Wrap Text
BASEL III PILLAR 3 DISCLOSURE AS AT 30 SEPTEMBER 2019
ABSA 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: ZAE000255915 ISIN: ZAE000079810
JSE share code: ABG JSE share code: ABSP
(Absa Group Limited) (Absa Bank)
ABSA GROUP LIMITED – BASEL III PILLAR 3 DISCLOSURE AS AT 30 SEPTEMBER 2019
This quarterly Pillar 3 disclosure contains the quantitative Pillar 3 disclosure requirements in respect of Absa Group Limited (Absa Group or the Group)
and Absa Bank Limited (Absa Bank or the Bank). The quarterly report provides a view of the Group’s regulatory capital and risk exposures, and it complies
with:
- The Basel Committee on Banking Supervision (BCBS) revised Pillar 3 disclosure requirements (Pillar 3 standard).
- Regulation 43 of the Regulations relating to Banks (Regulations), issued in terms of the Banks Act, 1990 (Act No. 94 of 1990), where not superseded
by the revised Pillar 3 disclosure requirements.
1. Key prudential metrics and risk weighted assets (RWA)
In line with regulatory and accounting requirements, the capital and leverage position of Group and Bank in this document is reflected on a regulatory
basis (which requires unappropriated profits to be excluded), and in accordance with IFRS accounting rules (which requires the impact of the contribution
amounts received from Barclays PLC as part of the separation to be included). However, the capital and leverage position of the Group is also managed
on a statutory basis. For reference, the summary table below provides key capital and leverage information on a statutory, IFRS basis as at 30 September
2019.
Capital adequacy
The Group remains capitalised above the minimum regulatory capital requirements. Absa 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 as and when appropriate, in the domestic
and/or international capital markets.
The Absa Group statutory CET 1 ratios (calculated on an IFRS basis) have reduced by 70bps over Q3 2019, driven by the impact of the interim dividend
of R4.2bn combined with RWA growth.
30 Sep 2019 30 Jun 2019
IFRS IFRS
Group % %
Statutory capital ratios (includes unappropriated profits)
Common Equity Tier 1 (CET1) 11.8 12.5
Tier 1 capital 12.6 13.3
Total capital adequacy requirement (CAR) 15.2 16.0
Leverage 6.8 7.0
The remainder of this document reflects the capital and leverage position of Group and Bank on an IFRS, regulatory basis.
Page 1 of 7
1. Key prudential metrics and RWA
KM1: Key metrics (at consolidated group level)
In line with the requirements of IFRS 9, which became effective on 1 January 2018, the Group moved from the recognition of credit losses on an incurred
loss basis to an expected credit loss (ECL) basis. The Group elected to utilise the transition period of three years for phasing in the regulatory capital
impact of IFRS 9, as afforded by Directive 5. The table below reflects the capital and leverage position of the Group on a fully loaded basis, as well as on
a transitional basis.
Group 30 Sep 30 Jun 31 Mar 31 Dec 30 Sep
2019 2019 2019 2018 2018 (1)
Available capital (Rm)
1 CET1 transitional basis 100 115 95 034 95 984 92 829 94 638
1a Fully loaded ECL accounting model 98 387 93 306 94 256 90 237 92 062
2 Tier 1 transitional basis 107 216 102 101 101 341 98 547 98 993
2a Fully loaded ECL accounting model Tier 1 105 488 100 373 99 613 95 955 96 417
3 Total capital transitional basis 130 726 124 669 122 187 119 835 120 961
3a Fully loaded ECL accounting model total capital 128 998 122 941 120 459 117 243 118 385
RWA (Rm)
4 Total RWA transitional basis 884 742 844 332 832 028 818 592 780 897
4a Fully loaded RWA 877 595 837 186 824 882 807 872 770 177
Risk-based capital ratios as a percentage of RWA (%)
5 CET1 ratio transitional basis 11.3 11.3 11.5 11.3 12.1
5a Fully loaded ECL accounting model CET 11.2 11.2 11.4 11.2 11.9
6 Tier 1 ratio transitional basis 12.1 12.1 12.2 12.0 12.7
6a Fully loaded ECL accounting model Tier 1 ratio 12.0 12.0 12.1 11.9 12.5
7 Total capital ratio transitional basis 14.8 14.8 14.7 14.6 15.5
