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Profit and dividend announcement - ABSP
Absa Bank Limited
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)
Summary consolidated financial results for the reporting period ended 31 December 2017.
These summary 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 subsidiary of Barclays Africa Group Limited (the Group), which is listed on the
exchange operated by the JSE Limited. These audited summary consolidated financial results are published to provide
information to holders of the Bank’s listed non-cumulative, non-redeemable preference shares.
Commentary relating to the Bank’s summary consolidated financial results is included in the Barclays Africa Group
Limited results, as presented to shareholders on 1 March 2018.
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 by Barclays PLC and the
Group to determine possible interaction between the companies to ensure that the Group can operate as an independent and
sustainable group without the involvement of Barclays PLC.
Barclays PLC currently holds 14.9% in the Group.
As part of its divestment Barclays PLC contributed £765m to the Bank, primarily in recognition of the investments
required for the Bank to separate from Barclays PLC. Investments will be made 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 Bank over time.
The separation process will have an impact on the Bank’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) require 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 aforementioned will result in a
disconnect between underlying business performance and the IFRS financial results during the separation period. Normalised
financial results will therefore be disclosed while the underlying business performance is materially different from the
IFRS financial results.
The following presents the items which have been excluded from the normalised financial results:
- Barclays PLC contribution (including the endowment benefit)
- Hedging linked to separation activities
- Technology and brand separation projects
- Depreciation and amortisation on the aforementioned projects
- Transitional service payments to Barclays PLC
- Employee cost and benefits linked to separation activities
- Separation project execution and support cost
Basis of presentation
The Bank’s audited annual financial results have been prepared in accordance with the recognition and measurement
requirements of International Financial Reporting Standards (IFRS), interpretations issued by the IFRS Interpretations
Committee (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 of South Africa.
The principal accounting policies applied are set out in the Bank’s most recent audited annual consolidated
financial statements.
The information disclosed in the SENS is derived from the information contained in the annual audited consolidated and
separate financial statements (except items not indicated as audited) and does not contain full or complete disclosure
details. Any investment decisions by shareholders should be based on consideration of the audited annual consolidated
financial statements, which is available on request. The presentation and disclosure of these summary consolidated
financial statements complies 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 audited summary consolidated financial statements are the same as
those in place for the reporting period ended 31 December 2016, except for the adoption of the own credit
exemption of IFRS 9 Financial Instruments (IFRS 9), changes to the Bank’s operating segments and business portfolios
changes between operating segments. Refer to note 15.
Standards issued not yet effective
IFRS 9 - Financial instruments
IFRS 9 Financial Instruments replaces IAS 39 Financial Instruments: Recognition and Measurement with effect from 1
January 2018. IFRS 9 includes revised requirements for the classification and measurement of financial assets and
liabilities, the impairment of financial assets and hedge accounting. 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 Financial Instruments: Disclosures. Any change in the carrying value of financial
instruments upon initial application of IFRS 9 will be recognised in equity.
IFRS 9 introduces a revised impairment model which requires entities to recognise expected credit losses (ECL) based
on unbiased forward-looking information. The measurement of expected loss will involve increased complexity and
judgment including estimation of lifetime probabilities of default, loss given default, a range of unbiased future
economic scenarios, estimation of expected lives, estimation of exposures at default and assessing increases in
credit risk.
The revised impairment model is expected to have a material financial impact on the existing impairment provisions
previously recognised in terms of the requirements of IAS 39. It is estimated that the increase on IAS 39
impairment stock (including contractual interest suspended) will be in the region of 30%, on a pre-tax basis. Based
on the current requirements of Basel III, the increase in the accounting impairment provisions is not expected to
reduce the Bank’s Common Equity Tier 1 (CET1) capital ratio by more than 35bps on 1 January 2018, before taking into
account the impact of the regulatory transitional arrangement. The Bank has elected to utilise the transition period
of three years for phasing in the regulatory capital impact of IFRS 9. IFRS 9 has been considered in the Bank’s
capital planning.
The reasons for the increase in impairment provisions are:
- The removal of the emergence period that was necessitated by the incurred loss model of IAS 39. All stage 1 assets
will carry a 12 month expected credit loss provision. This differs from IAS 39 where unidentified impairments were
typically measured with an emergence period of between three to twelve months.
- The provisioning for lifetime expected credit losses on stage 2 assets; where some of these assets would not have
attracted a lifetime expected credit loss measurement per IAS 39.
- The inclusion of forecasted macroeconomic scenarios into the expectation of credit losses;
- The inclusion of expected credit losses on items that would not have been impaired under IAS 39, such as loan
commitments and financial guarantees.
On initial adoption the new classification and measurement requirements under IFRS 9 will have no impact on the
retained income of the Bank. The specific requirements of IFRS 9 relating to the presentation of gains and losses on
financial liabilities designated at fair value were early adopted at the beginning of the current reporting period.
The effects of changes in the credit risk of these liabilities’ are therefore presented in other comprehensive income
with the remaining effect presented in profit or loss. The Bank will continue to apply the rules under IAS 39 hedge
accounting until the project on accounting for macro hedging is completed, if not earlier.
IFRS 15 -Revenue from contracts with customers
Implementation efforts performed to date indicate that the adoption of IFRS 15 is not expected to have a significant
impact on the financial results of the Bank.
Auditors’ report
Ernst & Young Inc. and KPMG Inc., the Bank’s independent auditors, have audited the annual consolidated and separate
financial statements of the Bank from which management prepared the summary consolidated financial results. The
auditors have expressed an unqualified audit opinion on the consolidated annual financial statements. The summary
consolidated financial results comprise the summary consolidated statement of financial position at 31 December 2017,
summary consolidated statement of comprehensive income, summary consolidated statement of changes in equity and
summary consolidated statement of cash flows for the reporting period then ended and selected explanatory notes
(on pages 2-3 and 9-38), excluding items not indicated as audited. The audit report of the consolidated annual
financial statements is available for inspection at the Bank’s registered office.
These summary consolidated financial statements (on pages 2-3 and 9-38) for the year ended 31 December 2017 have
been audited by Ernst and Young Inc. and KPMG Inc., who expressed an unmodified opinion thereon. A copy of the
auditor’s report on the summary consolidated financial statements and of the auditor’s report on the annual
consolidated financial statements are available for inspection at the company’s registered office, together with
the financial statements identified in the respective auditor’s reports.
Events after the reporting period
The directors are not aware of any events after the reporting date of 31 December 2017 and the date of
authorisation of these consolidated financial statements (as defined per IAS 10 Events after the Reporting
Period).
On behalf of the Board
W E Lucas-Bull M Ramos
Chairman Chief Executive Officer
Johannesburg
28 February 2018
Declaration of preference share dividend number 24
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 24, equal to 70% of the average prime rate for
1 September 2017 to 28 February 2018, per Absa Bank preference share has been declared for the period
1 September 2017 to 28 February 2018. The dividend is payable on Monday, 16 April 2018, to shareholders of the
Absa Bank preference shares recorded in the Register of Members of the Company at the close of business on
Friday, 13 April 2018. The directors of Absa Bank confirm that the bank will satisfy the solvency and liquidity
test immediately after completion of the dividend distribution.
Based on the current prime rate, the preference dividend payable for the period 1 September 2017 to
28 February 2018 would indicatively be 3 558,01 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 cent (20%).
- The gross local dividend amount is 3 558,01 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 2 846,408
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, 10 April 2018
Shares commence trading ex dividend Wednesday, 11 April 2018
Record date Friday, 13 April 2018
Payment date Monday, 16 April 2018
Share certificates may not be dematerialised or rematerialised between Wednesday, 11 April 2018 and Friday,
13 April 2018, both dates inclusive.
On Monday, 16 April 2018, 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, 16 April 2018.
