABSA BANK LIMITED
(Incorporated in the Republic of South Africa)                             (Incorporated in the Republic of South Africa)
(Registration number: 1986/003934/06)                                      (Registration number: 1986/004794/06)
ISIN: ZAE000174124                                                         ISIN: ZAE000079810
JSE share code: BGA                                                        JSE share code: ABSP
(Barclays Africa Group)                                                    (Absa Bank)

BARCLAYS AFRICA GROUP LIMITED – BASEL III PILLAR 3 DISCLOSURE AS AT 30 SEPTEMBER 2017

The quarterly Pillar 3 disclosure is made in accordance with the requirements of the Banks Act, No. 94 of 1990 (the
Banks Act) read together with South African Reserve Bank Directive 11 of 2015 (D11/2015) and Directive 11 of 2014
(D11/2014), as well as the Basel Committee on Banking Supervision’s Revised Pillar 3 disclosure requirements issued on
28 January 2015.

1)   Capital Adequacy

Barclays Africa Group Limited

Barclays Africa Group Limited remains capitalised above the minimum regulatory capital requirements and above board
approved target capital ranges.

The Group continues to optimise the level and composition of capital resources. In line with this objective the Group will
continue to raise Basel III compliant capital instruments, in the domestic and/or international capital markets.


The table below represents the capital position for Barclays Africa Group Limited at 30 September 2017 and comparatives
at 30 June 2017.
                                                                30 Sep 2017 (1)                     30 Jun 2017 (1)
                                                                     IFRS (2)                           IFRS (2)
Regulatory Capital Position (excluding                            Rm                     %          Rm                  %
unappropriated profits)
Common Equity Tier 1 capital                                 94 489                   12.9        93 560                     12.9
     Ordinary share capital                                    1 694                    0.2         1 694                     0.2
     Ordinary share premium                                   12 898                    1.8        12 868                     1.8
     Reserves (3)                                             85 067                  11.6         83 681                    11.5
     Non-controlling interest                                  2 048                    0.3         1 831                     0.3
     Deductions                                              (7 218)                  (1.0)       (6 514)                    (0.9)
Additional Tier 1 capital                                      4 247                    0.6         2 665                     0.4
Tier 1 capital                                               98 736                   13.5        96 225                     13.3
Tier 2 capital                                               16 412                    2.2       14 659                      2.0
Total Capital                                               115 148                   15.7       110 884                     15.3




                                                                                                               Page 1 of 9
Statutory Capital Position (including                   IFRS (2)      Normalised (4)      IFRS (2)        Normalised (4)
unappropriated profits)                                       %                   %             %                     %
Common Equity Tier 1 capital                               13.6                 12.0         13.7                   12.1
Tier 1 capital                                             14.2                 12.7         14.0                   12.4
Total capital                                              16.4                 15.0         16.1                   14.5


Board Approved Target Ranges (including                     30 Sep 2017                         30 Jun 2017
unappropriated profits)
Common Equity Tier 1 capital                               10.0% - 11.5%                      10.0% - 11.5%
Tier 1 capital                                             11.5% - 13.0%                      11.5% - 13.0%
Total capital                                              14.0% - 15.5%                      14.0% - 15.5%


Absa Bank Limited (5)

Absa Bank Limited remains capitalised above the minimum regulatory capital requirements and above board approved
target capital ranges.

The table below represents the capital position for Absa Bank Limited at 30 September 2017 and comparatives at 30
June 2017.


                                                           30 Sep 2017 (1)                    30 Jun 2017 (1)

                                                               IFRS (2)                             IFRS (2)
Regulatory Capital Position (excluding
                                                            Rm                    %                  Rm                  %
unappropriated profits)
Common Equity Tier 1 capital                             69 049                 13.1          69 320                13.2
   Ordinary share capital                                   304                  0.1             304                    0.1
   Ordinary share premium                                36 880                  7.0          36 880                    7.0
   Reserves (3)                                          37 686                  7.1          37 068                    7.0
   Deductions                                           (5 821)                (1.1)          (4 932)               (0.9)
Additional Tier 1 capital                                 3 811                  0.7           2 293                    0.4
Tier 1 capital                                           72 860                 13.8          71 613                13.6
Tier 2 capital                                           16 838                  3.2          15 154                    2.9
Total Capital                                            89 698                 17.0          86 767                16.5




