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Stanbic IBTC Holdings PLC: Annual Report 2017

IM Insights
By IM Insights
9 months ago
Stanbic IBTC Holdings PLC: Annual Report 2017

Murabaha, Credit Risk, Net Assets, Participation, Provision, Receivables, Reserves, Sales, Specific Provision

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  1. 1 Stanbic IBTC Holdings PLC ANNUAL REPORT 2017
  2. 3 Stanbic IBTC Holdings PLC Annual Report 2017 Overview 6 8 10 12 Our vision and values Corporate profile Our network Recognitions Business review 16 19 23 27 38 41 42 44 47 49 50 53 59 65 Chairman ’s statement Chief Executive’s statement Economic review Financial review Executive committee Personal and Business Banking Case study: Ulysses Nigeria Ltd. Case study: Natural Prime Resources Nigeria Ltd Corporate and Investment Banking Case study: Kellogg Tolaram Nigeria Ltd Case study: Anheuser-Busch InBev Wealth Abridged sustainability report Enterprise risk review Annual report & financial statements 98 100 106 107 122 124 128 130 136 137 244 246 Board of directors Directors’ report Statement of directors’ responsibility Corporate governance report Report of the audit committee Independent auditors report Consolidated and separate statement of financial position Consolidated and separate statement of profit and loss Consolidated and separate statement of cash flows Notes to the consolidated and separate financial statement Annexure A Annexure B Other information 250 254 258 Management team Branch network Contact information
  3. 5 Having advisors with to make your Nigeria possible Our collective vision allows our group to make the connections between investors , businesses and inspired ideas. Creating new opportunities, and navigating the financial challenges of a changing economy imaginatively so that we never leave people unsupported or new avenues unexplored. This is what drives us at Stanbic IBTC Overview 6 8 10 12 Our vision and values Corporate profile Our network Recognitions
  4. 6 Group results in brief Stanbic IBTC Annual group financial statements for the year ended 31 December 2017 Overview Business review Annual report & financial statements Other information Vision and values To be the leading end-to-end financial solutions provider in Nigeria through innovative and customer-focused people. Working in teams We, and all aspects of our work, are interdependent. We appreciate that as teams we can achieve much greater things than as individuals. We value teams within and across business units, divisions and countries. Serving our customers We do everything in our power to ensure that we provide our clients with the products, services and solutions to suit their needs, provided that everything we do for them is based on sound business principles. Constantly raising the bar We have confidence in our ability to achieve ambitious goals and we celebrate success, but we are careful never to allow ourselves to become complacent or arrogant. Growing our people We encourage and help our people to develop to their full potential and measure our leaders on how well they grow and challenge the people they lead. Being proactive We strive to stay ahead by anticipating rather than reacting, but our actions are always carefully considered. Delivering to our shareholders We understand that we earn the right to exist by providing appropriate long-term returns to our shareholders. We try extremely hard to meet our various targets and deliver on our commitments. Upholding the highest levels of integrity Respecting each other We have the highest regard for the dignity of all people. We respect each other and what Stanbic IBTC stands for. We recognise that there are corresponding obligations associated with our individual rights. Our entire business model is based on trust and integrity as perceived by our stakeholders, especially our clients. 7
  5. 8 Group results in brief Stanbic IBTC Annual group financial statements for the year ended 31 December 2017 Overview Business review Annual report & financial statements Other information Corporate profile Stanbic IBTC Holdings PLC (“Stanbic IBTC”) was incorporated as Investment Banking and Trust Company Limited (“IBTC”), a private limited liability company, on 2 February 1989. IBTC was granted a merchant banking licence in February 1989 and commenced operations on 1 March 1989. IBTC’s merchant banking licence was converted to a universal banking licence in January 2002, pursuant to the universal banking guidelines of the Central Bank of Nigeria (“CBN”). In 2005, IBTC became a public company and its shares were listed on The Nigerian Stock Exchange (“The NSE” or “The Exchange”) In December 2005, IBTC merged with Chartered Bank PLC and Regent Bank PLC and changed its name to IBTC Chartered Bank PLC (“IBTC Chartered”) on 25 January 2006. On 24 September 2007, IBTC Chartered merged with Stanbic Bank Nigeria Limited (“Stanbic Bank”), a wholly owned subsidiary of Stanbic Africa Holdings Limited (“SAHL”), which in turn is a subsidiary of Standard Bank Group Limited of South Africa. As part of the transaction that resulted in the combination of IBTC Chartered and Stanbic Bank, SAHL acquired a majority shareholding (50.1%) in the enlarged bank, which was named Stanbic IBTC Bank PLC. On 1 November 2012, Stanbic IBTC officially adopted a Holding Company (“Holdco”) structure in compliance with the revised regulatory framework by the Central Bank of Nigeria which requires banks to divest from non-core banking businesses or adopt a HoldCo structure. Under the new structure, the subsidiaries of Stanbic IBTC Holdings PLC are Stanbic IBTC Bank, Stanbic IBTC Pension Managers Limited, Stanbic IBTC Asset Management Limited, Stanbic IBTC Trustees Limited, Stanbic IBTC Capital Limited, Stanbic IBTC Stockbrokers Limited, Stanbic IBTC Insurance Brokers Limited, Stanbic IBTC Ventures Limited, and Stanbic IBTC Investments Limited. Stanbic IBTC Nominees Limited and Stanbic IBTC Bureau de Change Limited are the only subsidiaries of Stanbic IBTC Bank. Corporate Structure Corporate and Investment Banking (“CIB”) Personal and Business Banking (“PBB”) Wealth Total income Total income Total income N89.0 billion N44.3 billion N39.5 billion Corporate and investment banking services to government, parastatals, larger corporates, financial institutions and international counter-parties in Nigeria. Banking and other financial services to individual customers and small to medium sized enterprises. Investment management in form of asset management, pension fund administration, trusteeship and insurance brokerage. Gross revenue Stanbic IBTC Holdings PLC 99.9% 99.9% 99.9% 88.2% 99.9% Stanbic IBTC Bank PLC Stanbic IBTC Capital Ltd (“SICL”) Stanbic IBTC Stockbrokers Ltd (“SISL”) Stanbic IBTC Pension Managers Ltd (“SIPML”) Stanbic IBTC Asset Management Ltd (“SIAML”) 99.9% 99.9% 75.0% 99.9% 99.9% 99.9% Stanbic IBTC Nominees Ltd (“SINL”) Stanbic IBTC Bureau de Change Ltd Stanbic IBTC Insurance Brokers Ltd (“SIIBL”) Stanbic IBTC Ventures Ltd (“SIVL”) Stanbic IBTC Trustees Ltd (“SITL”) Stanbic IBTC Investments Ltd (“SIIL”) Corporate and Investment Banking 54% Corporate and Investment Banking 51% Personal and Business Banking 27% Personal and Business Banking 26% Wealth 19% Wealth 23% Gross loans and advances Stanbic IBTC is a full service financial institution which offers a wide range of products to a variety of segments. Stanbic IBTC provides end-to-end financial solutions which include corporate and investment banking, personal and business banking, stockbroking and wealth management. Standard Bank Group, to which Stanbic IBTC belongs, is Africa’s largest bank by assets and earnings with strategic representation in 20 key sub-Saharan countries and other emerging markets. Standard Bank has been in operation for over 150 years and prides itself on being a global financial institution with African roots. Total income Total deposits Corporate and Investment Banking 63% Corporate and Investment Banking 42% Personal and Business Banking 37% Personal and Business Banking 58% 9
  6. 10 Group results in brief Stanbic IBTC Annual group financial statements for the year ended 31 December 2017 Overview Business review Annual report & financial statements Other information Standard Bank Group network Country overview Nigeria overview Standard Bank Group Overview 1 Angola Branches ATMs BNAs 2 Botswana Lagos Island: 27 Lagos Island: 85 Lagos Island: 4 3 Cote d’Ivoire Lagos Mainland: 33 Lagos Mainland: 116 Lagos Mainland: 10 4 DRC North Central: 31 North Central: 86 South South: 1 5 Ethiopia North West: 23 North West: 63 South West: 4 6 Ghana South East: 16 South East: 35 7 Kenya South South: 16 South South: 47 8 Lesotho South West: 31 South West: 103 9 Malawi Total: 177 Total: 535 10 Mauritius 11 Mozambique 3 6 5 13 15 12 Namibia 18 Market capitalisation R317 billion (US$28 billion) Total: 19 Total assets R2 trillion (US$165 billion) 7 13 Nigeria Operating 14 South Africa 4 15 South Sudan 16 Swaziland 1 17 Tanzania 20 Zimbabwe 9 19 18 Uganda 19 Zambia in 20 African countries and 8 countries outside Africa 17 20 12 10 2 16 8 14 11 54,558 employees (3,031 in Nigeria) 1,212 branches (177 in Nigeria) 9,036 ATMs (535 in Nigeria) 11
  7. 12 Group results in brief Stanbic IBTC Annual group financial statements for the year ended 31 December 2017 Overview Business review Annual report & financial statements Other information Recognitions SIAML 1. 2. SIPML Business Day Award for Best Managed Money Market Fund 2017 3. Business Day Award for Best Managed Fixed Income Fund 2017 4. 5. Business Day Award for Most Innovative PFA 2017 African Child Prize Award for Integrity in Corporate Business 2017 Nigerian Customer Service Awards for Excellent Service Delivery in PFA Category 2017 PBB 6. 7. 8. CIB The Asian Bankers Award for Best Branch Innovation for our Digital branch (2017) The Asian Bankers Award for Best SME Bank in Nigeria (2017) Human Development Initiatives Award for support towards tertiary education of orphans and children of widows and widowers (2017) 9. Human Capital Awards Best Sub Custodian in Nigeria 2017 – Global Finance (SINL) 10. Best FMDQ Registration Member (Quotations) – FMDQ (SICL) 11. Best Stockbroking/Investment Bank of the Year 2017 – BusinessDay Banking Awards (SISL) 12. Best FX Provider in Nigeria 2017 – Global Finance (Global Market) 13. 2017 Financial Mail Top Analyst Award: Best Equities Research, Sub Saharan Africa 14. 2017 Sprite Award: Best Fixed Income Research, Africa 15. Exceptional Investment in Employee Medical and Welfare (Redbridge Health Care – HealthMeetings.org) 16. Human Resources People Magazine Award for Outstanding Employee Engagement Strategy 17. Human Resources People Magazine Award for Outstanding Talent Management Strategy 18. Human Resources Best Practice Award for the Financial Industry in Nigeria 19. Best Human Resources Optimisation Award for Employee Engagement and Internal Communications 20. 2017 Chartered Institute of Personnel Management (“CIPM”) Best HR Practice Award 13
  8. 15 The experience to in new technologies , ventures and futures We have seen our country evolve dramatically over the last 29 years, so managing change is not only something we handle with great perspective, we plan for it. Looking to the future and capitalising on what Nigeria has to offer is key to how we progress. Our investments in communications infrastructure, alternative energy resources and transport links are all testaments to how we can see Nigeria needing more in years to come and making sure we are ahead of the curve. This is what drives us at Stanbic IBTC Business review 16 19 23 27 38 41 42 44 47 49 50 53 59 65 Chairman’s statement Chief Executive’s statement Economic review Financial review Executive Committee Personal and Business Banking Case study: Ulysses Nigeria Ltd. Case study: Natural Prime Resources Nigeria Ltd Corporate and Investment Banking Case study: Kellogg Tolaram Nigeria Ltd Case study: Anheuser-Busch InBev Wealth Abridged sustainability report Enterprise risk review
  9. Business review Stanbic IBTC Annual group financial statements for the year ended 31 December 2017 Overview Business review Annual report & financial statements Other information Chairman’s statement Basil Omiyi (con) Chairman 2017: A year of synchronised global recovery Fellow shareholders, distinguished ladies and gentlemen, on behalf of the Board of Stanbic IBTC Holdings PLC, I am pleased to welcome you all to this Annual General Meeting (“AGM”) of our company being the sixth since it became a holding company. Year 2017 turned out to be a year of synchronised global recovery despite political volatilities in some parts of the world. While growth stagnated in the UK at 1.8% given the stall in EU Brexit negotiations, China managed to maintain its rate of expansion, dispelling fears over a potential sharp slowdown as it matures after decades of rapid growth. The Eurozone also staged a recovery after years of uncertainty. Japan, as well as other major emerging economies such as Russia, continued to post solid growth numbers. However, there was a surge of political noise during the last quarter. In Spain, the Catalonia region’s drive for independence plunged the country into arguably the biggest political crisis in 40 years, posing a major challenge for the European Union. Due to irreconcilable differences among the four political parties involved, Chancellor Angela Merkel was unable to form a new threeway government in Germany, thereby increasing the chances of a new general election. In Italy, the campaign for next year’s general elections revealed a fragmented picture and a growing support for anti-establishment parties. The global oil price was also not left out as it recovered sharply in 2017, with Brent crude moving from $56.82 at the beginning of the year to close at $66.87 at year end, primarily driven by an agreement among OPEC and a number of nonmember countries such as Russia to extend production cuts to the end of 2018 and also as a result of increasing demand from factories around the world, particularly in China, amid a boom in economic activity. Locally, the World Bank had projected the country’s economy to grow by 1.0 per cent in 2017 following the carryover of a sub-zero (about -1.7 per cent) real Gross Domestic Product (“GDP”) growth rate from the 2016 recession. The most important policy challenge for the Federal Government was, therefore, to take the country out of recession within the year; and all this was at a time the naira traded at N490 against the US dollar at the Bureau de Change (“BDC”) while exchanging for N497 at the parallel (black) market, appreciating from about N516 per dollar in Q4 2016. External reserve had plummeted to $25.8 billion in December 2016 while inflation rate in January 2017 reached 18.72 per cent. Nigeria extended its slow climb out of its first recession in 25 years, as data from the National Bureau of Statistics (“NBS”) revealed that the economy grew by 1.92% year-on-year in the fourth quarter, being its third consecutive quarter of growth in 2017 (Q3’17: +1.4% year-onyear) after five consecutive quarters of negative growth. Also, inflation fell to 15.37 per cent in December 2017, from 18.72 per cent as of January 2017. The economic recovery was underpinned by a rebound in oil production due to the relative peace in the Niger Delta region, rising oil prices and foreign exchange stability as a result of the introduction of the Investors’ and Exporters’ Foreign Exchange (“IEFX”) Window by the Central Bank and the subsequent near liberalisation of the foreign exchange market, which brought the value of the naira in the parallel market from N525/$ to N362/$ in December 2017. The country’s external reserve grew significantly to $38.77 billion, representing a 50 per cent increase from the $25.84 billion recorded at the beginning of the year. The foreign exchange stability impacted positively on the performance of the bourse as The Exchange closed the year on a positive note with year-to-date return of 42.3%, emerging as one of the top five best performing stock markets for 2017 among major global stock exchanges. Positive market sentiments this year have been largely buoyed by foreign portfolio inflows into the equities markets since the introduction of the IEFX window (especially targeted at blue chip stocks), impressive corporate earnings releases and the positive macro-economic data. On a full year basis, all of the sectoral indices closed the year on a positive note. Foreign Portfolio Investment (“FPI”) increased significantly in 2017. The large chunk of FPI was invested in equities and Treasury Bills, which had attractive yield. In the banking industry, banks demonstrated resilience amid macro-economic challenges which weighed on credit expansion, asset quality and capital adequacy. Stanbic IBTC Bank PLC and Stanbic IBTC Holdings PLC retained their AAA national ratings by Fitch Ratings, reaffirming the institutions’ strong fundamentals and stability. In light of the above, our company made giant strides, recording several feats on all fronts. The company grew its Asset under Custody (“AuC”) to a record high of N5.6trn thus maintaining its leadership in the non-pension custodial business. The company’s share price grew from N15.00 at the beginning of the year to a record high of N44.30 while closing the year as the most priced banking stock at N41.50. The institution also made quantum leaps in almost all of its key performance metrics culminating in an ROE of over 28%. In recognition of our contribution to providing excellent solutions for clients we won several awards during the year across the group. The awards won include but not limited to the following: The NSE CEO award for 2017, (for the sixth year consecutively), Business Day Award for Best Managed Fixed Income Fund 2017, Nigerian Customer Service Awards for Excellent Service Delivery in PFA Category 2017, The Asian Bankers Award for Best Branch Innovation for our Digital branch, Business Day Banking Awards for the Best Stockbroking/Investment Bank of the Year 2017 and Best FX Provider in Nigeria 2017 by Global Finance. We remain optimistic that in 2018 and beyond, we are well positioned to sustain the progress made so far as we continue to create value for our customers with our innovative solutions while taking advantage of any potential upsides in the economy and in turn provide sustainable returns to our shareholders. Balance Sheet The Group’s total assets increased by 31.6% (N333 billion) from N1,053.5 billion as at 31 December 2016 to N1,386.4 billion as at 31 December 2017 due to positive growth in business activities and change in FX rate for foreign currency translation. Major growth lines in total assets are trading securities due to positions currently held (N151.5 billion), investment in financial securities (N316.6 billion) and net loans to customers also Deposits from customers increased by N192.7billion 31.6% 2017 in numbers 34.3% 16 Group total assets increased by N333 billion 44.5% Group’s net interest income increase 69.6% Group’s profit after tax increase 17
  10. 18 Business review Stanbic IBTC Annual group financial statements for the year ended 31 December 2017 In line with the comprehensive risk management framework of the Group , there was a significant increase in the provisions held for loans and advances in 2017. Provisions grew by N9.4 billion or 42.1% from N22.4 billion in 2016 to N31.8 billion in 2017, representing 7.9% of gross loan book (2016: 6.0%). Funding the growth in total asset is an increase in total liabilities of N288.5 billion (31.6%) between period end 2016 and 2017. Deposits from customers increased by N192.7 billion, representing a 34.3% growth year-on-year. This growth is in alignment with the bank’s focus on raising cheap customer liabilities. Shareholders’ funds grew by N45.0 billion following the impressive result for the financial year 2017. Income Statement Stanbic IBTC Holdings PLC achieved total income of N172.8 billion for the financial period ended 31 December 2017, which is 37.1% above prior period result of N126.1 billion. This growth can be largely adduced to increase in revenue from government securities due to high yields and improved trading revenue following liberalisation of the FX market and the opening of the IEFX window. The group’s net interest income witnessed a growth of N25.7 billion (44.5%) from N57.9 billion in 2016 to N83.6 billion in 2017. Non-interest revenue increased by N21 billion or 31% from N68.2 billion in 2016 to N89.2 billion in 2017 driven by significant growth in trading revenue of N13.8 billion. Total expenses increased to N86.0 billion in 2017 from N69.0 billion in 2016. Despite the 24.6% growth in cost, cost to income ratio for 2017 stood at 49.8% compared to 54.8% in 2016. Overall, group profit after tax increased by 69.6% from N28.52 billion in 2016 to N48.38 billion in 2017. General Our Corporate Social Investment (“CSI”) pillars are centred on education, economic empowerment and healthcare. These pillars enhance our brand reputation, increase employee proposition and present us as socially responsible and ultimately grow our market share. Through our signature CSI programme “Together4ALimb”, seven (7) children received artificial limbs and Educational Trust in 2017 while twenty (20) children have benefited from the programme since inception. We have also had over 2,000 staff participate in the annual walks. In 2018, our signature activities would be; Together4ALimb, Adopted School Project, Malaria Day, Employee CSI and Global Fund Partnership. As a group, we remain committed to the attainment and maintenance of the highest standards of corporate governance. We aim to continue to adopt global best practices that are applicable and relevant to our own business environment. At the same time, we will continue to make significant investments in our people through training across board, as we recognise that growing our people holds the key to our longer term competitiveness. Business review Annual report & financial statements Other information Chief Executive’s statement Chairman’s statement (continued) witnessed marginal growth of 5.4% (N19.1 billion) to close at N372.1 billion. Overview Finally, I would like to thank our clients, shareholders, regulators and staff for their unwavering support in the course of the year. Basil Omiyi (con) Chairman 1 February 2018 Yinka Sanni Chief Executive A record breaking, pace-setting year in our market The Year 2017 was impressive in the history of our company as our business made giant strides on several fronts amidst the recessionary trends and other economic headwinds which marked activities within the year. Globally, it was a year of strong growth that was supported by low-interest rate stimulus from central banks and a gradual easing of the crisis that have rocked both developed and emerging economies in recent times. Locally, Nigeria exited the recession as the economy expanded by 0.83% yearon-year in 2017, according to the National Bureau of Statistics (“NBS”). Drivers of the economic growth were: the significant increase in the value of capital imported into the country, which more than doubled in the third quarter to $4.15 billion, from $1.8 billion inflow recorded in the second quarter coupled with higher crude oil receipts. Nigeria’s annual inflation rate continued to decline, easing to 15.37% in December 2017 (lowest rate of price increases since April 2016 (13.7%)). The banking sector also contributed to the activities of the macro economy as the Central Bank of Nigeria’s (“CBN”) FX intervention exercise continued to promote economic activities. The CBN continued to meet demand for invisibles; providing FX to Small and Medium Enterprises (“SMEs”) for eligible imports, and continued with the special FX interventions for retail and wholesale demand. Foreign Exchange liquidity was also significantly supported by activities of investors on the new IEFX window bringing total trades from inception via this medium to $26.2 billion, with Stanbic IBTC Bank accounting for approximately 46% of this amount. The resultant improvement in USD liquidity had a positive effect on the naira which further strengthened against the USD in the parallel market to close the quarter at N362.00 to USD$1. This represents a significant appreciation from the all-time high of N490.00 to USD$1 which the year opened at. Given the lower FX intervention sales by the CBN, coupled with higher crude oil receipts, the nation’s external foreign reserves closed the year at $38.77 billion, which is the highest figure recorded since November 2014. As such, the Monetary Policy Committee (‘’MPC’’) of the CBN, which met once (in November) during the last quarter of the year, agreed to retain the benchmark Monetary Policy Rate (“MPR”) at 14% per annum, as well as other monetary policy parameters (corridor around the MPR, CRR and Liquidity Ratio) at the same levels they were since July 2016, in line with market expectations. The Stanbic IBTC Bank Nigeria Purchasing Managers’ Index (“PMI”) jumped in December, ending the year at a three-year high. The indicator lies comfortably above the 50-point threshold that separates expansion from contraction in business conditions, pointing to robust growth in the private sector. These positive economic indices led to the success of the country’s fourth Eurobond issuance during the last quarter. Stanbic IBTC Capital Limited, our Investment Banking subsidiary, acted as the sole Financial Adviser to the Debt Management Office (“DMO”) in the fund raising activity, which raised a total of USD3.0 billion within the last quarter of 2017. 19
  11. 20 Business review Stanbic IBTC Annual group financial statements for the year ended 31 December 2017 Overview Business review Annual report & financial statements Other information Chief Executive’s statement (continued) On The NSE, the equities market closed the year with a gain of 42.30% (2016: -6.17%), its strongest performance since 2013. The NSE sector indices showed that all sectors closed the year in positive territory with the banking sector being the top-performing sector. In the local fixed income market, yields remained elevated for the most part of 2017 amidst sticky inflation and a resulting tight monetary policy environment. Our business recorded significant strides despite the recessionary trends and other economic headwinds, leveraging on our competencies to provide best-in-class services to our customers and stakeholders while deploying efficient cost management initiatives. In summary, a significant growth in profitability was recorded largely driven by very strong performances from our Corporate and Investment Banking and Wealth Management businesses. Total Asset grew by 32%. Our group posted increases of 37.1% and 69.6% over the prior year’s performance in operating income and profit after tax, respectively, and achieved an ROE of 28.9% compared to 18.9% in the previous year. You will find included herein detailed financial reports. Our Share price reached an all-time high of N44.30 on 19 October 2017 and closed at N41.50/share for the year ended 31 December 2017. Our pension business achieved record assets under management of N2.3 trillion, making Stanbic IBTC Pension Managers Limited the largest institutional investment business in Nigeria. Stanbic IBTC Stockbrokers Limited, our stockbroking subsidiary with its high performance culture, consolidated its leadership position as the leading stockbroking firm in terms of transaction values in 2017. This confirms the goodwill and execution capability of the firm, leveraging on the expertise of the Stanbic IBTC Group, to provide robust services in the capital market. The firm was again awarded the 2017 NSE CEO award for capital market operators as the best dealing member, being the sixth time in a row. SISL has been Nigeria’s number one stockbroking house, posting the highest turnover for the last nine (9) years consecutively. The business has retained the number one spot in fifteen (15) of the last twenty (20) years. Our custody business retained its market leadership and reinforced its role as the leading non-pension custodial service provider in Nigeria. This feat was underscored by a significant growth in assets under custody by Stanbic IBTC Nominees Limited (“SINL”) to N5.6 trillion. In addition, SINL continued to set the pace within the custody industry; successfully executing the first commercial securities lending transaction in Nigeria on 14 December 2017. Our asset management subsidiary, Stanbic IBTC Asset Management Limited, successfully listed a total of 9 Collective Investment Schemes (“CIS”). These include the Stanbic IBTC Dollar Fund as well as SIAML Pension ETF 40, which mirrors the performance of an index of top 40 listed companies that are permissible for investment by Pension Fund Administrators (“PFA”) on The NSE. We moved up the league table in terms of client service as evidenced by our 3rd position ranking on the KPMG Customer Service Survey (from 4th in 2016) in retail banking and to 4th ( from 10 th in 2016) in Corporate Banking. On employee engagement, amongst several other awards, our Human Capital division was awarded the CIPM’s Best HR Practice Awards, Best HR Practice Awards for the second year running, even as our devoted staff continue to seek and conduct the right business the right way; in a socially, economically and environmentally sustainable manner. 2017 Accolades We are grateful that as an indicator of our leadership in our focus sectors and in recognition of our efforts to making our company a great place to work, 2017 saw Stanbic IBTC again receiving a number of accolades and awards, including: •The Asian Bankers award for Best Branch Innovation for our Digital branch •2017 Financial Mail Top Analyst Award: Best Equities Research, Sub Saharan Africa •The Asian Bankers award for Best SME Bank in Nigeria. •2017 Sprite Award: Best Fixed Income Research, Africa •Best Sub Custodian in Nigeria 2017 - Global Finance •Business Day Award for Best Managed Money Market Fund 2017 •Best FMDQ Registration Member (Quotations) – FMDQ •Business Day Award for Best Managed Fixed Income Fund •Best Stockbroking/Investment Bank of 2017 the year 2017 – Business Day Banking •Business Day Award Awards for Most Innovative PFA 2017 •Best Dealing Member Firm •Nigerian Customer Service Awards - The NSE CEO Awards for Excellent Service Delivery in PFA •African Child Prize Award for Integrity Category 2017 in Corporate Business 2017 • 2017 CIPM Best HR Practice Awards •Best FX Provider in Nigeria 2017 – Global Finance The achievement of these milestones was due to the hard work and dedication of our staff as well as the loyalty of our esteemed customers. Despite the economic, regulatory and political headwinds, as we enter a preelection year that would herald the 2019 general elections, our outlook for the year remains positive as we leverage on our competencies to execute flawlessly as a Universal Financial Services Organisation providing innovative and best-in-class endto-end financial solutions to our customers in a sustainable manner while creating value for our shareholders. •Human Development Initiatives award for support towards tertiary education of orphans and children of widows and widowers •Exceptional Investment in Employee Medical & Welfare (Redbridge Health Care - HealthMeetings.org) •HR People Magazine Award for Outstanding Employee Engagement Strategy •HR People Magazine Award for Outstanding Talent Management Strategy •HR Best Practice Award for the Financial Industry in Nigeria •Best HR Optimisation Award for Employee Engagement and Internal Communication Yinka Sanni Chief Executive 1 February 2018 21
  12. 22 Business review Stanbic IBTC Annual group financial statements for the year ended 31 December 2017 Overview Business review Annual report & financial statements Other information Economic review Global economic environment Will 2018 turn out to be another good year, with global equities performing strongly, volatility staying low, the dollar subdued and bond yields generally calm? This was the story of 2017. For 2018 to be a repeat, certain threats or risks need to remain dormant. What are these risks? Probably the main threat is an implosion of riskier assets created not by any specific shock but instead as a simple function of stretched valuations. Many traders and investors will argue that you need a specific event to materialise to trigger financial market disarray. This could come in the arenas of monetary policy, or geopolitics for example. But a ‘trigger’ is not necessarily needed, in our view. With risk assets as strong as they are and with volatility as low as it is, asset price implosion could occur naturally as investors rush to the exits to protect profits. But how likely is this in 2018? This is clearly a hard question to answer but the probability of such a scenario is well below 50%, in our view. This then requires a careful analysis of possible specific threats or risks that could cause an asset price implosion in 2018. Monetary policy is certainly one such area but something, in our view, that is constrained to the United States of America (“US”). It is hard to see other central banks like the European Central Bank (“ECB”) and Bank of Japan (“BoJ”) falling behind the curve in 2018 and sparking global panic by catching up with policy tightening that is way ahead of current expectations. The US is another matter for the Federal Reserve Bank (“FED”) could easily fall behind the curve; after all, this is what has tended to happen in the more recent tightening cycles. However, markets should probably remain optimistic here as well. The FED’s rate hike in March was an example of a hike that was not well discounted by the market beforehand, meaning that FED members essentially had to tell the market to catch up. The fact that this event failed to derail asset prices leaves us hopeful that the market can take a modest FED surprise on board without too much problem. The key here, of course, is the word ‘modest’. So if, for instance, the Federal Open Market Committee (“FOMC”) median call for 75 bps of rate hikes in 2018 turns into 100 bps we think the market will cope. If it is 150 bps or more it might be a very different story. Surging US rates might not be a huge risk this year to global markets. But a surging dollar could prove to be just as disruptive. US tax cuts do create some risk of strong dollar demand from US firms as they repatriate overseas profits to benefit from the lowering of the US tax rate. With USD2.5-USD3tr thought to be sitting abroad in the form of foreign profit, repatriation flows could be substantial. However, the evidence tends to suggest that the offshore profits are mainly held in dollar instruments. Unwinding of these could impact the price of those instruments but probably not the value of the dollar too much. Hence, this issue is unlikely to flare up in 2018. Among other risks to consider from a global perspective in 2018, we would include the end of the North America Free Trade Agreement (NAFTA), failure of Brexit talks, a debt-related implosion in China, the rise of Eurosceptic parties in Italian elections, North Korean military conflict, an indictment of some sort to the current US administration and more. But are these risks sufficiently high to mean that markets should stay clear of risk assets in 2018? The answer is probably ‘no’. With respect to actual economic performance, G10 economies seem robust – with the exception of the United Kingdom (“UK”) – but lower economic risk contrasts with some increases in political risk (Catalonian independence) and geopolitical risk (North Korea). Growth looks robust even if inflation in many countries remains short of central bank targets. The US is expected to deliver even stronger growth numbers in 2018, perhaps growing by 2.7% year-on-year from an estimate of 2.3% year-on-year in 2017. On the other hand, the UK is expected to struggle and grow by only 0.9% year-on-year compared to the 1.3% it grew by in 2017. Interestingly, Japan and China are also expected to continue normalising, growing by 1.0% and 6.3% year-on-year from the 1.3% and 6.5% which they grew by in 2017, respectively. With commodity prices on the rise (especially crude oil prices), the risks that face emerging markets in 2018 may prove to be of a different kind. Towards the tail end of 2017, the US President boasted of a “bigger” button than North Korean leader Kim Jong Un. He was referring to the alleged nuclear button that sits on Kim’s desk but we wonder whether the President’s real power lies in blowing up the dollar rather than his nuclear capability. In our view, the threat to the dollar lies in the confrontational “America First” policy that does not just take in North Korea but also the administration’s attitude towards other issues, such as global security (given the attacks on NATO members), global trade, or global climate change with the withdrawal from the Paris Accord. The US risks losing global influence and with this loss could come losses for the dollar. In just over six months, Brent crude oil prices have increased by 50% to around USD69 per barrel. At some stage, US oil producers, lured by high prices, should start to boost production, reversing the falling trend in the number of operating rigs that we have seen since July 2017, thus countering the OPEC cuts. Yet, robust global demand and geopolitical tensions are likely to keep crude oil prices elevated for a longer period. This should bode well for Nigeria as long as the country limits below the line subsidies to petrol imports, which has allowed it keep retail petrol prices unchanged. Other commodities, especially metals, are set for further gains in 2018 given the upward revisions to global economic growth and expectations of a weaker dollar (generally there is a negative correlation between the dollar and spot commodity price indices). 23
  13. 24 Business review Stanbic IBTC Annual group financial statements for the year ended 31 December 2017 Overview Business review Annual report & financial statements Other information Economic review (continued) Political landscape Economic growth Aside from the president’s health, perhaps the most widely debated political issue in 2017 was the proposed “restructuring” of Nigeria. Over the years, Nigeria has been criticised for functioning within a federal political arrangement, comprising the central “federal” government and regional “state and local” governments. The inference is that the current system misaligns incentives of regional governments, as they receive resources from the center without necessarily putting those resources to the best use. Unsurprisingly, the distribution of oil revenues by the federal government to state and local governments, and the use (or lack thereof) of those funds by those regional governments for the good of the masses, are the basic tenets of the restructure debate. The Nigerian economy contracted and began its journey towards recovery in 2017, helped mainly by a rebound in oil prices and oil production as well as adjustments made to the foreign exchange market which finally allowed robust levels of portfolio flows back into the country. As such, the economy is expected to continue growing at a modest pace. However, given the trajectory of oil prices and our expectation, taking account of a potential decline in coming months, they will remain above the 2017 oil price average, we expect the economy to grow by around 2.5% year-on-year in 2018. The central theme here appears to be the devolution of powers with the view to give more economic responsibility to the state, with respect to both revenues and expenditures, while the federal government oversees foreign policy and defence-related matters. Should the discourse culminate in actual changes to the federal system of government, the immediate losers will likely be those states that rely solely on the federal government’s monthly allocations to survive. However, it can be argued that such a change may be beneficial in the longer term. With the 2019 general elections now barely 12 months away, political attention will likely now focus on campaigns, especially as the Independent National Electoral Commission (“INEC”) recently published election timelines. The main question remains: has the current administration done enough to convince Nigerians of another term in office? Will the administration be willing to take tough decisions which arguably are beneficial to the country in the medium term such as allowing a more market reflective pricing template for petrol and electricity supply? And also just as important, is the main opposition organised enough to mount a credible challenge? Favourable upside risks to the outlook come from a higher than anticipated oil price environment, a smoother than expected election campaign cycle, unchanged positive sentiment from foreign investors and potentially more favourable monetary policy stance taken by the Central Bank of Nigeria. The implementation of the Economic Recovery and Growth Plan (“ERGP”) remains slow. The authorities expect that implementation of the plan should result in economic growth reaching 7.0% y/y in 2020, after their forecast for a rather optimistic 2.2% y/y in 2017. In order to ensure structural reform which will lead to long run economic development, authorities must implement many parts of the ERGP. The plan outlines three broad objectives (restoring growth, investing in people and building a competitive economy) and five principles (tackling constraints to growth, leveraging the private sector, allowing markets to function, promoting national cohesion and inclusion, as well as upholding the countries core values). Furthermore, there are five execution priorities (macroeconomic stability, achieving food security, energy sufficiency, improving transport infrastructure and Small and Medium Scale Enterprises (“SME”) development). National Bureau of Statistics (“NBS”) data indicates that GDP growth in 2017 rose by 0.8% year-on-year mainly as a result of a rebound in the oil sector. The increase was higher than the contraction of 1.6% year-on-year in 2016. Although one might point out that the oil sector makes up only around 10% of total GDP in Nigeria, it indirectly accounts for another 65% of the economy, according to the NBS. The oil sector grew by 8.4% year-on-year in the fourth quarter of 2017 from 25.9% in the preceding quarter, and a contraction of 17.7% in the fourth quarter of 2016. However, in the fourth quarter, the non-oil sector showed some signs of recovery after being depressed for most of the year. Specifically, the agriculture sector, which has been a subject of much attention over the last two years, appeared to have lost some momentum, having grown by an average 3.5% year-on-year in 2017 from 4.1% year-on-year in 2016. This perhaps suggests that gains from the increased focus on the sector will probably take some time given the slow implementation of structural reforms which are required to de-risk the sector while improving the ease of doing business in that sector. Growth in manufacturing sector continued to disappoint despite the improvement in availability of FX for the most parts of 2017. The sector returned to positive growth of 0.1% year-on-year in the fourth quarter of 2017 from a contraction of 2.9% in preceding quarter and 2.5% in the same quarter of 2016 while averaging a contraction of 0.2% in 2017. On the whole, the sector improved in 2017 compared to 2016 when it contracted by an average of 4.3% year-on-year. Both the construction and trade sectors continued to show moderate signs of improvement, with the trade sector still remaining in negative growth territory. In 2017, the construction sector grew by 1.0% year-on-year compared to a contraction of 5.9% year-on-year during the same period in 2016. Surprisingly, the trade sector actually performed worse in 2017 than it did in 2016. The sector delivered an average contraction of 1.0% year-on-year in 2017 compared to a contraction of 0.2% in 2016. This underperformance suggests that businesses still found it difficult to access credit, which counteracted the benefits of having access to more FX. Also of concern was the performance of the information and communications sector. The sector slipped into a recession for the first time in decades as lower disposable incomes resulted in a lagged negative impact on the sector’s share of the consumer’s wallet. The sector contracted by an average 1.0% year-on-year in 2017, compared to a growth of 1.9% yearon-year in the same period of 2016. Fiscal position Yet again, the authorities have prepared a 2018 budget that looks very much like those presented in 2017 and 2016, which both looked ambitious on the revenue side. The budgeted deficit, however, is expected to remain within the fiscal responsibility rule, below 3.0% of GDP. The proposed 2018 budget deficit remains broadly unchanged at around NGN2.1 trillion (1.6% of GDP) with around NGN306 billion being privatisation proceeds. Interestingly, authorities will attempt to split the funding balance of NGN1.7 trillion equally between domestic and foreign sources. The broadly unchanged net domestic funding proposal means that the yield curve should remain supported through most of 2018. Given that the 2018 budget proposal is anchored on an exchange rate of N305.00 it is unlikely that the CBN will choose to engineer a convergence of the different segments within the FX market. Oil production is projected to remain broadly unchanged at 2.3m bpd, while real GDP growth is forecast at 3.5% y/y. Furthermore, the oil price benchmark is proposed to remain broadly flat at USD47 per barrel. However, it would not be surprising if the National Assembly were to increase the benchmark rate given current global oil price realities. With a revenue target of NGN6.6 trillion, we remain concerned about the government’s ambitious revenue targets. While the authorities have outlined some planned revenue boosting reforms, including implementing the Voluntary Assets and Income Declaration Scheme (“VAIDS”) as well as increasing VAT on ‘luxury’ goods, it is still hard to believe that these would suffice to produce the 40% y/y jump between what we anticipate will be the actual non-oil revenue collected in 2017 and the target for 2018. NGN2.4 trillion is budgeted for oil revenues, while NGN4.2 trillion is expected to come from the non-oil sector. As such, meeting the NGN8.6 trillion expenditure target is at risk given revenue concerns. Assuming we are correct and the authorities miss their revenue targets, it is likely that the fiscal deficit could widen more than the planned 1.6% of GDP. Should there be a need to limit expenditure, infrastructure spending plans may need to be deferred. Proposed capital expenditure makes up around 28% of the total expenditure envelope, while debt servicing takes up another 23%. It is worthy to note that no provision has been made for petrol subsidies in the 2018 budget proposal. We anticipate that material changes will be incorporated in the final iteration of the 2018 budget. Specifically, we suspect lawmakers will attempt to increase the oil price benchmark, especially if international crude oil prices remain stuck in a USD65-70 per barrel handle. This could result in some implementation risks should oil prices decline later in 2018. Furthermore, given that the budget proposal has been presented slightly ahead of schedule, it may be approved earlier than usual, perhaps around the end of the first quarter. Finally, yield curve dynamics will continue being dictated by the central bank’s liquidity management stance, especially as supply of Naira-denominated government paper is unlikely to rise. That being said, external borrowing will rise, starting with a possible USD2.5 billion – USD4.0 billion Eurobond issuance during the course of the next 4 months. This will follow the issuance of two long tenured Eurobonds in November 2017, which resulted in authorities receiving USD3.0 billion from the proceeds. Exchange rate and interest rate dynamics The central bank maintained an effectively tight monetary policy stance for much of 2017 without adjusting the formal policy rate. We expect much of the same through the course of this year, albeit with an easing bias towards the end of the year. Indeed, the CBN has arguably already influenced yields lower by momentarily halting Open Market Operations (“OMO”) aimed at sterilising Naira in December 2017. The temporary halt in OMO issuances meant that the yield curve declined by up to 500 bps in some cases, and while the CBN has resumed those OMOs once more, they are now at much lower levels. The combination of a less hawkish central bank, lower domestic borrowing by the fiscal authorities and potentially lower headline inflation in 2018 should all mean a downward bias to interest rates, especially in the later parts of 2018. This slightly lower interest rate environment should then result in improved private sector credit extension and subsequently a rebound in import demand growth which should place some pressure on the currency, particularly within the investors-and-exportersforeign-exchange-window. Furthermore, the potential for some capital outflows as some foreign investors exit ahead of the 2019 elections could exacerbate the pressure on the exchange rate. However, FX reserves are in a much better shape than they were 12 months ago. At USD40 billion, and potentially rising towards USD45 billion by the second quarter, the CBN should be able to limit any disorderly depreciation of the currency. 25
  14. 26 Business review Stanbic IBTC Annual group financial statements for the year ended 31 December 2017 Overview Business review Annual report & financial statements Other information Financial review The group’s strong results for 2017 align with the improvement in the economic performance of Nigeria in 2017 which also reflects an improvement in global economic growth in 2017. The country officially pulled out of recession in 2017 after five consecutive quarters of negative economic growth. GDP year-on-year growth rate for the year was 0.8% from a contraction of 1.6% in 2016. Underpinning the economic growth for 2017 are improvements in crude oil prices which increased from $56.82 at the beginning of 2017 to $66.87 by year-end. Also contributing to the growth in revenue receipts from crude oil was a period of relative peace in the Niger-Delta region leading to minimal disruptions to oil production. The liberalisation of the FX market through the introduction of the Investors’ and Exporters’ Foreign Exchange (“IEFX”) window by the Central Bank of Nigeria led to an increase in foreign investors’ activities in the market which support foreign currency flows into the economy. The impressive performance reported for 2017 benefited from strong margins in our earning assets and an improvement in our overall trading activity. As a result, profit after tax for the year stood at N48.4 billion, a 70% improvement over prior year of N28.5 billion. Despite the growth in the economy and the gross earning of the institution, the performance of the group is not insulated against the economic realities of credit impairment and inflation both of which tapered the overall result of the group. Credit impairment increased by 29% to close at N25.6 billion from N19.8 billion last year while operating expenses had a growth of 25% due to inflation adjusted staff cost and growth in other business related operational costs. Operating environment The operating environment opened 2017 on a difficult note but the introduction of the IEFX window led to improved FX liquidity in the country thereby causing increased activities in various markets. The stock market returned 42.3% on the back of renewed investor confidence in 2017. High interest rate and yield in government securities also attracted foreign investor flows. Inflationary rate moderated and closed the year at 15.37% from 18.55% at the end of 2016. billion (>100%) to close the year at N43.2 billion. The strong growth was underlined by a sustained effort to create sustainable client focused franchise which saw an improvement in business transactions. This was also supported by strong yields on government securities and increased foreign currency flows in the market. The rebound in oil price, relative peace in the delta and consistent oil production helped in the revenue generation of the country as external reserves reached USD$38.77 billion in December 2017. The naira remained stable at N306.00 in the official market but appreciated against the dollar in the parallel market. At the Bureau de Change, the exchange rate closed at N362.00/$1 in December 2017 as against N485.45/$1 in December 2016. The wealth business continued to show business resilience and positive growth trajectory in its operation. The business grew Asset under Management (“AuM”) from N2.1 trillion in 2016 to N2.7 trillion in 2017 with N260 billion of the growth coming from increased contributions. The Pension business recorded an increase in the number of Retirement Savings Account (“RSA”) by over 87,000 accounts despite the increased competitive environment. Wealth business contribution to the overall profitability improved to N19.2 billion from N15.2 billion in 2016. Average Interbank rates remained neutral year-on-year to close at 8.56% in December 2017 from 8.50% in December 2016, although we witnessed significant spikes in the course of the year. The decline towards the end of the year was as a result of increased liquidity in the system in absence of CBN OMO interventions. Financial highlights for the year With the exception of Stanbic IBTC Ventures Limited (SIVL), all other subsidiaries of the group generated good results in the year. The banking subsidiary remained the most profitable subsidiary within the group closely followed by the Pension business. The banking subsidiary, which has Personal & Business Banking and Corporate & Transactional Banking (“CTB”) as its business segments, witnessed varied outcomes in the year. PBB made a loss after tax of N14.4 billion in the year largely due to the strategic but prudent decision to write-off some persistently delinquent facilities in the year leading to the growth in credit impairment. The business however showed strong and sustainable business fundamentals leading to growth in both net interest income and non-interest revenue. CTB on the other hand recorded a laudable performance with a PAT growth of N27.3 2017 also proved successful for the other business units. In particular the stockbrokerage business improved its market share to 16% and recorded a significant improvement in profit after tax. Supporting this enhanced results were the increased activity on the stock market and our ability to leverage on our brand to increase client presence. This effort ended up being recognised by Business Day which saw them bag the award as the Best Stockbroker/Investment Banking Firm for the second consecutive year in 2017. We also witnessed improvements in our Custody and Capital businesses. Custody assets grew by 93% to N5.6 trillion. We continue to own the largest custody business in the market. Our capital business also recorded an improvement in profitability from a loss of N935million to a profit of N1.7 billion. With the improvement in markets, we witnessed a number of clients accessing the market to either raise equity or debt. This led to an increase in transactional income for the organisation. 27
  15. 28 Business review Stanbic IBTC Annual group financial statements for the year ended 31 December 2017 Overview Business review Annual report & financial statements 29 Other information Financial review (continued) How we create value Looking ahead We offer trustee, pension and non-pension asset management services Other revenue Income from pension and non-pension asset management Expenses – We invest in developing and retaining our people to deliver on our strategy Staff costs Liquidity risk The economic statistics, together with their expected influence on the group’s performance in 2017 and 2018, assuming no management action, have been set out in the table below. The table below relates to the group’s operations in Nigeria. Key measurement metric = Dividend to our shareholders Net profit – = Tax to governments Retained equity which is reinvested to sustain and grow our business Impact of economic factor in 2017 Expected economic factor in 2018 Expected impact of economic factor in 2018 / / + + + – – + Interest rates + + – – Unemployment rates + – - + Credit loss ratio Crude oil prices + + + + Interest rates + – – + Growth in fee and commission revenue GDP growth / + + + Net interest margin Growth in trading revenue Growth in operating expenses Effective tax rate Growth in pension revenue Inflation (CPI) – + – + Market trading volumes + + + + Market price volatility + + + + Exchange rate + – / / Inflation (CPI) – / – / Corporate tax rate / / / / Equity market performance + + / / Unemployment rates + – – + Interest rates + + – – + = Increase in economic factor/positive impact on the group’s performance – = Decrease in economic factor/negative impact on the group’s performance Other operating costs Economic factor in 2017 GDP growth / = Neutral We invest in our operations, which include IT systems and business running costs Economic factors that impact metrics Interest rates Growth in loans and advances Business and reputational risk We earn income from investment properties and dividend income Trading revenue Business performance would be driven by our continuous focus on client centricity, capital management and interest margin management. With the IFRS 9 accounting standard now effective, we will continue to focus on capital management and its consequential impact on credit risks and product pricing. Impact of the economic environment on key financial ratios Operational risk, including compliance, environmental and/or social risk We offer equity, foreign exchange and commodity instrument to customers Net fees and commission revenue Investment risk We provide transactional banking facilities to our customers and clients Interest expense Interest rate risk We source for deposits from our customers and other banks Interest income and credit impairment charges Market risk Income after credit impairments We lend money to our customers, invest in government securities and money market instruments Principal risk arising from this activity Credit risk Income statement impact Credit risk Business activity We expect the improvement in the operating environment to continue in 2018. GDP is forecasted to grow by 2.5% while inflation is expected to fall to about 14%. Being a pre-election year, we do expect the government to be conservative with its economic policies. However, we expect that government capital investments would increase, thereby driving the overall economic growth in the country.
