Barclays Africa Group Limited - Basel III Pillar 3 Disclosure as at 30 September 2017 BARCLAYS AFRICA GROUP LIMITED ABSA BANK LIMITED (Incorporated in the Republic of South Africa) (Incorporated in the Republic of South Africa) (Registration number: 1986/003934/06) (Registration number: 1986/004794/06) ISIN: ZAE000174124 ISIN: ZAE000079810 JSE share code: BGA JSE share code: ABSP (Barclays Africa Group) (Absa Bank) BARCLAYS AFRICA GROUP LIMITED – BASEL III PILLAR 3 DISCLOSURE AS AT 30 SEPTEMBER 2017 The quarterly Pillar 3 disclosure is made in accordance with the requirements of the Banks Act, No. 94 of 1990 (the Banks Act) read together with South African Reserve Bank Directive 11 of 2015 (D11/2015) and Directive 11 of 2014 (D11/2014), as well as the Basel Committee on Banking Supervision’s Revised Pillar 3 disclosure requirements issued on 28 January 2015. 1) Capital Adequacy Barclays Africa Group Limited Barclays Africa Group Limited remains capitalised above the minimum regulatory capital requirements and above board approved target capital ranges. The Group continues to optimise the level and composition of capital resources. In line with this objective the Group will continue to raise Basel III compliant capital instruments, in the domestic and/or international capital markets. The table below represents the capital position for Barclays Africa Group Limited at 30 September 2017 and comparatives at 30 June 2017. 30 Sep 2017 (1) 30 Jun 2017 (1) IFRS (2) IFRS (2) Regulatory Capital Position (excluding Rm % Rm % unappropriated profits) Common Equity Tier 1 capital 94 489 12.9 93 560 12.9 Ordinary share capital 1 694 0.2 1 694 0.2 Ordinary share premium 12 898 1.8 12 868 1.8 Reserves (3) 85 067 11.6 83 681 11.5 Non-controlling interest 2 048 0.3 1 831 0.3 Deductions (7 218) (1.0) (6 514) (0.9) Additional Tier 1 capital 4 247 0.6 2 665 0.4 Tier 1 capital 98 736 13.5 96 225 13.3 Tier 2 capital 16 412 2.2 14 659 2.0 Total Capital 115 148 15.7 110 884 15.3 Page 1 of 9 Statutory Capital Position (including IFRS (2) Normalised (4) IFRS (2) Normalised (4) unappropriated profits) % % % % Common Equity Tier 1 capital 13.6 12.0 13.7 12.1 Tier 1 capital 14.2 12.7 14.0 12.4 Total capital 16.4 15.0 16.1 14.5 Board Approved Target Ranges (including 30 Sep 2017 30 Jun 2017 unappropriated profits) Common Equity Tier 1 capital 10.0% - 11.5% 10.0% - 11.5% Tier 1 capital 11.5% - 13.0% 11.5% - 13.0% Total capital 14.0% - 15.5% 14.0% - 15.5% Absa Bank Limited (5) Absa Bank Limited remains capitalised above the minimum regulatory capital requirements and above board approved target capital ranges. The table below represents the capital position for Absa Bank Limited at 30 September 2017 and comparatives at 30 June 2017. 30 Sep 2017 (1) 30 Jun 2017 (1) IFRS (2) IFRS (2) Regulatory Capital Position (excluding Rm % Rm % unappropriated profits) Common Equity Tier 1 capital 69 049 13.1 69 320 13.2 Ordinary share capital 304 0.1 304 0.1 Ordinary share premium 36 880 7.0 36 880 7.0 Reserves (3) 37 686 7.1 37 068 7.0 Deductions (5 821) (1.1) (4 932) (0.9) Additional Tier 1 capital 3 811 0.7 2 293 0.4 Tier 1 capital 72 860 13.8 71 613 13.6 Tier 2 capital 16 838 3.2 15 154 2.9 Total Capital 89 698 17.0 86 767 16.5 Statutory Capital Position (including IFRS (2) Normalised (4) IFRS (2) Normalised (4) unappropriated profits) % % % % Common Equity Tier 1 capital 13.6 11.4 14.1 11.9 Tier 1 capital 14.3 12.2 14.5 12.3 Total capital 17.5 15.3 17.4 15.2 Page 2 of 9 Board Approved Target Ranges (including unappropriated profits) 30 Sep 2017 30 Jun 2017 Common Equity Tier 1 capital 10.0% - 11.5% 10.0% - 11.5% Tier 1 capital 11.0% – 12.5% 11.0% – 12.5% Total capital 13.5% - 15.0% 13.5% - 15.0% 2) Overview of Risk Weighted Assets (RWAs) [OV1] a b c 30 Sep 2017 (1) 30 Jun 2017 (1) 30 Sep 2017 (1) Minimum capital RWA RWA requirements (6) Barclays Africa Group Limited Rm Rm Rm 1 Credit risk (excluding counterparty credit risk) 534 497 515 946 42 760 2 Of which standardised approach (SA) 152 922 146 408 12 234 3 Of which internal rating-based (IRB) 381 575 369 538 30 526 approach 4 Counterparty credit risk (CCR) 31 448 32 156 2 516 5 Of which standardised approach for CCR 31 448 32 156 2 516 (SA-CCR) (7) 6 Of which internal model method (IMM) - - - 7 Equity positions in banking book under 9 521 9 223 761 market-based approach 8 Equity investments in funds – look-through - - - approach 9 Equity investments in funds – mandate-based - - - approach 10 Equity investments in funds – fall-back - - - approach 11 Settlement risk 435 583 35 12 Securitisation exposures in banking book 492 564 39 13 Of which IRB ratings-based approach (RBA) 492 564 39 14 Of which IRB Supervisory Formula - - - Approach (SFA) 15 Of which SA/simplified supervisory formula - - - approach (SSFA) 16 Market risk 23 993 32 284 1 919 17 Of which standardised approach (SA) 9 292 10 645 743 18 Of which internal model approaches (IMA) 14 701 21 639 1 176 19 Operational risk 103 487 103 487 8 279 20 Of which Basic Indicator Approach 3 528 3 528 282 21 Of which Standardised Approach 25 533 25 533 2 043 22 Of which Advanced Measurement 74 426 74 426 5 954 Approach Page 3 of 9 Non-customer assets 23 845 24 904 1 908 23 Amounts below the thresholds for deduction 5 175 5 633 414 (subject to 250% risk weight) 24 Floor adjustment - - - 25 Total 732 893 724 780 58 631 (1+4+7+8+9+10+11+12+16+19+23+24+non- customer assets) Pillar 2a requirement (1.5%) 10 994 Capital conservation buffer (1.25%) (8) 9 161 S.A. minimum capital requirements including 78 786 buffers (9) The key drivers of change in RWA consumption quarter on quarter were as follows: - Credit risk: Portfolios subject to the AIRB approach have increased by R12bn as a result of exposure growth in Corporate and Investment Banking (CIB). Portfolios subject to the SA have increased by R6.5bn mainly due to asset growth outside of South Africa as well as exchange rate fluctuations. - CCR: The decrease in CCR of R0.7bn is in line with market volatility, specifically exchange rate fluctuations. - Market risk: The decrease in market risk of R8.3bn is due to lower levels of Value at Risk (VaR) and Stressed Value at Risk (sVaR) in the three-month averaging period. a b c 30 Sep 2017 (1) 30 Jun 2017 (1) 30 Sep 2017 (1) Minimum capital RWA RWA requirements (6) Absa Bank Limited (5) Rm Rm Rm 1 Credit risk (excluding counterparty credit risk) 383 693 373 604 30 695 2 Of which standardised approach (SA) 12 396 13 545 991 3 Of which internal rating-based (IRB) 371 297 360 059 29 704 approach 4 CCR 30 955 31 815 2 476 5 Of which standardised approach for CCR 30 955 31 815 2 476 (SA-CCR) (7) 6 Of which internal model method (IMM) - - - 7 Equity positions in banking book under market- 2 494 2 493 200 based approach 8 Equity investments in funds – look-through - - - approach 9 Equity investments in funds – mandate-based - - - approach 10 Equity investments in funds – fall-back - - - approach 11 Settlement risk 435 583 35 12 Securitisation exposures in banking book 492 564 39 13 Of which IRB ratings-based approach (RBA) 492 564 39 14 Of which IRB Supervisory Formula - - - Approach (SFA) 15 Of which SA/simplified supervisory formula - - - Page 4 of 9 approach (SSFA) 16 Market risk 18 076 24 741 1 446 17 Of which standardised approach (SA) 3 375 3 102 270 18 Of which internal model approaches (IMA) 14 701 21 639 1 176 19 Operational risk 73 612 73 612 5 889 20 Of which Basic Indicator Approach 3 439 3 439 275 21 Of which Standardised Approach - - - 22 Of which Advanced Measurement 70 173 70 173 5 614 Approach Non-customer assets 17 898 17 971 1 432 23 Amounts below the thresholds for deduction 620 762 50 (subject to 250% risk weight) 24 Floor adjustment - - - 25 Total 528 275 526 145 42 262 (1+4+7+8+9+10+11+12+16+19+23+24+non- customer assets) Pillar 2a requirement (1.5%) 7 924 Capital conservation buffer (1.25%) (8) 6 603 S.A. minimum capital requirements including 56 789 buffers (9) The key drivers of change in RWA consumption quarter on quarter were as follows: - Credit risk: Portfolios subject to the AIRB approach have increased by R11.2bn as