National Bank of Bahrain: Condensed Interim Financial Information - 30 June 2019

Transcription

1. NATIONAL BANK OF BAHRAIN B .S.C. CONDENSED INTERIM FINANCIAL INFORMATION 30 June 2019 Commercial registration: 269 (Licensed by the Central Bank of Bahrain as a conventional retail bank) Board of Directors: Farouk Yousuf Khalil Almoayyed, Chairman Dr. Essam Abdulla Fakhro, Deputy Chairman Fawzi Ahmed Kanoo, Deputy Chairman Khalid Yousif Abdul Rahman, Director Hussain Sultan Al Ghanem, Director Khalid Al Rumaihi, Director Sh. Rashid Bin Salman Mohamed Al Khalifa, Director Hala Ali Yateem, Director Yusuf Abdulla Yousif Akbar Alireza, Director Mohamed Tareq Mohamed Sadeq, Director Rishi Kapoor, Director Office: PO Box 106, NBB Tower Government Avenue, Manama, Kingdom of Bahrain Telephone 17228800, Fax 17228998 Auditors: KPMG Fakhro
2. National Bank of Bahrain B .S.C. Condensed interim financial information for the six months ended 30 June 2019 CONTENTS Independent auditors’ report on review of condensed interim financial information Page 1 Condensed interim financial information Condensed statement of financial position Condensed statement of profit or loss Condensed statement of comprehensive income Condensed statement of changes in equity Condensed statement of cash flows Notes to the condensed interim financial information 1. Reporting entity 2. Basic of preparation and significant accounting policies 3. Adoption of new accounting standards 4. Seasonality 5. Related parties 6. Appropriations 7. Loans and advances 8. Net impairment provisions 9. Employment share incentive scheme 10. Contingent liabilities and banking commitments 11. Property and equipment 12. Operating segment information 13. Fair value hierarchy 14. Cash and cash equivalents 2 3 4 5-6 7 8 8 8-10 10 10 10 11 11 11 12 12 13 13-15 15
6. National Bank of Bahrain B .S.C. CONDENSED STATEMENT OF COMPREHENSIVE INCOME for the six months ended 30 June 2019 Bahraini Dinar Millions Six months ended 30 June 2019 (reviewed) Profit for the period Other comprehensive income: Items that are or may be reclassified to profit or loss: Fair value through other comprehensive income (debt instruments) - Net change in fair value - Net amount transferred to profit or loss Items that will not be reclassified to profit or loss: Fair value through other comprehensive income (equity instruments) Total other comprehensive income/(loss) for the period Total comprehensive income for the period Three months ended 30 June 2018 (reviewed) 30 June 2019 (reviewed) 30 June 2018 (reviewed) 40.0 36.8 19.6 17.1 1.6 (26.3) - (3.3) (2.7)- (15.7) (4.1) 7.0 3.9 5.2 2.9 4.5 44.5 (22.4) 14.4 (0.8) 18.8 (12.8) 4.3 - - The condensed interim financial information consists of pages 2 to 15. 4
7. National Bank of Bahrain B .S.C. CONDENSED STATEMENT OF CHANGES IN EQUITY for the six months ended 30 June 2019 Bahraini Dinar Millions 2019 (reviewed) Other reserves and retained earnings Share capital Balance at 31 December 2018 2018 appropriations: Cash dividend at 25% Bonus shares issued at 10% Transfer to donations and charity reserve Transfer to statutory reserve Balance after 2018 appropriations Shares allocated during the period (note 9) Comprehensive income for the period: Profit for the period Other comprehensive income Total comprehensive income for the period Utilisation of donations and charity reserve Balance at 30 June 2019 Unallocated shares Share premium Statutory reserve General reserve Fair value reserve Donation charity reserve Retained earnings Total equity 202.0 475.8 (34.8)) (13.8) (34.8) - 140.3 (1.5) 5.0 70.1 32.4 10.0 17.5 14.0 (0.2) - - - - - - 7.0 - - 3.5 - (3.5) (7.0) - 142.9 441.0 - - 154.3 (1.7) 5.0 77.1 32.4 10.0 21.0 - 0.3 1.3 - - - - - 1.6 - - - - - 4.5 - 40.0 - 40.0 4.5 - - - - - 4.5 - 40.0 44.5 6.3 77.1 32.4 14.5 (0.7) 20.3 182.9 (0.7) 486.4 154.3 (1.4) The condensed interim financial information consists of pages 2 to 15. 5
