AI Baraka Banking Group B.S.C. Interim Condensed Consolidated Financial Statements 31-March-2018 (Reviewed)

Transcription

1. AI Baraka Banking Group B .S.C. INTERIM CONDENSED CONSOLIDATED FINANCIAL STATEMENTS 31 MARCH 2018 (REVIEWED)
2. ”a. Ernst 8. Young Tel: '973 3.753 5455 Fax: 9973 1753 5405 PD. Box 140 Bulldin a better working world 10th Floor. East Tower manama Bahrain World Trade Cent-.: av” om-‘mena ca. Not 6700 Manama Kinqdom ol Bah -bh.ey.(om / 2997.- an REPORT ON REVIEW OF INTERIM CONDENSED CONSOLIDATED FINANCIAL STATEMENTS TO THE SHAREHOLDERS OF AL BARAKA BANKING GROUP B.S.C. Introduction We have reviewed the accompanying interim condensed consolidated financial Banking Group B.S.C. (the "Bank") and its subsidiaries (together March 2018, comprising of interim consolidated financial position as statements of Al Baraka the "Group") as at 31 at 31 March 2018 and the related interim consolidated statements of changes in owners' equity income, cash flows, and changes in off-balance sheet equity of investment period then ended and explanatory notes. The Board of Directors are responsible for the preparation and presentation of these interim condensed consolidated financial statements in accordance with the accounting policies disclosed in note 2. Our responsibility is to express a conclusion on these interim accountholders for the three months condensed consolidated financial statements based Scope We on our review. of Review conducted our review in "Review accordance with of Interim lntemational Standard Financial Information on Review Performed Engagements 2410. by the Independent Auditor of the Entity". A review of interim financial information consists of making inquiries. primarily of persons responsible for financial and accounting matters. and applying analytical and other review procedures. A review is substantially less in scope than an audit conducted in accordance with International Standards on Auditing and consequently does not enable us to obtain assurance that we would become aware of all significant matters that might be identified in an audit. Accordingly, we do not express an audit opinion. Conclusion Based on our review, nothing has come to our attention that causes us interim condensed consolidated financial statements accompanying all material respects, in accordance with the Mi 7 May 2018 Manama, Kingdom of Bahrain accounting policies to believe that the are not prepared, disclosed in note 2. in
3. Grou B .S.C. INTERIM CONSOLIDATED STATEMENT OF FINANCIAL POSITION AlBaraka Bankin At 31 March 2018 (Reviewed) Audited 31 March 31 December 2018 2017 Notes US$ ’000 US$ '000 meA 5,151,640 11,741,865 2,712,367 1,860,746 2,653,520 409,167 577,665 5,430,085 12,001,050 2,377,654 1,856,018 2,888,334 430,192 469,878 25,106,970 25,453,211 Other liabilities 5,261,097 1 ,044,423 1,217,308 1,155,181 5,465,433 1 322,470 1,236,555 1,035,983 Total liabilities 8,678,009 9,060,441 11 14,075,748 13,882,109 14 1,242,879 1 206,679 ASSETS Cash and balances with banks Receivables Mudaraba and Musharaka financing Muntahia Bittamleek Ijarah Investments Property and equipment an Other assets TOTAL ASSETS LIABILITIES, EQUITY OF INVESTMENT ACCOUNTHOLDERS AND OWNERS' EQUITY LIABILITIES Customer current and other accounts Due to banks Long term financing EQUITY OF INVESTMENT ACCOUNTHOLDERS OWNERS' EQUITY Share capital Treasury shares Share premium Perpetual tier1 capital 15 Reserves Cumulative changes in fair values Foreign currency translations Retained earnings 14 Proposed appropriations 14 Equity attributable to (755,014) 505,624 parent's shareholders and Sukuk holders Non-controlling interest Total owners' (9,550) 18,644 400,000 199,282 40,443 (706,242) 530,615 60,334 (9,989) 19,029 400,000 152,643 42,212 equity - 1,597,384 1,740,205 755,829 770,456 2,353,213 2,510,661 25,106,970 25,453,211 TOTAL LIABILITIES, EQUITY OF INVESTMENT ACCOUNTHOLDERS AND OWNERS' EQUITY // rw—fi: “fa—594:“ W u-w -' ‘ ;___ Adnan Ahmed Yousif Saleh AbduIlah Kamel Member of the Board and Chairman President and Chief Executive The attached notes 1 to 19 form part of these interim condensed consolidated financial statements. 2