On behalf of the board
N R Drutman
Company Secretary
Johannesburg
28 February 2018
Absa Bank Limited is a company domiciled in South Africa. Its registered office is the 7th Floor,
Barclays Towers West, 15 Troye Street, Johannesburg, 2001.
Summary consolidated IFRS salient features
2017 2016
Statement of comprehensive income (Rm)
Revenue 50 094 48 801
Operating expenses 31 608 27 525
Profit attributable to ordinary equity holders 8 067 9 568
Headline earnings(1) 8 548 9 778
Statement of financial position
Loans and advances to customers (Rm) 660 492 630 646
Total assets (Rm) 988 358 918 311
Deposits due to customers (Rm) 583 825 564 812
Loans-to-deposits and debt securities ratio (%) 91.5 89.5
Financial performance (%)
Return on average equity 11.8 16.3
Return on average assets 0.91 1.06
Return on average risk-weighted assets 1.64 1.96
Non-performing loans (NPLs) ratio on gross loans and advances 3.6 3.0
Operating performance (%)
Net interest margin on average interest bearing assets(2) 3.91 4.02
Credit loss ratio on gross loans and advances to customers and banks 0.73 0.93
Credit loss ratio on net loans and advances to customers 0.8 1.04
Non-interest income as % of total revenue 41.3 41.0
Cost-to-income ratio 63.1 56.4
Jaws (12.2) 1.62
Effective tax rate, excluding indirect taxation 27.9 25.9
Share statistics (million)
Number of ordinary shares in issue 448.3 420.1
Weighted average number of ordinary shares in issue 440.7 417.7
Diluted weighted average number of ordinary shares in issue 440.7 417.7
Share statistics (cents)
Headline earnings per ordinary share 1 939.4 2 340.9
Diluted headline earnings per ordinary share 1 939.4 2 340.9
Basic earnings per ordinary share 1 830.3 2 290.6
Diluted basic earnings per ordinary share 1 830.3 2 290.6
Dividend per ordinary share relating to income for the reporting period 2 372.7 1 169.4
Dividend cover (times) 0.8 2.0
Net asset value per ordinary share 17 998 15 386
Tangible net asset value per ordinary share 17 136 14 829
Capital adequacy (%)
Absa Bank Limited 16.9 15.0
Common Equity Tier 1 (%)
Absa Bank Limited 13.4 11.6
Notes
(1) After allowing for R362m (31 December 2016: R351m) profit attributable to preference equity
holders.
(2) The Bank changed its definition of ‘Interest-bearing assets and liabilities’ to only include
assets and liabilities that generate ‘Net Interest income’. This resulted in certain inter-
group assets and liabilities being excluded from ‘Interest-bearing assets and liabilities’
as these generate ‘non-interest income’. Consequently, interest-bearing assets and liabilities
have been restated for 31 December 2016.
Summary consolidated normalised salient features
2017 2016
Statement of comprehensive income (Rm)
Revenue 49 689 48 801
Operating expenses 29 708 27 525
Profit attributable to ordinary equity holders 9 550 9 568
Headline earnings 9 793 9 778
Statement of financial position
Total assets (Rm) 987 548 918 311
Financial performance (%)
Return on average equity 14.8 16.3
Return on average assets 1.05 1.06
Return on risk-weighted assets 1.88 1.96
Operating performance (%)
Non-interest income as percentage of total revenue 41.5 41.0
Cost-to-income ratio 59.8 56.4
Jaws (6.11) 1.62
Effective tax rate, excluding indirect taxation 27.0 25.9
Share statistics (million)
Number of ordinary shares in issue 448.3 420.1
Weighted average number of ordinary shares in issue 440.8 417.7
Diluted weighted average number of ordinary shares in issue 440.8 417.7
Share statistics (cents)
Headline earnings per ordinary share 2 221.9 2 340.9
Diluted headline earnings per ordinary share 2 221.9 2 340.9
Basic earnings per ordinary share 2 166.5 2 290.6
Diluted basic earnings per ordinary share 2 166.5 2 290.6
NAV per ordinary share 15 599 15 386
Tangible NAV per ordinary share 14 913 14 829
Capital adequacy (%)
Absa Bank Limited 15.0 15.0
Common Equity Tier 1 (%)
Absa Bank Limited 11.6 11.6
Summary consolidated normalised reconciliation
Unadjusted Adjustments Normalised
IFRS Bank for Barclays Bank
Performance separation performance
Reconciliation of normalised to IFRS results
Statement of comprehensive income (Rm)
Net interest income 29 413 325 29 088
Non-interest income 20 681 80 20 601
Total income 50 094 405 49 689
Impairment losses on loans and advances (5 113) - (5 113)
Operating expenses (31 688) (1 901) (29 707)
Other expenses (1 718) (394) (1 394)
Share of post tax results of associates and
joint ventures 170 - 170
Operating profit before income tax 11 755 (1 890) 13 645
Tax expenses (3 278) (408) (3 687)
Profit for the reporting period 8 477 (1 482) 9 959
Profit attributable to:
Ordinary equity holders 8 067 (1 482) 9 549
Preference equity holders 362 - 362
Additional Tier 1 Capital 48 - 48
8 477 (1 482) 9 959
Headline earnings 8 548 (1 245) 9 793
Operating performance (%)
Net interest margin on average interest-
bearing assets 3.91 n/a 3.90
Credit loss ratio on gross loans and advances
to customers and banks 0.73 n/a 0.74
Non-interest income as % of income 41.3 n/a 41.5
Income growth 2.6 n/a 1.8
Operating expenses growth 14.8 n/a 7.9
Cost-to-income ratio 63.1 n/a 59.8
Effective tax rate 27.9 n/a 27.0
Statement of financial position (Rm)
Loans and advances to customers 660 492 - 660 492
Loans and advances to banks 43 217 - 43 217
Investment securities 76 524 - 76 524
Other assets 208 125 (912) 207 213
Total assets 988 358 (912) 987 446
Deposits due to customers 583 825 - 583 825
Debt securities in issue 137 942 - 137 942
Other liabilities(1) 181 262 9 840 191 102
Total liabilities 903 029 9 840 912 869
Equity 85 329 (10 752) 74 577
Total equity and liabilities 988 358 (912) 987 446
Key performance ratios (%)
Return on average assets 0.91 n/a 1.05
Return on average equity 14.3 n/a 14.8
Capital adequacy 16.9 n/a 15.0
Common Equity Tier 1 13.4 n/a 11.6
Share statistics (cents)
Diluted headline earnings per ordinary share 1 939.4 n/a 2 221.9
Notes
(1) ‘Other liabilities’ of R9 840m, included in Adjustments for Barclays separation, represents
the contribution that was received from Barclays PLC, net of amounts already spent on
separation activities. The cash received is held centrally by Treasury and is presented as
an intersegmental asset in ‘Other liabilities’.
Barclays separation financial results
‘Net interest income’ includes the endowment benefit received on the Barclays PLC investment, while
foreign exchange hedging gains linked to the separation activities have been disclosed as ‘non-
interest income’. ‘Operating expenses’ includes R1.9bn professional fees, information technology
costs, marketing, transitional service costs and salary costs incurred during the reporting period.
‘Other expenses’ reflects the impairment of an intangible asset that was utilised during the
current year.