8. National Bank of Bahrain B .S.C. CONDENSED STATEMENT OF CHANGES IN EQUITY for the six months ended 30 June 2019 Bahraini Dinar Millions 2018 (reviewed) Other reserves and retained earnings Share capital Unallocated shares Share premium Statutory reserve General reserve Fair value reserve Donation charity reserve Retained earnings Total equity 127.5 (1.7) 4.0 63.8 32.4 26.1 16.0 179.8 447.9 - - - - - (12.7) - 9.9 (2.8) - - - - - - - (4.1) (4.1) Restated Balances at 1 January 2018 127.5 (1.7) 4.0 63.8 32.4 13.4 16.0 185.6 441.0 2017 appropriations: Cash dividend at 25% Bonus shares issued at 10% Transfer to donations and charity reserve Transfer to general reserve Transfer to statutory reserve Balance after 2017 appropriations 12.8 140.3 (0.1) (1.8) 4.0 6.3 70.1 (12.8) 19.1 (6.3) 32.4 13.4 3.1 19.1 (31.5) 0.1 (3.1) (19.1) 132.0 (31.5) 409.5 Shares allocated during the period (note 9) - 0.3 1.0 - - - - - 1.3 Comprehensive income for the period: Profit for the period Other comprehensive loss Total comprehensive income for the period - - - - - (22.4) (22.4) - 36.8 36.8 36.8 (22.4) 14.4 Utilisation of donations and charity reserve Balance at 30 June 2018 140.3 (1.5) 5.0 70.1 32.4 )9.0( (0.9) 18.2 168.8 (0.9) 424.3 Balance at 31 December 2017 Impact of adopting IFRS 9 as at 1 January 2018 Impact on adopting IFRS 9 by associates Unallocated shares are shares that remain unallocated to employees under the employee share incentive scheme. The condensed interim financial information consists of pages 2 to 15. 6
9. National Bank of Bahrain B .S.C. CONDENSED STATEMENT OF CASH FLOWS for the six months ended 30 June 2019 Bahraini Dinar Millions Six months ended 30 June 2019 (reviewed) 30 June 2018 (reviewed) Cash flow from operating activities Profit for the period Adjustments to reconcile profit for the period to net cash from/(used in) operating activities: Depreciation Net impairment provisions Share of profit of associates 40.0 36.8 2.0 4.7 (2.4) 1.0 1.3 (3.2) Profit for the period after adjustments 44.3 35.9 (11.6) 69.8 (28.6) (51.6) (19.1) 63.6 (3.9) (64.6) 9.0 4.2 39.3 (1.0) (22.7) (43.9) 9.0 18.4 8.6 (73.7) 7.9 7.3 (18.0) Dividend received from associates Capital reduction of associates Purchase of property and equipment, net 0.6 1.0 (4.8) 0.8 (1.9) Net cash used in investing activities (3.2) (1.1) Dividends paid Donations and charities paid Payment of lease liabilities (34.3) (0.7) (1.0) (31.3) (0.9) - Net cash used in financing activities (36.0) (32.2) Net decrease in cash and cash equivalents during the period (31.9) (51.3) Cash and cash equivalents at 1 January 310.9 195.1 Cash and cash equivalents at 30 June (note 14) 279.0 143.8 Change in operating assets and liabilities: Balances with central banks (mandatory cash reserve) Treasury bills Placements with banks and other financial institutions Loans and advances Investment securities Interest receivable and other assets Due to banks and other financial institutions Borrowings under repurchase agreements Customer deposits Interest payable and other liabilities Net cash from/(used in) operating activities Cash flow from investing activities Cash flow from financing activities The condensed interim financial information consists of pages 2 to 15. 7
10. National Bank of Bahrain B .S.C. NOTES TO THE CONDENSED INTERIM FINANCIAL INFORMATION for the six months ended 30 June 2019 Bahraini Dinar Millions 1. Reporting entity National Bank of Bahrain B.S.C., a public shareholding company, was incorporated in the Kingdom of Bahrain by an Amiri decree in January 1957. The Bank is licensed by the Central Bank of Bahrain as a conventional retail bank. 2. Basis of preparation and significant accounting policies The condensed interim financial information is prepared in accordance with IAS 34 ‘Interim Financial Reporting’ and the applicable provisions of the Central Bank of Bahrain regulations. The condensed interim financial information should be read in conjunction with the 2018 annual financial statements of the Bank, except for the effects of adoption of IFRS 16 ‘Leases’ as described in note 3. The condensed interim financial information is reviewed by the external auditors, not audited. The comparatives for the condensed statement of financial position have been extracted from the audited financial statements for the year ended 31 December 2018 and the reviewed condensed interim financial information for the six months ended 30 June 2018. The comparatives for the condensed statements of profit or loss, comprehensive income, changes in equity and cash flows have been extracted from the reviewed condensed interim financial information for the six