4. Al Baraka Banking Group B .S.C. INTERIM CONSOLIDATED STATEMENT OF INCOME For the three months ended 31 March 2018 (Reviewed) M— Notes 31 March 2018 31 March 2017 U53 '000 US$ '000 330,164 296,777 (282,975) (251,483) INCOME Net income from jointly financed contracts and investments Return equity of investment accountholders Group‘s share as a Mudarib on before 96,567 92,269 (186,408) (159,214) 143,756 137,563 727 281 75.504 50,279 7,801 88,045 39,665 3,762 278,067 269,316 (21,449) (20,445) 258,618 248,871 89,446 11,543 60,511 85,169 11,559 50,996 161,500 147,724 95,118 (13,475) 101,147 81.643 72,235 (24,674) (20,725) NET INCOME FOR THE PERIOD 56,969 51,510 Attributable to: Equity holders of the parent Non-controlling interest 34,992 21.977 34,003 17,507 56,969 51,510 2.84 2.76 share as a Mudarib Group's Return on equity of investment accountholders share of income from investment accountholders Group's (as a equity of Mudarib and Rabalmal) managing off-balance sheet Mudarib share for equity of investment accountholders Net income from self financed contracts and investments Fees and commission income operating income Other Profit paid on long term financing TOTAL OPERATING INCOME OPERATING EXPENSES Staff expenses Depreciation and amortisation Other operating expenses TOTAL OPERATING EXPENSES NET INCOME FOR THE PERIOD BEFORE NET ALLOWANCE FOR CREDIT LOSSES AND TAXATION Net allowance for credit losses / 16 impairment (28,912) NET INCOME FOR THE PERIOD BEFORE TAXATION Taxation Basic and diluted earnings per share US - 13 cents . < /,/ S; ' W 7"” Saleh Abdullah Kamel Adnan Ahmed Yousif Chairman Member of the Board and President and Chief Executive The attached notes 1 to 19 form part of these interim condensed consolidated financial statements. 3
5. Al Baraka Banking Group B .S.C. INTERIM CONSOLIDATED STATEMENT OF CASH FLOWS For the three months ended 31 March 2018 (Reviewed) Three months ended 31 March 2018 31 March 2017 USS '000 USS '000 81,643 72,235 11,543 42,063 11,559 64,083 OPERATING ACTIVITIES Net income for the period before taxation Adjustments for. Depreciation and amortisation Depreciation on Ijarah Muntahia Bittamleek Unrealised loss (gain) on equity and debt-type instruments at fair value through statement of income Gain on disposal of property and equipment Gain on disposal of investment in real estate Gain on disposal of equity-type instruments at fair value through equity Gain on disposal of equity and debt-type instruments at fair value through statement of income Net allowance for credit losses I impairment (3,252) - (564) (952) (154) (58) 28,912 13,475 (513) (1,864) Income from associates Operating profit before changes Net (414) (1,824) (10) 4 in operating assets and liabilities 173,018 142,894 changes in operating assets and liabilities: 268,671 254,943 (339,441) (46,790) (76,789) (204,344) (278,047) 125,927 194,184 (75,695) Reserves with central banks Receivables Mudaraba and Musharaka financing Ijarah Muntahia Bittamleek Other assets Customer current and other accounts Due to banks Other liabilities Equity of investment accountholders paid Taxation Net cash (used in) from operating activities 128,242 (138,177) 198,252 (86,444) 10,378 (146,529) (103,901) 12,891 168,361 (34,725) (34,487) 181,366 138,191 15,566 (277,916) (18,567) INVESTING ACTIVITIES Net Net purchase of investments purchase of property and equipment Net movement in associates Net disposal of investment in associates Net cash from 191 16 307 163 154,255 (used in) investing activities (296,304) FINANCING ACTIVITIES Dividends paid to equity holders of the parent Net movement in treasury shares Long term financing Net change in non-controlling interest Net cash used in Foreign financing activities currency translation adjustments NET CHANGE IN CASH AND CASH EQUIVALENTS Cash and cash equivalents at 1 January CASH AND CASH EQUIVALENTS AT 31 MARCH (note 19) The attached notes 1 to 19 form (24,134) (54) (19,247) (13,830) (25) (4.843) (7.036) (57,265) (11,904) (72,277) (10.013) (9,774) (136,855) - 2,861,182 2,851,959 2,851,408 2,715,104 part of these interim condensed consolidated financial statements. 4