Summary consolidated statement of financial position
as at 31 December
2017 2016
Note Rm Rm
Assets
Cash, cash balances and balances with central banks 28 792 28 252
Investment securities 76 524 84 174
Loans and advances to banks 2 43 217 39 296
Trading portfolio assets 104 781 74 389
Hedging portfolio assets 2 667 1 734
Other assets 15 513 16 645
Current tax assets 57 616
Non-current assets held for sale 1 1 119 367
Loans and advances to customers 2 660 492 630 646
Loans to Group Companies 36 530 25 794
Investments in associates and joint ventures 1 235 1 065
Investment properties - 222
Property and equipment 13 519 12 726
Goodwill and intangible assets 3 861 2 339
Deferred tax assets 51 46
Total assets 988 358 918 311
Liabilities
Deposits from banks 74 110 60 148
Trading portfolio liabilities 59 834 42 503
Hedging portfolio liabilities 1 117 2 054
Other liabilities 27 824 21 150
Provisions 2 073 2 060
Current tax liabilities 55 4
Non-current liabilities held for sale - 9
Deposits due to customers 583 825 564 812
Debt securities in issue 137 942 139 573
Borrowed funds 3 15 866 15 679
Deferred tax liabilities 383 1 020
Total liabilities 903 029 849 012
Equity
Capital and reserves
Attributable to ordinary equity holders:
Ordinary share capital 304 304
Ordinary share premium 36 879 24 964
Preference share capital 1 1
Preference share premium 4 643 4 643
Additional Tier 1 Capital 1 500 -
Retained earnings 37 855 36 099
Other reserves 4 145 3 262
85 327 69 273
Non-controlling interest - ordinary shares 2 26
Total equity 85 329 69 299
Total equity and liabilities 988 358 918 311
Summary consolidated statement of comprehensive income
for the period ended 31 December
2017 2016
Note Rm Rm
Net interest income 29 413 28 809
Interest and similar income 71 438 69 894
Interest expense and similar charges (42 025) (41 085)
Non-interest income 20 681 19 992
Net fee and commission income 17 279 16 168
Fee and commission income 18 608 17 628
Fee and commission expense (1 329) (1 460)
Gains and losses from banking and trading activities 2 860 2 969
Gains and losses from investment activities 3 2
Other operating income 539 853
Total Income 50 094 48 801
Impairment losses on loans and advances (5 113) (6 408)
Operating income before operating expenditure 44 981 42 393
Operating expenditure (31 608) (27 525)
Other expenses (1 788) (1 575)
Other impairments 4 (512) (577)
Indirect taxation (1 276) (998)
Share of post-tax results of associates and joint ventures 170 118
Operating profit before income tax 11 755 13 411
Taxation expense (3 278) (3 477)
Profit for the reporting period 8 477 9 934
Profit attributable to:
Ordinary equity holders 8 067 9 568
Non-controlling interest - 15
Preference equity holders 362 351
Additional Tier 1 Capital 48 -
8 477 9 934
Earnings per share:
Basic earnings per share (cents per share) 1 830.3 2 290.6
Diluted earnings per share (cents per share) 1 830.3 2 290.6
2017 2016
Note Rm Rm
Profit for the reporting period 8 477 9 934
Other comprehensive income
Items that will not be reclassified to profit or loss (154) (12)
Fair value losses arising from changes in own credit risk
on liabilities designated at fair value through profit or loss (147) -
Movement in retirement benefit fund assets and liabilities (7) (12)
Decrease in retirement benefit surplus (10) (17)
Deferred tax 3 5
Items that are or may be subsequently reclassified to profit
or loss 677 928
Movement in foreign currency translation reserve 55 (453)
Differences in translation of foreign operations 3 (133)
Release to profit or loss 52 (320)
Movement in cash flow hedging reserve 794 1 726
Fair value gains 1 465 2 714
Amount removed from other comprehensive income and recognised
in profit or loss (365) (314)
Deferred tax (306) (674)
Movement in available-for-sale reserve (172) (345)
Fair value losses (307) (475)
Release to profit or loss 67 (3)
Deferred tax 68 133
Total comprehensive income for the reporting period 9 000 10 850
Total comprehensive income attributable to:
Ordinary equity holders 8 590 10 484
Non-controlling interest - 15
Preference equity holders 362 351
Additional Tier 1 Capital 48 -
9 000 10 850
Summary consolidated statement of changes in equity
Number of
ordinary Share Share
shares(1) capital premium
’000 Rm Rm
Balance at the beginning of the reporting period 431 318 304 24 964
Total comprehensive income for the reporting period - - -
Profit for the reporting period - - -
Other comprehensive income - - -
Dividends paid during the reporting period - - -
Distributions paid during the reporting period - - -
Shares issued 16 983 - 3 500
Issuance of Additional Tier 1 Capital - - -
Purchase of Barclays Africa Group Limited shares in respect
of equity-settled share-based payment arrangements - - -
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 interest in subsidiary(2) - - -
Barclays separation(3) - - 8 415
Shareholder contribution - fair value of investment(4) - - -
Balance at the end of the reporting period 448 301 304 36 879
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 disinvestment, the Bank issued share capital to Barclays PLC for
R8,4bn and received an additional R3,7bn in cash. The resultant cash received meets the definition
of a transaction with a shareholder.
(4) CLS Group Holding AG shares were transferred to Barclays PLC for no consideration in 2005. During
the current reporting period these shares were transferred back to the Bank for a nominal
consideration of one British Pound Sterling (GBP). The shares have been recognised at a fair value
of R48m. The related credit has been recognised in equity as a shareholder contribution.
Preference Preference Additional
share share Tier 1
capital premium Capital(5)
Rm Rm Rm
Balance at the beginning of the reporting period 1 4 643 -
Total comprehensive income for the reporting period - - -
Profit for the reporting period - - -
Other comprehensive income - - -
Dividends paid during the reporting period - - -
Distributions paid during the reporting period - - -
Shares issued - - -
Issuance of Additional Tier 1 Capital - - 1 500
Purchase of Barclays Africa Group Limited shares in respect
of equity-settled share-based payment arrangements - - -
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 interest in subsidiary(2) - - -
Barclays separation(3) - - -
Shareholder contribution - fair value of investment(4) - - -
Balance at the end of the reporting period 1 4 643 1 500
Bank
2017
Available-
Retained Total other for-sale
earnings reserves reserve
Rm Rm Rm
Balance at the beginning of the reporting period 36 099 3 262 259
Total comprehensive income for the reporting period 8 323 677 (172)
Profit for the reporting period 8 477 - -
Other comprehensive income (154) 677 (172)
Dividends paid during the reporting period (9 962) - -
Distributions paid during the reporting period (48) - -
Shares issued - - -
Issuance of Additional Tier 1 Capital - - -
Purchase of Barclays Africa Group Limited shares in respect
of equity-settled share-based payment arrangements (125) - -
Transfer of vesting options - - -
Movement in share-based payment reserve - 36 -
Transfer from share-based payment reserve - (586) -
Value of employee services - 590 -
Conversion from cash-settled schemes - - -
Deferred tax - 32 -
Share of post-tax results of associates and joint ventures (170) 170 -
Disposal of interest in subsidiary(2) - - -
Barclays separation(3) 3 690 - -
Shareholder contribution - fair value of investment(4) 48 - -
Balance at the end of the reporting period 37 855 4 145 87
Foreign
Cash flow currency
hedging translation Capital
reserve reserve reserve
Rm Rm Rm
Balance at the beginning of the reporting period (145) (54) 1 422
Total comprehensive income for the reporting period 794 55 -
Profit for the reporting period - - -
Other comprehensive income 794 55 -
Dividends paid during the reporting period - - -
Distributions paid during the reporting period - - -
Shares issued - - -
Issuance of Additional Tier 1 Capital - - -
Purchase of Barclays Africa Group Limited shares in respect
of equity-settled share-based payment arrangements - - -
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 interest in subsidiary(2) - - -
Barclays separation(3) - - -
Shareholder contribution - fair value of investment(4) - - -