months period ended 30 June 2018. The condensed interim financial information does not contain all the information and disclosures required for full financial statements which are prepared in accordance with international financial reporting standards. In addition, results for the six months period ended 30 June 2019 are not necessarily indicative of the results that may be expected for the financial year ending 31 December 2019. The condensed interim financial information is influenced by accounting policies, assumptions, estimates and management judgement, which necessarily have to be made in the course of preparation of the condensed interim financial information. The Bank makes estimates and assumptions that affect the reported amounts of assets and liabilities. All estimates and assumptions required in conformity with IFRS are best estimates undertaken in accordance with the application of standards. Actual results may differ from these estimates. The significant judgements made by management in applying the Bank’s accounting policies and the key sources of estimation are in accordance with the application of standards and are the same as those applied to the audited financial statements for the year ended 31 December 2018. The Bank’s financial risk management objectives and policies are consistent with those disclosed in the audited financial statements for the year ended 31 December 2018. 3. Adoption of new accounting standards The Bank has applied IFRS 16 with a transition date of 1 January 2019 which resulted in changes in accounting policies and adjustments to the amounts from those previously recognised in the financial statements as at 31 December 2018. As permitted by the transitional provisions of IFRS 16, the Bank elected to use the modified retrospective approach and therefore the comparative information has not been restated and continues to be reported under IAS 17 ‘Leases’ and IFRIC 4 ‘Determining whether an arrangement contains a lease’. Set out below are the details of the specific IFRS 16 accounting policies applied in the current period and the IFRS 16 transition impact disclosures for the Bank. 8
11. National Bank of Bahrain B .S.C. NOTES TO THE CONDENSED INTERIM FINANCIAL INFORMATION for the six months ended 30 June 2019 3. Bahraini Dinar Millions Adoption of new accounting standards (continued) (a) Changes in accounting policies At the inception of the contract, the Bank assesses whether a contract is, or contains, a lease. A contract is, or contains, a lease if the contract conveys the right to control the use of an identified asset for the period of time in exchange for consideration. To assess whether a contract conveys the right to control the use of an identified asset, the Bank assesses whether: - the contract involves the use of an identified asset, this may be specified explicitly or implicitly, and should be physically distinct or represent substantially all of the capacity of a physically distinct asset. If the supplier has a substantive substitution right, then the asset is not identified; - the Bank has the right to obtain substantially all of the economic benefits from use of the asset throughout the period of use; and - the Bank has the right to direct the use of the asset. The Bank has this right when it has the decision-making rights that are most relevant to changing how and for what purpose the asset is used. In rare cases where the decision about how and for what purpose the asset is used is predetermined, the Bank has the right to direct the use of the asset if either: - the Bank has the right to operate the asset; or - the Bank designed the asset in a way that predetermines how and for what purpose it will be used. The new definition of a lease under IFRS 16 has been applied for contracts entered into, or changed, on or after 1 January 2019. At inception or on reassessment of a contract that contains a lease component, the Bank allocates the consideration in the contract to each lease component on the basis of their relative stand-alone prices. However, for the leases of land and buildings in which it is a lessee, the Bank has elected not to separate non-lease components and to account for the lease and non-lease components as a single lease component. i) Measurement The Bank recognises