  16. 30 Business review Stanbic IBTC Annual group financial statements for the year ended 31 December 2017 Overview Business review Annual report & financial statements 31 Other information Financial review (continued) Growth in loans and advances Net interest margin Credit loss ratio Growth in non-interest revenue Loans and advances remain the biggest portion of total assets in the group’s balance sheet. This asset class provides revenue to the group in form of interest income, transaction fees charged as documentation and administration fees and opportunities for insurance related income. The group is focused on growing this asset class within the accepted risk levels. Net interest margin is the profit earned from interest on loans and advances and investments less interest paid on customer deposits and other funding sources. The movement in benchmark lending rates such as the prime lending rate in Nigeria impacts significantly on the net interest margin. The credit loss ratio is the credit impairment charge expressed as a percentage of the average group loans and advances balance. Credit impairment is the amount of loans and advances given to customers that is charged to income statement as provision for bad loans. This is the cost of risk incurred by the bank from the customers’ inability to repay their loans. The two major components of non-interest revenue are net fee and commission and trading revenue. The growth or decline in non-interest revenue is largely induced by changes in these two variables. The graph below shows the average prime lending rate and the group’s net interest margin. Gross Domestic Product (“GDP”) growth and interest rate have major impact on loan growth in the Nigerian economy as they impact customers’ ability to repay their loans. % % 17.8 8.0 The graph below shows GDP growth as it impacted loan growth 17.6% 7.0 Nbillion % 450.0 7.0 350.0 5.4 6.0 5.9 5.0 250.0 2.7 3.0 2.0 50.0 0 303.3 413.4 379.4 375.3 403.9 0.8 -50.0 -150.0 17.4 6.0 5.0 1.0 2013 2014 Gross loans and advances 2015 2016 2017 16.9% 16.7% $million 7.0 16.6 16.6% 16.4 4.9% 5.5% 4.7% 5.9% 6.9% 2013 2014 2015 2016 2017 16.2 120.00 108.70 16.8 3.0 2.0 % 99.50 6.0 100.00 5.0 80.00 4.0 16.0 0.0 54.75 53.60 Net interest margin Average prime lending rate -2.0 GDP growth The growth in economic indices coupled with increased support to clients in our preferred sectors resulted in the growth in risk asset. The change in FX translation rate following the multiple FX rate available in the country also contributed to the growth. The group will continue to monitor the economy in 2018 to harness emerging opportunities and also tighten its risk management process to improve the quality of loans. 2.0 40.00 45.10 20.00 1.0 The interest rate charged on loans and advances are mostly linked to the prime lending rate which serves as the benchmark rate for loans. Interest rate regime in 2017 had varied cycles. Government securities yields were high for the better part of the year but started tapering in Q4. Market remained quite liquid in the first half of the year partly due to the fact that offshore investors were unable to exit the country due to unavailability of FX. 60.00 3.0 0 -1.0 -1.5 17.0 16.9% 4.0 1.0 Credit loss ratio and average crude oil prices 17.2 4.0 150.0 17.6 The growth in credit impairment is occasioned by the strategic decision to write-off some facilities and also the need to increase the provision held for some facilities that moved to non-performing loan. This contributed to an increase in the bank’s credit loss ratio to 6.6% in 2017 (2016: 5.2%). 0.0 0.9% 0.8% 3.8% 5.2% 6.6% 2013 2014 2015 2016 2017 Credit loss ratio (%) Average crude oil price ($) 0 Growth in net fees and commission revenue This depends on growth in transaction volumes and activity across the service delivery channels, which are a function of economic activity. The Central Bank of Nigeria has however placed a ceiling on some fee lines which means that banks cannot charge above the amount stated by the central bank. Net fees and commission grew by 13% in 2017 on the back of growth in customers’ transactions as we continue to improve on our alternative banking channels. Growth in trading revenue The trading revenue is basically income from trading in foreign currency, fixed income securities and equities. This revenue source is dependent on trading volumes and volatility in the market which impact on the spread made by traders. With the liberalisation of the FX market through the introduction of IEFX window, there was a resurgence in market activities and trade flows. Trading revenue soared leading to a growth of 90% in 2017. Growth in operating expenses Inflation is a major economic factor that drives cost growth in the group. Headline inflation (year-on-year) receded marginally for the eleventh consecutive month to 15.4 percent in December 2017 and this contributed significantly to current cost growth. Growth in headcount, revised salary structure, growth in balance sheet size with the attendant growth in regulatory charges and increase in vendor payment due to currency depreciation all fuelled the growth in operating expenses. Operating expenses and average annual inflation rate Nmillion % 100,000 18.0 15.7% 90,000 16.5% 16.0 80,000 14.0 70,000 12.0 60,000 50,000 10.0 8.5% 8.1% 40,000 8.0 9.0% 6.0 30,000 4.0 20,000 10,000 57,948 57,901 62,066 69,041 86,026 0 2.0 0 2013 Operating expenses (N’m) 2014 Average inlation rate 2015 2016 2017
  17. 32 Business review Stanbic IBTC Annual group financial statements for the year ended 31 December 2017 Overview Business review Annual report & financial statements Other information Financial review (continued) Net interest income Effective tax rate Nigeria’s corporate tax rate remained unchanged throughout 2017, although the government had an increased focus on tax collection. This is not expected to change in 2018 given the revenue drive of both state and federal governments. under management which in turn increases the net asset value of the funds. The revenue from the pension and non-pension asset management business is usually a percentage of the net assets value of the funds. Growth in revenue from pension and non-pension assets The level of unemployment also affects the revenue from pension business. A decline in unemployment rate means that more people are getting employed and pension contributions will increase thereby resulting in increased assets under management, while an increase in unemployment rate will have an adverse effect on the revenue of the pension business. The growth in revenue from managing pension and non-pension assets is dependent on equity market performance, money market interest rates and yields on government securities. Growth in equity market performance results in higher investment income on assets Analysis of the Group’s financial performance Income statement analysis The statement of profit or loss reflects the revenue earned by the business and costs incurred in generating the revenue for the year end 2017. The profit for the year grew significantly year-on-year by 70%. Below are explanations for significant movements recorded in the year. Interest income growth was mainly driven by growth in the volume and yield of government securities coupled with marginal growth in risk asset. The increase in interest expense can be attributed to growth in customer deposit mostly from fixed deposit which grew by 60%. In CIB, net interest income was up 98% on the back of a growth in interest income driven by increased yield on financial instruments. Interest expense increased by 30% as the business grew customer deposits. In PBB, net interest income grew by 4%. The business witnessed an increase in interest income of 10% due to a dip in loans and advances to customers on account of loan write-offs and NPL of 11.4%. Interest expense also increased by a margin of 27% due to increased focus on liability generation, which is evident by the growth in customer’s deposits. The impact of the above was cushioned by growth in funding benefits of 72%. Change % 2017 Nmillion Nmillion Nmillion Gross earnings 36 212,434 156,425 100,000 Net interest income 44 83,587 57,859 Interest income 41 122,911 87,467 Summarised income statement – Group 2016 Interest expense 33 (39,324) (29,608) Non-interest revenue 31 89,182 68,194 Net fees and commission revenue 13 59,089 52,154 Fees and commission revenue 12 Fees and commission expense 59,430 Non-interest revenue Net interest income increased year-on-year by 44%. Interest income and interest expense increased year-on-year by 41% and 33%, respectively. 52,918 (55) (341) (764) Trading revenue 90 29,148 15,326 Other revenue 32 945 714 % 8.0 6.9% 80,000 5.9% 6.0 5.5% 4.9% 60,000 4.5% 4.8% 5.1% 4.7% 40,000 3.6% 4.0 3.9% 2.0 20,000 37,013 46,658 43,860 57,859 83,587 2013 2014 2015 2016 2017 0 Total income 37 172,769 126,053 Credit impairment charges 29 (25,577) (19,803) Income after credit impairment charges 39 147,192 106,250 Operating expenses 25 (86,026) (69,041) Staff costs 20 (36,282) (30,173) Other operating expenses 28 (49,744) (38,868) Profit before taxation 64 61,166 37,209 Direct taxation 47 (12,785) (8,689) Profit for the period 70 48,381 28,520 (44) 2,186 3,878 Equity holders of the parent 87 46,195 24,642 Profit for the period 70 48,381 28,520 Profit attributable to: Non-controlling interests 0.0 Net interest income Net interest margin before impairment charges Net interest margin after impairment charges Non-interest revenue comprises mainly fee and commission and trading revenue. Fee and commission revenue is dependent on transactional banking volumes and asset under management, which are a function of economic activity and of the competitive environment for banking services. Non-interest revenue increased by 31% on the back of a 13% growth in net fees and commission, 90% increase in trading revenue and 32% increase in other revenue. Growth in fee and commission was on the back of increased asset management fees from the wealth business, growth in stockbroking and non-pension custody fees, foreign services transactions and corporate finance fees. PBB business witnessed a decline of 12% in net fee and commission income. The reduction in the volume of foreign transaction on card products due to the restriction of foreign transaction to only the bank’s USD debit card on account of FX shortage contributed significantly to the decline in PBB’s fee income. The impact of this was however cushioned by increased customer transactional activities which generated increased electronic channel fees and current account maintenance fees. CIB recorded a 20% growth in net fees and commissions revenue. This impressive growth can be attributed to growth in non-pension custody fees on account of growth in asset under custody from N2.9 trillion at the beginning of the year to close at N5.6 trillion, increase in trade and transactional fees, rebound in stock market leading to increased trades thus increase in stockbroking fees and growth in corporate finance related deals and fee income. Trading revenue growth of 90% is premised on liberalisation of the FX market through the introduction of the IEFX window, growth in trade business due to the availability of FX and futures and forward related transactions. 33
  18. 34 Business review Stanbic IBTC Annual group financial statements for the year ended 31 December 2017 Overview Business review Annual report & financial statements 35 Other information Financial review (continued) Wealth business continues to be the trail blazer with a growth of N6.7 billion (24%) above previous year. The growth can be attributed to the increase in asset under management of 31% as well as higher average return on investment. Nmillion % 100,000 100 90,000 90 80,000 80 70 70,000 60,000 57% 50,000 56% 55% 52% 40,000 40 30,000 30 20,000 20 10,000 48,219 57,987 56,788 68,194 89,182 0 10 0 2013 2014 2015 2016 PBB’s credit impairment charge increased to N15 billion during the year from N9.5 billion in 2016. The growth in credit provisions on personal lending was mainly due to strategic decision to take a one-time write-off of some restructured facilities that are further showing distress signs. This led to the reduction in customer loan book of PBB and will improve the quality of loans in the books. Credit loss ratio for PBB business stood at 9.9% as against a ratio of 6.0% in previous year. Nmillion % 30,000 8.5 PBB business had a cost growth of 21% driven by 11% increase in staff cost and 30% in other operating costs. The cost growth is on account of headcount growth, increase in salaries, maintenance and upgrade of existing infrastructures and marketing cost. Wealth’s operating expenses recorded a growth of 24% driven by growth in staff cost of 32% and other operating costs of 18%. Cost to income ratio remained flat at 31%, same as prior year. Inflation adjustment to staff salaries accounted for growth in staff cost. The major contributor to growth in other operating expense is the provision made for the newly introduced Pension Fund Protection Levy. Breakdown of operating expenses 6.6% 15,000 3.8% 12,009 15,925 4.5 2.5 Percentage of NIR to total income 5,000 0 6.5 5.2% 20,000 2017 Corporate & Investment Banking 46% 0.9% 1,922 745 3,502 2,922 3,878 0.5 0.8% -5,000 -1.5 2013 2014 2015 2016 2017 Credit impairment charge on non-performing loans 36,282 30,173 Other operating expenses: 28 49,744 38,868 Information technology 26 5,984 4,751 Communication expenses 31 1,205 921 Premises and maintenance 12 4,517 4,023 Depreciation expense (2) 4,129 4,204 Amortisation of intangible assets 39 46 33 4 2,482 2,382 AMCON expenses 12 5,034 4,504 Other insurance premium 33 858 647 10 340 310 (39) 19 31 Non-audit service fee Professional fees 13 850 755 76 3,711 2,103 Training expenses 57 1,139 726 Security expenses 24 1,484 1,195 Travel and entertainment 39 1,773 1,280 Although the group continued its tight hold on cost, total operating expenses still grew by 25% year-on-year as the group had to invest in both human and material resources to drive the growth in total revenue that has epitomised this financial year. Stationery and printing 35 1,182 874 5 2,982 2,853 Pension administration expense (36) 215 336 Penalties and fines (46) 38 70 The group uses the inflation and cost to income as the benchmark to measure its performance on cost management. While the group’s cost growth trended ahead of average inflation rate of 16.5%, it managed to improve cost to income ratio to 49.8% from 54.8% in 2016. Donations >100 437 122 (90) 25 248 20 401 334 Operating expenses CIB’s credit impairment grew marginally by 3% to N10.6 billion in 2017 from N10.3 billion in 2016. The impairment charge for the year is coming mainly from provisions made on three clients two of which are in the oil and gas sector and the third a telecom company. A combination of low crude oil price, restiveness in the Niger-Delta region and management issues are responsible for the 20 Staff costs Administration and membership fees Credit loss ratio Credit impairment charges increased by 29% to N25.6 billion during the year owing to the strategic decision to write-off certain loans from the books of the bank, resulting in the credit loss ratio for the year worsening to 6.6% compared to prior year of 5.2%. The growth in provisions is mainly from the non-performing loan book where the write-offs were recorded and additional provisions made for new and existing non-performing loans. Nmillion Auditors renumeration Credit impairment charge on performing loans Credit impairment charges 2016 Nmillion Deposit insurance premium (254) (285) Personal & Business Banking 15% Wealth 39% 2017 Change % 25,831 25,000 10,000 Non-interest revenue Growth in IT cost and provisions for litigation and tax liabilities are part of the growth items in other operating expenses. 60 50 54% current state of these facilities. CIB’s credit loss ratio for the year stood at 4.4% as against 4.7% in 2016. Growth in staff cost (20%) accounted for over 35% of the increase in total operating expenses. The growth can be adduced to an increase in staff numbers and inflation adjusted salary increase. Other operating expenses grew by 28% due to increase in deposit insurance and AMCON sinking fund contribution expenses, information technology expenses and provisions raised. CIB’s operating expenses increased by 31%, while cost to income ratio improved to 33.2% from the 45.4% reported in prior year. The cost to income ratio improved on the back of a higher growth in revenues (80%) as compared to the cost growth reported. Marketing and advertising Operational losses Directors fees Provision for legal costs, levies and fines 79 3,538 1,978 Impairment of other financial assets >100 3,068 914 Bank Charges >100 764 280 3 1,496 1,458 89 828 437 Motor vehicle maintenance expense Indirect tax (VAT) Others Total operating expenses 9 1,199 1,099 25 86,026 69,041
  19. 36 Business review Stanbic IBTC Annual group financial statements for the year ended 31 December 2017 Overview Business review Annual report & financial statements Other information Financial review (continued) Balance sheet analysis Cash and cash equivalents The statement of financial position shows the position of the group’s assets, liabilities and equity at 31 December 2017. The growth in this balance sheet line of 33% (N100 billion) can be adduced to the increase in cash balances held in offshore correspondent banks (Nostro balances) and growth in cash reserve requirement (“CRR”) balance above the regulatory limit of 22.5% owing to the non-refund of excess CRR by the Central Bank. The group’s balance sheet size increased by 32% to close at N1.39 trillion from N1.05 trillion at the end of 2016. Significant movements over the year are discussed below. Change % 2017 2016 Nmillion Nmillion Trading assets Assets Cash and cash equivalents Pledged assets Trading assets Derivative assets Financial investments Assets held for sale Loans and advances Loans and advances to banks Loans and advances to customers 33 401,348 301,351 53 43,240 28,303 >100 151,479 16,855 Trading asset growth was on account of position held in treasury bills part of which constituted hedging strategy for local currency (“LCY”) interest rate risk on FX swaps. (23) 11,052 14,317 Financial investments 25 316,641 252,823 2 114 112 4 381,711 368,229 (37) 9,623 15,264 Financial investments provided a veritable alternative investment outlet to risk assets in the course of the year due to the attractive yields. The growth of 25.2% witnessed in financial investment is to take advantage of the attractive yields on this asset class in the absence of significant growth in customer loans and advances 5 372,088 352,965 Other assets 26 49,442 39,220 Loans and advances Property and equipment (5) 21,883 22,962 (15) 605 713 3 8,901 8,638 32 1,386,416 1,053,523 Total net loans and advances increased by 4% to N381.7 billion (2016: N368.2 billion), with customer loans and advances accounting for the entire growth with a balance of N372.1 billion compared to prior year of N353 billion. Loans and advances to banks declined by 37% to N9.6 billion (2016: N15.3 billion). Intangible assets Deferred tax assets Total assets Equity and liabilities Equity 32 185,218 140,798 Equity attributable to ordinary shareholders 33 182,060 137,102 Ordinary share capital 0 5,025 5,000 Ordinary share premium 2 66,945 65,450 Reserves Non-controlling interest Liabilities Trading liabilities Derivative liabilities Deposit and current accounts 65 110,090 66,652 (15) 3,158 3,696 32 1,201,198 912,725 >100 62,449 5,325 (78) 2,592 11,788 33 815,363 614,735 Deposits from banks 15 61,721 53,766 Deposits from customers 34 753,642 560,969 (22) 74,892 96,037 4 29,046 27,964 29 12,240 9,508 Other borrowings Subordinated debt Current tax liabilities Deferred tax liabilities >100 120 47 Provisions 23 12,979 10,581 Other liabilities 40 191,517 136,740 Total equity and liabilities 32 1,386,416 1,053,523 The bank maintained a cautious approach to loan book growth as the economy gradually recovers from recession and with focus on identified growth segments of the economy. In CIB, customer loan balance grew by 10% and this can be attributed to increases in both overdraft facilities and term loans. The bulk of the growth witnessed in term loan is coming from the foreign currency book on account of new facilities booked and change in exchange rate for foreign currency translation. In PBB, customer loan balances declined by 1%. This was largely driven by the strategic decision to write-off some restructured facilities that were showing further stress signs. The business also continued the strategy to cut down lending on some product lines such as on instalment sales and finance leases. The Central Bank’s approval was sought for the full write-off of these facilities by way of an extension of the approval granted last year for loan write-off. Deposit and current accounts Deposit and current accounts grew by 33% from a prior year close of N614.7 billion to N815.4 billion in 2017. The major contributor to this growth is increase in customer deposits of over N192 billion. Customer deposits grew by 34% to close at N753.6 billion at the end of 2017 (2016: N561 billion). The growth in customer deposits was driven by a strategy targeted at acquiring customers with regular income flow, banking the customers’ ecosystem and improving our service delivery across all channels. The group’s deposit mix of current-and-savings deposits to total deposits deteriorated to 49% from 57% in 2016 due to the need to raise tenured funds to match some assets on the book. In CIB, customer deposit increased by 53% due to the deliberate effort to grow term deposits to fund some risk assets and also to support the balance sheet owing to the discretionary deductions made by the Central Bank for investments in special treasury bills. In PBB, customer deposits grew by 24%, with current-andsavings-accounts (“CASA”) growing by 29%, reaffirming the continued strategy to grow CASA volumes. The ratio of CASA as a proportion of customer deposits improved to 67% from 64% in 2016. The business continued its focus on growing retail deposits during the year with particular focus on banking the customers’ ecosystem. 37
  20. 38 Business review Stanbic IBTC Annual group financial statements for the year ended 31 December 2017 Overview Business review Annual report & financial statements Other information Executive committee Yinka Sanni Demola Sogunle Wole Adeniyi Babatunde Macaulay M’fon Akpan Rotimi Adojutelegan Gboyega Dada Chief Executive, Stanbic IBTC Holdings PLC Chief Executive, Stanbic IBTC Bank PLC Executive Director, Business support, Stanbic IBTC Bank PLC Executive Director, Personal & Business Banking, Stanbic IBTC Bank PLC Head, Risk, Stanbic IBTC Bank PLC Chief Compliance Officer, Stanbic IBTC Bank PLC Chief Information Officer Andrew Mashanda Eric Fajemisin Victor Yeboah-Manu Olufunke Amobi Malcom Irabor Kola Lawal Nkiru Olumide-Ojo Executive Director, Corporate & Transactional Banking, Stanbic IBTC Bank PLC Chief Executive, Stanbic IBTC Pension Managers Limited Chief Financial Officer Head, Human Capital Head, Legal Services, Stanbic IBTC Bank PLC Head, Corporate & Investment Banking Credit Head, Marketing & Communications Angela Omo-Dare Benjamin Ahulu Dele Kuti Country Head, Legal Services, Stanbic IBTC Holdings PLC Head, Internal Audit, Stanbic IBTC Bank PLC Global Sector Head – Oil & Gas Client Coverage Sam Ocheho Chidi Okezie Oluwatosin Odutayo Taiwo Ala Head, Global Markets, Stanbic IBTC Bank PLC Company Secretary Ag. Head of Finance, Stanbic IBTC Bank PLC Head, Internal Control 39
  21. 40 Business review Stanbic IBTC Annual group financial statements for the year ended 31 December 2017 Overview Business review Annual report & financial statements Other information Personal and Business Banking Personal and Business Banking (“PBB”) is the retail arm of the Stanbic IBTC Holdings PLC, which offers banking and other financial services to individual customers and businesses, by providing bespoke products to meet the varied needs of retail customers. Our bouquet of offerings ranges from the most basic to the most sophisticated of financial services, and we ensure that our customers’ requirements are always met through the most cost effective and convenient method. PBB is split into two segments, namely Business Banking and Personal Banking. The Business Banking segment comprises small and medium enterprises (“SMEs”) and commercial banking customers (midcorporates), while the Personal Banking comprises individual customers, including workplace banking, private banking and High Net Worth individuals. Despite the challenging macro-economic environment in 2017, the key drivers of the business continued to progress positively. Total customer deposits increased by N83.4 billion (24%) in the year driven majorly by current-and-savings-account (“CASA”), which grew by N66.1 billion in the year. The business experienced an increase in total customer base to 1,747,784 as at December 2017, compared to 1,421,115 as at December 2016. The business also continues to acquire customers in the focus segment. A total of 260,701 new customers were acquired in 2017 across all segments within PBB. The 2017 full year sales figure represents an improvement of 6% and 81% compared to 2016 & 2015, respectively. These new customers added N32.7 billion in CASA deposits and resulted in an improvement in cost of funds to 2.9% from 4.0% in prior year. We have seen consistent growth across all our digital banking platforms. The growth recorded in 2017 represents 165% increase year-on-year across all digital banking channels. Total downloads on the Stanbic IBTC Mobile Banking App as at December 2017 represents 545% yearto-date growth on downloads compared to December 2016 across Android, Apple, Windows and Blackberry devices. We continue to make significant investments in digital channels to increase our digital engagements with customers and also deliver enhanced customer experience. Our overall distribution channel strategy strives to align with customer preferences and facilitate efficient service delivery. PBB has also made progress in the customer experience journey and improving customer satisfaction. The progress is manifest in the 2017 KPMG Banking Industry Customer Satisfaction Survey (“BICSS”). Retail banking moved from 4th in 2016 to 3rd position in 2017 and SME Banking moved from 13th in 2015 to 8th position in 2017. Our Africa-China Banking Center has been set-up and is geared for launch. The center is aimed at providing bespoke solutions and addressing the needs of business communities in both Nigeria and China. This would drive better engagement with our clients and improve trade relations between both countries. We thank all our customers for their support in 2017 and look forward to 41
  22. 42 Business review Stanbic IBTC Annual group financial statements for the year ended 31 December 2017 Overview Business review Annual report & financial statements Other information Case study Ulysses Nigeria Limited Relationship with Stanbic IBTC The Business Ulysses Nigeria Limited was incorporated in October 1987. The company is a distinguished player in the manufacture of household and cosmetic products. The establishment of the company was hinged on the increased demand for indigenous household and personal care products which would match international standard. The company’s mission is to provide high quality products which would positively impact people every day. The company operates with a sense of responsibility towards its valued customers, distributors, regulatory bodies and more importantly towards its environment. The company’s vision statement is to design, manufacture and deliver top of the range products that meet the unique need and expectation of each customer through innovation, commitment and value addition. Ulysses Nigeria Limited’s major brands include Sunshine bleach, Sunshine UltraMarine Blue, Sunshine Air Freshener and Blue diamond bleach. The company also produces a vast brand of body lotions such as Soft and Sensual, Silver Line and Glorious Flowers. These products are available across the country. Ulysses Nigeria Limited commenced banking relationship with Stanbic IBTC in March 2016. In March 2017, the Bank approved a Letter of Credit Confirmation Line which has been active till date. Business development and future prospects The company has operated its account and facilities in a proper manner. All obligations are always met on or before due date without request for extensions. The company’s relationship with Stanbic IBTC has experienced significant growth over the past few years. The Bank’s market share of the company has increased to 60% from 20% in the previous year. The company has a staff strength of 308 and all its staff have salary accounts with Stanbic IBTC Bank PLC. Company Offices and Outlets The company’s head office/factory is located at 227, Apapa Road, Iganmu Industrial Estate. Ulysses Nigeria Limited aims to commence the expansion of its factory located around the Otta axis in Ogun State. The proposed factory would be well-equipped and would be able to meet capacity and production in the coming years. With the expansion of the factory, it is expected that production will increase further, meeting the demand of the company’s clients within and outside Nigeria. The company currently has distributors across the nation with a clientele base within the ECOWAS community. In 2018, the company has projected to grow its revenue by 40%. 43
  23. 44 Business review Stanbic IBTC Annual group financial statements for the year ended 31 December 2017 Overview Business review Annual report & financial statements Other information Case study Natural Prime Resources Nigeria Ltd. The Business Relationship with Stanbic IBTC Natural Prime Resources Nigeria Limited (“NPRNL”) was incorporated on 19 August 2010 and commenced full operations in January 2014. The company is one of the viable manufacturers in the soap and detergent industry in the country. Natural Prime Resources Nigeria Limited commenced banking relationship with Stanbic IBTC in January 2016. In February 2017, the Bank approved a Letter of Credit Confirmation Line and eventually increased the limit by over 100% as at September 2017. The company’s mission is to meet the needs of washing powder users with high quality detergents at affordable prices, hence rooting to become the number one detergent manufacturer in Nigeria. The company’s flagship brand, “So Klin” has become one of the leading brands in the market. The brand is one of the pioneering brands of sachets in the industry. The company’s strong brand name, large market share, broad product range and extensive distribution network as well as its experience and track record in the marketing of fast moving consumer products, are sources of strength and growth to the company. Natural Prime Resources also produces the “Boom” brand of detergent which is fast gaining market share. The company usually sells its finished products locally, however in the last few years, the company has been able to tap into opportunities for exports to other African countries. The company’s sole distributor in Nigeria is Euro Mega Atlantic Limited (“Euro Mega”). Euro Mega channels the products through its network of over 500 sub-distributors located nationwide. Natural Prime Resources’ 2016 Financial Year End (“FYE”) turnover was N26.56 billion which grew to N40 billion as of 2017 FYE. The company is aiming for a 15% increase in 2018. The company has operated its account and facilities in a proper manner. All obligations are always met on or before due date without request for extensions. Our wallet share of the business has grown from zero to about 15% in 2017. The company has a staff strength of 853 of which 32% have opened salary accounts with Stanbic IBTC. We intend to pre-enlist the staff for workplace banking products such as unsecured personal loans, credit cards and Vehicle and Asset Finance facilities. The client’s sole distributor has an account with Stanbic IBTC and has been profiled on our digital channels platforms. We have also opened accounts for 15 of the company’s sub-distributors and also created a loyalty scheme for them. In 2018, we project to on-board at least 50% of these distributors. Prior to 2017, the relationship with NPRNL was fairly inactive but we have since grown our wallet share of the business and the plan is to grow to a significant level in 2018. Business Location The company’s factory is located at Block V, Plot 9,10 Industrial 1, Opic Estate Igbesa Agbara, Ogun State while its administrative office is at 3 Magbon Close, Ikoyi. Business development and future prospects In 2018, NPRNL’s plan is to grow its export business to other African countries. The company began exportation about 2 years ago and the volume increased in 2017. The company plans to expand this part of the business so that it contributes significantly to the overall revenue of the company. The So Klin brand is well established in the Nigerian market. The AC Nielsen Report for Q3 2017 places So Klin as number one in the detergent market with 24% market share. The brand’s leadership position is due to the quality of its products as well as marketing and distribution strategies. In 2018, the company plans to increase turnover by 15% by deepening market share locally and also increasing volume of exports. 45
  24. 46 Business review Stanbic IBTC Annual group financial statements for the year ended 31 December 2017 Overview Business review Annual report & financial statements Other information Corporate and Investment Banking Introduction The Corporate and Investment Banking (“CIB”) business continues to make great strides in Nigeria’s challenging and complex economic, capital markets and regulatory environment in pursuit of its goal of being the clear leader in corporate and investment banking in Nigeria. The business leverages Standard Bank’s heritage with presence in twenty African countries and major financial centers around the world, in delivering the end-to-end financial service solutions to our clients. CIB comprises four business units: Client Coverage, Global Markets, Investment Banking and Transactional Products and Services with greater focus on delivering a superior client experience through our Universal Financial Services Organisation for a deeper products penetration across CIB, PBB and Wealth into our clients’ ecosystem. The challenging macroeconomic and business environment, which negatively impacted deal making in 2016 continued in the first quarter of the year. Severe FX liquidity challenges, rising interest rates and high inflation triggered the suspension of expansion and capital raising plans of our clients. The rest of the year was characterised by recovery and favourable market conditions. Increased economic activity was supported by improved oil production and prices, stability in the FX market, better access to liquidity and declining inflation. These factors positively impacted our investment banking business and translated into strong financial performance in 2017. Departmental highlights Client Coverage The client engagement model is central to everything we do in CIB. Client Coverage team focuses on understanding the needs and strategic goals of our clients in order to deliver the end-to-end financial service solutions across products and markets. The team, structured by sector, provides a single point of contact for our clients within the group. Drawing on our sector expertise and experience, the team members work closely with clients and product specialists across the group to create customised solutions for our clients. Stanbic IBTC Capital Limited (“SICL”) Stanbic IBTC Capital is the leading investment banking firm in Nigeria. The firm provides corporate finance and debt advisory services to a diversified client base that includes corporate and government entities within and outside Nigeria. It helps clients raise capital to strengthen and grow their businesses and also provides financial and strategic advisory services. SICL is registered with the Securities & Exchange Commission as an Issuing House and Underwriter. The corporate finance solutions SICL provides include: private and public equity capital raises (initial public offers, rights issues), mergers and acquisitions, corporate restructuring, bonds, commercial papers, and ratings advisory. The debt advisory solutions include debt arranging, optimal capital structure advisory across energy and infrastructure, real estate and diversified industrials sectors. SICL 2017 highlights In 2017, SICL continued to remain a leading investment banking firm in Nigeria. Our position as the leading investment bank in Nigeria was confirmed by continued flow of business, market-wide acknowledgement and the industry awards received. SICL 2017 Awards •Best Foreign Investment Bank and Best Debt House (EMEA Finance African Banking Awards) •Issuing House of the Year (Pearl Awards) •Best FMDQ Registration Member, Quotations (FMDQ Debt Capital Market Awards) •Euromoney Real Estate Survey Award in Nigeria as well as overall best real estate loan financing, real estate equity financing, real estate debt capital markets, and real estate mergers and acquisitions advisory firm. Notable transactions for the year •Sole issuing house: Unilever Nigeria Plc’s N58.9 billion rights issue. •Sole issuing house: Guinness Nigeria Plc’s N39.7 billion rights issue. •Lead issuing house and bookrunner: Dufil Prima Foods Plc’s N10.0 billion debut bond issuance •Financial Advisor and overall transaction coordinator: Merger of AB InBev’s Nigerian brewery subsidiaries – International Breweries Plc, Intafact Beverages Limited, and Pabod Breweries Limited. •Sole mandated arranger: N6.0 billion Medium Term Facility for Kellogg Tolaram Nigeria Limited to finance the construction of Nigeria’s first cereal manufacturing plant. •Mandated lead arranger: Dual currency financing of Novare Gateway Mall, Abuja (US$8.4 million & N3.3 billion). 47
  25. 48 Business review Stanbic IBTC Annual group financial statements for the year ended 31 December 2017 Corporate and Investment Banking (continued) Global Markets The Global Markets business comprises sales and trading teams with specialisations in fixed income, foreign exchange, money markets and structuring of a wide range of financial hedging solutions. The business had an outstanding year in 2017 with its world-class trading, sales and research teams remaining leaders in their respective fields. 2017 Awards • Number 1 Trading house for full year 2017 in value traded overall in the overthe-counter (“OTC”) market as reported by the FMDQ OTC Securities Exchange. •Number 1 Trading house for FX, FX Derivatives and Unsecured Placements as reported by the FMDQ OTC Securities Exchange. •Our Research Team won the Top Analyst Ranking 2017 (Financial Mail), Best Research House for Sub Saharan Africa (Financial Mail) as well as Spire Awards Best Research House 2017. Stanbic IBTC Stockbrokers Limited (“SISL”) Stanbic IBTC Stockbrokers Limited, a market leading firm, provides stockbroking services to local and foreign investors in the Nigerian Capital Market. SISL is Nigeria’s largest stockbroking firm in terms of transaction value - a position that has been held since 2006 (2017 current market share of 18%). 2017 Awards • Received the 2017 NSE (The Nigerian Stock Exchange) CEO award for the sixth consecutive year as the best dealing member firm. •Awarded Business Day Banking Award 2017 for Best Stockbroker/ Investment Banking Firm for the second consecutive year. Notable transactions for the year During the course of the year, SISL played a critical role in the successful execution of leading equity capital markets deals. Most notable of these are: •Stockbroker to Guinness Nigeria Plc’s N39.7 billion (US$110 million) Rights Issue. •Stockbroker to Unilever Nigeria Plc’s N58.9 billion (US$163 million) Rights issue. •Stockbroker to UAC Nigeria’s N15.4 billion (US$42 million) Rights Issue. •Stockbroker to Union Bank’s N50 billion (US$138 million) Rights issue. •Stockbroker to International Breweries Plc in its merger with Intafact Beverages Limited and Pabod Breweries Limited (AB InBev’s subsidiaries in Nigeria). Transactional Products and Services (“TPS”) Transactional Products and Services provides standardised and tailored transactional products and services, including trade finance, working capital and cash management solutions. The team offers a full range of solutions to deliver specific payments, collections and liquidity management capabilities. TPS’ wealth of experience ensures products are designed to meet our clients’ specific business needs. Our online channel capabilities continue to evolve to meet our clients’ complex and changing requirements. Despite the very challenging business environment, the Transactional Products and Services business remained focused on its key business drivers and competitive advantage to deliver a strong performance in 2017. Revenues grew by 61.8%, deposits by 6.6% and channel utilisation by 53.2%. All three product Overview Business review Annual report & financial statements Case study lines within the TPS business namely Cash Management, Trade Finance and Custodial Services recorded positive trends driven largely by new client acquisition, clientcentric product offerings and channel commercialisation. Stanbic IBTC Nominees Limited (“SINL”) Stanbic IBTC Nominees Limited provides custodial services to both local and international clients and investors, namely fund managers, asset managers, global custodians, international broker dealers, stockbrokers, retirement benefit schemes and other institutional investors wishing to invest in the Nigerian market. SINL is currently the largest custodian in the Nigerian market with approximately 80% market share of all foreign institutional portfolios investing in the Nigerian market. SINL continued to hold its leading position in the custody of non-pension assets and, in testament to this, executed the first Securities lending transaction in Nigeria. Kellogg Tolaram Nigeria Limited Financing the Construction of a N6billion Cereal Manufacturing Plant In April 2017, Stanbic IBTC Capital Limited and Stanbic IBTC Bank Plc provided Kellogg Tolaram Nigeria Limited (“KTNL”) with a N6 billion medium term facility to finance the construction of a new cereal manufacturing plant at the Lagos Free Trade Zone located in Lekki. KTNL is the result of a joint venture between Kellogg Company USA (“Kellogg”) and Tolaram Group, Singapore (“Tolaram”) which was set up to locally manufacture cereals and snacks in Nigeria and will serve as the sourcing hub for West African markets. Kellogg is the world’s leading manufacturer and marketer of ready-to-eat cereal and convenience foods, while Tolaram is one of the largest food companies in Nigeria with a solid track record of building strong consumer brands like Indomie instant noodles. The establishment of the new cereal manufacturing factory is an important milestone for the company as it creates a platform for the popular Kellogg’s breakfast cereal brands to be manufactured locally with world class quality and enjoyed by the Nigerian consumers. The factory, which has a production capacity of about 10,000 metric tonnes of cereal per annum, was commissioned in December 2017 and has commenced operations from January 2018. The investment will go a long way in preserving precious foreign exchange while generating employment and development opportunities for the local workforce. The transaction enhances Kellogg Tolaram’s status as a key player in the Nigerian cereal industry and also provides the company with the opportunity to ultimately become a dominant local cereal manufacturer in West Africa, whilst increasing its current market share. The transaction demonstrates the support that the Stanbic IBTC Group provides towards driving growth and investment in Nigeria. It also coincidentally aligns with the Federal Government’s drive to support local industries in a bid to strengthen the local currency. With over 2,000 direct and indirect jobs created, a source of livelihood is created for many Nigerians. Other information 49
  26. 50 Business review Stanbic IBTC Annual group financial statements for the year ended 31 December 2017 Case study Anheuser-Busch InBev Consolidation of Brewery Operations in Nigeria via Merger and US $50 million Debt Financing for Capital Expansion 1.Overall transaction adviser and financial adviser to Intafact Beverages Limited and Pabod Breweries Limited; 2.Stockbrokers to International Breweries Plc; and 3.Sole lender to International Breweries Plc and Intafact Beverages Limited Anheuser-Busch InBev SA/NV (AB InBev) is the largest brewer and multinational beverage group in the world. Following AB InBev’s acquisition of SABMiller Plc in 2016, International Breweries Plc, Intafact Beverages Limited and Pabod Breweries Limited (the merging companies) became indirect subsidiaries of AB InBev. The core business of the merging companies is the production and distribution of alcoholic and non-alcoholic beverages in Nigeria. The intention of the merger was to jointly create a market leadership position and to maximise value for stakeholders. International Breweries, the only listed company among the three merging companies, is on The Nigerian Stock Exchange and has become the top six listed company by market capitalisation, up from number 15. The value of the consideration to shareholders of Intafact Beverages and Pabod Breweries, in the form of International Breweries shares, was US$ 950 million / N291 billion. This merger has reshaped the competitive landscape for the Nigerian beverage sector. It has created the second largest beer brewer in Nigeria with a combined installed capacity of 5.65 million hectolitres. The merger is expected to lead to administrative efficiencies, cost reduction and operational synergies which will be beneficial to shareholders of the enlarged entity. It also positions the enlarged company for success in a difficult competitive market. Tough macroeconomic conditions in 2016 and 2017 created significant challenges for FMCG companies in Nigeria. Consumer purchasing power declined on account of high inflation and unemployment. Input and production costs increased because of challenges and increased cost of sourcing FX to buy raw materials. Stanbic IBTC Capital Limited advised two of AB InBev’s subsidiaries (Intafact Beverages Limited and Pabod Breweries Limited) on their merger with International Breweries Plc. Stanbic IBTC Stockbrokers Limited were stockbrokers to International Breweries Plc. As overall transaction adviser to the merger, Stanbic IBTC Capital Limited supported AB InBev and the merging entities on key deal parameters and considerations, including transaction structuring, regulatory approvals, shareholder engagement, valuation and share exchange ratio, and project management. In a separate transaction, Stanbic IBTC Capital Limited and Standard Bank of South Africa supported AB InBev’s long term investment plans for Nigeria by structuring and arranging US$50 million debt financing to fund AB InBev’s capital expansion and working capital requirements. AB InBev’s announced plans for Nigeria include the construction of a US$250 million brewery in Sagamu, positioned to be the second largest brewery in Africa. This merger and debt financing transactions represent Stanbic IBTC’s unique service offering as a full service corporate and investment bank and our commitment to assist international institutions in achieving their strategic objectives and growing their investments in Nigeria. Overview Business review Annual report & financial statements Other information 51
  27. 52 Business review Stanbic IBTC Annual group financial statements for the year ended 31 December 2017 Overview Business review Annual report & financial statements Other information Wealth What we offer Stanbic IBTC Holding’s Wealth group comprises four legal entities viz. Stanbic IBTC Pension Managers Limited (“SIPML”), Stanbic IBTC Asset Management Limited (“SIAML”), Stanbic IBTC Trustees Limited (“SITL”) and Stanbic IBTC Insurance Brokers Limited (“SIIBL”). The Wealth franchise being capital light is focused on annuity type income, pension administration and management, private non-pension asset management, trusteeship and estate planning as well as insurance brokerage. The businesses within Wealth underlines SIBTC’s capability to meet the broader financial needs of our customers and ensure we provide protection and preservation of their assets. It completes the loop in our promise of being a universal financial services organisation as we seek to provide solutions at every stage of an individual’s life. Overview Outlined below are the Stanbic IBTC subsidiaries which make up Wealth; •Stanbic IBTC Pension Managers Limited (SIPML) deals with the administration and management of pension assets, •Stanbic IBTC Asset Management Limited (SIAML) deals with the management of non-pension assets. Our Wealth & Investment team, experts who serve as advisors to high net-worth individuals, sits within this subsidiary. •Stanbic IBTC Trustees Limited (SITL) deals with trusteeship and estate management functions and •Stanbic IBTC Insurance Brokers Limited for insurance brokerage and risk management functions As at 31 December 2017, Wealth had N2.71 trillion (US$ 8.62 billion) in assets under management (“AUM”) and has remained the leading wealth manager in Nigeria with the pension business - SIPML consolidating its pre-eminent position as the largest Pension Fund Administrator (“PFA”) in terms of AUM and number of Retirement Savings Accounts (“RSAs”). The asset management company, SIAML also maintained its position as the largest non-pension assets manager measured by value of AUM, number and size of mutual funds and number of customers while SITL and SIIBL further broadened the product offering by catering to the needs of different strata of our clientele with respect to estate management, trusteeship and brokerage for various classes of insurance respectively. 2017 highlights •Wealth maintained its leading position as the largest institutional investment business and number one wealth manager in Nigeria with assets under management of N2.71 trillion (US$ 8.62 billion). •Growth of 26% was recorded in year-on-year net profit. •Cost efficiency remained stable at a cost to income ratio of 31.0%. •Recorded a return on equity (“ROE”) of 61.8%. •Stanbic IBTC Money Market fund defended its position as the largest mutual fund in Nigeria thereby maintaining its leadership position. SIAML now has a market share of over 40% of the collective investment schemes (“CIS”) industry. •SIAML listed a total of nine mutual funds on The NSE in 2017 to further improve the visibility of our products. •The minimum investment amount for our mutual funds were reduced to N5,000 and $1,000 for our naira denominated mutual funds and Stanbic IBTC dollar fund, respectively, to accommodate more retail investors. •Our online platform and mobile app were upgraded for simpler and more efficient transaction processing for mutual fund clients. For instance, clients can now open instant mutual fund accounts online and through our mobile app. •SIAML also sponsored a workshop for the adoption of the Global Investment Performance Standards in Nigeria in a bid to promote transparency, professionalism and investor confidence. •SITL renamed her flagship estate planning product, Simple Will to ‘’Legacee’’ after requisite approval of the patent name registry. This was done for improved acceptability and a public launch was also held. •SITL was appointed joint trustee to the only Sovereign bond issued in the year. •SIIBL won significant key mandates during the year including its appointment for insurance brokerage services to the largest shopping Mall in Nigeria & also large mandates in the oil & gas sector. •SIIBL registered a sender ID, ‘’SIBTCInsure’’ with the National Communication Commission (“NCC”) to enable us to proactively send automatic insurance renewal notices to clients. In addition, a contact centre was set up in order to improve customer service and drive our customer centricity strategy. •Three additional self-service kiosks were deployed to serve our pension clients. These were built to enhance customer experience and ensure easier accessibility to information by pension clients. Our customers can also enjoy self-service for frequently requested enquiries. •As part of our customer centricity, digitisation and cost saving efforts, we launched an online portal for our pension clients to submit benefits applications. Voluntary Contributions (“VC”) application was used as a pilot test and the feature is now accessible to all clients. •In our bid to drive awareness and improved education on the contributory pension scheme, SIPML held employer forums across six regions (Lagos, Abuja, Port-Harcourt, Enugu, Ibadan and Benin). These events were well attended by up to 3,500 employer representatives cumulatively. 53
  28. 54 Business review Stanbic IBTC Annual group financial statements for the year ended 31 December 2017 Overview Business review Annual report & financial statements 55 Other information Wealth (continued) •Our external recognition reflected through the number of awards won by the Pension business, which includes the Business Day Award 2017 for the Most Innovative PFA, African Child Prize Award 2017 – Integrity in corporate business, the Nigerian Customer Experience Awards - Excellent Service Delivery in PFA Category, Best Pension Fund of the Year by the National Association of Insurance & Pension Correspondents (“NAIPCO”) and the Lead Best Pension Manager of the year. •Our Asset Management business also won the Business Day Awards for Best managed funds for money market and best managed funds for fixed income as well as the Euro money Awards in excellence - Africa’s best bank and the Private Banker awards 2017 (for our Wealth & Investment business) for the second year running. 2018 Priorities • Continued collaboration with SEC, The NSE, FMDQ and other key stakeholders in improving awareness and education regarding mutual funds. •We plan to step up on the use of technology to enhance transaction processing and efficiency of subscriptions and redemption of our mutual funds. We would also enhance the use of digital and user-friendly customer interfaces to provide more bespoke advisory services to both high net worth and retail clients. •We intend to finalise our digital investment platform to capture the retail market, effectively seek to increase our focus on investors’ education through traditional and digital media channels. •Grow the insurance revenue stream by harnessing all the opportunities within the group through improved collaboration and extend our product offerings to other non-customers of the group through expansion of sales structure to cover new locations and empower staff to provide quotes to clients within reasonable timelines. •We will continue our digitisation journey by implementing new channels to drive our retail insurance acquisition strategy and some corporate products, and also aim to improve ways of working to support digital ambition. •Streamline all business processes through automation and documentation to enhance business turnaround time and deliver quality customer experience. • In our bid to deliver improved customer experience through innovation, to drive client retention and improved efficiency in our pension operations, we intend to update the online portal to accommodate receipt of the 25% benefit applications from pension contributors. •SIPML is poised to implement the multi-fund structure which allows pension contributors to decide their investment exposure based on their risk appetite. This is regulatory driven and it is expected to commence in Q1 2018. •Following the joint circular issued by the National Pension Commission and the National Insurance Commission on the modalities for the transfer of the annuity assets, SIIBL will double its efforts on securing new annuity mandates to boost income. 2017 2016 Total income N39.46 billion N32.07 billion Cost to income ratio 31.0% 30.9% Assets under management N2.71 trillion N2.08 trillion •We aim to offer new products and solutions in both traditional and alternative assets to meet the changing and diverse needs of existing and potential clients. Adopting more innovative methods in the delivery of our Wealth & Investment solutions to enhance our clients’ experience. Retirement savings accounts 1,595,343 1,508,040 Profit before Tax N27.23 billion N22.17 billion •Equip and resource the alternative investment desk to focus on positioning SIAML in the alternative investment space and enhance our alternative investment products and capabilities. In the same vein, we aim to position our mutual funds for more inclusion at the retail end of the market. Revenue by business unit • We will also increase the visibility of our mutual funds and related solutions through deliberate and intentional prospecting and increase marketing efforts to reposition the funds against more specific client needs and objectives. • C  ontinuous improvement of our mutual fund online access platform in our pursuit of simpler, better and faster investment channels for our customers as we continue to lead innovation in the industry. SIPML 87.11% SIAML 10.86% SITL 0.98% SIIBL 1.05% Strategy Financial performance The wealth business model focuses on providing financial advisory, financial planning, investment portfolio management, estate planning and a number of other financial services to our customers. In doing this, we are committed to ensuring security, liquidity as well as competitive long term returns at every stage of the clients’ life cycle. The equities market posted an impressive return of 42.3% as of YE 2017, its best performance in four years. This strong performance was driven by a significant increase in foreign portfolio flows on the back of improved liquidity in the foreign exchange market and expectation for improved corporate performance alongside improving macroeconomic fundamentals as Nigeria exited recession in Q3. In 2017, we maintained our leadership position in the various segments of the wealth business by improving on our product offerings, client base and assets under management. In the Pension business, our client base grew by 87,303 and we closed the year with a total of 1,595,343 RSA clients. Pension assets under management also increased by 22.79% to close the year at N2.31 trillion (US$7.57 billion). In the asset management segment, we increased our client base by 26.9% to close the year at 92,391. The slowdown in economic activities stalled business expansions and triggered job cuts across various sectors of the economy. Therefore, new hiring across all sectors slowed down, negatively impacting the momentum of new client acquisition by the pension business. Despite the foregoing, we continued to maintain close relationships with our stakeholders by organising regular awareness sessions through their employers and town hall forums with employer representatives to educate them on their roles and rights as members of the contributory pension scheme. Our asset management business continued to focus on ensuring we maintained our leadership position in the industry by growing the net asset value of funds under management. The elevated interest rate for most of the year as well as the fund manager’s expertise helped our money market fund emerge as the best in the industry. SITL was appointed as joint trustees with five others on a sizeable bond issuance. It also rebranded and repositioned the Wills product, now ‘Legacee’, to position it for more ready acceptance amongst its target market. In the course of the year, we continued to create trust and estate planning awareness while providing advocacy and thought leadership to the Securities and Exchange Commission. For the insurance brokerage business, we continued to proffer risk management solutions to our clients. Our collaborative efforts with the group helped improve our client base and recognition in the industry. We plan to continue to provide a hedge against unforeseen risks as well as consolidate our position within the industry in our areas of expertise. In the fixed income market, the tight monetary policy by the Central Bank of Nigeria (“CBN”) kept interest rates high thus creating solid carry trade opportunities for international investors and real return opportunity for domestic investors with treasury bills and government bonds rising as high as 22% and 16.9%, respectively. Cost of debt servicing remained a major concern for the country’s economic managers and they sought to address this by issuing Eurobonds to redeem maturing treasury bills in the last quarter of 2017. This resulted in a compression of the yield curve by c. 210bps as average treasury bills and government bonds yields declined by 350bps and 71bps respectively. Consequently, the year ended with profit taking on both equities and fixed income as investors sought to close their books with strong realised gains. Total income grew by 23% and net profit by an impressive 26% over the 2016 figures, while total assets under management increased by 31% to close the year at N2.71 trillion (USD8.62 billion). Performance highlights Net interest income Growth % 2017 Nmillion 2016 Nmillion 18 4,375 3,693 Non-interest revenue 24 35,087 28,374 Total income 23 39,462 32,067 (32) (5,514) (4,177) Staff cost Other operating cost (18) (6,722) (5,716) Tax provision (16) (8,068) (6,964) 26 19,158 15,210 Profit after tax
  29. 56 Business review Stanbic IBTC Annual group financial statements for the year ended 31 December 2017 Wealth (continued) Looking forward The global economy is expected to experience sustained growth in 2018 while central banks of developed economies are expected to be less accommodative. Africa’s key trading partners such as China and India are expected to grow at 6.50% and 7.40% in 2018 with positive tailwinds expected for Sub-Saharan Africa as stronger external demand should support commodity prices whilst cyclical recoveries in oil and agriculture would bolster growth across a number of countries. Similarly, the rebound in growth in Nigeria is expected to pick up pace in 2018 as oil production recovers, oil prices remain stable (forecasted to average $59pb in 2018) and government revenues continue to improve. The key risks to this outlook are: inclusion of Nigeria in OPEC’s output cut and resurgence of militant activities in the delta. Political risk will also remain in the short term, being a pre-election year, a period when horse-trading from interest groups usually takes place. However, in the medium to long term, sustained efforts to diversify government FX revenues away from oil will be key to achieving sustained capital investment and development. The 2018 proposed budget of N8.6 trillion seeks to consolidate on the gains of 2017, which focused on recovery and growth. While remaining in line with the Medium Term Expenditure Framework (MTEF 2018 – 2020), the revenue targets of the budget seem ambitious partly due to assumptions used. In addition to seeming unrealistic assumptions made on the exchange rate and revenue generation, real GDP growth is forecasted at 3.5%, significantly higher than market expectations of over 2%. With a budget deficit target of N2.0 trillion, the government would have to strike the right balance between funding the budget deficit and its goal of lowering debt servicing costs. Monetary policy is expected to ease slightly as the CBN strives to maintain the handle on inflationary pressures and Foreign Exchange stability in a preelection year. We therefore expect rates to stay around the mid-teens during the year. Furthermore, we expect the easing in monetary policy to also create opening for corporate issuances at attractive levels when compared with government securities. In equities, we will seek for opportunities to increase equity allocation in funds with regular inflow patterns and a long term outlook thus taking full advantage of rising economic growth, opportunity to outperform inflation and accumulate wealth for beneficiaries of such funds. Thus, we will focus on companies best positioned to deliver earnings growth and strong market performance in the current phase of the economic cycle. Fixed income continues to provide income and liquidity opportunity for funds. Given our positioning in duration coming into the year, we would remain focused on taking advantage of opportunities to boost total return as they become available. We will continue to engage actively with SEC & FMAN to improve transparency, reporting standards and investor confidence in the capital market. We would also aim to expand the investment universe in order to meet our clients’ objectives. We aim for increased investments in digital solutions to deliver exceptional client experience while leveraging on Standard Bank group’s knowledge sharing platforms and networks for our alternative investment team. We keep driving for growth in pension assets via an increased awareness of the benefits of contributions into the scheme through education for employer compliance, conversion of un-funded accounts and special focus for new businesses from contributing employers. We will also continue to follow up with employers for pension remittances as it is in the best interest of our clients and plan more employer town hall sessions in 2018 to allow for more direct stakeholder engagement. The trustees’ business will consolidate on its mandate acquisition drive for lucrative transactions with worthwhile revenues in its attempt to significantly move the dial and earn appreciable income to ensure it meets and exceeds its financial targets. It will be aided by its revamped outlook, organisational re-design, strategy adjustment and competency review to ensure fit for purpose structure and optimal results. Improved visibility of our Wealth & Investment offering with deliberate collaboration with the group is also expected to improve as we focus more on client centricity so our clients can extract the best value from our universal offering. We will offer strategic, tailormade responses to each client’s need as we proffer the right solutions and thoughtful client engagement to ensure they remain clients for life. We aim to continue SIIBL’s digitisation journey with an online sales platform (subject to regulatory considerations) to drive retail sales. We also plan to expand the sales structure to include a sales agency to enable wider coverage so that our sales staff will be stationed closer to source of business and positioned to work closely with various business units across Stanbic IBTC subsidiaries. We will continue in our drive to position the insurance brokerage business as the firm of choice and ensure a mutually beneficial partnership with our key internal and external stakeholders. We will stay ready for regulatory changes which have been highly anticipated in prior years such as the opening of the much awaited transfer window in the pension industry, commencement of the micro pension scheme and implementation of the guideline on withdrawal from RSA towards equity contribution for a mortgage. Despite the sustained recession for the most part of 2017 and the resultant challenges, we will remain steadfast to our core values and policies which will guide our decisions throughout the course of the year. We will continue to focus on positioning the group as an end-to-end financial services organisation by collaborating purposefully with other Stanbic IBTC subsidiaries thus delivering the entire group to both existing and new clients. We will leverage on the group’s position across the value chain of financial services to deepen existing client relationships as we unearth opportunities that will drive real progress for our clients. Overview Business review Annual report & financial statements Other information 57
  30. 58 Business review Stanbic IBTC Annual group financial statements for the year ended 31 December 2017 Overview Business review Annual report & financial statements Other information Sustainability Report 2017 Introduction from the Chief Executive In 2017, the Nigerian financial services industry took further steps towards digitalisation. Data provided by the Central Bank of Nigeria (“CBN”) showed a significant uptake in electronic banking. Competition for e-banking market share from Financial Technology (“FinTech”) companies rose with provision of e-solutions as new players entered the market. However, banks continue to adopt newer and better solutions to simplify their operations and remain nimble. It was a significant year for the Stanbic IBTC Group. Following the resolution of the long-drawn issue with the Financial Reporting Council of Nigeria late in 2016, we were able to release our outstanding financial reports as well as hold our 4th (2015) and 5th (2016) AGMs. There was also a change at the board and management levels. The founder and chairman, Atedo Peterside, resigned to take up a new role in the mother brand, Standard Bank Group of South Africa, while the Chief Executive of the holding company, Sola David-Borha, was elevated to a bigger role as Chief Executive (Rest of Africa) at the Standard Bank Group. We continued to be at the forefront of innovation and experienced some positive transformational changes and developed further competencies in other segments of the financial services industry, like in retail and personal banking, outside our well-honed competencies in investment banking and wealth management. We were equally able to provide significant support to government’s fund raising efforts to finance the 2017 national budget deficit. We were instrumental to government’s successful Eurobond Programmes, Diaspora Bond issue, and FGN Savings Bond programme and their listing on both The Nigerian Stock Exchange and the FMDQ OTC Securities Exchange for secondary trading. We realised that our success as a business is dependent on the success of the individuals and businesses we serve and on the economy where we operate from. Therefore, we are mindful to develop relevant solutions that not only ensure our success but guarantee the success of government, businesses and individuals. We pride ourselves on our rich pedigree in financial innovation, drawn from our Standard Bank heritage, which has enabled us provide solutions that have enhanced the quality of life of individuals and boost their financial security; facilitate business expansion, economic growth and development in key sectors like oil and gas, manufacturing, agriculture, power, healthcare, and real estate, among others. Our business strategy is to offer banking services to assist our internal and external stakeholders manage social and environmental challenges and invest for the future. We work hard to build trust in our operations and establish partnerships that will be beneficial in the long term. This Sustainability Report details our corporate social investments, environmental and social risk management and performance as well as our shared values in 2017. Our priority, going forward, will be to ensure financial, social and environmental sustainability in our operations. We not only want to achieve financial outcomes, but we also want to fulfill our purpose of driving the growth of our economy. Stanbic IBTC Corporate Profile consonance with our brand and vision “To be the leading end-to-end financial solutions provider in Nigeria through innovative and customer-focused people.” The group offers expert services in three business areas - Corporate and Investment Banking; Personal and Business Banking and Wealth Management. We do everything in our power to ensure that we provide our clients with the products, services and solutions to suit their needs, provided that everything we do for them is based on sound business principles. We uphold high standards of corporate governance and are committed to advancing the principles and practice of sustainable development. Our success and growth over the long term is built on making a difference in the communities in which we operate. Stanbic IBTC Holdings has nine subsidiaries: •Stanbic IBTC Bank (including Stanbic IBTC Bureau de Change Ltd and Stanbic IBTC Nominees Limited) •Stanbic IBTC Pension Managers Limited •Stanbic IBTC Asset Management Limited •Stanbic IBTC Stockbrokers Limited •Stanbic IBTC Trustees Limited Stanbic IBTC Holdings is a full service financial institution which offers a wide range of products to a variety of segments. Stanbic IBTC provides end-to-end financial solutions which include corporate and investment banking, personal and business banking, stockbroking and wealth management. Our Approach to Sustainability Standard Bank Group, to which Stanbic IBTC belongs, is the largest African bank by assets with a unique footprint across 20 African countries, including South Africa, and 12 countries outside Africa, including key financial centres in Europe, United States and Asia. Standard Bank has been in operation for over 154 years and prides itself on being a global bank with African roots. Our approach to sustainability begins with our objective to operate an ethical, professional, accountable and profitable business. This is couched in our threepronged sustainability framework document. We designed the SEE (Social, Economic and Environmental) framework to ensure we support the wellbeing of communities by delivering value through the products and services that we provide. Stanbic IBTC Holdings aims to position itself as the leading end-to-end financial services solutions provider in Nigeria in We have a commitment to contribute to sustainable development. This commitment is embedded in our core •Stanbic IBTC Ventures Limited •Stanbic IBTC Capital Limited •Stanbic IBTC Investments Limited •Stanbic IBTC Insurance Brokers Limited 59
  31. 60 Business review Stanbic IBTC Annual group financial statements for the year ended 31 December 2017 Overview Business review Annual report & financial statements Other information Sustainability Report 2017 (continued) values of integrity, professionalism and respect for both internal and external stakeholders as outlined in the SEE framework. In implementing the Nigerian Sustainable Banking Principles in our business activities and operations, Stanbic IBTC is under the following three pillars. •Credit • Group Real Estate Services (“GRES”) •Procurement Credit: Integrate Environmental and Social Considerations into Credit Decision Making process by ensuring on boarding of new business opportunities are E&S compliant and follows approved credit process, policy and guidelines for Corporate and Investment Banking (‘CIB”) and Business Banking (“BB”). GRES: Monitor our ecological footprints with respect to the impact of our business operations, in terms of Power maximisation, waste management, carbon emissions, energy and water efficiency and building designs and architecture that are green. Procurement: Assess, develop and screen suppliers with a view to ensuring the sustainability of our vendors and their ability to meet our procurement needs and also assist them in mitigating social and environmental costs. Corporate Governance Creating thriving partnerships Stanbic IBTC has a strong governance structure, with distinct roles and responsibilities between the board and management. These roles are governed by clearly marked policies and controls. Our work is governed by internal and external regulations as well as international best practices. Corporate governance is a key part of our entire operation in evaluating, approving, and monitoring of projects. Our major CSI objectives remain: support for strategic and credible projects, in line with business objectives; deploy scalable solutions that are beneficial to a higher number of people; work with credible partners; and leverage existing business opportunities. The Chief Executive of the Group has the overall responsibility for sustainability accountability, supported by an executive committee. However, care is taken to ensure decisions are cascaded from the top management level to the individual employee. Corporate Social Investment: Business and Societal Needs Our priority is to ensure financial, social and environmental sustainability. Through our social investments, we hope to boost the Stanbic IBTC brand reputation, increase our market share and improve employee relations in a way to enhance our long term competitiveness. For maximum impact, we identified, using a research-based approach and by engaging with our stakeholders, including communities, governments and individuals, the critical needs of our business environment. These needs fall under Education, Health and Economic Empowerment and form the tripod upon which our Corporate Social Investment activities rest. The convergence of social investment goals and business helps engender long term benefits and sustainability. Sustainable Lending In providing credit facilities to conglomerates, multinationals, small and medium scale enterprises, we continue to review the environmental and social (E&S) risk considerations embedded in our credit approval process. This entails the screening of credit transactions for E&S risks, as well as monitoring their activities to ensure our clients carry out their operations in line with acceptable environmental and social standards. From January 2017, we have assessed about 330 Business Banking credit transactions for E&S risks. In our Corporate and Investment Banking business, 36 approved credit transactions were assessed for E&S risks. We also take pride in providing credit facilities to Business Banking clients for environmentally beneficial purposes. As of June 2017, we had approved credit facilities of about $2.2million for this area. Beneficiaries of our sustainable lending include Dangote Refinery, Indorama Eleme Petrochemical, Kellogs Tolerams, Lekki Concession Company, and Presco, among others. Environmental and Social Risk Management Stanbic IBTC acknowledges that the development of a corporate culture whereby environmental sustainability principles are adhered to both in its operating environment and with counterparties is crucial to sustainable development. Our impacts on society and the environment can be both indirect, arising from the activities of our customers who we finance, and direct through our day-to-day operational activities and the products and services we provide. These are either internal, affecting employees or the organisation, or external, affecting communities, customers, partners and regulators, among others. Thus, we go beyond compliance in our approach to environmental and social risk management. This approach has helped us achieve best practice performance through sound governance structures and policies, monitoring mechanisms, strategic partnership, energy efficient and renewable energy programmes, supplier development and screening, employee training and awareness, products and services that help reduce carbon emission and green building design. In line with regulatory stipulation, Stanbic IBTC complies with the Nigeria Sustainable Banking Principles (“NSBP”) and through the Standard Bank Group is a signatory to the Equator Principles, thereby adopting international best practice in Environmental and Sustainability standards. We adopt a precautionary approach to environmental management, striving to anticipate and prevent environmental degradation in line with the guidelines set out in the Equator Principles and the provisions of the Environmental Laws of Nigeria. Awareness Creation Our awareness creation drive increased across our stakeholder groups, in the implementation of NSBP. Following the NSBP adoption, a total of 120 employees received introductory environmental and social risk training in 2015 and several others in 2016. This number rose across our business units in 2017. Benefits of Environmental and Social Risk Management Appropriately and efficiently managed environmental and social risks and opportunities will enhance our: •Overall risk management which in turn reduces costs and liabilities; •Ability to access capital and attract foreign investors and partners; •Financial and non-financial performance; •Brands and reputations at the individual organisation as well as sector level; • Operational efficiencies; • Ability to attract and retain talents; •Relationships with our clients by becoming a trusted advisor; and •Growth prospects by reaching new markets and innovating new products and services. Empowering our People We expect an increasingly productive and highly motivated workforce, one that constantly exceeds the expectations of customers. We are continuously engaging our employees to ensure their growth through leadership trainings and skills acquisition, a diversified and conducive work environment, and well-structured compensation policy. Higher levels of employee engagement are linked to lower levels of absenteeism and employee turnover. In 2017, employees formed an important part of our CSI, helping to create awareness and actively participating in chosen initiatives, individually and as a team. Our organisation is very sensitive to gender parity and inclusion. As a result, we have initiatives targeted at the wellbeing and advancement of women in business and in paid employment. •The Stanbic IBTC Blue Women Network is a platform for female employees of Stanbic IBTC across all cadres, which provides opportunities for networking, development and growth. By default, all women who join our organisation become crucial members of the network. We also ensure that staff policies targeted at our female employees address their needs. Health Our employees remain at the heart of our business; and we believe that their wellbeing is important to enable us deliver our promises to our clients and stakeholders as an organisation. Therefore, we take matters concerning their wellbeing to heart and have invested in a number of wellness programmes to encourage healthy lifestyles for them. The wellness initiatives include: •Weekly on-site aerobics in our four head office campuses across the group; •Physical activities encouraged in all our offices, including our branches nationwide; these are group walks and daily exercise-at-the-desk routine for all employees. To also encourage physical exercise, we have instituted a no-lift-day once a week across the organisation, when staff are encouraged to opt for the staircases rather than use the lift. For our external stakeholders, one of the key pillars of our CSI initiative is in the health sector. We have consistently partnered with an NGO Slum2School to create awareness on the scourge of malaria as well as distribute mosquito treated nets to indigent school children and pregnant women in underserved and malaria prone communities. Through our signature CSI initiative, Together4 A Limb, we provide prostheses for children with limb losses as well as replacing these limbs annually until they are 18 years. So far, we have 20 beneficiaries. Being an ardent supporter of persons living with prostheses, our organisation has constructed wheelchair access ramps in 33 branches and our major head office campuses across the group to facilitate access of physically challenged persons into our office locations. We will continue to explore ways to alleviate the difficulties encountered by the physically challenged for a more inclusive banking experience for all our customers. Education Education, through knowledge and skills acquisition, is an essential ingredient for a productive workforce. As a result, we are continuously engaging our employees to ensure their growth through leadership trainings and skills acquisition, to complement a diversified and conducive work environment, and well-structured compensation policy. We continue to invest in the educational advancements of our communities through our CSI Initiatives such as the Mentor-aClass project, where staff members take a day off to engage school children in our adopted school, Lagos Progressive School, Surulere, on financial literacy, leadership and analytical skills, among others. Under our staff volunteerism initiative, a block of six classrooms was donated to the National Orthopaedic Special School, Igbobi, Lagos by the Operation Shared Services Team. The children we fitted with artificial limbs were also awarded Stanbic IBTC Educational Trusts to give them a better chance at success in life. 61
  32. 62 Business review Stanbic IBTC Annual group financial statements for the year ended 31 December 2017 Overview Business review Annual report & financial statements Other information Sustainability Report 2017 (continued) Economic Empowerment At Stanbic IBTC, we apply sustainable principles that drive the growth and development of the industries we finance and communities in which we operate in. It gives us satisfaction to deliver value to the communities we serve by contributing to their social, economic and environmental (“SEE”) wellbeing through the services we provide. Our aim is to improve life for everyone in Nigeria and beyond. We not only want to achieve financial outcomes, but we also want to fulfil our purpose of driving the country’s growth. We made donations to orphanages, we have also made donations to widows through the Human Development Initiatives. We have initiatives targeted at the wellbeing and advancement of women in business and paid employment in a way to ensure gender parity and inclusion. As of June 2017, we had successfully empowered businesses owned by women through lending amounting to about 16% of the total loan portfolio for Stanbic IBTC Bank. Sustainability Practices Stanbic IBTC is a member of the Nigerian Conservation Fund which supports sustainability related causes. Our membership further attests to our commitment to maintain a robust operation focused on environmental education, biodiversity conservation, policy advocacy, public sensitisation on environmental issues, mitigating environmental pollution and poverty reduction. Our key sustainability practices include: 1. Energy efficiency in operations Replenishing our sources of energy remains an important aspect for the growth of our economy. As a result of this, we have embarked on energy efficiency initiatives across Stanbic IBTC Group. These include: • Operation Switch Off and UnPlug (“SOUP”) initiative which encourages staff members to switch off and unplug electronic devices at close of business. • Switch-off initiative which aims to save energy consumed by elevators and central air conditioners in our head office campuses. We also turn-off power at 6pm in our branches. This initiative also encourages work-life balance among our employees, who remain the drivers of our business. • Installation of energy saving LED bulbs across our bank branches and head office campuses for reduced energy consumption. • Installation of motion sensors in buildings for the control of power. Use of alternative sources of power for ATMs and branches – Our Festac and Katin Kwari branches are partly powered by solar energy; while ten (10) offsite ATMs are also powered by alternative sources. 2. Paper reduction and recycling Across the group, we strive to bring unnecessary printing to a minimum and reduce paper usage in our business operations. As at August 2017, we had successfully reduced our year-to-date paper usage (for printing and photocopy) across the bank by about 30 percent compared to the same period in 2016. Measures taken include: •Installation of Follow-Me Printing on Printers •Setting printers to Double Sided printing by default • Recycling of paper for printing •The use of shared folders to document storage as against printing •Eliminated the use of paper in 12 branch processes We are also supportive of paper recycling and have recently worked with partners to recycle over nine (9) tons of archived paper in exchange for tissue papers that will be used in our offices. These initiatives serve as one of the ways we contribute to the reduction in tree-felling for paper production. A more balanced ecosystem is achievable if such practice is encouraged by organisations. 3. Green Branches In addition to our printing reduction and paper recycling initiatives, we are also piloting ‘Green Branches’ within our organisation where additional sustainability initiatives and processes will be driven. Our aim is to run operations in these branches that ensure minimal paper use, increased energy and water efficiency. 4. Tree planting in Zaria branch In line with efforts targeted at preventing desert encroachment, especially in the northern part of Nigeria, a substantial part of our Zaria Branch is being landscaped to provide greenery and shade for our staff and customers who use the location. 5. Waste segregation To address issues of environmental degradation resulting from indiscriminate and inappropriate disposal of waste, the group continues to invest in solid waste segregation and recycling initiatives involving the sensitisation of staff and customers on the need to separate solid waste for further recycling. The deployment of waste bins designed for segregation of solid waste are ongoing in our head office campuses. 6. Water utilisation We have implemented eco-friendly water utilisation measures to reduce wastage by: •Installing toilet systems with dual flush knobs •Installing of taps with motion sensors in restrooms and kitchens As a responsible corporate citizen, we will continue to carry out our business operations in ways that minimise any negative social, economic and environmental impact. We will continue to review our operational processes and engage our key stakeholders to achieve as much involvement in our sustainability initiatives as possible, for the benefit of the communities we operate in. Employee Volunteerism At Stanbic IBTC, our vision recognises that our people are our most important asset, which makes it imperative to inspire and engage employees in ongoing CSI efforts to make a meaningful impact. We see our employees as our partners in all our sustainability initiatives. By doing this, not only do we succeed in getting their active involvement, but also benefit from the fact that employees gain a lot of valuable skills and experiences which make them a better asset to our organisation. The sustainability of an idea needs everyone in every title to be aligned to our mission of moving forward. We believe our people and culture will determine our success in executing our strategy, which includes our CSI. Our business philosophy is anchored on and vested in building relationships and trust with our clients/ customers, employees, shareholders, regulators, communities and other key stakeholders. Our values underpin our legitimacy and are intended to reinforce the trust our stakeholders have in our organisation. As such, we endeavor to carry along and get the buy in of all our internal and external stakeholders. We have a culture of staff involvement and participation in our social investment initiatives which means that our staff are not only part of the activation but the entire process of identifying key areas where we choose to support, collaborate or invest. We try as much as possible to encourage our staff to either as teams or units voluntarily contribute and participate through departmental CSI activities. This initiative has been hugely successful over the past year. Through staff CSI volunteerism or contribution alone, we invested over a N100 million towards various charitable causes under the health, education and economic empowerment portfolios in 2017. Under our staff volunteerism initiative, a block of six modern classrooms was built and donated to the National Orthopaedic Special School, Igbobi, Lagos. Sponsorships Development is key to our deciding on what sponsorships we undertake. We continue to identify credible and impactful initiatives that are compliant with our sustainability policy to support through sponsorships. And our sponsorships cut across the broad spectrum of sectors which we serve, to reflect our end-to-end financial services credentials. Through our Fine-Arts-and-The-Acts, Stanbic IBTC is recognised as an active sponsor and supporter of the creative industry. The overriding objective of our arts sponsorship programme is to nurture and promote the development of the creative industry, encouraging engagement and social interaction. We also sponsored the ArtX Lagos and the Eat Drink Lagos. Standards and Codes Stanbic IBTC’s business sustainability and international best practices continue to attract commendations, recognitions and revalidation through various awards and certifications. Stanbic IBTC Bank PLC and its holding company, Stanbic IBTC Holdings PLC, both recorded AAA(nga) national long-term ratings by Fitch Ratings, which provide a relative measure of creditworthiness for rated institutions. According to Fitch Ratings, “AAA is the highest credit quality. They are assigned only in cases of exceptionally strong capacity for payment of financial commitments. This capacity is highly unlikely to be adversely affected by foreseeable events.” Fitch said triple A “denotes the lowest expectation of default risk” while the F1+ “indicates the strongest intrinsic capacity for timely payment of financial commitments.” Such regular ratings provide an idea of the credit worthiness of the institutions so rated. The Stanbic IBTC Blue Academy was accredited by the banking industry umbrella body, the Chartered Institute of Bankers of Nigeria, and certification issued to validate its training standard. Awards The stockbroking arm of the Group, Stanbic IBTC Stockbrokers Limited, received The Nigerian Stock Exchange CEO award as the best dealing member firm in 2017, for a high-performance culture, the sixth consecutive time it would win the award. 63
  33. 64 Business review Stanbic IBTC Annual group financial statements for the year ended 31 December 2017 Overview Business review Annual report & financial statements Other information Enterprise risk review Overview Risk Management’s objective continues to align with the group’s strategic focus “to be the leading end-to-end financial solutions provider in Nigeria through innovative and customer-focused people”. Effective risk management is fundamental and essential to the achievement of the group’s strategic objectives. It is also one of the pillars of the institution’s strategic value drivers, which entails supporting our clients by doing the right business the right way and maintaining the highest possible standards of responsible business practice using the right frameworks that align with regulatory expectations and standard business practices as well as procedures. The Group Risk function continues its oversight and advisory responsibilities by deploying a consistent, comprehensive and strategic approach to the identification, measurement, management and reporting of enterprise-wide risks across the group. This is executed through proactive risk management practices which ensure that the business maintains the right balance in terms of the risk-return trade off whilst limiting the negative variations that could impact the group’s capital, earnings, risk assets and appetite levels in a constantly changing and dynamic operating environment. Furthermore, Group Risk continues to shape, drive and monitor the activities relating to risk and conduct in the institution through various measures, including strengthening the risk and control environment, monitoring risk appetite and governance standards across the institution and elevating risk awareness by deploying requisite compliance training programme for all Stanbic IBTC employees with a standard process of monitoring and escalating deficiencies in meeting the required standards. This is also in line with the established code of conduct and ethics that all members of staff must adhere and attest to on an annual basis. The Board sets the tone and risk appetite for the organisation, including the tolerance levels for key risks. These risks are however managed in accordance with a set of governance standards, frameworks and policies which align with the global best practices. The overarching approach to managing enterprise-wide risk is based on the “Three Lines of Defense” principle which requires the first line (Business risk owners) to appropriately demonstrate ownership and accountability for risks and manage same closest to the point of incidence; second line (including Risk, Compliance, and Internal Control) to review and challenge as well as provide oversight and advisory functions; and the third line (Internal Audit) to conduct assurance that control processes are fit for purpose, are implemented in accordance with standard operating procedures, and operating effectively or as intended. Risk management framework Approach and structure The group’s approach to risk management is based on governance processes that rely on both individual responsibility and collective oversight that is supported by a tailored Management Information System (“MIS”). This approach balances corporate oversight at senior management level with independent risk management structures in the business where the business unit heads, as part of the first line of defense, are specifically responsible for the management of risk within their businesses using appropriate risk management frameworks that meet the required group minimum standards. An important element that underpins the group’s approach to the management of all risk is independence and appropriate segregation of responsibilities between Business and Risk. Risk officers report separately to the Head of Risk who reports to the Chief Executive of Stanbic IBTC Bank and also through a matrix reporting line to the Standard Bank Group (“SBG”). All principal risks are supported by the Risk Management department. 65
  34. 66 Business review Stanbic IBTC Annual group financial statements for the year ended 31 December 2017 Overview Business review Annual report & financial statements Other information Enterprise risk review (continued) Governance structure The risk governance structure provides a platform for the board, executive and senior management through the various committees to evaluate and debate material existential and emerging risks which the group is exposed to, and assess the effectiveness of risk responses through the risk profiles of the underlying business units and functional areas (please refer to the pictorial representation of the group risk governance structure below). The risk-focused board committees include the statutory audit committee, board credit committee, board IT committee, board legal committee, and board risk management committee, while executive management oversight at the subsidiary and group levels is achieved through management committees that focus on specific risks. Each of the board and management committees is governed by mandates that set out the expected committee’s terms of reference. Stanbic IBTC Board Shareholders Board Committees Statutory Audit Committee Management Committees Risk Management Remuneration (REMCO) Nominations Legal Information Technology ADHOC Risk Oversight Committee Internal Financial Control Risk categories The group’s enterprise risk management framework is designed to govern, identify, measure, manage, control and report on the principal risks to which the group is exposed. The principal financial risks are defined as follows: Credit risk Governance structurea Executive Committee Residual risk is then evaluated against the risk appetite. Equity and Investment Risk Committee Operational Risk & Compliance Committee Board Committees Information Strategy & Governance Committee Statutory Committees IT Steering Committee New & Amended Products, Business & Services Management Committees This is continuously evolving to meet changing needs and requirements. a Risk governance standards, policies and procedures The group has developed a set of risk governance standards for each principal risk, including credit, market, liquidity, operational, IT, legal, environmental & social risk and compliance risks. The standards define the acceptable conditions for the assumption of the major risks and ensure alignment and consistency in the manner in which these risks are identified, measured, managed, controlled and reported across the group. All standards are supported by either policies and/or procedural documents. They are applied consistently across the group and are approved by the Board. It is the responsibility of the business unit executive management to ensure that the requirements of the risk governance standards, policies and procedures are implemented within and across the business units. • reviewing and monitoring the group’s performance in relation to set risk appetite. Risk appetite Risk appetite is defined by core metrics which are carefully calibrated and converted into limits, thresholds and triggers across the relevant risk types, at both entity and business line levels, through an analysis of the risks that impact those metrics. Risk appetite is an expression of the amount, type and tenure of risk that the group is prepared to accept in order to deliver its business objectives. It is the balance of risk and return as the group implements business plans, whilst recognising a range of possible outcomes. The Board establishes the group’s parameters for risk appetite by: • providing strategic leadership and guidance; • reviewing and approving annual budgets and forecasts for the group and each subsidiary; Stress testing Stress testing serves as a diagnostic and forward looking tool to improve the group’s understanding of its credit; market, liquidity and operational risks profile under event based scenarios. Management reviews the outcome of stress tests and selects appropriate mitigating actions to minimise and manage the impact of the risks to the group. Credit risk arises primarily in the group operations where an obligor/counterparty fails to perform in accordance with agreed terms or where the counterparty’s ability to meet such contractual obligations is impaired. Credit risk comprises counterparty risk, wrong-way risk, settlement risk, country risk and concentration risk. Counterparty risk Counterparty risk is the risk of loss to the group as a result of failure by a counterparty to meet its financial and/or contractual obligations to the group. It has three components: • primary credit risk, which is the exposure at default (“EAD”) arising from lending and related banking product activities, including their underwriting; • pre-settlement credit risk, which is the EAD arising from unsettled forward and derivative transactions, arising from the default of the counterparty to the transaction and measured as the cost of replacing the transaction at current market rates; • issuer risk, which is the EAD arising from traded credit and equity products, and including their underwriting. Wrong-way risk Wrong-way risk is the risk that arises when default risk and credit exposure increase together. There are two types of wrong-way risk: specific wrong way risk (which arises through poorly structured transactions, for example, those collateralised by own or related party shares) and general wrong way risk (which arises where the credit quality of the counterparty may for non-specific reasons be correlated with a macroeconomic factor which also affects the credit quality of the counterparty). Settlement risk Settlement risk is the risk of loss to the group from a transaction settlement, where value is exchanged and the counter value is not received in whole or part. Country and cross border risk Country and cross border risk is the risk of loss arising from political or economical conditions or events in a particular country which reduce the ability of counterparties in that particular country to fulfill their obligations to the group. Cross border risk is the risk of restriction on the transfer and convertibility of local currency funds, into foreign currency funds thereby limiting payment by offshore counterparties to the group. Concentration risk Concentration risk refers to any single exposure or group of exposures large enough to cause credit losses which threaten the group’s capital adequacy or ability to maintain its core operations. It is the risk that common factors within a risk type or across risk types cause credit losses or an event occurs within a risk type which results to credit losses. Market risk Market risk is defined as the risk of a change in the actual or effective market value or earnings of a portfolio of financial instruments caused by adverse movements in market variables such as equity, bond and commodity prices, foreign exchange rates, interest rates, credit spreads, recovery rates, correlations and implied volatilities in the market variables. Market risk covers both the impact of these risk factors on the market value of traded instruments as well as the impact on the group’s net interest margin as a consequence of interest rate risk on banking book assets and liabilities. Liquidity risk Liquidity risk is defined as the risk that the group, although balance-sheet solvent, cannot maintain or generate sufficient cash resources to meet its payment obligations in full as they fall due or can only do so at materially disadvantageous terms. There are two major sources of liquidity risk, which are funding liquidity risk and market liquidity risk. Funding liquidity risk refers to the risk that the counterparties who provide the group with funding will withdraw or not roll-over that funding. Market liquidity risk, on the other hand, refers to the risk of a generalised disruption in asset markets that makes normal liquid assets illiquid and the potential loss through the forced-sale of assets resulting in proceeds being below their fair market value. Credit risk Principal credit standard and policies The group’s Governance Standard, as reviewed regularly, sets out the broad overall principles to be applied in credit risk decisions and sets out the overall framework for the consistent and unified governance, identification, measurement, management and reporting of credit risk in the group. The Corporate and Investment Banking (“CIB”) and the Personal and Business Banking (“PBB”) Global Credit Policies have been designed to expand the Group Credit Risk Governance Standard requirements by embodying the core principles for identifying, measuring, approving, and managing credit risk. These policies provide a comprehensive framework within which all credit risk emanating from the operations of the bank are legally executed, properly monitored and controlled in order to minimise the risk of financial loss; and assure consistency of approach in the treatment of regulatory compliance requirements. In addition to the Credit Risk Governance 67
  35. 68 Business review Stanbic IBTC Annual group financial statements for the year ended 31 December 2017 Overview Business review Annual report & financial statements Other information Enterprise risk review (continued) Standard and CIB and PBB Global Credit Policies, a number of related credit policies and documents have been developed, with contents that are relevant to the full implementation and understanding of the credit policies. Methodology for risk rating Internal counterparty ratings and default estimates that are updated and enhanced from time-to-time play an essential role in the credit risk management and decision-making process, credit approvals, internal capital allocation, and corporate governance functions. Ratings are used for the following purposes: •Credit assessment and evaluation •Credit monitoring •Credit approval and delegated authority • Economic capital calculation, portfolio and management reporting • Regulatory capital calculation • R ARORC (Risk-Adjusted Return on Regulatory Capital) calculation • Pricing: Probability of Default (“PD”), Exposure at Default (“EAD”) and Loss given Default (“LGD”) may be used to assess and compare relative pricing of assets/facilities, in conjunction with strategic, relationship, market practice and competitive factors. The primary method for credit risk assessment and evaluation lies in the counterparty risk grading. This is quantified and calculated in compliance with the group’s credit rating policy leveraging Basel II compliant models (currently in use) which are updated or enhanced on a periodic basis as required. Credit risk quantification for any exposure or portfolio is summarised by the calculation of the expected loss (“EL”), which is arrived at in the following way: •Based on the risk grading foundation, which yields the counterparty’s probability of default (“PD”), the nature and quantum of the credit facilities are considered; •A forward-looking quantification of the exposure at default is determined in accordance with group standard guidelines. •Risk mitigants such as security and asset recovery propensities are then quantified to moderate exposure at default to yield the loss given default. •Finally, the EL is a function of the PD, the LGD and the EAD. These parameters are in turn used in quantifying the required regulatory capital reserving, using the Regulatory Capital Calculator developed, maintained and updated in terms of Basel 2, and the economic capital implications through the use of Credit Portfolio Management’s (“CPM’s”) Economic Capital tools. Furthermore, bearing in mind the quantum of the facility and the risk/reward thereof, an appropriate consideration of Basel 2 capital requirements (where applicable) and the revenue and return implications of the credit proposal is also important in the risk consideration and rating methodology. Framework and governance Credit risk remains a key component of financial risks faced by any bank given the very nature of its business. The importance of credit risk management cannot be over emphasised as consequences can be severe when neglected. The group has established governance principles to ensure that credit risk is managed effectively within a comprehensive risk management and control framework. In reaching credit decisions and taking credit risk, both the credit and business functions must consistently and responsibly balance risk and return, as return is not the sole prerogative of business neither is credit risk the sole prerogative of credit. Credit (and the other risk functions, as applicable) and business must work in partnership to understand the risk and apply appropriate risk pricing, with the overall aim of optimising the bank’s risk adjusted performance. The reporting lines, responsibilities and authority for managing credit risk in the group are clear and independent. However, ultimate responsibility for credit risk rests with the board. Group’s rating Grade description Standard & Poor’s Fitch SB01 – SB12/SB13 Investment grades AAA to BBB- AAA to BBB- SB14 – SB21 Sub Investment grades BB+ to CCC+ BB+ to CCC+ SB22 – SB25 Cautionary grade CCC to C CCC to C Credit risk mitigation Credit risk mitigation is defined as all methods of reducing credit expected loss whether by means of reduction of EAD (e.g. netting), risk transfer (e.g. guarantees) or risk transformation. Guarantees, collateral and the transaction structures are used by the group to mitigate credit risks both identified and inherent though the amount and type of credit risk is determined on a case by case basis. The group’s credit policy and guidelines are used in a consistent manner while security is valued appropriately and reviewed regularly for enforceability and to meet changing business needs. The credit policy establishes and defines the principles of risk transfer, transformation and reduction. The processes and procedures for accepting, verifying, maintaining, and releasing collateral are well documented in order to ensure appropriate application of the collateral management techniques. IFRS 7 The tables that follow analyse the credit quality of loans and advances measured in terms of IFRS. Maximum exposure to credit risk are less than 90 days past due, but it is expected that the full carrying value will be recovered when considering future cash flows, including collateral. Ultimate loss is not expected but could occur if the adverse conditions persist. Non-performing loans Loans and advances are analysed and categorised based on credit quality using the following definitions. Neither past due nor specifically impaired loans are loans that are current and fully compliant with all contractual terms and conditions. Early arrears but not specifically impaired loans include those loans where the counterparty has failed to make contractual payments and payments •the group has identified objective evidence of default, such as a breach of a material loan covenant or condition; or Non-performing but not specifically impaired loans are not specifically impaired due to the expected recoverability of the full carrying value when considering future cash flows, including collateral. Credit risk measurement A key element in the measurement of credit risk is the assignment of credit ratings, which are used to determine expected defaults across asset portfolios and risk bands. The risk ratings attributed to counterparties are based on a combination of factors which cover business and financial risks: The group uses the PD Master Scale rating concept with a single scale to measure the credit riskiness of all counterparty types. The grading system is a 25-point scale, with three additional default grades. • substandard items that show underlying well-defined weaknesses and are considered to be specifically impaired; Non-performing loans are those loans for which: Performing loans Non-performing specifically impaired loans are those loans that are regarded as nonperforming and for which there has been a measurable decrease in estimated future cash flows. Specifically impaired loans are further analysed into the following categories: • doubtful items that are not yet considered final losses due to some pending factors that may strengthen the quality of the items; and • l ost items that are considered to be uncollectible in whole or in part. The group provides fully for its anticipated loss, after taking collateral into account. Loans Performing loans Neither past due nor specifically impaired loans Current Early arrears but not specifically impaired loans Close monitoring Portfolio credit impairments Non-performing loans Non-performing but not specifically impaired loans Substandard Specifically impaired loans Doubtful Specific credit impairments Loss 69
  36. 70 Business review Stanbic IBTC Annual group financial statements for the year ended 31 December 2017 Overview Business review Annual report & financial statements 71 Other information Enterprise risk review (continued) Maximum exposure to credit risk by credit quality Performing loans Non-performing loans Neither past due nor specifically impaired Not specifically impaired Specifically impaired loans Non-performing loans December 2017 Note Net after securities and expected recoveries on specifically impaired loans Nmillion Balance sheet impairments for non-performing specifically impaired loans Nmillion Gross specific impairment coverage % Total nonperforming loans Nmillion Nonperforming loans % 10,813 10,813 64 16,955 11.4 Total loans and advances to customers Nmillion Balance sheet impairments for performing loans Nmillion Normal monitoring Nmillion Close monitoring Nmillion Early arrears Nmillion Sub-standard Nmillion Doubtful Nmillion Lost Total Nmillion Nmillion Securities and expected recoveries on specifically impaired loans Nmillion 149,324 2,775 106,656 12,186 13,526 4,426 6,301 6,228 16,955 6,142 7,426 76 4,365 724 889 1,113 156 179 1,448 793 655 655 45 1,448 19.5 12,167 162 4,555 2,596 772 65 3,663 516 4,244 1,694 2,550 2,550 60 4,244 34.9 Personal and Business Banking Mortgage loans Instalment sale and finance leases Card debtors 1,451 20 923 6 210 28 68 216 312 24 288 288 92 312 21.5 Other loans and advances 128,280 2,517 96,813 8,860 11,655 3,220 2,414 5,317 10,951 3,631 7,320 7,320 67 10,951 8.5 Corporate and Investment Banking 254,528 8,072 219,326 8,366 12,079 13,027 1,730 - 14,757 4,654 10,103 10,103 68 14,757 5.8 Corporate loans 254,528 8,072 219,326 8,366 12,079 13,027 1,730 - 14,757 4,654 10,103 10,103 68 14,757 5.8 Gross loans and advances to customers 403,852 10,847 325,982 20,552 25,605 17,453 8,031 6,228 31,712 10,796 20,916 20,916 66 31,712 7.9 Less: Impairment for loans and advances Net loans and advances (31,764) 12 372,088 Add the following other banking activities exposures: Cash and cash equivalents Derivatives Financial investments (excluding equity) 7 401,348 10.6 11,052 11 314,367 Loans and advances to banks 12 9,623 Trading assets 9.1 151,479 8 43,240 Pledged assets Other financial assets 41,427 Total on-balance sheet exposure 1,344,624 Unrecognised financial assets: Letters of credit 30.1 118,054 Guarantees 30.1 35,323 Loan commitments Total exposure to credit risk 56,108 1,554,109 Additional disclosures on loans and advances is set out in note 12.