6. awners ' equity '000 US! Total Nan- icontr ling nter st 'USJ000 7 0.456 Total '000 U83 Aproiatns '000 U53 Sukuk EQUITY OWNERS‘ CHANGES OF B.SC. Group STAEMNT CBarka ONSLIDATE Banki g AI INTERIM in (706 (705.24 ) 2018 March 31 ended months thre the For .769 (48.7 2) 34.9 2 (3.962) 1 - 34.9 2 1.59734 - - .962) 50 .624 (3 (48.7 2) (15 .014) '000 36.30 35.30 36.30 of '000 US! 4.143 4.143 5.312 Other res ves 'US!000 46. 39 fair holders (Reviwd) (21.69 ) 21.971 (16.4 1) 50. 0 75 ,029 and Cumlative changes investmn of Atribuale 60.3 4 .242) value the to 730 fair parent equity (70.468) 56.969 (16.461) (3.962) 50, 0 2,35 .21 - (56.021) 47 .594 Cumlative changes proerty equipment US: value and IN of (54) (102.6 0) 1.537 45 (24.134) 60.3 4 (24.134) (36.20 ) 1.74025 2.49 721 Retained e mings 530.615 '000 in .279 (49,17 ) ‘000 US! Foreign cune cy transl tion US! holders (15 .837) 2.358024 (24.134) 2.51061 3 (54) Resrves fina cial (46. 39) 1 52.643 62.643 conslidate 40 . 0 40 , 0 40 . 0 condes Share premium ‘US:000 18.64 10.64 385 (9.5 0) (439) rStauory es rve 'us:000 52.643 1 Perptual staemnts. tier capital US!'000 ‘000 Treasury shares USS Share capital 'US!000 1 1 (9,5 0) 36.20 (9. 39) of 142.379 1 1 1 interim 1 306. 79 106. 79 9.029 these part form 19 to 1 an as 30 as 2016 FAS 2013 adjustmen period at 201: 14) 14) in in changes the (note (note shares b a l n c e values curency J a n u a r y s h a r e s 2. 1 ) January adoption ot1 January Is ued move nt treasury move nt cumlative transl o income 1 At Translto at (Note Restaed Dlvidens Bonus 1 tor lalr Net Net In Foreign Net subidlares Zakah nonin inter st Dlvidens Alocatin move nt cont ling ot oi Nel 2010 March 31 A! notes at ched The 5
7. (25) owners' equity '000 2.05 61 (1 .396) Nan- '000 contrling interst US: 72 .623 Total (739) (1.376) (10. 12) 51.510 (5.971) (4,021) .065) (107) (455) (5.607) 17.507 (1.065) 731.64 (5 2) (920) (4. 05) 34.0 3 US! Total 'oao U53 (25) 1.230956 (1 .396) 69.657 (1 .396) (57.461 (5.971) (1 (4.021) 2.0546 1.293642 ) Aproiatns '000 US: '000 US: 527.356 Retained earni gs 497.3 4 '000 Foreign curency transltion US! (6 .71 9) parent EQUITY OWNERS' CHANGES B.SC. Group STAEMNT CBarka ONSLIDATE Banki g Al INTERIM lair in equity 2018 March 31 ended months thre the For of Cumlative changes value investmn to (Reviwd) and Cumlative changes proerty equipment holders Atribuale at value of IN OF in the fair Resrves '000 U53 '000 USS (671. 24) 36.30 36.30 - (552) 4.971 4.419 (920) Other res ves '000 42. 31 US! 41.31 rStautory esrve 'U83000 39.740 139.740 1 Share premium '000 U88 511 18.574 sTreasury hares ‘US!000 (9.536) Share capital 'USS000 (536) 57.461 1.4921 fina cial conslidate 9.065 condes (10,124) these 1 - staemnts. 1.206 79 interim of part form 19 to 2017 14) 14) in shares in changes in translio period subidares Zakah the January shares is ued move nt treasury move nt cumUIalive lair move nt ortehsevers curency income Divdens Bonus Net Net Net Foreign Net Divdens Alocatin 1 At (note (note values in for of of 1 inter st 2017 no-ctrling March 31 A! notes at ched The 6