7a Fully loaded ECL accounting model total capital ratio 14.7 14.7 14.6 14.5 15.4
Additional CET1 buffer requirements as a percentage of RWA %
8 Capital conservation buffer requirement (2.5% from 2019) 2.5 2.5 2.5 1.9 1.9
9 Countercyclical buffer requirement(2) - - - - -
10 Bank G-SIB and/or D-SIB additional requirements(3) - - - - -
11 Total of bank CET1 specific buffer requirements (Row 8 + row 9 + row 10) 2.5 2.5 2.5 1.9 1.9
12 CET1 available after meeting the bank’s minimum capital requirements 3.8 3.8 4.0 3.9 4.7
Basel III leverage ratio
13 Total Basel III leverage ratio exposure measure (Rm) 1 638 103 1 597 486 1 586 022 1 494 861 1 431 094
14 Basel III leverage ratio (%) (row 2 / row 13) transitional basis 6.5 6.4 6.4 6.6 6.9
Fully loaded ECL accounting model Basel III leverage ratio (%) (row 2a /
6.4 6.3 6.3 6.4 6.7
14a row13)
Liquidity coverage ratio (4)
15 Total high quality liquid assets (HQLA) (Rm) 183 757 179 203 187 500 189 979 180 750
16 Total net cash outflow (Rm) 149 051 141 104 160 559 172 903 167 234
17 LCR (%) 123.3 127.0 116.8 109.9 108.1
Net stable funding ratio
18 Total available stable funding (ASF) (Rm) 868 808 834 432 827 614 808 351 799 054
19 Total required stable funding (RSF) (Rm) 769 183 749 331 750 073 733 786 704 855
20 NSFR (%) 113.0 111.4 110.3 110.2 113.4
Page 2 of 7
1. Key prudential metrics and RWA
OV1: Overview of RWA
Group Bank
30 Sep 30 Jun 30 Sep 30 Sep 30 Jun 30 Sep
2019 2019 2019 2019 2019 2019
RWA RWA MCR(5) RWA RWA MCR(5)
Rm Rm Rm Rm Rm Rm
1 Credit risk (excluding counterparty credit risk (CCR)) 644 552 606 312 74 123 443 390 426 041 50 990
2 Of which: standardised approach (SA) 197 289 176 964 22 688 9 226 9 408 1 061
Of which: foundation internal rating-based (FIRB)
3 - - - - - -
approach
4 Of which: supervisory slotting approach - - - - - -
Of which: advanced internal ratings based (AIRB)
5 447 263 429 348 51 435 434 164 416 633 49 929
approach
6 CCR 15 713 16 894 1 807 14 630 15 867 1 682
7 Of which: SA-CCR (6) 15 713 16 894 1 807 14 630 15 867 1 682
8 Of which: internal model method (IMM) - - - - - -
9 Of which: other CCR - - - - - -
10 Credit valuation adjustment (CVA) 8 030 9 483 923 8 030 9 483 923
Equity positions under the simple risk weigh
11 3 879 3 921 446 1 815 1 815 209
approach
12 Equity investments in funds – look-through approach 7 600 7 607 874 353 358 41
Equity investments in funds – mandate-based
13 - - - 0 - 0
approach
14 Equity investments in funds – fall-back approach - - - 0 - 0
15 Settlement risk 1 605 905 185 1 510 837 174
16 Securitisation exposures in banking book 28 28 3 28 28 3
17 Of which: IRB ratings based approach (SEC-IRBA) 28 28 3 28 28 3
Of which: securitisation external RBA (SEC-ERBA),
18 - - - 0 - 0
including internal assessment approach (IAA)
19 Of which: securitisation SA (SEC-SA) - - - 0 - 0
20 Market risk 43 254 41 885 4 974 29 455 32 843 3 388
21 Of which: SA 21 275 16 891 2 447 7 476 7 849 860
22 Of which: internal model approaches (IMA) 21 979 24 994 2 527 21 979 24 994 2 528
Capital charge for switch between trading book and
23 - - - - - -
banking book
24 Operational risk 97 483 97 483 11 210 59 186 59 186 6 806
Non-customer assets 29 615 27 964 3 406 22 008 20 998 2 531
Amounts below the thresholds for deduction (subject
25 16 935 15 802 1 948 4 710 3 147 542
to 250% risk weight)
26 Floor adjustment (7) 16 048 16 048 1 846 18 524 18 524 2 130
Total
27 (1+6+10+11+12+13+14+15+16+20+23+24+25+26+ 884 742 844 332 101 745 603 639 589 127 69 419
non customer assets)
The key drivers of change in RWA consumption from 30 June 2019 to 30 September 2019 were as follows:
- Credit risk: The increase of R38.2bn is attributable to increases in the IRB portfolios of R17.9bn and standardised portfolios of R20.3bn. The primary
driver for the increase in the South African IRB portfolios is exposure growth in Retail and Business Banking (RBB). The R20.3bn increase in the
standardised portfolios is as a result of balance sheet growth of R12.5bn and foreign exchange movements of R7.5bn.