  37. 72 Business review Stanbic IBTC Annual group financial statements for the year ended 31 December 2017 Overview Business review Annual report & financial statements 73 Other information Enterprise risk review (continued) Maximum exposure to credit risk by credit quality Performing loans Non-performing loans Neither past due nor specifically impaired Not specifically impaired Specifically impaired loans Non-performing loans December 2016 Note Non-performing Nmillion Sub-standard Nmillion Doubtful Nmillion Lost Total Nmillion Nmillion 22,372 - 8,035 4,803 5,837 18,675 7,426 11,249 11,249 60 18,675 12.3 1,798 - 189 27 42 258 94 164 164 64 258 2.9 3,417 - 1,111 68 518 1,697 916 781 781 46 1,697 10.3 Balance sheet impairments for performing loans Nmillion Normal monitoring Nmillion Close monitoring Nmillion Early arrears Nmillion 152,360 3,509 86,222 25,092 8,924 51 5,396 1,472 16,532 275 6,141 5,277 Personal and Business Banking Instalment sale and finance leases Card debtors Other loans and advances 48 1,185 - 380 - 68 92 68 228 14 214 214 94 228 12.7 73,500 18,343 16,777 - 6,667 4,616 5,209 16,492 6,402 10,090 10,090 61 16,492 13.2 - 222,956 7,591 194,856 5,995 22,104 - - - - - - 7,591 194,856 5,995 22,104 - - - - - - Gross loans and advances 375,316 11,100 281,078 31,087 44,476 - 8,035 4,803 5,837 18,675 7,426 Less: (22,351) 12 352,965 7 301,351 10.6 14,317 Financial investments (excluding equity) 11 251,233 Loans and advances to banks 12 15,264 Trading assets 9.1 16,855 8 28,303 Add the following other banking activities exposures: Derivatives Pledged assets Other financial assets 31,897 Total on-balance sheet exposure 1,012,185 Unrecognised financial assets: Letters of credit 30.1 15,620 Guarantees 30.1 38,523 Loan commitments Total exposure to credit risk 30,193 1,096,521 Additional disclosures on loans and advances is set out in note 12. Nonperforming loans % 3,135 222,956 Cash and cash equivalents Total nonperforming loans Nmillion 1,793 Corporate and Investment Banking Net loans and advances Gross specific impairment coverage % 125,111 Corporate loans Impairment for loans and advances Balance sheet impairments for non-performing specifically impaired loans Nmillion Securities and expected recoveries on specifically impaired loans Nmillion Total loans and advances to customers Nmillion Mortgage loans Net after securities and expected recoveries on specifically impaired loans Nmillion 11,249 - - - - - - - - 11,249 60 18,675 5.0
  38. 74 Business review Stanbic IBTC Annual group financial statements for the year ended 31 December 2017 Overview Business review Annual report & financial statements 75 Other information Enterprise risk review (continued) Ageing of loans and advances past due but not specifically impaired Less than 31 days Nmillion 31-60 days Nmillion Collateral 61-89 days Nmillion 90-180 days Nmillion More than 180 days Nmillion Total collateral coverage Total Nmillion December 2017 Personal and Business Banking 10,172 1,923 1,432 - - 13,526 Mortgage loans 501 272 117 - - 889 Instalment sales and finance lease 490 272 11 - - 772 Card debtors 144 48 17 - - 210 9,038 1,331 1,287 - - 11,655 3,261 582 8,236 - - 12,079 3,261 582 8,236 - - 12,079 13,432 2,506 9,668 - - 25,605 Other loans and advances Corporate and Investment Banking Corporate loans Total Note Personal and Business Banking 16,824 3,923 1,624 - - 22,372 1,579 142 77 - - 1,798 Instalment sales and finance lease 1,801 1,054 562 - - 3,417 200 131 49 - - 380 13,244 2,596 936 - - 16,777 - 8,675 13,430 - - 22,105 - 8,675 13,430 - - 22,105 16,824 12,598 15,054 - - 44,477 Card debtors Other loans and advances Corporate and Investment Banking Corporate loans Total Renegotiated loans and advances are exposures which have been refinanced, rescheduled, rolled over or otherwise modified due to weaknesses in the counterparty’s financial position, and where it has been judged that normal repayment will likely continue after the restructure. Renegotiated loans that would otherwise be past due or impaired amounted to N13.5 billion as at 31 Dec 2017 (Dec 2016: N34.8 billion). Collateral includes: •financial securities that have a tradable market, such as shares and other securities; 273,744 122,279 - - 41,061 81,218 - 677,220 677,220 - - - - - - Bank 223,600 223,600 - - - - - - Retail 196,068 94,153 101,915 - - 26,014 68,220 7,681 7,426 - 7,426 - - - - 7,426 188,642 94,153 94,489 - - 26,014 68,220 255 1,492,911 1,268,717 224,194 - - 67,075 149,438 7,681 Retail mortgage Add: Financial assets not exposed to credit risk 36,853 Less: Impairments for loans and advances (31,763) Less: Unrecognised off balance sheet items (153,377) Total exposure 1,344,624 7 401,348 10.6 11,052 Financial investments (excluding equity) 11 314,367 Loans and advances 12 381,711 Derivatives Trading assets 9 151,479 •physical items, such as property, plant and equipment; and Pledged assets 8 43,240 •financial guarantees, suretyships and intangible assets. Total All exposures are presented before the effect of any impairment provisions. In the retail portfolio, 52% (Dec 2016: 69%) is collateralised. Of the group’s total exposure, 85% (Dec 2016: 67%) is unsecured and mainly reflects exposures to well-rated corporate counterparties, bank counterparties and sovereign entities. 1%-50% Nmillion 396,023 Cash and cash equivalents Collateral The table that follows shows the financial effect that collateral has on the group’s maximum exposure to credit risk. The table is presented according to Basel II asset categories and includes collateral that may not be eligible for recognition under Basel II but that management takes into consideration in the management of the group’s exposures to credit risk. All on- and off-balance sheet exposures which are exposed to credit risk, including nonperforming assets, have been included. Secured Greater than 100% Nmillion Corporate Reconciliation to statement of financial position: Renegotiated loans and advances Nmillion 50%100% Nmillion Sovereign Total Mortgage loans Unsecured Nmillion Netting agreements Nmillion December 2017 Other retail December 2016 Total exposure Nmillion Secured exposure after netting Nmillion Other financial assets 41,427 1,344,624
  39. 76 Business review Stanbic IBTC Annual group financial statements for the year ended 31 December 2017 Overview Business review Annual report & financial statements 77 Other information Enterprise risk review (continued) Collateral Concentration of risks of financial assets with credit risk exposure Total collateral coverage Note Total exposure Nmillion Unsecured Nmillion Secured Nmillion Netting agreements Nmillion Secured exposure after netting Nmillion 1%-50% Nmillion 50%100% Nmillion Greater than 100% Nmillion a) G  eographical sectors The following table breaks down the group’s main credit exposure at their carrying amounts, as categorised by geographical region as of 31 December 2017. For this table, the group has allocated exposures to regions based on the region of domicile of our counterparties. Trading assets Nmillion Derivative assets Nmillion Pledged assets Nmillion Financial investments (excluding equity) Nmillion - - - - 14,896 - 14,896 South West 8,284 800 - 12,860 319,839 - 341,783 South East - - - - 7,273 - 7,273 December 2016 Corporate 302,251 79,295 Sovereign 415,361 Bank Retail Retail mortgage Other retail Total 222,956 - - 46,763 88,940 87,254 415,361 - - 134,739 134,739 - - - - - 170,029 52,354 117,675 - - 41,972 41,710 33,994 8,924 - 8,924 - - - - 8,924 161,105 52,354 108,751 - - 41,972 41,710 25,070 1,022,380 681,749 340,631 - - 88,735 130,650 121,248 31 December 2017 South South North West North Central North East Outside Nigeria (54,143) 1,012,185 Reconciliation to statement of financial position: 7 301,351 10.6 14,317 Financial investments (excluding equity) 11 251,233 Loans and advances 12 368,229 Trading assets 9.1 16,855 Pledged assets 8.1 28,303 Total - - - 16,623 - 16,623 8,521 43,240 301,507 12,466 - 508,929 - - - - 991 - 991 - 1,731 - - - 9,623 11,354 11,052 43,240 314,367 372,088 9,623 901,849 Trading assets Nmillion Derivative assets Nmillion Pledged assets Nmillion Financial investments (excluding equity) Nmillion Loans and advances to customers Nmillion Loans and advances to banks Nmillion Total Nmillion South South 1,198 - - - 13,445 - 14,643 South West 5,001 1,208 - 10,131 293,196 - 309,536 South East - - - - 6,575 - 6,575 North West - - - - 22,837 - 22,837 31 December 2016 Total exposure Other financial assets 143,195 (22,351) Less: Unrecognised off balance sheet items Derivatives Total Nmillion 66,299 Less: Impairments for loans and advances Cash and cash equivalents Loans and advances to banks Nmillion 151,479 Carrying amount Add: Financial assets not exposed to credit risk Loans and advances to customers Nmillion 31,897 1,012,185 10,656 12,529 28,303 241,102 15,171 7,504 315,265 North East North Central - - - - 1,741 - 1,741 Outside Nigeria - 580 - - - 7,760 8,340 16,855 14,317 28,303 251,233 352,965 15,264 678,937 Carrying amount
  40. 78 Business review Stanbic IBTC Annual group financial statements for the year ended 31 December 2017 Overview Business review Annual report & financial statements 79 Other information Enterprise risk review (continued) Concentration of risks of financial assets with credit risk exposure (continued) b. Industry sectors Trading assets Nmillion Derivative assets Nmillion Pledged assets Nmillion Financial investments (excluding equity) Nmillion Agriculture - 621 - - Business services - 22 - - 3,967 - 3,989 Communication - 1 - 553 13,673 - 14,227 Community, social & personal services - - - - - - - Construction and real estate - 3 - - 41,526 - 41,529 31 December 2017 Electricity Loans and advances to customers Nmillion Loans and advances to banks Nmillion Nmillion 23,208 - 23,829 - - - - - - - 1,752 - 11,326 600 9,623 31,585 Government (including Central Bank) 143,195 8,521 43,240 301,409 21,930 - 518,295 Hotels, restaurants and tourism - - - - 22 - 22 Manufacturing - 26 - - 124,539 - 124,565 Mining - 1 - - 61,285 - Private households - 1 - - 45,364 - Transport, storage and distribution - - - - 6,038 - Wholesale & retail trade - 104 - 1,079 29,936 151,479 11,052 43,240 314,367 372,088 Carrying amount Pledged assets Nmillion Agriculture - 1 - - Business services - - - - 3,741 - 3,741 Communication - - - 470 21,015 - 21,485 Community, social & personal services - - - - 2 - 2 Construction and real estate - 26 - - 37,546 - 37,572 Total 8,284 Financial intermediaries & insurance Trading assets Nmillion Derivative assets Nmillion Financial investments (excluding equity) Nmillion 31 December 2016 Electricity Loans and advances to customers Nmillion Loans and advances to banks Nmillion Nmillion 26,205 - 26,206 Total - - - - - - - 5,001 582 - 9,248 1,538 7,760 24,129 Government (including Central Bank) 11,854 12,529 28,303 241,515 14,421 7,504 316,126 Hotels, restaurants and tourism - - - - 21 - 21 Manufacturing - 1,097 - - 99,510 - 100,607 61,286 Mining - - - - 58,244 - 58,244 45,365 Private households - - - - 48,215 - 48,215 6,038 Transport, storage and distribution - - - - 11,331 - 11,331 - 31,119 Wholesale & retail trade - 82 - - 31,176 - 31,258 9,623 901,849 16,855 14,317 28,303 251,233 352,965 15,264 678,937 Financial intermediaries & insurance Carrying amount c. Analysis of financial assets disclosed above by portfolio distribution and risk rating AAA to ANmillion BBB+ to BBBNmillion Below BBBNmillion Unrated Total Nmillion Nmillion At 31 December 2017 5 687,201 213,889 754 901,849 At 31 December 2016 7,666 18,923 604,205 49,845 680,639
  41. 80 Business review Stanbic IBTC Annual group financial statements for the year ended 31 December 2017 Overview Business review Annual report & financial statements 81 Other information Enterprise risk review (continued) Concentration of risks of off-balance sheet engagements b. Industry sectors a. Geographical sectors 31 December 2017 South South 31 December 2017 Bonds and guarantees Nmillion Letters of credit* Nmillion Total Nmillion Agriculture Business services Bonds and guarantees Nmillion Letters of credit Nmillion 2017 Total Nmillion Bonds and guarantees Nmillion Letters of credit Nmillion 2016 Total Nmillion 247 - 247 - 1 1 4,033 6,626 10,659 437 253 690 - - - 155 118 273 379 - 379 34,044 118,054 152,098 South East 30 - 30 North West 120 - 120 Financial intermediaries & insurance North Central 750 - 750 Hotels, Restaurants and Tourism North East - - - Manufacturing 3,981 Outside Nigeria - - - Mining/oil and gas 2,393 35,323 118,054 153,377 South West Total Communication Construction and real estate Wholesale & retail trade Carrying amount Bonds and guarantees Nmillion Letters of credit* Nmillion Nmillion 850 - 850 South West 35,177 15,620 50,797 South East 18 - 18 North West 90 - 90 2,388 - 2,388 North East - - - Outside Nigeria - - - 38,523 15,620 54,143 31 December 2016 South South North Central Total *Amount excludes letters of credit for which cash collateral has been received. 49 - 49 19,248 - 19,248 17,912 - 17,912 154 31 185 - 45,159 45,159 - - - 27,019 31,000 10,698 10,462 21,160 26,851 29,244 2,845 1,366 4,211 Private households Transport, storage and distribution 31 December 2016 - - - 486 - 486 168 1,728 1,896 22 - 22 6,540 10,671 17,211 4,478 3,389 7,867 35,323 118,054 153,377 38,523 15,620 54,143 Total Credit provisioning based on prudential guidelines In accordance with the Prudential Guidelines issued by the Central Bank of Nigeria, provision against credit risk is as follows; Non performing accounts Interest and/or principal outstanding for over: Classification Minimum provision 90 days but less than 180 days Substandard 10% Doubtful 50% Lost 100% 180 days but less than 360 days Over 360 days When a loan is deemed uncollectible, it is written off against the related provision for impairments. Subsequent recoveries are credited to the provision for loan losses in the profit and loss account. If the amount of the impairment subsequently decreases due to an event occurring after the write-down, the release of the provision is credited as a reduction of the provision for impairment in the statement of profit or loss. Performing accounts A minimum of 2% general provision on performing loans is made in accordance with the Prudential Guidelines.
  42. 82 Business review Stanbic IBTC Annual group financial statements for the year ended 31 December 2017 Overview Business review Annual report & financial statements Other information Enterprise risk review (continued) Prudential guidelines disclosures Had the Prudential Guidelines been employed in the preparation of these financial statements, the impairments for loans and advances to customers as well as related disclosures, would have been made as follows: Group 31 Dec 2017 Nmillion 31 Dec 2016 Nmillion 403,852 375,316 7,426 8,924 12,167 17,272 1,451 1,501 Overdrafts and other demand loans 128,281 45,970 Other term loans 254,527 301,649 Credit impairments for loans and advances (22,333) (25,569) Specific provision (14,995) (14,467) General provision (7,338) (11,102) 381,519 349,747 373,334 355,466 35,322 24,022 17,732 5,685 - doubtful 8,736 5,828 - lost 8,854 12,509 408,656 379,488 Prudential disclosure of loan and advances to customers Customer exposure for loans and advances Mortgage loans Instalment sale and finance leases Card debtors Net loans and advances to customers Prudential disclosure of loan classification Performing loans Non-performing loans - substandard Total performing and non performing loans Adjustment for Interest in suspense and below-market interest staff loans Customer exposure for loans and advances Non-performing loan ratio (regulatory) (4,804) (4,172) 408,656 379,488 8.64% 6.33% Liquidity risk • collateral management; Framework and governance The nature of banking and trading activities results in a continuous exposure to liquidity risk. Liquidity problems can have an adverse impact on a group’s earnings and capital and, in extreme circumstances, may even lead to the collapse of a group which is otherwise solvent. • daily cash flow management; The group’s liquidity risk management framework is designed to measure and manage the liquidity position at various levels of consolidation such that payment obligations can be met at all times, under both normal and considerably stressed conditions. Under the delegated authority of the board of directors, the Asset and Liability Committee (“ALCO”) sets liquidity risk policies in accordance with regulatory requirements, international best practice and SBG stated risk appetite. Tolerance limits, appetite thresholds and monitoring items are prudently set and reflect the group’s conservative appetite for liquidity risk. ALCO is charged with ensuring ongoing compliance with liquidity risk standards and policies. The Group must, at all times, comply with the more stringent Standard Bank imposed tolerance limits or regulatory limits. Liquidity and funding management A sound and robust liquidity process is required to measure, monitor and manage liquidity exposures. The group has incorporated the following liquidity principles as part of a cohesive liquidity management process: •structural liquidity mismatch management; • long-term funding ratio; •maintaining minimum levels of liquid and marketable assets; • depositor restrictions; • local currency loan to deposit ratio; • foreign currency loan to deposit ratio; • interbank reliance limit; • intra-day liquidity management; Maintaining minimum levels of liquid and marketable assets • liquidity stress and scenario testing; • funding plans; • liquidity contingency planning. The cumulative impact of these principles is monitored, at least monthly by ALCO through a process which is underpinned by a system of extensive controls. The latter includes the application of purposebuilt technology, documented processes and procedures, independent oversight and regular independent reviews and evaluations of the effectiveness of the system. The group ensures that the banking entity (Stanbic IBTC Bank PLC) is within the regulatory liquidity ratio of 30% at all times. Minimum levels of prudential liquid assets are held in accordance with all prudential requirements as specified by the regulatory authorities. The group needs to hold additional unencumbered marketable assets, in excess of any minimum prudential liquid asset requirement, to cater for volatile depositor withdrawals, draw-downs under committed facilities, collateral calls, etc. The following criteria apply to readily marketable securities: •prices must be quoted by a range of counterparties; • the asset class must be regularly traded; 83.91% 56.24% • t he asset may be sold or repurchased in a liquid market, for payment in cash; and settlement must be according to a prescribed, rather than a negotiated, timetable. Average 106.72% 78.05% Depositor concentration Maximum 119.64% 101.95% Liquidity ratio Minimum 2017 2016 Structural liquidity mismatch management The mismatch principle measures the group’s liquidity by assessing the mismatch between its inflow and outflow of funds within different time bands on a maturity ladder. The structural liquidity mismatch is based on behaviourally-adjusted cash flows which factors a probability of maturity into the various time bands. As expected, cash flows vary significantly from the contractual position, behavioural profiling is applied to assets, liabilities and offbalance sheet items with an indeterminable maturity or drawdown period. A net mismatch figure is obtained by subtracting liabilities and netting offbalance sheet positions from assets in each time band. The group’s liquidity position is assessed by means of the net cumulative mismatch position while its liquidity mismatch performance is an aggregation of the net liquidity position in each successive time band expressed as a percentage of total funding related to deposits. To ensure that the group does not place undue reliance on any single entity as a funding source, restrictions are imposed on the short dated (0 – 3 months term) deposits accepted from any entity. These include: •the sum of 0 – 3 month deposits and standby facilities provided by any single deposit counterparty must not, at any time, exceed 10% of total funding related liabilities to the public; and •the aggregate of 0 – 3 month deposits and standby facilities from the 10 largest single deposit counterparties must not, at any time, exceed 20% of total funding related liabilities to the public. Concentration risk limits are used to ensure that funding diversification is maintained across products, sectors, and counterparties. Primary sources of funding are in the form of deposits across a spectrum of retail and wholesale clients. As mitigants, the group maintains marketable securities in excess of regulatory requirements in order to create a buffer for occasional breaches of concentration limits. 83
  43. 84 Business review Stanbic IBTC Annual group financial statements for the year ended 31 December 2017 Overview Business review Annual report & financial statements 85 Other information Enterprise risk review (continued) Loan to deposit limit Daily cash flow management A limit is put in place, restricting the local currency loan to deposit ratio to a maximum specified level, which is reviewed periodically. Similarly, in order to restrict the extent of foreign currency lending from the foreign currency deposit base, a foreign currency loan to deposit limit, which is also referred to as own resource lending, is observed. As mitigants, the group maintains high levels of unencumbered marketable and liquid assets in excess of regulatory benchmark. The group generates a daily report to monitor significant cash flows. Maturities and withdrawals are forecast at least three months in advance and management is alerted to large outflows. The report, which is made available to the funding team, ALM and market risk, also summarises material daily new deposits as well as the interbank and top depositor reliance (by value and product). Intra-day liquidity management The group manages its exposures in respect of payment and settlement systems. Counterparties may view the failure to settle payments when expected as a sign of financial weakness and in turn delay payments to the group. This can also disrupt the functioning of payment and settlement systems. At a minimum, the following operational elements are included in the group’s intra-day liquidity management: •capacity to measure expected daily gross liquidity inflows and outflows, including anticipated timing where possible; •capacity to monitor its intra-day liquidity positions, including available credit and collateral; •sufficient intra-day funding to meet its objectives; •ability to manage and mobilise collateral as required; •robust capacity to manage the timing of its intra-day outflows; and •readiness to deal with unexpected disruptions to its intra-day liquidity flows. The daily cash flow management report forms an integral part of the ongoing liquidity management process and is a crucial tool to proactively anticipate and plan for large cash outflows. Interbank reliance Interbank funding traditionally is seen as the most volatile and least stable source of funding, easily influenced by market sentiment and prone to flight under stress situations. Consequently, to ensure prudent liquidity management is enforced, the group restricts the local currency interbank funding as a proportion of the local currency funding base to a maximum of 15% of the total currency funding base. Liquidity stress testing and scenario testing Anticipated on-balance sheet and offbalance sheet cash flows are subjected to a variety of the group specific and systemic stress scenarios in order to evaluate the impact of unlikely but plausible events on liquidity positions. Scenarios are based on both historical events, such as past emerging markets crises, past local financial markets crisis and hypothetical events, such as an entity specific crisis. The results obtained from stress testing provide meaningful input when defining target liquidity risk positions. Maturity analysis of financial liabilities by contractual maturity The tables on the next page analyses cash flows on a contractual, undiscounted basis based on the earliest date on which the group can be required to pay (except for trading liabilities and trading derivatives) and may therefore not agree directly with the balances disclosed in the consolidated statement of financial position. Derivative liabilities are included in the maturity analysis on a contractual, undiscounted basis when contractual maturities are essential for an understanding of the derivatives’ future cash flows. All other derivative liabilities are treated as trading instruments and are included at fair value in the redeemable on demand bucket since these positions are typically held for short periods of time. The following tables also include contractual cash flows with respect to off-balance sheet items which have not yet been recorded on-balance sheet. Where cash flows are exchanged simultaneously, the net amounts have been reflected. Maturity analysis of financial liabilities by contractual maturity Redeemable on demand Nmillion Maturing within 1 month Nmillion Maturing between 1-6 months Nmillion Maturing between 6-12 months Nmillion Maturing after 12 months Nmillion Nmillion 134 449 1,678 331 - 2,592 Total December 2017 Financial liabilities Derivative financial instruments Trading liabilities Deposits and current accounts Subordinated debt Other borrowings - 28,385 27,170 6,239 658 62,452 577,551 138,719 107,192 18,332 4 841,798 - - - - 45,687 45,687 10,615 - 5,661 7,885 58,269 82,431 588,300 167,553 141,701 32,787 104,618 1,034,959 Letters of credit - 30,128 87,096 8,128 - 125,352 Guarantees - 332 20,365 7,650 6,977 35,324 Loan commitments - 18,339 22,355 13,918 1,496 56,108 Total - 48,799 129,816 29,696 8,473 216,784 - 1,177 8,466 2,110 35 11,788 Total Unrecognised financial instruments December 2016 Financial liabilities Derivative financial instruments Trading liabilities Deposits and current accounts Subordinated debt Other borrowings - 99 4,489 82 655 5,325 455,715 97,185 72,885 12,102 5 637,892 - - 1,337 1,338 46,767 49,442 214 2,579 4,858 30,870 76,034 114,555 455,929 101,040 92,035 46,502 123,496 819,002 Letters of credit 1,020 2,625 12,449 546 - 16,640 Guarantees 1,178 367 11,107 20,818 5,053 38,523 - 18,463 7,775 1,099 2,856 30,193 2,198 21,455 31,331 22,463 7,909 85,356 Total Unrecognised financial instruments Loan commitments Total
  44. 86 Business review Liquidity contingency plans The group recognises that it is not possible to hold sufficiently large enough quantity of readily available liquidity to cover the least likely liquidity events . However, as such events can have devastating consequences, it is imperative to bridge the gap between the liquidity the group chooses to hold and the maximum liquidity the group might need. The group’s liquidity contingency plan is designed to, as far as possible, protect stakeholder interests and maintain market confidence in order to ensure a positive outcome in the event of a liquidity crisis. The plan incorporates an extensive early warning indicator methodology supported by a clear and decisive crisis response strategy. Early warning indicators span group specific crises, systemic crises, contingency planning, and liquidity risk management governance and are monitored based on assigned frequencies and tolerance levels. The crisis response strategy is formulated around the relevant crisis management structures and addresses internal and external communications, liquidity generation, operations, as well as heightened and supplementary information requirements. To ensure adherence to international best practices for prudent liquidity risk management and in line with the Central Bank of Nigeria’s guideline for the development of liquidity contingency funding plans by way of a binding standby funding agreement contracts between banks, Stanbic IBTC Bank PLC (a subsidiary of the group) has entered into the following funding agreements: (i) A local currency contingency standby funding agreement with Zenith Bank PLC up to a limit of N10 billion effective 09 February 2017. See note 12.1 on page 179. (ii) A foreign currency revolving facility from Standard Bank of South Africa (Isle of Man Branch) of US$50 million. The facility is effective from 18 July 2017 and renewable annually. See note 36.5 The group did not draw on any of the commitments during the period. Stanbic IBTC Annual group financial statements for the year ended 31 December 2017 Foreign currency liquidity management A number of indicators are observed to monitor changes in either market liquidity or exchange rates. Foreign currency loans and advances are restricted to the availability of foreign currency deposits. Funding strategy Funding markets are evaluated on an ongoing basis to ensure appropriate group funding strategies are executed depending on the market, competitive and regulatory environment. The group employs a diversified funding strategy, sourcing liquidity in both domestic and offshore markets, and incorporates a coordinated approach to accessing capital and loan markets across the group. Concentration risk limits are used within the group to ensure that funding diversification is maintained across products, sectors, geographic regions and counterparties. Primary funding sources are in the form of deposits across a spectrum of retail and wholesale clients, as well as longterm capital and loan markets. The group remains committed to increasing its core deposits and accessing domestic and foreign capital markets when appropriate to meet its anticipated funding requirements. Depositor concentrations Single depositor Top 10 depositors 2017 % 2016 % 7 4 27 16 Market risk The identification, management, control, measurement and reporting of market risk is categorised as follows: Trading market risk These risks arise in trading activities where the bank acts as a principal with clients in the market. The group’s policy is that all trading activities are contained within the bank’s Corporate and Investment Banking trading operations. Overview Banking book interest rate risk These risks arise from the structural interest rate risk caused by the differing re-pricing characteristics of banking assets and liabilities. Market risk measurement Foreign currency risk These risks arise as a result of changes in the fair value or future cash flows of financial exposures due to changes in foreign exchange rates. • daily VaR; Equity investment risk These risks arise from equity price changes in listed and unlisted investments, and managed through the equity investment committee, which is a sub-committee of the executive committee. Framework and governance The board approves the market risk appetite and standards for all types of market risk. The board grants general authority to take on market risk exposure to the asset and liability committee (“ALCO”). ALCO sets market risk policies to ensure that the measurement, reporting, monitoring and management of market risk associated with operations of the bank follow a common governance framework. The bank’s ALCO reports to EXCO and also to the board risk management committee. The in-country risk management is subject to SBG oversight for compliance with group standards and minimum requirements. The market risk management unit, which is independent of trading operations and accountable to ALCO, monitors market risk exposures due to trading and banking activities. This unit monitors exposures and respective excesses daily, report monthly to ALCO and quarterly to the board risk management committee. The techniques used to measure and control market risk include: • daily net open position Business review Annual report & financial statements historical distribution. Hence, there is a need to back-test the VaR model regularly. VaR back-testing The board, on the input of ALCO, sets limits on the level of exposure by currency and in aggregate for overnight positions. The latter is also aligned to the net open position limit as specified by the regulators, which is usually a proportion of the groups’ capital. The group and the banking business back-test its foreign currency, interest rate and credit trading exposure VaR model to verify the predictive ability of the VaR calculations thereby ensuring the appropriateness of the model. Back-testing exercise is an ex-post comparison of the daily hypothetical profit and loss under the one-day buy and hold assumption to the prior day VaR. Profit or loss for backtesting is based on the theoretical profits or losses derived purely from market moves both interest rate and foreign currency spot moves and it is calculated over 250 cumulative trading-days at 95% confidence level. Daily value-at-risk (VaR) Stress tests VaR is a technique that estimates the potential losses that may occur as a result of market movements over a specified time period at a predetermined probability. Stress testing provides an indication of the potential losses that could occur in extreme market conditions. •back-testing; •PV01; • annual net interest income at risk; Daily net open position VaR limits and exposure measurements are in place for all market risks the trading desk is exposed to. The bank generally uses the historical VaR approach to derive quantitative measures, specifically for market risk under normal market conditions. Normal VaR is based on a holding period of one day and a confidence level of 95%. Daily losses exceeding the VaR are likely to occur, on average, 13 times in every 250 days. The use of historic VaR has limitations as it is based on historical correlations and volatilities in market prices and assumes that future prices will follow the observed The stress tests carried out include individual market risk factor testing and combinations of market factors on individual asset classes and across different asset classes. Stress tests include a combination of historical and hypothetical simulations. PV01 PV01 is a risk measure used to assess the effect of a change of rate of one basis point on the price of an asset. This limit is set for the fixed income, money market trading, credit trading, derivatives and foreign exchange trading portfolios. Other information Other market risk measures Other market risk measures specific to individual business units include permissible instruments, concentration of exposures, gap limits, maximum tenure and stop loss triggers. In addition, only approved products that can be independently priced and properly processed are permitted to be traded. Pricing models and risk metrics used in production systems, whether these systems are off-the-shelf or in-house developed, are independently validated by the market risk unit before their use and periodically thereafter to confirm the continued applicability of the models. In addition, the market risk unit assesses the daily liquid closing price inputs used to value instruments and performs a review of less liquid prices from a reasonableness perspective at least fortnightly. Where differences are significant, mark-to-market adjustments are made. Annual net interest income at risk A dynamic forward-looking annual net interest income forecast is used to quantify the banks’ anticipated interest rate exposure. This approach involves the forecasting of both changing balance sheet structures and interest rate scenarios, to determine the effect these changes may have on future earnings. The analysis is completed under both normal market conditions as well as stressed market conditions. 87
  45. 88 Business review Stanbic IBTC Annual group financial statements for the year ended 31 December 2017 Overview Business review Annual report & financial statements 89 Other information Enterprise risk review (continued) Analysis of Value-at-Risk (VaR) and actual income Interest rate risk in the banking book The table below highlights the historical diversified normal VaR across the various trading desks. The minimum and maximum trading diversified normal VaR stood at NGN10 million and NGN396 million, respectively, with an annual average of NGN188 million which translates to a conservative VaR base limit utilisation of 16.2% on average. Interest rate risk in the banking book (“IRRBB”) can be defined as the reduction in banking book net interest income due to changes in interest rates arising from the different re-pricing characteristics of banking book assets and liabilities. IRRBB is further divided into the following sub-risk types: Diversified Normal Var Exposures (N’million) Desk Maximum Minimum Average 30-Dec-17 31-Dec-16 Limit Bankwide 396 10 188 135 41 1,057 FX Trading 243 5 91 75 35 246 Money Markets Trading 257 6 142 124 9 379 47 1 13 10 4 303 Fixed Income Trading Credit Trading - - - - - 118 Derivatives - - - - - 40 Analysis of PV01 The table to the right shows the PV01 of the money markets banking and the individual trading books as at year end. The money markets trading book PV01 exposure increased to N1.2 million from that of the previous year as a result of T-bills purchase of N101 billion, the money markets banking book PV01 exposure stood at N10.1 million; higher than that of the previous year as a result of T-bills purchase of N27.4 billion, while the fixed income trading book PV01 exposure was N939,000. Overall trading PV01 exposure was N2.2 million against a limit of N9.3 million thus reflecting a very conservative exposure utilisation. PVO1 (NGN’000) Money market trading book Fixed income trading book Credit trading book Derivatives trading book Total trading book Money market banking book 31-Dec-17 31-Dec-16 Limit 1,213 218 2,998 939 104 2,755 - - 1,032 - - 405 2,151 322 9,300 10,057 8,430 11,800 The group’s approach to managing IRRBB is governed by prudence and is in accordance with the applicable laws and regulations, best international practice and the competitive situation within which it operates in financial markets. Interest rate risk is transferred to and managed within the bank’s treasury operations under supervision of ALCO. Measurement of IRRBB •Repricing risk referring to the timing differences in the maturity (fixed rate) and repricing (floating rate) of assets and liabilities. •Yield curve risk arising when unanticipated shifts in the yield curve have adverse effects on the group’s income. •Basis risk arising from the imperfect correlation in the adjustment of the rates earned and paid on different instruments with otherwise similar repricing characteristics. •Optionality risk arising from the options embedded in bank asset and liability portfolios, providing the holder with the right, but not the obligation, to buy, sell, or in some manner alter the cash flow of an instrument or financial contract. •Endowment risk referring to the interest rate risk exposure arising from the net differential between interest rate insensitive assets such as non-earning assets and interest rate insensitive liabilities such as non-paying liabilities and equity. Approach to managing interest rate risk on positions in the banking book Banking-related market risk exposure principally involves the management of the potential adverse effect of interest movements on banking book earnings (net interest income and banking book mark-to-market profit or loss). The analytical technique used to quantify IRRBB is an earnings based approach. A dynamic, forward-looking net interest income forecast is used to quantify the bank’s anticipated interest rate exposure. Desired changes to a particular interest rate risk profile are achieved through the restructuring of on-balance sheet repricing or maturity profiles. All assets and liabilities are allocated to gap intervals based on either their repricing or maturity characteristics. However, assets and liabilities for which no identifiable contractual repricing or maturity dates exist are allocated to gap intervals based on behavioural profiling. The impact on net interest income due to interest rate changes cover 12 months of forecasting and allows for the dynamic interaction of payments, new business and interest rates. The analyses are done under stressed market conditions in which the banking book is subjected to an upward 300 basis points (2016: 400 basis points) and downward 350 basis points (2016: 200 basis points) parallel rate shocks for local currency and 100 basis points (2016: 100 basis points) upward and downward parallel rate shocks for foreign currency positions. The table below shows the sensitivity of the bank’s net interest income in response to standardised parallel rate shocks. 31 December 2017 NGN USD Other Increase in basis points 300 100 100 NGNm 4,808 264 (56) 350 100 100 NGNm (6,644) (832) 56 400 100 100 NGNm 3,827 601 (65) 200 100 100 (2,556) (546) 65 Sensitivity of annual net interest income Decrease in basis points Sensitivity of annual net interest income Total 5 016 (7,420) 31 December 2016 Increase in basis points Sensitivity of annual net interest income Decrease in basis points Sensitivity of annual net interest income NGNm 4,363 (3,037)
  46. 90 Business review Stanbic IBTC Annual group financial statements for the year ended 31 December 2017 Overview Business review Annual report & financial statements 91 Other information Enterprise risk review (continued) Hedging of endowment risk IRRBB is predominantly the consequence of endowment exposures, being the net exposure of non-rate sensitive liabilities and equity less non-rate sensitive assets. The endowment risk is hedged using marketable liquid instruments in the same currency as the exposure as and when it is considered opportune. Hedge decisions are made by ALCO following careful consideration of the interest rate views to be hedged against, including magnitude, direction, timing and probability, and the exposure to be hedged. Market risk on equity investment The group’s equity and investment risk committee (“GEIRC”) has governance and oversight of all investment decisions. The committee is tasked with the formulation of risk appetite and oversight of investment performance. In this regard, a loss trigger is in place for the non-strategic portion. Concentrations of currency risk – on- and off-balance sheet financial instruments Exposure to currency risks At 31 December 2016 The group takes on exposure to the effects of fluctuations in the prevailing foreign currency exchange rates on its financial position and cash flows. The board sets limits on the level of exposure by currency and in aggregate for both overnight and intra day positions, which are monitored daily. The table below summarises the group’s exposure to foreign currency exchange risk as at 31 December 2017. Cash and balances with central bank USD GBP Euro Others Total Nmillion Nmillion Nmillion Nmillion Nmillion Cash and balances with central bank Pledged asset 196,431 187,599 4,424 11,741 1,153 401,348 43,240 - - - - 43,240 Derivative assets 11,044 8 - - - 11,052 Trading securities 143,195 8,284 - - - 151,479 Financial investments 316,266 375 - - - 316,641 Asset held for sale Loans and advances to customers Loans and advances to banks Other assets 114 - - - - 114 194,715 168,990 198 8,173 12 372,088 8,086 1,509 28 - - 9,623 47,523 1,895 10 14 - 49,442 960,614 368,660 4,660 19,928 1,165 1,355,027 Total Nmillion 140,417 149,899 3,172 7,144 719 301,351 16,855 - - - - 16,855 - - - - 28,303 Derivative assets Financial investments 14,282 35 - - - 14,317 252,822 1 - - - 252,823 112 - - - - 112 12,917 2,347 - - - 15,264 195,786 156,475 72 631 1 352,965 31,155 683 58 2 (1) 31,897 692,649 309,440 3,302 7,777 719 1,013,887 5,325 - - - - 5,325 Derivative liabilities 11,754 34 - - - 11,788 Deposits and current accounts from banks 53,692 - - 74 - 53,766 399,968 156,981 2,308 1,363 349 560,969 37,253 58,784 - - - 96,037 Financial liabilities Trading liabilities Financial assets Others Nmillion 28,303 Other financial assets Naira Euro Nmillion Trading assets Loans and advances to banks Nmillion GBP Nmillion Pledged assets Loans and advances to customers At 31 December 2017 USD Nmillion Financial assets Asset held for sale Concentrations of currency risk – on- and off-balance sheet financial instruments Naira Nmillion Deposits and current accounts from customers Other borrowings Subordinated debt 15,713 12,251 - - - 27,964 Other financial liabilitiies (restated) 56,745 75,360 881 3,251 172 136,409 580,450 303,410 3,189 4,688 521 892,258 Net on-balance sheet financial position 112,199 6,030 113 3,089 198 121,629 Off balance sheet 25,009 26,944 228 2,220 742 55,143 Financial liabilities Derivative liabilities Trading liabilities Deposits and current accounts from banks Deposits and current accounts from customers Subordinated debt Other liabilities Other borrowings Net on-balance sheet financial position Off balance sheet 2,584 8 - - - 2,592 62,449 - - - - 62,449 23,556 33,223 2 4,860 80 61,721 438,537 301,476 4,029 9,489 111 753,642 15,784 13,262 - - - 29,046 133,900 50,698 549 5,408 743 191,298 15,581 59,311 - - - 74,892 692,391 457,978 4,580 19,757 934 1,175,640 268,223 (89,318) 80 171 231 179,387 13,904 108,762 1,170 29,542 - 153,378 Exchange rates applied Year-end spot rate* 2017 2016 US Dollar 331.16 305 GBP 447.70 377.33 Euro 397.26 321.62 * Some foreign currency borrowings were valued at a rate different from interbank rate due to volatile exchange regime. See note 22 (viii).
  47. 92 Business review Stanbic IBTC Annual group financial statements for the year ended 31 December 2017 Overview Business review Annual report & financial statements Other information Enterprise risk review (continued) Sensitivity analysis Capital management A reasonably possible strengthening or weakening of the US dollar, GBP or Euro against the Naira at 31 December would have affected the measurement of financial instruments denominated in a foreign currency and affected equity and profit or loss by the amounts shown below. This analysis assumes that all other variables, in particular interest rates, remain constant. Capital adequacy The group manages its capital base to achieve a prudent balance between maintaining capital ratios to support business growth and depositor confidence, and providing competitive returns to shareholders. The capital management process ensures that each group entity maintains sufficient capital levels for support of our clients, our business strategy, and regulatory compliance purposes including stress testing. The group ensures that its actions do not compromise sound governance and appropriate business practices and it eliminates any negative effect on payment capacity, liquidity and profitability. A sound capital management is the center of the overall performance landscape, to ensure delivery on its objective of maximising the shareholder’s value. Profit or loss Effect in Nmillion Equity, net of tax Strengthening Weakening Strengthening Weakening USD (20% movement) (17,864) 17,864 (12,505) 12,505 GBP (10% movement) 8 (8) 6 (6) EUR (5% movement) 9 (9) 6 (6) 1,206 (1,206) 844 (844) At 31 December 2017 At 31 December 2016 USD (5% movement) GBP (2% movement) 11 (11) 8 (8) EUR (1% movement) 154 (154) 108 (108) Basel II framework The Basel II framework stipulates a minimum level of capital that banks must maintain to ensure that they can meet their obligations, cover unexpected losses; and can, very importantly, promote public confidence. It also specifies comprehensive disclosure requirements for banks operating under the framework. The Basel II framework is based on three pillars: •Pillar I - Minimum Capital Requirements. This details various approaches to measure and quantify capital required for the three major risk components that a bank faces: credit risk, market risk and operational risk. Stanbic IBTC has adopted the Standardised Approach for Credit and Market Risk and the Basic Indicator Approach for Operational Risk. • Pillar II - Supervisory Review. This is structured along two separate but complementary stages: the Internal Capital Adequacy Assessment Process (“ICAAP”), and the Supervisory Review and Evaluation process (“SREP”). The bank conducts a self-assessment of its internal capital requirements via the ICAAP whilst the Central Bank of Nigeria (“CBN”) conducts its assessment of the bank via the SREP. •Pillar III – Market Discipline allows market participants access information on risk exposure and risk management policies and procedures through disclosures. The bank through this Pillar III Disclosures report provides an overview of its risk management practices in line with the CBN Guidance Notes on Pillar III Disclosures. The Pillar III Disclosures Report will be published on a bi-annual basis and will be made available through the company’s website at www.stanbicibtcbank.com. Capital adequacy Regulatory capital adequacy is measured based on Pillar 1 of the Basel II capital framework. Capital adequacy ratio is calculated by dividing the capital held by total risk-weighted assets. Risk weighted assets comprise computed risk weights from credit, operational and market risks associated with the business of the bank. Notional risk weighted assets for market risk is calculated using the standardised approach while operational risk is determined using the basic indicator approach. Management monitors the capital adequacy ratio on a proactive basis. Throughout the period under review, Stanbic IBTC Group operated above its targeted capitalisation range and well over the minimum regulatory capital adequacy ratio of 10% (for banks) as mandated by CBN. The Central Bank of Nigeria adopted the Basel II capital framework with effect from 1 October 2014 and revised the framework in June 2015. Stanbic IBTC Group has been compliant with the requirements of Basel II capital framework since it was adopted. The main movements in regulatory capital in 2017 include the increase in capital adequacy ratio to 23.5% due to a N46 billion increase in total regulatory capital. The increase in total regulatory capital was as a result of the following factors: Regulatory capital The group’s regulatory capital is divided into two tiers: • Tier 1 capital increased by N40 billion largely as a result of an increase in retained earnings of N35 billion •Tier 1 capital which comprises share capital, share premium, retained earnings and reserves created by appropriations of retained earnings. The closing balance on deferred tax assets is deducted in arriving at Tier 1 capital; • Tier 2 capital increased by N5 billion •Tier 2 capital which includes subordinated debts and other comprehensive income. Subordinated debt at the end of the period totalled N28 billion and is broken down as follows: •Naira denominated subordinated debt totalling N15.6 billion issued on 30 September 2014 at an interest rate of 13.25% per annum; • N100 million Naira denominated subordinated debt issued on 30 September 2014. Interest is payable semi-annually at 6-month Nigerian Treasury Bills yield plus 1.20%. It has a tenure of 10 periods and is callable after 5 periods from the issue date. The debt is unsecured; • USD denominated term subordinated non-collaterised facility of USD40 million obtained from Standard Bank of South Africa effective 31 May 2013. The facility expires on 31 May 2025 and is repayable at maturity. Interest on the facility is payable semi-annually at LIBOR (London Inter Bank Offered Rate) plus 3.60%. Total eligible Tier 2 Capital as at 31 December 2017 was N34 billion (2016: N29 billion). Investment in unconsolidated subsidiaries and associations are deducted from Tier 1 and 2 capital to arrive at total regulatory capital. • Risk Weighted Assets (“RWA”) increased by N172 billion as a result of increases in credit and operational RWA 93
  48. 94 Business review Stanbic IBTC Annual group financial statements for the year ended 31 December 2017 Overview Business review Annual report & financial statements 95 Other information Enterprise risk review (continued) B II 31 Dec 2017 Nmillion B II 31 Dec 2016 Nmillion 179,270 138,831 5,025 5,000 Share premium 66,945 65,450 Share premium 42,469 42,469 General reserve (retained profit) 85,227 50,157 General reserve (retained profit) 65,767 40,664 Capital management – BASEL II regulatory capital Stanbic IBTC Group Tier 1 Paid-up Share capital SMEEIS reserve Capital management – BASEL II regulatory capital Stanbic IBTC Bank PLC Tier 1 Paid-up share capital B II 31 Dec 2016 Nmillion 133,317 108,228 1,875 1,875 1,039 1,039 1,039 1,039 AGSMEIS reserve 749 - AGSMEIS reserve 749 - Statutory reserve 16,863 32,576 Statutory reserve 21,405 22,153 264 (19,087) 13 28 Non controlling interests 3,159 3,696 - - Less: regulatory deduction 9,506 9,351 Less: regulatory deduction 8,976 9,084 - - Deferred Tax Assets 8,321 8,321 8,901 8,638 605 713 605 713 50 50 Other reserves Goodwill Deferred tax assets Other intangible assets Current year losses SMEEIS reserve B II 31 Dec 2017 Nmillion Other reserves Non controlling interests Other intangible assets Investment in the capital of financial subsidiaries - Excess exposure(s) over single obligor without CBN approval Under impairment - - Exposures to own financial holding company Reciprocal cross-holdings in ordinary shares of financial institutions - - Unsecured lending to subsidiaries within the same group Investment in the capital of banking and financial institutions - - Eligible Tier I capital Excess exposure(s) over single obligor without CBN approval - - Exposures to own financial holding company - - Tier II Unsecured lending to subsidiaries within the same group - - Hybrid (debt/equity) capital instruments 169,763 129,480 34,239 28,906 Eligible Tier I capital Hybrid (debt/equity) capital instruments Subordinated term debt Other comprehensive income (OCI) - - 29,046 27,964 - 99,144 32,787 28,149 - - 29,046 27,964 3,741 185 50 50 Reciprocal cross-holdings in ordinary shares of financial institutions - - Investment in the capital of banking and financial institutions - - 50 50 - - Subordinated term debt Less: regulatory deduction 5,193 942 Less: regulatory deduction - - Exposures to own financial holding company Reciprocal cross-holdings in ordinary shares of financial institutions - - Unsecured lending to subsidiaries within the same group Investment in the capital of banking and financial institutions - - Investment in the capital of financial subsidiaries - - Exposures to own financial holding company - - Unsecured lending to subsidiaries within the same group - - Eligible Tier II capital Total regulatory capital 34,239 28,906 204,002 158,386 Investment in the capital of financial subsidiaries - - 32,737 28,099 157,078 127,243 Credit risk 574,948 458,266 Operational risk 179,605 146,986 13,270 1,917 767,823 607,169 Eligible Tier II capital Risk weighted assets: Market risk Risk weighted assets: - 124,341 Other comprehensive income (OCI) Tier II - Total risk weight Credit risk 604,262 486,430 Operational risk 249,669 207,092 Total capital adequacy ratio 20.5% 21.0% 13,270 1,917 Tier I capital adequacy ratio 16.2% 16.3% 867,200 695,439 Total capital adequacy ratio 23.5% 22.8% Tier I capital adequacy ratio 19.6% 18.6% Market risk Total risk weight
  49. 97 Foundations designed for in our people , skills and strengths We know the soundest investment is one that is based in people, for people. Which is why we invest in everyone in different ways, because we believe that knowledge and its empowerment is pivotal to our success. Be it through our Assets management experts, our Youth Leadership Series, the schools we have donated to for the betterment of young Nigerians or even podcasts for our customers on how they can save, invest or simply learn more about how banking works, we want everyone to grow with us. This is what drives us at Stanbic IBTC Annual report & financial statements 98 100 106 107 122 124 128 130 136 137 244 246 Board of directors Directors’ report Statement of directors’ responsibility Corporate governance report Report of the audit committee Independent auditors report Consolidated and separate statement of financial position Consolidated and separate statement of profit and loss Consolidated and separate statement of cash flows Notes to the consolidated and separate financial statement Annexure A Annexure B
  50. 98 Annual report & financial statements Stanbic IBTC Annual group financial statements for the year ended 31 December 2017 Overview Business review Annual report & financial statements Other information Board of Directors Basil Omiyi (con) Salamatu. H. Suleiman Chairman BSc, PGD Appointed: 2015 Independent Non-executive LLB, BL, LLM Appointed: 2016 Directorships: David Michaels Nigeria Limited, SEPLAT Petroleum Development Company, Taf Nigerian Homes Limited, RivTaf Nigeria Limited Yinka Sanni Ngozi Edozien Chief Executive, BSc, MBA, AMP (Harvard Business School) Appointed: 2017 Independent non-executive BA, MBA Appointed: 2015 Directorships: The Nigeria Economic Summit Group; Stanbic IBTC Bank PLC; Stanbic IBTC Pension Managers Limited; Stanbic IBTC Asset Management Limited; Stanbic IBTC Insurance Brokers Limited, Stanbic IBTC Trustees Limited; Stanbic IBTC Capital Limited; Stanbic IBTC Ventures Limited; Stanbic IBTC Investments Limited; Stanbic IBTC Stockbrokers Limited Committee member: Board Risk Management Committee; Board Legal Committee; Board IT Committee; Board Nominations Committee Dominic Bruynseels Prof. Fabian Ajogwu (san) Non-executive BA Hons, MBA, Associate of Institute of Bankers, UK, Diploma in Financial Studies Appointed: 2012 Independent non-executive LL.B, B.L, LL.M, MBA, Ph.D. Appointed: 2017 Directorships: Standard Bank de Angola, S.A, Stanbic Bank Ghana Limited, Standard Bank RDC SARL, Stanbic IBTC Pension Managers Limited Committee member: Board Remunerations Committee, Board Risk Management Committee, Board Nominations Committee, Board Legal Committee, Board IT Committee Directorships: Urshday Limited, Nep Mall Limited, Elysium Dem Nigeria Limited, Gray-Bar Alliance Limited, Kenna Partners Committee member: Board Remunerations Committee, Board Legal Committee, Board Risk Management Directorships: Barloworld, Vlisco Group, PZ Cussons PLC, African Leadership Network Advisory Board, Guinness Nigeria Plc Committee member: Board IT Committee, Board Risk Management Committee, Ad-hoc Head Office Property Sub-Committee. Committee Lilian Ifeoma Esiri Ratan Mahtani Non-executive LLB, BL, LLM Appointed: 2012 Non-executive Appointed: 2012 Directorships: Stanbic IBTC Asset Management Limited, Podini International Limited, Veritas Geophysical Nigeria Limited, Ashbert Leisures Limited, Ashbert Beverages Limited, Ashbert Oil and Gas Limited Committee member: Board Risk Management Committee, Audit Committee, Board Legal Committee Ballama Manu Simpiwe Tshabalala Non-executive BSc, MSc Appointed: 2015 Non-executive BA; LLB; LLM Appointed: August 2013 Directorships: Sicom Capital Services Limited, Alpine Investments Limited, Modibo Adamu University of Technology, Shell Nigeria Closed Pension Fund Administrator Limited Committee member: Board Risk Management Committee, Board IT Committee Directorships: Stanbic IBTC Bank PLC; Standard Bank of South Africa; Standard Bank Group; Banking Association of South Africa. Committee: Board Remunerations Committee; Board Nominations Committee Directorships: Aegean Investments Limited, Churchgate Nigeria Limited, First Century International Limited, First Continental Properties Ltd, T F Kuboye and Co, International Seafoods Limited Committee member: Audit Committee Directorships: Forte Oil Limited; Flour Mills of Nigeria PLC; Primechoice Investments Limited; S & M Investments Limited Committee member: Board Remunerations Committee; Board Legal Committee 99
  51. 100 Annual report & financial statements Stanbic IBTC Annual group financial statements for the year ended 31 December 2017 Overview Business review Annual report & financial statements 101 Other information Directors’ report For the year ended 31 December 2017 The directors present their annual report on the affairs of Stanbic IBTC Holdings PLC (“the company”) and its subsidiaries (“the group”), together with the consolidated financial statements and auditor's report for the year ended 31 December 2017. Asset Management Limited, Stanbic IBTC Capital Limited, Stanbic IBTC Investments Limited, Stanbic IBTC Stockbrokers Limited, Stanbic IBTC Ventures Limited, Stanbic IBTC Insurance Brokers Limited and Stanbic IBTC Trustees Limited. a. Legal form The company prepares consolidated financial statements, which include separate financial statements of the company. The company was incorporated in Nigeria under the Companies & Allied Matters Act (“CAMA”) as a public limited liability company on 14 March 2012. The company’s shares were listed on 23 November 2012 on the floor of The Nigerian Stock Exchange. b. Principal activity and business review The principal activity of the company is to carry on business as a financial holding company, to invest and hold controlling shares, in as well as manage equity in its subsidiary companies. The company has nine direct subsidiaries, namely: Stanbic IBTC Bank PLC, Stanbic IBTC Pension Managers Limited, Stanbic IBTC d. Directors' shareholding The direct interests of directors in the issued share capital of the company as recorded in the register of directors shareholding and/or as notified by the directors for the purposes of section 275 and 276 of CAMA and the listing requirements of The Nigerian Stock Exchange are as follows: Direct shareholding Number of Ordinary Shares of Stanbic IBTC Holdings PLC held as at 31 December 2017 Number of Ordinary Shares of Stanbic IBTC Holdings PLC held as at 31 December 2016 Basil Omiyi - - Yinka Sanni1 - - Dominic Bruynseels - - Salamatu Suleiman - - 42,894,194 42,776,676 c. Operating results and dividends The group's gross earnings increased by 35.81%, while profit before tax increased by 64.38% for the year ended 31 December 2017. The board recommended the approval of a final dividend of 50 kobo per share (31 Dec 2016: 5 kobo per share) for the year ended 31 December 2017. Highlights of the group's operating results for the year under review are as follows: Ifeoma Esiri 2 Ratan Mahtani 28,544,005 28,465,803 Ngozi Edozien 18,563 18,563 Ballama Manu 151,667 151,667 - - 3 Simpiwe Tshabalala 31 Dec 2017 Group Nmillion 31 Dec 2016 Group Nmillion 31 Dec 2017 Company Nmillion 31 Dec 2016 Company Nmillion Gross earnings 212,434 156,425 29,922 2,528 Profit before tax 61,166 37,209 27,545 1,501 (12,785) (8,689) (2,380) (892) Profit after tax 48,381 28,520 25,165 609 Non controlling interest (2,186) (3,878) - - Profit attributable to equity holders of the parent 46,195 24,642 25,165 609 Dividend proposed/paid (final) 5,025 500 5,025 500 Dividend paid (interim) 6,000 - 6,000 - Income tax 1 Mr Yinka Sanni has indirect shareholding amounting to 5,005,466 ordinary shares through SITL The Sanni Family Trust. 2 Mrs Ifeoma Esiri has indirect shareholding amounting to 2,666,670 ordinary shares through Ashbert Limited. 3 Mr Ratan Mahtani has indirect shareholdings amounting to 1,083,670,994 ordinary shares (Dec 2016: 1,064,555,439) respectively through First Century International Limited, Churchgate Nigeria Limited, International Seafoods Limited, Foco International Limited and RB Properties Limited. In accordance with the provisions of Company’s Articles of Association and the Companies and Allied Matters Act CAP C20 Laws of the Federation of Nigeria, the Directors to retire by rotation at this Annual General Meeting (AGM) are Messrs. Dominic Bruynseels, Yinka Sanni and Ms. Ngozi Edozien. With the exception of Mr. Dominic Bruynseels, who will not be seeking a re-election, the other two retiring Directors, being eligible, are offering themselves for re-election. e. Directors’ interest in contracts f. Property and equipment The Company currently has a number of Technical and Management Service Agreements with its subsidiaries, which provide for the provision of shared services to these subsidiaries in line with CBN Regulation for Holding Companies. These services are provided at arm's length and appropriate fees charged in line with best practice. Information relating to changes in property and equipment is given in note 17 to the financial statements. In the directors’ opinion the disclosures regarding the group’s properties are in line with the related statement of accounting policy of the group. One of the Bank's branches located on the Ground Floor at Churchgate Towers, PC 30, Churchgate Street, Victoria Island, Lagos, which is owned by First Continental Properties Limited, and Mr. Ratan Mahtani is a Director on the Board of this Company. The lease was renewed in March 2015, for a period of three years at a cost of N146 million. Stanbic IBTC Bank (a subsidiary of the Company) has a security equipment maintenance contract with Allegiance Technologies Limited whose director is a close family member of Mr. Moses Adedoyin who is a former non-executive director of Stanbic IBTC Bank (a subsidiary of the Company). The contract covers provision of maintenance services for CCTV and electronic access control systems to the bank. Payment made within the year was N24.74million.