8. Total '000 US$ ACOUNTHLDERS (727) 1 , 7 9 1 903, 80 49 ,720 (486,074) (21,6 ) Others 'US$000 48,190 12,385 (6,017) 1,036 INVESTM OF Investm '000 US$ 190,78 5,039 (35,6 5) 1,515 Muntahi Bitamlek ’000 US$ 1 2,345 12,97 (6,376) 1,468 estae 'US$000 real (364) 55 I n v e s t m n SHE T 48,41 '000 1,862 (157) ’000 US$ 17 ,793 13 ,736 (1 2,748) 5,85 (513) 1,249 Cash '000 3 ,196 5 ,141 (60,897) OF-BALNCE (Reviwd) recivable Sales IN 2018 B.SC. March OF Group ended 10,368 350 120,41 82,962 (3,061) 1,710 150,761 631 82, 42 15 48,102 38,150 38,165 US$ 307, 87 26 ,201 123, 07 (162, 3) 203, 72 1,925 (120) (137) 3,156 5 , 6 4 9 2 3, 23 13 ,2 3 (79,8 6) 27,4 0 73,5 8 94,576 (70,658) thre the For staemnts. fina cial 248,690 conslidate 290,328 condes 97,478 these interim of part 31 Banki g STAEMNT months Al (2 ,917) 138,732 157,6 2 (9,134) 1,65 (2) 220 - in Mudarb finacing US$ 29 .657 27 .4 2 (264,017) Bar ka INTERIM (38) 5 ,575 10,17 25,242 (23,967) (1,062) (22) - 918,032 ljarah EQUITY CHANGES (19) 901,42 872,043 382, 16 (349,329) 9,37 (281) 3,506 form 2018 t r a n s l t i o n expnse share 2018 2017 t r a n s l t i o n expnse share 2017 e x c h a n g e e x c h a n g e M a r c h March January January Deposit Withdrawls Income Mudarib‘s Foreign Deposit Withdrawls Income Mudarib's Foreign of of net net 1 31 1 At At At 31 At 19 to 1 notes at ched The 7
9. Al Baraka Banking Group B .S.C. NOTES TO THE INTERIM CONDENSED CONSOLIDATED FINANCIAL STATEMENTS At 31 March 2018 (Reviewed) ACTIVITIES 1 Banking Group B.S.C. (the "Bank") is a joint stock company incorporated in the Kingdom of Bahrain on 27 June 2002. under Commercial Registration ("CR") number 48915. The Bank is engaged in banking activities in the Middle East. Europe, North African and South African region. The address of the Bank's registered office is Bahrain Bay, PO. Box 1882, Manama. Kingdom of Bahrain. The Bank is listed AI Baraka on Bahrain Bourse and NASDAQ Dubai. The Bank operates under an Islamic wholesale banking license issued by the Central Bank of Bahrain (the “CBB"). The principal activities of the Bank and its subsidiaries (the "Group") comprise of international and banking, financing, treasury and investment activities. The Bank is supervised and regulated by commercial the CBS. BASIS OF PREPARATION AND ACCOUNTING POLICIES 2 Basis of Preparation These interim condensed consolidated financial statements for the three months period ended 31 March 2018 have been prepared in accordance with the guidance given by the lntemational Accounting Standard 34 "Interim Financial Reporting" The interim condensed consolidated financial statements do not contain - in the annual consolidated financial statements, and should be read in conjunction with the annual consolidated financial statements as at 31 December 2017. In addition. results for the three months period ended 31 March 2018 are not necessarily indicative of the results that may be expected for the financial year ending 31 December 2018. all information and disclosures required prepared on a historical cost basis, through statement of income, equityGroup (classified as property and equipment) The interim condensed consolidated financial statements have been except for investment in real estate. equity and debt-type instruments type instruments through equity and land occupied by the that have been measured at fair value. The interim condensed consolidated financial statements are presented in United States Dollars ("US$") being the functional and reporting currency of the Group. All values are rounded to the nearest US$ thousand ("US$ '000") unless otherwise indicated. Statement of compliance The consolidated financial statements for the year ended 31 December 2017 were prepared in accordance with Financial Accounting Standards issued by the Accounting and Auditing Organisation for Islamic Financial Institutions ("AAOIFI"), the Shari’a Rules and Principles as determined by the Shari'a Supervisory Board of the Group, the Bahrain Commercial Companies Law, the Central Bank of Bahrain and Financial Institutions Law and the CBB Rule Book (Volume 