a result of exposure growth in CIB. The decrease in the SA of R1.1bn is mainly due to a reduction in the size of the portfolio in South Africa measured on a standardised basis. - CCR: The decrease in CCR of R0.9bn is in line with market volatility, specifically exchange rate fluctuations. - Market Risk: The decrease in market risk of R6.7bn is due to lower levels of VaR and sVaR in the three-month averaging period. RWA flow statements of credit risk exposures under IRB RWA flow statements of credit risk exposures under IRB [CR8] a Barclays Africa Group Limited RWA amounts Rm 1 RWA as at end of previous reporting period (30 Jun 2017) 369 538 2 Asset size 12 037 3 Asset quality - 4 Model updates - 5 Methodology and policy - 6 Acquisitions and disposals - 7 Foreign exchange movements - 8 Other - 9 RWA as at end of reporting period (30 Sep 2017) 381 575 Page 5 of 9 a Absa Bank Limited (5) RWA amounts Rm 1 RWA as at end of previous reporting period (30 Jun 2017) 360 059 2 Asset size 11 238 3 Asset quality - 4 Model updates 5 Methodology and policy - 6 Acquisitions and disposals - 7 Foreign exchange movements - 8 Other - 9 RWA as at end of reporting period (30 Sep 2017) 371 297 RWA flow statements of market risk exposures under an Internal Models Approach [MR2] Barclays Africa Group Limited and Absa Bank Limited a b c d e f Stressed Total VaR VaR IRC CRM Other RWA Rm Rm Rm Rm Rm Rm 1 RWA at previous quarter end (30 Jun 10 805 10 834 - - - 21 639 2017) 2 Movements in risk levels (2 763) (2 712) - - - (5 475) 3 Model updates/changes (1 463) (1 463) 4 Methodology and policy - - - - - - 5 Acquisitions and disposals - - - - - - 6 Foreign exchange movements - - - - - - 7 Other - - - - - - 8 RWA at end of reporting period (30 6 579 8 122 - - - 14 701 Sep 2017) Capital consumption of Barclays Africa Group Limited and Absa Bank’s portfolios subject to the Internal Models Approach decreased by R6.9bn from June 2017 to September 2017. Drivers of quarter on quarter changes in RWA consumption are due to reduced levels of VaR and sVaR. Page 6 of 9 3) Leverage Ratio The leverage ratio framework is complementary to the risk-based capital framework and is a non-risk based contingency measure to restrict the build-up of excessive leverage in the banking sector. The tables below represent the leverage ratios for Barclays Africa Group Limited and Absa Bank Limited at 30 September 2017 and the comparatives for the past three quarter end periods, namely 31 December 2016, 31 March 2017 and 30 June 2017. 2017 2016 IFRS Barclays Africa Group Limited 30 Sep 30 Jun 31 Mar 31 Dec Leverage ratio exposure (Rm) 1 318 673 1 259 572 1 254 437 1 251 249 Tier 1 Capital (excluding unappropriated profits) (Rm) 98 736 96 225 82 249 84 008 Leverage ratio (excluding unappropriated profits) (%) 7.5 7.6 6.6 6.7 Leverage ratio (including unappropriated profits) (%) (10) 7.9 8.1 6.9 7.1 Board target leverage ratio (including unappropriated ?4.5 ?4.5 ?4.5 ?4.5 profits) (%) Minimum required leverage ratio (%) 4.0 4.0 4.0 4.0 2017 2016 IFRS Absa Bank Limited (5) 30 Sep 30 Jun 31 Mar 31 Dec Leverage ratio exposure (Rm) 1 136 516 1 095 984 1 092 562 1 088 789 Tier 1 Capital (excluding unappropriated profits) (Rm) 72 860 71 613 55 656 56 943 Leverage ratio (excluding unappropriated profits) (%) 6.4 6.5 5.1 5.2 Leverage ratio (including unappropriated profits) (%) (10) 6.7 7.0 5.7 5.8 Board target leverage ratio (including unappropriated ?4.5 ?4.5 ?4.5 ?4.5 profits) (%) Minimum required leverage ratio (%) 4.0 4.0 4.0 4.0 4) Liquidity Coverage Ratio The objective of the liquidity coverage ratio (LCR) is to promote the short-term resilience of the liquidity risk profile of banks by ensuring that they have sufficient high quality liquid assets (HQLA) to survive a significant stress scenario lasting 30 calendar days. The LCR became effective on 1 January 2015, with a requirement of 60%, which will increase by 10% per year to 100% on 1 January 2019. The requirement for 2017 is 80%. The LCR is calculated as the value of HQLA divided by total net cash