Statutory Capital Position (including
                                                        IFRS (2)      Normalised (4)       IFRS (2)       Normalised (4)
unappropriated profits)
                                                              %                   %              %                    %

Common Equity Tier 1 capital                               13.6                 11.4           14.1                 11.9
Tier 1 capital                                             14.3                 12.2           14.5                 12.3
Total capital                                              17.5                 15.3           17.4                 15.2


                                                                                                          Page 2 of 9
Board Approved Target Ranges (including
unappropriated profits)                                            30 Sep 2017                       30 Jun 2017

Common Equity Tier 1 capital                                      10.0% - 11.5%                     10.0% - 11.5%
Tier 1 capital                                                   11.0% – 12.5%                      11.0% – 12.5%
Total capital                                                     13.5% - 15.0%                     13.5% - 15.0%



2)       Overview of Risk Weighted Assets (RWAs) [OV1]

                                                                          a                    b                      c
                                                             30 Sep 2017 (1)      30 Jun 2017 (1)     30 Sep 2017 (1)
                                                                                                     Minimum capital
                                                                       RWA                  RWA
                                                                                                     requirements (6)
         Barclays Africa Group Limited                                  Rm                   Rm                     Rm
     1    Credit risk (excluding counterparty credit risk)          534 497              515 946               42 760

     2       Of which standardised approach (SA)                    152 922              146 408               12 234
     3       Of which internal rating-based (IRB)                   381 575              369 538               30 526
             approach
     4    Counterparty credit risk (CCR)                             31 448               32 156                2 516
     5       Of which standardised approach for CCR                  31 448               32 156                2 516
             (SA-CCR) (7)
     6       Of which internal model method (IMM)                          -                   -                      -
     7    Equity positions in banking book under                      9 521                9 223                    761
          market-based approach
     8    Equity investments in funds – look-through                       -                   -                      -
          approach
     9    Equity investments in funds – mandate-based                      -                   -                      -
          approach
 10       Equity investments in funds – fall-back                          -                   -                      -
          approach
 11       Settlement risk                                               435                  583                    35
 12       Securitisation exposures in banking book                      492                  564                    39
 13          Of which IRB ratings-based approach (RBA)                  492                  564                     39
 14          Of which IRB Supervisory Formula                              -                   -                      -
             Approach (SFA)
 15          Of which SA/simplified supervisory formula                    -                   -                      -
             approach (SSFA)
 16       Market risk                                                23 993               32 284                1 919
 17          Of which standardised approach (SA)                      9 292               10 645                    743
 18          Of which internal model approaches (IMA)                14 701               21 639                1 176
 19       Operational risk                                          103 487              103 487                8 279
 20          Of which Basic Indicator Approach                        3 528                3 528                    282
 21          Of which Standardised Approach                          25 533               25 533                2 043
 22          Of which Advanced Measurement                           74 426               74 426                5 954
             Approach


                                                                                                           Page 3 of 9
          Non-customer assets                                        23 845                24 904                   1 908
 23       Amounts below the thresholds for deduction                  5 175                 5 633                     414
          (subject to 250% risk weight)
 24       Floor adjustment                                                 -                     -                       -
 25       Total                                                    732 893                724 780                 58 631
          (1+4+7+8+9+10+11+12+16+19+23+24+non-
          customer assets)
          Pillar 2a requirement (1.5%)                                                                            10 994
          Capital conservation buffer (1.25%) (8)                                                                   9 161
          S.A. minimum capital requirements including                                                             78 786
          buffers (9)

The key drivers of change in RWA consumption quarter on quarter were as follows:

      -     Credit risk: Portfolios subject to the AIRB approach have increased by R12bn as a result of exposure growth in
            Corporate and Investment Banking (CIB). Portfolios subject to the SA have increased by R6.5bn mainly due to
            asset growth outside of South Africa as well as exchange rate fluctuations.
      -     CCR: The decrease in CCR of R0.7bn is in line with market volatility, specifically exchange rate fluctuations.
      -     Market risk: The decrease in market risk of R8.3bn is due to lower levels of Value at Risk (VaR) and Stressed
            Value at Risk (sVaR) in the three-month averaging period.