a right-of-use asset and a lease liability at the lease commencement date. The right-of-use asset is initially measured at cost, which comprises: - the amount of the initial measurement of the lease liability; - any lease payment made at or before the commencement date, less any lease incentives received; - any initial direct cost incurred by the lessee; and - estimated cost to dismantle and to remove the underlying asset, or to restore the underlying asset or the site on which it is located. The right-of-use asset is subsequently depreciated using the straight line method from the commencement date to the earlier of the end of the useful life of the right-of-use asset or the end of the lease term. The estimated useful lives of right-of-use assets are determined based on the lease term. Lease liability is measure as the present value of the future lease payments that are not paid at the commencement date. The lease payments are discounted based on the Bank’s incremental borrowing rate. Lease liability comprises the following: - fixed payments, including in-substance fixed payments; - variable lease payments that depend on an index or a rate, initially measured using the index or rate as at the commencement date; - amounts expected to be payable under a residual value guarantees; 9
12. National Bank of Bahrain B .S.C. NOTES TO THE CONDENSED INTERIM FINANCIAL INFORMATION for the six months ended 30 June 2019 3. Bahraini Dinar Millions Adoption of new accounting standards (continued) (a) Changes in accounting policies (continued) - the exercise price of a purchase option if the Bank is reasonably certain to exercise that option; - lease payments in an optional renewal period if the Bank is reasonably certain to exercise an extension option; and - penalties for early termination of a lease unless the Bank is reasonably certain not to terminate early. The lease liability is measured at amortised cost using the effective interest method. It is remeasured when there is a change in future lease payments arising from a change in an index or rate, if there is a change in the Bank’s estimate of the amount expected to be payable under a residual value guarantee, or if the Bank changes its assessment of whether it will exercise a purchase, extension or termination option. When the lease liability is remeasured in this way, a corresponding adjustment is made to the carrying amount of the right-of-use asset, or is recorded in profit or loss if the carrying amount of the right-of-use asset has been reduced to zero. ii) Short-term leases and leases of low-value assets The Bank has elected not to recognise right-of-use assets and lease liabilities for short-term leases that have a lease term of 12 months or less and for leases of low-value assets. The Bank recognises the lease payments associated with these leases as an expense on a straight-line basis over the lease term. (b) Impact of adopting IFRS 16 On transition to IFRS 16, the Bank elected to apply the practical expedient to grandfather the assessment of which transactions are leases. It applied IFRS 16 to contracts that were previously identified as leases. The impact from the adoption of IFRS 16 as at 1 January 2019 has resulted in an increase in property and equipment by BHD 5.4 million and an increase in interest payable and other liabilities by BHD 5.4 million: Closing balance under IAS 17 (31 December 2018) Impact on remeasurements: Right-of-use asset Lease liability Opening balance under IFRS 16 on date of initial application of 1 January 2019 Property and equipment Interest payable and other liabilities 16.6 43.8 5.4 5.4 5.4 5.4 22.0 49.2 4. Seasonality For the six months ended 30 June 2019, other income includes BHD 2.6 million (30 June 2018: BHD 2.9 million) of dividends received from the Bank's investments in equity securities. This income is of a seasonal nature. 5. Related parties Certain related parties (major shareholders, directors of the Bank and their families and companies of which they are principal owners, and key management personnel) were customers and/or suppliers of the Bank in the ordinary course of business. The transactions with these parties were made on an arm's length basis. 