  52. 102 Annual report & financial statements Stanbic IBTC Annual group financial statements for the year ended 31 December 2017 Overview Business review Annual report & financial statements 103 Other information Directors’ report (continued) g. Shareholding analysis j. Dividend history and unclaimed dividend as at 31 December 2017 The shareholding pattern of the company as at 31 December 2017 is as stated below: Total dividend amount declared Dividend type N Dividend per share N Percentage unclaimed % Final 2,170,298,271 20 kobo 3,696,332 0.17 2,170,297,800 20 kobo 48,156,001 2.22 3,375,000,000 30 kobo 612,484 0.02 4,218,750,000 25 kobo 3,151,000 0.07 Final 6,750,000,000 40 kobo 236,322,519 3.50 Final 5,062,500,000 30 kobo 247,713,548 4.89 187,731,036 5.79 No. of shareholders Percentage of shareholders No. of holding Percentage holdings 1-1,000 38,927 41.26 20,876,138 0.21 2005 1,001-5,000 36,234 38.41 75,010,745 0.75 2006 Final 5,001-10,000 9,314 9.87 57,898,179 0.58 2007 Interim 10,001-50,000 7,677 8.14 144,351,126 1.44 2007 Final 50,001-100,000 1,109 1.18 70,347,244 0.70 2008 100,001-500,000 808 0.86 150,642,851 1.50 2009 500,001-1,000,000 Share range Year end Net dividend amount unclaimed as at 31 Dec 2017 114 0.12 72,107,982 0.72 2010 Final 3,240,215,108 39 kobo 1,000,001-5,000,000 82 0.09 166,658,735 1.66 2011 Interim 1,687,500,000 10 kobo 28,470,451 1.69 5,000,001-10,000,000 17 0.02 124,336,305 1.24 2012 Final 900,570,889 10 kobo 18,250,450 2.03 10,000,001-50,000,000 38 0.04 931,519,004 9.27 2013 Interim 6,304,041,033 70 kobo 154,180,646 2.45 50,000,001-100,000,000 12 0.01 857,323,698 8.53 2013 Final 901,992,337 10 kobo 24,360,890 2.70 100,000,001-10,000,000,000 Grand Total Foreign shareholders 11 0.01 7,378,393,724 73.42 2014 Interim 9,920,077,516 110 kobo 249,315,618 2.51 94,343 100 10,049,465,731 100 2014 Final 1,352,701,559 15 kobo 34,296,830 2.54 2015 Interim 8,235,882,607 90 kobo 221,620,659 2.69 158 - 5,461,742,246 54.47% 2015 Final 210,646,919 5 kobo 17,000,500 8.07 2016 Final 488,001,035 5 kobo - - 2017 Interim 5,603,519,759 60 kobo - - Total 1,474,878,964 h. Substantial interest in shares According to the register of members as at 31 December 2017, no shareholder held more than 5% of the issued share capital of the company except the following: 2017 Shareholder Stanbic Africa Holdings Limited (SAHL) First Century International Limited 2016 k. Dividend history and unclaimed dividend as at 31 December 2017 (continued) No. of shares held Percentage shareholding No of shares held Percentage shareholding 5,333,569,874 53.07% 5,318,957,354 53.20% 760,504,089 7.57% 747,089,076 7.47% i. Share capital history Authorised (No. of shares) ‘000 As at date, the outstanding dividend for 2016 and 2017 had not fallen due as unclaimed dividend Issued and fully paid up N’000 Year Increase Cumulative Increase Cumulative 2012 5,000,000 5,000,000 5,000,000 5,000,000 2015 1,500,000 6,500,000 - 5,000,000 2017 - - 24,733 5,024,733 The total unclaimed dividend fund as at 31 December 2017 amounted to N1,475 million (Dec. 2016: N1,540 million) – see note 26.1. A sum of N1,301 million of the fund balance is held in an investment account (money market mutual fund) managed by Stanbic IBTC Asset Management Limited (Dec. 2016: N723 million), while the balance is held in demand deposits maintained with Stanbic IBTC Bank PLC. Total income earned on the investment account and recognised by the company for the year ended 31 December 2017 was N141 million (Dec 2016: N61 million) – see notes 31.1 and 31.5.
  53. 104 Annual report & financial statements Stanbic IBTC Annual group financial statements for the year ended 31 December 2017 Overview Business review Annual report & financial statements 105 Other information Directors’ report (continued) l. Donations and Charitable Gifts The group and company made contributions to charitable and non – political organisations amounting to N436.63 million and N142.81 million respectively (Dec 2016: Group – N121.75 million; Company – N83.97 million) during the year. Group N‘000 Company N‘000 180,000 - Adopted School Project – Lagos Progressive School, Surulere, Lagos 67,608 17,328 Kaduna State Business Incubator Project 25,000 - Chartered Institute of Stockbrokers (“CIS”) Secretariat Building Project 25,000 Lagos State Security Trust Fund 25,000 North East Children's Trust Fund 20,000 Nigerian Police Force – Purchase of Cars and Security Equipments* Group N‘000 Company N‘000 Lagos Cheshire Home for the Disabled 80 80 Royal Diamond Orphanage, Ikeja, Lagos 75 75 Bales of Mercy Orphanage, Gbagada, Lagos 75 75 25,000 Sickle Cell Foundation Nigeria 50 50 25,000 Companionate Orphanage Home 43 43 20,000 Total 436,629 142,812 Lagos State Healthcare Centre, Ebute Metta, Lagos 17,511 - Institute of Human Virology Nigeria – Contribution to Research Centre 10,000 10,000 Society for Family Health – development of point of use water guard in Otta, Ogun State Continued: *B  ank commitments to The Nigerian Police Force for the purchase of cars and security equipment, as decided by the Body of Bank CEOs to boost national security which was ratified at the 331st meeting of the Bankers' Committee held on 09 February 2017. 10,000 10,000 CBN's Financial Literacy Campaign 7,249 575 Nigeria Prisons Training School, Kaduna 7,205 - Support for Benue State Flood Victims 4,998 4,998 National Orthopaedic Special School, Igbobi, Lagos 3,500 3,500 Together4alimb Education Trust Fund – South South 3,000 3,000 Together4alimb Education Trust Fund – North Central 3,000 3,000 Lagos University Teaching Hospital - Renovation of Accident and Emergency Ward 3,000 3,000 Human Development Initiatives (“HDI”) Onike, Lagos 2,500 2,500 Kano State Appeal Fund Raising for Victims of Fire Disasters 2,500 2,500 Together4alimb – limb project 2,286 1,328 The Nigeria Foundation for the Support of Victims of Terrorism - Victims Support Fund (VSF) 2,208 - Bank Directors Association of Nigeria – Head Office Project 2,000 2,000 Makoko Community Children – Insecticide mosquito treated nets on World Malaria Day 1,887 1,887 Together4alimb Education Trust Fund – South East 1,500 1,500 Center for Values in Leadership – Support for School Project in Delta State 1,500 1,500 Save the Children Project 1,020 - CIS 2017 National Workshop and Annual Conference 1,000 - Health safety and welfare at work 850 - The company enforces strict health and safety rules and practices at the work environment which are reviewed and tested regularly. The company’s staff are covered under a comprehensive health insurance scheme pursuant to which the medical expenses of staff and their immediate family are covered up to a defined limit. Edo State sensitisation program on Contributory pensions scheme Child Correctional Center, Idi – Araba, Lagos 811 811 Nigerian Red Cross Society Motherless Babies' Home 558 558 Kaduna State Muslim Pilgrims Welfare Board 500 - Nigerian Red Cross Society – “Give Love” programme 500 500 Peculiar Saint Orphanage & Special Needs Centre, Ajah, Lagos 420 420 Salvation Army 411 - Ken Ade Private School Makoko 348 348 Heart of Gold Children’s Hospice Surulere 348 348 Web of Hearts Migrants & IDP Camp, Ibeju-Lekki, Lagos 265 265 National Association of Nigerian students – Logistics support 250 250 Pure Souls Learning Foundation for Autism, Ikeja GRA, Lagos 225 225 Bola-Mofo Zion Shelter 150 150 Sokoto Bankers Committee dinner 100 - Youth Rescue & Care Initiative 100 - m. Events after the reporting date There were no events after the reporting date which could have a material effect on the financial position of the group as at 31 December 2017 which have not been recognised or disclosed. n. Human resources Employment of physically challenged The company continues to maintain a policy of giving fair consideration to applications for employment made by physically challenged with due regard to their abilities and aptitude. The company’s policy prohibits discrimination against physically challenged persons or persons with HIV in the recruitment, training and career development of its employees. In the event of members of staff becoming physically challenged, efforts will be made to ensure that, as far as possible, their employment with company continues and appropriate training is arranged to ensure that they fit into the company’s working environment. Fire prevention and firefighting equipment are installed in strategic locations within the company’s premises. The company has both Group Personal Accident and Workmen’s Compensation Insurance cover for the benefit of its employees. It also operates a contributory pension plan in line with the Pension Reform Act 2014. o. Employee involvement and training The company ensures, through various fora, that employees are kept informed on matters concerning them. Formal and informal channels are employed for communication with employees with an appropriate two – way feedback mechanism. In accordance with the company’s policy of continuous staff development, training facilities are provided in the group’s well equipped Training School (the Blue Academy). Employees of the Company attend training programmes organised by the Standard Bank Group (“SBG”) in South Africa and elsewhere and participate in programmes at the Standard Bank Global Leadership centre in South Africa. The company also provides its employees with on the job training in the company and at various Standard Bank locations. p. Auditors The auditors, Messrs. KPMG Professional Services, having satisfied the relevant corporate governance rules on their tenure in office, have indicated their willingness to continue in office as auditors. In accordance with Section 357 (2) of the Companies and Allied Matters Act of Nigeria, the auditors will be re-appointed at the next annual general meeting without any resolution being passed. By order of the Board Chidi Okezie Company Secretary FRC/2013/NBA/00000001082 01 February 2018
  54. 106 Annual report & financial statements Stanbic IBTC Annual group financial statements for the year ended 31 December 2017 Statement of directors’ responsibilities in relation to the financial statements Overview Business review Annual report & financial statements Other information Corporate governance report For the year ended 31 December 2017 Introduction The company is a member of the Standard Bank Group, which holds a 53.07% equity holding (through Stanbic Africa Holdings Limited) in the company. The directors accept responsibility for the preparation of the annual consolidated and separate financial statements that give a true and fair view in accordance with International Financial Reporting Standards (“IFRS”) and in the manner required by the Companies and Allied Matters Act, Cap C. 20, Laws of the Federation of Nigeria, 2004, the Financial Reporting Council of Nigeia Act, 2011 and the Banks and Other Financial Institutions Act, Cap B3, Laws of the Federation of Nigeria, 2004 and relevant Central Bank of Nigeria (“CBN”) Guidelines and Circulars. The directors further accept responsibility for maintaining adequate accounting records as required by the Companies and Allied Matters Act Cap C.20, Laws of the Federation of Nigeria, 2004 and for such internal control as the directors determine is necessary to enable the preparation of financial statements that are free from material misstatement whether due to fraud or error. The directors have made an assessment of the Group and Company’s ability to continue as a going concern and have no reason to believe the Group and Company will not remain a going concern in the year ahead. Signed on behalf of the directors by: Basil Omiyi Yinka Sanni Chairman FRC/2016/IODN/00000014093 01 February 2018 Chief Executive FRC/2013/CISN/00000001072 01 February 2018 Standard Bank Group (“SBG”) is committed to implementing initiatives that improve corporate governance for the benefit of all stakeholders. SBG’s board of directors remains steadfast in implementing governance practices that comply with international best practice, where substance prevails over form. Subsidiary entities within SBG are guided by these principles in establishing their respective governance frameworks, which are aligned to SBG’s standards in addition to meeting the relevant jurisdictional requirements in their areas of operation. Stanbic IBTC Holdings PLC (“the company”), and its subsidiaries (“the group”), as a member of SBG, operate under a governance framework which enables the board to balance its role of providing oversight and strategic counsel with its responsibility to ensure conformance with regulatory requirements, group standards and acceptable risk tolerance parameters. The direct subsidiaries of the company are: Stanbic IBTC Bank PLC, Stanbic IBTC Asset Management Limited, Stanbic IBTC Pension Managers Limited, Stanbic IBTC Insurance Brokers Limited, Stanbic IBTC Trustees Limited, Stanbic IBTC Stockbrokers Limited, Stanbic IBTC Ventures Limited, Stanbic IBTC Investments Limited and Stanbic IBTC Capital Limited and these subisidiaries have their own distinct boards and take account of the particular statutory and regulatory requirements of the businesses they operate. These subsidiaries operate under a governance framework that enables their boards to balance their roles in providing oversight and strategic counsel with their responsibility for ensuring compliance with the regulatory requirements that apply in their areas of operation and the standards and acceptable risk tolerance parameters adopted by the company. In this regard they have aligned their respective governance frameworks to that of the company. As Stanbic IBTC Holdings PLC is the holding company for the subsidiaries in the group, the company’s board also acts as the group board, with oversight of the full activities of the group. A number of committees have been established by the company’s board that assists the board in fulfilling its stated objectives. The committees’ roles and responsibilities are set out in their mandates, which are reviewed periodically to ensure they remain relevant. The mandates set out their roles, responsibilities, scope of authority, composition and procedures for reporting to the board. Codes and regulations The company operates in highly regulated markets and compliance with applicable legislation, regulations, standards and codes, including transparency and accountability, remain an essential characteristic of its culture. The board monitors compliance with these by means of management reports, which include information on the outcome of any significant interaction with key stakeholders such as regulators. The group complies with all applicable legislation, regulations, standards and codes. Shareholders’ responsibilities The shareholders’ role is to approve appointments to the board of directors and the external auditors as well as to grant approval for certain corporate actions that are by legislation or the company’s articles of association specifically reserved for shareholders. Their role is extended to holding the board accountable and responsible for efficient and effective corporate governance. Developments during the year ended 31 December 2017 During the year under review, the following developments in the company’s corporate governance practices occurred: • The Board conducted an annual review of its Mandates and the Mandates of the Board and Executive Committees and approved the revised Mandates. • There was a continued focus on directors training via attendance at various courses such as Effective Corporate Governance & the Role of Company Secretaries in building Progressive Boards, London School of Bank Risk Management, 2017 Global CEO Conference – Module II in addition, and as with prior years, the Board held its annual Board Strategy Session in order to review the overall Group Strategy. • The Chairman of the Board, Mr Atedo Peterside, CON, resigned on 31 March 2017 and was replaced by Mr. Basil Omiyi, CON. • Prof. Fabian Ajogwu, SAN, was appointed as an Independent NonExecutive Director following receipt of all required regulatory approvals. • Mr. Yinka Sanni was appointed Chief Executive of the Company following the resignation of Mrs. Sola DavidBorha, who assumed a new role as Chief Executive, Africa Regions at Standard Bank. All regulatory and shareholders’ approvals for Mr. Sanni’s appointment have been obtained. • T he Company listed additional 49,465,731 ordinary shares of 50 kobo each via two scrip dividend issues, which increased the total issued and paid up shares of the Company to 10,049,465,731 ordinary shares Focus areas for 2018 The group intends during 2018 to: • c ontinue the focus on directors’ training via formal training sessions and information bulletins on issues that are relevant; •continue to enhance the level of information provided to and interaction with shareholders, investors and stakeholders generally. 107
  55. 108 Annual report & financial statements Stanbic IBTC Annual group financial statements for the year ended 31 December 2017 Overview Business review Annual report & financial statements Other information Corporate governance report (continued) Board and directors Board structure and composition Ultimate responsibility for governance rests with the board of directors of the company, who ensure that appropriate controls, systems and practices are in place. The company has a unitary board structure and the roles of chairman and chief executive are separate and distinct. The company’s chairman is a non-executive director. The number and stature of nonexecutive directors ensure that sufficient consideration and debate are brought to bear on decisions thereby contributing to the efficient running of the board. One of the features of the manner in which the board operates is the role played by board committees, which facilitate the discharge of board responsibilities. The committees each have a board approved mandate that is regularly reviewed. Strategy The board considers and approves the company’s strategy. Once the financial and governance objectives for the following year have been agreed, the board monitors performance against financial objectives and detailed budgets on an on-going basis, through quarterly reporting. Regular interaction between the board and the executive is encouraged. Management is invited, as required, to make presentations to the board on material issues under consideration. Directors are provided with unrestricted access to the company’s management and company information, as well as the resources required to carry out their responsibilities, including external legal advice, at the company’s expense. It is the board’s responsibility to ensure that effective management is in place to implement the agreed strategy, and to consider issues relating to succession planning. The board is satisfied that the current pool of talent available within the company, and the ongoing work to deepen the talent pool, provides adequate succession depth in both the short and long term. Skills, knowledge, experience and attributes of directors The board ensures that directors possess the skills, knowledge and experience necessary to fulfill their obligations. The directors bring a balanced mix of attributes to the board, including: • international and domestic experience; • operational experience; •knowledge and understanding of both the macroeconomic and the microeconomic factors affecting the group; • local knowledge and networks; and •financial, legal, entrepreneurial and banking skills. The credentials and demographic profile of the board are regularly reviewed, to ensure the board’s composition remains both operationally and strategically appropriate. Appointment philosophy The appointment philosophy ensures alignment with all necessary legislation and regulations which include, but are not limited to the requirements of the Central Bank of Nigeria; SEC Code of Corporate Governance; the Companies & Allied Matters Act as well as the legislations of Standard Bank Group’s home country. Consideration for the appointment of directors and key executives take into account compliance with legal and regulatory requirements and appointments to external boards to monitor potential for conflicts of interest and ensure directors can dedicate sufficient focus to the company’s business. The board takes cognisance of the skills, knowledge and experience of the candidate, as well as other attributes considered necessary to the prospective role. The board’s size as at 31 December 2017 was ten (10), comprising one (1) executive director and nine (9) non-executive directors. It is important to note that of the nine (9) non-executive directors, three (3) namely; Mrs. Salamatu Hussaini Suleiman, Ms. Ngozi Edozien and Prof. Fabian Ajogwu, SAN, are Independent Non-Executive Directors in compliance with the CBN Code. The board has the right mix of competencies and experience. Board responsibilities The key terms of reference in the board’s mandate, which forms the basis for its responsibilities, are to: •agree the group’s objectives, strategies and plans for achieving those objectives; •annually review the corporate governance process and assess achievement against objectives; •review its mandate at least annually and approve recommended changes; •delegate to the chief executive or any director holding any executive office or any senior executive any of the powers, authorities and discretions vested in the board’s directors, including the power of sub-delegation; and to delegate similarly such powers, authorities and discretions to any committee and subsidiary company board as may exist or be created from time to time; •determine the terms of reference and procedures of all board committees and review their reports and minutes; •consider and evaluate reports submitted by members of the executive; • ensure that an effective risk management process exists and is maintained throughout the group and its subsidiaries to ensure financial integrity and safeguarding of the group’s assets; •review and monitor the performance of the chief executive and the executive team; •approve capital funding for the group, and the terms and conditions of rights or other issues and any prospectus in connection therewith; •ensure that an adequate budget and planning process exists, performance is measured against budgets and plans, and approve annual budgets for the group; •approve significant acquisitions, mergers, take-overs, divestments of operating companies, equity investments and new strategic alliances by the group; •approve the remuneration of nonexecutive directors on the board and board committees, based on • assume ultimate responsibility for financial, operational and internal systems of control, and ensure adequate reporting on these by committees to which they are delegated; •take ultimate responsibility for regulatory compliance and ensure that management reporting to the board is comprehensive; •ensure a balanced and understandable assessment of the group’s position in reporting to stakeholders; •review non financial matters that have not been specifically delegated to a management committee; and •consider and approve capital expenditure recommended by the executive committee; •specifically agree, from time to time, matters that are reserved for its decision, retaining the right to delegate any of these matters to any committee from time to time in accordance with the articles of association. •consider and approve any significant changes proposed in accounting policy or practice, and consider the recommendations of the statutory audit committee; •consider and approve the annual financial statements, quarterly results and dividend announcements and Delegation of authority The ultimate responsibility for the company and its operations rests with the board. The board retains effective control through a well-developed governance structure of board committees. These committees provide in-depth focus on specific areas of board responsibility. The board delegates authority to the chief executive to manage the business and affairs of the company. The executive committee assists the chief executive when the board is not in session, subject to specified parameters and any limits on the board’s delegation of authority to the chief executive. Membership of the executive committee is set out on page 111. In addition, a governance framework for executive management assists the chief executive in his task. Board-delegated authorities are regularly monitored by the company secretary’s office. The corporate governance framework was adopted by the board on 28 November 2012 and formalised with mandate approvals which were reviewed in July 2017. The corporate governance framework is set out below: Stanbic IBTC HoldCo governance structure Stanbic IBTC Board Shareholders Board Committees Statutory Audit Committee Management Committees Executive Committee •ensure consideration is given to succession planning for the chief executive and executive management; •establish and review annually, and approve major changes to, relevant group policies; notices to shareholders, and consider the basis for determining that the group will be a going concern as per the recommendation of the audit committee; recommendations made by the remuneration committee, and recommend to shareholders for approval; Risk Management Remuneration (REMCO) Nominations Legal Information Technology ADHOC Risk Oversight Committee Internal Financial Control Equity and Investment Risk Committee Operational Risk & Compliance Committee Board Committees Information Strategy & Governance Committee Statutory Committees IT Steering Committee Management Committees This is continuously evolving to meet changing needs and requirements. a New & Amended Products, Business & Services 109
  56. 110 Annual report & financial statements Stanbic IBTC Annual group financial statements for the year ended 31 December 2017 Report of the external consultants on board effectiveness and evaluation Overview Business review Annual report & financial statements Other information Corporate governance report (continued) Induction and training 10 April 2018 The Chairman Stanbic IBTC Holdings PLC The Head Office, IBTC Place Walter Carrington Crescent Victoria Island, Lagos. An induction programme designed to meet the needs of each new director is being implemented. One-on-one meetings are scheduled with management to introduce new directors to the company and its operations. The company secretary manages the induction programme. The CBN Code of Conduct as well as the Securities & Exchange Commission’s code of corporate governance is provided to new directors on their appointment. Directors are kept abreast of all relevant legislation and regulations as well as sector developments leading to changing risks to the organisation on an on-going basis. This is achieved by way of management reporting and quarterly board meetings, which are structured to form part of ongoing training. Directors attended various trainings at different periods during the year that included trainings on Risk Management; enhancing Board performance, Change Management, and Financial Reporting. These trainings were aimed at enhancing the understanding of key issues, and skills of directors. Dear Sir, Executive committee members Report to the Directors of Stanbic IBTC Holdings PLC on the outcome of the 2017 Board Performance Assessment As at 31 December 2017, the Group Executive committee comprised 21 members drawn from key functions within the Company as well as its subsidiaries PricewaterhouseCoopers Limited (“PWC”) was engaged to carry out an evaluation of the Board of Directors of Stanbic IBTC Holdings PLC. (“the Company”) as required by Section 15.1 of the Securities and Exchange Commission (“SEC”) Code of Corporate Governance for Public Companies in Nigeria (“the Code or “SEC Code”). The evaluation covers the Board’s structure, composition, responsibilities, processes, relationships and performance of the committees for the year ended 31 December 2017. S/N Name Responsibility i Yinka Sanni Chief Executive, Stanbic IBTC Holdings PLC ii Demola Sogunle Chief Executive, Stanbic IBTC Bank PLC iii Wole Adeniyi Executive Director, Business support, Stanbic IBTC Bank PLC iv Babatunde Macaulay Executive Director, Personal & Business Banking, Stanbic IBTC Bank PLC v Andrew Mashanda Executive Director, Corporate & Transactional Banking, Stanbic IBTC Bank PLC vi Eric Fajemisin Chief Executive, Stanbic IBTC Pension Managers Limited vii Victor Yeboah-Manu Chief Financial Officer viii Angela Omo-Dare Country Head, Legal Services, Stanbic IBTC Holdings PLC ix Benjamin Ahulu Head, Internal Audit, Stanbic IBTC Bank PLC x Dele Kuti Global Sector Head - Oil & Gas Client Coverage We also facilitated a Self and Peer-assessment of each Director’s performance in the year under review. This assessment covered the Director’s time commitment to the business of the Company, commitment to continuous learning and development and a self & peer assessment. Each individual Director’s Assessment report was prepared and made available to them respectively while a consolidated report of the performance of all Directors was also submitted to the Board Chairman. xi Sam Ocheho Head, Global Markets, Stanbic IBTC Bank PLC xii M'fon Akpan Head, Risk, Stanbic IBTC Bank PLC xiii Rotimi Adojutelegan Chief Compliance Officer, Stanbic IBTC Bank PLC xiv Gboyega Dada Chief Information Officer Yours faithfully xv Olufunke Amobi Head, Human Capital For: PricewaterhouseCoopers Limited xvi Malcom Irabor Head, Legal Services, Stanbic IBTC Bank PLC The Board is responsible for the preparation and presentation of information relevant to its performance. Our responsibility is to reach a conclusion on the Board’s performance based on work carried out within the scope of our engagement as contained in our letter of engagement. In carrying out the assessment, we have relied on representations made by the Directors and on the documents provided for our review. The Board has complied to a large extent with the provisions of the Code. Areas of compliance include establishment of an Audit Committee, participation at Board training, adequate oversight of the audit plan, robust succession planning and implementation of the succession plan. Also, the Board has adequate oversight of the Company’s risk exposures. We have identified some areas for improvement. The Chairmen of the Company’s Board Committees should ensure they attend the Annual General Meeting. Further details of our findings are contained in the full report. Femi Osinubi FRC/2017/ICAN/00000016659 PricewaterhouseCoopers Limited Landmark Towers, 5B Water Corporation Road, Victoria Island, PO Box 2419, Lagos, Nigeria T: +234 (1) 271 1700, www.pwc.com/ng TIN: 00290010-0001 RC 39418 Directors: S Abu, O Adekoya, J.Adeola, W Adetokunbo-Ajayi, UN Akpata, E Agbeyi, O Alakhume, I Aruofor , K Asante-Poku (Ghanian), C Azobu, R Eastaugh (South African), E Erhie, K Erikume, A Eriksson (Kenyan), I Ezeuko, M Iwelumo, D McGraw (American), A Nevin (Canadian), (British), P Obianwa, B Odiaka, T Ogundipe, C. Ojechi, D. Oladipo, M. Olajide, P Omontuemhen, T Oputa, O Osinubi, T Oyedele, AB Rahji, O Ubah, A Ugarov (American), C. Uwaegbute xvii Kola Lawal Head, Corporate & Investment Banking Credit xviii Nkiru Olumide-Ojo Head, Marketing & Communications xix Chidi Okezie Company Secretary xx Oluwatosin Odutayo Ag. Financial Controller, Stanbic IBTC Bank PLC xxi Taiwo Ala Head, Internal Control 111
  57. 112 Annual report & financial statements Stanbic IBTC Annual group financial statements for the year ended 31 December 2017 Overview Business review Annual report & financial statements 113 Other information Corporate governance report (continued) Board meetings Remuneration committee The board meets, at a minimum, once every quarter with ad-hoc meetings being held whenever they are deemed necessary. The board will hold a strategy session in July 2018. Directors, in accordance with the articles of association of the company, attend meetings either in person or via tele / video conferencing. The remuneration committee (“REMCO”) was vested with responsibilities during the year under review that included: Directors are provided with comprehensive board documentation at least seven days prior to each of the scheduled meetings. Name The chief executive attends meetings by invitation. Other members of executive management are invited to attend when appropriate. No individual, irrespective of position, is expected to be present when his or her remuneration is discussed. • reviewing the remuneration philosophy and policy • considering the guaranteed remuneration, annual performance bonus and pension incentives of the group’s executive directors and managers; Feb April July Oct Basil Omiyi     Yinka Sanni     - -   Sim Tshabalala     Dominic Bruynseels     Ifeoma Esiri     Ballama Manu     Ratan Mahtani     Ngozi Edozien*     • considering the average percentage increases of the guaranteed remuneration of executive management across the group, as well as long-term and short-term incentives; and Salamatu Suleiman*     • agreeing incentive schemes across the group. Prof. Fabian Ajogwu* = Attendance A = Apology - = Not a member of the Committee at the relevant time • reviewing the performance measures and criteria to be used for annual incentive payments for all employees; When determining the remuneration of executive and nonexecutive directors as well as senior executives, REMCO is expected to review market and competitive data, taking into account the company’s performance using indicators such as earnings. REMCO utilises the services of a number of suppliers and advisors to assist it in tracking market trends relating to all levels of staff, including fees for non-executive directors. • determining the remuneration of the chairman and non-executive directors, which are subject to board and shareholder approval; The board reviews REMCO’s proposals and, where relevant, will submit them to shareholders for approval at the annual general meeting (“AGM”). The board remains ultimately responsible for the remuneration policy. As at 31 December 2017, the committee consisted of four directors, all of whom are non–executives, with the Chairman being an Independent Director. * Independent Director Board committees Members’ attendance at REMCO meetings during the year ended 31 December 2017 is stated below: Some of the functions of the board have been delegated to board committees, consisting of board members appointed by the board, which operates under mandates approved at the board meeting of 28 July 2017. Name Risk management committee The board is ultimately responsible for risk management. The main purpose of the risk management committee, as specified in its mandate, is the provision of independent and objective oversight of risk management within the company. The committee is assisted in fulfilling its mandate by a number of management commitees. To achieve effective oversight, the committee reviews and assesses the integrity of risk control systems and ensures that risk policies and strategies are effectively managed and contribute to a culture of discipline and control that reduces the opportunity for fraud. The risk management committee during the year under review was vested, among others, with the following responsibilities: • to ensure that the group’s material business risks are being effectively identified, quantified, monitored and controlled and that the systems in place to achieve this are operating effectively at all times; and • such other matters relating to the group’s risk assets as may be specifically delegated to the committee by the board. A more in-depth risk management section which provides details of the overall framework for risk management in the group commences on page 65 of this annual report. • to periodically review the group’s risk management systems and report thereon to the board; Members’ attendance at risk management committee meetings during the year ended 31 December 2017 is stated below: Feb April July Oct Ifeoma Esiri (Chairman)     Yinka Sanni     Dominic Bruynseels     Ngozi Edozien   A  Ballama Manu     Fabian Ajogwu - - -  A = Apology - = Not a member of the Committee at the relevant time * Independent Director July October    Dominic Bruynseels     Sim Tshabalala     Fabian Ajogwu - - -  A = Apology - = Not a member of the Committee at the relevant time Remuneration The committee’s mandate is in line with SBG’s standards, while taking account of local circumstances. As at 31 December 2017, the committee consisted of six directors, five of whom, including the chairman, are non – executive directors. = Attendance April  = Attendance • to oversee management’s activities in managing credit, market, liquidity, operational, legal and other risks of the group; Name January Salamatu Suleiman (Chairman) Introduction The purpose of this section is to provide stakeholders with an understanding of the remuneration philosophy and policy applied across the group for executive management, employees, and directors (executive and non-executive). Remuneration philosophy The group’s board and remuneration committee set a remuneration philosophy which is guided by SBG’s philosophy and policy as well as the specific social, regulatory, legal and economic context of Nigeria. In this regard, the group employs a cost-to-company structure, where all benefits are included in the listed salary and appropriately taxed. The following key factors have informed the implementation of reward policies and procedures that support the achievement of business goals: •the provision of rewards that enable the attraction, retention and motivation of employees and the development of a high performance culture; • maintaining competitive remuneration in line with the market, trends and required statutory obligations; • rewarding people according to their contribution; •allowing a reasonable degree of flexibility in remuneration processes and choice of benefits by employees; •utilising a cost-to-company remuneration structure; and •educating employees on the full employee value proposition; The group’s remuneration philosophy aligns with its core values, including growing our people, appropriately remunerating high performers and delivering value to our shareholders. The philosophy emphasises the fundamental value of our people and their role in ensuring sustainable growth. This approach is crucial in an environment where skills remain scarce. The board sets the principles for the group‘s remuneration philosophy in line with the approved business strategy and objectives. The philosophy aims to maintain an appropriate balance between employee and shareholder interests. The deliberations of REMCO inform the philosophy, taking into account reviews of performance at a number of absolute and relative levels – from a business, an individual and a competitive point of view.
  58. 114 Annual report & financial statements Stanbic IBTC Annual group financial statements for the year ended 31 December 2017 Overview Business review Annual report & financial statements 115 Other information Corporate governance report (continued) A key success factor for the group is its ability to attract, retain and motivate the talent it requires to achieve its strategic and operational objectives. The group’s remuneration philosophy includes short-term and long-term incentives to support this ability. Short-term incentives, which are delivery specific, are viewed as strong drivers of competitiveness and performance. A significant portion of top management’s reward is therefore variable, being determined by financial performance and personal contribution against specific criteria set in advance. This incites the commitment and focus required to achieve targets. Long-term incentives seek to ensure that the objectives of management and shareholders are broadly aligned over longer time periods. Remuneration policy The group has always had a clear policy on the remuneration of staff, executive and non-executive directors which set such remuneration at levels that are fair and reasonable in a competitive market for the skills, knowledge, experience required and which complies with all relevant tax laws. REMCO assists the group’s board in monitoring the implementation of the group remuneration policy, which ensures that: •salary structures and policies, as well as cash and long term incentives, motivate sustained high performance and are linked to corporate performance objectives; •stakeholders are able to make a reasonable assessment of reward practices and the governance process; and •the group complies with all applicable laws and codes. Remuneration structure Management and general staff Non-executive directors Terms of service Directors are appointed by the shareholders at the AGM, although board appointments may be made between AGMs. These appointments are made in terms of the company’s policy. Shareholder approvals for such interim appointments are however sought at the annual general meeting that holds immediately after such appointments are made. Total remuneration packages for employees comprises the following: Non-executive directors are required to retire after three years and may offer themselves for re-election. If recommended by the board, their re-election is proposed to shareholders at the AGM. In terms of CAMA, if a director over the age of 70 is seeking reelection to the board his age must be disclosed to shareholders at the meeting at which such re-election is to occur. Fees Non-executive directors receive fixed annual fees and sitting allowances for their service on the board and board committees. There are no contractual arrangements for compensation for loss of office. Non-executive directors do not receive shortterm incentives, nor do they participate in any long-term incentive schemes. REMCO reviews the non-executive directors’ fees annually and makes recommendations on same to the board for consideration. Based on these recommendations, the board in turn recommends a gross fee to shareholders for approval at the annual general meeting. • guaranteed remuneration – based on market value and the role played; • annual bonus – used to stimulate the achievement of group objectives; • long term incentives – rewards the sustainable creation of shareholder value and aligns behaviour to this goal; • pension – provides a competitive post-retirement benefit in line with other employees. •where applicable, expatriate benefits in line with other expatriates in Nigeria. Terms of service The minimum terms and conditions for managers are governed by relevant legislation and the notice period is between one to three months. Fixed remuneration Managerial remuneration is based on a total cost-to-company structure. Cost-to-company comprises a fixed cash portion, compulsory benefits (medical aid and retirement fund membership) and optional benefits. Market data is used to benchmark salary levels and benefits. Salaries are normally reviewed annually in March. For all employees, performance-related payments have formed an increasing proportion of total remuneration over time to achieve business objectives and reward individual contribution. Fees that are payable for the reporting period 1 January to 31 December of each year are as follows: Category 2018(i) 2017 Chairman 35,000,000 30,000,000 Non-Executive Directors 23,500,000 20,000,000 - Chairman 460,000 400,000 - Non-Executive Directors 400,000 340,000 There is therefore a link between rating, measuring individual performance and reward. However, as noted earlier, the Group’s remuneration philosophy is designed in such a way as to prevent excessive risk taking by Management. Short-term incentives All staff participate in a performance bonus scheme. Individual awards are based on a combination of business unit performance, job level and individual performance. In keeping with the remuneration philosophy, the bonus scheme seeks to attract and retain high-performing managers. As well as taking performance factors into account, the size of the award is assessed in terms of market-related issues and pay levels for each skill set, which may for instance be influenced by the scarcity of skills in that area. The company has implemented a deferred bonus scheme (“DBS”) to compulsorily defer a portion of incentives over a minimum threshold for some senior managers and executives. This improves alignment of shareholder and management interests and enables clawback under certain conditions, which supports risk management. Long-term incentives It is essential for the group to retain key skills over the longer term. The group has put in place a deferred bonus scheme for top talents. The scheme is designed to reward and retain top talents. Post-retirement benefits Pension Retirement benefits are typically provided on the same basis for employees of all levels and are in line and comply with the Pension Reform Act 2014. All employees (executives, managers and general staff) are rated on the basis of performance and potential and this is used to influence performance-related remuneration rating and the consequent pay decision is done on an individual basis. Sitting Allowances for Board Meetings(ii) (i) Proposed for approval by shareholders at the AGM taking place in 2018. Remuneration as at 31 December 2017 The amounts specified below represent the total remuneration paid to executive and non-executive directors for the year under review: (ii) Fees quoted as sitting allowance represent per meeting sitting allowance paid for board, board & audit committees and ad hoc meetings. No annual fees are payable to committee members with respect to their roles on such committees. Retirement benefits Non-executive directors do not participate in the pension scheme. Executive directors The company had only one executive director as at 31 December 2017. Executive directors receive a remuneration package and qualify for long-term incentives on the same basis as other employees. Executive director's bonus and pension incentives are subject to an assessment by REMCO of performance against various criteria. The criteria include the financial performance of the company, based on key financial measures and qualitative aspects of performance, such as effective implementation of group strategy and human resource leadership. In addition, the Group's remuneration philosophy is designed in such a way as to prevent excessive risk taking by Management. 2017 Nmillion 2016 Nmillion Fees & sitting allowance 401 334 Executive compensation 373 373 Total 774 707 The group will continue to ensure its remuneration policies and practices remain competitive, drive performance and are aligned across the group and with its values.
  59. 116 Annual report & financial statements Stanbic IBTC Annual group financial statements for the year ended 31 December 2017 Overview Business review Annual report & financial statements 117 Other information Corporate governance report (continued) The board nominations committee The board nominations committee is a sub-committee of the Board of Directors (“the board”) of the company and has the responsibility to: Members’ attendance at the Board Nomination Committee meetings for the year 01 January to 31 December 2017 is stated in the following table: Name January a) provide oversight on the selection, nomination and re-election process for directors; Mr Sim Tshabalala  Mr Yinka Sanni  b)provide oversight on the performance of directors on the various committees established by the board; Mr. Dominic Bruynseels c)provide oversight in relation to the board evaluation and governance process and the reports that are to be made to the Securities & Exchange Commission, Central Bank of Nigeria and shareholders with respect to same. The goal of the committee is to review nomination, election and re-election for directors in such a way as to attract and retain the highest quality directors whose attributes will ensure that their membership of the board will be of benefit and add value to the bank. The committee consists of such number of directors as may be approved by the board, but shall not be less than three and shall include the Chief Executive. In addition, any member of senior management may be invited to attend meetings of the committee. Composition The committee is made up of three nonexecutive directors and one executive director appointed by the Board. Ms. Ngozi Edozien  = Attendance - = Not a member of the Committee at the relevant time The audit committee The role of the audit committee is defined by the Companies & Allied Matters Act and includes making recommendations to the board on financial matters. These matters include assessing the integrity and effectiveness of accounting, financial, compliance and other control systems. The committee also ensures effective communication between internal auditors, external auditors, the board and management. The committee’s key terms of reference comprise various categories of responsibilities and include the following: •review the audit plan with the external auditors with specific reference to the proposed audit scope, and approach to risk activities and the audit fee; •meet with external auditors to discuss the audit findings and consider detailed internal audit reports with the internal auditors; •annually evaluate the role, independence and effectiveness of the internal audit function in the overall context of the risk management systems; Members’ attendance at audit committee meetings for the period 01 January to 31 December 2017 is stated below: January April July October Mr. Samuel Ayininuola -    Mr Dominic Bruynseels     •review the accounting policies adopted by the group and all proposed changes in accounting policies and practices; Mrs Ifeoma Esiri     Mr Ratan Mahtani     Mr. Olatunji Bamidele     •consider the adequacy of disclosures; Mr Ibhade George     •review the significant differences of opinion between management and internal audit; •review the independence and objectivity of the auditors; and •all such other matters as are reserved to the audit committee by the Companies & Allied Matters Act and the company’s Articles of Association. As required by law, the audit committee members have recent and relevant financial experience. Name = Attendance A = Apology - = Not a member at the relevant time The board Information Technology (“IT”) committee c) review Stanbic IBTC’s assessment of risks associated with IT, including disaster recovery, business continuity and IT security. The board IT committee is one of the committees established by the Board in 2015. The committee has the following responsibilities: a) provide guidance on how IT decisions are made, enforced and evaluated within Stanbic IBTC in accordance with Central Bank of Nigeria’s (“CBN”) IT standards blueprint; The committee consists of a minimum of two Non-Executive Directors and shall also include the Chief Executive. In addition, any member of senior management may be invited to attend meetings of the committee. b) assist the Board to fulfil its oversight responsibilities for Stanbic IBTC’s investments, operations and strategy in relation to IT; Members’ attendance at the Board IT Committee meetings for the period 01 Jan to 31 December 2017 is stated below: Composition The committee is made up of six members, three of whom are non-executive directors while the remaining three members are shareholders elected at the annual general meeting. The committee, whose membership is stated below, is chaired by a shareholder representative. As at 31 December 2017, the committee consisted of the following persons: Mr. Samuel Ayininuola* Chairman Mr. Ibhade George* Member Mr. Olatunji Bamidele* Member Mr. Dominic Bruynseels** Member Mrs. Ifeoma Esiri** Member Mr. Ratan Mahtani** Member * = Shareholders representative ** = Non Executive Director Name January April July October Mr Dominic Bruynseels     Mr Yinka Sanni     Ms. Ngozi Edozien     Mr. Ballama Manu     = Attendance A = Apology The board legal committee This Committee was also established by the Board in 2015 and has the following key responsibilities. The committee’s key terms of reference comprise various categories of responsibilities and include the following: 1. R  eviewing the legal risks and other legal issues facing Stanbic IBTC and its subsidiaries and for discussing appropriate strategies to address the risk arising from the litigation portfolios of Stanbic IBTC and its subsidiaries (the Litigation Portfolio) 2. R  eview and assess the likely success of the individual matters included in the Litigation Portfolio and of any threatened litigation and where necessary shall recommend that Management seek appropriate out-of-court settlement of specific matters
  60. 118 Annual report & financial statements Stanbic IBTC Annual group financial statements for the year ended 31 December 2017 Overview Business review Annual report & financial statements Other information Corporate governance report (continued) Composition The committee is made up of at least two non-executive directors and one executive director appointed by the Board. Members’ attendance at the Board Legal Committee meetings for the year 01 January to 31 December 2017 is stated below: Name January April July October Mrs. Ifeoma Esiri     Mr Yinka Sanni     - - -  Mr. Dominic Bruynseels     Mrs. Salamatu Suleiman     Prof Fabian Ajogwu = Attendance A = Apology - = Not a member at the relevant time The Board has also established a number of Ad-Hoc Committees with specific responsibilities. As those Committees are not Standing Committees of the Board, those Ad-Hoc Committees would be dissolved as soon as they have concluded their responsibilities as delegated by the Board. Company secretary It is the role of the company secretary to ensure the board remains cognisant of its duties and responsibilities. In addition to providing the board with guidance on its responsibilities, the company secretary keeps the board abreast of relevant changes in legislation and governance best practices. The company secretary oversees the induction of new directors, including subsidiary directors, as well as the ongoing training of directors. All directors have access to the services of the company secretary. Going concern On the recommendation of the audit committee, the board annually considers and assesses the going concern basis for the preparation of the financial statements at the year end. The board continues to view the company as a going concern for the foreseeable future. Management committees Dealing in securities The group has the following management committees: In line with its commitment to conduct business professionally and ethically, the company has introduced policies to restrict the dealing in securities by directors, shareholder representatives on the audit committee and embargoed employees. A personal account trading policy is in place to prohibit employees and directors from trading in securities during close periods. Compliance with this policy is monitored on an ongoing basis. • Executive Committee (Exco) • Equity Investment Committee •Information Strategy & Data Governance Committee •Operational Risk and Compliance Committee • New & Amended Products Committee • Risk Oversight Committee • Internal Financial Control Committee Relationship with shareholders As an indication of its fundamental responsibility to create shareholder value, effective and ongoing communication with shareholders is seen as essential. In addition to the ongoing engagement facilitated by the company secretary and the head of investor relations, the company encourages shareholders to attend the annual general meeting and other shareholder meetings where interaction is welcomed. The chairman of the company’s audit committee is available at the meeting to respond to questions from shareholders. Voting at general meetings is conducted either a show of hands or a poll depending on the subject matter of the resolution on which a vote is being cast and separate resolutions are proposed on each significant issue. Sustainability The company as a member of the Standard Bank Group (“SBG”) is committed to conducting business professionally, ethically, with integrity and in accordance with international best practice. To this end, the company subscribes to and adopts risk management standards, policies and procedures that have been adopted by the SBG. The company is also bound by the Nigerian Sustainable Banking Principles (“the Principles”) and the provisions of the Principles are incorporated into policies approved by the Board. SBG’s risk management standards, policies and procedures have been amended to be more reflective of the Nigerian business and regulatory environment. All such amendments to the risk management standards, policies and procedures have been agreed to by Standard Bank Africa (“SBAF”) Risk Management. The group is committed to contributing to sustainable development through ethical, responsible financing and business practices which unlocks value for our stakeholders. We manage the environmental and social aspects that impact our activities, products and services whilst ensuring sustainable value creation for our customers. We are passionately committed to encouraging financial inclusion through the provision of banking and other financial services to all cadres of the society and a promoter of gender equality. Social responsibility As an African business, the group understands the challenges and benefits of doing business in Africa, and owes its existence to the people and societies within which it operates. The group is therefore committed not only to the promotion of economic development but also to the strengthening of civil society and human well being. The group is concentrating its social investment expenditure in defined focus areas which currently include education, in order to make the greatest impact. These areas of focus will be subject to annual revision as the country’s socio-economic needs change. Ethics and organisational integrity The board aims to provide effective and ethical leadership and ensures that its conduct and that of management are aligned to the organisation’s values and code of ethics. The board subscribes to the SBG group’s values and enables decision making at all levels of the business according to defined ethical principles and values. Compliance with The Nigerian Stock Exchange’s listing rule Stanbic IBTC Holdings PLC (“SIBTC”) has adopted a Personal Account Trading Policy (“PATP”) for both employees and directors which incorporates a code of conduct regarding securities transactions by directors and employees. The PATP was circulated to all employees who in the course of the year had any insider or material information about SIBTC; it is also published in the company’s internal communication on a regular basis and also hoisted on the company’s website. For the year ended 31 December 2017, we confirm that all directors complied with the PATP regarding their SIBTC securities transacted on their account during the year. Compliance with the Securities and Exchange Commission’s code of corporate governance As a public company, Stanbic IBTC Holdings PLC confirms that as at the year ended 31 December 2017 the company has complied with the principles set out in the Securities and Exchange Commission’s code of corporate governance. The company applies the code’s principles of transparency, integrity and accountability through its own behaviour, corporate governance best practice and by adopting, as appropriate and proportionate for a company of its size and nature. The policies and procedures adopted by the Board and applicable to the company’s businesses are documented in mandates, which also set out the roles and delegated authorities applying to the Board, Board Committees, and the Executive Committee. Compliance with the Central Bank of Nigeria code of corporate governance As a financial holding company, Stanbic IBTC Holdings PLC is primarily regulated by the Central Bank of Nigeria (“CBN”). In this regard, compliance with the CBN Code of Corporate Governance, as well as all regulations issued by the CBN for Financial Holding Companies remain an essential characteristic of its culture. We confirm that as at the year ended 31 December 2017 the company has complied in all material respects with the principles set out in the CBN’s code of corporate governance. Compliance with the Central Bank of Nigeria Whistleblowing Guidelines In accordance with clause 4.11 of the CBN Guidelines for Whistleblowing, Stanbic IBTC Holdings PLC and its subsidiaries have complied in all material respects with the principles set out in the Whistleblowing Guidelines, as at year end. Complaints Management Policy Stanbic IBTC Holdings PLC has a Complaints Management Policy in place in compliance with the Securities & Exchange Commission rule which became effective in February 2015. Shareholders may have access to this policy via any of the following options: •By accessing same through our website www.stanbicibtc.com/nigeriagroup/AboutUs/Code-of-Ethics • By requesting for a copy through the office of the Company Secretary 119
  61. 120 Annual report & financial statements Stanbic IBTC Annual group financial statements for the year ended 31 December 2017 Disclosure on diversity in employment The group is an equal opportunity employer that is committed to maintaining a positive work environment that facilitates high level of professional efficiency at all times. The group’s policy prohibits discrimination against gender, physically challenged persons or persons with HIV in the recruitment, training and career development of its employees. i) Physically challenged persons: The group continues to maintain a policy of giving fair consideration to applications for employment made by physically challenged persons with due regard to their abilities and aptitude. ii) Gender diversity within the group 31 Dec 2017 31 Dec 2016 Workforce % of gender composition Workforce % of gender composition Women 1,285 42% 1,241 42% Men 1,746 58% 1,685 58% 3,031 100% 2,926 100% Women 168 41% 214 44% Men 242 59% 275 56% 410 100% 489 100% Women 3 30% 3 30% Men 7 70% 7 70% 10 100% 10 100% Women - 0% 1 100% Men 1 100% 1 100% 1 100% Women 30 33% 29 32% Men 61 67% 63 68% 91 100% 92 100% Total workforce: Recruitments made during the period: Diversity of members of board of directors – Number of Board members: Diversity of board executives – Number of Executive directors to Chief executive officer: 0% Diversity of senior management team – Number of Assistant General Manager to General Manager Chidi Okezie Company Secretary FRC/2013/NBA/00000001082 01 February 2018 Overview Business review Annual report & financial statements Other information 121
  62. 122 Annual report & financial statements Stanbic IBTC Annual group financial statements for the year ended 31 December 2017 Report of the audit committee Overview Business review Annual report & financial statements Other information Audit committee For the year ended 31 December 2017 To the members of Stanbic IBTC Holdings PLC In compliance with the provisions of Section 359(3) to (6) of the Companies & Allied Matters Act Cap C20 Laws of the Federation of Nigeria 2004, the audit committee considered the audited consolidated and separate financial statements for the year ended 31 December 2017 together with the management controls report from the auditors and the company’s response to this report at its meeting held on 29 January 2018. In our opinion, the scope and planning of the audit for the year ended 31 December 2017 were adequate. We have exercised our statutory functions under Section 359 (6) of the Companies and Allied Matters Act of Nigeria and acknowledge the co-operation of management and staff in the conduct of these responsibilities. We are of the opinion that the accounting and reporting policies of the company and the group are in accordance with legal requirements and agreed ethical practices, and that the scope and planning of both the external and internal audits for the year ended 31 December 2017 were satisfactory and reinforced the group’s internal control systems. After due consideration, the audit committee accepted the report of the auditors that the financial statements were in accordance with ethical practice and International Financial Reporting Standards. The committee reviewed management’s response to the auditors findings in respect of management matters and we are satisfied with management’s response thereto. We are satisfied that the company has complied with the provisions of Central Bank of Nigeria circular BSD/1/2004 dated 18 February 2004 on “Disclosure of insider related credits in the financial statements of banks”, and hereby confirm that an aggregate amount of N55,430,844,445 (31 December 2016: N40,857,634,282) was outstanding as at 31 December 2017. The perfomance status of insider related credits is as disclosed in note 37. The committee also approved the provision made in the consolidated and separate financial statements in relation to the remuneration of the auditors. Olatunji Bamidele Shareholders’ Representative Ibhade George Shareholders’ Representative Samuel Ayininuola Chairman/Shareholders’ Representative Mr. Samuel Ayininuola Chairman, Audit Committee FRC/2016/ICAN/00000015248 29 January 2018 Members of the audit committee are: 1. Mr. Samuel Ayininuola* 2. Mr. Ibhade George* 3. Mr. Olatunji Bamidele* 4. Mr. Dominic Bruynseels** 5. Mrs. Lilian Ifeoma Esiri** 6. Mr. Ratan Mahtani** * = Shareholders representative ** = Non Executive Director Lilian Ifeoma Esiri Non-Executive Director Dominic Bruynseels Non-Executive Director Ratan Mahtani Non-Executive Director 123
  63. 124 Annual report & financial statements Stanbic IBTC Annual group financial statements for the year ended 31 December 2017 Overview Business review Annual report & financial statements Other information Independent auditors report To the Shareholders of Stanbic IBTC Holdings Plc Report on the Audit of the Consolidated and Separate Financial Statements Opinion We have audited the consolidated and separate financial statements of Stanbic IBTC Holdings Plc (“the Company”) and its subsidiaries (together, “the group”), which comprise the consolidated and separate statement of financial position as at 31 December, 2017, and the consolidated and separate statement of profit or loss and other comprehensive income, the consolidated and separate statement of changes in equity and the consolidated and separate statement of cash flows for the year then ended, and a summary of significant accounting policies and other explanatory information, as set out on pages 128 to 247. In our opinion, the accompanying consolidated and separate financial statements give a true and fair view of the consolidated and separate financial position of the Group and its subsidiaries as at 31 December 2017, and of its consolidated and separate financial performance and its consolidated and separate cash flows for the year then ended in accordance with International Financial Reporting Standards (“IFRSs”) and in the manner required by the Companies and Allied Matters Act, Cap C.20, Laws of the Federation of Nigeria, 2004 and the Financial Reporting Council of Nigeria Act, 2011 and the Banks and other Financial Institutions Act, Cap B3, Laws of the Federation of Nigeria, 2004 and relevant Central Bank of Nigeria (“CBN”) Guidelines and Circulars. Basis for Opinion We conducted our audit in accordance with International Standards on Auditing (“ISAs”). Our responsibilities under those standards are further described in the Auditor’s Responsibilities for the Audit of the Consolidated and Separate Financial Statements section of our report. We are independent of the Group and Company in accordance with the International Ethics Standards Board for Accountants’ Code of Ethics for Professional Accountants (“IESBA Code”) together with the ethical requirements that are relevant to our audit of the consolidated and separate financial statements in Nigeria and we have fulfilled our other ethical responsibilities in accordance with these requirements and the IESBA Code. We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our opinion. Key Audit Matters Key audit matters are those matters that, in our professional judgment, were of most significance in our audit of the consolidated and separate financial statements of the current period. These matters were addressed in the context of our audit of the financial statements as a whole, and in forming our opinion thereon, and we do not provide a separate opinion on these matters. Credit impairment of loans and advances to customers The impairment of loans and advances to customers is inherently a significant and judgmental area for the Group. Management makes complex and subjective judgments over both the timing of recognition and the estimation of the size of impairment. The credit impairment recognised for loans and advances to customers represents management’s best estimate of the impairment within the loan portfolios at the reporting date and is determined on an individual basis for loans and advances to customers that exceed specific thresholds, and on a collective basis for a portfolio of loans of a similar nature. For individual specific credit impairments on significant corporate and retail loans and advances to customers, key assumptions, judgments and estimates made by the Directors include: the adequacy and recoverability of collateral; expected future cash flows and the timing of the cash flows. For collective credit impairment on retail loans and advances, a statistical model is applied, which approximates the losses inherent in the credit portfolios. The key assumptions, estimates and judgments made by management include: the probability of default; the loss given default; and the emergence periods. For collective impairments on corporate loans a credit risk grade is allocated to the exposures based on a pre-specified scale that reflects the underlying credit risk for a given exposure. These grades determine the probability of defaults and explain management’s perspective of the credit risk of the obligors/exposures. How the matter was addressed in our audit Our audit procedures in this area included the following: • For the corporate loans and advances, we tested controls over management review of data inputted in the risk grading system as well as timing of reviews of risk grades allocated to counterparties. • We tested controls over the accuracy of credit data such as management review and approval of loan parameters inputted into the software, used in the loans and advances impairment process both for retail and corporate loans and advances. • We performed substantive procedures which included validating loans and advances by sector, type and currency in order to identify credit exposures with a higher risk on a sample basis. • We re-calculated management’s discounted cash flow for specific credit impairments on corporate loans and advances and assessed the reasonableness of the cash flow forecasts and the valuation of collaterals against customer information in the credit files and the historical experience on realisation. • For corporate and retail portfolio loans and advances we challenged management’s assumptions used in calculating the collective credit impairment by recalculating and testing key parameters such as probability of default, emergence period and loss given default. The Group’s accounting policy on credit impairment and related disclosures on credit impairments and risks are shown in notes 4.3, 6.1, 12.3 and 41 respectively. Provisions for legal and tax matters In the normal course of business, the Group is exposed to the risk of litigation and claims from third parties. Management makes significant estimates in determining the provisions to be recorded in the financial statements with respect to claims and judgments against the Group. We focused on this area due to the range of potential outcomes, number and amount claimed against the Group as well as the considerable uncertainties around timing and probability of various litigations and claims against the Group. In addition, the Group was subjected to significant tax assessments from the relevant tax authorities during the year. Tax laws are subject to varying interpretations in determining the amounts that should be recognised and therefore provisions for tax are subject to management’s estimation and judgment. Management’s judgment includes consideration and application of regulations by various tax authorities with respect to the relevant tax positions. Where there is uncertainty, management makes provisions for tax based on the most probable outcome. We focused on this area due to the significance of these estimations, uncertainties and judgments applied by management. How the matter was addressed in our audit Our procedures included the following: With respect to provision for legal claims: • We inspected a sample of significant litigations and claims to substantiate the information provided by management on the nature of the claims. • We challenged management’s assessment of the possible outcome for significant litigation and claims and the related provisions by inspecting correspondence with the Group’s solicitors and obtaining direct confirmations from the Group’s solicitors to test for completeness and the likelihood of the Group’s success in defending the claims. • We obtained from independent solicitors other than those handling the claims, their opinion on the likelihood of the success in respect of claims where the Group has appealed. • We assessed whether the Group’s disclosures relating to significant legal proceedings adequately disclosed the potential liabilities to the Group. With respect to tax provisions: • We inspected correspondences with relevant tax authorities to understand the nature and management’s consideration of tax assessments. • We engaged our Tax Specialists to evaluate the assumptions applied by the Group in the determination of tax provisions, based on their knowledge and experience of the Group’s operations and of the application of the relevant tax legislation by the respective authorities. • We evaluated the adequacy of the Group’s disclosures regarding current taxes and tax provisions. The Group’s policy on current tax and legal provisions as well as related disclosures and notes to the financial statements on provisions are contained in note 4.10, 6.9 and 25. Recoverability of deferred tax assets The Group had recognised deferred tax assets of N8.9 billion (2016: N8.6 billion) which arose from historic tax losses, unutilised capital allowances and other deductible temporary differences. An assessment is required as to when and whether sufficient future taxable profits are likely to be generated to support the recoverability of the deferred tax assets recognised. We focused on this area due to the significant judgments involved in the estimation of future taxable profits. How the matter was addressed in our audit Our procedures included the following: • We tested the recoverability assessment including calculations to check that the recorded amount of the deferred asset is adequate based on the temporary differences identified, the timing of the estimated future taxable profits and the tax rate applied. • We challenged management assessment of the recoverable amounts, including the estimated future taxable profits and the underlying assumptions including forecasts and projections by using our knowledge of the business, industry and past performance. • We checked whether historic tax losses, unutilised capital allowance and other deductible temporary differences were determined in accordance with the relevant tax laws. The Group’s accounting policy on deferred tax and related disclosures are shown in notes 4.11, 6.6 and note 16 respectively. Valuation of derivatives The Group’s derivative instruments comprise foreign currency swaps and foreign exchange forward contracts, which are used to manage foreign exchange risk. Management uses a complex valuation methodology involving multiple inputs including discount rates, exchange rates, earning yields and adjustments to estimate the fair value of these derivative instruments. We focused on this area due to the significance of these derivatives and the related estimation uncertainty. 125