                                                                            a                    b                      c
                                                            30 Sep 2017 (1)        30 Jun 2017 (1)       30 Sep 2017 (1)
                                                                                                        Minimum capital
                                                                        RWA                  RWA
                                                                                                        requirements (6)
      Absa Bank Limited (5)                                              Rm                    Rm                     Rm
 1    Credit risk (excluding counterparty credit risk)              383 693               373 604                 30 695
 2          Of which standardised approach (SA)                       12 396               13 545                     991
 3          Of which internal rating-based (IRB)                     371 297              360 059                  29 704
            approach
 4    CCR                                                             30 955               31 815                   2 476
 5          Of which standardised approach for CCR                    30 955               31 815                   2 476
            (SA-CCR) (7)
 6          Of which internal model method (IMM)                               -                -                        -
 7    Equity positions in banking book under market-                   2 494                 2 493                    200
      based approach
 8    Equity investments in funds – look-through                               -                -                        -
      approach
 9    Equity investments in funds – mandate-based                              -                -                        -
      approach
10    Equity investments in funds – fall-back                                  -                -                        -
      approach
11    Settlement risk                                                    435                  583                      35
12    Securitisation exposures in banking book                           492                  564                      39
13          Of which IRB ratings-based approach (RBA)                    492                   564                     39
14          Of which IRB Supervisory Formula                                   -                -                        -
            Approach (SFA)
15          Of which SA/simplified supervisory formula                         -                -                        -


                                                                                                              Page 4 of 9
                approach (SSFA)
16       Market risk                                                        18 076                24 741                    1 446
17              Of which standardised approach (SA)                          3 375                  3 102                       270
18              Of which internal model approaches (IMA)                    14 701                21 639                    1 176
19       Operational risk                                                   73 612                73 612                    5 889
20              Of which Basic Indicator Approach                            3 439                  3 439                       275
21              Of which Standardised Approach                                    -                        -                      -
22              Of which Advanced Measurement                               70 173                70 173                    5 614
                Approach
         Non-customer assets                                                17 898                17 971                    1 432
23       Amounts below the thresholds for deduction                            620                    762                       50
         (subject to 250% risk weight)
24       Floor adjustment                                                         -                    -                          -
25       Total                                                            528 275                526 145                  42 262
         (1+4+7+8+9+10+11+12+16+19+23+24+non-
         customer assets)
             Pillar 2a requirement (1.5%)                                                                                   7 924
             Capital conservation buffer (1.25%) (8)                                                                        6 603
             S.A. minimum capital requirements including                                                                  56 789
             buffers (9)


The key drivers of change in RWA consumption quarter on quarter were as follows:

         -      Credit risk: Portfolios subject to the AIRB approach have increased by R11.2bn as a result of exposure growth
                in CIB. The decrease in the SA of R1.1bn is mainly due to a reduction in the size of the portfolio in South Africa
                measured on a standardised basis.
         -      CCR: The decrease in CCR of R0.9bn is in line with market volatility, specifically exchange rate fluctuations.
         -      Market Risk: The decrease in market risk of R6.7bn is due to lower levels of VaR and sVaR in the three-month
                averaging period.

RWA flow statements of credit risk exposures under IRB RWA flow statements of credit risk exposures under IRB
[CR8]
                                                                                                                            a
         Barclays Africa Group Limited                                                                         RWA amounts
                                                                                                                          Rm
     1       RWA as at end of previous reporting period (30 Jun 2017)                                                369 538
     2       Asset size                                                                                               12 037
     3       Asset quality                                                                                                  -
     4       Model updates                                                                                                  -
     5       Methodology and policy                                                                                         -
     6       Acquisitions and disposals                                                                                     -
     7       Foreign exchange movements                                                                                     -
     8       Other                                                                                                          -
     9       RWA as at end of reporting period (30 Sep 2017)                                                         381 575