Balance at the end of the reporting period 649 1 1 422
Associates’ Total equity
Share-based and joint attributable
payment ventures’ to equity
reserve reserve holders
Rm Rm Rm
Balance at the beginning of the reporting period 713 1 067 69 273
Total comprehensive income for the reporting period - - 9 000
Profit for the reporting period - - 8 477
Other comprehensive income - - 523
Dividends paid during the reporting period - - (9 962)
Distributions paid during the reporting period - - (48)
Shares issued - - 3 500
Issuance of Additional Tier 1 Capital - - 1 500
Purchase of Barclays Africa Group Limited shares in respect
of equity-settled share-based payment arrangements - - (125)
Transfer of vesting options - - -
Movement in share-based payment reserve 36 - 36
Transfer from share-based payment reserve (586) - (586)
Value of employee services 590 - 590
Conversion from cash-settled schemes - - -
Deferred tax 32 - 32
Share of post-tax results of associates and joint ventures - 170 -
Disposal of interest in subsidiary(2) - - -
Barclays separation(3) - - 12 105
Shareholder contribution - fair value of investment(4) - - 48
Balance at the end of the reporting period 749 1 237 85 327
Non-controlling
interest-
ordinary Total
shares equity
Rm Rm
Balance at the beginning of the reporting period 26 69 299
Total comprehensive income for the reporting period - 9 000
Profit for the reporting period - 8 477
Other comprehensive income - 523
Dividends paid during the reporting period - (9 962)
Distributions paid during the reporting period - (48)
Shares issued - 3 500
Issuance of Additional Tier 1 Capital - 1 500
Purchase of Barclays Africa Group Limited shares in respect
of equity-settled share-based payment arrangements - (125)
Transfer of vesting options - -
Movement in share-based payment reserve - 36
Transfer from share-based payment reserve - (586)
Value of employee services - 590
Conversion from cash-settled schemes - -
Deferred tax - 32
Share of post-tax results of associates and joint ventures - -
Disposal of interest in subsidiary(2) (24) (24)
Barclays separation(3) - 12 105
Shareholder contribution - fair value of investment(4) - 48
Balance at the end of the reporting period 2 85 329
Number of
ordinary Share Share
shares(1) capital premium
’000 Rm Rm
Balance at the beginning of the reporting period 412 798 304 21 455
Total comprehensive income for the reporting period - - -
Profit for the period for the reporting period - - -
Other comprehensive income - - -
Dividends paid during the reporting period - - -
Distributions paid during the reporting period - - -
Shares issued 18 520 - 3 500
Issuance of Additional Tier 1 Capital - - -
Purchase of Barclays Africa Group Limited shares in respect of
equity-settled share-based payment arrangements - - -
Transfer of vesting options - - 9
Movement in share-based payment reserve - - -
Transfer from 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
Notes
All movements are reflected net of taxation.
(1) This includes ordinary shares and ‘A’ ordinary shares
Preference Preference Additional
share share Tier 1
capital premium Capital
Rm Rm Rm
Balance at the beginning of the reporting period 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 - - -
Distributions paid during the reporting period - - -
Shares issued - - -
Issuance of Additional Tier 1 Capital - - -
Purchase of Barclays Africa Group Limited shares in respect
of equity-settled share-based payment arrangements - - -
Transfer of vesting options - - -
Movement in share-based payment reserve - - -
Transfer from 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 1 4 643 -
2016
Total Available-
Retained other for-sale
earnings reserves reserve
Rm Rm Rm
Balance at the beginning of the reporting period 32 033 2 050 604
Total comprehensive income for the reporting period 9 907 928 (345)
Profit for the period for the reporting period 9 919 - -
Other comprehensive income (12) 928 (345)
Dividends paid during the reporting period (5 851) - -
Distributions paid during the reporting period - - -
Shares issued - - -
Issuance of Additional Tier 1 Capital - - -
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
Cash flow Foreign currency
hedging translation Capital
reserve reserve reserve
Rm Rm Rm
Balance at the beginning of the reporting period (1 871) 399 1 422
Total comprehensive income for the reporting period 1 726 (453) -
Profit for the period for the reporting period - - -
Other comprehensive income 1 726 (453) -
Dividends paid during the reporting period - - -
Distributions paid during the reporting period - - -
Shares issued - - -
Issuance of Additional Tier 1 Capital - - -
Purchase of Barclays Africa Group Limited shares in respect
of equity-settled share-based payment arrangements - - -
Transfer of vesting options - - -
Movement in share-based payment reserve - - -
Transfer from 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 (145) (54) 1 422
Total
Share Associates’ attributable
based and Joint to ordinary
payment ventures’ equity
reserve reserve holders
Rm Rm Rm
Balance at the beginning of the reporting period 547 949 60 486
Total comprehensive income for the reporting period - - 10 835
Profit for the period for the reporting period - - 9 919
Other comprehensive income - - 916
Dividends paid during the reporting period - - (5 851)
Distributions paid during the reporting period - - -
Shares issued - - 3 500
Issuance of Additional Tier 1 Capital - - -
Purchase of Barclays Africa Group Limited shares in respect
of equity-settled share-based payment arrangements - - (198)
Transfer of vesting options - - 335
Movement in share-based payment reserve 166 - 166
Transfer from share-based payment reserve (315) - (315)
Value of employee services 411 - 411
Conversion from cash-settled to equity-settled Schemes 30 - 30
Deferred tax 40 - 40
Share of post-tax results of associates and joint ventures - 118 -
Balance at the end of the reporting period 713 1 067 69 273
Non-controlling
interest- Total
ordinary shares equity
Rm Rm
Balance at the beginning of the reporting period 11 60 497
Total comprehensive income for the reporting period 15 10 850
Profit for the period for the reporting period 15 9 934
Other comprehensive income - 916
Dividends paid during the reporting period - (5 851)
Distributions paid during the reporting period - -
Shares issued - 3 500
Issuance of Additional Tier 1 Capital - -
Purchase of Barclays Africa Group Limited shares in
respect of equity-settled share-based payment arrangements - (198)
Transfer of vesting options - 335
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 - -
Balance at the end of the reporting period 26 69 299
Summary consolidated statement of cash flows
2017 2016
Note Rm Rm
Net cash (utilised in)/generated from operating activites (4 478) 2 300
Net cash utilised in investing activities (3 906) (4 090)
Net cash generated from /(utilised in) financing activities 7 008 ( 168)
Net cash generated from Barclays separation 12 106 -
Net cash utilised in other financing activities (5 098) ( 168)
Net decrease in cash and cash equivalents (1 376) (1 958)
Cash and cash equivalents at the beginning of the reporting period 1 12 416 14 374
Cash and cash equivalents at the end of the reporting period 2 11 040 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
Loans and advances to banks(2) 2 754 5 767
12 416 14 374
2. Cash and cash equivalents at the end of the reporting period
Cash, cash balances and balances with central banks(1) 9 684 9 662
Loans and advances to banks(2) 1 356 2 754
11 040 12 416
Notes
(1) Includes coins and bank notes.
(2) Includes call advances, which are used as working capital for the Bank
Summary 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 loans and advances to customers of R1 118m and property and
equipment of R1m 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 R373m and liabilities
of R26m out of non-current assets and non-current liabilities held for sale respectively.
- Corporate and Investment Banking South Africa (CIB SA) transferred investment securities with a carrying
value of R547m to non-current assets held for sale. Prior to its disposal at a carrying value of R467m,
a negative fair value adjustment of R80m was applied to the investment securities.