  64. 126 Annual report & financial statements Stanbic IBTC Annual group financial statements for the year ended 31 December 2017 Overview Business review Annual report & financial statements Other information Independent auditors report (continued) How the matter was addressed in our audit Our procedures included the following: • We evaluated the design, implementation and operating effectiveness of key controls over the inputs used in determining the Group’s valuation of derivative instruments. • We inspected derivative contracts on a sample basis to obtain an understanding of the respective transactions. • We engaged our Valuation Specialists to evaluate the appropriateness of the methodology and assumptions used by management including correlation factors, volatilities in determining fair value and accounting for the derivative positions to assess whether the valuation model used by the Group was in line with acceptable market practice. • We carried out substantive test to ascertain the accuracy of the fair value of derivative assets and liabilities by obtaining quoted rates and compared these rates to the mark-to-market rates used by management. • We recomputed the fair value of the instruments using validated inputs. The Group’s accounting policy on derivative instruments and relevant financial risk disclosures are shown in notes) 4.3, 4.5, 6.2, 10, 28, and note 41 respectively. Information Other than the Financial Statements and Audit Report thereon The Directors are responsible for the other information which comprises the Chairman’s statement, Chief Executive’s statement, Economic review, Financial review, Directors’ report, Statement of Directors’ responsibilities, Corporate governance, Report of the Audit Committee, Other national disclosures, the Overview, Business Review and the overviews of Management team, Branch network, Abridged sustainability report and contact information but does not include the consolidated and separate financial statements and our audit report thereon. We obtained prior to the date of this auditor’s report the Directors’ report, Statement of Directors’ responsibilities, corporate governance report, Report of the Audit Committee and Other national disclosures. The Chairman’s statement, Chief Executive’s statement, Economic review, Financial review, the Overview, Business review and the reviews of the management team, Branch network, Abridged sustainability report and contact information is expected to be made available to us after that date. Our opinion on the consolidated and separate financial statements does not cover the other information and we do not express any form of assurance conclusion thereon. In connection with our audit of the consolidated and separate financial statements, our responsibility is to read the other information and in doing so, consider whether the other information is materially inconsistent with the consolidated and separate financial statements or our knowledge obtained in the audit or otherwise appears to be materially misstated. If, based on the work we have performed, we conclude that there is a material misstatement of this other information, we are required to report that fact. We have nothing to report in this regard. When we read the reports, which have not been made available to us at the date of this report, if we conclude that there is a material misstatements therein, we are required to communicate the matter to those charged with governance Responsibilities of the Directors for the Consolidated and Separate Financial Statements The Directors are responsible for the preparation of consolidated and separate financial statements that give a true and fair view in accordance with IFRSs and in the manner required by the Companies and Allied Matters Act, Cap C.20, Laws of the Federation of Nigeria, 2004 and the Financial Reporting Council of Nigeria Act, 2011 and the Banks and other Financial Institutions Act, Cap B3, Laws of the Federation of Nigeria, 2004 and relevant Central Bank of Nigeria (“CBN”) Guidelines and Circulars and for such internal control as the directors determine is necessary to enable the preparation of financial statements that are free from material misstatement, whether due to fraud or error. In preparing the consolidated and separate financial statements, the directors are responsible for assessing the Group (and Company’s) ability to continue as a going concern, disclosing, as applicable, matters related to going concern and using the going concern basis of accounting unless the directors either intend to liquidate the Group (and Company) or to cease operations, or have no realistic alternative but to do so. Auditor’s Responsibilities for the Audit of the Consolidated and separate Financial Statements Our objectives are to obtain reasonable assurance about whether the consolidated and separate financial statements as a whole are free from material misstatement, whether due to fraud or error, and to issue an auditor’s report that includes our opinion. Reasonable assurance is a high level of assurance, but is not a guarantee that an audit conducted in accordance with ISAs will always detect a material misstatement when it exists. Misstatements can arise from fraud or error and are considered material if, individually or in the aggregate, they could reasonably be expected to influence the economic decisions of users taken on the basis of these financial statements. As part of an audit in accordance with ISAs, we exercise professional judgment and maintain professional skepticism throughout the audit. We also: • Identify and assess the risks of material misstatement of the consolidated and separate financial statements, whether due to fraud or error, design and perform audit procedures responsive to those risks, and obtain audit evidence that is sufficient and appropriate to provide a basis for our opinion. The risk of not detecting a material misstatement resulting from fraud is higher than for one resulting from error, as fraud may involve collusion, forgery, intentional omissions, misrepresentations, or the override of internal control. • Obtain an understanding of internal control relevant to the audit in order to design audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the Group (and Company’s) internal control. • Evaluate the appropriateness of accounting policies used and the reasonableness of accounting estimates and related disclosures made by the directors. • Conclude on the appropriateness of directors’ use of the going concern basis of accounting and, based on the audit evidence obtained, whether a material uncertainty exists related to events or conditions that may cast significant doubt on the Group (and Company’s) ability to continue as a going concern. If we conclude that a material uncertainty exists, we are required to draw attention in our auditor’s report to the related disclosures in the consolidated and separate financial statements or, if such disclosures are inadequate, to modify our opinion. Our conclusions are based on the audit evidence obtained up to the date of our auditor’s report. However, future events or conditions may cause the Group (and Company) to cease to continue as a going concern. • Evaluate the overall presentation, structure and content of the consolidated and separate financial statements, including the disclosures, and whether the consolidated and separate financial statements represent the underlying transactions and events in a manner that achieves fair presentation. • Obtain sufficient appropriate audit evidence regarding the financial information of the entities or business activities within the Group to express an opinion on the consolidated financial statements. We are responsible for the direction, supervision and performance of the group audit. We remain solely responsible for our audit opinion. We communicate with the Board of Directors and the Audit Committee regarding, among other matters, the planned scope and timing of the audit and significant audit findings, including any significant deficiencies in internal control that we identify during our audit. We also provide the Board of Directors and the Audit Committee with a statement that we have complied with relevant ethical requirements regarding independence, and to communicate with them all relationships and other matters that may reasonably be thought to bear on our independence, and where applicable, related safeguards. From the matters communicated with the Board of Directors and the Audit Committee, we determine those matters that were of most significance in the audit of the consolidated and separate financial statements of the current period and are therefore the key audit matters. We describe these matters in our auditor’s report unless law or regulation precludes public disclosure about the matter or when, in extremely rare circumstances, we determine that a matter should not be communicated in our report because the adverse consequences of doing so would reasonably be expected to outweigh the public interest benefits of such communication. Report on Other Legal and Regulatory Requirements Compliance with the requirements of Schedule 6 of the Companies and Allied Matters Act, Cap C.20, Laws of the Federation of Nigeria, 2004. In our opinion, proper books of account have been kept by the Group, so far as appears from our examination of those books and the Bank’s statement of financial position and statement of profit or loss and other comprehensive income are in agreement with the books of account. Compliance with Section 27 (2) of the Banks and the other Financial Institutions Act Cap B3, Laws of the Federation of Nigeria, 2004 and Central Bank of Nigeria circular BSD/1/2004. i.The Group paid penalties in respect of contravention of the Central Bank of Nigeria guidelines during the year ended 31 December 2017. Details of penalties paid are disclosed in note 40 to the financial statements. ii. Related party transactions and balances are disclosed in note 36 to the financial statements in compliance with the Central Bank of Nigeria circular BSD/1/2004. Kabir O. Okunlola FRC/2012/ ICAN/00000000428 For: KPMG Professional Services Chartered Accountants 12 February 2018. Lagos, Nigeria 127
  65. 128 Annual report & financial statements Stanbic IBTC Annual group financial statements for the year ended 31 December 2017 Overview Business review Annual report & financial statements 129 Other information Consolidated and separate statement of financial position Group Note 31 Dec 2017 Nmillion Company 31 Dec 2016 Nmillion 31 Dec 2017 Nmillion Group 31 Dec 2016 Nmillion Assets Cash and cash equivalents 7 401,348 301,351 7,545 1,768 8.1 43,240 28,303 - - Trading assets 9.1 151,479 16,855 - - Financial investments Asset held for sale Loans and advances 31 Dec 2017 Nmillion 31 Dec 2016 Nmillion 31 Dec 2017 Nmillion 31 Dec 2016 Nmillion Equity 185,218 140,798 92,654 72,970 Equity attributable to ordinary shareholders 182,060 137,102 92,654 72,970 5,025 5,000 5,025 5,000 Note Equity and liabilities Pledged assets Derivative assets 10.6 11,052 14,317 - - 11 316,641 252,823 1,625 920 11.4 114 112 - - 12 381,711 368,229 - - Ordinary share capital 19.2 Share premium 19.2 66,945 65,450 66,945 65,450 Reserves 19.3 110,090 66,652 20,684 2,520 3,158 3,696 Non-controlling interest Loans and advances to banks 12 9,623 15,264 - - Liabilities Loans and advances to customers 12 372,088 352,965 - - Trading liabilities Other assets 15 49,442 39,220 2,148 2,226 Derivative liabilities Equity investment in subsidiaries 13 - - 85,539 85,539 Current tax liabilities 24 Property and equipment 17 21,883 22,962 517 2,404 Deposit and current accounts 21 Intangible assets 18 605 713 - - Deposits from banks 21 Deferred tax assets 16 8,901 8,638 - - Deposits from customers 21 1,386,416 1,053,523 97,374 92,857 Total assets Company 1,201,198 912,725 4,720 19,887 9.2 62,449 5,325 - - 10.6 2,592 11,788 - - 12,240 9,508 157 68 815,363 614,735 - - 61,721 53,766 - - 753,642 560,969 - - Other borrowings 22 74,892 96,037 - 16,404 Subordinated debt 23 29,046 27,964 - - Provisions 25 12,979 10,581 - - Other liabilities 26 191,517 136,740 4,563 3,406 16.1 120 47 - 9 1,386,416 1,053,523 97,374 92,857 Deferred tax liabilities Total equity and liabilities Yinka Sanni Chief Executive FRC/2013/CISN/00000001072 01 February 2018 Basil Omiyi Chairman FRC/2016/IODN/00000014093 01 February 2018 The accompanying notes from page 137 to 243 form an integral part of these financial statements Victor Yeboah-Manu Chief Financial Officer FRC/2016/ANAN/00000015802 01 February 2018
  66. 130 Annual report & financial statements Stanbic IBTC Annual group financial statements for the year ended 31 December 2017 Overview Business review Annual report & financial statements 131 Other information Consolidated and separate statement of profit or loss and other comprehensive income Consolidated and separate statement of profit or loss For the year ended 31 December 2017 For the year ended 31 December 2017 Group Note Gross earnings Net interest income Company Group 31 Dec 2017 Nmillion 31 Dec 2016 Nmillion 31 Dec 2017 Nmillion 31 Dec 2016 Nmillion 212,434 156,425 29,922 2,528 83,587 57,859 (1,050) (80) Interest income 31.1 122,911 87,467 45 17 Interest expense 31.2 (39,324) (29,608) (1,095) (97) 89,182 68,194 29,877 2,511 Profit for the year 31 Dec 2017 Nmillion 31 Dec 2016 Nmillion 31 Dec 2017 Nmillion 31 Dec 2016 Nmillion 48,381 28,520 25,165 609 4,294 (333) - - (63) 76 - - 83 (76) - - 4,314 (333) - - Other comprehensive income Items that are or may be reclassified subsequently to profit or loss: Net change in fair value of available-for-sale financial assets Net fee and commission revenue 31.3 59,089 52,154 1,491 852 Realised fair value adjustments on available-for-sale financial assets reclassified to income statement Fee and commission revenue 31.3 59,430 52,918 1,491 852 Income tax on other comprehensive income Fee and commission expense 31.3 (341) (764) - - Non-interest revenue Other comprehensive income for the year net of tax Trading revenue 31.4 29,148 15,326 - - Other revenue 31.5 945 714 28,386 1,659 172,769 126,053 28,827 2,431 (25,577) (19,803) - - Income before credit impairment charges Credit impairment charges 31.6 Total comprehensive income for the year Operating expenses 147,192 106,250 28,827 2,431 (86,026) (69,041) (1,282) (930) Staff costs 31.7 (36,282) (30,173) (590) (500) Other operating expenses 31.8 (49,744) (38,868) (692) (430) 61,166 37,209 27,545 1,501 (12,785) (8,689) (2,380) (892) 48,381 28,520 25,165 609 2,186 3,878 - - Equity holders of the parent 46,195 24,642 25,165 609 Profit for the year 48,381 28,520 25,165 609 Profit before tax Income tax 33.1 Profit for the year 4,314 (333) - - 52,695 28,187 25,165 609 Total comprehensive income attributable to: Non-controlling interests Equity holders of the parent Income after credit impairment charges 2,250 3,829 - - 50,445 24,358 25,165 609 52,695 28,187 25,165 609 Profit attributable to: Non-controlling interests 13.3 Earnings per share Basic earnings per ordinary share (kobo) 34 460 246 250 6 Diluted earnings per ordinary share (kobo) 34 460 246 250 6 The accompanying notes from page 137 to 243 form an integral part of these financial statements Company The accompanying notes from page 137 to 243 form an integral part of these financial statements
  67. 132 Annual report & financial statements Stanbic IBTC Annual group financial statements for the year ended 31 December 2017 Overview Business review Annual report & financial statements 133 Other information Consolidated and separate statement of changes in equity For the year ended 31 December 2017 Merger reserve Nmillion Statutory credit risk reserve Nmillion Available-for- sale revaluation reserve Nmillion Share-based payment reserve Nmillion AGSMEIS reserve Nmillion Other regulatory reserves Nmillion Retained earnings Nmillion Ordinary shareholders' equity Nmillion Noncontrolling interest Nmillion Total equity Nmillion 65,450 (19,123) 1,025 942 36 - 33,615 50,157 137,102 3,696 140,798 4,250 - - 46,195 50,445 2,250 52,695 - - - - - - - 46,195 46,195 2,186 48,381 4,250 - - - 4,250 64 4,314 Net change in fair value on available-for-sale financial assets - - - - 4,230 - - - 4,230 64 4,294 Realised fair value adjustments on available-for-sale financial assets - - - - (63) - - - (63) - (63) Income tax on other comprehensive income - - - - 83 - - Group Note Ordinary share capital Nmillion Share premium Nmillion 5,000 Balance at 1 January 2017 Total comprehensive income for the year Profit for the year Other comprehensive (loss)/income after tax for the year Statutory credit risk reserve - (1,025) Transfer to AGSMEIS reserves - 83 - 83 1,025 - - - - - - - - - 749 - (749) - - - - - - - - - - 6,547 (6,547) - - - 25 1,495 - - - (7) - - (7,000) (5,487) (2,788) (8,275) - - - - - (7) - - - (7) 19.2 25 1,495 20 - - - - - - - - (7,000) (7,000) (2,788) (9,788) Balance at 31 December 2017 5,025 66,945 (19,123) - 5,192 29 749 40,162 83,081 182,060 3,158 185,218 Balance at 1 January 2016 5,000 65,450 (19,123) 6,684 1,226 56 Transfer to statutory reserves 19.3 Transactions with shareholders, recorded directly in equity Equity-settled share-based payment transactions Increase in paid-up capital (scrip issue) Dividends paid to equity holders 1,520 Total comprehensive income for the year Profit for the year (284) - - - - - - - - Other comprehensive income/(loss) after tax for the year Net change in fair value on available-for-sale financial assets (7) - - (284) 1,520 - 26,218 38,215 123,726 5,241 128,967 - - 24,642 24,358 3,829 28,187 - - 24,642 24,642 3,878 28,520 (284) (49) (333) (284) (49) (333) - - (284) - - - - - - - 76 - 76 - - (76) - (76) Realised fair value adjustments on available-for-sale financial assets - - - - 76 - Income tax on other comprehensive income - - - - (76) - Statutory credit risk reserve - - - (5,659) - - Transfer to statutory reserves - 5,659 - - - 7,397 (7,397) - - - (5,374) (16,356) Transactions with shareholders, recorded directly in equity - - - - - (20) - - (10,962) (10,982) Equity-settled share-based payment transactions - - - - - (8) - - - ( 8)  ransfer of vested portion of equity settled share based payment to T retained earnings - - - - - (12) - - 12 - - - (10,974) (10,974) (5,374) (16,348) Purchase of non-controlling shares Dividends paid to equity holders - - - - - - Balance at 31 December 2016 5,000 65,450 (19,123) 1,025 942 36 Refer to note 19.3 for an explanation of the components of reserve The accompanying notes from page 137 to 243 form an integral part of these financial statements - (8) - - - - - 33,615 50,157 137,102 3,696 140,798
  68. 134 Annual report & financial statements Stanbic IBTC Annual group financial statements for the year ended 31 December 2017 Overview Business review Annual report & financial statements 135 Other information Consolidated and separate statement of changes in equity For the year ended 31 December 2017 Company Note Balance at 1 January 2017 Ordinary share capital Nmillion Share premium Nmillion Available-for-sale revaluation reserve Nmillion Share-based payment reserve Nmillion Other regulatory reserves Nmillion Retained earnings Nmillion Ordinary shareholders’ equity Nmillion 5,000 65,450 - 5 - 2,515 72,970 25,165 25,165 Total comprehensive income for the year - Profit for the year - - - - - 25,165 25,165 Other - - - - - - - 25 1,495 - (1) - (7,000) (5,481) - (1) 19.2 25 1,495 20 - - - - Balance at 31 December 2017 5,025 66,945 - Balance at 1 January 2016 5,000 65,450 - Transactions with shareholders, recorded directly in equity Equity-settled share-based payment transactions Increase in paid-up capital (scrip issue) Dividends paid to equity holders Total comprehensive income for the year - (1) - 1,520 - (7,000) (7,000) 4 - 20,680 92,654 9 - 1,901 72,360 609 609 - Profit for the year - - - - - 609 609 Transactions with shareholders, recorded directly in equity - - - (4) - 5 1 - 1 - - 1 - (5) - 5 - - - - - - - 5 - 2,515 72,970 Equity-settled share-based payment transactions Transfer of vested portion of equity settled share based payment to retained earnings - Dividends paid to equity holders - Balance at 31 December 2016 The accompanying notes from page 137 to 243 form an integral part of these financial statements 5,000 - 65,450
  69. 136 Annual report & financial statements Stanbic IBTC Annual group financial statements for the year ended 31 December 2017 Overview Business review Annual report & financial statements Other information Consolidated and separate statement of cash flows Notes to the consolidated and separate financial statements For the year ended 31 December 2017 For the year ended 31 December 2017 Group Note Net cash flows from operating activities Cash flows from operations Profit before tax Adjusted for: Credit impairment charges on loans and advances Company 1 Reporting entity 31 Dec. 2017 Nmillion 31 Dec. 2016 Nmillion 31 Dec. 2017 Nmillion 31 Dec. 2016 Nmillion 131,786 201,215 26,668 2,105 57,651 161,739 1,926 1,004 61,166 37,209 27,545 1,501 (57,915) 5,640 (26,854) (1,191) 25,577 19,803 - - Depreciation of property and equipment 31.8 4,129 4,204 308 229 Amortisation of intangible asset 31.8 46 33 - - Dividend income 31.5 (112) (225) (28,092) (1,501) (7) (8) (1) 1 Equity-settled share-based payments Unobservable Valuation difference in derivatives 10.7 (9,598) (3,460) - - Fair value adjustment for derivatives 35.5 3,667 1,459 - - Non-cash flow movements in other borrowings 22 1,035 37,484 - - Non-cash flow movements in subordinated debt 23 1,082 4,265 - - Impairment of intangible asset 18 62 - - - 31.2 39,324 29,608 1,095 97 Interest income 31.1 (122,911) (87,467) (45) (17) Loss/(gain) on sale of property and equipment 31.5 (209) (56) (119) - (Increase)/decrease in income-earning assets 35.1 (258,873) 60,607 78 770 Increase/(decrease) in deposits and other liabilities 35.2 313,273 58,283 1,157 (76) 101 203 28,092 1,501 (36,855) (30,328) (1,095) (97) Interest expense Dividends received Interest paid Interest received Direct taxation paid 24.1 Net cash flows from/ (used in) investing activities 121,193 77,505 45 17 (10,304) (7,904) (2,300) (320) (62,345) (109,204) 993 (16,749) - - Capital expenditure on - property 17 (1,820) (168) - equipment, furniture and vehicles 17 (3,318) (2,061) (110) (139) 2,297 430 1,808 - (59,504) (90,311) (705) (262) - (16,348) - (16,348) (30,448) (22,554) (21,884) 16,404 P  roceeds from sale of property, equipment, furniture and vehicles Investment in subsidiaries Net cash flows (used in)/from financing activities Proceeds from addition to other borrowings 22 25,278 22,054 - 16,404 Repayment of other borrowings 22 (47,458) (44,608) (16,404) - 1,520 - 1,520 - Proceed from script issue Dividends paid (9,788) - (7,000) - Net increase in cash and cash equivalents 38,993 69,457 5,777 1,760 (745) 14,906 - - 191,761 107,398 1,768 8 230,009 191,761 7,545 1,768 35.4 Cash and cash equivalents at beginning of the year Cash and cash equivalents at end of the year 2 Basis of preparation (a)Statement of compliance These consolidated and separate financial statements have been prepared in accordance with International Financial Reporting Standards (“IFRS”) as issued by the International Accounting Standards Board (“IASB”). The financial statements comply with the Companies and Allied Matters Act of Nigeria, Bank and Other Financial Institution Act, Financial Reporting Council of Nigeria Act, and relevant Central Bank of Nigeria circulars. The consolidated and separate financial statements were authorised for issue by the Board of Directors on 1 February 2018. (b)Basis of measurement These consolidated and separate financial statements have been prepared on the historical cost basis except for the following material items in the statement of financial position: • derivative financial instruments are measured at fair value (Purchase)/sale of financial investments Effect of exchange rate changes on cash and cash equivalents Stanbic IBTC Holdings PLC (the 'company') is a company domiciled in Nigeria. The company's registered office is at I.B.T.C. Place, Walter Carrington Crescent, Victoria Island, Lagos, Nigeria. These consolidated financial statements comprise the company and its subsidiaries (together referred to as the 'group'). The group is primarily involved in the provision of banking and other financial services to corporate and individual customers. 35.3 The accompanying notes from page 137 to 243 form an integral part of these financial statements • financial instruments at fair value through profit or loss are measured at fair value • available-for-sale financial assets are measured at fair value • liabilities for cash-settled share-based payment arrangements are measured at fair value • trading assets and liabilities are measured at fair value The group applies accrual accounting for recognition of its income and expenses. (c) Going concern assumption These consolidated and separate financial statements have been prepared on the basis that the group and company will continue to operate as a going concern. (d)Functional and presentation currency These consolidated and separate financial statements are presented in Nigerian Naira, which is the company's functional and presentation currency. All financial information presented in Naira has been rounded to the nearest million, except when otherwise stated. (e)Use of estimates and judgement The preparation of the consolidated and separate financial statements in conformity with IFRS requires management to make judgements, estimates and assumptions that affect the application of accounting policies and the reported amount of assets, liabilities, income and expenses. Actual results may differ from these estimates. Estimates and underlying assumptions are reviewed on an on-going basis. Revisions to accounting estimates are recognised in the period in which estimates are revised and in any future period affected. i)Judgement Information about judgement made in applying accounting policies that have the most significant effect on the amounts recognised in the consolidated financial statements is included in the following notes: • Note 6.7 Depreciation and useful life of property and equipment • Note 6.10 Foreign currency obligation valued at different rates ii) Assumptions and estimation uncertainties Information about assumptions and estimation uncertainties that have significant risk resulting in material adjustment to the carrying amounts of assets and liabilities within the year ending 31 December 2017 is included in the following notes: • Note 6.4 Intangible assets • Note 6.6 Recognition of deferred tax assets • Note 6.7 Share-based payments 3 Changes in accounting policies The group has consistently applied the accounting policies as set out in Note 4 to all periods presented in these financial statements. 4 Statement of significant accounting policies Except for the changes explained in note 3, the group has consistently applied the following accounting policies to all periods presented in these consolidated and separate financial statements. 137
  70. 138 Annual report & financial statements Stanbic IBTC Annual group financial statements for the year ended 31 December 2017 Overview Business review Annual report & financial statements Other information Notes to the consolidated and separate financial statements For the year ended 31 December 2017 4.1 Basis of consolidation Acquisitions Basis of consolidation Separate financial statements The acquisition method of accounting is used to account for the acquisition of subsidiaries by the group. The consideration transferred is measured as the sum of the fair value of the assets given, equity instruments issued and liabilities incurred or assumed at the acquisition date. The consideration includes any asset, liability or equity resulting from a contingent consideration arrangement. The obligation to pay contingent consideration is classified as either a liability or equity based on the terms of the arrangement. The right to a return of previously transferred consideration is classified as an asset. Transaction costs are recognised within profit or loss as and when they are incurred. Where the initial accounting is incomplete by the end of the reporting period in which the business combination occurs (but no later than 12 months since the acquisition date), the group reports provisional amounts. Common control transactions Subsidiaries Consolidated financial statements Acquisitions Disposal of a subsidiary Partial disposal of a subsidiary Initial measurement of NCI interest Where applicable, the group adjusts retrospectively the provisional amounts to reflect new information obtained about facts and circumstances that existed at the acquisition date and affected the measurement of the provisional amounts. Identifiable assets acquired, liabilities and contingent liabilities assumed in a business combination are measured initially at their fair values at the acquisition date, irrespective of the extent of any NCI. The excess (shortage) of the sum of the consideration transferred (including contingent consideration), the value of NCI recognised and the acquisition date fair value of any previously held equity interest in the subsidiary over the fair value of identifiable net assets acquired is recorded as goodwill in the statement of financial position (gain on bargain purchase, which is recognised directly in profit or loss). When a business combination occurs in stages, the previously held equity interest is remeasured to fair value at the acquisition date and any resulting gain or loss is recognised in profit or loss. Subsidiaries (including mutual funds, in which the group has both an irrevocable asset management agreement and a significant investment) Separate financial statements Consolidated financial statements Investments in subsidiaries are accounted for at cost less accumulated impairment losses (where applicable) in the separate financial statements. The carrying amounts of these investments are reviewed annually for impairment indicators and, where an indicator of impairment exists, are impaired to the higher of the investment’s fair value less costs to sell and value in use. The accounting policies of subsidiaries that are consolidated by the group conform to the group’s accounting policies. Intragroup transactions, balances and unrealised gains (losses) are eliminated on consolidation. Unrealised losses are eliminated in the same manner as unrealised gains, but only to the extent that there is no evidence of impairment. The proportion of comprehensive income and changes in equity allocated to the group and non controlling interests (NCI) are determined on the basis of the group’s present ownership interest in the subsidiary. Subsidiaries are consolidated from the date on which the group acquires control up to the date that control is lost. The group controls an entity if it is exposed to, or has the rights to variable returns from its involvement with the entity and has the ability to affect those returns through its power over the entity. Control is assessed on a continuous basis. For mutual funds the group further assesses its control by considering the existence of either voting rights or significant economic power. Increases in the group’s interest in a subsidiary, when the group already has control, are accounted for as transactions with equity holders of the group. The difference between the purchase consideration and the group’s proportionate share of the subsidiary’s additional net asset value acquired is accounted for directly in equity. Disposal of a subsidiary A disposal arises where the group loses control of a subsidiary. When the group loses control of a subsidiary, the profit or loss on disposal is calculated as the difference between the fair value of the consideration received (including the fair value of any retained interest in the underlying investee) and the carrying amount of the assets and liabilities and any non-controlling interest. Any gains or losses in OCI that relate to the subsidiary are reclassified to profit or loss at the time of the disposal. On disposal of a subsidiary that includes a foreign operation, the relevant amount in the FCTR is reclassified to profit or loss at the time at which the profit or loss on disposal of the foreign operation is recognised. Partial disposal of a subsidiary A partial disposal arises as a result of a reduction in the group’s ownership interest in an investee that is not a disposal (i.e. a reduction in the group’s interest in a subsidiary whilst retaining control). Decreases in the group’s interest in a subsidiary, where the group retains control, are accounted for as transactions with equity holders of the group. Gains or losses on the partial disposal of the group’s interest in a subsidiary are computed as the difference between the sales consideration and the group’s proportionate share of the investee’s net asset value disposed of, and are accounted for directly in equity. Initial measurement of NCI The group elects on each acquisition to initially measure NCI on the acquisition date at either fair value or at the NCI’s proportionate share of the investees’ identifiable net assets. Common control transactions Common control transactions, in which the company is the ultimate parent entity both before and after the transaction, are accounted for at book value. Foreign currency translations Foreign currency transactions are translated into the respective group entities’ functional currencies at exchange rates prevailing at the date of the transactions. In accordance with IAS 21.26, the group concluded that it has to apply a different exchange rate for the measurement of some of its liabilities, as this rate represents the rate at which the liabilities could have been settled if the transaction occurred at balance sheet date. Foreign exchange gains and losses resulting from the settlement of such transactions and from the translation of monetary assets and liabilities denominated in foreign currencies at year end exchange rates, are recognised in profit or loss. Non-monetary assets and liabilities denominated in foreign currencies that are measured at historical cost are translated using the exchange rate at the transaction date, and those measured at fair value are translated at the exchange rate at the 139
  71. 140 Annual report & financial statements date that the fair value was determined. Exchange rate differences on nonmonetary items are accounted for based on the classification of the underlying items. In the case of foreign currency gains and losses on debt instruments classified as available for sale, a distinction is made between foreign currency differences resulting from changes in amortised cost Stanbic IBTC Annual group financial statements for the year ended 31 December 2017 of the security and other changes in the carrying amount of the security. Foreign currency differences related to changes in the amortised cost are recognised in profit or loss, and other changes in the carrying amount, except impairment, are recognised in equity. For available for sale equity investments, foreign currency differences are recognised in OCI. Foreign currency gains and losses on intragroup loans are recognised in profit or loss except where the settlement of the loan is neither planned nor likely to occur in the foreseeable future. Overview Business review Annual report & financial statements Other information Financial assets Held to maturity Non-derivative financial assets with fixed or determinable payments and fixed maturities that management has both the positive intent and ability to hold to maturity. Loans and receivables Non-derivative financial assets with fixed or determinable payments that are not quoted in an active market, other than those classified as at fair value through profit or loss or available-for-sale. Held for trading Those financial assets acquired principally for the purpose of selling in the near term, those that form part of a portfolio of identified financial instruments that are managed together and for which there is evidence of a recent actual pattern of short-term profit taking. Designated at fair value through profit or loss Financial assets are designated to be measured at fair value in the following instances: - to eliminate or significantly reduce an accounting mismatch that would otherwise arise 4.2 Cash and cash equivalents - where the financial assets are managed and their performance evaluated and reported on a fair value basis Cash and cash equivalents presented in the statement of cash flows consist of cash and balances with the central bank (excluding cash reserve), and balances with other banks with original maturities of 3 months or less from the date of acquisition that are subject to an insignificant risk of changes in their fair values and are used by management to fulfill short term commitments. Cash and balances with the central bank comprise coins and bank notes, balances with central bank and other short term investments. - where the financial asset contains one or more embedded derivatives that significantly modify the financial asset’s cash flows. Available for sale Financial assets that are not classified into one of the above-mentioned financial asset categories. 4.3 Financial instruments The relevant financial instruments are financial assets held for trading, available for sale financial assets, loans and receivables and other liabilities. Financial Instruments Financial assets Financial liabilities Financial guarantee contracts Derivatives and embedded derivatives Subsequent measurement Subsequent to initial measurement, financial assets are classified in their respective categories and measured at either amortised cost or fair value as follows: Held to maturity and Loans and receivables Amortised cost using the effective interest method with interest recognised in interest income, less any impairment losses which are recognised as part of credit impairment charges. Directly attributable transaction costs and fees received are capitalised and amortised through interest income as part of the effective interest rate. Available for sale Fair value, with changes in fair value recognised directly in the available-for-sale reserve until the financial asset is derecognised or impaired. Other Impairment Reclassification Interest income on debt financial assets is recognised in profit and loss in terms of the effective interest rate method. Dividends received on equity available-for-sale financial assets are recognised in other revenue within profit or loss. Held to maturity Designated at fair value through profit or loss Sale and repurchase agreements Loan and receivable Held for trading Offsetting Available for sale Amortised cost Pledged assets Held for trading Designated at fair value through profit or loss Recognition and initial measurement – financial instruments All financial instruments are measured initially at fair value plus directly attributable transaction costs and fees, except for those financial instruments that are subsequently measured at fair value through profit or loss where such transaction costs and fees are immediately recognised in profit or loss. Financial instruments are recognised (derecognised) on the date the group commits to purchase (sell) the instruments (trade date accounting). When debt (equity) available-for-sale financial assets are disposed of, the cumulative fair value adjustments in OCI are reclassified to interest income (other revenue). Held for trading Fair value, with gains and losses arising from changes in fair value (including interest and dividends) recognised in trading revenue. Designated at fair value through profit or loss Fair value, with gains and losses recognised in interest income for all debt financial assets and in other revenue within non-interest revenue for all equity instruments. 141
  72. 142 Annual report & financial statements Stanbic IBTC Annual group financial statements for the year ended 31 December 2017 Overview Business review Annual report & financial statements Other information Notes to the consolidated and separate financial statements For the year ended 31 December 2017 Impairment A financial asset is impaired if objective evidence indicates that a loss event has occurred after initial recognition which has a negative effect on the estimated future cash flows of the financial asset that can be estimated reliably. The group assesses at each reporting date whether there is objective evidence that a financial asset, which is either carried at amortised cost or classified as available-for-sale, is impaired as follows: Held to maturity and Loans and receivables The following criteria are used by the group in determining whether there is objective evidence of impairment for loans or groups of loans include: • known cash flow difficulties experienced by the borrower; • a breach of contract, such as default or delinquency in interest and/or principal payments; • breaches of loan covenants or conditions; • it becoming probable that the borrower will enter bankruptcy or other financial reorganisation; and •w  here the group, for economic or legal reasons relating to the borrower’s financial difficulty, grants the borrower a concession that the group would not otherwise consider. The group first assesses whether there is objective evidence of impairment individually for loans that are individually significant, and individually or collectively for loans that are not individually significant. Non-performing loans include those loans for which the group has identified objective evidence of default, such as a breach of a material loan covenant or condition as well as those loans for which instalments are due and unpaid for 90 days or more. The impairment of non-performing loans takes into account past loss experience adjusted for changes in economic conditions and the nature and level of risk exposure since the recording of the historic losses. When a loan carried at amortised cost has been identified as specifically impaired, the carrying amount of the loan is reduced to an amount equal to the present value of its estimated future cash flows, including the recoverable amount of any collateral, discounted at the financial asset’s original effective interest rate. The carrying amount of the loan is reduced through the use of a specific credit impairment account and the loss is recognised as a credit impairment charge in profit or loss. Available for sale When an available for sale asset has been identified as impaired, the cumulative loss, measured as the difference between the acquisition price and the current fair value, less any previously recognised impairment losses on that financial asset, is reclassified from OCI to profit or loss. If, in a subsequent period, the amount relating to an impairment loss decreases and the decrease can be linked objectively to an event occurring after the impairment loss was recognised, where the instrument is a debt instrument, the impairment loss is reversed through profit or loss. An impairment loss in respect of an equity instrument classified as available-for-sale is not reversed through profit or loss but accounted for directly in OCI. Reclassification Reclassifications of financial assets are permitted only in the following instances: Held to maturity Where the group is to sell more than an insignificant amount of held-to-maturity investments, the entire category would be tainted and reclassified from held-to-maturity to available-for-sale assets with the difference between amortised cost and fair value being accounted for in OCI. Loans and receivables The group may choose to reclassify financial assets from loans and receivables to held to maturity if the group, at the date of reclassification, has the intention and ability to hold these financial assets for the foreseeable future or until maturity. Held for trading The group may choose to reclassify held for trading non-derivative financial assets to another category of financial assets in the following instances: • non-derivative trading assets out of the held-for-trading category if the financial asset is no longer held for the purpose of selling it in the near term. Increases in loan impairments and any subsequent reversals thereof, or recoveries of amounts previously impaired (including loans that have been written off), are reflected within credit impairment charges in profit or loss. Subsequent to impairment, the effects of discounting unwind over time as interest income. • non-derivative trading assets that would not otherwise have met the definition of loans and receivables are permitted to be reclassified only in rare circumstances. The calculation of the present value of the estimated future cash flows of collateralised financial assets recognised on an amortised cost basis includes cash flows that may result from foreclosure less costs of obtaining and selling the collateral, whether or not foreclosure is probable. If the group determines that no objective evidence of impairment exists for an individually assessed loan, whether significant or not, it includes the loan in a group of financial loans with similar credit risk characteristics and collectively assesses for impairment. Loans that are individually assessed for impairment and for which an impairment loss is recognised are not included in a collective assessment for impairment. Impairment of groups of loans that are assessed collectively is recognised where there is objective evidence that a loss event has occurred after the initial recognition of the group of loans but before the reporting date. In order to provide for latent losses in a group of loans that have not yet been identified as specifically impaired, a credit impairment for incurred but not reported losses is recognised based on historic loss patterns and estimated emergence periods (time period between the loss trigger events and the date on which the group identifies the losses). Groups of loans are also impaired when adverse economic conditions develop after initial recognition, which may impact future cash flows. The carrying amount of groups of loans is reduced through the use of a portfolio credit impairment account and the loss is recognised as a credit impairment charge in profit or loss. Previously impaired loans are written off once all reasonable attempts at collection have been made and there is no realistic prospect of recovering outstanding amounts. Available-for-sale debt instruments are impaired when there has been an adverse effect in fair value of the instrument below its cost and for equity instruments where there is information about significant or prolonged changes with an adverse effect on the environment in which the issuer operates that indicates that the cost of the investment in the equity instrument may not be recovered. • non-derivative trading assets that would meet the definition of loans and receivables if the group, at the date of reclassification, has the intention and ability to hold these financial assets for the foreseeable future or until maturity. Reclassifications are made at fair value as of the reclassification date. Effective interest rates for financial assets reclassified to loans and receivables, held-to-maturity and available-for-sale categories are determined at the reclassification date. Subsequent changes in estimates of cash flows (other than credit impairment changes) adjust the financial asset’s effective interest rates prospectively. On reclassification of a trading asset, all embedded derivatives are reassessed and, if necessary, accounted for separately. Financial Liabilities Nature Held for trading Those financial liabilities incurred principally for the purpose of re-purchasing in the near term, those that form part of a portfolio of identified financial instruments that are managed together and for which there is evidence of a recent actual pattern of short-term profit taking. Designated at fair value through profit or loss Financial liabilities are designated to be measured at fair value in the following instances: • to eliminate or significantly reduce an accounting mismatch that would otherwise arise • where the financial liabilities are managed and their performance evaluated and reported on a fair value basis • where the financial liability contains one or more embedded derivatives that significantly modify the financial liability’s cash flows. At amortised cost All other financial liabilities not included the above categories. 143
  73. 144 Annual report & financial statements Stanbic IBTC Annual group financial statements for the year ended 31 December 2017 Overview Business review Annual report & financial statements Other information Notes to the consolidated and separate financial statements For the year ended 31 December 2017 Subsequent measurement Subsequent to initial measurement, financial liabilities are classified in their respective categories and measured at either amortised cost or fair value as follows: Held for trading Fair value, with gains and losses arising from changes in fair value (including interest and dividends) recognised in trading revenue. Designated at fair value through profit or loss Fair value, with gains and losses arising from changes in fair value (including interest and dividends) recognised in interest expense. At amortised cost Amortised cost using the effective interest method with interest recognised in interest expense. Sale and repurchase agreements Derecognition of financial assets and liabilities Financial assets and liabilities are derecognised in the following instances: Financial assets Financial assets are derecognised when the contractual rights to receive cash flows from the financial assets have expired, or where the group has transferred its contractual rights to receive cash flows on the financial asset such that it has transferred substantially all the risks and rewards of ownership of the financial asset. Any interest in transferred financial assets that is created or retained by the group is recognised as a separate asset or liability. The group enters into transactions whereby it transfers assets recognised in its statement of financial position, but retains either all or a portion of the risks or rewards of the transferred assets. If all or substantially all risks and rewards are retained, then the transferred assets are not derecognised. Transfers of assets with the retention of all or substantially all risks and rewards include securities lending and repurchase agreements. In transfers where control over the asset is retained, the group continues to recognise the asset to the extent of its continuing involvement, determined by the extent to which it is exposed to changes in the value of the transferred asset. Financial liabilities to pledged assets, if the transferee has received the right to sell or re-pledge them in the event of default from agreed terms. Initial recognition of pledged assets is at fair value, whilst subsequently measured is at fair value. These transactions are performed in accordance with the usual terms of securities lending and borrowing Financial liabilities are derecognised when the obligation of the financial liabilities are extinguished, that is, when the obligation is discharged, cancelled or expires. Where an existing financial asset or liability is replaced by another with the same counterparty on substantially different terms, or the terms of an existing financial asset or liability are substantially modified, such an exchange or modification is treated as a derecognition of the original asset or liability and the recognition of a new asset or liability, with the difference in the respective carrying amounts being recognised in profit or loss. In all other instances, the renegotiated asset or liability’s effective interest rate is redetermined at date of modification taking into account the renegotiated terms. or modified terms of a debt instrument. Financial guarantee contracts A derivative is a financial instrument whose fair value changes in response to an underlying variable, requires no initial net investment or an initial net investment that is smaller than would be required for other types of contracts that would be expected to have a similar response to changes in market factors and is settled A financial guarantee contract is a contract that requires the group (issuer) to make specified payments to reimburse the holder for a loss it incurs because a specified debtor fails to make payment when due in accordance with the original Financial guarantee contracts are initially recognised at fair value, which is generally equal to the premium received, and then amortised over the life of the financial guarantee. Financial guarantee contracts are subsequently measured at the higher of the: •present value of any expected payment, when a payment under the guarantee has become probable; and • unamortised premium. Derivatives and embedded derivatives at a future date. Derivatives are initially recognised at fair value on the date on which the derivatives are entered into and subsequently remeasured at fair value. All derivative instruments are carried as financial assets when the fair value is positive and as financial liabilities when the fair value is negative, subject to offsetting principles as described under the heading “Offsetting” below. All gains and losses from changes in the fair values of derivatives are recognised immediately in profit or loss as trading revenue. Other Pledged assets Financial assets transferred to external parties that do not qualify for de-recognition are reclassified in the statement of financial position from financial investments or trading assets Securities sold subject to linked repurchase agreements (repurchase agreements) are reclassified in the statement of financial position as pledged assets when the transferee has the right by contract or custom to sell or repledge the collateral. The liability to the counterparty is included under deposit and current accounts or trading liabilities, as appropriate. Securities purchased under agreements to resell (reverse repurchase agreements), at either a fixed price or the purchase price plus a lender’s rate of return, are recorded as loans and included under trading assets or loans and advances, as appropriate. For repurchase and reverse repurchase agreements measured at amortised cost, the difference between the purchase and sales price is treated as interest and amortised over the expected life using the effective interest rate method. Offsetting Financial assets and liabilities are offset and the net amount reported in the statement of financial position when there is a legally enforceable right to set-off the recognised amounts and there is an intention to settle the asset and the liability on a net basis, or to realise the asset and settle the liability simultaneously. The legally enforceable right must not be contingent on future events and must be enforceable in the normal course of business and in the event of default, insolvency or bankruptcy of the counterparties to the transaction. 4.4 Rules issued by the Financial Reporting Council of Nigeria Transactions requiring registration from statutory bodies such as the National Office for Technology Acquisition and Promotion The group has entered into various agreements in relation to franchise and management services as well as information technology services which, as at year end 31 December 2017 financial period, were yet to be registered by the appropriate statutory body. We have reported these contracts in line with the rule specified above. Transactions and/or events of a financial nature that require approval and/or registration or any act to be performed by a statutory body in Nigeria and/or where a 4.5 Fair value Inputs and valuation techniques statute clearly provides for a particular act to be performed and/or registration to be obtained; such transactions or events shall be regarded as having financial reporting implication only when such act is performed and/or such registration is obtained. Accordingly, the details of the required act and/or registration obtained from such statutory body shall be disclosed by way of note in the financial statements if the transaction is recognised as part of the financial reporting of the entity. Fair value Day one profit/loss Cost exception Fair value hierarchy Hierarchy transfers Fair value levels In terms of IFRS, the group is either required to or elects to measure a number of its financial assets and financial liabilities at fair value. Regardless of the measurement basis, the fair value is required to be disclosed, with some exceptions, for all financial assets and financial liabilities. Fair value is the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction in the principal (or most advantageous) market between market participants at the measurement date under current market conditions. Fair value is a market based measurement and uses the assumptions that market participants would use when pricing an asset or liability under current market conditions. When determining fair value it is presumed that the entity is a going concern and is not an amount that represents a forced transaction, involuntary liquidation or a distressed sale. In estimating the fair value of an asset or a liability, the group takes into account the characteristics of the asset or liability that market participants would take into account when pricing the asset or liability at the measurement date. 145
  74. 146 Annual report & financial statements Stanbic IBTC Annual group financial statements for the year ended 31 December 2017 Overview Business review Annual report & financial statements Other information Notes to the consolidated and separate financial statements For the year ended 31 December 2017 Inputs and valuation techniques Fair value is measured based on quoted market prices or dealer price quotations for identical assets and liabilities that are traded in active markets, which can be accessed at the measurement date, and where those quoted prices represent fair value. If the market for an asset or liability is not active or the instrument is not quoted in an active market, the fair value is determined using other applicable valuation techniques that maximise the use of relevant observable inputs and minimises the use of unobservable inputs. These include the use of recent arm’s length transactions, discounted cash flow analyses, pricing models and other valuation techniques commonly used by market participants. Fair value measurements are categorised into level 1, 2 or 3 within the fair value hierarchy based on the degree to which the inputs to the fair value measurements are observable and the significance of the inputs to the fair value measurement. Where discounted cash flow analyses are used, estimated future cash flows are based on management’s best estimates and a market related discount rate at the reporting date for an asset or liability with similar terms and conditions. Item Description Valuation technique Main inputs and assumptions (Level 2 and 3 fair value hierarchy items) Loans and advances to banks and customers Loans and advances comprise: For certain loans fair value may be determined from the market price of a recently occurring transaction adjusted for changes in risks and information between the transaction and valuation dates. Loans and advances are reviewed for observed and verified changes in credit risk and the credit spread is adjusted at subsequent dates if there has been an observable change in credit risk relating to a particular loan or advance. In the absence of an observable market for these instruments, discounted cash flow models are used to determine fair value. Discounted cash flow models incorporate parameter inputs for interest rate risk, foreign exchange risk, liquidity and credit risk, as appropriate. For credit risk, probability of default and loss given default parameters are determined using the relevant terms of the loan and loan counterparty such as the industry classification and subordination of the loan. • Discount rate For certain deposits, fair value may be determined from the market price on a recently occurring transaction adjusted for all changes in risks and information between the transaction and valuation dates. In the absence of an observable market for these instruments discounted cash flow models are used to determine fair value based on the contractual cash flows related to the instrument. The fair value measurement incorporates all market risk factors including a measure of the group’s credit risk relevant for that financial liability. The market risk parameters are valued consistently to similar instruments held as assets stated in the section above. For collateralised deposits that are designated to be measured at fair value through profit or loss, such as securities repurchase agreements, the credit enhancement is incorporated into the fair valuation of the liability. • Discount rate If an asset or a liability measured at fair value has both a bid and an ask price, the price within the bid-ask spread that is most representative of fair value is used to measure fair value. The group’s valuation control framework governs internal control standards, methodologies, and procedures over its valuation processes, which include the following valuation techniques and main inputs and assumptions per type of instrument: Item Description Valuation technique Main inputs and assumptions (Level 2 and 3 fair value hierarchy items) Derivative financial instruments Derivative financial instruments comprise foreign exchange, and interest rate. Standard derivative contracts are valued using market accepted models and quoted parameter inputs. More complex derivative contracts are modelled using more sophisticated modelling techniques applicable to the instrument. Techniques include: • Discount rate* • Spot prices of the underlying • Discounted cash flow model • Black-Scholes model Trading assets and Trading liabilities Trading assets and liabilities comprise instruments which are part of the group’s underlying trading activities. These instruments primarily include sovereign and corporate debt, and collateral. Where there are no recent market transactions in the specific instrument, fair value is derived from the last available market price adjusted for changes in risks and information since that date. Pledged assets Pledged assets comprise instruments that may be sold or repledged by the group’s counterparty in the absence of default by the group. Pledged assets include sovereign debt (government treasury bills and bonds) pledged in terms of repurchase agreements. Financial investments Financial investments are nontrading financial assets and primarily comprise of sovereign and corporate debt, unlisted equity instruments, investments in mutual fund investments and unit-linked investments. Where a proxy instrument is quoted in an active market, the fair value is determined by adjusting the proxy fair value for differences between the proxy instrument and the financial investment being fair valued. Where proxies are not available, the fair value is estimated using more complex modelling techniques. These techniques include discounted cash flow and BlackScholes models using current market rates for credit, interest, liquidity, volatility and other risks. Combination techniques are used to value unlisted equity securities and include inputs such as earnings and dividend yields of the underlying entity. • • • • • • • • • • • • assets Correlation factors Volatilities Dividend yields Earnings yield Valuation multiples Discount rate* Spot prices of the underlying Correlation factors Volatilities Dividend yields Earnings yield Valuation multiples • Loans and advances to banks: call loans, loans granted under resale agreements and balances held with other banks. • Loans and advances to customers: mortgage loans (home loans and commercial mortgages), other asset-based loans, including collateralised debt obligations (instalment sale and finance leases), and other secured and unsecured loans (card debtors, overdrafts, other demand lending, term lending and loans granted under resale agreements). Deposits from bank and customers Deposits from banks and customers comprise amounts owed to banks and customers, deposits under repurchase agreements, negotiable certificates of deposit, creditlinked deposits and other deposits. • Probability of default • Loss given default • Probability of default • Loss given default *Discount rates, where applicable, include the risk-free rate, risk premiums, liquidity spreads, credit risk (own and counterparty as appropriate), timing of settlement, storage/service costs, prepayment and surrender risk assumptions and recovery rates/loss given default. 147
  75. 148 Annual report & financial statements Stanbic IBTC Annual group financial statements for the year ended 31 December 2017 Overview Business review Annual report & financial statements Other information Notes to the consolidated and separate financial statements For the year ended 31 December 2017 Cost exception Day one profit or loss For financial instruments, where the fair value of the financial instrument differs from the transaction price, the difference is commonly referred to as day one profit or loss. Day one profit or loss is recognised in profit or loss immediately where the fair value of the financial instrument is either evidenced by comparison with other observable current market transactions in the same instrument, or is determined using valuation models with only observable market data as inputs. Day one profit or loss is deferred where the fair value of the financial instrument is not able to be evidenced by comparison with other observable current market transactions in the same instrument, or determined using valuation models that utilise non-observable market data as inputs. The timing of the recognition of deferred day one profit or loss is determined individually depending on the nature of the instrument and availability of market observable inputs. It is either amortised over the life of the transaction, deferred until the instrument’s fair value can be determined using market observable inputs, or realised through settlement. Any difference between the fair value at initial recognition and the amount that would be determined at that date using a valuation technique in a situation in which the valuation is dependent on unobservable parameters is not recognised in profit or loss immediately but is recognised over the life of the instrument on an appropriate basis or when the instrument is redeemed. 4.6 Employee benefits Where the fair value of investments in equity instruments or identical instruments do not have a quoted price in an active market, and derivatives that are linked to and must be settled by delivery of such equity instruments, are unable to be reliably determined, those instruments are measured at cost less impairment losses. Impairment losses on these financial assets are not reversed. Post-employment benefits Employee benefits Termination benefits Short-term benefits Defined contribution plans Equity-linked transactions Equity-settled share based-payments Cash-settled share based-payments Fair value hierarchy The group’s financial instruments that are both carried at fair value and for which fair value is disclosed are categorised by level of fair value hierarchy. The different levels are based on the degree to which the inputs to the fair value measurements are observable and the significance of the inputs to the fair value measurement. Type Description Statement of financial position Statement of other comprehensive income Income statement Defined contribution plans The group operates a contributory pension plan in line with the Pension Reform Act 2014. Employees and the Bank contribute 8% and 10% respectively of each of the qualifying staff salary in line with the provisions of the Pension Reforms Act 2014. Liability is recognised for unpaid contributions. No impact. Contributions are recognised as an expense in profit or loss in the periods during which services are rendered by employees. Termination benefits Termination benefits are recognised when the group is committed, without realistic possibility of withdrawal, to a formal detailed plan to terminate employment before the normal retirement date, or to provide termination benefits as a result of an offer made to encourage voluntary redundancy when it is probable that the offer will be accepted, and the number of acceptances can be estimated reliably. A liability is recognised for the termination benefit representing the best estimate of the amount payable. No impact. Termination benefits are recognised as an expense if the group has made an offer encouraging voluntary redundancy, it is probable that the offer will be accepted, and the number of acceptances can be estimated reliably. Short-term benefits Short-term benefits consist of salaries, accumulated leave payments, profit share, bonuses and any non-monetary benefits such as medical aid contributions. A liability is recognised for the amount expected to be paid under short-term cash bonus plans or accumulated leave if the group has a present legal or constructive obligation to pay this amount as a result of past service provided by the employee and the obligation can be estimated reliably. No direct impact. Short-term employee benefit obligations are measured on an undiscounted basis and are expensed as the related service is provided. Hierarchy levels The levels have been defined as follows: Level 1 Fair value is based on quoted market prices (unadjusted) in active markets for an identical financial asset or liability. An active market is a market in which transactions for the asset or liability take place with sufficient frequency and volume to provide pricing information on an ongoing basis. Level 2 Fair value is determined through valuation techniques based on observable inputs, either directly, such as quoted prices, or indirectly, such as those derived from quoted 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 or indirectly observable from market data. Level 3 Fair value is determined through valuation techniques using significant unobservable inputs. This category includes all instruments where the valuation technique includes inputs not based on observable data and the unobservable inputs have a significant effect on the instrument’s valuation. This category includes instruments that are valued based on quoted prices for similar instruments where significant unobservable adjustments or assumptions are required to reflect differences between the instrument being valued and the similar instrument. Hierarchy transfer policy Transfers of financial assets and financial liabilities between levels of the fair value hierarchy are deemed to have occurred at the end of the reporting period during which change occurred. 149
  76. 150 Annual report & financial statements Stanbic IBTC Annual group financial statements for the year ended 31 December 2017 Overview Business review Annual report & financial statements Other information Notes to the consolidated and separate financial statements For the year ended 31 December 2017 Equity-linked transactions Equity-settled share based payments The fair value of the equity-settled share based payments are determined on grant date and accounted for within operating expenses – staff costs over the vesting period with a corresponding increase in the group’s share-based payment reserve. Non-market vesting conditions, such as the resignation of employees and retrenchment of staff, are not considered in the valuation but are included in the estimate of the number of options expected to vest. At each reporting date, the estimate of the number of options expected to vest is reassessed and adjusted against profit or loss and equity over the remaining vesting period. On vesting of the equity-settled share based payments, amounts previously credited to the share-based payment reserve are transferred to retained earnings through an equity transfer. Cash-settled share based payments Cash-settled share based payments are accounted for as liabilities at fair value until the date of settlement. The liability is recognised over the vesting period and is revalued at every reporting date up to and including the date of settlement. All changes in the fair value of the liability are recognised in operating expenses – staff costs. Non Financial assets Intangible assets Leasehold improvements and building Computer software Motor vehicles Computer equipment Furniture, fittings and equipment Land Initial and subsequent measurement Useful lives, depreciation/ amortisation method or fair value basis Impairment Derecognition Tangible assets Property and equipment are measured at cost less accumulated depreciation and accumulated impairment losses. Cost includes expenditure that is directly attributable to the acquisition of the asset. Land is measured at cost less accumulative impairment loss. Land is not depreciated. Property and equipment are depreciated on the straight-line basis over estimated useful lives (see below) of the assets to their residual values. Land is not depreciated. Intangible assets that have an indefinite useful life are tested annually for impairment and additionally when an indicator of impairment exists. The non-financial assets are derecognised on disposal or when no future economic benefits are expected from their use or disposal. The gain or loss on derecognition is recognised in profit or loss and is determined as the difference between the net disposal proceeds and the carrying amount of the non-financial asset. Costs that are subsequently incurred are included in the asset’s related carrying amount or are recognised as a separate asset, as appropriate, only when it is probable that future economic benefits will flow to the group and the cost of the item can be measured reliably. Expenditure, which does not meet these criteria, is recognised in profit or loss as incurred. 4.7 Non-financial assets (Intangible assets, property and equipment) Tangible assets Type Where significant parts of an item of property or equipment have different useful lives, they are accounted for as separate major components of property and equipment. Land N/A Buildings 25 years Computer 3-5 years Motor vehicles 4 years Office equipments 6 years Furniture 4 years Capitalised leased assets/ branch refurbishments greater of 6 years or useful life of underlying asset The residual values, useful lives and the depreciation method applied are reviewed, and adjusted if appropriate, at each financial period end. Other non-financial assets are reviewed for impairment at each reporting date and tested for impairment whenever events or changes in circumstances indicate that the carrying amount may not be recoverable. An impairment loss is recognised in profit or loss for the amount by which the asset’s carrying amount exceeds its recoverable amount. The recoverable amount is determined as the higher of an asset’s fair value less costs to sell and value in use. Fair value less costs to sell is determined by ascertaining the current market value of an asset and deducting any costs related to the realisation of the asset. In assessing value in use, the estimated future cash flows are discounted to their present value using a pre-tax discount rate that reflects current market assessments of the time value of money and the risks specific to the asset. 151
  77. 152 Annual report & financial statements Stanbic IBTC Annual group financial statements for the year ended 31 December 2017 Overview Business review Annual report & financial statements Other information Notes to the consolidated and separate financial statements For the year ended 31 December 2017 Type Intangible assets/ computer software Initial and subsequent measurement Useful lives, depreciation/ amortisation method or fair value basis Costs associated with developing or maintaining computer software programmes and the acquisition of software licences are generally recognised as an expense as incurred. However, direct computer software development costs that are clearly associated with an identifiable and unique system, which will be controlled by the group and have a probable future economic benefit beyond one period, are recognised as intangible assets. Impairment Derecognition Type Description Statement of financial position Income statement Finance lease -lessor Leases, where the group transfers substantially all the risks and rewards incidental to ownership, are classified as finance leases. Finance lease receivable, including initial direct costs and fees, are primarily accounted for as financing transactions in banking activities, with rentals and instalments receivable, less unearned finance charges, being included in loans and receivables. Finance charges earned within interest income are computed using the effective interest method, which reflects a constant periodic rate of return on the investment in the finance lease. Operating lease -lessee All leases that do not meet the criteria of a finance lease are classified as operating leases. Accruals for unpaid lease charges, together with a straight-line lease asset or liability, being the difference between actual payments and the straight-line lease expense are recognised. Payments made under operating leases, net of any incentives received from the lessor, are recognised in profit or loss on a straight-line basis over the term of the lease.Contingent rentals are expensed as they are incurred. Amortisation is recognised in profit or loss on a straight-line basis at rates appropriate to the expected lives of the assets (2 to 15 years) from the date that the asset is available for use. Amortisation methods, useful lives and residual values are reviewed at each financial period end and adjusted, if necessary. Intangible assets are carried at cost less accumulated amortisation and accumulated impairment losses from the date that the assets are available for use. Expenditure subsequently incurred on computer software is capitalised only when it increases the future economic benefits embodied in the specific asset to which it relates. 4.9 Equity When an operating lease is terminated before the lease period has expired, any payment required to be made to the lessor by way of penalty is recognised as an expense in the period in which termination takes place. Equity Share issue costs 4.8 Leases Distributions on ordinary shares Leases Financial leases Operating leases Lessee Lessee Share issue costs Incremental external costs directly attributable to a transaction that increases or decreases equity are deducted from equity, net of related tax. All other share issue costs are expensed. Distributions to owners Distributions are recognised in equity in the period in which they are declared. Distributions declared after the reporting date are disclosed in the distributions note to the financial statements. 4.10 Provisions, contingent assets and contingent liabilities Lessor Provisions, contingent assets and contingent liabilities Type Description Statement of financial position Income statement Finance lease -lessee Leases, where the group assumes substantially all the risks and rewards incidental to ownership, are classified as finance leases. The leased asset is capitalised at the inception of the lease at the lower of the fair value of the leased asset and the present value of the minimum lease payments together with an associated liability to the lessor. A lease finance cost, determined with reference to the interest rate implicit in the lease or the group’s incremental borrowing rate, is recognised within interest expense over the lease period Lease payments less the interest component, which is calculated using the interest rate implicit in the lease or the group’s incremental borrowing rate, are recognised as a capital repayment which reduces the liability to the lessor. Provisions Provision for legal claims Provision for restructuring Provision for onerous contracts Provision for tax claims Contingent assets Contingent liabilities 153