- CCR & CVA: The decreases in CCR of R1.2bn and in CVA of R1.5bn are mainly attributable to market volatility.
- Market Risk: The increase of R1.7bn is primarily as a result of specific risk capital on local currency sovereign bonds held by ARO.
Page 3 of 7
1. Key prudential metrics and RWA
CR8: RWA flow statements of credit risk exposures under IRB
30 Sep 2019
RWA Amounts
Rm
1 RWA as at end of previous reporting period 429 348
2 Asset size 14 577
3 Asset quality 2 803
4 Model updates 535
5 Methodology and policy -
6 Acquisitions and disposals -
7 Foreign exchange movements -
8 Other -
9 RWA as at end of reporting period 447 263
MR2: RWA flow statements of market risk exposures under IMA
30 Sep 2019
Total capital
VaR sVaR IRC(8) CRM Total RWA
Other requirement (9)
Rm Rm Rm Rm Rm Rm Rm
1 RWA at previous quarter end 9 200 15 794 24 994 2 874
2 Movements in risk levels (1 495) (1 520) - - - (3 015) (347)
3 Model updates/changes - - - - - - -
4 Methodology and policy - - - - - - -
5 Acquisitions and disposals) - - - - - - -
6 Other - - - - - - -
7 RWA at end of reporting period 7 705 14 274 - - - 21 979 2 527
Page 4 of 7
2. Leverage
Consistent with the treatment in table KM1, the leverage position below is shown on a regulatory, IFRS basis.
LR1: Summary comparison of accounting assets versus leverage ratio exposure measure
Group Bank
30 Sep 30 Jun 30 Sep 30 Jun
2019 2019 2019 2019
Rm Rm Rm Rm
1 Total consolidated assets as per published financial statements 1 406 208 1 376 705 1 163 460 1 154 828
Adjustment for investments in banking, financial, insurance or
2 commercial entities that are consolidated for accounting purposes (37 738) (38 140) - -
but outside the scope of regulatory consolidation
Adjustment for fiduciary assets recognised on the balance sheet
3 pursuant to the operative accounting framework but excluded from - - - -
the leverage ratio exposure measure
4 Adjustments for derivative financial instruments 4 107 12 702 4 407 18 596
Adjustments for securities financing transactions (i.e. repos and
5 - - - -
similar secured lending)
Adjustments for off-balance sheet items (i.e. conversion to credit
6 277 327 257 316 231 457 211 370
equivalent amounts of off-balance sheet exposures)
7 Other adjustments (11 801) (11 097) (9 897) (9 971)
8 Leverage ratio exposure measure 1 638 103 1 597 486 1 389 427 1 374 823
LR2: Leverage ratio common disclosure template
Group Bank
30 Sep 30 Jun 30 Sep 30 Jun
2019 2019 2019 2019
Rm Rm Rm Rm
On-balance sheet exposures
On-balance sheet exposures (excluding derivatives and securities
1 1 247 886 1 217 735 1 043 486 1 039 113
financing transactions (SFTs), but including collateral)
2 (Asset amounts deducted in determining Basel III Tier 1 capital) (11 801) (10 838) (9 897) (9 713)
Total on-balance sheet exposures (excluding derivatives and SFTs)
3 1 236 085 1 206 897 1 033 589 1 029 400
(sum of rows 1 and 2)
Derivative exposures
Replacement cost associated with all derivatives transactions (where
4 applicable net of eligible cash variation margin and/ or with bilateral 19 199 22 483 19 199 23 285
netting)
5 Add-on amounts for PFE associated with all derivatives transactions 41 209 41 981 41 209 42 227
Gross-up for derivatives collateral provided where deducted from the
balance sheet assets pursuant to the operative accounting - - - -
6 framework
(Deductions of receivable assets for cash variation margin provided
- - - -
7 in derivatives transactions)
8 (Exempted CCP leg of client-cleared trade exposures) - - - -
9 Adjusted effective notional amount of written credit derivatives - - - -
(Adjusted effective notional offsets and add-on deductions for written
- - - -
10 credit derivatives)
11 Total derivative exposures (sum of rows 4 to 10) 60 408 64 464 60 408 65 512
Security financing transaction exposures
Gross SFT assets (with no recognition of netting), after adjusting for
12 64 282 68 809 63 973 68 541
sale accounting transactions
(Netted amounts of cash payables and cash receivables of gross
- - - -
13 SFT assets)
14 CCR exposure for SFT assets - - - -
15 Agent transaction exposures - - - -
Total securities financing transaction exposures (sum of rows 12 to
16 64 282 68 809 63 973 68 541
15)
Other off-balance sheet exposures