                                                                                                                      Page 5 of 9
                                                                                                      a
        Absa Bank Limited (5)                                                               RWA amounts
                                                                                                    Rm
    1    RWA as at end of previous reporting period (30 Jun 2017)                                  360 059
    2    Asset size                                                                                 11 238
    3    Asset quality                                                                                    -
    4    Model updates
    5    Methodology and policy                                                                           -
    6    Acquisitions and disposals                                                                       -
    7    Foreign exchange movements                                                                       -
    8    Other                                                                                            -
    9    RWA as at end of reporting period (30 Sep 2017)                                           371 297



RWA flow statements of market risk exposures under an Internal Models Approach [MR2]
        Barclays Africa Group Limited and
        Absa Bank Limited                             a           b       c        d           e          f
                                                           Stressed                                   Total
                                                   VaR         VaR      IRC     CRM        Other      RWA
                                                    Rm          Rm      Rm       Rm          Rm         Rm
1       RWA at previous quarter end (30 Jun
                                                10 805       10 834       -            -       -     21 639
        2017)
2       Movements in risk levels                (2 763)      (2 712)      -            -       -    (5 475)
3       Model updates/changes                   (1 463)                                             (1 463)
4       Methodology and policy                        -             -     -            -       -              -
5       Acquisitions and disposals                    -             -     -            -       -              -
6       Foreign exchange movements                    -             -     -            -       -              -
7       Other                                         -             -     -            -       -              -
8       RWA at end of reporting period (30
                                                  6 579      8 122        -            -       -     14 701
        Sep 2017)


Capital consumption of Barclays Africa Group Limited and Absa Bank’s portfolios subject to the Internal Models
Approach decreased by R6.9bn from June 2017 to September 2017. Drivers of quarter on quarter changes in RWA
consumption are due to reduced levels of VaR and sVaR.




                                                                                                    Page 6 of 9
3)   Leverage Ratio

The leverage ratio framework is complementary to the risk-based capital framework and is a non-risk based
contingency measure to restrict the build-up of excessive leverage in the banking sector.

The tables below represent the leverage ratios for Barclays Africa Group Limited and Absa Bank Limited at 30
September 2017 and the comparatives for the past three quarter end periods, namely 31 December 2016, 31 March
2017 and 30 June 2017.

                                                                                   2017                            2016
                                                                                            IFRS

 Barclays Africa Group Limited                                        30 Sep         30 Jun          31 Mar        31 Dec

 Leverage ratio exposure (Rm)                                     1 318 673       1 259 572        1 254 437    1 251 249
 Tier 1 Capital (excluding unappropriated profits) (Rm)               98 736         96 225          82 249        84 008
 Leverage ratio (excluding unappropriated profits) (%)                    7.5             7.6            6.6           6.7
 Leverage ratio (including unappropriated profits) (%) (10)               7.9             8.1            6.9           7.1
 Board target leverage ratio (including unappropriated
                                                                        ?4.5           ?4.5             ?4.5         ?4.5
 profits) (%)
 Minimum required leverage ratio (%)                                      4.0             4.0            4.0           4.0


                                                                                    2017                            2016

                                                                                           IFRS
Absa Bank Limited (5)                                                 30 Sep          30 Jun           31 Mar        31 Dec

Leverage ratio exposure (Rm)                                      1 136 516        1 095 984        1 092 562    1 088 789
Tier 1 Capital (excluding unappropriated profits) (Rm)                72 860          71 613           55 656        56 943
Leverage ratio (excluding unappropriated profits) (%)                     6.4              6.5            5.1             5.2
Leverage ratio (including unappropriated profits) (%) (10)                6.7              7.0            5.7             5.8
Board target leverage ratio (including unappropriated
                                                                        ?4.5              ?4.5           ?4.5          ?4.5
profits) (%)
Minimum required leverage ratio (%)                                       4.0              4.0            4.0             4.0



4)   Liquidity Coverage Ratio

The objective of the liquidity coverage ratio (LCR) is to promote the short-term resilience of the liquidity risk profile of
banks by ensuring that they have sufficient high quality liquid assets (HQLA) to survive a significant stress scenario
lasting 30 calendar days. The LCR became effective on 1 January 2015, with a requirement of 60%, which will increase
by 10% per year to 100% on 1 January 2019. The requirement for 2017 is 80%.