2 and applicable provisions of Volume 6) and C83 directives, regulations and associated resolutions and rules and procedures of the Bahrain Bourse. In accordance with the requirements of AAOIFI, for matters for which no AAOIFI standards exist including "Interim Financial Reporting", the Group uses the relevant lntemational Financial Reporting Standards ("IFRS") as issued by the lntemational Accounting Standards Board ("IASB"). given it does not contradict with Shari'a Rules and Principles and the conceptual framework of AAOIFI. These interim condensed consolidated financial statements have been prepared using accounting policies, which are consistent with those used in the preparation of the annual consolidated financial statements for the year ended 31 December 2017, except for the early adoption of FAS 30. Early adoption of FAS 30 Impairment, Credit Losses and Onerous Commitments ("FAS 30") Group has early adopted FAS 30, effective from 1 January 2018 which has a mandatory date of initial application of 1 January 2020. The requirements of FAS 30 represent a significant change from the provisions part of FAS 11 "Provisions and Reserves". 2.1 - The FAS 30, the standard has been applied retrospectively and the comparative amounts have not been restated. The impact of the early adoption of FAS 30 has been recognised in owners‘ equity. The standard eliminates the use of the existing FAS 11. As permitted by
10. AI Baraka Banking Group B .S.C. NOTES TO THE INTERIM CONDENSED CONSOLIDATED FINANCIAL STATEMENTS At 31 March 2018 (Reviewed) 2 BASIS OF PREPARATION AND ACCOUNTING POLICIES (continued) 2.1 Early adoption (continued) of FAS 30 - Impairment, Credit Losses and Onerous Commitments ("FAS 30") Transition Changes in accounting policies resulting from the adoption of FAS 30 have been applied retrospectively, except comparative periods which have not been restated. Differences in the carrying amounts of financial assets resulting from the adoption of FAS 30 are recognised in owner's equity as at 1 January 2018. Accordingly, the information presented for 2017 does not reflect the requirements of FAS 30 and therefore is not comparable to the information presented for 2018 under FAS 30. Impact of adopting FAS 30 Following is the impact of early adoption of FAS 30: Balance 31 Retained earnings Non-controlling interest Other reserves of investment accountholders Equity Cash and balances with banks Receivables Mudaraba and Musharaka Investments ljarah - Debt-type financing instruments at amortised cost Muntahia Bittamleek Other assets Other liabilities The key changes to the Group's accounting policies resulting Restated December Transition balance 1 2017 adjustment January 2018 US$ ’000 US$ ’000 US$ ’000 530,615 770,456 46,639 13,882,109 (56,021) (49,177) (46,639) (56,174) 474,594 721,279 5,430,085 12,001,050 2,377,654 2,250,552 1,856,018 469,878 1,035,983 (109) (187,037) (4,957) (4,706) (19,119) from its . - 13,825,935 5,429,976 11,814,013 2,372,697 2,245,846 1,836,899 488,875 1,047,063 18,997 11,080 adoption of FAS 30 are summarized in note 2.2 below. 2.2 a) Summary of significant accounting policies Financial contracts Financial contracts consist of cash and balances with banks, receivables, Mudaraba (net of deferred profit) and Musharaka financing, Investments debt type instruments at amortised cost, ljarah Muntahia - Bittamleek (where the estimates of future cash flows dependent on a single customer) and certain other assets. In addition it consist of off-balance sheets exposures such as letter of credit, letter of guaranties and undrawn commitments. Balances relating to these contracts are stated net of allowance for credit losses. b) Impairment assessment (policy applicable from 1st January 2018) Impairment of financial assets FAS 30 replaces the ‘incurred Ioss‘ model in FAS 11 with Expected Credit Loss (ECL) impairment model also applies to certain financing commitments and financial guarantee to equity investments. model. The new contracts but not The carried at amortised cost. Assets credit Group applies three-stage approach to measure ECL on financial assets migrate through the following three stages based on the change in recognition. quality since initial