17 Off-balance sheet exposures at gross notional amount 400 447 375 350 343 055 318 002
18 (Adjustments for conversion to credit equivalent amounts) (123 120) (118 034) (111 598) (106 632)
19 Off-balance sheet items (sum of rows 17 and 18) 277 327 257 316 231 457 211 370
Capital and total exposures
20 Tier 1 capital (excluding unappropriated profits) 107 216 102 101 75 225 71 016
21 Total exposures (sum of lines 3, 11, 16 and 19) 1 638 103 1 597 486 1 389 427 1 374 823
Leverage ratio
22 Basel III leverage ratio (10) 6.5 6.4 5.4 5.2
Page 5 of 7
3. Liquidity
LIQ1: Liquidity coverage ratio (LCR)
Group (11) Bank (12)
Total Total Total Total
unweighted weighted unweighted weighted
value value value value
(average) (average) (average) (average)
Rm Rm Rm Rm
High-quality liquid assets (HQLA)
1 Total HQLA 183 757 162 359
Cash outflows
Retail deposits and deposits from small business customers, of
2
which: 362 059 27 139 274 165 19 828
3 Stable deposits - - - -
4 Less stable deposits 362 059 27 139 274 165 19 828
5 Unsecured wholesale funding, of which: 320 961 171 748 266 693 143 374
Operational deposits (all counterparties) and deposits in networks
6
of cooperative banks 105 684 26 421 105 455 26 364
7 Non-operational deposits (all counterparties) 202 727 132 777 155 133 110 905
8 Unsecured debt 12 550 12 550 6 105 6 105
9 Secured wholesale funding 1 033 1 033
10 Additional requirements, of which: 302 762 32 102 272 143 27 100
Outflows related to derivative exposures and other collateral
11
requirements 10 587 10 587 8 268 8 268
12 Outflows related to loss of funding on debt products - - - -
13 Credit and liquidity facilities 292 175 21 515 263 875 18 832
14 Other contractual funding obligations - - - -
15 Other contingent funding obligations 171 721 8 350 138 764 6 864
16 Total cash outflows 240 372 198 199
Cash inflows
17 Secured lending (eg reverse repos) 19 909 5 201 19 909 5 201
18 Inflows from fully performing exposures 108 013 76 499 74 049 59 873
19 Other cash inflows 10 250 9 621 6 250 5 621
20 Total cash inflows 138 172 91 321 100 208 70 695
Total weighted value Total weighted value
21 Total HQLA (Rm) 183 757 162 359
22 Total net cash outflows (Rm) 149 051 127 504
23 LCR (%) 123.3 127.3
Page 6 of 7
Notes:
(1) These numbers have been restated. Refer to reporting changes overview on the inside front cover of the Group results booklet for the period ended
30 June 2019.
(2) The countercyclical buffer is not required for banks in South Africa.
(3) Bank-specific confidential requirement.
(4) The Group LCR reflects an aggregation of the Bank LCR and the LCR of the Absa Regional Operations (ARO). For this purpose, a simple average
of the relevant 3 month-end data points is used in respect of ARO. In respect of Bank, the LCR was calculated as a simple average of 90 calendar-
day LCR observations. The December 2018 and March 2019 Group LCR was restated post a change in certain assumptions.
(5) The 2019 minimum regulatory capital requirement is calculated at 11.5% (2018: 11.13%), which includes the capital conservation buffer but excludes
the bank-specific individual capital requirement (Pillar 2b add-on) and the D-SIB add-on.
(6) SA-CCR amount is calculated using the current exposure method (CEM).
(7) Includes the operational risk floor.
(8) IRC: incremental risk charge.
(9) Calculated at 11.5% of RWA.
(10) Numbers reported are on a regulatory basis, and include the contribution amounts from Barclays PLC as part of the separation.
(11) The Absa Group LCR for 30 September 2019 reflects an aggregation of the Absa Bank and Absa Regional Operations (ARO) LCR. The ARO LCR
is calculated as a simple average of the relevant 3 month-end data points. The surplus HQLA of ARO in excess of the minimum requirement of
100% has been excluded from the calculation of the ARO LCR.
(12) The Absa Bank Limited quarterly LCR is calculated on a simple average of 90 calendar-day observations.
Johannesburg
29 November 2019
Enquiries:
Alan Hartdegen
E-mail: Alan.Hartdegen@absa.africa
Lead Independent Sponsor:
J.P. Morgan Equities South Africa Proprietary Limited
Joint Sponsor:
Corporate and Investment Banking – a division of Absa Bank Limited
Page 7 of 7
Date: 29-11-2019 10:58:00
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