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
31 December
2017
Performing loans
Exposure Impairment Coverage ratio
Rm Rm %
South Africa Banking 644 242 3 915 0.61
RBB South Africa 425 859 3 356 0.79
Retail Banking South Africa 363 074 2 583 0.71
Credit cards 26 849 578 2.15
Instalment credit agreements 76 498 703 0.92
Loans to associates and joint ventures 23 037 - -
Mortgages 213 508 1 124 0.53
Other loans and advances 726 - -
Overdrafts 5 349 51 0.95
Personal and term loans 17 107 127 0.74
Business Banking South Africa 62 785 773 1.23
Mortgages (including CPF) 27 010 140 0.52
Overdrafts 19 865 393 1.98
Term loans 15 910 240 1.51
CIB South Africa 218 383 559 0.26
Wealth 4 930 14 0.28
Head office, Treasury and other operations In
South Africa 987 10 1.01
Loans and advances to customers 650 159 3 939 0.61
Loans and advances to banks 43 217 - -
693 376 3 939 0.57
Non-performing loans
Exposure Impairment Coverage ratio
Rm Rm %
South Africa Banking 23 694 9 510 40.14
RBB South Africa 21 675 8 678 40.04
Retail Banking South Africa 18 340 7 582 41.34
Credit cards 3 622 2 626 72.50
Instalment credit agreements 2 360 1 112 47.12
Loans to associates and joint ventures - - -
Mortgages 10 241 2 056 20.08
Other loans and advances - - -
Overdrafts 384 236 61.46
Personal and term loans 1 733 1 552 89.56
Business Banking South Africa 3 335 1 096 32.86
Mortgages (including CPF) 1 477 519 35.14
Overdrafts 1 082 375 34.66
Term loans 776 202 26.03
CIB South Africa 2 019 832 41.21
Wealth 262 174 66.41
Head office, Treasury and other operations In
South Africa - - -
Loans and advances to customers 23 956 9 684 40.42
Loans and advances to banks - - -
23 956 9 684 40.42
Net total exposure
Rm
South Africa Banking 654 511
RBB South Africa 435 500
Retail Banking South Africa 371 249
Credit cards 27 267
Instalment credit agreements 77 043
Loans to associates and joint ventures 23 037
Mortgages 220 569
Other loans and advances 726
Overdrafts 5 446
Personal and term loans 17 161
Business Banking South Africa 64 251
Mortgages (including CPF) 27 828
Overdrafts 20 179
Term loans 16 244
CIB South Africa 219 011
Wealth 5 004
Head office, Treasury and other operations In
South Africa 977
Loans and advances to customers 660 492
Loans and advances to banks 43 217
703 709
31 December
2016(1)
Performing loans
Exposure Impairment Coverage ratio
Rm Rm %
South Africa Banking 614 881 4 531 0.74
RBB South Africa 413 325 3 887 0.94
Retail Banking South Africa 355 064 3 114 0.88
Credit cards 27 374 596 2.18
Instalment credit agreements 73 530 735 1.00
Loans to associates and joint ventures 18 933 - -
Mortgages 214 610 1 219 0.57
Other loans and advances 492 - -
Overdrafts 3 923 45 1.15
Personal and term loans 16 202 519 3.20
Business Banking South Africa 58 261 773 1.33
Mortgages (including CPF) 24 661 158 0.64
Overdrafts 18 284 366 2.00
Term loans 15 316 249 1.63
CIB South Africa 201 556 644 0.32
Wealth 5 615 14 0.25
Head office, Treasury and other
operations In South Africa 654 4 0.61
Loans and advances to customers 621 150 4 549 0.73
Loans and advances to banks 39 296 - -
660 446 4 549 0.69
Non-performing loans
Exposure Impairment Coverage ratio
Rm Rm %
South Africa Banking 23 590 9 604 40.71
RBB South Africa 21 325 8 420 39.48
Retail Banking South Africa 18 037 7 258 40.24
Credit cards 4 001 2 919 72.96
Instalment credit agreements 2 085 925 44.36
Loans to associates and joint ventures - - -
Mortgages 9 920 2 097 21.14
Other loans and advances - - -
Overdrafts 220 142 64.55
Personal and term loans 1 811 1 175 64.88
Business Banking South Africa 3 288 1 162 35.34
Mortgages (including CPF) 1 567 536 34.21
Overdrafts 929 421 45.32
Term loans 792 205 25.88
CIB South Africa 2 265 1 184 52.27
Wealth 116 57 49.14
Head office, Treasury and other
operations In South Africa - - -
Loans and advances to customers 23 706 9 661 40.75
Loans and advances to banks - - -
23 706 9 661 40.75
Net total exposure
Rm
South Africa Banking 624 336
RBB South Africa 422 343
Retail Banking South Africa 362 729
Credit cards 27 860
Instalment credit agreements 73 955
Loans to associates and joint ventures 18 933
Mortgages 221 214
Other loans and advances 492
Overdrafts 3 956
Personal and term loans 16 319
Business Banking South Africa 59 614
Mortgages (including CPF) 25 534
Overdrafts 18 426
Term loans 15 654
CIB South Africa 201 993
Wealth 5 660
Head office, Treasury and other operations In South Africa 650
Loans and advances to customers 630 646
Loans and advances to banks 39 296
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: R2 841m
(31 December 2016: R2 381m) of subordinated notes were issued and R2 805m (31 December 2016: Rnil)
were redeemed.
4. Other impairments
2017 2016
Rm Rm
Impairment raised on financial instruments (30) (13)
Other 542 590
Intangible assets (1) 326 590
Property and equipment (2) 216 -
512 577
5. Headline earnings
2017 2016
Gross Net(3) Gross Net(3)
Rm Rm Rm Rm
Headline earnings are determined as follows:
Profit attributable to ordinary equity
holders of the Bank 8 067 9 568
Total headline earnings adjustment: 481 210
IFRS 5 - Loss on disposal of non-current
assets held for sale 33 34 - -
IAS 16 - Profit on disposal of property
and equipment (18) (13) (22) (16)
IAS 21 - Recycled foreign currency
translation reserve 52 52 (320) (297)
IAS 36 - Impairment of property and equipment 216 155 - -
IAS 36 - Impairment of intangible assets 326 238 590 590
IAS 39 - Release of available-for-sale
reserves 67 49 (3) (2)
IAS 40 - Change in fair value of investment
properties (37) (29) (84) (65)
IAS 40 - Profit on disposal of investment property (5) (5) - -
Headline earnings/diluted headline earnings 8 548 9 778
Headline earnings per share/diluted headline
earnings per share (cents) 1 939.4 2 340.9
Notes
(1) The impairment incurred during the current reporting period mainly relates to computer software, Barclays.
Net which was fully impaired. 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.
(2) During the current reporting period management have decided to dispose of certain property and equipment
resulting in an impairment of R216m.
(3) The net amount is reflected after taxation.
6. Dividends per share
2017 2016
Rm Rm
Dividends declared to ordinary equity holders
Interim Dividend (28 July 2017: 892,25702 cents) 4 000 -
Special Dividend (30 June 2017: 811,4669592) (6 December 2016:
476,12 cents) (10 June 2016: 363,37 cents) 3 500 3 500
Final Dividend (1 March 2018: 669,1928 cents) (23 February 2017:
486,88017 cents) 3 000 2 100
10 500 5 600
Dividends declared to preference equity holders
Interim dividend (28 July 2017: 3 685,06849 cents) (29 July 2016:
3 696,57534 cents) 182 183
Final dividend (1 March 2018: 3 558,01 cents) (23 February 2017:
3 644,79452 cents) 176 180
358 363
Distributions declared to Additional Tier 1 Capital note holders
Distribution (12 December 2017) 48 -
48 -
Dividends paid to ordinary equity holders (1)
Final dividend (10 April 2017: 486,88017 cents)(2) (11 April 2016:
484,49896 cents) 2 100 2 000
Interim dividend (11 September 2017: 892,25702 cents) 4 000 -
Special dividend (30 June 2017: 811,4669592) (6 December 2016:
476,12 cents) (10 June 2016: 363,37 cents) 3 500 3 500
9 600 5 500
Dividends paid to preference equity holders (1)
Final dividend (10 April 2017: 3 644,79452 cents)(11 April 2016:
3 395,47945 cents) 180 168
Interim dividend (11 September 2017: 3 685,06849 cents)
(12 September 2016: 3 696,57534 cents) 182 183
362 351
Distributions paid to Additional Tier 1 Capital note holders
Distribution (12 December 2017) 48 -
48 -
Notes
(1) The dividend paid dates have been corrected to reflect date of payment. Previously these
dates referred to date of declaration.