outflows. HQLA represents the value of assets that can be easily and immediately converted into cash. Net cash outflows are calculated according to regulations. Absa Bank Limited successfully applied for a committed liquidity facility from the South African Reserve Bank under Guidance Note 6 of 2016, which is included in HQLA for LCR purposes from January 2016. Page 7 of 9 Barclays Africa Group Limited (11) Barclays Africa Group Limited holds HQLA well in excess of the regulatory minimum requirement. The table below represents the average LCR (12) for Barclays Africa Group Limited at 30 September 2017 and the comparatives at 30 June 2017: 30 Sep 2017 (1) 30 Jun 2017 (1) High Quality Liquid Assets (Rm) 155 794 155 075 Net Cash Outflows (Rm) 131 195 130 416 LCR (%) 118.8 118.9 Required LCR (%) 80.0 80.0 Absa Bank Solo (13) Absa Bank Solo holds HQLA well in excess of the regulatory minimum requirement. The table below represents the average LCR (12) for Absa Bank Solo at 30 September 2017 and the comparatives at 30 June 2017: 30 Sep 2017 (1) 30 Jun 2017 (1) High Quality Liquid Assets (Rm) 144 252 144 168 Net Cash Outflows (Rm) 116 527 115 876 LCR (%) 123.8 124.4 Required LCR (%) 80.0 80.0 Notes: 1. The 30 September figures and 30 June 2017 comparatives are unaudited. 2. The IFRS view includes the contribution amounts received from Barclays PLC as part of the separation. 3. Reserves as at 30 September 2017 have already been reduced by the value of the 2017 interim ordinary dividend of R4.0bn for Barclays Africa Group Limited and R4.0bn for Absa Bank Limited, which were declared on 28 July 2017 and paid on 11 September 2017 respectively. 4. The normalised ratios exclude the impact of the separation from Barclays PLC and reflect the underlying performance of the Group. 5. Absa Bank Limited includes subsidiary undertakings, special purpose entities, joint ventures, associates and offshore holdings. 6. The South African minimum regulatory capital requirement of 8% (excluding the Pillar 2a and capital conservation buffers). 7. SA-CCR is calculated using the Current Exposure Method. 8. The capital conservation buffer is phased-in between 1 January 2016 and 1 January 2019 reaching 2.5% by 1 January 2019. 9. The 2017 minimum regulatory capital requirements of 10.75% include the RSA minimum of 8%, Pillar 2a of 1.50% and capital conservation buffer of 1.25% but exclude the bank-specific individual capital requirement (Pillar 2b add- on) and the domestic systemically important banks (D-SIB) add-on. The Pillar 2a buffer will reduce between 1 January 2016 and 1 January 2019 reaching 1.00% by 1 January 2019. Page 8 of 9 10. The leverage ratio including unappropriated profits for Barclays Africa Group Limited and Absa Bank Limited at 30 September 2017, on a normalised basis, was 7.0% (30 June 2017: 7.2%) and 5.6% (30 June 2017: 5.9%) respectively. 11. The LCR of Barclays Africa Group Limited represents an aggregation of the relevant individual net cash outflows and HQLA portfolios of all the banking entities which form part of the group. Where non-South African banking entities have an excess of HQLA above the minimum required by the LCR, this excess has been excluded from the calculation. 12. The values disclosed represent the simple average of the relevant 3 month-end data points. 13. Absa Bank Solo consists of only the South African banking operation. Johannesburg 30 November 2017 Enquiries: Alan Hartdegen (+2711) 350-2598 E-mail: Alan.Hartdegen@barclaysafrica.com Lead Independent Sponsor: J.P. Morgan Equities South Africa Proprietary Limited Joint Sponsor: Corporate and Investment Bank – a division of Absa Bank Limited Page 9 of 9 Date: 30/11/2017 11:30:00 Produced by the JSE SENS Department. The SENS service is an information dissemination service administered by the JSE Limited ('JSE'). The JSE does not, whether expressly, tacitly or implicitly, represent, warrant or in any way guarantee the truth, accuracy or completeness of the information published on SENS. 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