11. Al Baraka Banking Group B .S.C. NOTES TO THE INTERIM CONDENSED CONSOLIDATED FINANCIAL STATEMENTS At 31 March 2018 (Reviewed) BASIS OF PREPARATION AND ACCOUNTING POLICIES 2 2.2 (continued) Summary of significant accounting policies (continued) b) Impairment assessment (policy applicable from 1st January 2018) (continued) lmpalnnent of financial assets (continued) Stage 1: twelve months ECL For exposures where there has not been a Significant increase in Credit Risk ("SICR"). since initial recognition. a portion of the lifetime ECL‘s that represent the ECL that result from default events on a financial contract that is possible within 12 months after the reporting date (or a shorter period if the life of the financial instrument is less than 12 months).of the lifetime ECL associated with the expected probability of default events occurring Stage 2: lifetime ECL within next twelve months after the reporting date is recognised. not credit impaired For credit exposures where there has been a SlCR since initial recognition but that are not credit impaired, a lifetime ECL is recognised. Lifetime ECL is the loss that results from all possible default events over the — expected life of the financial contract. estimate of credit losses and is determined based on the difference between the present value of all cash shortfalls. The cash shortfall is the difference between all contractual cash flows that are due to the Group and the present value of the recoverable amount, for financial assets that are not credit-impaired at the reporting date. Lifetime ECL (Stage 2) Stage 3: Lifetime ECL is a probability-weighted credit Impaired Financial contracts are assessed as credit impaired when one or more events that have impact on the estimated future cash flows of that asset have occurred. - a detrimental 3 financial contracts, the provisions for credit-impairment are determined based on the difference between the net carrying amount and the recoverable amount of the financial contract. As this uses the same criteria as under FAS 11. the Group methodology for specific allowance for credit losses For Stage remains in case largely unchanged. guarantees which the Group can recover its exposure. the past due requirements. whichever is more strict. are applied for allowance for where there is no collaterals or per Group's policy credit losses calculation. rules as or local Credit-impaired financial assets At each reporting date. the Group assesses whether financial assets carried at amortised cost are creditimpaired. Evidence that a financial asset is credit-impaired includes the following observable data: - - - - or issuer. past due event; probability that the borrower will enter bankruptcy or other financial reorganization; or the restructuring of a facility by the Group on terms that the Group would not consider othenwise. significant financial difficulty of the a breach of contract such as a borrower default or Measurement of ECL Following - - - are the key inputs into the measurement of ECL: Probability of Default (PD); Loss Given Default (LGD); and Exposure At Default (EAD). parameters are generally derived from internally developed models and other historical data. These are adjusted to reflect forward-looking information as described below. These 10