  78. 154 Annual report & financial statements Stanbic IBTC Annual group financial statements for the year ended 31 December 2017 Overview Business review Annual report & financial statements Other information Notes to the consolidated and separate financial statements For the year ended 31 December 2017 Provisions Provisions are recognised when the group has a present legal or constructive obligation as a result of past events, it is probable that an outflow of resources embodying economic benefits will be required to settle the obligation and a reliable estimate of the amount of the obligation can be made. Provisions are determined by discounting the expected future cash flows using a pre-tax discount rate that reflects current market assessments of the time value of money and the risks specific to the liability. The group’s provisions typically (when applicable) include the following: Provisions for legal claims Provisions for legal claims are recognised on a prudent basis for the estimated cost for all legal claims that have not been settled or reached conclusion at the reporting date. In determining the provision management considers the probability and likely settlement (if any). Reimbursements of expenditure to settle the provision are recognised when and only when it is virtually certain that the reimbursement will be received. Type Description, recognition and measurement Current taxdetermined for current period transactions and events Current tax represents the expected tax payable on taxable income for the period, using tax rates enacted or substantively enacted at the reporting date, and any adjustments to tax payable in respect of previous periods. Current tax also includes any tax arising from dividend. Provision for restructuring A provision for restructuring is recognised when the group has approved a detailed formal plan, and the restructuring either has commenced or has been announced publicly. Future operating costs or losses are not provided for. Contingent assets Contingent liabilities Contingent assets are not recognised in the annual financial statements but are disclosed when, as a result of past events, it is probable that economic benefits will flow to the group, but this will only be confirmed by the occurrence or non-occurrence of one or more uncertain future events which are not wholly within the group’s control. When applicable, minimum tax is recorded under current income tax in profit or loss. The company has also not been subject to minimum tax, (in line with the provisions of the Nigerian tax laws - Section 33 of Companies Income Tax Act CAP C21 LFN 2007 (as amended) as it has more than 25% of imported capital. Deferred taxdetermined for future tax consequences Contingent liabilities include certain guarantees (other than financial guarantees) and letters of credit and are not recognised in the annual financial statements but are disclosed in the notes to the annual financial statements. 4.11 Taxation Taxation Income tax Current tax is recognised as an expense for the period and adjustments to past periods except to the extent that current tax related to items that are charged or credited in OCI or directly to equity. Nigerian tax laws mandates a minimum tax assessment for companies having no taxable profits for the period or where the tax on profits is below the minimum tax. Minimum tax is computed as 0.125% of turnover in excess of N500,000 plus the highest of: (i) 0.5% of gross profits; (ii) 0.5% of net assets; (iii) 0.25% of paid-up capital; or (iv) 0.25% of turnover. Further, the Nigerian tax laws mandates that where a dividend is paid out of profit on which no tax is payable due to either: (a) no total profit; or (b) the total profit is less than the amount of dividend paid, the company paying the dividend will be subjected to tax at 30% of the dividends paid, as if the dividend is the total profits of the company for the period of assessment to which the accounts, out of which the dividends paid relates. Provision for onerous contracts A provision for onerous contracts is recognised when the expected benefits to be derived by the group from a contract are lower than the unavoidable cost of meeting its obligations under the contract. The provision is measured at the present value of the lower of the expected cost of terminating the contract and the expected net cost of continuing with the contract. Before a provision is established, the group recognises any impairment loss on the assets associated with that contract. Provision for tax claims Provisions for taxes claims relates to additional assessment on taxes, including withholding tax, value added tax, PAYE tax. Offsetting Deferred tax is recognised in profit or loss except to the extent that it relates to a business combination (relating to a measurement period adjustment where the carrying amount of the goodwill is greater than zero), or items recognised directly as part of OCI. Deferred tax is recognised in respect of temporary differences arising between the tax bases of assets and liabilities and their carrying values for financial reporting purposes. Deferred tax is measured at the tax rates that are expected to be applied to the temporary differences when they reverse, based on the laws that have been enacted or substantively enacted at the reporting date. Deferred tax is not recognised for the following temporary differences: • the initial recognition of goodwill; • the initial recognition of assets and liabilities in a transaction that is not a business combination, which affects neither accounting nor taxable profits or losses; and • investments in subsidiaries, associates and jointly controlled arrangements (excluding mutual funds) where the group controls the timing of the reversal of temporary differences and it is probable that these differences will not reverse in the foreseeable future. The amount of deferred tax provided is based on the expected manner of realisation or settlement of the carrying amount of the asset or liability and is not discounted. Indirect tax Deferred tax assets are recognised to the extent that it is probable that future taxable income will be available against which the unused tax losses can be utilised. Deferred tax assets are reviewed at each reporting date and are reduced to the extent that it is no longer probable that the related tax benefit will be realised. Current tax Deferred tax Current tax assets and liabilities, deferred tax assets and liabilities are offset if there is a legally enforceable right to offset current tax liabilities and assets, and they relate to income taxes levied by the same tax authority on the same taxable entity, or on different tax entities, but they intend to settle current tax liabilities and assets on a net basis or their tax assets and liabilities will be realised simultaneously. Indirect taxation Indirect taxes are recognised in profit or loss, as part of other operating expenses. N/A Dividend tax Taxes on dividends declared by the group are recognised as part of the dividends paid within equity as dividend tax represents a tax on the shareholder and not the group. N/A 155
  79. 156 Annual report & financial statements Stanbic IBTC Annual group financial statements for the year ended 31 December 2017 Overview Business review Annual report & financial statements Other information Notes to the consolidated and separate financial statements For the year ended 31 December 2017 4.12 Revenue and expenditure Revenue and expenditure Net interest income Non-interest revenue Operating expenses Net fee and commission revenue Other revenue Trading revenue Management fees on asset under management Description Recognition and measurement Net interest income Interest income and expense (with the exception of borrowing costs that are capitalised on qualifying assets, that is assets that necessarily take a substantial period of time to get ready for their intended use or sale and which are not measured at fair value) are recognised in profit or loss using the effective interest method for all interest-bearing financial instruments. In terms of the effective interest method, interest is recognised at a rate that exactly discounts estimated future cash payments or receipts through the expected life of the financial instrument or, where appropriate, a shorter period, to the net carrying amount of the financial asset or financial liability. Direct incremental transaction costs incurred and origination fees received, including loan commitment fees, as a result of bringing margin-yielding assets or liabilities into the statement of financial position, are capitalised to the carrying amount of financial instruments that are not at fair value through profit or loss and amortised as interest income or expense over the life of the asset or liability as part of the effective interest rate. Where the estimates of payments or receipts on financial assets (except those that have been reclassified from held for trading) or financial liabilities are subsequently revised, the carrying amount of the financial asset or financial liability is adjusted to reflect actual and revised estimated cash flows. The carrying amount is calculated by computing the present value of the adjusted cash flows at the financial asset or financial liability’s original effective interest rate. Any adjustment to the carrying value is recognised in net interest income. Where financial assets have been impaired, interest income continues to be recognised on the impaired value (gross carrying value less specific impairment) based on the original effective interest rate. Fair value gains and losses on realised debt financial instruments, including amounts reclassified from OCI in respect of available-for-sale debt financial assets are included in net interest income. Net fee and commission revenue Fee and commission revenue, including transactional fees, account servicing fees, investment management fees, sales commissions and placement fees are recognised as the related services are performed. Loan commitment fees for loans that are not expected to be drawn down are recognised on a straight-line basis over the commitment period. Loan syndication fees, where the group does not participate in the syndication or participates at the same effective interest rate for comparable risk as other participants, are recognised as revenue when the syndication has been completed. Syndication fees that do not meet these criteria are capitalised as origination fees and amortised as interest income. The fair value of issued financial guarantee contracts on initial recognition is amortised as income over the term of the contract. Fee and commission expenses, included in net fee and commission revenue, are mainly transaction and service fees relating to financial instruments, which are expensed as the services are received. Expenditure is recognised as fee and commission expenses where the expenditure is linked to the production of fee and commission revenue. Trading revenue Trading revenue comprises all gains and losses from changes in the fair value of trading assets and liabilities, together with related interest income, expense and dividends. Other revenue Other revenue includes dividends on equity investments. Gains and losses on equity available-for-sale financial assets are reclassified from OCI to profit or loss on derecognition or impairment of the investments. Dividends on these instruments are recognised in profit or loss. Dividend income Dividends are recognised in profit or loss when the right to receipt is established. Scrip dividends are recognised as dividends received where the dividend declaration allows for a cash alternative. Management fees on assets under management Fee income includes management fees on assets under management and administration fees. Management fees on assets under management are recognised over the period for which the services are rendered, in accordance with the substance of the relevant agreements. Operating expenses Expenses are recognised on an accrual bases regardless of the time of cash outflows. Expenses are recognised in the income statement when a decrease in future economic benefit related to a decrease in an asset or an increase of a liability has arisen that can be measured reliably. Expenses are recognised in the same reporting period when they are incurred in cases when it is not probable to directly relate them to particular income earned during the current reporting period and when they are not expected to generate any income during the coming periods. Expenses that are not related to the income earned during the reporting period, but expected to generate future economic benefits, are recorded in the financial statements as assets. Offsetting Income and expenses are presented on a net basis only when permitted by the accounting standards, or for gains and losses arising from a group of similar transactions. 4.13 Other significant accounting policies Segment reporting Other significant accounting policies Fiduciary activities Non interest banking Statutory credit risk reserve Other regulatory reserve Statutory reserves Small & medium scale industries reserve 157
  80. 158 Annual report & financial statements Stanbic IBTC Annual group financial statements for the year ended 31 December 2017 Overview Business review Annual report & financial statements Other information Notes to the consolidated and separate financial statements For the year ended 31 December 2017 Segment reporting An operating segment is a component of the group engaged in business activities, whose operating results are reviewed regularly by management in order to make decisions about resources to be allocated to segments and assessing segment performance. The group’s identification of segments and the measurement of segment results is based on the group’s internal reporting to management. Transactions between segments are priced at market-related rates. Fiduciary activities Non interest banking The group commonly engages in trust or other fiduciary activities that result in the holding or placing of assets on behalf of individuals, trusts, post-employment benefit plans and other institutions. These assets and the income arising directly thereon are excluded from these annual financial statements as they are not assets of the group. However, fee income earned and fee expenses incurred by the group relating to the group’s responsibilities from fiduciary activities are recognised in profit or loss. 4.14 Non-current assets held for sale and disposal groups Type Description Statement of financial position Income statement Non-current assets/ disposal groups that are held for sale Comprising assets and liabilities that are expected to be recovered primarily through sale rather than continuing use (including regular purchases and sales in the ordinary course of business). Immediately before classification, the assets (or components of a disposal group) are remeasured in accordance with the group’s accounting policies and tested for impairment. Thereafter, the assets are measured at the lower of their carrying amount and fair value less costs to sell. Impairment losses on initial classification as well as subsequent gains and losses on remeasurement of these assets or disposal groups are recognised in profit or loss. Assets and liabilities (or components of a disposal group) are presented separately in the statement of financial position. The banking subsidiary operates a non-interest banking window. The window provides non-interest banking products and services (based on Islamic commercial jurisprudence) to its customers through existing infrastructure of the bank. The products and the accounting treatments are as follows: Deposit liabilities: Deposits liabilities generated by the non interest banking window are classified as financial liabilities at amortised cost. The non-interest banking deposits include Imaan Current account and Imaan Transact Plus. Murabaha Financing: The bank finances assets under its Imaan Local Purchase and Contract Finance Product. This is operated under the Murabaha mode of finance and its main purpose is to provide the avenue for contractors to obtain financial assistance required to execute supply contracts. Murabaha receivables from customers are stated net of deferred profits, impairment allowance, and any amounts written off. Income and expenses: Income from account transactions are included in fee and commission income, while income from murabaha financing is included in other income and is recognised on a time apportioned basis over the period of the contract based on the principal amounts outstanding. Administrative expenses of the window are included under staff costs and other operating expenses. The banking subsidiary on 11 December 2017 obtained the approval of the Central Bank of Nigeria to cease its operation of the products and services currently offered under the Non Interest Banking (NIB) Window. The Bank is therefore in the process of closing the Window and accordingly: 4.15 Equity linked transactions 1. The Bank will not be taking on any new customers for NIB Business. 2. T  he Bank intends to provide customers who are currently enjoying the Window’s products and services with the opportunity to subscribe for alternative products and services offered by the Stanbic IBTC group that will meet their specific needs. 3. It is envisaged that existing customers of the Window will remain as NIB customers for a period. During this period the NIB Relationship Managers will engage with and sensitise them on other products within the Stanbic IBTC bouquet of products and services that could provide a viable alternative to their current products and services. NIB Window is not a major line of business for the group and as such the closure of the NIB Window was not accounted under IFRS 5 Non current assets held for sale and discontinued operations. Statutory credit risk reserve The statutory credit risk reserve represents a reserve component created when credit impairment on loans and advances as accounted for under IFRS using the incurred loss model differ from the Prudential Guidelines set by the Central Bank of Nigeria. Statutory reserve Nigerian banking and pension industry regulations require the banking and pension subsidiaries to make an annual appropriation to a statutory reserve. For the banking subsidiary, an appropriation of 30% of profit after tax is made if the statutory reserve is less than paid-up share capital and 15% of profit after tax if the statutory reserve is greater than the paid up share capital. The pension subsidiary is required to transfer 12.5% of its profit after tax to a statutory reserve. Statutory reserve is not available for distribution to shareholders. See note 19.3 (b)(i). The group’s equity compensation plans Equity-settled share based-payments Equity-settled share based payments Property and equipment and intangible assets are not depreciated or amortised. Cash-settled share based-payments The fair value of the equity-settled share based payments are determined on grant date and accounted for within operating expenses - staff costs over the vesting period with a corresponding increase in the group’s share-based payment reserve. Non-market vesting conditions, such as the resignation of employees and retrenchment of staff, are not considered in the valuation but are included in the estimate of the number of options expected to vest. At each reporting date, the estimate of the number of options expected to vest is reassessed and adjusted against profit or loss and equity over the remaining vesting period. On vesting of the equity-settled share based payments, amounts previously credited to the share-based payment reserve are transferred to retained earnings through an equity transfer. Cash-settled share based payments Cash-settled share based payments are accounted for as liabilities at fair value until the date of settlement. The liability is recognised over the vesting period and is revalued at every reporting date up to and including the date of settlement. All changes in the fair value of the liability are recognised in operating expenses – staff costs. 159
  81. 160 Annual report & financial statements Stanbic IBTC Annual group financial statements for the year ended 31 December 2017 Overview Business review Annual report & financial statements Other information Notes to the consolidated and separate financial statements For the year ended 31 December 2017 4.16 New standards and interpretations not yet effective The following new or revised standards, amendments and interpretations are not yet effective for the year ended 31 December 2017 and have not been applied in preparing these annual financial statements. Pronouncement Title IFRS 9 Financial Instruments (continued) Expected credit loss (ECL) impairment model IFRS 9’s ECL impairment model’s requirements will represent the most material IFRS 9 impact. Pronouncement Title IFRS 9 Financial Instruments Background IFRS 9 Financial Instruments (“IFRS 9”) will replace the existing standard dealing with the accounting treatment for financial instruments IAS 39 Financial Instruments: Recognition and Measurement (“IAS 39”) from 1 January 2018. IFRS 9 consists of the following key areas which represent changes from that of IAS 39: •R  evised requirements for the classification and measurement of financial assets and consequential changes in the classification and measurement of financial liabilities, mainly relating to the recognition of changes in fair value due to changes in own credit risk on fair value designated financial liabilities in OCI as opposed to the income statement. • An expected credit loss (“ECL”) impairment model. • Revised requirements and simplifications for hedge accounting. IFRS 9 is required to be adopted retrospectively from 1 January 2018, with the exception of IFRS 9’s hedge accounting requirements where the standard permits an entity to choose as its accounting policy to continue to apply with IAS 39 hedge accounting requirements instead of the requirements in Chapter 6 of IFRS 9. The group has elected to not restate its comparative financial statements. Accordingly, the difference between the previous IAS 39 and new IFRS 9 carrying values will be recognised in the group’s opening retained earnings as at 1 January 2018. IFRS 9 requirements The following is a summary of IFRS 9’s key requirements and the estimated impact on the group (it should be noted that the group’s final transition impact was, at the time of the preparation of these financial statements, being determined. Accordingly, the estimated impact set out below, may change as a result of changes in the group’s size and nature of its assets and liabilities as well as changes in the risk rating and expected loss input variables (including forward looking macroeconomic factors) of its assets): Classification of financial assets and liabilities IFRS 9 requires all financial assets to be classified and measured on the basis of the entity’s business model for managing the financial assets and its contractual cash flow characteristics. The accounting for financial assets differs in various other areas to existing requirements such as embedded derivatives and the recognition of fair value adjustments in OCI. All changes in the fair value of financial liabilities that are designated at fair value through profit or loss due to changes in own credit risk will be required to be recognised in OCI with no subsequent recognition in the income statement. Whilst IFRS 9’s classification and measurement requirements are expected to have a negligible net impact on the group’s reserves as at 1 January 2018, there were instances in which the classification and measurement of financial assets changed from fair value to amortised cost. There was no impact on the group’s reserve in respect of classification requirements for financial liabilities IFRS 9 largely retains the existing requirements in IAS 39 for the classification of financial liabilities. The IASB developed the IFRS 9 ECL impairment model with the objective of transitioning from an incurred loss approach to an expected loss model which will require entities to recognise impairment losses in advance of an exposure having objective evidence of impairment. The ECL model will apply to financial assets measured at either amortised cost or at fair value through OCI, as well as loan commitments when there is present commitment to extend credit (unless these are measured at fair value through profit or loss). With the exception of purchased or originated credit impaired financial assets, expected credit losses are required to be measured through a loss allowance at an amount equal to either 12-month expected credit losses or full lifetime expected credit losses. A loss allowance for full lifetime expected credit losses is recognised for a financial asset where the credit risk of that financial asset increased significantly since initial recognition (unless the financial asset is exposed to a low level of credit risk) as well as for certain contract assets and trade receivables or where the exposure is classified as in default. For all other financial instruments, expected credit losses are measured at an amount equal to 12-month expected credit losses. Significant increase in credit risk or low credit risk The assessment of significant increase in credit risk for the group’s PBB exposures will be based on changes in a customer’s credit score and for the group’s CIB exposures on changes in internal credit ratings, together with the expected outlook for the specific sector and industry and other relevant available information. For both the group’s PBB and CIB exposures, the determination will be set to identify significant deterioration in credit risk before the exposure reaches a past due status of 30 days. Exposures for which there is a significant increase in credit risk but for which the credit risk is low remain in stage one. Exposures are generally considered to have a low credit risk where there is a low risk of default, the exposure has a strong capacity to meet its contractual cash flow obligations and adverse changes in economic and business conditions are unlikely to reduce the exposure’s ability to fulfil its contractual obligations. Forward-looking information In determining whether there has been a significant increase in credit risk and in determining the expected credit loss calculation, IFRS 9 requires the consideration of forward-looking information. The determination of significant increase in credit risk is required to include consideration of all reasonable and supportable information available without undue cost or effort. This information will typically include forward-looking information based on expected macro-economic conditions and specific factors that are expected to impact individual portfolios. The incorporation of forward-looking information represents a significant change from existing accounting requirements which are based on observable events. The use of such forward-looking information will increase the use of management judgement and is expected to increase the volatility of impairment provisions as a result of continuous changes in future expectations. The forward-looking framework will be based on the group’s economic expectations, industry and sub-sector-specific expectations, as well as expert management judgement. Default While default is not specifically defined by IFRS 9, the group has aligned the determination of default with its existing internal credit risk management definitions and approaches. Default is determined as occurring at the earlier of: • when either, based on objective evidence, the counterparty is considered to be unlikely to pay amounts due on the due date or shortly thereafter without recourse to actions such as realisation of security; or • when the counterparty is past due for more than 90 days (or, in the case of overdraft facilities in excess of the current limit). In some cases, additional specific criteria are set according to the nature of the lending product. 161
  82. 162 Annual report & financial statements Stanbic IBTC Annual group financial statements for the year ended 31 December 2017 Overview Business review Annual report & financial statements Other information Notes to the consolidated and separate financial statements For the year ended 31 December 2017 Pronouncement Title Pronouncement IFRS 9 Financial Instruments (continued) Title Impact on reserves The IFRS 9’s requirements noted above are expected to reduce the group’s reserves at 1 January 2018 by approximately N10,857 million. Hedge accounting The revised general hedge accounting requirements are better aligned with an entity’s risk management activities and provide both additional opportunities to apply hedge accounting and various simplifications in achieving hedge accounting. The group’s date of adoption of the IFRS 9 revised hedge accounting requirements will be based on further IFRS developments with respect to the IASB’s macro hedge accounting project or on the group deeming it opportune to adopt the revised requirements. The group has elected to continue with IAS 39’s hedge accounting requirements, but will implement IFRS 9’s revised hedge accounting disclosures. Estimated impact on adoption of IFRS 9 In Nmillion As reported at 31 December 2017 Estimated adjustment on adoption of IFRS 9 Estimated adjusted opening balance as at 01 January 2018 Retained earnings 83,830 (10,739) 73,091 Other reserves 26,260 (118) 26,142 3,158 (5) 3,153 NCI • a decrease of N118 million related to classification and measurement requirements, other than impairments • a decrease of approximately N10,739 million related to impairment requirements Capital Implications IFRS 9 will have consequential impacts on the group’s regulatory capital adequacy. The group has estimated the impact of IFRS 9 on capital to be approximately 7% in total regulatory capital and 140 basis points reduction in capital adequacy ratio. Effective date 1 January 2018 Title IFRS 9 Financial Instruments amendment On 12 October 2017, IASB issued an amendment to IFRS 9 (the amendment). This allows financial assets with prepayment features that permit or require a party to a contract either to pay or receive reasonable compensation for the early termination of the contract (so that, from the perspective of the holder of the asset there may be ‘negative compensation’), to be measured at amortised cost or at fair value through other comprehensive income. The amendment is required to be applied retrospectively. The amendment is not expected to have a material impact on the group. The following table details the key drivers of this estimate: IFRS 9 ECL Driver Reason Stage one (12 month expected loss) PBB’ existing emergence period is between three and six months and for CIB exposure it is 12 months. The change to a 12-month expected loss requirement for exposures will hence result in an increase in impairments for PBB. Stage two (lifetime expected loss for items for which there is a significant increase in credit risk) IFRS 9 will require a lifetime loss to be recognised for items for which there has been a significant increase in credit risk. This requirement will affect both PBB and CIB’s credit impairments. Stage three (lifetime expected loss for credit impaired exposures) Whilst IFRS 9 contains similar requirements to that of existing accounting requirements, an increase in impairment provisions will be recognised as a result of the requirement to include the probability of multiple lifetime defaults. Off-balance sheet exposures The IFRS 9 requirement for impairments for off-balance sheet facilities results in the requirement for additional credit impairments for both PBB and CIB. Forward-looking information The inclusion of forward-looking economic information could increase the level of provisions as a result of the possible consequence of deteriorating economic conditions. IFRS 9 Financial Instruments (continued) Effective date 1 January 2019 earlier application permitted Title IFRS 10 and IAS 28 (amendments) Sale or Contribution of Assets between an Investor and its Associate or Joint Venture The amendments address an inconsistency between the requirements in IFRS 10 and those in IAS 28, in dealing with the sale or contribution of assets between an investor and its associate or joint venture. The main consequence of the amendments is that a full gain or loss is recognised when a transaction involves a business (whether it is housed in a subsidiary or not). A partial gain or loss is recognised when a transaction involves assets that do not constitute a business, even if these assets are housed in a subsidiary. The amendments will be applied prospectively and are not expected to have a material impact on the group’s financial statements. Effective date 1 January 2019 Title IFRS 15 Revenue from Contracts with Customers This standard replaces IAS 11 Construction Contracts, IAS 18 Revenue, IFRIC 13 Customer Loyalty Programmes, IFRIC 15 Agreements for the Construction of Real Estate, IFRIC 18 Transfer of Assets from Customers and SIC-31 Revenue – Barter of Transactions Involving Advertising Services. The standard contains a single model that applies to contracts with customers and two approaches to recognising revenue: at a point in time or over time. The model features a contract-based five-step analysis of transactions to determine whether, how much and when revenue is recognised. The core principle of IFRS 15 is that an entity recognises revenue to depict the transfer of promised goods or services to customers at an amount that reflects the consideration which the entity expects to be entitled to in exchange for those goods and services. The standard incorporates a five step analysis to determine the amount and timing of revenue recognition. 163
  83. 164 Annual report & financial statements Stanbic IBTC Annual group financial statements for the year ended 31 December 2017 Overview Business review Annual report & financial statements Other information Notes to the consolidated and separate financial statements For the year ended 31 December 2017 Pronouncement Title Pronouncement IFRS 15 Revenue from Contracts with Customers (continued) Title The group has analysed the nature of its fees as follows: IFRS 17 Insurance Contracts (continued) An optional simplified premium allocation approach (PAA) is available for all contracts that are less than 12 months at inception. The PAA is similar to the current unearned premium reserve profile over time. The requirement to eliminate all treasury shares has been amended such that treasury shares held as underlying items for a group of direct participating contracts or investment funds are not required to be eliminated and can be accounted for as financial assets. i) Bank transaction fees: This includes electronic banking charges, account transaction fee, custody fees among others. There will be no changes to the current account treatment of these fees. ii) Asset management fee: Fee is based on daily net asset of the fund or performance of the fund at the end of the quarter. There will be no changes to the current account treatment of these fees. These requirement will provide transparent reporting about an entities’ financial position and risk and will provide metrics that can be used to evaluate the performance of insurers and how that performance changes over time. An entity may re-assess its classification and designation of financial instruments under IFRS 9, on adoption of IFRS 17. iii) Insurance fees and commission: This includes administrative and brokerages fees charges on insurance related products. There will be no changes to the current account treatment of these fees. The standard will be applied retrospectively. The impact on the annual financial statements has not yet been fully determined. Based on the analysis done to date, the impact on the annual financial statements is not expected to be significant. Effective date 1 January 2018 Effective date 1 January 2021 earlier application permitted Title IAS 40 Investment Property amendment Title IFRIC 23 Uncertainty over Income Tax Treatments The amendments clarify the requirements on transfers to, or from, investment property when, and only when, there is a change in use. A change in use occurs when the property meets, or ceases to meet, the definition of investment property and there is evidence of the change in use. This Interpretation clarifies how to apply the recognition and measurement requirements in IAS 12 when there is uncertainty over income tax treatments. In such a circumstance, an entity shall recognise and measure its current or deferred tax asset or liability applying the requirements in IAS 12 based on taxable profit (tax loss), tax bases, unused tax losses, unused tax credits and tax rates determined applying this Interpretation. This Interpretation addresses: whether an entity considers uncertain tax treatments separately; the assumptions an entity makes about the examination of tax treatments by taxation authorities; how an entity determines taxable profit (tax loss), tax bases, unused tax losses, unused tax credits and tax rates; and how an entity considers changes in facts and circumstances. The IFRIC will be applied retrospectively. The impact on the annual financial statements has not yet been fully determined. The standard is not expected to have a significant impact on the group as the group does not have investment property. Effective date 1 January 2018 Title IFRIC 22 Foreign Currency Transactions and Advance Consideration The IFRIC provides guidance on how to determine the date of the transaction for the purpose of determining the exchange rate to use on initial recognition of the related asset, expense or income (or part of it) on the derecognition of a non-monetary asset or non-monetary liability arising from the payment or receipt of advance consideration in a foreign currency. The IFRIC will be applied retrospectively or prospectively. The group has identified and reviewed the contracts and transaction that are within the scope of this interpretation which indicate that this IFRIC will not materially impact the annual financial statements. Effective date 1 January 2018 Title IFRS 17 Insurance Contracts Effective date 1 January 2019 earlier application permitted Title IFRS 2 Share-based Payment amendment The amendments are intended to eliminate diversity in practice in three main areas of the classification and measurement of share based payment transactions are: the effects of vesting conditions on the measurement of a cash-settled share based payment transaction; the classification of a share-based payment transaction with net settlement features for withholding tax obligations; the accounting where a modification to the terms and conditions of a share-based payment transaction changes its classification from cash-settled to equity-settled. This standard replaces the existing accounting standard IFRS 4 Insurance Contracts which gave entities dispensation to account for insurance contracts (particularly measurement) using local actuarial practice, resulting in a multitude of different approaches. The overall objective of IFRS 17 is to provide a more useful and consistent accounting model for insurance contracts among entities issuing insurance contracts globally. The standard requires an entity to measure insurance contracts using updated estimates and assumptions that reflect the timing of cash flows and any uncertainty relating to insurance contracts. A general measurement model (GMM) will be applied to long-term insurance contracts, and is based on a fulfilment objective (riskadjusted present value of best estimate future cash flows) and uses current estimates, informed by actual trends and investment markets. IFRS 17 establishes what is called a contractual service margin (CSM) in the initial measurement of the liability which represents the unearned profit on the contract and results in no gain on initial recognition. The CSM is released over the life of the contract, but interest on the CSM is locked in at inception rates. The CSM will be utilised as a “shock absorber” in the event of changes to best estimate cash flows. On loss making (onerous) contracts, no CSM is set up and the full loss is recognised at the point of contract inception. The GMM is modified for contracts which have participation features. The amendments will be applied prospectively. The impact on the annual financial statements is not expected to be significant. Effective date 1 January 2018 Title IAS 28 Interest in Associates and Joint Ventures (amendment) This amendment clarifies that an entity should apply IFRS 9, including its impairment requirements, to long-term interests in an associate or joint venture that form part of the net investment in the associate or joint venture only when the equity method is not applied. The amendments will be applied retrospectively. The impact on the annual financial statements is not expected to have a significant impact on the annual financial statements. Effective date 1 January 2019 earlier application permitted 165
  84. 166 Annual report & financial statements Stanbic IBTC Annual group financial statements for the year ended 31 December 2017 Overview Business review Annual report & financial statements Other information Notes to the consolidated and separate financial statements For the year ended 31 December 2017 5. Segment reporting Pronouncement Title Annual improvements 2015-2017 cycle The IASB has issued various amendments and clarifications to existing IFRS, none of which is expected to have a significant impact on the group’s annual financial statements. Effective date 1 January 2019 earlier application permitted Title IFRS 16 Leases This standard will replace the existing standard IAS 17 Leases as well as the related interpretations and sets out the principles for the recognition, measurement, presentation and disclosure of leases for both parties to a contract, being the lessee (customer) and the lessor (supplier). The group is organised on the basis of products and services, and the segments have been identified on this basis. The principal business units in the group are as follows: Business unit Personal and Business Banking Banking and other financial services to individual customers and small-to-medium-sized enterprises. Mortgage lending – Provides residential accommodation loans to mainly personal market customers. Instalment sale and finance leases – Provides instalments finance to personal market customers and finance of vehicles and equipment in the business market. Card products – Provides credit and debit card facilities for individuals and businesses. Transactional and lending products – Transactions in products associated with the various points of contact channels such as ATMs, internet, telephone banking and branches. This includes deposit taking activities, electronic banking, cheque accounts and other lending products coupled with debit card facilities to both personal and business market customers. Corporate and Investment Banking Corporate and investment banking services to larger corporates, financial institutions and international counterparties. Global markets – Includes foreign exchange, fixed income, interest rates, and equity trading. Transactional and lending products – Includes corporate lending and transactional banking businesses, custodial services, trade finance business and property-related lending. Investment banking – Include project finance, structured finance, equity investments, advisory, corporate lending, primary market acquisition, leverage finance and structured trade finance. Wealth The wealth group is made up of the company’s subsidiaries, whose activities involve investment management, pension management, portfolio management, unit trust/funds management, and trusteeship. The core principle of this standard is that the lessee and lessor should recognise all rights and obligations arising from leasing arrangements on balance sheet. The most significant change pertaining to the accounting treatment of operating leases is from the lessees’ perspective. IFRS 16 eliminates the classification of leases as either operating leases or finance leases as is required by IAS 17 and introduces a single lessee accounting model, where a right of use (ROU) asset together with a liability for the future payments is to be recognised for all leases with a term of more than 12 months, unless the underlying asset is of low value. The lessor accounting requirements in IAS 17 has not changed substantially in terms of this standard as a result a lessor continues to classify its leases as operating leases or finance leases and accounts for these as it is currently done in terms of IAS 17. In addition, the standard requires lessor to provide enhanced disclosures about its leasing activities and in particular about its exposure to residual value risk and how it is managed. The standard will be applied retrospectively. The impact on the annual financial statements has not yet been fully determined. However, the group has formed an IFRS 16 working group and detailed project plan, identifying key responsibilities and milestones of the project. The group is in the process of determining the estimated impact as well as discussing the system requirements to accommodate IFRS 16’s principles. Effective date 1 January 2019 earlier application permitted Title IFRS 4 (amendment) Insurance Contracts The amendment to applying IFRS 9 Financial Instruments with IFRS 4 Insurance Contracts introduces two approaches: an overlay approach and a deferral approach. The amended Standard will give all companies that issue insurance contracts the option to recognise in other comprehensive income, rather than profit or loss, the volatility that could arise when IFRS 9 is applied before the new insurance contracts standard is issued; and give companies whose activities are predominantly connected with insurance an optional temporary exemption from applying IFRS 9 until 2021. The entities that defer the application of IFRS 9 will continue to apply the existing financial instruments Standard IAS 39. The amendments to IFRS 4 supplement existing options in the Standard that can already be used to address the temporary volatility. The amendments will have no material impact on the activities of the group as the group has no insurance contract as at reporting date and has no intention to issue insurance contract in the coming year. Effective date 1 January 2019 earlier application permitted An operating segment is a component of the group engaged in business activities from which it can earn revenues, whose operating results are regularly reviewed by the group's executive management in order to make decisions about resources to be allocated to segments and assessing segment performance. The group’s identification of segments and the measurement of segment results is based on the group’s internal reporting to management. Segment results include customer-facing activities and support functions. 167
  85. 168 Annual report & financial statements Stanbic IBTC Annual group financial statements for the year ended 31 December 2017 Overview Business review Annual report & financial statements 169 Other information Notes to the consolidated and separate financial statements For the year ended 31 December 2017 Operating segments Net interest income Personal & Business Banking Corporate & Investment Banking Wealth Eliminations Group 31 Dec 2017 Nmillion 31 Dec 2016 Nmillion 31 Dec 2017 Nmillion 31 Dec 2016 Nmillion 31 Dec 2017 Nmillion 31 Dec 2016 Nmillion 31 Dec 2017 Nmillion 31 Dec 2016 Nmillion 31 Dec 2017 Nmillion 31 Dec 2016 Nmillion 31,243 29,964 47,969 24,202 4,375 3,693 - - 83,587 57,859 Interest income - external source 29,890 31,882 87,551 51,892 5,470 3,693 - - 122,911 87,467 Interest expense - external source (13,022) (10,287) (25,207) (19,321) (1,095) - - - (39,324) (29,608) Inter-segment revenue/(costs) 14,375 8,369 (14,375) (8,369) - - - - - - Non-interest revenue 13,044 14,512 44,533 26,548 35,087 28,374 (3,482) (1,240) 89,182 68,194 Net fee and commission revenue 12,664 14,312 15,060 10,731 35,058 28,348 (3,693) (1,237) 59,089 52,154 - - 29,146 15,326 2 - - - 29,148 15,326 380 200 327 491 27 26 211 (3) 945 714 Trading revenue Other revenue Revenue Credit impairment charges Income after credit impairment charges 44,287 44,476 92,502 50,750 39,462 32,067 (3,482) (1,240) 172,769 126,053 (14,970) (9,504) (10,607) (10,299) - - - - (25,577) (19,803) 29,317 34,972 81,895 40,451 39,462 32,067 (3,482) (1,240) 147,192 106,250 Operating expenses (44,234) (36,656) (33,038) (23,732) (12,236) (9,893) 3,482 1,240 (86,026) (69,041) Profit before direct taxation (14,917) (1,684) 48,857 16,719 27,226 22,174 - - 61,166 37,209 (1,608) 71 (3,109) (1,796) (8,068) (6,964) - - (12,785) (8,689) Profit/(loss) for the year (16,525) (1,613) 45,748 14,923 19,158 15,210 - - 48,381 28,520 Total assets 227,531 227,149 1,140,332 788,451 43,995 47,318 (25,442) (9,391) 1,386,416 1,053,524 Total liabilities Direct taxation 203,721 207,655 959,069 703,143 12,964 11,322 25,444 (9,391) 1,201,198 912,726 Depreciation and amortisation 3,251 3,177 538 738 387 322 - - 4,175 4,237 Number of employees 2,030 2,154 454 237 547 535 - - 3,031 2,926
  86. 170 Annual report & financial statements Stanbic IBTC Annual group financial statements for the year ended 31 December 2017 Overview Business review Annual report & financial statements 171 Other information Notes to the consolidated and separate financial statements For the year ended 31 December 2017 6. Key management assumptions In preparing the financial statements, estimates and assumptions are made that could materially affect the reported amounts of assets and liabilities within the next financial year. Estimates and judgements are continually evaluated and are based on factors such as historical experience and current best estimates of uncertain future events that are believed to be reasonable under the circumstances. 6.1 Credit impairment losses on loans and advances Portfolio loan impairments The group assesses its loan portfolios for impairment at each reporting date. In determining whether an impairment loss should be recorded in profit or loss, the group makes judgments as to whether there is observable data indicating a measurable decrease in the estimated future cash flows from a portfolio of loans before the decrease can be allocated to an individual loan in that portfolio. For corporate and investment banking portfolio, estimates are made of the duration between the occurrence of a loss event and the identification of a loss on an individual basis. This is calculated on a portfolio basis, based on historical loss ratios, adjusted for national and industry-specific economic conditions and other indicators present at the reporting date that correlate with defaults on the portfolio. These include early arrears and other indicators of potential default, such as changes in macroeconomic conditions and legislation affecting credit recovery. These annual loss ratios are applied to loan balances in the portfolio and scaled to the estimated loss emergence period. At the year end, the group applied the following loss emergence periods For Personal and Business Banking portfolio, the estimates for the duration between the occurrence of a loss event and the identification of a loss impairment for performing loans is calculated using portfolio loss given default and the probability of default for the arrears bucket and linked to the relevant emergence period. Average loss emergence period Determination of statutory credit risk reserves Provisions under prudential guidelines are determined using the time based provisioning regime prescribed by the Revised Central Bank of Nigeria (“CBN”) Prudential Guidelines. This is at variance with the incurred loss model required by IFRS under IAS 39. As a result of the differences in the methodology/provision regime, there will be variances in the impairments allowances required under the two methodologies. Paragraph 12.4 of the revised Prudential Guidelines for Deposit Money Banks in Nigeria stipulates that Banks would be required to make provisions for loans as Dec 2016 Months Mortgage lending Dec 2017 Nmillion 3 3 Instalment sale and finance leases 3 3 (5) 90 General provision on loans and advances Card debtors 3 3 (0.4) (1) Impairment on other financial assets Personal & Business Banking Other lending Dec 2016 Nmillion 307 41 9 (.4 ) 3 3 303 (48) 12 12 1,125 1,187 1 Sensitivity is based on the effect of a change of one month in the emergence period on the value of the impairment. Specific loan impairments Non-performing loans include those loans for which the group has identified objective evidence of default, such as a breach of a material loan covenant or condition as well as those loans for which instalments are due and unpaid for 90 days or more. Management’s estimates of future cash flows on individually impaired loans are based on historical loss experience for assets with similar credit risk characteristics. The methodology and assumptions used for estimating both the amount and timing of future cash flows Expected time to recovery The company’s subsidiary Stanbic IBTC Bank, has complied with the requirements of the guidelines as follows: •Prudential Provisions is greater than IFRS provisions; the excess provision resulting should be transferred from the general reserve account to a “regulatory risk reserve”. Expected recoveries as a percentage of impaired loans Dec 2016 Months Dec 2017 % Dec 2016 % 12 12 38 38 65 47 2 1 Instalment sale and finance leases 6 6 48 55 3 3 Card debtors 8 8 9 9 3 2 Other lending 8 8 22 22 57 41 1 Sensitivity is based on the effect of a change of one percentage point in the value of the estimated recovery on the value of the impairment. Specific provision on loans and advances 31 Dec 2016 Nmillion 14,995 14,467 7,338 11,102 18,148 10,851 40,481 36,420 11,249 IFRS Provision Specific impairment on loans and advances 12.3 20,916 Portfolio Impairment on loans and advances 12.3 10,848 11,102 18,148 13,044 49,912 35,395 - 1,025 1,025 6,684 (1,025) (5,659) Appropriation: Transfer (to)/from retained earnings Dec 2016 Nmillion 31 Dec 2017 Nmillion Prudential Provision Opening regulatory reserve Dec 2017 Nmillion Corporate & Investment Banking The estimated recoveries for Corporate and Investment Banking non performing loans are calculated on a customer by customer basis. Note Closing regulatory reserve Impairment loss sensitivity1 Dec 2017 Months Statement of prudential adjustments Impairment on other financial assets are reviewed regularly to reduce any difference between loss estimates and actual loss experience. Recoveries of individual loans as a percentage of the outstanding balances are estimated as follows: Personal & Business Banking Mortgage lending Provisions for loans recognised in the profit and loss account should be determined based on the requirements of IFRS. However, the IFRS provision should be compared with provisions determined under prudential guidelines and the expected impact/changes in general reserves should be treated as follows: •Prudential Provisions is less than IFRS provisions; IFRS determined provision is charged to the statement of comprehensive income. The cumulative balance in the regulatory risk reserve is thereafter reversed to the general reserve account Sensitivity1 Dec 2017 Months Corporate & Investment Banking (total loan portfolio) prescribed in the relevant IFRS Standards when IFRS is adopted. However, Banks would be required to comply with the following: 6.2 Fair value of financial instruments The fair value of financial instruments, such as unlisted equity investments and certain derivatives, that are not quoted in active markets is determined using valuation techniques. Wherever possible, models use only observable market data. Where required, these models incorporate assumptions that are not supported by prices from observable current market transactions in the same instrument and are not based on available observable market data. Such assumptions include risk premiums, liquidity discount rates, credit risk, volatilities and correlations. Changes in these assumptions could affect the reported fair values of financial instruments.Additional disclosures on fair value measurements of financial instruments are set out in notes 28. 6.3 Impairment of available-for-sale investments The group determines that available-forsale equity investments are impaired and recognised as such in profit or loss when there has been a significant or prolonged decline in the fair value below its cost. The determination of what is significant or prolonged requires judgement. In making this judgement, the group evaluates, among other factors, the normal volatility in the fair value. In addition, impairment may be appropriate when there is evidence of a deterioration in the financial health of the investee, industry or sector, or operational and financing cash flows or significant changes in technology.Had the declines of financial instruments with fair values below cost been considered significant or prolonged, the group would have suffered an additional loss attributable to ordinary shareholders of
  87. 172 Annual report & financial statements Stanbic IBTC Annual group financial statements for the year ended 31 December 2017 Overview Business review Annual report & financial statements 173 Other information Notes to the consolidated and separate financial statements For the year ended 31 December 2017 Nil (Dec 2016: N12 million) in its financial statements, being the transfer of the negative revaluations within the availablefor-sale reserve to profit or loss. 6.4 Intangible assets Direct computer software development costs that are clearly associated with an identifiable and unique system, which will be controlled by the group and have a probable future economic benefit beyond one year, are capitalised and disclosed as computer software intangible assets. Computer software intangible assets are carried at cost less accumulated amortisation and accumulated impairment losses. The assets are tested for impairment whenever events or changes in circumstances indicate that the carrying amount may not be recoverable. The determination of the recoverable amount of each asset requires judgement. The recoverable amount is based on the value in use and calculated by estimating future cash benefits that will result from each asset and discounting these cash benefits at an appropriate pre-tax discount rate (see note 4.7). 6.5 Investment funds The group acts as fund manager to a number of investment funds. Determination of whether the group controls such an investment fund usually focuses on the assessment of the aggregate economic interest of the group in the fund and the investors’ rights to remove the fund manager. For all the investment funds managed by the group, the trust deed empowers the investors to vote for the removal of the fund manager without cause, but subject to approval of a vast majority of all unitholders, and the group’s aggregate economic interest in each case is less than 25%. As a result, the group has concluded that it acts as agent for the investors in all cases, and therefore has not consolidated these funds.Further disclosure in respect of investment funds in which the group has an interest is contained in note 14. 6.6 Recognition of deferred tax assets: Deferred tax assets are reviewed at each reporting date and are reduced to the extent that it is no longer probable that the related tax benefit will be realised. The most significant management assumption is the forecasts used to support the probability assessment that sufficient taxable profits will be generated by the entities in the group in order to utilise the deferred tax assets. The forecasts of taxable profits are determined based on approved budgets for future periods and adjusted for any adjustments that management deems necessary and are supportable at the time of reporting. The tax exempt status of income realised on Nigerian government securities is one of the major drivers for the negative taxable income within Stanbic IBTC Bank PLC, which is the largest contributor to the deferred tax asset, through tax losses, in the group. The uncertainty surrounding the ability to generate sufficient future taxable income after the termination of the tax exempt status in 2022 has made management to conclude that not all tax losses carried forward should be recorded as deferred tax assets. The assessment of availability of future taxable profit against which carry forward tax losses can be utilised is disclosed under Note 16. 6.7 Share-based payment The group has both cash and equitysettled share incentive schemes which are issued to qualifying employees based on the rules of the respective schemes. The group uses the Black-Scholes option pricing model to determine the fair value of awards on grant date for its equitysettled share incentive schemes. The valuation of the group’s obligations with respect to its cash-settled share incentive scheme obligations is determined with reference to the parent and ultimate parent’s share price, which is an observable market input. In determining the expense to be recognised for both the cash and equity-settled share schemes, the group estimates the expected future vesting of the awards by considering staff attrition levels. The group also makes estimates of the future vesting of awards that are subject to non-market vesting conditions by taking into account the probability of such conditions being met. Refer to note 31.11 for further details regarding the carrying amount of the liabilities arising from the group’s cashsettled share incentive schemes and the expenses recognised in the income statement. 6.8 Depreciation and useful life of property and equipment The estimation of the useful lives of assets is based on management’s judgement. Any material adjustment to the estimated useful lives of items of property and equipment will have an impact on the carrying value of these items. 6.9 Provisions The group make provisions for items such as legal claims, fines, and penalties. The amount provided are based on the management best estimate of the amounts that will be required to settle the obligation in the event that it crystallises. Provisions are determined by discounting the expected future cash flows using a pre-tax discount rate that reflects current market assessments of the time value of money and the risks specific to the liability. Any material difference in management best estimates will have an impact to the carrying amount of the provisions. Refer to note 25 for further details. 6.10 Foreign currency obligations valued at different rates Following the developments in the foreign exchange market, the group concluded during the year that is was no longer feasible to settle all its USD deposits and other borrowings at the interbank rate applied to other assets and liabilities. For the determination of the impacted USD deposits and other borrowings, the group assessed the deposits and other borrowings that were not covered by available USD assets for settlement of those liabilities and for determination of the applicable rate, the group made an analysis of applicable transactions in the market and based on that analysis assessed the rate at which the relevant USD deposits and other borrowing could have been settled if the cash flows occurred at balance sheet date. Refer to note 22 (viii) 7. Cash and cash equivalents Group Coins and bank notes Balances with central bank Current balances with banks within Nigeria Current balances with banks outside Nigeria Balances with central bank include cash reserves of N150,523 million (Dec. 2016: N88,773 million) and special intervention fund of N20,817 million (Dec. 2016: N20,817) that are not available for use by the group on a day to day basis. These restricted cash balances are held with Central Bank of Nigeria (“CBN”). Company 31 Dec 2017 Nmillion 31 Dec 2016 Nmillion 31 Dec 2017 Nmillion 31 Dec 2016 Nmillion 36,853 66,300 - - 177,990 113,656 - - 519 12,047 7,545 1,768 185,986 109,348 - - 401,348 301,351 7,545 1,768 Included in current balances with banks outside Nigeria is N19,641 million (Dec. 2016: N15,151 million) due from Standard Bank Group. See note 36.3 for details. Included in current balances with banks outside Nigeria is N19,602 million (Dec. 2016: N41,420 million) which represents Naira value of foreign currency bank balances held on behalf of customers in respect of letters of credit transactions. The corresponding liability is included in other liabilities (See note 26.1). 8. Pledged assets 8.1 Pledged assets Group Company 31 Dec 2017 Nmillion 31 Dec 2016 Nmillion 31 Dec 2017 Nmillion 31 Dec 2016 Nmillion 10,769 - - - 32,471 28,303 - - 43,240 28,303 - - - - - - 43,240 16,434 - - - 11,869 - - 43,240 28,303 - - Financial assets that may be repledged or resold by counterparties Treasury bills – Trading Treasury bills – Available-for-sale Maturity analysis The maturities represent periods to contractual redemption of the pledged assets recorded. Maturing within 1 month Maturing after 1 month but within 6 months Maturing after 6 months but within 12 months 8.2 Total assets pledged The assets pledged by the group are strictly for the purpose of providing collateral to counterparties for various transactions. These transactions include assets pledged in connection with clearing/settlement activities of the group. To the extent that the counterparty is permitted to sell and/or repledge the assets in the absence of default, the assets are classified in the statement of financial position as pledged assets. Financial assets pledged as collateral for liabilities The carrying amount of total financial assets that have been pledged as collateral for liabilities (included in amounts reflected in 8.1 above) at 31 Dec 2017 was N13,699 million (Dec. 2016: N2,716 million). The transactions in respect of which the collaterals were pledged are as follows: (i) N  2,931 million (Dec. 2016: N2,716 million) pledged in respect of on- lending facility obtained from Bank of Industry as disclosed under note 22(iii). (ii) N10,768 million (Dec. 2016: N0 million) pledged in respect of repurchase lending agreements. These transactions are conducted under terms that are usual and customary to standard lending, and securities borrowing and lending activities.
  88. 174 Annual report & financial statements Stanbic IBTC Annual group financial statements for the year ended 31 December 2017 Overview Business review Annual report & financial statements 175 Other information Notes to the consolidated and separate financial statements For the year ended 31 December 2017 9.2 Trading liabilities 9. Trading assets and trading liabilities Trading assets and trading liabilities mainly relate to client-facilitating activities carried out by the Global Markets business. These instruments are managed on a combined basis and should therefore be assessed on a total portfolio basis and not as stand-alone assets and liability classes. Group 31 Dec 2017 Nmillion Unlisted Company 31 Dec 2016 Nmillion 31 Dec 2017 Nmillion 31 Dec 2016 Nmillion Unlisted 143,195 11,854 - 31 Dec 2017 Nmillion 31 Dec 2016 Nmillion 31 Dec 2017 Nmillion 31 Dec 2016 Nmillion 52,451 5,325 - - 9,998 - - - 62,449 5,325 - - 657 655 - - Comprising: Government bonds (short positions) Classification Listed Company Classification Listed 9.1 Trading assets Group - Deposits Treasury bills (short positions) 8,284 5,001 - - 151,479 16,855 - - 2,930 2,185 - - Maturity analysis 140,265 9,669 - - The maturity analysis is based on the remaining periods to contractual maturity from period end. 9,998 - - - 51,794 4,670 - - 62,449 5,325 - - - - - - Comprising: Government bonds Treasury bills Placements Dated assets 8,284 5,001 - - 151,479 16,855 - - 151,479 16,855 - - 151,479 16,855 - Repayable on demand Maturing within 1 month 28,383 99 - - Maturing after 1 month but within 6 months 27,170 4,489 - - Maturing after 6 months but within 12 months Maturing after 12 months Maturity analysis 6,239 82 - - 657 655 - - 62,449 5,325 - - The maturities represent periods to contractual redemption of the trading assets recorded. Redeemable on demand - - - - 8,284 5,017 - - Maturing after 1 month but within 6 months 82,768 8,262 - - Maturing after 6 months but within 12 months 57,513 2,645 - - 2,914 931 - - - - - - 151,479 16,855 - - Maturing within 1 month Maturing after 12 months Undated assets Redemption value Trading assets had a redemption value at 31 December 2017 of N151,479 million (Dec. 2016: N16,956 million). 10. Derivative instruments All derivatives are classified as derivatives held for trading purposes. 10.1 Use and measurement of derivative instruments In the normal course of business, the group enters into a variety of derivative transactions for both trading and risk management purposes. Derivative financial instruments are entered into for trading purposes and for hedging foreign exchange and interest rate exposures. Derivative instruments used by the group in both trading and hedging activities include swaps, forwards and other similar types of instruments based on foreign exchange rates and interest rates. The risks associated with derivative instruments are monitored in the same manner as for the underlying instruments. Risks are also measured across the product range in order to take into account possible correlations. The fair value of all derivatives is recognised on the statement of financial position and is only netted to the extent that there is both a legal right of set-off and an intention to settle on a net basis. Swaps are transactions in which two parties exchange cash flows on a specified notional amount for a predetermined period. 10.2 Derivatives held-for-trading The group trades derivative instruments on behalf of customers and for its own positions. The group transacts derivative contracts to address customer demand by structuring tailored derivatives for customers. The group also takes proprietary positions for its own account. Trading derivative products include the following derivative instruments: 10.2.1 Foreign exchange derivatives Foreign exchange derivatives are primarily used to hedge foreign currency risks on behalf of customers and for the group’s own positions. Foreign exchange derivatives primarily consist of foreign exchange forwards. 10.2.2 Non-deliverable foreign exchange derivatives contract Non-deliverable foreign exchange derivative contracts (“NDFs”) is a variation of foreign exchange derivatives described above. NDFs are cash settled and do not require physical delivery of foreign currency. The counterparties settle the difference between the contracted NDF price or rate and the prevailing spot price or rate on an agreed notional amount.
  89. 176 Annual report & financial statements Stanbic IBTC Annual group financial statements for the year ended 31 December 2017 Overview Business review Annual report & financial statements 177 Other information Notes to the consolidated and separate financial statements For the year ended 31 December 2017 10.2.3 Interest rate derivatives Interest rate derivatives are primarily used to modify the volatility and interest rate characteristics of interest-earning assets and interest-bearing liabilities on behalf of customers and for the group’s own positions. Interest rate derivatives primarily consist of swaps. 10.3 Unobservable valuation differences on initial recognition If fair value on initial recognition is not evidenced by a quoted price in an active market or based on a valuation technique that uses data only from observable markets, then any difference between the fair value at initial recognition and the transaction price is not recognised in profit and loss immediately but is deferred. The unobservable valuation difference is disclosed under note 10.7. 10.4 Fair values The fair value of a derivative financial instrument represents for quoted instruments the quoted market price and for unquoted instruments the present value of the positive or negative cash flows, which would have occurred if the rights and obligations arising from that instrument were closed out in an orderly market place transaction at year end. 10.5 Notional amount The gross notional amount is the sum of the absolute value of all bought and sold contracts. The notional amounts have been translated at the closing rate at the reporting date where cash flows are receivable in foreign currency. The amount cannot be used to assess the market risk associated with the positions held and should be used only as a means of assessing the group’s participation in derivative contracts. 10.7 Unobservable valuation differences on initial recognition The table below sets out the aggregate difference yet to be recognised in profit or loss at the beginning and end of the year with a reconciliation of the changes of the balance during the year for derivative assets and liabilities. Group Note Unrecognised profit at beginning of the year 31 December 2017 Within 1 year Nmillion After 5 years Nmillion Net fair value Nmillion Fair value of assets Nmillion Fair value of liabilities Nmillion Contract/ notional amount Nmillion Forwards 1,455 1,455 Swaps 7,005 - Total derivative assets/(liabilities) 8,460 - - 4,038 (2,583) 482,364 7,005 7,014 (9) 115,140 8,460 11,052 (2,592) 597,504 14,098 (3,460) 4,500 - Unrecognised profit at end of the year 31.4 11. Financial investments Financial investments comprise assets held for liquidity requirement purposes. Total derivative assets/(liabilities) 31 Dec 2017 Nmillion 31 Dec 2016 Nmillion 31 Dec 2017 Nmillion 31 Dec 2016 Nmillion Short – term negotiable securities 301,995 240,059 - - Listed 301,995 240,059 - - - - - - Other financial investments 14,646 12,764 1,625 920 Listed 11,293 11,174 1,625 920 Unlisted Government bonds Derivatives held-for-trading Swaps Company 3,353 1,590 - - 316,641 252,823 1,625 920 1,530 1,456 - - 301,995 240,059 - - 11.1 Comprising: 31 December 2016 Forwards 3,460 (9,598) Unlisted Derivatives held-for-trading - Recognised in profit or loss during the year Maturity analysis of net fair value After 1 year but within 5 years Nmillion 31 Dec 2016 Nmillion Additional profit on new transactions Group 10.6 Derivative assets and liabilities 31 Dec 2017 Nmillion 1,981 548 - 2,529 - - 1,981 13,713 (11,732) 121,445 548 604 (56) 23,352 2,529 14,317 (11,788) 144,797 Treasury bills Corporate bonds 1,079 - - - Unlisted equities (see note 11.2 below) 2,274 1,590 - - Mutual funds and unit-linked investments (see note 14) 9,763 9,718 1,625 920 316,641 252,823 1,625 920 Included in derivative assets is N973 million (Dec. 2016: N265 million) due from related parties. See note 36.3 for details. Included in derivative liabilities is N186 million (Dec. 2016: N5,336 million) due from related parties. See note 36.3 for details. Mutual funds and unit-linked investments include N1.3 billion (Dec 2016: N723 million) held against unclaimed dividend liability as disclosed in note 26. Maturity analysis The maturities represent periods to contractual redemption of the financial investments recorded. Redeemable on demand Maturing within 1 month Maturing after 1 month but within 6 months Maturing after 6 months but within 12 months Maturing after 12 months Undated investments1 - - - - 29,873 3,775 - - 179,562 168,365 - - 92,560 68,332 - - 2,609 1,043 - - 12,037 11,308 1,625 920 316,641 252,823 1,625 920 All financial investments of the group are classified as available for sale investments. 1 Undated investments include unlisted equities and mutual funds and linked investments.
  90. 178 Annual report & financial statements Stanbic IBTC Annual group financial statements for the year ended 31 December 2017 Overview Business review Annual report & financial statements 179 Other information Notes to the consolidated and separate financial statements For the year ended 31 December 2017 11.2 Analysis of unlisted equity investments Group 12. Loans and advances Company 31 Dec 2017 Nmillion 31 Dec 2016 Nmillion 31 Dec 2017 Nmillion 31 Dec 2016 Nmillion Small and medium scale industries: 137 137 - - Credit Reference Company Limited 50 50 - - CR Services Limited 87 87 - - Other unquoted equity direct investments 2,274 1,590 Unified Payment Services Ltd (formerly Smart Card Nigeria PLC) 219 158 - - FSDH Merchant Bank Limited 650 707 - - 29 27 - - 553 470 - - 18 14 - - 805 214 - - Total investment in unlisted equity investment 2,411 1,727 - - Impairment allowance (note 11.3) (137) (137) - - 2,274 1,590 - - FMDQ OTC PLC MTN Communications Central Securities Clearing System PLC Nigerian Interbank Settlement System PLC 11.3 Impairment on unlisted equity investments At start of the year 12.1 Loans and advances net of impairments Group Company 31 Dec 2017 Nmillion 31 Dec 2016 Nmillion 31 Dec 2017 Nmillion 31 Dec 2016 Nmillion 9,623 15,264 - - 9,623 15,264 - - Loans and advances to customers 372,088 352,965 - - Gross loans and advances to customers 403,852 375,316 - - Personal and business banking (PBB) 149,325 152,360 - - 7,426 8,924 - - 12,167 16,532 - - 1,451 1,793 - - Loans and advances to banks Placements with banks Mortgage loans Instalment sale and finance leases Card debtors Other loans and advances 128,281 125,111 - - Corporate and Investment banking (CIB) 254,527 222,956 - - Corporate loans 254,527 222,956 Credit impairments for loans and advances (note 12.3) (31,764) (22,351) - - Specific credit impairments (20,916) (11,249) - - Portfolio credit impairments (10,848) (11,102) - - 381,711 368,229 - - Net loans and advances 137 1,072 - - Comprising: Additions - - - - Gross loans and advances 413,475 390,580 - - Write back - (15) Less: Credit impairments (31,764) (22,351) - - Write off - (920) Net loans and advances 381,711 368,229 - - 137 137 - - Regulatory prudential disclosures on loans and advances have been disclosed under note 6 and credit risk management – prudential guidelines disclosures. 11.4 Asset classified as held for sale Unquoted equity investment 114 112 - - 114 112 - - (i) A sset held for sale represents investment in Nigeria Mortgage Refinance Company Ltd. No impairment loss was recognised on reclassification of the unquoted equity investment as held for sale as at 31 December 2017 (31 December 2016: Nil) as the directors expect that the fair value less costs to sell is not lower than the carrying amount. Included in loans and advances to banks is N9,234 million (Dec. 2016: N7,760 million) due from Standard Bank Group. See note 36.3 for details. Of this amount, N7,027 million (Dec 2016: N5,413 million) relates to proceeds received from SBSA from the sale of Finacle software. The proceeds are placed in an escrow account and are not available for use by the group on a day to day basis Included in gross loans and advances to customers is an amount of N13,520 million (2016: N17,272 million) relating to both PBB and CIB instalmental sale and finance leases. See note 12.2 for analysis of finance lease receivable. Stanbic IBTC Bank has in place a reciprocal standby contingency funding agreement, of N10 billion with Zenith Bank PLC. Under this contingency funding agreement, both institutions have warranted to provide each other with local currency contingency funding of up to N10 billion. The agreement, renewable annually, became effective from 09 February 2017. During the year, both institutions did not draw on the available liquidity contingency funding. See page 86 under “Liquidity Contingency” for further details. Analysis of gross loans and advances by performance Performing loans - customers - bank Non-performing loans - substandard 381,762 371,905 - - 372,139 356,641 - - 9,623 15,264 - - 31,713 18,675 17,453 8,035 - - - doubtful 8,032 4,803 - - - lost 6,228 5,837 - - 413,475 390,580 - - Gross loans and advances
  91. 180 Annual report & financial statements Stanbic IBTC Annual group financial statements for the year ended 31 December 2017 Overview Business review Annual report & financial statements 181 Other information Notes to the consolidated and separate financial statements For the year ended 31 December 2017 12.1 Loans and advances net of impairments (continued) 12.2 Instalment sale and finance leases Maturity analysis Included in gross loans and advances to customers are finance leases as analysed below: The maturity analysis is based on the remaining periods to contractual maturity from the period end. Group Group Company 31 Dec 2017 Nmillion 31 Dec 2016 Nmillion 31 Dec 2017 Nmillion 31 Dec 2016 Nmillion Redeemable on demand 26,217 76,174 - - Maturing within 1 month 62,244 54,594 - - Maturing after 1 month but within 6 months 79,076 83,324 - - Maturing after 6 months but within 12 months 25,004 20,283 - - Maturing after 12 months 220,934 156,205 - - Gross loans and advances 413,475 390,580 - - Segmental analysis - industry Agriculture Business services Communication Community, social & personal services - - - 36 35 - - 125,979 101,242 - - Oil & Gas 71,226 65,578 - - Private households 50,607 52,511 - - 8,601 12,140 - - 32,302 33,033 - - 413,475 390,580 - - Wholesale & retail trade Gross loans and advances Segmental analysis – geographic area The following table sets out the distribution of the group’s loans and advances by geographic area where the loans are recorded. South South South West 16,673 15,021 - - 346,409 308,662 - - South East 8,289 7,153 - - North West 17,762 25,605 - - North Central 13,629 24,560 - - 1,090 1,819 - - 9,623 7,760 - - 413,475 390,580 - - North East Outside Nigeria Gross loans and advances 17,272 - - 2,125 1,716 11,395 13,635 - - - 1,921 - - - - Transport, storage & distribution 13,520 - 14,631 - Net investment in instalment sale and finance leases 22,500 16,870 - - 20,494 10,235 1,882 17,730 - Receivable after 5 years 22,285 2,310 14,641 - Receivable after 1 year but within 5 years Government - - - Financial intermediaries & insurance - 2,983 - - 22,595 (5,323) 4,548 - 16,951 - 4,213 - 31 Dec 2016 Nmillion (3,431) - - 31 Dec 2017 Nmillion Unearned finance charges deducted - 2 31 Dec 2016 Nmillion Receivable after 5 years 29,424 38,066 Manufacturing Receivable after 1 year but within 5 years 24,760 - Hotels, restaurants and tourism Receivable within 1 year Receivable within 1 year 42,737 Construction & real estate Gross investment in instalment sale and finance leases Company 31 Dec 2017 Nmillion All loans and advances to customers are held at amortised cost.