6. Appropriations At the annual ordinary general meeting and the extraordinary general meeting for the year 2018, which were held on 6 March 2019, certain appropriations and amendments were approved and effected during the period. These appropriations include BHD 35.1 million (BHD 34.8 million excluding dividends on unallocated shares under the employee share incentive scheme) for cash dividend at 25%, BHD 3.5 million for donations and contributions, a transfer of BHD 7.0 million from retained earnings to the statutory reserve and an increase in paid up capital due to a one-for-ten bonus issue through the utilisation of BHD 1.41 million from the retained earnings. The authorised share capital was also increased to BHD 200.0 million from BHD 150.0 million. 10
13. National Bank of Bahrain B .S.C. NOTES TO THE CONDENSED INTERIM FINANCIAL INFORMATION for the six months ended 30 June 2019 7. Bahraini Dinar Millions Loans and advances (a) Exposure by staging 30 June 2019 Loans and advances Less: impairment provisions Net loans and advances Stage 1 1,106.4 (5.9) 1,100.5 Stage 2 42.4 (2.5) 39.9 Stage 3 119.3 (45.6) 73.7 Total 1,268.1 (54.0) 1,214.1 Stage 1 1,085.5 (6.6) 1,078.9 Stage 2 52.7 (6.3) 46.4 Stage 3 101.3 (36.5) 64.8 Total 1,239.5 (49.4) 1,190.1 Stage 1 6.6 (0.5) (0.2) 5.9 Stage 2 6.3 (4.7) 0.9 2.5 31 December 2018 Loans and advances Less: impairment provisions Net loans and advances (b) Impairment provisions on loans and advances Impairment at 31 December 2018 Net transfer between stages Write off during the period Net charge for the period (note 8) Impairment at 30 June 2019 Stage 3 36.5 5.2 (0.4) 4.3 45.6 Total 49.4 (0.4) 5.0 54.0 (c) Aging schedule of non-performing loans and advances 30 June 2019 31 December 2018 53.6 53.5 Over 3 months to 1 year 1 to 3 years Over 3 years Non-performing loans not subject to cooling off period 29.8 26.1 9.8 65.7 119.3 12.5 26.1 9.2 47.8 101.3 Fair market value of collateral Stage 3 impairment provision 112.5 45.6 132.8 36.5 Up to 3 months (subject to cooling off period) In accordance with the Central Bank of Bahrain guidelines, loans that have been classified as non-performing should remain classified as non-performing for a cooling off period of not less than 1 year from the date of becoming performing. Absent of the cooling off period, the non-performing loan ratio at 30 June 2019 is 5.2% (31 December 2018: 3.9%) 8. Net impairment provisions 30 June 2019 Loans and advances (note 7b) Investment securities - debts Loan commitments and guarantees 9. 30 June 2018 5.0 (0.1) (0.2) 3.0 (1.1) (0.6) 4.7 1.3 Employee share incentive scheme During the period, as part of the employee share incentive scheme, the Bank has allocated ordinary shares with a nominal value of BHD 0.3 million (2018: BHD 0.3 million) to the employees under this scheme, which has resulted in share premium of BHD 1.3 million (2018: BHD 1.0 million). Unallocated shares under the scheme are deducted from equity. The allocated shares under the scheme are entitled to cash dividends and bonus shares. 11
14. National Bank of Bahrain B .S.C. NOTES TO THE CONDENSED INTERIM FINANCIAL INFORMATION for the six months ended 30 June 2019 Bahraini Dinar Millions 10. Contingent liabilities and banking commitments 30 June 2019 (reviewed) Contingent liabilities Letters of credits Guarantees Banking commitments Undrawn loan commitments Forward commitments Interest rate contracts Foreign exchange contracts 31 December 2018 (audited) 30 June 2018 (reviewed) 26.8 152.9 179.7 27.9 151.9 179.8 27.8 163.7 191.5 10.8 601.7 1,924.0 2,536.5 2,716.2 15.1 18.8 630.2 2,075.3 2,739.4 2,919.2 28.8 7.9 595.4 1,425.7 2,057.8 2,249.3 11. Property and equipment Property and equipment Right-of-use of leased property 30 June 2019 20.2 4.6 24.8 31 December 2018 16.6 16.6 Right-of-use of leased property relating to IFRS 16 adopted from 1 January 2019. Balance at 1 January 2019 Depreciation charge for the period Balance at 30 June 2019 Leased property 5.4 (0.8) 4.6 Lease liabilities Lease liabilities relating to right-of-use of leased property are presented under interest payable and other liabilities and amounted to BHD 4.4 million as at 30 June 2019. Maturity analysis of contractual undiscounted cash flows: Less than 1 year 1 to 3 years 3 to 5 years Total undiscounted lease liabilities Lease liabilities included in the statement of financial position 30 June 2019 1.1 2.1 1.3 4.5 4.4 Amount recognised in profit or loss Interest on lease liabilities Depreciation charge on right-of-use of leased property 30 June 2019 0.1 0.8 12