The LCR is calculated as the value of HQLA divided by total net cash outflows. HQLA represents the value of assets that
can be easily and immediately converted into cash. Net cash outflows are calculated according to regulations.

Absa Bank Limited successfully applied for a committed liquidity facility from the South African Reserve Bank under
Guidance Note 6 of 2016, which is included in HQLA for LCR purposes from January 2016.




                                                                                                                Page 7 of 9
Barclays Africa Group Limited (11)


Barclays Africa Group Limited holds HQLA well in excess of the regulatory minimum requirement. The table below
represents the average LCR (12) for Barclays Africa Group Limited at 30 September 2017 and the comparatives at 30
June 2017:
                                                             30 Sep 2017 (1)      30 Jun 2017 (1)

 High Quality Liquid Assets (Rm)                                       155 794               155 075

 Net Cash Outflows (Rm)                                                131 195               130 416

 LCR (%)                                                                  118.8                 118.9

 Required LCR (%)                                                          80.0                  80.0


Absa Bank Solo (13)

Absa Bank Solo holds HQLA well in excess of the regulatory minimum requirement. The table below represents the
average LCR (12) for Absa Bank Solo at 30 September 2017 and the comparatives at 30 June 2017:

                                                               30 Sep 2017 (1)        30 Jun 2017 (1)
 High Quality Liquid Assets (Rm)                                       144 252               144 168

 Net Cash Outflows (Rm)                                                116 527               115 876

 LCR (%)                                                                  123.8                 124.4

 Required LCR (%)                                                          80.0                  80.0



Notes:
1. The 30 September figures and 30 June 2017 comparatives are unaudited.
2. The IFRS view includes the contribution amounts received from Barclays PLC as part of the separation.
3. Reserves as at 30 September 2017 have already been reduced by the value of the 2017 interim ordinary dividend of
   R4.0bn for Barclays Africa Group Limited and R4.0bn for Absa Bank Limited, which were declared on 28 July 2017
   and paid on 11 September 2017 respectively.
4. The normalised ratios exclude the impact of the separation from Barclays PLC and reflect the underlying
   performance of the Group.
5. Absa Bank Limited includes subsidiary undertakings, special purpose entities, joint ventures, associates and offshore
   holdings.
6. The South African minimum regulatory capital requirement of 8% (excluding the Pillar 2a and capital conservation
   buffers).
7. SA-CCR is calculated using the Current Exposure Method.
8. The capital conservation buffer is phased-in between 1 January 2016 and 1 January 2019 reaching 2.5% by 1 January
   2019.
9. The 2017 minimum regulatory capital requirements of 10.75% include the RSA minimum of 8%, Pillar 2a of 1.50%
   and capital conservation buffer of 1.25% but exclude the bank-specific individual capital requirement (Pillar 2b add-
   on) and the domestic systemically important banks (D-SIB) add-on. The Pillar 2a buffer will reduce between 1
   January 2016 and 1 January 2019 reaching 1.00% by 1 January 2019.




                                                                                                            Page 8 of 9
10. The leverage ratio including unappropriated profits for Barclays Africa Group Limited and Absa Bank Limited at 30
    September 2017, on a normalised basis, was 7.0% (30 June 2017: 7.2%) and 5.6% (30 June 2017: 5.9%)
    respectively.
11. The LCR of Barclays Africa Group Limited represents an aggregation of the relevant individual net cash outflows and
    HQLA portfolios of all the banking entities which form part of the group. Where non-South African banking entities
    have an excess of HQLA above the minimum required by the LCR, this excess has been excluded from the
    calculation.
12. The values disclosed represent the simple average of the relevant 3 month-end data points.
13. Absa Bank Solo consists of only the South African banking operation.



Johannesburg
30 November 2017

Enquiries:
Alan Hartdegen
(+2711) 350-2598
E-mail: Alan.Hartdegen@barclaysafrica.com

Lead Independent Sponsor:
J.P. Morgan Equities South Africa Proprietary Limited

Joint Sponsor:
Corporate and Investment Bank – a division of Absa Bank Limited




                                                                                                           Page 9 of 9

Date: 30/11/2017 11:30:00 Produced by the JSE SENS Department. The SENS service is an information dissemination service administered by the JSE Limited ('JSE'). 
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