(2) Dividends paid has been corrected since disclosed in interim. The final dividend per share
paid to ordinary equity holders previously disclosed at interim was 1 249.15983 cents per
share (gross R5.6bn).
7. Acquisitions and disposals of businesses and other similar transactions
7.1.1 Acquisitions of businesses during the current reporting period
There were no acquisitions of businesses during the current reporting period.
7.1.2 Disposals of businesses during the current reporting period
Apart from the businesses classified as non-current assets/liabilities held for sale and disposed of (refer
to note 1) there were no other disposals of businesses that were finalised during the current reporting
period. The cash consideration received on disposals included in non-current assets/liabilities held for sale
was R205m.
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
Barclays Africa Group Limited is the parent of Absa Bank Limited.
As part of the separation, Barclays PLC sold ordinary Barclays Africa Group shares representing 12.2% and
33.7% of issued ordinary share capital in May 2016 and June 2017 respectively. Barclays PLC currently
holds 126.2m ordinary Barclays Africa Group shares representing 14.9% of issued ordinary shares. The
remaining 85.1 % of the shares are widely held on the JSE.
Barclays PLC contributed £765 million to the Bank, primarily in recognition of the investments required
for the Bank 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 Bank over time.
CLS Group Holding AG shares were transferred to Barclays PLC for no consideration in 2005. During the current
reporting period these shares were transferred back to the Bank for a nominal consideration of one British
Pound (GBP). The shares have been recognised at a fair value of R48m. The related credit has been recognised
in equity as a shareholder contribution.
9. Financial guarantee contracts
31 December
2017 2016
Rm Rm
Financial guarantee contracts 10 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
2017 2016
Rm Rm
Authorised capital expenditure
Contracted but not provided for 257 509
The Bank has capital commitments in respect of
computer equipment, software and property development.
Management is confident that future net revenues and
funding will be sufficient to cover these commitments.
Operating lease payments due
No later than one year 1 026 947
Later than one year and no later than five years 2 654 2 367
Later than five years 902 1 195
4 582 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
31 December
2017 2016
Rm Rm
Guarantees 28 960 30 469
Irrevocable debt facilities 145 087 122 958
Letters of credit 3 834 4 645
Other contingencies 151 135
178 032 158 207
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 the
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. In consequence, Absa,
together with the SARB, Minister of Finance and National Treasury, brought an application to review and set
aside the remedial action recommended in the Public Protector’s report which was successful and the report
was thus set aside.
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 provisions for income taxes necessarily involves a degree of estimation and judgement. There are many
transactions and calculations for which the ultimate tax treatment is uncertain or in respect of which the
relevant tax authorities may have indicated disagreement with the Bank’s treatment and accordingly the final tax
charge cannot be determined until resolution has been reached with the relevant tax authority.
The Bank recognises provisions for anticipated tax audit issues based on estimates of whether additional taxes
will be due after taking into account external advice where appropriate. The carrying amount of any resulting
provisions will be sensitive to the manner in which tax matters are expected to be resolved, and the stage of
negotiations or discussion with the relevant tax authorities. There may be significant uncertainty around the
final outcome of tax proceedings, which in many instances, will only be concluded after a number of years.
Management estimates are informed by a number of factors including, inter alia, the progress made in
discussions or negotiations with the tax authorities, the advice of expert legal counsel, precedent set by the
outcome of any previous claims, as well as the nature of the relevant tax environment.
Where the final tax outcome of these matters is different from the amounts that were initially recorded, such
differences will impact the current and deferred income tax assets and liabilities in the reporting period in
which such determination is made. These risks are managed in accordance with the Bank’s Tax Risk Framework.
12. Segment reporting
2017 2016(1)
Rm Rm
12.1 Headline earnings contribution by segment
South Africa Banking 11 903 11 251
RBB South Africa 8 636 8 544
CIB South Africa 3 267 2 707
Wealth ( 429) (261)
Head Office, Treasury and other operations in South Africa (1 681) (1 212)
Barclays separation (1 245) -
Total headline earnings 8 548 9 778
12.2 Total income by segment
South Africa Banking 50 777 49 448
RBB South Africa 40 275 39 512
CIB South Africa 10 502 9 937
Wealth 430 448
Head Office, Treasury and other operations in South Africa (1 518) (1 095)
Barclays separation 405 -
Total income 50 094 48 801
12.3 Total internal income by segment
South Africa Banking (11 324) (15 636)
RBB South Africa (8 346) (8 708)
CIB South Africa (2 978) (6 928)
Wealth 6 10
Head Office, Treasury and other operations in South Africa 15 950 14 164
Barclays separation 325 -
Total internal income 4 957 (1 462)
12.4 Total assets by segment
South Africa Banking 1 209 227 1 144 244
RBB South Africa 741 230 716 930
CIB South Africa 467 997 427 314
Wealth 6 083 6 112
Head Office, Treasury and other operations in South Africa (227 864) (232 045)
Barclays separation 912 -
Total assets 988 358 918 311
12.5 Total liabilities by segment
South Africa Banking 1 194 542 1 130 979
RBB South Africa 730 984 707 223
CIB South Africa 463 558 423 756
Wealth 6 504 6 359
Head Office, Treasury and other operations in South Africa (288 177) (288 326)
Barclays separation(2) (9 840) -
Total liabilities 903 029 849 012
Notes
(1) Operational changes, management changes and associated changes to the way in which the
CODM views the performance of each business segment, have resulted in the reallocation of
earnings, assets and liabilities between operating segments. For details on the business
portfolio changes refer to note 15.
(2) This represents the contribution of R12.1bn that was received from Barclays PLC, net of
amounts already spent on separation activities. The cash received is centrally held by
Treasury and is presented as an intersegmental asset in ‘Other liabilities’.
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.
2017 2016(1)
Carrying Fair value Carrying value Fair value
value
Rm Rm Rm Rm
Financial assets
Balances with the South African
Reserve Bank 19 108 19 108 18 552 18 552
Coins and bank notes 9 684 9 684 9 662 9 662
Money market assets - - 38 38
Cash, cash balances and balances
with central banks 28 792 28 792 28 252 28 252
Loans and advances to banks 26 020 26 020 19 439 19 439
Other assets 13 327 13 420 14 822 14 895
South Africa Banking 627 704 627 935 600 264 599 347
RBB South Africa 435 500 435 731 422 238 421 321
Retail Banking South Africa 371 248 371 479 362 730 362 621
Credit cards 27 267 27 267 27 861 27 861
Instalment credit agreements 77 044 77 275 73 955 73 650
Loans to associates and joint
ventures 23 037 23 037 18 933 18 933
Mortgages 220 569 220 569 221 225 221 237
Other loans and advances 726 726 492 492
Overdrafts 5 443 5 443 3 947 3 947
Personal and term loans 17 162 17 162 16 317 16 501
Business Banking South Africa 64 252 64 252 59 508 58 700
Mortgages (including CPF) 27 828 27 828 25 406 25 418
Overdrafts 19 199 19 199 18 448 18 448
Term loans 17 225 17 225 15 654 14 834
CIB South Africa 192 204 192 204 178 026 178 026
Wealth 5 004 5 004 5 660 5 660
Head Office, Treasury and other
operations in South Africa 974 974 645 645
Loans and advances to customers -
net of impairment losses 633 681 633 913 606 569 605 652
Loans to Group companies 36 530 36 530 25 794 25 794
Non-current assets held for sale 1 118 1 118 - -
Total assets 739 469 739 793 694 876 694 032
Financial liabilities
Deposits from banks 52 079 52 079 42 514 42 514
Other liabilities 25 709 25 724 19 039 19 279
Call deposits 62 725 62 725 62 270 62 270
Cheque account deposits 153 539 153 539 152 474 152 474
Credit card deposits 1 896 1 896 1 906 1 906
Fixed deposits 131 521 131 521 116 049 116 113
Foreign currency deposits 18 444 18 444 23 325 23 325
Notice deposits 58 460 58 460 59 358 59 457
Other deposits 1 414 1 414 2 059 2 059
Saving and transmission deposits 135 375 135 375 130 208 130 208
Deposits due to customers 563 374 563 374 547 649 547 812
Debt securities in issue 132 701 132 701 133 906 131 329
Borrowed funds 15 866 15 866 15 679 15 900
Total liabilities 789 729 789 744 758 787 756 834
Note
(1) These numbers have been restated, refer to Note 15.