12. Al Baraka Banking Group B .S.C. NOTES TO THE INTERIM CONDENSED CONSOLIDATED FINANCIAL STATEMENTS At 31 March 2018 BASIS OF PREPARATION AND ACCOUNTING POLICIES 2 2.2 (Reviewed) (continued) Summary of significant accounting policies (continued) b) lmpairrnent assessment (policy applicable from 1st January 2018) (continued) Definition of default Group considers a financial asset to be in default when the borrower is unlikely to pay its credit obligations to the Group in full, without recourse by the Group to actions such as liquidating collateral; or the borrower is past due more than 90 days or any material credit obligation to the Group. In assessing whether a borrower is in default, the Group considers both qualitative factors such as breaches of covenants and quantitative factors such as overdue status and non-payment on another obligation of the same issuer to the Group. The Probability of default Credit risk grades are a primary input into the determination of the term structure of Probability of Default (PD) for exposures. The Group collects performance and default information about its credit risk exposures analysed by credit risk grading for corporate and days-past—due for retail portfolio. The Group employs statistical models for analysing the data collected and generate estimates of PD of exposures and how these are expected to change as a result of the passage of time. This analysis includes the identification and calibration of relationships between changes in default rates and changes in key macro-economic factors, across various geographies in which the Group operates. component (subsidiary) of the Group uses combination of key macro-economic indicators including, fiscal surplus/deficit as a percentage of GDP. gross domestic product (GDP) growth. oil prices, government spending, stock market volatility, cost of funding, lending rates credit growth, inflation rate and unemployment. Each Types of P05 used for ECL computation 12-month PDs - over the - within the next 12 months (or life of the financial instrument if that is less than 12 months). This is used to This is the estimated remaining probability of default occurring calculate 12-month ECLs. - Lifetime PDs This is the estimated probability of a default occurring over the financial instrument. This is used to calculate lifetime ECLs for ‘stage 2‘. - remaining life of the Incorporation of forward looking information The Group considers latest available economic forecasts published by the International Monetary Fund (IMF) or other reputed service providers. for 5 years. The Group employs statistical models to incorporate macro-economic factors on historical default rates. In case none of the macro-economic parameters are statistically significant or the results of forecasted PDs are significantly deviated from the present forecast for the economic conditions, quantitative PD overlay shall be used by the management after analyzing the - portfolio as per the diagnostic tool. information increases the level of judgment as to how changes in these macroeconomic factors will affect the ECL applicable to the stage 1 and stage 2 exposures which are considered as performing (Stage 3 are the exposures under default category). As per the policy the, methodologies and assumptions involved, including any forecasts of future economic conditions, are Incorporating forward-looking required to be reviewed periodically. Loss Given Default parentage that determine the amount of loss that will arise if the borrower was to default. This is calculated by looking at the collateral and other resources available to the Group that can be used to LGD is a recover the asset in case of default. Group estimates LGD parameters based on the history of recovery rates of claims against defaulted counterparties, based on historical data using both internal and external factors. For Estimation of LGD, the Group considers use of any of the following methods: The history: When data is available units corresponding recovery data. Internal default information and 11 can estimate LGDs using the historical default