  92. 182 Annual report & financial statements Stanbic IBTC Annual group financial statements for the year ended 31 December 2017 Overview Business review Annual report & financial statements 183 Other information Notes to the consolidated and separate financial statements For the year ended 31 December 2017 12.3 Credit impairments for loans and advances A reconciliation of the allowance for impairment losses for loans and advances, by class: Group 31 December 2017 Mortgage lending Nmillion Instalment sale and finance leases Nmillion Segmental analysis of non-performing loans and specific impairments – industry The following table sets out the segment analysis of the group’s non-performing loans and impairment by industry. Card debtors Nmillion Other loans and advances Nmillion Corporate loans Nmillion Non-performing loans Total Nmillion Group Specific impairments 31 Dec 2017 Nmillion 31 Dec 2016 Nmillion 31 Dec 2017 Nmillion 31 Dec 2016 Nmillion 1,492 3,128 886 1,799 225 967 121 753 Specific impairments Agriculture Balance at beginning of the year 164 784 211 10,090 - 11,249 Business services Net impairments raised 507 3,079 114 14,408 10,127 28,235 Communication 8,537 2,643 6,784 1,119 Construction & real estate 1,780 322 792 176 165 119 132 94 Impaired accounts written off (6) (1,306) (36) (17,091) - (18,439) Discount element recognised in interest income (9) (6) (2) (88) (24) (129) 656 2,551 287 7,319 10,103 20,916 Balance at end of the year Government Hotels, restaurants and tourism Manufacturing 23 23 14 14 125 1,726 79 585 Portfolio impairments Oil & Gas 7,379 2,114 3,938 1,704 Balance at beginning of the year 51 275 49 3,136 7,591 11,102 Private households 6,551 4,313 4,754 3,462 Net impairments raised/(released) 23 (99) (27) (633) 482 (254) Transport, storage & distribution 4,027 1,885 2,414 614 Wholesale & retail Trade 1,409 1,435 1,002 929 31,713 18,675 20,916 11,249 Balance at end of the year Total 74 176 22 2,503 8,073 10,848 730 2,727 309 9,822 18,176 31,764 31 December 2016 Segmental analysis of non performing loans and specific impairment – geographic area The following table sets out the distribution of the group's impairments by geographic area where the loans are recorded. Specific impairments Balance at beginning of the year 429 3,447 138 7,089 7,588 18,691 South South Net impairments raised/(released) 222 340 215 8,068 7,549 16,394 South West (3) (4) (1) (72) - (80) South East (484) (2,999) (141) (4,995) (15,137) (23,756) North West 164 784 211 10,090 - 11,249 Discount element recognised in interest income Impaired accounts written off Balance at end of the year North Central North East Portfolio impairments Balance at beginning of the year 112 496 19 1,761 4,836 7,224 Net impairments (released)/raised (61) (221) 30 1,375 2,755 3,878 51 275 49 3,136 7,591 11,102 215 1,059 260 13,226 7,591 22,351 Balance at end of the year Total 1,917 1,756 1,488 1,315 26,377 9,523 16,918 5,652 1,365 487 872 375 1,009 3,664 793 2,273 965 3,191 780 1,588 80 54 65 46 31,713 18,675 20,916 11,249
  93. 184 Annual report & financial statements Stanbic IBTC Annual group financial statements for the year ended 31 December 2017 Overview Business review Annual report & financial statements 185 Other information Notes to the consolidated and separate financial statements For the year ended 31 December 2017 Group 13. Equity investment in subsidiaries Company % 31 Dec 2017 Nmillion Stanbic IBTC Ventures Limited 100 - - 500 500 Stanbic IBTC Bank PLC 100 - - 63,467 63,467 Stanbic IBTC Capital Limited 100 - - 3,500 3,500 Stanbic IBTC Asset Management Limited 100 - - 710 710 Stanbic IBTC Pension Managers Limited 88.24 - - 16,913 16,913 Stanbic IBTC Trustees Limited 100 - - 300 300 Stanbic IBTC Insurance Brokers Limited 100 - - 20 20 Stanbic IBTC Investments Limited 100 - - 20 20 Stanbic IBTC Stockbrokers Limited 100 31 Dec 2016 Nmillion 31 Dec 2017 Nmillion 31 Dec 2016 Nmillion - - 109 109 - - 85,539 85,539 13.2 Significant restrictions The group does not have significant restrictions on its ability to access or use its assets and settle its liabilities other than those resulting from the regulatory frameworks within which the subsidiaries operate. Ltd and Stanbic IBTC Investments Ltd) to maintain certain level of regulatory capital. In addition, the banking subsidiary (Stanbic IBTC Bank PLC) is required to keep certain levels of liquid assets, limit exposures to other parts of the group and comply with other ratios. The regulatory frameworks require all the subsidiaries (except Stanbic IBTC Ventures For information on assets, liabilities and earnings of the subsidiaries, see Note 13.4. NCI percentage Total assets Total liabilities Net assets 13.1 List of significant subsidiaries The table below provides details of the direct and indirect subsidiaries of the group. Carrying amount of NCI 13.3 Non-controlling interests (NCI) in subsidiaries The following table summarises the information relating to the group subsidiary that has material NCI. Stanbic IBTC Pension Managers Limited: The principal place of business is Wealth House, Plot 1678, Olakunle Bakare Close, Off Sanusi Fafunwa Street, Victoria Island, Lagos. 31 Dec 2017 31 Dec 2016 11.76% 11.76% Nmillion Nmillion 38,144 41,210 (11,290) (9,781) 26,854 31,429 3,158 3,696 Revenue 35,328 27,850 18,589 13,890 2,186 3,878 Subsidiaries Country of incorporation Nature of business Percentage holdings % Financial year end Profit Stanbic IBTC Ventures Limited Nigeria Undertakes proprietary investment activities 100 31 December Cash flows from operating activities 17,991 14,521 Stanbic IBTC Bank PLC Nigeria Provision of banking and related financial services 100 31 December Cash flows from investing activities (8,736) (16,779) Stanbic IBTC Capital Limited Nigeria Provision of general corporate finance and debt advisory services 100 31 December Cash flow from financing activities, before dividends to NCI (20,912) - Cash flow from financing activities - cash dividends to NCI (2,788) - (14,445) (2,258) Stanbic IBTC Asset Management Limited Nigeria Acting as investment manager, portfolio manager and as a promoter of unit trusts and funds 100 31 December Stanbic IBTC Pension Managers Limited Nigeria Administration and management of pension fund assets 88.24 31 December Stanbic IBTC Trustees Limited Nigeria Acting as executors and trustees of wills and trusts and provision of agency services 100 31 December Stanbic IBTC Stockbrokers Limited Nigeria Provision of stockbroking services 100 31 December Stanbic IBTC Insurance Brokers Limited Nigeria Provision of insurance brokerage services 100 31 December Stanbic IBTC Investments Limited Nigeria Undertakes equity investments for the group 100 31 December Stanbic IBTC Bureau De Change Limited (Indirect holding) Nigeria Buying and selling of currencies 100 31 December Stanbic IBTC Nominees Limited (Indirect holding) Nigeria Investor services as well as acting as an agent of its parent company Stanbic IBTC Bank PLC in the execution of various mandates relating to the custody of assets. 100 31 December Note: Indirect holdings have been duly consolidated Profit allocated to NCI Net decrease in cash and cash equivalents
  94. 186 Annual report & financial statements Stanbic IBTC Annual group financial statements for the year ended 31 December 2017 Overview Business review Annual report & financial statements 187 Other information Notes to the consolidated and separate financial statements For the year ended 31 December 2017 13.4 Summarised financial information of the consolidated entities Stanbic IBTC Holdings PLC Company Nmillion Stanbic IBTC Bank PLC Nmillion Stanbic IBTC Capital Ltd Nmillion Stanbic IBTC Pension Mgrs Ltd Nmillion Stanbic IBTC Asset Mgt Ltd Nmillion Stanbic IBTC Ventures Ltd Nmillion Stanbic IBTC Trustees Ltd Nmillion Stanbic IBTC Insurance Brokers Limited Nmillion Stanbic IBTC Investments Limited Nmillion Stanbic IBTC Stockbrokers Ltd Nmillion Net interest income (1,050) 78,009 729 5,026 307 144 90 47 - 285 Non interest revenue 29,877 49,658 3,718 30,302 4,098 117 309 379 - 1,112 (30,388) 89,182 Total income 28,827 127,667 4,447 35,328 4,405 261 399 426 - 1,397 (30,388) 172,769 Staff costs (590) (28,296) (1,506) (3,811) (1,378) - (157) (168) - (376) Operating expenses (692) (43,449) (669) (5,563) (949) (69) (95) (116) (13) (210) Consolidations/ Eliminations Nmillion Stanbic IBTC Holdings PLC Group Nmillion Income statement Credit impairment charges 83,587 (36,282) 2,081 (49,744) - (25,577) - - - - - - - - - (25,577) Total expenses (1,282) (97,322) (2,175) (9,374) (2,327) (69) (252) (284) (13) (586) 2,081 (111,603) Profit before tax 27,545 30,345 2,272 25,954 2,078 192 147 142 (13) 811 (28,307) 61,166 Tax (2,380) (1,503) (585) (7,365) (631) (194) (29) (43) - (55) Profit for the year (2017) 25,165 28,842 1,687 18,589 1,447 (2) 118 99 (13) 756 (28,307) 48,381 609 15,030 (935) 13,890 1,096 494 110 110 - 123 (2,007) 28,520 7,545 400,838 5,777 510 566 79 50 25 19 7,435 (21,496) 401,348 - 11,052 - - - - - - - - - 11,052 Trading assets - 151,479 - - - - - - - - - 151,479 Pledged assets - 43,240 - - - - - - - - - 43,240 Profit for the year ended 31 December 2016 (12,785) Assets Cash and cash equivalents Derivative assets Financial investments 1,625 276,530 2,238 29,600 2,305 1,967 453 206 - 1,902 (185) 316,641 Asset held for sale - - - - - - - - 114 - - 114 Loans and advances to banks - 9,234 - 324 - - - - - - 65 9,623 Loans and advances to customers - 372,088 - - - - - - - - - 372,088 Deferred tax asset - 8,346 183 213 111 - 12 13 - 23 - 8,901 Equity investment in group companies 85,539 - - - - - - - - - (85,539) - 2,148 40,655 1,959 4,649 1,677 - 171 102 - 75 (1,994) 49,442 517 18,602 10 2,848 103 - 2 8 - 2 (209) 21,883 - 605 - - - - - - - - - 605 Total assets (2017) 97,374 1,332,669 10,167 38,144 4,762 2,046 688 354 133 9,437 (109,358) 1,386,416 Total assets at 31 December 2016 92,857 993,759 8,483 41,210 5,057 2,872 743 306 132 2,497 (94,393) 1,053,523 Other assets Property and equipment Intangible assets
  95. 188 Annual report & financial statements Stanbic IBTC Annual group financial statements for the year ended 31 December 2017 Overview Business review Annual report & financial statements 189 Other information Notes to the consolidated and separate financial statements For the year ended 31 December 2017 13.4 Summarised financial information of the consolidated entities (continued) Stanbic IBTC Holdings PLC Company Nmillion Stanbic IBTC Bank PLC Nmillion Stanbic IBTC Capital Ltd Nmillion Stanbic IBTC Pension Mgrs Ltd Nmillion Stanbic IBTC Asset Mgt Ltd Nmillion Stanbic IBTC Ventures Ltd Nmillion Stanbic IBTC Trustees Ltd Nmillion Stanbic IBTC Insurance Brokers Ltd Nmillion Stanbic IBTC Investments Ltd Nmillion Stanbic IBTC Stockbrokers Ltd Nmillion Consolidations/ Eliminations Nmillion Stanbic IBTC Holdings PLC Group Nmillion Derivative liabilities - 2,592 - - - - - - - - - 2,592 Trading liabilities - 62,449 - - - - - - - - - 62,449 Deposits from banks - 61,721 - - - - - - - - - 61,721 Deposits from customers - 775,262 - - - - - - - - (21,620) 753,642 Other borrowings - 74,892 - - - - - - - - - 74,892 Subordinated debt - 29,046 - - - - - - - - - 29,046 157 2,412 664 7,817 752 146 43 57 - 192 - 12,240 - - - - - 120 - - - - - 120 4,563 185,595 4,349 3,473 840 5 136 186 113 7,530 (2,294) 204,496 Equity and reserves 92,654 138,700 5,154 26,854 3,170 1,775 509 111 20 1,715 (85,444) 185,218 Total liabilities and equity 97,374 1,332,669 10,167 38,144 4,762 2,046 688 354 133 9,437 (109,358) 1,386,416 Total liabilities and equity at 31 December 2016 92,857 993,759 8,483 41,210 5,057 2,872 743 306 132 2,497 (94,393) 1,053,523 Liabilities and equity: Current tax liabilities Deferred tax liabilities Provisions and other liabilities
  96. 190 Annual report & financial statements Stanbic IBTC Annual group financial statements for the year ended 31 December 2017 Overview Business review Annual report & financial statements 191 Other information Notes to the consolidated and separate financial statements For the year ended 31 December 2017 14. Involvement with unconsolidated investment funds 15. Other assets The table below describes the types of investment funds that the group does not consolidate but in which it holds an interest. Group Type of investment funds Mutual funds Nature and purpose To generate fees from managing assets on behalf of third party investors. These vehicles are financed through the issue of units to investors. Interest held by the group Trading settlement assets Investments in units issued by the funds Due from group companies (see note 36.3) Management fees Asset under management S/N Investment fund i Stanbic IBTC Nigerian Equity Fund ii Stanbic IBTC Ethical Fund iii Stanbic IBTC Imaan Fund iv Stanbic IBTC Guaranteed Investment Fund v Stanbic IBTC Money Market Fund vi 31,626 11,550 11 92 Receivable in respect of unclaimed dividends (see (ii) below) 250 817 250 817 Deposit for investment (see (iii) below) 749 - - - 6,655 6,539 219 252 50 - - - 54,474 41,546 2,254 2,298 (5,032) (2,326) (106) (72) 49,442 39,220 2,148 2,226 40,428 31,080 1,270 1,102 9,014 8,140 878 1,124 49,442 39,220 2,148 2,226 7,696 482 191 Current Non-current 3 4,069 3,146 112 - 166,828 65,661 7,882 8,839 Stanbic IBTC Bond Fund 1,077 1,004 176 211 vii Stanbic IBTC Balanced Fund 1,059 883 80 - viii Stanbic IBTC Dollar Fund 5,604 - 188 91 ix Stanbic IBTC Aggressive Fund 291 208 15 10 x Stanbic IBTC Conservative Fund 330 425 37 27 xi Stanbic IBTC Absolute Fund 4,950 5,318 288 80 xii Stanbic IBTC Exchange Traded Fund 1,567 530 200 41 195,028 86,743 9,710 9,718 Total 55 7,077 5 1,082 - 31 Dec 2016 Nmillion 148 - 1,365 409 31 Dec 2017 Nmillion 183 - 561 432 31 Dec 2016 Nmillion 225 20,863 15 784 31 Dec 2017 Nmillion 245 12,742 1,027 Impairment allowance on doubtful receivables 1,724 (i) Account receivable includes an amount of N2.5 billion representing a judgment sum held with Access Bank PLC pursuant to a garnishee order granted by the Federal high court. It also includes fee receivables and short term receivables in respect of electronic payment transactions.  ccount receivable also includes an amount of N2.7 billion representing cash collateral placed with the Central Bank of Nigeria A in respect of foreign exchange forward trasactions executed on behalf of clients. (ii) Amount represents receivable from the company’s registrar in respect of unclaimed dividends and forms part of the assets held against unclaimed dividend liabilities as disclosed in note 26. (iii) Deposit for investment relates to Stanbic IBTC Bank PLC’s annual commitment towards Agri-Business/Small and Medium Enterprises Investment Scheme (“AGSMEIS”) based on CBN guidelines (see note 19.3(b)(ii)). Group The interest held by the group is presented under financial investments in the statement of financial position and no losses were incurred by the group during the year. Income earned by the group from this investment was N2,204 million ( December 2016: N2,179 million) 31 Dec 2016 Nmillion 1,360 Other debtors 1,991 31 Dec 2017 Nmillion Accrued income Prepayments Interest held by the group 31 Dec 2016 Nmillion Indirect/withholding tax receivables Accounts receivable (see note (i) below) The table below sets out an analysis of the investment funds managed by the group, their assets under management, and the carrying amounts of interests held by the group in the investment funds. The maximum exposure to loss is the carrying amount of the interest held by the group. Company 31 Dec 2017 Nmillion Movement in provision for doubtful receivables Company 31 Dec 2017 Nmillion 31 Dec 2016 Nmillion 31 Dec 2017 Nmillion 31 Dec 2016 Nmillion At start of year 2,326 1,601 72 50 Additions/(write back) 3,068 801 34 22 Amount written off (362) (76) - - At end of year 5,032 2,326 106 72
  97. 192 Annual report & financial statements Stanbic IBTC Annual group financial statements for the year ended 31 December 2017 Overview Business review Annual report & financial statements 193 Other information Notes to the consolidated and separate financial statements For the year ended 31 December 2017 16. Deferred tax assets Group 31 Dec 2017 Nmillion Deferred tax assets (note 16.1) Company 31 Dec 2016 Nmillion 31 Dec 2017 Nmillion 17. Property and equipment 31 Dec 2016 Nmillion 8,901 8,638 - - 8,901 8,638 - - Group Land Nmillion Motor vehicles Nmillion Furniture, fittings and equipment Nmillion Computer equipment Nmillion Work in progress Nmillion Nmillion 20,579 939 699 11,120 14,624 2,539 50,500 139 1,681 380 477 1,646 815 5,138 (156) - (63) (277) (113) (1,942) (2,551) 10 - 43 160 1,149 (1,362) - Balance at 31 December 2017 20,572 2,620 1,059 11,480 17,306 50 53,087 Balance at 1 January 2016 20,293 973 526 10,377 13,329 3,424 48,922 Additions 114 54 239 662 497 663 2,229 Disposals (68) (185) (66) (14) (165) (153) (651) Transfers/reclassifications 240 97 - 95 963 (1,395) - 20,579 939 699 11,120 14,624 2,539 50,500 Balance at 1 January 2017 8,317 - 384 8,799 10,038 - 27,538 Charge for the year 1,225 - 159 752 1,993 - 4,129 Disposals (43) - (57) (262) (101) - (463) Transfers/reclassifications (31) - - 29 2 - - Balance at 31 December 2017 9,468 - 486 9,318 11,932 - 31,204 Balance at 1 January 2016 6,844 - 312 8,076 8,379 - 23,611 Charge for the year 1,514 - 130 728 1,832 - 4,204 (41) - (58) (2) (176) - (277) - - - (3) 3 - - 8,317 - 384 8,799 10,038 - 27,538 31 December 2017 11,104 2,620 573 2,162 5,374 50 21,883 31 December 2016 12,262 939 315 2,321 4,586 2,539 22,962 17.1 Cost Balance at 1 January 2017 The directors have determined that based on the group’s profit forecast, it is probable that there will be future taxable profits against which the temporary differrence, from which a deferred tax asset has been recognised, can be utilised. Deferred tax asset amounting to N9,437 million (Dec 2016: N9,141 million) (Company N229 million,Dec 2016: Nil) arising from unutilised tax losses and capital allowances has not been recognised as at 31 December 2017. Unutilised tax losses arise mainly from tax exempt income from government instruments. Additions Disposals/expensed Transfers/reclassifications Leasehold improvements and building Nmillion Total Analysis of unrecognised deferred tax Unutilised tax losses 9,590 8,587 382 - Capital allowances (153) 554 (153) - 9,437 9,141 229 - 16.1 Deferred tax analysis Group Company 31 Dec 2017 Nmillion 31 Dec 2016 Nmillion 31 Dec 2017 Nmillion 31 Dec 2016 Nmillion Deferred tax liabilities (120) (47) - (9) Deferred tax asset 8,901 8,638 - - Deferred tax closing balance 8,781 8,591 - (9) Nmillion Nmillion Nmillion Nmillion Credit impairment charges 3,756 3,330 - - Property and equipment 3,432 3,941 - (176) (2,353) (716) - - Unutilised losses 1,599 49 - 49 Provision for employee bonus & share incentive 2,468 2,034 - 118 Deferred tax assets closing balance 8,901 8,638 - (9) 16.2 (i) Deferred tax assets by source Fair value adjustments on financial instruments Nmillion Nmillion Nmillion Nmillion Fair value adjustments on financial instruments (120) (47) - - Deferred tax liabilities closing balance (120) (47) - - (ii) Deferred tax liabilities by source Balance at 31 December 2016 17.2 Accumulated depreciation Disposals Transfers/reclassifications Balance at 31 December 2016 Net book value: Deferred tax at end of the year 8,781 8,591 - (9) 16.3 Deferred tax reconciliation Deferred tax at beginning of the year 8,591 8,222 ( 9) 555 Originating/(reversing) temporary differences for the year: 273 293 9 ( 564) Credit impairment charges 426 1,163 - - Property and equipment Fair value adjustments on financial instruments Unutilised losses (509) (40) 176 (366) (1,627) (605) - - 1,550 (285) (49) (123) Provision for employee bonus & share incentive 434 60 (118) (75) Fair value adjustments on financial instruments-Available for sale (83) 76 - - 8,781 8,591 - ( 9) Deferred tax at end of the year There were no capitalised borrowing costs related to the acquisition of property and equipment during the year (2016: Nil).
  98. 194 Annual report & financial statements Stanbic IBTC Annual group financial statements for the year ended 31 December 2017 Overview Business review Annual report & financial statements 195 Other information Notes to the consolidated and separate financial statements For the year ended 31 December 2017 Company Freehold land and buildings Nmillion Balance at 1 January 2017 Additions 18. Intangible asset Motor vehicles Nmillion Furniture, fittings and equipment Nmillion Computer equipment Nmillion Work in progress Nmillion Total Nmillion - - 175 1,135 1,683 2,993 - - 14 57 39 110 Disposals - - (3) (10) (1,683) (1,696) Transfers/reclassifications - - - 39 (39) - Balance at 31 December 2017 - - 186 1,221 - 1,407 17.1 Cost Reconciliation of carrying amount Balance at 1 January 2016 - - 129 826 1,900 2,855 Additions 1 - 48 25 66 140 Disposals - - (2) - - (2) (1) - - 284 (283) 0 - - 175 1,135 1,683 2,993 Transfers/reclassifications Balance at 31 December 2016 17.2 Accumulated depreciation Purchased Software Nmillion Nmillion 746 746 - - Write-off / expenses (62) (62) Balance at 31 December 2017 684 684 Group 18.1 Cost Balance at 1 January 2017 Additions Balance at 1 January 2016 Total - - Additions 746 746 Balance at 31 December 2016 746 746 Balance at 1 January 2017 33 33 Amortisation for the year 46 46 Balance at 31 December 2017 79 79 - - 18.2 Accumulated amortisation Balance at 1 January 2016 Balance at 1 January 2017 - - 82 507 - 589 Amortisation for the year 33 33 Charge for the year - - 39 269 - 308 Balance at 31 December 2016 33 33 (2) (5) 31 December 2017 605 605 31 December 2016 713 713 Disposals Transfers/reclassifications - - - - Balance at 31 December 2017 - - 119 771 (7) - 890 Balance at 1 January 2016 - - 46 315 - 361 Charge for the year - - 37 192 - 229 Disposals - - (1) - - (1) Impairments - - - - - - Transfers/reclassifications - - - - - - Balance at 31 December 2016 - - 82 507 - 589 Carrying amount: There were no capitalised borrowing costs related to the internal development of software during the year (Dec 2016: Nil). Intangible assets relate to cost of upgrade to Finacle core banking software. The original asset was leased from Standard Bank of South Africa (“SBSA”) under a Sale, Purchase and Assignment Agreement (“SPA”), which is currently a subject of pending litigation. Refer to note 30.6 for details of the litigation and explanation of the SPA. The software development cost was borne by the group and assessed by the group to qualify for capitalisation, since the future benefits are available to the group 19. Share capital and reserves Net book value: 31 December 2017 - - 67 450 - 517 31 December 2016 - - 93 628 1,683 2,404 Group Company 31 Dec 2017 Nmillion 31 Dec 2016 Nmillion 31 Dec 2017 Nmillion 31 Dec 2016 Nmillion 6,500 6,500 6,500 6,500 5,025 5,000 5,025 5,000 66,945 65,450 66,945 65,450 19.1 Authorised 13,000,000,000 Ordinary shares of 50k each (Dec 2016: 13,000,000,000 Ordinary shares of 50k each) 19.2 Issued and fully paid-up 10,049,465,732 Ordinary shares of 50k each (Dec 2016: 10,000,000,000 Ordinary shares of 50k each) Ordinary share premium There was no increase in authorised share capital during the year. All issued shares are fully paid up. Details of directors’ interest in shares, the shareholder spread and major shareholders are given in the directors’ report on pages 100 to 102 of this annual report.
  99. 196 Annual report & financial statements Stanbic IBTC Annual group financial statements for the year ended 31 December 2017 Overview Business review Annual report & financial statements 197 Other information Notes to the consolidated and separate financial statements For the year ended 31 December 2017 Number of ordinary shares million Value of ordinary shares Nmillion Ordinary share premium Nmillion 10,000 5,000 65,450 49 25 1,495 Shares issued in terms of the final scrip distribution declared in respect of 2016 final dividend 20 10 361 Shares issued in terms of the final scrip distribution declared in respect of 2017 interim dividend 29 15 1,134 10,049 5,025 66,945 Reconciliation of shares issued Balance as at 31 December 2016 Balance as at 31 December 2017 19.3 Reserves a) Merger reserve Merger reserve arose as a result of the implementation of the holding company restructuring. It represents the difference between pre-restructuring share premium/ share capital and the post-restructuring share premium/share capital. b) Other regulatory reserves The other regulatory reserves includes statutory reserve and the small and medium scale industries reserve (SMEEIS) as described below. (i) Statutory reserves Nigerian banking and pension industry regulations require the Stanbic IBTC Bank PLC (“the bank”) and Stanbic IBTC Pension Managers Ltd (“SIPML”) that are subsidiary entities, to make an annual appropriation to a statutory reserve. As stipulated by S.16(1) of the Banks and Other Financial Institution Act of 1991 (amended), an appropriation of 30% of profit after tax is made if the statutory reserve is less than paid-up share capital and 15% of profit after tax if the statutory reserve is greater than the paid up share capital. The bank (a subsidiary) transferred 15% of its profit after tax to statutory reserves as at year end. Section 69 of Pension Reform Act, 2004 requires SIPML to transfer 12.5% of its profit after tax to a statutory reserve. (ii) Agri-Business / Small and medium scale industries reserve (AGSMEEIS) The SMEEIS reserve is maintained to comply with the Central Bank of Nigeria (“CBN”) requirement that all licensed banks set aside a portion of the profit after tax in a fund to be used to finance equity investment in qualifying small and medium scale enterprises. Under the terms of the guideline (approved by the Bankers’ Committee on 9 February 2017), participating banks shall set aside 5% of their profit after tax (“PAT”) annually. A transfer of N749 million (2016: nil) was made into the AGSMEEIS reserve, which represents 5% of prior year PAT. See note 15 (iii)) c) Available for sale reserve This represents unrealised gains or losses arising from changes in the fair value of available-for-sale financial assets which are recognised directly in the availablefor-sale reserve until the financial asset is derecognised or impaired. 21. Deposit and current accounts 31 Dec 2016 Nmillion 31 Dec 2017 Nmillion 31 Dec 2016 Nmillion Deposits from banks 61,721 53,766 - - 61,721 53,766 Deposits from customers 753,642 560,969 - - Current accounts 322,440 281,523 - - Call deposits 75,480 42,303 - - Savings accounts 48,444 38,630 - - d) Statutory credit risk reserve Should credit impairment on loans and advances as accounted for under IFRS using the incurred loss model differ from the Prudential Guidelines set by the Central Bank of Nigeria the following adjustment is required. Term deposits 307,278 191,535 - - Negotiable certificate of deposits - 6,978 - - 815,363 614,735 - - (i) If the Prudential Provision is greater than IFRS provisions; transfer the difference from the general reserve to a non-distributable regulatory reserve (statutory credit reserve). Maturity analysis The maturity analysis is based on the remaining periods to contractual maturity from period end. (ii) If the Prudential Provision is less than IFRS provisions; the excess charges resulting should be transferred from the regulatory reserve account to the general reserve to the extent of the non-distributable reserve previously recognised. Analysis of the statutory credit risk reserve is disclosed under note 6.1. e) Share based payment reserve This represents obligations under the equity settled portion of the group’s share incentive scheme which enables key management personnel and senior employees to benefit from the performance of Stanbic IBTC Holdings PLC and its subsidiaries. The directors recommended the payment of a final dividend of 50 kobo per share for the year ended 31 December 2017 (Dec 2016: 5 kobo per share). Withholding tax is deducted at the time of payment. During the year, the company paid a total dividend of N7 billion with the details below: Other deposits from banks Total deposits and current accounts Included in deposits from banks is N38,843 million (Dec 2016: N605 million) due to Standard Bank Group. See note 36.3. Group 500 500 2017 Interim Dividend 6,000 Total 7,000 Company 31 Dec 2017 Nmillion 31 Dec 2016 Nmillion 31 Dec 2017 Nmillion 31 Dec 2016 Nmillion Repayable on demand 524,029 446,724 - - Maturing within 1 month 162,281 89,925 - - Maturing after 1 month but within 6 months 112,485 67,108 - - 16,564 10,973 - - 4 5 - - 815,363 614,735 - - Maturing after 6 months but within 12 months Maturing after 12 months Total deposits and current accounts Segmental analysis – geographic area The following table sets out the distribution of the group’s deposit and current accounts by geographic area. 31 Dec 2017 Group % 31 Dec 2016 Nmillion % Nmillion South South 5 43,702 5 33,464 South West 73 594,369 70 432,359 South East 2 15,076 2 13,626 North West 3 26,750 4 21,839 North Central 8 68,442 9 54,680 North East 1 5,303 1 5,001 Outside Nigeria 8 61,721 9 53,766 100 815,363 100 614,735 Total deposits and current accounts Nmillion 2016 Final Dividend Company 31 Dec 2017 Nmillion 20. Dividend 2015 Final Dividend Group
  100. 198 Annual report & financial statements Stanbic IBTC Annual group financial statements for the year ended 31 December 2017 Overview Business review Annual report & financial statements 199 Other information Notes to the consolidated and separate financial statements For the year ended 31 December 2017 22. Other borrowings Group Company 31 Dec 2017 Nmillion 31 Dec 2016 Nmillion 31 Dec 2017 Nmillion 31 Dec 2016 Nmillion On-lending borrowings 74,892 79,633 - - FMO - Netherland Development Finance Company (see (i) below) 18,369 11,562 - - 543 427 - - 1,669 1,839 - - African Development Bank (see (ii) below) Nigeria Mortgage Refinance Company 3,116 4,153 - - Standard Bank Isle of Man (see (iv) below & note 36.3) Bank of Industry (see (iii) below) 40,406 50,524 - - CBN Commercial Agricultural Credit Scheme (see (v) below) 10,789 11,128 Other debt funding - 16,404 - 16,404 Debt funding from banks (see (vi) below) - 16,404 - 16,404 74,892 96,037 - 16,404 Other borrowings The terms and conditions of other borrowings are as follows: On-lending borrowings are funding obtained from Development Financial Institutions and banks which are simultaneously lent to loan customers. The group bears the credit risk on the loans granted to customers and are under obligation to repay the lenders. Specific terms of funding are provided below. (i)This represents a on-lending dollar denominated loan of US$90 million (2016: US$ 45 million) obtained from Netherland Development Finance Company (“FMO”). Additional disbursement of US$45 million was received during the year. The initial facility amount of US$45 million was effective from 08 April 2015, while the second disbursement of US$45 million was effective from 10 May 2017. The entire facility amount expires on 20 December 2019. Repayment of principal will be made in seven equal instalments which commenced from 20 December 2016 (for the initial disbursement) and 06 June 2017 (for the second disbursement) up till maturity. Interest is payable semi-annually at 6-month LIBOR plus 3.50%. (ii)This represents US$2.5m on-lending facility obtained during the period from African Development Bank. The facility was disbursed in two tranches of US$1.25 million each. Tranch A is priced at 6-month LIBOR + 3.6%, while Tranche B is priced at 6-month LIBOR +1.9%. Both tranches expires 09 June 2022 and are unsecured. (iii)The bank obtained a Central Bank of Nigeria (“CBN”) initiated onlending naira facility from Bank of Industry in September 2010 at a fixed rate of 1% per annum on a tenor based on agreement with individual beneficiary customer. The facility was granted under the Power and Aviation Intervention Fund scheme and Restructuring and Refinancing Facilities scheme. Disbursement of these funds are represented in loans and advances to customers. Based on the structure of the facility, the bank assumes default risk of amount lent to its customers. The facility was secured with treasury bills amounting to N2,931 million (Dec. 2016: N2,716 million). See note 8.2. (iv)The bank obtained an unsecured dollar denominated long term onlending facilities with floating rates tied to LIBOR from Standard Bank Isle of Man with average tenor of 5 years. The dollar value of the facility as at 31 December 2017 was USD$122 million (Dec 2016: USD$153 million). (v)The bank obtained an unsecured loan from the Central Bank of Nigeria (CBN) for the purpose of on - lending to customers under the Commercial Agricultural Credit Scheme (CACS). The tenor is also based on agreement with individual beneficiary customer. Disbursement of these funds are represented in loans and advances to customers. Based on the structure of the facility, the bank assumes default risk of amount lent to its customers. (vi) Other debt funding of N16.4 billion represents a loan facility obtained from Zenith Bank effective 21 December 2016. The facility was repaid during the period. (vii)The group has not had any default of principal, interest or any other breaches with respect to its debt securities during the period ended 31 December 2017 (Dec 2016: Nil). (viii)Following the developments in the foreign exchange market, the group concluded during the year that is was no longer feasible to settle all its USD other borrowings at the interbank rate applied to other assets and liabilities. For the determination of the impacted USD deposits and other borrowings, the group assessed the deposits and other borrowings that were not covered by available USD assets for settlement of those liabilities. Maturity Analysis The maturity analysis is based on the remaining periods to contractual maturity from period end. In determining the applicable rate, the group made an analysis of applicable transactions in the market and based on that analysis assessed the rate at which the relevant USD deposits and other borrowing could have been settled if the cash flows occurred at balance sheet date. The different rate applied was N366/$ and the impact was N489 million (Dec 2016: N3,765 million) Group Company 31 Dec 2017 Nmillion 31 Dec 2016 Nmillion 31 Dec 2017 Nmillion 31 Dec 2016 Nmillion 160 203 - - Maturing within 1 month 18,014 2,559 - - Maturing after 1 month but within 6 months 27,293 4,318 - - 7,157 25,956 - - 22,268 63,001 - 16,404 74,892 96,037 - 16,404 At start of the year 96,037 81,107 16,404 - Additions 25,278 22,054 - 16,404 55 2,102 1,095 - Repayable on demand Maturing after 6 months but within 12 months Maturing after 12 months Movement in other borrowings Accrued interest Effect of exchange rate changes [loss/(profit)] Payments made At end of the year 980 35,382 - - (47,458) (44,608) (17,499) - 74,892 96,037 - 16,404
  101. 200 Annual report & financial statements Stanbic IBTC Annual group financial statements for the year ended 31 December 2017 Overview Business review Annual report & financial statements 201 Other information Notes to the consolidated and separate financial statements For the year ended 31 December 2017 23. Subordinated debt 25.Provisions Group Subordinated fixed rate notes- Naira (see (i) below) Subordinated floating rate notes -Naira (see (ii) below) Subordinated debt - US dollar (see (iii) below) The terms and conditions of subordinated debt are as follows: (i)This represents Naira denominated subordinated debt issued on 30 September 2014 at an interest rate of 13.25% per annum payable semiannually. It has a tenor of 10 years and is callable after 5 years from the issue date. The debt is unsecured. Company Additions Accrued interest for the year Accrued interest paid Effect of exchange rate changes [loss/(profit)] Payments made At end of year - 10,581 Balance at 1 January 2017 104 104 - - Provisions made during the year 250 5,189 (96) (1,044) - 31 December 2017 - Total 5,439 13,306 12,251 - - Provisions used during the year 29,046 27,964 - - Provisions reversed during the year (901) - (1,000) - (1,901) Balance at 31 December 2017 7,293 5,686 - - 12,979 (iii)This represents US dollar denominated term subordinated non-collaterised facility of USD$40million obtained from Standard Bank of South Africa effective 31 May 2013. The facility expires on 31 May 2025 and is repayable at maturity. Interest on the facility is payable semi-annually at LIBOR (London Interbank Offered Rate) plus 3.60%. See note 36.3. Group Company Current 31 Dec 2017 Nmillion 31 Dec 2016 Nmillion 31 Dec 2017 Nmillion 31 Dec 2016 Nmillion 27,964 23,699 - - - - - - 2,706 2,621 - - (2 678) (2 512) - - 1,054 4,156 - - - - - - 29,046 27,964 - - Company 12,240 9,508 157 68 12,240 9,508 157 68 Nmillion Nmillion Nmillion Nmillion Current tax liabilities at beginning of the year 9,508 8,727 68 60 Movement for the year 2,732 781 89 8 13,058 8,981 2,389 328 (22) (296) - - (10,304) (7,904) (2,300) (320) 12,240 9,508 157 68 (1,140) - - - - - 7,293 5,686 - - 12,979 7,293 5,686 - - 12,979 Balance at 1 January 2016 8,043 984 - 1,000 10,027 Provisions made during the year 1,272 610 1,000 - 2,882 Provisions used during the year (371) (53) - (1,000) (1,424) Provisions reversed during the year (904) - - - (904) Balance at 31 December 2016 8,040 1,541 1,000 - 10,581 - - - - - 8,040 1,541 1,000 - 10,581 8,040 1,541 1,000 - 10,581 Non-current 31 December 2016 Current 31 Dec 2016 Nmillion Current tax liabilities at end of the year 1,000 - 31 Dec 2017 Nmillion (Over) / under provision - prior year 1,541 - 31 Dec 2016 Nmillion Payment made 8,040 15,609 31 Dec 2017 Nmillion Charge for the year Nmillion 15,636 Group 24.1 Reconciliation of current tax liabilities Penalties & fines Nmillion 31 Dec 2016 Nmillion 24. Current tax liabilities Current tax liabilities Interest cost on judgment debt Nmillion 31 Dec 2017 Nmillion The group has not had any default of principal, interest or any other convenant breaches with respect to its debt securities during the year ended 31 December 2017 (2016: Nil). At start of year Taxes & levies Nmillion 31 Dec 2016 Nmillion (ii)This represents N100 million Naira denominated subordinated debt issued on 30 September 2014. Interest is payable semi-annually at 6-month Nigerian Treasury Bills yield plus 1.20%. It has a tenor of 10 years and is callable after 5 years from the issue date. The debt is unsecured. Movement in subordinated debt Legal Nmillion 31 Dec 2017 Nmillion Non-current (a) Legal In the conduct of its ordinary course of business, the group is exposed to various actual and potential claims, lawsuits. The group makes provision for amounts that would be required to settle obligations that may crystallise in the event of unfavourable outcome of the lawsuits. Estimates of provisions required are based on management judgment. See note 30.4 for further details. (b) Taxes & levies Provisions for taxes and levies relate to additional assessment on taxes, including withholding tax, value added tax, PAYE tax. (c) Interest cost on judgment debt Provisions for interest cost on judgment debt relate to additional liability that management estimates the group would be required to settle over and above a judgment debt in legal cases where the group appealed a lower court decision but believes its appeal is unlikely to be successful.
  102. 202 Annual report & financial statements Stanbic IBTC Annual group financial statements for the year ended 31 December 2017 Overview Business review Annual report & financial statements 203 Other information Notes to the consolidated and separate financial statements For the year ended 31 December 2017 26. Other Liabilities 27. Classification of group financial instruments Group 31 Dec 2017 Nmillion Accounting classifications and fair values Company 31 Dec 2016 Nmillion 31 Dec 2017 Nmillion 31 Dec 2016 Nmillion The table below sets out the group’s classification of assets and liabilities, and their fair values. 26.1 Summary Trading settlement liabilities Cash-settled share-based payment liability (note 31.11) 13,250 19,078 - - 2,308 1,246 105 240 Accrued expenses - staff 6,163 4,581 1,071 258 Deferred revenue 4,690 331 - - Accrued expenses - others 4,735 5,445 1,252 968 17 34,335 227 86 Due to group companies (see note 36.3) Collections / remmitance payable (see note (i) below) 58,824 9,498 146 40 Customer deposit for letters of credit 47,077 41,420 - - Unclaimed balance (see note (ii) below) 1,973 1,766 - - Payables to suppliers and asset management clients 8,042 1,621 7 12 Draft & bank cheque payable 2,007 1,629 - - Electronic channels settlement liability 4,344 1,611 - - Unclaimed dividends liability (see note (iii) below) 1,475 1,540 1,475 1 540 Clients cash collateral for derivative transactions 22,443 5,527 - - Sundry liabilities 14,169 7,112 280 262 191,517 136,740 4,563 3,406 Current Non-current (i) Collections and remittance payable includes N19.6bn (31 Dec 2016: N69.3bn) relating to balance held in respect of clearing and settlement activities for over-the-counter foreign exchange transactions. 168,685 128,625 2,976 1,614 22,832 8,115 1,587 1,792 191,517 136,740 4,563 3,406 (ii) Unclaimed balances include demand drafts not yet presented for payment by beneficiaries (iii) Amount represents liability in respect of unclaimed dividends as at 31 December 2017. The assets held for the liability are presented in note 11 and note 15. 31 December 2017 Note Held-fortrading Nmillion Loans and receivables Nmillion Availablefor-sale Nmillion Other financial liabilities Nmillion Total carrying amount Nmillion Fair value 1 Nmillion Assets Cash and cash equivalents 7 - 401,348 - - 401,348 401,348 10.6 11,052 - - - 11,052 11,052 Trading assets 9.1 151,479 - - - 151,479 151,479 Pledged assets 8 10,769 - 32,471 - 43,240 43,240 Financial investments 11 - - 316,641 - 316,641 316,641 Loans and advances to banks 12 - 9,623 - - 9,623 9,623 Loans and advances to customers 12 - 372,088 - - 372,088 353,431 - 41,427 - - 41,427 41,427 173,300 824,486 349,112 - 1,346,898 1,328,241 Derivative assets Other assets (see (a) below) Liabilities 10.6 2,592 - - - 2,592 2,592 Trading liabilities Derivative liabilities 9.2 62,449 - - - 62,449 62,449 Deposits from banks 21 - - - 61,721 61,721 61,721 771,152 Deposits from customers 21 - - - 753,642 753,642 Subordinated debt 23 - - - 29,046 29,046 27,611 Other borrowings 22 - - - 74,892 74,892 69,984 - - - 186,827 186,827 186,827 65,041 - - 1,106,128 1,171,169 1,182,336 Other liabilities (see (b) below) (a) Other assets presented in the table above comprise financial assets only. The following items have been excluded: prepayment, indirect/withholding tax receivable, and accrued income. (b)Other liabilities presented in the table above comprise financial liabilities only. The following items have been excluded: deferred revenue.
  103. 204 Annual report & financial statements Stanbic IBTC Annual group financial statements for the year ended 31 December 2017 Overview Business review Annual report & financial statements Other information Notes to the consolidated and separate financial statements For the year ended 31 December 2017 31 December 2016 Note Held-fortrading Nmillion Loans and receivables Nmillion Availablefor-sale Nmillion Other financial liabilities Nmillion Total carrying amount Nmillion Fair value 1 Nmillion 7 - 301,351 - - 301,351 301,351 Assets Cash and cash equivalents 10.6 14,317 - - - 14,317 14,317 Trading assets Derivative assets 9.1 16,855 - - - 16,855 16,855 Pledged assets 8 - - 28,303 - 28,303 28,303 Financial investments 11 - - 252,823 - 252,823 252,823 Loans and advances to banks 12 - 15,264 - - 15,264 15,265 Loans and advances to customers 12 - 352,965 - - 352,965 341,941 - 31,897 - - 31,897 31,897 31,172 701,477 281,126 - 1,013,775 1,002,752 10.6 11,788 - - - 11,788 11,788 Trading liabilities 9.2 5,325 - - - 5,325 5,325 Deposits from banks 21 - - - 53,766 53,766 53,766 Other assets (see (a) below) Liabilities Derivative liabilities Deposits from customers 21 - - - 560,969 560,969 574,310 Subordinated debt 23 - - - 27,964 27,964 25,423 Other borrowings 22 - - - 96,037 96,037 91,555 Other liabilities (see (b) below) - - - 136,409 136,409 136,409 17,113 - - 875,145 892,258 898,576 Carrying value has been used where it closely approximates fair values. Fair value estimates are generally subjective in nature, and are made as of a specific point in time based on the characteristics of the financial instruments and relevant market information. Where available, the most suitable measure for fair value is the quoted market price. In the absence of organised secondary markets for financial instruments, such as loans, deposits and unlisted derivatives, direct market prices are not always available. The fair value of such instruments was therefore calculated on the basis of well-established valuation techniques using current market parameters. 1 (a) Other assets presented in the table above comprise financial assets only. The following items have been excluded: prepayment, indirect/withholding tax receivable, and accrued income. (b) Other liabilities presented in the table above comprise financial liabilities only. The following items have been excluded: deferred revenue. 28. Fair values of financial instruments The fair values of financial assets and financial liabilities that are traded in active markets are based on quoted market prices or dealer price quotations. For all other financial instruments, fair values are determined using other valuation techniques. 28.1 Valuation models The group measures fair values using the following fair value hierarchy, which reflects the significance of the inputs used in making the measurements Level 1 – fair values are based on quoted market prices (unadjusted) in active markets for an identical instrument. Level 2 – fair values are calculated using valuation techniques based on observable inputs, either directly (i.e. as quoted prices) or indirectly (i.e. derived from quoted 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 or indirectly observable from market data. Level 3 – fair values are based on valuation techniques using significant unobservable inputs. This category includes all instruments where the valuation technique includes inputs not based on observable data and the unobservable inputs have a significant effect on the instrument’s valuation. This category includes instruments that are valued based on quoted prices for similar instruments where significant unobservable adjustments or assumptions are required to reflect differences between the instruments. Valuation techniques include discounted cash flow models, comparison with similar instruments for which market observable prices exist, Black-Scholes and other valuation models. Assumptions and inputs used in valuation techniques include riskfree and benchmark interest rates, bonds and equity prices, foreign exchange rates, equity prices and expected volatilities and correlations. Specific valuation techniques used to value financial instruments include: •Quoted market prices or dealer quotes for similar instruments; •The fair value of interest rate swaps is calculated as the present value of the estimated future cash flows based on observable yield curves; •The fair value of forward foreign exchange contracts is determined using forward exchange rates at the balance sheet date, with the resulting value discounted back to present value; •Other techniques, such as discounted cash flow analysis, are used to determine fair value for the remaining financial instruments. Fair value estimates obtained from models are adjusted for any other factors, such as liquidity risk or model uncertainties, to the extent that the group believes that a third party market participant would take them into account in pricing a transaction. For measuring derivatives that might change classification from being an asset to a liability or vice versa such as interest rate swaps, fair values take into account the credit valuation adjustment (“CVA”) when market participants take this into consideration in pricing the derivatives. 28.2 Valuation framework The group has an established control framework with respect to the measurement of fair values. This framework includes a market risk function, which has overall responsibility for independently verifying the results of trading operations and all significant fair value measurements, and a product control function, which is independent of front office management and reports to the Chief Financial Officer. The roles performed by both functions include: •verification of observable pricing •re-performance of model valuations; •review and approval process for new models and changes to models •calibration and back-testing of models against observed market transactions; •analysis and investigation of significant daily valuation movements; and •review of significant unobservable inputs, valuation adjustments and significant changes to the fair value measurement of level 3 instruments. Significant valuation issues are reported to the audit committee. 205
  104. 206 Annual report & financial statements Stanbic IBTC Annual group financial statements for the year ended 31 December 2017 Overview Business review Annual report & financial statements 207 Other information Notes to the consolidated and separate financial statements For the year ended 31 December 2017 28.3 Financial instruments measured at fair value - fair value hierarchy The tables below analyse financial instruments carried at fair value at the end of the reporting year, by level of fair value hierarchy into which the fair value measurement is categorised. The amounts are based on the values recognised in the statement of financial position. See note 4.5 on accounting policies on fair value. Group Note Carrying amount Nmillion Level 1 Nmillion Level 2 Nmillion Level 3 Nmillion Total Nmillion Group Derivative assets Trading assets Assets Financial investments Pledged assets Financial investments 10.6 14,317 - 14,317 - 14,317 9.1 16,855 11,854 5,001 - 16,855 8 28,303 28,303 - - 28,303 11 252,823 251,247 470 1,106 252,823 312,298 291,404 19,788 1,106 312,298 - 4,805 6,247 11,052 9.1 151,479 143,195 8,284 - 151,479 8 43,240 43,240 - - 43,240 Held-for-trading 31,172 11,854 19,318 - 31,172 11 316,641 313,288 1,536 1,817 316,641 Available-for-sale 281,126 279,550 470 1,106 281,126 522,412 499,723 14,625 8,064 522,412 312,298 291,404 19,788 1,106 312,298 Comprising: Liabilities 173,300 Available-for-sale 153,964 13,089 - 167,053 Derivative liabilities Trading liabilities 349,112 345,759 1,536 8,064 355,359 522,412 499,723 14,625 8,064 522,412 10.6 11,788 - 11,788 - 11,788 9.2 5,325 5,325 - - 5,325 17,113 5,325 11,788 - 17,113 17,113 5,325 11,788 - 17,113 17,113 5,325 11,788 - 17,113 Comprising: Liabilities 10.6 2,592 - 9.2 62,449 52,451 65,041 52,451 65,041 52,451 65,041 52,451 2,592 - 2,592 9,998 - 62,449 12,590 - 65,041 12,590 - 65,041 12,590 - 65,041 Comprising: Held-for-trading Nmillion 11,052 Held-for-trading Trading liabilities Total Nmillion 10.6 Comprising: Derivative liabilities Level 3 Nmillion Assets 31 December 2017 Trading assets Level 2 Nmillion 31 December 2016 Pledged assets Derivative assets Carrying amount Nmillion Level 1 Note Held-for-trading There have been no transfers between Level 1 and Level 2 during the year. No reclassifications were made in or out of level 3 during the year. 28.4 Level 3 fair value measurement (i) The following table shows a reconciliation from the beginning balances to the ending balances for fair value measurements in level 3 of the fair value hierarchy. There have been no transfers between Level 1 and Level 2 during the year. No reclassifications were made in or out of level 3 during the year. Group Balance at 1 January 2017 Derivative assets Nmillion Financial investments Nmillion Total Nmillion - 1,106 1,106 (5,240) - (5,240) Gain/(loss) recognised in other comprehensive income - 711 711 Originations and purchases - - - Gains/(losses) included in profit or loss - Trading revenue Day one profit / (loss) recognised 11,487 - 11,487 Sales and settlements - - - Write back of impairment - - - Balance at 31 December 2017 6,247 1,817 8,064 Balance at 1 January 2016 - 502 502 Gains/(losses) included in profit or loss - Trading revenue - - - Gain/(loss) recognised in other comprehensive income - 604 604 Originations and purchases - - - Sales and settlements - - - Write back of impairment - - - Balance at 31 December 2016 - 1,106 1,106
  105. 208 Annual report & financial statements Stanbic IBTC Annual group financial statements for the year ended 31 December 2017 Overview Business review Annual report & financial statements 209 Other information Notes to the consolidated and separate financial statements For the year ended 31 December 2017 Gain or loss for the year in the table above are presented in the statement of profit or loss and other comprehensive income as follows: Derivative assets Nmillion Group Financial investments Nmillion Total 28.5 Financial instruments not measured at fair value – fair value hierarchy The following table sets out the fair values of financial instruments not measured at fair value and analyses them by the level in the fair value hierarchy into which each fair value measurement is categorised. Nmillion 31 December 2017 Group Other comprehensive income - 711 711 (5,240) - (5,240) Assets (5,240) 711 (4,529) Cash and cash equivalents Other comprehensive income - 604 604 Trading revenue - - - - 604 604 Trading revenue 31 December 2016 Fair value Nmillion Level 1 Level 2 Level 3 Total Nmillion Nmillion Nmillion Nmillion 401,348 - 401,348 - 401,348 9,623 - - 9,623 9,623 353,431 - - 353,431 353,431 31 December 2017 Loans and advances to banks Loans and advances to customers Other financial assets 41,427 - 41,427 - 41,427 805,829 - 442,775 363,054 805,829 61,721 - 61,721 - 61,721 771,152 - 771,152 - 771,152 Other borrowings 69,984 - 69,984 - 69,984 Subordinated debt 27,611 - 27,611 - 27,611 Liabilities (ii) Unobservable inputs used in measuring fair value The information below describes the significant unobservable inputs used at year end in measuring financial instruments categorised as level 3 in the fair value hierarchy. Type of financial instrument Fair value as at 31 Dec 2017 Nmillion Significant unobservable input Fair value measurement sensitivity to unobservable input Valuation technique Unquoted equities 1,817 (2016: 1,106) Discounted cash flow Risk adjusted discount rate A significant increase in the spread above the risk-free rate would result in a lower fair value Derivative assets 6,247 (2016: Nil) Discounted cash flow • Own credit risk (DVA) A significant move (either positive or negative) in the unobservable input will result in a significant move in the fair value. • Counterparty credit risk (CVA, basis risk and country risk premium) Deposits from banks Deposits from customers Other financial liabilities - 186,827 - 186,827 - 1,117,295 - 1,117,295 301,351 - 301,351 - 301,351 15,265 - - 15,265 15,265 352,965 - - 341,941 341,941 31 December 2016 Assets Cash and cash equivalents Loans and advances to banks Loans and advances to customers Other financial assets • USD / NGN quanto risk 186,827 1,117,295 • Implied FX volatility 31,897 - 31,897 - 31,897 701,477 - 333,248 357,205 690,454 53,766 - 53,766 - 53,766 Liabilities (iii) The effect of unobservable inputs on fair value measurement (sensitivity analysis) The table below indicates the valuation techniques and main assumptions used in the determination of the fair value of the level 3 assets and liabilities measured at fair value on a recurring basis. The table further indicates the effect that a significant change in one or more of the inputs to a reasonably possible alternative assumption would have on profit or loss at the reporting date. Effect on OCI/Profit or loss Valuation technique Significant unobservable input Variance in fair value measurement Favourable Unfavourable Nmillion Nmillion Unquoted equities Discounted cash flow Risk adjusted discount rate From (2%) to 2% 144 (127) Derivative assets Discounted cash flow • Own credit risk (DVA) • Counterparty credit risk (CVA, basis risk and country risk premium) • USD / NGN quanto risk • Implied FX volatility From (1%) to 1% 360 (362) Risk adjusted discount rate From (2%) to 2% 2017 Discounted cash flow Deposits from customers 560,969 - 574,310 - 574,310 Other borrowings 96,037 - 91,555 - 91,555 Subordinated debt 27,964 - 25,423 - 25,423 136,409 - 136,409 - 136,409 875,145 - 881,463 - 881,463 Other financial liabilities Fair value of loans and advances is estimated using discounted cash flow techniques. Input into the valuation techniques includes interest rates and expected cash flows. Expected cash flows are discounted at current market rates to determine fair value. Fair value of deposits from banks and customers is estimated using discounted cash flow techniques, applying the rates offered for deposits of similar maturities and terms. The fair value of deposits payable on demand is the amount payable at the reporting date. 29. Financial instruments subject to offsetting, enforceable master netting arrangements and similar agreements 2016 Unquoted equities Deposits from banks 80 (64) IFRS requires financial assets and financial liabilities to be offset and the net amount presented in the statement of financial position when, and only when, the group and company have a current legally enforceable right to set off recognised amounts, as well as the intention to settle on a net basis or to realise the asset and settle the liability simultaneously. Accordingly, the following table sets out the impact of offset, as well as financial assets and financial liabilities that are subject to an enforceable master netting arrangement or similar agreement, irrespective of whether they have been offset in accordance with IFRS. It should be noted that the information below is not intended to represent the group and company’s actual credit exposure, nor will it agree to that presented in the statement of financial position.
  106. 210 Annual report & financial statements Stanbic IBTC Annual group financial statements for the year ended 31 December 2017 Overview Business review Annual report & financial statements 211 Other information Notes to the consolidated and separate financial statements For the year ended 31 December 2017 Group Gross amount of recognised financial assets1 Nmillion Gross amounts of recognised financial liabilities offset in the statement of financial position2 Nmillion Net amounts of financial assets presented in the statement of financial position Nmillion Financial instruments, financial collateral & cash collateral3 Nmillion Net amount Nmillion 31 December 2017 Net amounts of financial assets presented in the statement of financial position Nmillion Financial instruments, financial collateral & cash collateral3 Nmillion Net amount Nmillion 31 December 2016 Assets Assets Derivative assets 10,840 - 10,840 (3,689) 7,151 Pledged assets 10,768 - 10,768 (9,998) 770 Loans and advances to customers 11,865 - 11,865 (4,425) 7,440 33,473 - 33,473 (18,112) 15,361 Gross amount of recognised financial liabilities1 Nmillion Gross amounts of recognised financial assets offset in the statement of financial position2 Nmillion Group Group Gross amount of recognised financial assets1 Nmillion Gross amounts of recognised financial liabilities offset in the statement of financial position2 Nmillion Net amounts of financial liabilities presented in the statement of financial position Nmillion Financial instruments, financial collateral & cash collateral3 Nmillion Net amount Nmillion 31 December 2017 Derivative assets 266 - 266 (266) - 6,900 - 6,900 (4,934) 1,966 7,166 - 7,166 (5,200) 1,966 Gross amount of recognised financial liabilities1 Nmillion Gross amounts of recognised financial assets offset in the statement of financial position2 Nmillion Net amounts of financial liabilities presented in the statement of financial position Nmillion Financial instruments, financial collateral & cash collateral3 Nmillion Net amount Nmillion (5,336) - (5,336) 266 (5,070) - - - - - (5,336) - (5,336) 266 (5,070) Loans and advances to customers Group 31 December 2016 Liabilities Liabilities Derivative liabilities Derivative liabilities 1,851 - 1,851 (1,851) - Trading liabilities 9,998 - 9,998 (9,998) - Deposits from customer 4,425 - 4,425 (4,425) - 21,121 - 21,121 (1,838) 19,283 1 37,395 - 37,395 (18,112) 19,283 or a similar agreement, irrespective of whether the offsetting criteria is met. Other liabilities Gross amounts are disclosed for recognised assets and liabilities that are either offset in the statement of financial position or subject to a master netting arrangement or a 1 similar agreement, irrespective of whether the offsetting criteria is met. Deposits from banks Gross amounts are disclosed for recognised assets and liabilities that are either offset in the statement of financial position or subject to a master netting arrangement 2 The amounts that qualify for offset in accordance with the criteria per IFRS. 3 Related amounts not offset in the statement of financial position that are subject to a master netting arrangement or similar agreement, including financial collateral (whether recognised or unrecognised) and cash collateral. 2 The amounts that qualify for offset in accordance with the criteria per IFRS. 3 Related amounts not offset in the statement of financial position that are subject to a master netting arrangement or similar agreement, including financial collateral (whether recognised or unrecognised) and cash collateral. The table below sets out the nature of agreement and the types of rights relating to items which do not qualify for offset but that are subject to a master netting arrangement or similar agreement. Nature of agreement Related rights Derivative assets and liabilities, other liabilities ISDAs The agreement allows for set off in the event of default Trading liabilities, pledged assets Global master repurchase agreements The agreement allows for set off in the event of default The table below sets out the nature of agreement and the types of rights relating to items which do not qualify for offset but that are subject to a master netting arrangement or similar agreement. Nature of agreement Related rights Derivative assets and liabilities ISDAs The agreement allows for set off in the event of default Trading liabilities Global master repurchase agreements The agreement allows for set off in the event of default
  107. 212 Annual report & financial statements Stanbic IBTC Annual group financial statements for the year ended 31 December 2017 Overview Business review Annual report & financial statements 213 Other information Notes to the consolidated and separate financial statements For the year ended 31 December 2017 30. Contingent liabilities and commitments 30.1 Contingent liabilities Letters of credit Guarantees Group Company 31 Dec 2017 Nmillion 31 Dec 2016 Nmillion 31 Dec 2017 Nmillion 31 Dec 2016 Nmillion 118,054 15,620 - - 35,323 38,523 - - 153,377 54,143 - - Guarantees and letters of credit are given to third parties as security to support the performance of a customer to third parties. As the group will only be required to meet these obligations in the event of the customer’s default, the cash requirements of these instruments are expected to be considerably below their nominal amounts. 30.2 Capital commitments Contracted capital expenditure 789 596 26 - Capital expenditure authorised but not yet contracted 17,252 8,841 2,067 - 18,041 9,437 2,093 - The approval received from NOTAP for the payment of US$10.3m under the affiliate software agreement (“ASA”) is related to the software sold to SBSA pursuant to the SPA. The legality of the SPA is the issue before the Court of Appeal, Lagos Division in Appeal No. CA/L/208/2016. The transactions involved in the SPA will be reviewed, determined and accounted for after the judgment of the Court of Appeal, Lagos Division has been obtained. As part of the Federal High Court judgment of the 14 December 2015, in the legal case between Stanbic IBTC Holdings PLC and the FRC, the Court ruled that the original sale of the Finacle banking software to Standard Bank of South Africa through the SPA was illegal, null and void, because NOTAP’s approval to the SPA had not been obtained. The Court also ruled that the agreement between SIBTC and SBSA by which the exported technology was leased back to Stanbic IBTC Bank was also illegal, null and void. Below is a consideration of the accounting implications. SIBTC is currently reviewing a number of options that are designed to successfully separate its IT infrastructure from those of SBSA. Any chosen approach would require approvals from the Board, shareholders, NOTAP and the CBN. The SPA agreement involved SBSA paying ZAR 189million to SIBTC to acquire the Finacle V1 software in 2012. The proceeds of the sale have since that time been held in an interest bearing deposit account with SBSA. As at 31 December 2017, the balance in the account was ZAR 261 million (made up of ZAR 189 million plus ZAR 72 million accrued interest up to 31 December 2017). SIBTC is yet to fulfill the full conditions of the SPA agreement which will result in the release of the deposit in escrow. 30.7 Obligations not recognised on transactions with pending regulatory registration In compliance with the rules of the Financial Reporting Council of Nigeria, the group has not recognised in these financial statements its obligations under some agreements where regulatory registration was yet to be received as at the end of the reporting year. The details of the affected transactions and the associated obligations are as follows: The expenditure will be funded from the group’s internal resources. 30.3 Loan commitments As at 31 December 2017, the group had irrevocable loan commitments amounting to N56.1 billion (Dec 2016: N30.2 billion) in respect of various loan contracts. 30.4 Legal proceedings In the ordinary course of business the group is exposed to various actual and potential claims, lawsuits and other proceedings that relate to alleged errors, omissions, breaches. The directors are satisfied, based on present information and the assessed probability of such existing claims crystallising that the group has adequate insurance cover and/or provisions in place to meet such claims. There were a total of 297 legal proceedings outstanding as at 31 December 2017 (Dec. 2016: 282 cases). 198 of these were against the group with claims amounting to N159.6 billion (31 December 2016: N158 billion), while 99 other cases (Dec 2016: 103 cases) were instituted by the group with claims amounting to N18.4 billion (31 December 2016: N13 billion). The claims against the group are generally considered to have a low likelihood of success and the group is actively defending same. Management believes that the ultimate resolution of any of the proceedings will not have a significantly adverse effect on the group. Where the group envisages that there is a more than average chance that a claim against it will succeed, adequate provisions are raised in respect of such claim. See note 25 for details of provisions raised. 30.5 Update on the legal case between Stanbic IBTC Holdings PLC and the Financial Reporting Council In November 2016, Stanbic IBTC Holdings PLC (“SIBTC”), the Financial Reporting Council of Nigeria (“FRC”) and National Office for Technology Acquisition and Promotion (“NOTAP”) reached a negotiated agreement on some of the issues that are related to the FRC regulatory decision. Pursuant to such agreement, SIBTC’s appeal has been amended and a payment was made to the FRC. The appeal’s sole focus now relates to the alleged illegality of the agreements between SIBTC and Standard Bank of South Africa (“SBSA”). The appeal (as amended) is however still pending before the Court of Appeal. The FRC, which has amended its brief of appeal in response to the amended appeal filed by SIBTC, has also withdrawn its cross appeal and its appeal against the injunctive orders of the Federal High Court. The appeal has been adjourned for hearing on 08 November 2018. 30.6 Finacle Core Banking software In 2012, SBSA purchased from Stanbic IBTC Bank PLC its Finacle banking software for a consideration of ZAR 189 million, which sale was captured in a Sale, Purchase and Assignment Agreement (“SPA”) submitted to the National Office for Technology Acquisition and Promotion in 2013. Subsequently, an affiliate software agreement was established with Stanbic IBTC Bank which related to SBSA licensing back the purchased software to Stanbic IBTC Bank in consideration of the payment of an annual license fee. On 27 December 2013, NOTAP approved and registered the Affiliate Software License with a total technology fee not exceeding US$10,324,286.70 expiring on 31 May 2015 (Certificate No. NOTAP/ AG/FI/1280/12/217). An amount of US$ 9.6m was remitted to SBSA on account of this authorisation. Following the expiration of NOTAP’s approval for this license, no additional accruals have been made in relation to the fees payable for the use of the software, which situation has taken account of the Bank’s inability to obtain NOTAP’s further approval on the said affiliate software agreement. Contingent liability 31 Dec 2017 Nmillion 31 Dec 2016 Nmillion Pending 5 6 Information Technology Agreement between External Stanbic IBTC Bank PLC and Infosys Technologies Limited (Online Procurement Request) as at March 2017 Pending 353 294 Finacle ITMS Integration Programme (Cash Management Solution): Agreement with Infosys Technologies Limited and Affiliate Software License Agreement Nucleus Software Limited India. External Pending 46 148 Finacle Production Support agreement between External Edge Verve Systems Limited and Stanbic IBTC Bank PLC as at June 2017 Pending 69 - STANBIC-NG V3 Finacle Enhancement and External Implementation agreement between EdgeVerve Systems LIMITED and Stanbic IBTC Bank PLC, Nigeria. Pending 85 - Supplemental to the Master Agreement between External Wizzit Technologies and Stanbic IBTC Bank PLC as at May 2017 Pending 22 - Amendment to the Master Software License Agreement between Edgverve Systems Limited India and Stanbic IBTC Bank PLC Pending 424 - Type of agreement Transferor Registration status Software License Agreement with SunTec Business Solutions FZE as at December 29, 2015. External External
  108. 214 Annual report & financial statements Stanbic IBTC Annual group financial statements for the year ended 31 December 2017 Overview Business review Annual report & financial statements 215 Other information Notes to the consolidated and separate financial statements For the year ended 31 December 2017 Third party funds under management and funds under administration Members of the group provide discretionary and non-discretionary investment management services to institutional and private investors. 31.2 Interest expense Pension funds Unit Trusts / Collective investments 31 Dec 2017 Nmillion 31 Dec 2016 Nmillion 2,312,872 1,883,584 400,928 86,743 32,164 22,507 5,643,213 2,899,792 8,389,177 4,892,626 Trusts and Estates Assets held under custody – custodial services 31 Dec 2016 Nmillion 31 Dec 2017 Nmillion 31 Dec 2016 Nmillion Savings accounts 1,150 821 - - Current accounts 4,694 701 - - Call deposits 1,525 1,744 - - Term deposits 21,679 18,294 - 97 4,450 2,790 - - Interbank deposits Borrowed funds 5,258 1,095 - 29,608 1,095 97 52,918 1,491 852 All interest expense reported above relates to financial assets not carried at fair value through profit or loss. Included in interest expense reported above is N2,710 million (2016: N2,224 million) from related party transactions. See note 36.3. Fee and commission revenue Group Company 31 Dec 2017 Nmillion 31 Dec 2016 Nmillion 31 Dec 2017 Nmillion 31 Dec 2016 Nmillion 2,340 1,200 - - Interest on loans and advances to customers 61,284 54,910 - - Interest on investments 59,287 31,357 45 17 122,911 87,467 45 17 Interest on loans and advances to banks 5,826 39,324 31.3 Net fee and commission revenue 31. Income statement information 31.1 Interest income Company 31 Dec 2017 Nmillion Commissions and fees earned in respect of trust and management activities performed are included in profit or loss. Assets managed and funds administrated on behalf of third parties include: Group 59,430 Account transaction fees 3,606 7,113 - - Card based commission 3,294 3,970 - - 5,417 2,944 - - 33,928 27,453 - - Brokerage and financial advisory fees Asset management fees Custody transaction fees 2,951 1,751 - - Electronic banking 1,220 1,209 - - Foreign currency service fees 6,207 6,562 - - Documentation and administration fees 1,703 1,298 - - All interest income reported above relates to financial assets not carried at fair value through profit or loss. Interest income for the year ended 31 December 2017 includes N129 million (December 2016: N80 million) relating to the unwinding of discount element of credit impairments. Other fee and commision revenue 1,104 618 1,491 852 Included in interest income is N438 million (2016: N184 million) earned from related party transactions. See note 36.3. Fee and commission expense Interest on investments of N45 million (2016: N17 million) reported by the company relates to interest earned on money market mutual funds held by the company. (341) (764) - - 59,089 52,154 1,491 852 Other fee income for Group includes commission on sale of government securities, agency fee, account statement fee, funds transfer charges, salary processing and administration charges, reference letter charges, and cash withdrawal charges. Other fee and commission income for the Company of N1,477 million (2016: N835 million) represents fee income earned by the company from technical and management service provided to subsidiaries. 31.4 Trading revenue Foreign exchange 11,085 6,218 - - Fixed income 18,849 5,548 - - Interest rates (786) 3,563 - - 0 (3) - - 29,148 15,326 - - Equities Included in trading revenue reported above is a trading loss amount of N4,143m (2016: N5,136m) from related party transactions. See note 36.3 for details. Trading revenue reported above includes trading income of N5,749 million (2016: trading income of N2,778 million) relating to derivative transactions. Included in trading income / loss from derivatives is N9,598 million (2016: Nil) relating to unboservable valuation difference recognised during the year. As at year end, unobservable valuation difference yet to be recognised amounted to N4,500 million (see note 10.7).