15. National Bank of Bahrain B .S.C. NOTES TO THE CONDENSED INTERIM FINANCIAL INFORMATION for the six months ended 30 June 2019 Bahraini Dinar Millions 12. Operating segment information Retail, Commercial & SMEs Corporate, Institutional & Investment Banking Treasury, Capital Markets & Wealth Management Overseas Branches Total 30 June 2019 30 June 2018 30 June 2019 30 June 2018 30 June 2019 30 June 2018 30 June 2019 30 June 2018 30 June 2019 30 June 2018 External revenue 21.4 17.8 16.9 13.4 2.0 1.7 52.5 43.8 92.8 76.7 External expense (12.6) (6.5) (5.6) (5.9) (0.1) (0.1) (8.3) (5.2) (26.6) (17.7) Inter-segment interest income / (expense) 19.3 11.7 2.1 2.6 0.1 - (21.5) (14.3) - - Total revenue 28.1 23.0 13.4 10.1 2.0 1.6 22.7 24.3 66.2 59.0 Result 18.0 10.5 8.6 6.1 (2.2) (0.4) 18.9 22.2 43.3 38.4 Unallocated corporate expenses (3.3) (1.6) Profit for the period 40.0 36.8 13. Fair Value Hierarchy The Bank measures fair values of financial instruments using the following fair value hierarchy that reflects the significance of the inputs used in making the measurements. Level 1: Quoted prices (unadjusted) in active markets for identical assets or liabilities. Level 2: Valuation techniques based on observable inputs, either directly (i.e. as prices) or indirectly (i.e. derived from prices). This category includes instruments valued using quoted market prices in active markets for similar instruments; quoted prices for identical or similar instruments in markets that are considered less than active; or other valuation techniques where all significant inputs are directly observable from market data. Level 3: Valuation techniques using significant unobservable inputs. This category includes all instruments where the valuation technique includes inputs which are not based on observable data and for which the unobservable inputs have a significant effect on the instrument’s valuation. The fair value of financial assets and liabilities other than those disclosed below approximate their carrying value. 13
16. National Bank of Bahrain B .S.C. NOTES TO THE CONDENSED INTERIM FINANCIAL INFORMATION for the six months ended 30 June 2019 Bahraini Dinar Millions 13. Fair value hierarchy (continued) The following analyses financial assets and liabilities carried at fair value, by valuation method. 30 June 2019 Level 1 Fair value through profit or loss: Equity securities Fair value through other comprehensive income: Debt securities Equity securities Derivative financial assets Derivative financial liabilities 31 December 2018 Level 2 Level 3 Total - 0.9 - 0.9 250.9 50.8 - 10.9 301.7 - 4.3 5.2 1.0 10.9 - Level 1 Level 2 Level 3 Total - 0.4 - 0.4 250.9 61.7 301.6 43.6 - 11.1 301.6 54.7 4.3 317.8 1.0 345.2 - 10.2 10.6 0.7 11.1 - 10.2 366.9 0.7 - 14
17. National Bank of Bahrain B .S.C. NOTES TO THE CONDENSED INTERIM FINANCIAL INFORMATION for the six months ended 30 June 2019 Bahraini Dinar Millions 13. Fair value hierarchy (continued) The following analyses the movement in level 3 financial assets during the period. There were no transfers between level 1, level 2 and level 3 of the fair value hierarchy: Fair value through other comprehensive income 2019 2018 At 1 January 11.1 10.9 Total gains in other comprehensive income (0.2) 0.1 At 30 June 10.9 11.0 Level 3 comprises unquoted equity investments classified as fair value through other comprehensive income which are measured at their estimated fair values based on the latest financial information available. Sensitivity analysis of the movement in fair value of the financial instruments in the level 3 category is assessed as not significant to the other comprehensive income and total equity. 14. Cash and cash equivalents 30 June 2019 30 June 2018 Cash and balances with central banks Less: cash reserve with central banks 121.1 (87.1) 34.0 100.7 (79.1) 21.6 Placement with banks and other financial institutions Less: placements with an original maturity over 3 months 103.4 103.4 104.3 (3.6) 100.7 439.6 (298.0) 402.2 (380.7) 141.6 21.5 279.0 143.8 Treasury bills Less: treasury bills with an original maturity over 3 months 15