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.
2017
Recurring fair value Level 1 Level 2 Level 3 Total
measurements Rm Rm Rm Rm
Financial Assets
Investment securities 37 737 32 841 5 946 76 524
Loans and advances to banks - 16 713 484 17 197
Trading and hedging portfolio
assets 31 379 72 194 1 824 105 397
Debt instruments 29 185 2 410 177 31 772
Derivative assets - 58 594 546 59 140
Commodity derivatives - 973 124 1 097
Credit derivatives - - 165 165
Equity derivatives - 2 356 173 2 529
Foreign exchange derivatives - 15 548 8 15 556
Interest rate derivatives - 39 717 76 39 793
Equity instruments 567 - - 567
Money market assets 1 627 11 190 1 101 13 918
Loans and advances to customers - 22 070 4 741 26 811
Total financial assets 69 116 143 818 12 995 225 929
Financial liabilities
Deposits from banks - 22 031 - 22 031
Trading and hedging portfolio
liabilities 8 141 51 866 944 60 951
Derivative liabilities - 51 866 944 52 810
Commodity derivatives - 1 164 121 1 285
Credit derivatives - - 148 148
Equity derivatives - 1 965 423 2 388
Foreign exchange derivatives - 14 500 4 14 504
Interest rate derivatives - 34 237 248 34 485
Short positions 8 141 - - 8 141
Deposits due to customers 203 18 676 1 572 20 451
Debt securities in issue 399 4 354 488 5 241
Total financial liabilities 8 743 96 927 3 004 108 674
Non-financial assets
Commodities 2 051 - - 2 051
Investment properties - - - -
Non-recurring fair value
measurements
Non-current assets held
for sale(1) - - - -
Non-current liabilities
held for sale(1) - - - -
2016
Recurring fair value Level 1 Level 2 Level 3 Total
measurements Rm Rm Rm Rm
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
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
Note
(1) Includes certain items classified in terms of the requirements of IFRS 5 which are
measured in terms of their respective standards.
14.5 Measurement of assets and liabilities categorised at Level 2
The following table presents information about the valuation techniques and significant
observable inputs used in measuring assets and liabilities categorised as Level 2 in the
fair value hierarchy:
Category of asset/liability Valuation techniques applied Significant observable inputs
Loans and advances to Discounted cash flow Interest rate and/or
banks models money market curves
Trading and hedging portfolio assets and liabilities
Debt instruments Discounted cash flow Underlying price of
models market traded
instruments and
interest rates
Derivatives
Commodity derivatives Discounted cash Spot price of
flow and/or option physical or futures,
pricing, futures interest rates
pricing and/or exchange and/or volatility
traded fund (ETF) models
Credit derivatives Discounted cash flow Interest rate,
and/or credit default recovery rate,
swap models credit spread and/or
quanto ratio
Equity derivatives Discounted Spot price,
cash flow, interest rate,
option pricing volatility and/or
and/or futures dividend stream
pricing models
Foreign exchange Discounted cash Spot price,
derivatives flow and/or option interest rate
pricing models and/or volatility
Interest rate Discounted cash Interest rate
derivatives flow and/or option curves, repurchase
pricing models agreement curves,
money market curves
and/or volatility
Money market assets Discounted cash Money market
flow models rates and/or
interest rates
Loans and advances Discounted cash Interest
to customers flow models rate curves
and/or money
market curves
Investment securities Listed equity: Underlying price
market bid price. of the market
Other items: traded instruments
discounted cash and/or interest
flow models rate curves
Deposits Discounted cash Interest rate curves
from banks flow models and/or money
market curves
Deposits due Discounted cash Interest
to customers flow models rate curves
and/or money
market curves
Debt securities in Discounted cash Underlying price
issue and other flow models of the market
liabilities 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:
2017
Trading
and
hedging Loans and
portfolio Other advances
assets assets to customers
Rm Rm Rm
Opening balance at the beginning of the reporting
period 1 505 - 4 890
Net interest income - - 12
Other income - - -
Gains and losses from banking and trading activities (635) - 29
Gains and losses from investment activities - - -
Purchases 1 101 - 1 020
Sales (147) - (1 112)
Movement in other comprehensive income - - -
Transfer in/(out) of Level 3 - - (98)
Closing balance at the end of the reporting period 1 824 - 4 741
Loans and
advances Investment
to banks securities
Rm Rm
Opening balance at the beginning of the reporting
period 571 1 062
Net interest income - 62
Other income - -
Gains and losses from banking and trading activities - -
Gains and losses from investment activities - 2
Purchases 88 4 789
Sales (175) -
Movement in other comprehensive income - 31
Transfer in/(out) of Level 3 - -
Closing balance at the end of the reporting period 484 5 946
Total
Investment assets at
properties fair value
Rm Rm
Opening balance at the beginning of the reporting period 222 8 250
Net interest income - 74
Other income 37 37
Gains and losses from banking and trading activities - (606)
Gains and losses from investment activities - 2
Purchases - 6 998
Sales (259) (1 693)
Movement in other comprehensive income - 31
Transfer in/(out) of Level 3 - (98)
Closing balance at the end of the reporting period - 12 995
2016
Trading
and hedging Loans and
portfolio Other advances to
assets assets customers(1)
Rm Rm Rm
Opening balance at the beginning of the reporting period 1 415 17 7 511
Net interest income - - 232
Gains and losses from banking and trading activities 116 - 65
Purchases 1 308 - -
Sales (1 334) (17) (1 956)
Movement in other comprehensive income - - -
Transferred to/(from) assets - - -
Transfer out of Level 3 - - (962)
Closing balance at the end of the reporting period 1 505 - 4 890
Loans and
advances to Investment
banks securities
Rm Rm
Opening balance at the beginning of the reporting period 2 109 1 285
Net interest income - 56
Gains and losses from banking and trading activities (139) 16
Purchases 70 2
Sales (1 469) (147)
Movement in other comprehensive income - 4
Transferred to/(from) assets - -
Transfer out of Level 3 - (154)
Closing balance at the end of the reporting period 571 1 062
Investment Total assets
properties at fair value
Rm Rm
Opening balance at the beginning of the reporting period 518 12 855
Net interest income 61 349
Gains and losses from banking and trading activities - 58
Purchases - 1 380
Sales (65) (4 988)
Movement in other comprehensive income - 4
Transferred to/(from) assets (292) (292)
Transfer out of Level 3 - (1 116)
Closing balance at the end of the reporting period 222 8 250
2017
Trading and
Deposits hedging Deposits
from portfolio due to
banks liabilities customers
Rm Rm Rm
Opening balance at the beginning of the reporting period - 307 1 139
Net interest income - - 7
Gains and losses from banking and trading activities - 585 -
Issues - 52 1 685
Settlements - - (1 144)
Transfer in/(out) of Level 3 - - (115)
Closing balance at the end of the reporting period - 944 1 572
Debt Total
securities liabilities
in issue at fair value
Rm Rm
Opening balance at the beginning of the reporting period 604 2 050
Net interest income - 7
Gains and losses from banking and trading activities - 585
Issues 30 1 767
Settlements (68) (1 212)
Transfer in/(out) of Level 3 (78) (193)
Closing balance at the end of the reporting period 488 3 004
2016
Trading and
hedging Deposits
Deposits portfolio due to
from banks liabilities customers
Rm Rm Rm
Opening balance at the beginning of the reporting
period 7 216 2 557
Gains and losses from banking and trading activities - 91 -
Gains and losses from investment activities - - 139
Issues - - 1 953
Settlements (7) - (3 510)
Closing balance at the end of the reporting period - 307 1 139
Debt Total
securities liabilities at
in issue fair value
Rm Rm
Opening balance at the beginning of the reporting period 624 3 404
Gains and losses from banking and trading activities - 91
Gains and losses from investment activities (9) 130
Issues - 1 953
Settlements (11) (3 528)
Closing balance at the end of the reporting period 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:
2017
Trading and
hedging Loans and
portfolio advances to Investment
assets customers securities
Rm Rm Rm
Gains and losses from banking and
trading activities 142 761 48
Total Trading and
assets hedging Total
at fair portfolio liabilities
value liabilities at fair value
Rm Rm Rm
Gains and losses from banking and
trading activities 951 (284) (284)
2016
Trading and Trading
hedging and hedging
portfolio portfolio Investment
assets liabilities securities
Rm Rm Rm
Gains and losses from banking and
trading activities (22) 731 9
Total Trading Total
assets and hedging liabilities
at fair portfolio at fair
value liabilities value
Rm Rm Rm
Gains and losses from banking and
trading activities 718 (104) (104)
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 by 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:
2017
Potential effect Potential effect
recorded in recorded directly
profit or loss in equity
Significant Favourable/ Favourable/
unobservable (Unfavourable) (Unfavourable)
parameters Rm Rm
Loans and BAGL/Absa
advances to bank funding spread 17/(17) -/-
Deposits due BAGL/Absa
to customers funding spread 13/(12) -/-
Investment securities Risk adjustment yield curves,
future earnings and
marketability discount 59/(59) 253/(240)
Loans and
advances
to customers Credit spreads 60/(69) -/-
Other assets Credit spreads -/- -/-
Trading and Volatility,
hedging credit spreads,
portfolio basis curves,
assets yield curves,
repo curves,
funding spreads 33/(33) -/-
Trading and Volatility,
hedging credit spreads,
portfolio basis curves,
liabilities yield curves,
repo curves,
funding spreads 17/(17) -/-
Other Volatility,
liabilities credit spreads -/- -/-
199/(207) 253/(240)
2016
Potential effect Potential effect
recorded in recorded directly
profit or loss in equity
Significant Favourable/ Favourable/
unobservable (Unfavourable) (Unfavourable)
parameters Rm Rm
Deposits due BAGL/Absa
to customers funding spread -/- -/-
Investment Risk adjustment
securities yield curves,
future earnings
and marketability
discount 13/(14) 31/(33)
Loans and
advances
to customers Credit spreads 72/(71) -/-
Other assets Credit spreads -/- -/-
Trading and Volatility,
hedging credit spreads,
portfolio basis curves,
assets yield curves,
repo curves,
funding spreads 175/(175) -/-
Trading and Volatility,
hedging credit spreads,
portfolio basis curves,
liabilities yield curves,
repo curves,
funding spreads 36/(36) -/-
Other Volatility,
liabilities 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:
Category of Valuation techniques Significant
asset/ liability applied unobservable inputs
Loans and Discounted Credit
advances cash flow spreads
to banks and and/or
customers dividend
yield models
Investment Discounted Risk adjusted
securities cash flow yield curves,
models, future
third-party earnings
valuations, marketability
earnings discounts
multiples and/or
and/or income comparator
capitalisation multiples
valuations
Trading and hedging
portfolio assets and
liabilities
Debt Discounted cash Credit
instruments flow models spreads
Derivative
assets
Credit derivatives Discounted cash flow Credit spreads,
and/or credit recovery rates
default swap and/or quanto
(hazard rate) models ratio
Equity derivatives Discounted cash flow, Volatility and/or
option pricing and/or dividend streams
futures pricing models (greater than 3 years)
Foreign exchange Discounted cash flow African basis curves
derivatives and/or option pricing (greater than 1 year)
models
Interest rate Discounted cash Real yield curves
derivatives flow and/or (less than 1 year),
option pricing models repurchase agreement
curves (less than 1 year),
funding spreads
Deposits due Discounted cash BAGL’s funding
to customers flow models spreads (greater
than 5 years)
Debt securities Discounted cash Funding curves
in issue flow models (greater than
5 years)
Investment Properties Discounted cash flow Estimates of periods
models in which rental units
will be disposed of
Annual selling price escalations
Annual rental escalations
Expense ratios
Vacancy rates
Income capitalisation rates
Risk adjusted discount rates
2017 2016
Category of Range of estimates utilised
asset/liability for the unobservable inputs
Loans and advances
to banks and customers 0,3% to 2,3% 0,5% to 5%
Investment securities Discount rate Discount rate
of 7% and 9%, of 13%,
comparator comparator
multiples multiples
between 5 between
and 10,5 5 and 10,5
Trading and hedging
portfolio assets and
liabilities
Debt instruments 3% to 15% 1,2% to 11,2%
Derivative assets
Credit derivatives 0% to 90% 0% to 40%
Equity derivatives 15,09% to 17,82% to
64,67% 67,71%
Foreign exchange derivatives (28%) to 29,5% (16,6%) to 13,1%
Interest rate derivatives 0,25% to 10,69% 0,31% to 3,38%
Deposits due to customers 0,2% to 1,9% (0,27%) to 2,13%
Debt securities in issue 0,2% to 1,9% (0,27%) to 2,13%
1 to 6 years 1 to 10 years
6% 1% to 7%
6% 1% to 7%
n/a 25% to 50%
n/a 1% to 7%
7,75% to 8% 10% to 11%
Investment Properties 11% to 15% 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:
2017 2016
Rm Rm
Opening balance at the beginning of the reporting period (139) (105)
New transactions (27) (64)
Amounts recognised in profit or loss during the reporting period 32 30
Closing balance at the end of the reporting period (134) (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
period ended 31 December 2016.
- Barclays PLC disposed of 12,2% and 33,7% of the Group’s shares in May 2016 and June 2017,
respectively. As part of its divestment Barclays PLC contributed R12.1 billion to the Bank in
June 2017, primarily in recognition of the investments required for the Bank 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 Bank over time. The separation process will increase the
capital base of the Bank 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 resulting in the restatement of operating expenses from RBB
South Africa (R615m) to CIB SA R221m, Head Office, Treasury and other operations R199m and
Wealth R195m.
- CPF customers with loan balances exceeding R40m of R10.9bn were moved from RBB SA to CIB SA
to reflect the Bank’s customer segmentation and coverage model.
- 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 Bank further enhanced segmental disclosures in the second half of 2017 to provide granularity
to the South Africa Banking segment (which now expands to RBB SA and CIB SA levels).
Administration and contact details
Absa Bank Limited
Incorporated in the Republic of South Africa
Registration number: 1986/004794/06
Authorised financial services and registered credit provider (NCRCP7)
JSE share code: ABSP
ISIN: ZAE000079810
Registered office
7th Floor, Barclays Towers West
15 Troye Street, Johannesburg, 2001
PO Box 7735, Johannesburg, 2000
Switchboard: +27 11 350 4000
barclaysafrica.com
Head Investor Relations
Alan Hartdegen
Telephone: +27 11 350 2598
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
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 of release: 1 March 2018
Date: 01/03/2018 07:06:00 Produced by the JSE SENS Department. The SENS service is an information dissemination service administered by the JSE Limited ('JSE').
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