  109. 216 Annual report & financial statements Stanbic IBTC Annual group financial statements for the year ended 31 December 2017 Overview Business review Annual report & financial statements 217 Other information Notes to the consolidated and separate financial statements For the year ended 31 December 2017 31.5 Other revenue Group Company Group 31 Dec 2017 Nmillion 31 Dec 2016 Nmillion 31 Dec 2017 Nmillion 31 Dec 2016 Nmillion Dividend income 112 225 28,092 1,501 Gains on disposal of property and equipment 209 56 119 - Others (see (b) below) 624 433 175 158 945 714 28,386 1,659 - - 20,912 - a) Dividend income was earned from the following investees: Stanbic IBTC Pension Managers Limited Company 31 Dec 2017 Nmillion 31 Dec 2016 Nmillion 31 Dec 2017 Nmillion 31 Dec 2016 Nmillion Information technology 5,984 4,751 - - Communication expenses 1,205 921 - - Premises and maintenance 4,517 4,023 - - Depreciation expense 4,129 4,204 308 229 31.8 Other operating expenses Amortisation of intangible assets 46 33 - - Deposit insurance premium 2,482 2,382 - - 5,034 4,504 - - Stanbic IBTC Asset Management Limited - - 2,000 800 AMCON expenses (see (i) below) Stanbic IBTC Ventures Limited - - 900 100 Other insurance premium 858 647 - - Stanbic IBTC Capital Limited - - 800 - Auditors renumeration 340 310 49 64 Stanbic IBTC Stockbrokers Limited - - 280 520 Stanbic IBTC Insurance Limited - - 100 - Stanbic IBTC Trustees Limited - - 100 81 Stanbic IBTC Bank PLC - - 3,000 - 112 225 - - 112 225 28,092 1,501 Other equity investments b) T  hese include gains from investment of unclaimed dividends, investment administration charges, and distribution received from liquidation of unquoted equity investments. Non-audit service fee (see (ii) below) 19 31 6 1 850 755 - - Administration and membership fees 3,711 2,103 - - Training expenses 1,139 726 - - Security expenses 1,484 1,195 - - Travel and entertainment 1,773 1,280 - - Stationery and printing 1,182 874 - - Marketing and advertising 2,982 2,853 - - 215 336 - - Professional fees Pension administration expense Penalties and fines Donations 31.6 Credit impairment charges Net credit impairments raised and released for loans and advances 27,981 20,272 - - Recoveries on loans and advances previously written off (2,404) (469) - - 25,577 19,803 - - Comprising: Net specific credit impairment charges 15,925 - - Specific credit impairment charges (note 12.3) 28,235 16,394 - - Recoveries on loans and advances previously written off (2,404) (469) - - (254) 3,878 - - 25,577 19,803 - - 33,177 28,957 170 500 180 241 24 - 2,925 975 396 - 36,282 30,173 590 500 31.7 Staff costs Short term – salaries and allowances Staff cost: below-market loan adjustment Equity-linked transactions (note 31.11) Included in staff costs is N344 million (2016: N333 million) representing salaries and allowances paid to executive directors for the year. See note 32. 70 - - 122 142 84 25 248 - - 401 334 230 208 Provision for legal costs, levies and fines (See note 25) 3,538 1,978 - - Impairment of other financial assets 3,068 914 - - 764 280 - 1,496 1,458 - 828 437 71 55 1,199 1,099 (114) (211) 49,744 38,868 692 430 Directors fees Bank Charges 25,831 Portfolio credit impairment charges/(reversal) (note 12.3) Operational losses 38 437 Motor vehicle maintenance expense Indirect tax (VAT) Others (i) AMCON expenses AMCON charges (0.3% of total asset value) is a statutory levy by the Asset Management Corporation of Nigeria on all commercial banks operating in Nigeria.
  110. 218 Annual report & financial statements Stanbic IBTC Annual group financial statements for the year ended 31 December 2017 Overview Business review Annual report & financial statements 219 Other information Notes to the consolidated and separate financial statements For the year ended 31 December 2017 (ii) Non audit services 31.9 Transactions requiring regulatory approval (continued) The details of services provided by the auditors (Messrs KPMG Professional Services) during the year, other than statutory audit of financial statements, are as follows: Group Company 31 Dec 2017 Nmillion 31 Dec 2016 Nmillion 31 Dec 2017 Nmillion 31 Dec 2016 Nmillion 4 - - - Tax services – review transfer pricing documentation - 1 - 1 Professional fees on Scrip dividend issue 2 - 2 - Audit of deposit insurance certification 3 1 3 - Professional fees on review of ISA 810 3 - 1 - Assurance services – ISAE 3000 review of controls at Stanbic IBTC Nominees Limited 4 5 - - Advisory services – survey financial services industry - 3 - - Compilation of financial information for preparation of rights issue - 5 - - CBN corporate governance and whistle blowing guidelines - 12 - - Training services - 1 - - Audit services – audit procedures on BA 610 reporting for SBSA 4 3 - - 19 31 6 1 Advisory services – remuneration survey (i) NOTAP approved the transfer of technology agreement with Wizzit International, South Africa for a year and expired in April 2017. During the year, a total amount of N18 million was paid to Wizzit International. (ii) The software licence agreement payment to Microsoft Ireland Operations Limited was approved by NOTAP in 2015 for a validity period of 3 years. During the year, a total payment of N1,125 million was made. (iii) NOTAP issued approval for a year and expired for payment of Annual Technical Supports (“ATS”) services for Finacle software expiring in December 2017. During this year, a total payment of N220 million was made. (iv) An addendum NOTAP approval was received for a year, effective May 2017, to the software licence agreement with Intellinx Limited. During the year, a total amount of N101 million was paid to Intellinx Limited. (v) NOTAP approved the software licence agreement payment to Nucleus Software Exports Limited for a year expiring March 2018. During the year under review, a total payment of N14 million was made. 31 Dec 2017 Nmillion 31 Dec 2016 Nmillion 63 51 - - 193 354 - - - - - - 256 405 - - 31.11 Share-based payment transactions The group operates a number of share- based payment arrangements under which the entity receives services from employees as a consideraion for equity instrument of the group or cash settlement based on equity instrument of the group. Amounts recognised in financial statements Registration certificate number Approved basis and amount Certificate validity (i) T  he Master agreement between Wizzit International and Stanbic IBTC Bank PLC NOTAP/AG/ FI/1280/16/208 $54,570 30 April 2016 to 30 April 2017 (ii) Microsoft Volume Licensing Agreement between Microsoft and Stanbic IBTC Bank PLC NOTAP/AG/ FI/1280/15/64 Bulk remittance of $3,396,240.00 01 March 2015 to 28 February 2018 (iii) Amendment to the Master Software Licence Agreement between Edgverve Systems Limited India and Stanbic IBTC Bank PLC NOTAP/AG/ FI/1280/23/150 $665,622 1 year expiring on 31 December 2017 (iv) Software Licence and Support Agreement between Intellinx Limited and Stanbic IBTC Bank PLC NOTAP/AG/ FI/1280/17/528 Bulk remittance of $306,497 02 May 2017 to 02 November 2017 (v) Affiliate Agreement between Nucleus Software Exports Limited and Stanbic IBTC Bank PLC NOTAP/AG/ FI/1280/13/440 Bulk remittance of $41,452 02 May 2014 to 01 May 2017 Company 31 Dec 2016 Nmillion More than five years The group obtained approval of National Office for Technology and Promotion (NOTAP) for some information technology project, the cost of which have been recognised in these financial statements. Relevant details are disclosed as follows: Transaction involved At year end, the future minimum lease payments under non-cancellable operating leases were payable as follows: Group Between one and five years The rules of Financial Reporting Council of Nigeria require that transactions or agreements requiring registration by regulatory body in Nigeria shall only be recognised in the financial statements to the extent that approval is obtained. For transactions recognised, the relevant registration details are required to be disclosed. The group leases a number of branch and office premises under operating leases. The lease period varies, and typically run for a period of 3 to 10 years, with an option to renew the lease after that date. Lease payments are increased periodically (usually every three periods) to reflect market rentals. 31 Dec 2017 Nmillion Less than one year 31.9 Transactions requiring regulatory approval 31.10 Operating leases At 31 December 2017, the group had the following share-based arrangements 31 Dec 2017 Nmillion 31 Dec 2016 Nmillion 18 9 1,125 385 (a) Share appreciation rights based on equity instrument of Stanbic IBTC Holdings PLC (Stanbic IBTC Equity Growth Scheme) – cash settled (b) Share options and appreciation rights based on equity instrument of Standard Bank Group (Parent company share incentive schemes) – equity settled (c) Deferred bonus scheme. The expenses and liabilities recognised in respect of the share based arrangements are as follows: 220 201 Expenses recognised in staff costs Stanbic IBTC Equity Growth Scheme (credit)/charge 101 85 14 - Parent company share incentive schemes** Deferred bonus scheme (DBS) 680 31 Dec 2016 Nmillion 1,520 129 (7) (9) 1,412 854 2,925 974 1,265 421 Liabilities recognised in other liabilities Stanbic IBTC Equity Growth Scheme 1,478 31 Dec 2017 Nmillion Deferred bonus scheme 1,043 825 2,308 1,246 **The parent company share incentive scheme is equity settled. As such, a corresponding decrease in equity has been recognised. See Statement of changes in equity for further details.
  111. 220 Annual report & financial statements Stanbic IBTC Annual group financial statements for the year ended 31 December 2017 Overview Business review Annual report & financial statements 221 Other information Notes to the consolidated and separate financial statements For the year ended 31 December 2017 31.11 Share-based payment transactions (continued) 31.11 Share-based payment transactions (continued) a) Stanbic  IBTC Equity Growth Scheme b. P  arent company share incentive schemes Share options and appreciation rights A number of employees of the group participate in the Standard Bank Group’s share schemes. Standard Bank Group (“SBG”) has two equity-settled schemes, namely the Group Share Incentive Scheme and the Equity Growth Scheme. The Group Share Incentive Scheme confers rights to employees to acquire ordinary shares at the value of the SBG share price at the date the option is granted. The Equity Growth Scheme was implemented in 2005 and represents appreciation rights allocated to employees. The eventual value of the right is effectively settled by the issue of shares equivalent in value to the value of the rights. On 1 March 2010 and 1 March 2011, the group granted share appreciation rights to key management personnel that entitles the employees to cash value determined based on the decrease in share price of Stanbic IBTC Holdings PLC between grant date and exercise date. The object and purpose of the scheme is to promote an identity of interest between the group and its senior employees, to attract, retain and motivate skilled and competent personnel with high potential to influence the direction, growth and profitability of the group by enhancing leadership commitment and drive to grow the group market value and position in support of shareholder interests. The two schemes have five different sub-types of vesting categories as illustrated by the table below: The provision in respect of liabilities under the scheme amounts to N1,265 million at 31 Dec 2017 (Dec 2016: N421 million). Year The terms and conditions of the grants are as follows. Vesting category Year % vesting Expiry Type A 3, 4, 5 50, 75, 100 10 Years % vesting Expiry Type A 3, 4, 5 50, 75, 100 10 Years Type B 5, 6, 7 50, 75, 100 10 Years Type C 2, 3, 4 50, 75, 100 10 Years Type D 2, 3, 4 33, 67, 100 10 Years Type E 3, 4, 5 33, 67, 100 10 Years Units 31 Dec 2017 31 Dec 2016 59,113,755 67,824,702 Reconciliation Units outstanding at beginning of the year b(i) Group share incentive scheme – share options - - Forfeited Granted (186,916) - Exercised (33,599,126) (8,710,947) - - Lapsed Units outstanding at end of the year A reconciliation of the movement of share options and appreciation rights is detailed as follows: 25,327,713 59,113,755 Option price range Number of options 31 Dec 2017 (ZAR) 31 Dec 2017 (Naira) 31 Dec 2017 - 227,525 Transfers 62.39 - 111.94 1,678 - 3,010 65,900 (96,350) Exercised 92.00 - 111.94 2,474 - 3,010 (21,050) (102,950) - (28,225) 44,850 - Options outstanding at beginning of the year Lapsed The fair value of share appreciation rights is determined using Black-Scholes formula. The inputs used in the measurement of their fair value were as follows: 31 Dec 2017 31 Dec 2016 Weighted average fair value at grant date (N) – Rights granted 1 March 2010 15.30 15.30 Weighted average fair value at grant date (N) – Rights granted 1 March 2011 17.83 17.83 Expected life (years) Options outstanding at the end of the year 31 Dec 2016 The weighted average SBG share price for the year to 31 December 2017 year end was ZAR157.29 (December 2016: ZAR151.63). The following options granted to employees had not been exercised at 31 December 2017: Option price range Weighted average price 3.19 3.19 Number of ordinary shares (ZAR) (Naira) (ZAR) Expected volatility (%) 37.46 40.84 6,100 28.00 170,800 92.00 2,473.88 Year to 31 December 2018 Risk-free interest rate (%) 13.88 16.25 1,250 62.39 77,988 62.39 1,677.67 Year to 31 December 2019 1.57 6.18 37,500 98.80 - 103.03 3,087 - 3,228 101.62 2,732.56 Year to 31 December 2021 Dividend yield (%) 44,850 There were no options outstanding at 31 December 2016. (Naira) Option expiry year
  112. 222 Annual report & financial statements Stanbic IBTC Annual group financial statements for the year ended 31 December 2017 Overview Business review Annual report & financial statements 223 Other information Notes to the consolidated and separate financial statements For the year ended 31 December 2017 b(ii) Equity Growth Scheme - Appreciation rights Appreciation right price range 31 Dec 2017 (ZAR) Rights outstanding at beginning of the period Number of rights 31 Dec 2017 (Naira) 31 Dec 2017 31 Dec 2016 - - - 65,130 Transfers 62.39 - 156.96 1,677 - 4,221 113,230 (65,130) Exercised 62.39 - 98.00 - (77,204) - Lapsed - - - - Rights outstanding at the end of the period - - 36,026 - 31.11 Share-based payment transactions (continued) Deferred bonus scheme 2012 (DBS 2012) In 2012, changes were made to the DBS to provide for a single global incentive deferral scheme across the Standard Bank Group (SBG). The purpose of the Deferred Bonus Scheme 2012 is to encourage is indexed to the SBG’s share price and accrues notional dividends during the vesting period, which are payable on vesting. The awards vest in three equal amounts at 18 months, 30 months and 42 months from the date of award. The final payout is determined with reference to the SBG’s share price on vesting date. a longer-term outlook in business decision-making and closer alignment of performance with long-term value creation. All employees granted an annual performance award over a threshold have part of their award deferred. The award Units 31 Dec 2017 31 Dec 2016 154,979 457,450 Reconciliation Units outstanding at beginning of the period The following rights granted to employees had not been exercised at 31 December 2017: Granted Price range Number of rights (ZAR) - 316,353 Exercised (202,298) (183,269) Expiry period Transfers 286,089 (372,565) Forfeited (5,089) (62,990) Weighted average price (Naira) (ZAR) (Naira) 15,005 156.96 156.96 Year to 31 December 2025 21,021 122.24 122.24 Year to 31 December 2026 36,026 Weighted average fair value at grant date (ZAR) There were no options outstanding at 31 December 2016. (c) Deferred bonus scheme (“DBS”) It is essential for the group to retain key skills over the longer term. This is done particularly through share-based incentive plans. The purpose of these plans is to align the interests of the group, its subsidiaries and employees, as well as to attract and retain skilled, competent people. The group has implemented a scheme to defer a portion of incentive bonuses over Lapsed Units outstanding at end of the period a minimum threshold for key management and executives. This improves the alignment of shareholder and management interests by creating a closer linkage between risk and reward, and also facilitates retention of key employees. All employees, who are awarded shortterm incentives over a certain threshold, are subject to a mandatory deferral of a percentage of their cash incentive into the DBS. Vesting of the deferred bonus occurs after three periods, conditional on Expected life (periods) continued employment at that time. The final payment of the deferred bonus is calculated with reference to the Standard Bank Group share price at payment date. To enhance the retention component of the scheme, additional increments on the deferred bonus become payable at vesting and one period thereafter. Variables on thresholds and additional increments in the DBS are subject to annual review by the remuneration committee, and may differ from one performance period to the next. - - 233,681 154,979 122.24 122.24 2.51 2.51 d. Performance reward plan (“PRP”) A new performance driven share plan commenced in March 2014 which rewards value delivered against specific targets. The PRP incentivises a group of senior executives to meet the strategic long-term objectives that deliver value to shareholders, to align the interests of those executives with those of shareholders and to act as an attraction and retention mechanism in a highly competitive marketplace for skills. The PRP operates alongside the existing conditional, equity-settled long-term plans, namely the EGS, GSIS and DBS. The PRP is settled in shares to the employee on the applicable vesting dates together with notional dividends that are settled in cash. The shares that vest (if any) and that are delivered to the employee are conditional on the pre-specified performance metrics. Units 31 Dec 2017 31 Dec 2016 Units outstanding at beginning of the year 12,300 110,800 Granted 67,200 24,600 Reconciliation Cancelled (24,528) (37,700) Transferred from/(to) group companies 142,600 (85,400) Exercised (32,272) - Units outstanding at end of the year 165,300 12,300 155.95 122.24 3.00 3.00 Weighted average fair value at grant date (ZAR) Expected life at grant date (year)
  113. 224 Annual report & financial statements Stanbic IBTC Annual group financial statements for the year ended 31 December 2017 Overview Business review Annual report & financial statements 225 Other information Notes to the consolidated and separate financial statements For the year ended 31 December 2017 e. Quanto stock scheme Since 2007, Standard Bank PLC has operated a deferred incentive arrangement in the form of the Quanto stock unit plan. Qualifying employees, with an incentive award above a set threshold, are awarded Quanto stock units denominated in USD for nil consideration, the value of which moves in parallel to the change in price of the SBG shares listed on the JSE. The cost 32. Emoluments of directors incentive is delivered in Quanto stock units with three period vesting and an additional six months holding period after vesting. Thereafter half of the remaining incentive (non-deferred portion) is paid immediately in cash and the other half is delivered in Quanto stock units with a six month vesting period. of the award is accrued over the vesting period (generally three periods), normally commencing the period in which these are awarded and communicated to employees. Special terms apply to employees designated by the Prudential Regulatory Authority (“PRA”) as Code Staff. For these employees the deferred portion of the Units 31 Dec 2016 Units outstanding at beginning of the year 147,000 287,000 Exercised (94,000) (140,000) Transfers - - 53,000 147,000 Reconciliation Quanto stock units granted not yet exercised at year end: 31 Dec 2017 Nmillion 31 Dec 2016 Nmillion 31 Dec 2017 Nmillion 31 Dec 2016 Nmillion 344 333 91 78 401 334 230 208 Executive directors Emoluments of directors in respect of services rendered1: While directors of Stanbic IBTC Holdings PLC as directors of the company and/or subsidiary companies Non-executive directors Emoluments of directors in respect of services rendered: While directors of Stanbic IBTC Holdings PLC as directors of the company and/or subsidiary companies otherwise in connection with the affairs of Stanbic IBTC Holdings PLC or its subsidiaries Pensions of directors and past directors 1 29 40 8 7 774 707 329 293 In order to align emoluments with the performance to which they relate, emoluments reflect the amounts accrued in respect of each period and not the amounts paid. Number of units 31 Dec 2017 31 Dec 2016 - - Unit expiry period period to 31 December 2016 Company otherwise in connection with the affairs of Stanbic IBTC Holdings PLC or its subsidiaries 31 Dec 2017 Units outstanding at end of the year Group period to 31 December 2017 - 94,000 period to 31 December 2018 53,000 53,000 Units outstanding at end of the year 53,000 147,000 31 Dec 2017 Nmillion 31 Dec 2016 Nmillion (i) the chairman 31 60 (ii) the highest paid director 91 78 Emoluments disclosed above include amounts paid to: 33. Taxation Group Income tax (note 33.1) Company 31 Dec 2017 Nmillion 31 Dec 2016 Nmillion 31 Dec 2017 Nmillion 31 Dec 2016 Nmillion 12,785 8,689 2,380 892 12,785 8,689 2,380 892 In accordance with Nigerian tax regime, dividends received by the company from its subsidiaries are exempted from tax if it is distributed to shareholders. The company has no taxable profit as a result of tax exempt dividends. The company has also not been subject to minimum tax, (in line with the provisions of the Nigerian tax laws Section 33 of Companies Income Tax Act CAP C21 LFN 2007 (as amended)) as it has more than 25% of imported capital. 33.1 Income tax Current year 12,785 8,689 2,380 892 Current tax 13,058 8,981 2,389 328 (273) (292) (9) 564 Deferred tax 12,785 8,689 2,380 892 Income tax recognised in other comprehensive income Taxation per statement of profit or loss 83 - - - Deferred tax 83 - - - Current tax Taxation per total comprehensive income - - - - 12,868 8,689 2,380 892
  114. 226 Annual report & financial statements Stanbic IBTC Annual group financial statements for the year ended 31 December 2017 Overview Business review Annual report & financial statements 227 Other information Notes to the consolidated and separate financial statements For the year ended 31 December 2017 33.2 Rate reconciliation Group 31 Dec 2017 % 34. Earnings per ordinary share Company 31 Dec 2016 % 31 Dec 2017 % 31 Dec 2016 % Group Rate reconciliation The total tax charge for the year as a percentage of profit before taxation Company 31 Dec 2017 Nmillion 31 Dec 2016 Nmillion 31 Dec 2017 Nmillion 31 Dec 2016 Nmillion 19 23 9 - Information technology levy 1 - - 1 Education tax 1 - - - The calculations of basic earnings per ordinary share has been based on the following profit attributable to ordinary shareholders and the weighted average number of ordinary shares outstanding: 21 23 9 1 Earnings attributable to ordinary shareholders (Nmillion) 46,195 24,642 25,165 609 10,049 10,000 10,049 10,000 460 246 250 6 The corporate tax charge for the year as a percentage of profit before tax Tax relating to prior years Net tax charge - - - - Weighted average number of ordinary shares in issue 21 23 9 1 Basic earnings per ordinary share (kobo) 0 - 31 - Diluted earnings per ordinary share Basic earnings per ordinary share equals diluted earnings per share as there are no potential dilutive ordinary shares in issue. The charge for the year has been reduced/(increased) as a consequence of: Non-taxable dividends WHT on Dividend not distributed & other taxes not at 30% (9) - (9) 29 Other Non-deductible expense (1) - - - Non-taxable interest 27 27 - - 9 - - - (16) - - - Other non-taxable income Tax losses not accounted for DTA Temporary difference not accounted for in deferred tax asset Other permanent differences Standard rate of tax 35. Statement of cash flows notes Group 35.1 (Increase)/decrease in assets 31 Dec 2017 Nmillion Company 31 Dec 2016 Nmillion 31 Dec 2017 Nmillion 31 Dec 2016 Nmillion - ( 11) - 5 ( 1) (10) (1) (5) Trading assets (134,624) 21,101 - - 30 Pledged assets (14,937) 58,267 - - 30 29 30 Temporary differences not accounted for in deferred tax asset concern temporary differences relating to mainly tax losses carried forward for which no deferred tax asset is recognised although the tax losses will continue to be available to offset future tax liability. The tax law permits the Company to continue to carry forward the tax losses indefinitely. Loans and advances (37,341) 2,225 - - Other assets (10,222) (15,479) 78 770 Restricted balance with the Central Bank (61,749) (5,507) - - (258,873) 60,607 78 770 198,159 26,496 - - 57,124 (18,776) - - 33.3 Income tax recognised in other comprehensive income The table below sets out the amount of income tax relating to each component within other comprehensive income: 35.2 Increase/(decrease) in deposits and other liabilities Deposit and current accounts Group Before tax Nmillion Tax (expense)/benefit Nmillion Net of tax Nmillion Other liabilities and provisions 31 December 2017 Net change in fair value of available-for-sale financial assets Realised fair value adjustments on available-for-sale financial assets transferred to profit or loss Related tax 4,294 - 4,294 (63) - (63) - 83 83 4231 - 4314 (333) (76) (409) 76 - 76 (257) (76) (333) 31 December 2016 Net change in fair value of available-for-sale financial assets Realised fair value adjustments on available-for-sale financial assets transferred to profit or loss Trading liabilities 57,990 50,563 1,157 (76) 313,273 58,283 1,157 (76) 401,348 301,351 7,545 1,768 (171,339) (109,590) - - 230,009 191,761 7,545 1,768 35.3 Cash and cash equivalents - Statement of cash flows Cash and cash equivalents (note 7) Less: restricted balance with the Central Bank of Nigeria Cash and cash equivalents at end of the year
  115. 228 Annual report & financial statements Stanbic IBTC Annual group financial statements for the year ended 31 December 2017 Overview Business review Annual report & financial statements 229 Other information Notes to the consolidated and separate financial statements For the year ended 31 December 2017 35.4 Effect of exchange rate changes on cash and cash equivalents Group 36. Related party transactions (continued) Company 31 Dec 2017 Nmillion 31 Dec 2016 Nmillion 31 Dec 2017 Nmillion 31 Dec 2016 Nmillion USD (1,068) 13,912 - - EUR 221 741 - - GBP 106 147 - - (4) 106 - - (745) 14,906 - - Currency Other currency Effect of exhange rate 36.3 Balances with Standard Bank of South Africa (“SBSA”) and other related parties In the normal course of business, current accounts are operated and placements of foreign currencies and trades between currencies are made with SBSA and other entities within the Standard Bank Group. The relevant balances are shown below: Group Movement in derivative assets Movement in derivative liabilities Unobservable valuation difference Note 31 Dec 2016 Nmillion 31 Dec 2017 Nmillion 31 Dec 2016 Nmillion 12 9,234 7,760 - - Amounts due from related parties Loans to banks 35.5 Net derivative assets Current account balances 3,265 (13,406) - - Derivatives assets (9,196) 11,405 - - Other assets 9,598 3,460 - - 3,667 1,459 - - 36. Related party transactions 36.2 Subsidiaries 36.1 Parent and ultimate controlling party The company is 53.07% owned by Stanbic Africa Holdings Limited, which is incorporated in the United Kingdom. The ultimate parent and controlling party of the group/ company is Standard Bank Group Limited, incorporated in South Africa. Stanbic IBTC Holdings PLC has 9 direct subsidiaries and 2 indirect subsidiaries as listed under note 36.2 below. Details of effective interest in subsidaries are disclosed below and also in Note 13. Stanbic IBTC Holdings PLC (“Holdco”) is related to other companies that are fellow subsidiaries of Standard Bank Group Limited. These include Standard Bank Isle of Man Limited, Standard Bank of South Africa (“SBSA”), Stanbic Bank Ghana Limited, CfC Stanbic Bank Kenya Limited, Stanbic Bank Botswana, Stanbic Bank Uganda Limited, and Standard Bank (Mauritius) Limited. ICBC Standard Bank PLC, which is an associate of Standard Bank Group Limited, is also a related party. % holding 7 19,641 15,151 7,545 1,768 10.6 973 265 - - 15 15 - 1,365 1,082 29,863 23,176 8,910 2,850 a. L oans to banks: These represent foreign currency placement with Standard Bank Group entities. Placements are usually denominated in US dollars and Rands. USD interest rate ranges between 0.12% - 3.0%, while Rand rate ranges between 5-8%. Tenor is usually short ranging between 1-6 months. The contract terms are based on normal market terms. Details per counterparty are as follows: Standard Bank of South Africa (see note i below) ICBC Standard Bank PLC Direct subsidiaries Stanbic IBTC Bank PLC 100% Stanbic IBTC Ventures Limited (“SIVL”) 100% Stanbic IBTC Capital Limited (“SICL”) 100% Stanbic IBTC Asset Managers Limited (“SIAML”) 100% Stanbic IBTC Pension Managers Limited (“SIPML”) 100% Stanbic IBTC Stockbrokers Limited (“SISL”) 100% Stanbic IBTC Trustees Limited (“SITL”) 100% Stanbic IBTC Insurance Brokers Limited (“SIIBL”) 100% Stanbic IBTC Bureau De Change Limited Stanbic IBTC Nominees Limited 8,839 7,396 - - 395 364 - - 9,234 7,760 - - (i) Included in the balance with SBSA is N7,027 million (2016: N5,413 million) representing amount received from SBSA under the Sale, Purchase Agreement for Finacle banking software. The fund is placed in an escrow account and is not available for use by the group on a day to day basis. Interest rate applicable on the balance as at year end was 7.32%. 88.24% Stanbic IBTC Investments Limited (“SIIL”) Indirect subsidiaries Company 31 Dec 2017 Nmillion b. Current account balances (Group): These represent trade related balances held with SBSA and are particularly used for letters of credit and other foreign trade transactions. The balances are repayable on demand and usually non interest bearing.  Current account balances (Company): These relate to demand deposit held with Stanbic IBTC Bank PLC. The deposit is non interest bearing and the terms are based on normal market terms. c. Derivatives: These represent fair value of currency swap and foreign exchange forward transactions with related parties. The transaction includes EUR/ USD swap, USD/ ZAR swap, GBP/USD swap and USD/ CNH swap with a combined notional principal of N52.69 billion (2016: N9.06 billion). The contracts maturity ranges from one month to 2 years. d.Other assets (Group): These represent reimbursable expenses recoverable from related parties. No specific impairments have been recognised in respect of the amount. Other assets (Company): These represent receivable from subsidiary entities in respect of reimbursable expenses and management service agreement. There exist technical and management service agreements between the company and its subsidiaries. Under the agreement, the company provides technical expertise and management skills to the subsidiaries in functional areas including marketing and branding, internal audit, human resources, financial control, and information technology. In return, subsidiaries pay fee based on percentage of their income to the company. The percentage ranges from 2% to 10% of profit before tax or commission income.
  116. 230 Annual report & financial statements Stanbic IBTC Annual group financial statements for the year ended 31 December 2017 Overview Business review Annual report & financial statements 231 Other information Notes to the consolidated and separate financial statements For the year ended 31 December 2017 36.3 Balances with Standard Bank of South Africa (“SBSA”) and other related parties (continued) Group Company Note 31 Dec 2017 Nmillion 31 Dec 2016 Nmillion 31 Dec 2017 Nmillion 31 Dec 2016 Nmillion 21 38,843 605 - - Amounts due to related parties Deposits and current accounts Derivatives liabilities Profit or loss impact of transactions with Standard Bank of South Africa and other related parties Group Note 31 Dec 2017 Nmillion Company 31 Dec 2016 Nmillion 31 Dec 2017 Nmillion 31 Dec 2016 Nmillion Interest income earned 31.1 436 184 - - Interest expense 31.2 (2,715) (2,224) - - 10.6 186 5,336 - - Trading revenue/(loss) 31.4 (4,143) (5,136) - - Trading liabilities 9.2 - - - - Fee and commission income 31.3 - - 1,491 835 Subordinated debt 23 13,306 12,251 - - Dividend income 31.5 - - 28,092 1,501 Other borrowings 22 40,406 50,524 - - Operating expense incurred 31.8 - - - - Other liabilities 26 17 34,335 227 86 92,758 103,051 227 86 j.Interest income earned: This represents interest earned on placement with group entities. The nature of transaction is presented in note 36.3(a) e. Deposits and current accounts: These represent demand deposits with related parties. Balances are denominated in NGN with no interest rates and are repayable on demand. Standard Bank of South Africa 38,840 602 - - ICBC Standard Bank PLC - repurchase agreements - - - - Standard Bank (Mauritius) Ltd - - - - Standard Bank De Angola SA 3 - - - Fellow subsidiaries with Stanbic IBTC group - 3 - - 38,843 605 - - f. Derivatives: These represent fair value of currency swap and forward transactions with entities within the Standard Bank Group. Details per counterparty are as follows: k.Interest expense: This represents interest expense booked in respect of deposits, subordinated debt, and other borrowing transactions with group entities. The nature of transaction is presented in note 36.3(e), (g), & (h). l.Trading revenue/(loss): This represents fair value gain/ (loss) on trading and derivative transactions with group entities. The nature of transaction is presented in note 36.3(c), (f) and (g). m.Fee and commission income: This represents fee income earned by the Company from technical and management service provided to subsidiaries. Details on the nature and terms of the agreement are provided in note 36.3 (d). (i) Key management compensation Standard Bank of South Africa ICBC London Plc 2 5,336 - - 184 - - - 186 5,336 - - Salaries and other short-term benefits Post-employment benefits The contract terms include currency swaps and forward exchange of EUR / USD, USD / ZAR, and USD / NGN. The contracts had a total notional principal of N39.25bn (Dec 2016: N39.0bn). Maturity dates of the contracts ranges from one month to three years. g.Subordinated debt: See note 23 for details of the transaction. h. Other borrowings: See note 22 for details of the transaction. i. Other liabilities (Group): These relate to amount owed to SBSA in respect of refinanced letter of credits. Other liabilities (Company): These represent reimbursable expenses payable to Stanbic IBTC Holdings Group. Value of share options and rights expensed n. Dividend income: represents dividend received from subsidiaries. 36.4 Balances with key management personnel Key management personnel includes: members of the Stanbic IBTC Holdings PLC board of directors and Stanbic IBTC Holdings PLC executive committee. The definition of key management includes close members of key management personnel and any entity over which key management exercise control, joint control or significant influence. Close family members are those family members who may influence, or be influenced by that person in their dealings with Stanbic IBTC Holdings PLC. They include the person’s domestic partner and children, the children of the person’s domestic partner, and dependents of the person or the person’s domestic partner. Group 31 Dec 2017 Nmillion 31 Dec 2016 Nmillion 1,089 474 50 25 154 16 1,294 515 (ii)Loans and deposit transactions with key management personnel Loans and advances Loans outstanding at the beginning of the year 214 330 Net movement during the year (23) (116) Loans outstanding at the end of the year 191 214 13 19 Net interest earned Loans include mortgage loans, instalment sale and finance leases and credit cards. Loans granted to employees and executive directors are granted at concessionary rates 14%-16% below the prime lending rate. No specific impairments have been recognised in respect of loans granted to key management at the reporting date (2016: nil). The mortgage loans and instalment sale and finance leases are secured by the underlying assets. All other loans are unsecured.
  117. 232 Annual report & financial statements Stanbic IBTC Annual group financial statements for the year ended 31 December 2017 Overview Business review Annual report & financial statements Other information Notes to the consolidated and separate financial statements For the year ended 31 December 2017 Group 31 Dec 2017 Nmillion 31 Dec 2016 Nmillion 247 373 30 (126) Deposit and current accounts Deposits outstanding at beginning of the year Net movement during the year Deposits outstanding at end of the year Net interest expense 277 247 1 3 Deposits include cheque, current and savings accounts. (iii) Investments Details of key management personnel’s investment transactions and balances with Stanbic IBTC Holdings PLC are set out below. Investment products Balance at the beginning of the year 63 63 Net movement during the year 288 - Balance at the end of the year 351 63 (iv) Shares and share options held Share and share options held 31 Dec 2017 Number 31 Dec 2016 Number 2,569,101 7,538,254 532,857 314,279 Aggregate number of share options issued to Stanbic IBTC key management personnel: Share options held (Stanbic IBTC Holdings PLC scheme) Share options held (ultimate parent company schemes) (v) Other transactions with key management personnel Directors interests in contracts One of the Bank’s branch located on the Ground Floor at Churchgate Towers, PC 30, Churchgate Street, Victoria Island, Lagos is owned by First Continental Properties Limited, and Mr. Ratan Mahtani is a Director on the Board of this Company. The lease was renewed in March 2015, is for a period of three years at a cost of N146 million. Stanbic IBTC Bank (a subsidiary of the Company) has a security equipment maintenance contract with Allegiance Technologies Limited whose director is a close family member of Mr Moses Adedoyin who is a former non-executive director of the Stanbic IBTC Bank (a subsidiary of the group). The contract covers provision of maintenance services for CCTV and electronic access control systems to the bank. Payment made within the year was N24.74mn. Loans to entities affiliated to directors and ex-directors/ Loans to employees The group has some exposures in terms of loans and advances to employees and to customers that are affiliated to its present and past directors. Loans granted to customers that are affiliated to directors were granted at commercial rates while those granted to executive directors and employees were granted at belowthe market rates. There were no nonperforming director related exposures as at balance sheet date (2016: Nil). Details of the exposures is presented in note 37. 36.5 Other related party transactions Shared service arrangement with subsidiaries Stanbic IBTC Holdings PLC provides some business support functions to some of its subsidiaries. The business support functions include internal audit, marketing and branding, internal control, legal and secretarial services. The costs incurred by Stanbic IBTC Holdings PLC in respect of the functions are shared between Stanbic IBTC Holdings PLC and subsidiaries in agreed ratio that reflect the rate of consumption by each entity. The costs shared are actual cost incurred with no mark-up included. Purchase of customer loans from Standard Bank of South Africa and Stanbic Bank, Kenya During the year, Stanbic IBTC Bank PLC bought some US dollar exposures from Standard Bank of South Africa (“SBSA”) and Stanbic Bank Kenya. The total value of the exposures bought from SBSA and Stanbic Bank, Kenya amounted to US$29.6 million and US$13.5 million respectively. The SBSA transaction was priced at a range of 99% to 100% of the loan value while the Stanbic Kenya transaction was priced at par value. These exposures have been derecognised in the financial statements of the group. Foreign currency revolving facility from Standard Bank of South Africa During 2017, Stanbic IBTC Bank PLC entered into a standby funding agreement with Standard Bank of South Africa (Isle of Man Branch) where Standard Bank of South Africa commits to provide up to US$50 million to Stanbic IBTC Bank PLC. The agreement is effective from 18 July 2017 and renewable annually. See page 120 under “Liquidity Contingency” for further details. Stanbic IBTC Bank PLC did not draw any fund under the agreement during the year. Staff health insurance scheme The group’s employees are covered under a comprehensive health insurance scheme provided by Total Health Trust Limited, a subsidiary of Liberty Holdings Limited. Liberty Holdings Limited is a subsidiary of Standard Bank Group Limited. Expenses incurred by the group in respect of the scheme for the year amounted to N311 million (2016: N305 million). 233
  118. 234 Annual report & financial statements Stanbic IBTC Annual group financial statements for the year ended 31 December 2017 Overview Business review Annual report & financial statements Other information Notes to the consolidated and separate financial statements For the year ended 31 December 2017 37. Director and staff related exposures The group has some exposures in terms of loans and advances to employees and to customers that are affiliated to its present and past directors. Loans granted to customers that are affiliated to directors are granted at commercial rates while those granted to executive directors and employees are granted at a below-the market rates. There were no non-performing director related exposures as at balance sheet date (2016: Nil). In cases where outstanding balance exceeds approved credit limit, no principal payment was due on the facility and the excess therefore relates to accrued interest. Schedule of directors and staff related credits Name of Company/Individual Relationship Name of related interest Facility type Currency Date granted Expiry date Approved credit limit N Outstanding plus accrued interest N Status Unilever Nigeria Plc Former Chairman (Holdco) Atedo Peterside Term Loan USD 10-Nov-17 Unilever Nigeria Plc Former Chairman (Holdco) Atedo Peterside Term Loan USD Unilever Nigeria Plc Former Chairman (Holdco) Atedo Peterside Term Loan USD Unilever Nigeria Plc Former Chairman (Holdco) Atedo Peterside Term Loan EUR Unilever Nigeria Plc Former Chairman (Holdco) Atedo Peterside Term Loan EUR Unilever Nigeria Plc Former Chairman (Holdco) Atedo Peterside Term Loan Unilever Nigeria Plc Former Chairman (Holdco) Atedo Peterside Term Loan Unilever Nigeria Plc Former Chairman (Holdco) Atedo Peterside Unilever Nigeria Plc Former Chairman (Holdco) Atedo Peterside Unilever Nigeria Plc Former Chairman (Holdco) Unilever Nigeria Plc Former Chairman (Holdco) Seplat Petroleum Development Company Plc Interest rate % Security nature 9-Jan-18 52,179,855 52,657,831 Performing 6 Unsecured 15-Nov-17 14-Jan-18 56,230,968 56,697,579 Performing 6 Unsecured 29-Nov-17 27-Feb-18 39,906,704 40,141,268 Performing 6 Unsecured 6-Dec-17 6-Mar-18 11,743,800 11,788,969 Performing 5 Unsecured 8-Dec-17 8-Mar-18 11,743,800 11,785,520 Performing 5 Unsecured USD 8-Dec-17 13-Feb-18 24,986,022 25,092,682 Performing 6 Unsecured EUR 12-Dec-17 12-Mar-18 11,717,549 11,758,928 Performing 6 Unsecured Term Loan EUR 12-Dec-17 12-Mar-18 36,319,563 36,447,814 Performing 6 Unsecured Term Loan EUR 15-Dec-17 15-Mar-18 8,153,205 8,173,855 Performing 5 Unsecured Atedo Peterside Term Loan USD 15-Dec-17 15-Mar-18 12,998,030 13,037,756 Performing 6 Unsecured Atedo Peterside Term Loan USD 28-Dec-17 26-Feb-18 5,282,002 5,312,730 Performing 6 Unsecured Chairman (Holdco) Basil Omiyi Term Loan USD 30-Sep-16 30-Sep-21 381,780,270 363,682,899 Performing 10 All Asset Debenture And Borrower Personal Guarantee Seplat Petroleum Development Company Plc Chairman (Holdco) Basil Omiyi Term Loan USD 13-May-15 31-Dec-18 7,451,100,000 3,281,130,021 Performing 8 All Asset Debenture And Borrower Personal Guarantee Seplat Petroleum Development Company Plc Chairman (Holdco) Basil Omiyi Term Loan USD 30-Jun-15 30-Sep-21 8,433,099,786 5,791,523,471 Performing 10 All Asset Debenture And Borrower Personal Guarantee Seplat Petroleum Development Company Plc Chairman (Holdco) Basil Omiyi Term Loan USD 29-Jun-17 30-Sep-21 6,165,749,770 6,021,435,156 Performing 10 All Asset Debenture And Borrower Personal Guarantee Seplat Petroleum Development Company Plc Chairman (Holdco) Basil Omiyi Term Loan USD 18-Dec-17 11-Jan-18 1,043,814,793 571,178,890 Performing 6 All Asset Debenture And Borrower Personal Guarantee Presco Plc Former Chairman (Holdco) Atedo Peterside Term Loan NGN 26-Jul-17 30-Jun-22 10,000,000 9,979,287 Performing 20 Negative Pledge Presco Plc Former Chairman (Holdco) Atedo Peterside Term Loan NGN 8-Nov-13 12-Nov-20 1,066,070,000 538,044,069 Performing 7 Negative Pledge Presco Plc Former Chairman (Holdco) Atedo Peterside Term Loan NGN 17-Jul-17 30-Jun-22 1,700,000,000 1,702,820,109 Performing 20 Negative Pledge Presco Plc Former Chairman (Holdco) Atedo Peterside Term Loan NGN 22-Jun-17 30-Jun-22 2,000,000,000 2,003,317,775 Performing 20 Negative Pledge Presco Plc Former Chairman (Holdco) Atedo Peterside Overdraft NGN 7-Dec-17 31-May-18 1,000,000,000 763,360,805 Performing 24 Negative Pledge Presco Plc Former Chairman (Holdco) Atedo Peterside Term Loan NGN 23-Nov-17 30-Jun-22 1,290,000,000 1,292,139,965 Performing 20 Negative Pledge Presco Plc Former Chairman (Holdco) Atedo Peterside Term Loan EUR 29-Dec-17 4-Feb-18 76,121,432 76,868,714 Performing 6 Negative Pledge Presco Plc Former Chairman (Holdco) Atedo Peterside Term Loan EUR 10-Nov-17 9-Jan-18 87,324,104 77,609,139 Performing 5 Negative Pledge Presco Plc Former Chairman (Holdco) Atedo Peterside Term Loan EUR 23-Oct-17 21-Jan-18 104,166,172 105,240,399 Performing 5 Negative Pledge Nigerian Breweries Plc Former Chairman (Holdco) Atedo Peterside Term Loan NGN 31-Jul-17 28-Jan-18 8,000,000,000 3,025,753,425 Performing 20 Negative Pledge Nigerian Breweries Plc Former Chairman (Holdco) Atedo Peterside Term Loan EUR 10-Oct-17 8-Jan-18 23,387,093 23,673,021 Performing 5 Negative Pledge Nigerian Breweries Plc Former Chairman (Holdco) Atedo Peterside Term Loan EUR 28-Dec-17 12-Jan-18 33,276,087 33,880,180 Performing 5 Negative Pledge Nigerian Breweries Plc Former Chairman (Holdco) Atedo Peterside Term Loan EUR 3-Nov-17 1-Feb-18 33,905,744 34,201,190 Performing 5 Negative Pledge Nigerian Breweries Plc Former Chairman (Holdco) Atedo Peterside Term Loan EUR 10-Oct-17 8-Jan-18 33,846,552 34,260,354 Performing 5 Negative Pledge Nigerian Breweries Plc Former Chairman (Holdco) Atedo Peterside Term Loan EUR 3-Nov-17 1-Feb-18 34,807,921 35,111,229 Performing 5 Negative Pledge Nigerian Breweries Plc Former Chairman (Holdco) Atedo Peterside Term Loan EUR 8-Nov-17 6-Feb-18 52,113,361 52,527,990 Performing 5 Negative Pledge Nigerian Breweries Plc Former Chairman (Holdco) Atedo Peterside Term Loan EUR 3-Nov-17 12-Feb-18 93,163,826 93,975,631 Performing 5 Negative Pledge 235
  119. 236 Annual report & financial statements Stanbic IBTC Annual group financial statements for the year ended 31 December 2017 Overview Business review Annual report & financial statements Other information Notes to the consolidated and separate financial statements For the year ended 31 December 2017 Schedule of directors and staff related credits (continued) Name of Company/Individual Relationship Name of related interest Facility type Currency Date granted Expiry date Approved credit limit N Outstanding plus accrued interest N Status Nigerian Breweries Plc Former Chairman (Holdco) Atedo Peterside Term Loan EUR 6-Dec-17 Nigerian Breweries Plc Former Chairman (Holdco) Atedo Peterside Term Loan EUR Nigerian Breweries Plc Former Chairman (Holdco) Atedo Peterside Term Loan EUR Nigerian Bottling Co Plc (Coca-Cola Hellenic Bottling Company) Former Chief Executive (Holdco) Olusola David-Borha Term Loan Nigerian Bottling Co Plc (Coca-Cola Hellenic Bottling Company) Former Chief Executive (Holdco) Olusola David-Borha Nigerian Bottling Co Plc (Coca-Cola Hellenic Bottling Company) Former Chief Executive (Holdco) Nigerian Bottling Co Plc (Coca-Cola Hellenic Bottling Company) Interest rate % Security nature 6-Mar-18 106,596,776 107,005,548 Performing 5 Negative Pledge 10-Oct-17 8-Jan-18 332,764,442 336,832,769 Performing 5 Negative Pledge 13-Dec-17 13-Mar-18 651,957,290 653,785,310 Performing 5 Negative Pledge EUR 13-Dec-17 13-Mar-18 7,327,461 7,348,007 Performing 5 Unsecured Term Loan USD 8-Nov-17 7-Jan-18 14,330,012 8,816,413 Performing 6 Unsecured Olusola David-Borha Term Loan EUR 5-Dec-17 2-Mar-18 13,878,433 13,933,700 Performing 5 Unsecured Former Chief Executive (Holdco) Olusola David-Borha Term Loan EUR 8-Dec-17 16-Jan-18 14,043,141 14,092,818 Performing 5 Unsecured Nigerian Bottling Co Plc (Coca-Cola Hellenic Bottling Company) Former Chief Executive (Holdco) Olusola David-Borha Term Loan EUR 29-Nov-17 27-Feb-18 23,995,835 24,133,525 Performing 6 Unsecured Nigerian Bottling Co Plc (Coca-Cola Hellenic Bottling Company) Former Chief Executive (Holdco) Olusola David-Borha Term Loan EUR 28-Nov-17 26-Feb-18 26,987,485 27,122,954 Performing 5 Unsecured Nigerian Bottling Co Plc (Coca-Cola Hellenic Bottling Company) Former Chief Executive (Holdco) Olusola David-Borha Term Loan EUR 29-Dec-17 11-Jan-18 45,508,902 45,529,055 Performing 5 Unsecured Nigerian Bottling Co Plc (Coca-Cola Hellenic Bottling Company) Former Chief Executive (Holdco) Olusola David-Borha Term Loan EUR 14-Dec-17 14-Jan-18 235,738,978 169,623,775 Performing 5 Unsecured Nigerian Bottling Co Plc (Coca-Cola Hellenic Bottling Company) Former Chief Executive (Holdco) Olusola David-Borha Term Loan USD 29-Dec-17 11-Jan-18 306,383,967 306,543,781 Performing 6 Unsecured MTN Nigeria Communications Ltd Ex-Non Executive Director Ahmed I Dasuki Term Loan NGN 31-Mar-14 29-Nov-19 7,500,000,000 3,339,206,320 Performing 21 Deed Of Security Over Shares And Shareholders Loans, Negative Pledge, Charge Over Security And Memoradum Of Deposit MTN Nigeria Communications Ltd Ex-Non Executive Director Ahmed I Dasuki Term Loan NGN 30-Nov-15 29-Nov-19 2,592,947,314 742,045,849 Performing 21 Deed Of Security Over Shares And Shareholders Loans, Negative Pledge, Charge Over Security And Memoradum Of Deposit MTN Nigeria Communications Ltd Ex-Non Executive Director Ahmed I Dasuki Term Loan USD 26-Oct-17 24-Jan-18 172,329,041 174,372,255 Performing 6 Deed Of Security Over Shares And Shareholders Loans, Negative Pledge, Charge Over Security And Memoradum Of Deposit MTN Nigeria Communications Ltd Ex-Non Executive Director Ahmed I Dasuki Term Loan USD 30-Nov-17 28-Feb-18 1,097,143,670 1,103,333,273 Performing 6 Deed Of Security Over Shares And Shareholders Loans, Negative Pledge, Charge Over Security And Memoradum Of Deposit Int Towers Limited Ex-Non Executive Director Ahmed I Dasuki Term Loan USD 23-Dec-14 13-Dec-21 3,912,655,400 3,963,781,679 Performing 6 Negative Pledge Golden Sugar Company Limited (A Subsidiary Of Flour Mills) Former Chairman (Holdco) Atedo Peterside Term Loan NGN 13-Jul-12 14-Jun-22 1,854,000,000 984,865,417 Performing 7 Debenture On Fixed And Floating Assets Golden Sugar Company Limited (A Subsidiary Of Flour Mills) Former Chairman (Holdco) Atedo Peterside Overdraft NGN 29-Dec-17 29-Jan-18 890,000,000 246,233 Performing - Debenture On Fixed And Floating Assets Aptics Nigeria Ltd (Subsidiary Of Novare Africa Fund Pcc) Non-Executive (Holdco) Fabian Ajogwu San Term Loan USD 27-Mar-14 29-Mar-19 4,305,080,000 3,024,880,635 Performing 10 All Asset Mortgage Debenture 237
  120. 238 Annual report & financial statements Stanbic IBTC Annual group financial statements for the year ended 31 December 2017 Overview Business review Annual report & financial statements Other information Notes to the consolidated and separate financial statements For the year ended 31 December 2017 Schedule of directors and staff related credits (continued) Expiry date Approved credit limit Nmillion Outstanding plus accrued interest Nmillion Status Name of Company/Individual Relationship Name of related interest Urshday Limited (Subsidiary Of Novare Africa Fund Pcc) Non-Executive (Holdco) Fabian Ajogwu San Term Loan NGN 28-Mar-17 30-Jun-22 450,000,000 503,897,612 Performing 23 All Asset Mortgage Debenture Urshday Limited (Subsidiary Of Novare Africa Fund Pcc) Non-Executive (Holdco) Fabian Ajogwu San Term Loan NGN 23-Dec-16 30-Jun-22 2,500,000,000 2,962,994,438 Performing 23 All Asset Mortgage Debenture Cadbury Nigeria Plc Former Chairman (Holdco) Atedo Peterside Term Loan NGN 21-Sep-17 20-Mar-18 575,587,398 610,974,196 Performing 22 Unsecured Cadbury Nigeria Plc Former Chairman (Holdco) Atedo Peterside Term Loan NGN 29-Sep-17 5-Jan-18 11,312,033 11,312,033 Performing 22 Unsecured Cadbury Nigeria Plc Former Chairman (Holdco) Atedo Peterside Term Loan NGN 5-Oct-17 11-Jan-18 1,692,334 1,692,334 Performing 22 Unsecured Cadbury Nigeria Plc Former Chairman (Holdco) Atedo Peterside Term Loan NGN 16-Oct-17 21-Jan-18 12,492,100 12,492,100 Performing 22 Unsecured Cadbury Nigeria Plc Former Chairman (Holdco) Atedo Peterside Overdraft NGN 16-Oct-17 31-May-18 2,400,000,000 1,902,046,630 Performing 22 Unsecured Cadbury Nigeria Plc Former Chairman (Holdco) Atedo Peterside Term Loan NGN 20-Oct-17 26-Jan-18 1,508,914 1,508,914 Performing 22 Unsecured Cadbury Nigeria Plc Former Chairman (Holdco) Atedo Peterside Term Loan NGN 20-Oct-17 18-Apr-18 1,040,937,565 1,086,738,818 Performing 22 Unsecured Cadbury Nigeria Plc Former Chairman (Holdco) Atedo Peterside Term Loan NGN 26-Oct-17 2-Jan-18 7,084,101 7,084,101 Performing 22 Unsecured Cadbury Nigeria Plc Former Chairman (Holdco) Atedo Peterside Term Loan NGN 3-Nov-17 8-Feb-18 20,657,472 20,657,472 Performing 22 Unsecured Cadbury Nigeria Plc Former Chairman (Holdco) Atedo Peterside Term Loan NGN 15-Nov-17 21-Feb-18 24,901,041 24,901,041 Performing 22 Unsecured Cadbury Nigeria Plc Former Chairman (Holdco) Atedo Peterside Term Loan NGN 22-Nov-17 23-Feb-18 1,045,366 1,045,366 Performing 22 Unsecured Cadbury Nigeria Plc Former Chairman (Holdco) Atedo Peterside Term Loan NGN 6-Dec-17 2-Mar-18 5,666,923 5,666,923 Performing 22 Unsecured Cadbury Nigeria Plc Former Chairman (Holdco) Atedo Peterside Term Loan NGN 7-Dec-17 9-Mar-18 20,838,962 20,838,962 Performing 22 Unsecured Cadbury Nigeria Plc Former Chairman (Holdco) Atedo Peterside Term Loan NGN 11-Dec-17 19-Mar-18 14,491,565 14,491,565 Performing 22 Unsecured Cadbury Nigeria Plc Former Chairman (Holdco) Atedo Peterside Term Loan NGN 18-Dec-17 22-Mar-18 7,663,854 7,663,854 Performing 22 Unsecured Cadbury Nigeria Plc Former Chairman (Holdco) Atedo Peterside Term Loan NGN 21-Dec-17 29-Mar-18 2,673,543 2,673,543 Performing 22 Unsecured ANAP Business Jets Limited (ANAP Holdings Limited) Former Chairman (Holdco) Atedo Peterside Card NGN 12-Jan-16 6-Jan-18 1,500,000 53 Performing 30 Shares ANAP Business Jets Limited (ANAP Holdings Limited) Former Chairman (Holdco) Atedo Peterside Card NGN 12-Jan-16 6-Jan-18 1,500,000 46,863 Performing 30 Shares ANAP Business Jets Limited (ANAP Holdings Limited) Former Chairman (Holdco) Atedo Peterside Card NGN 12-Jan-16 6-Jan-18 1,500,000 175,873 Performing 30 Shares ANAP Business Jets Limited (ANAP Holdings Limited) Former Chairman (Holdco) Atedo Peterside Card NGN 23-Nov-16 23-Nov-19 500,000 53 Performing 30 Shares ANAP Business Jets Limited (ANAP Holdings Limited) Former Chairman (Holdco) Atedo Peterside Card NGN 23-Nov-16 23-Nov-19 500,000 53 Performing 30 Shares ANAP Business Jets Limited (ANAP Holdings Limited) Former Chairman (Holdco) Atedo Peterside Card NGN 23-Nov-16 23-Nov-19 500,000 53 Performing 30 Shares ANAP Business Jets Limited (ANAP Holdings Limited) Former Chairman (Holdco) Atedo Peterside Card NGN 23-Nov-16 23-Nov-19 500,000 53 Performing 30 Shares ANAP Business Jets Limited (ANAP Holdings Limited) Former Chairman (Holdco) Atedo Peterside Card NGN 23-Nov-16 23-Nov-19 500,000 122,663 Performing 30 Shares ANAP Business Jets Limited (ANAP Holdings Limited) Former Chairman (Holdco) Atedo Peterside Card NGN 23-Nov-16 23-Nov-19 500,000 189,573 Performing 30 Shares ANAP Business Jets Limited (ANAP Holdings Limited) Former Chairman (Holdco) Atedo Peterside Card NGN 14-Dec-16 16-Jan-18 1,000,000 129,804 Performing 30 Shares ANAP Business Jets Limited (ANAP Holdings Limited) Former Chairman (Holdco) Atedo Peterside Card NGN 25-Jan-17 25-Jan-20 1,500,000 53 Performing 30 Shares Facility type Currency Date granted Interest rate % Security nature 239
  121. 240 Annual report & financial statements Stanbic IBTC Annual group financial statements for the year ended 31 December 2017 Overview Business review Annual report & financial statements 241 Other information Notes to the consolidated and separate financial statements For the year ended 31 December 2017 Schedule of directors and staff related credits (continued) Name of Company/Individual Relationship Name of related interest Facility type Currency Date granted Expiry date Guinness Nigeria Plc Non-Executive (Holdco) Ngozi Edozien Term Loan EUR 23-Nov-17 21-Feb-18 Guinness Nigeria Plc Non-Executive (Holdco) Ngozi Edozien Term Loan EUR 27-Nov-17 26-Jan-18 Guinness Nigeria Plc Non-Executive (Holdco) Ngozi Edozien Term Loan EUR 12-Dec-17 16-Jan-18 Guinness Nigeria Plc Non-Executive (Holdco) Ngozi Edozien Term Loan EUR 27-Nov-17 26-Jan-18 Guinness Nigeria Plc Non-Executive (Holdco) Ngozi Edozien Term Loan EUR 28-Dec-17 28-Mar-18 Adeniyi Oluwole Director (Bank) Adeniyi Oluwole Home Loans NGN 26-Mar-10 20-May-22 Atedo N.A. Peterside Former Chairman (Holdco) Atedo Peterside Card NGN 10-Feb-15 31-Oct-19 Dr AAE And Mrs JAO Sogunle Director (Bank) Demola Sogunle Term Loan NGN 28-Nov-17 20-Nov-22 Dr AAE And Mrs JAO Sogunle Director (Bank) Demola Sogunle Card USD 21-Nov-16 30-Nov-19 Various Staff Staff Various Staff Staff Loan NGN Total - Insider Related Credits Off balance sheet engagements Name of Company Name of related interest Relationship Facility type Currency Outstanding N’000 Status Golden Sugar Company Limited (A Subsidiary Of Flour Mills) Atedo Peterside Ex-Chairman (Holdco) Letter Of Credit USD 8,600 Performing Nigerian Breweries Group (Heineken Intl.) Atedo Peterside Ex-Chairman (Holdco) Letter Of Credit EUR 2,941 Performing Nigerian Bottling Co Plc (Coca-Cola Hellenic Bottling Company) Olusola DavidBorha Ex - Chief Executive (Holdco) Letter Of Credit EUR 22,709 Performing Nigerian Bottling Co Plc (Coca-Cola Hellenic Bottling Company) Olusola DavidBorha Ex - Chief Executive (Holdco) Bonds And Guarantees EUR 173,864 Performing Guinness Nigeria Plc Ngozi Edozien Non-Executive (Holdco) Letter Of Credit USD 6,601 Performing Flour Mills Of Nigeria Plc Atedo Peterside Ex-Chairman (Holdco) Letter Of Credit USD 27,435 Performing Pz Cussons Nigeria Plc Ngozi Edozien Non-Executive (Holdco) Letter Of Credit USD 2,828 Performing Unilever Nigeria Plc Atedo Peterside Ex-Chairman (Holdco) Letter Of Credit USD 7,572 Performing Mtn Nigeria Communications Ltd Ahmed I Dasuki Ex-Non Executive Director Letter Of Credit USD 7,324 Performing Presco Plc Atedo Peterside Ex-Chairman (Holdco) Letter Of Credit EUR 2,502 Performing 262,376 Outstanding plus accrued interest N Status Interest rate % Security nature 9,098,049 9,150,435 Performing 5 Unsecured 25,966,018 26,100,197 Performing 5 Unsecured 32,141,321 32,724,348 Performing 5 Unsecured 36,093,463 36,279,972 Performing 5 Unsecured 919,667,626 920,210,327 Performing 5 Unsecured 51,000,000 24,228,790 Performing 9 Legal Mortgage 20,000,000 490,628 Performing 30 Shares 60,000,000 59,477,258 Performing 18 Legal Mortgage Cash Approved credit limit N 8,279,000 1,386,077 Performing 30 9,191,683,238 5,869,343,455 Performing 11 80,951,138,441 55,430,844,445
  122. 242 Annual report & financial statements Stanbic IBTC Annual group financial statements for the year ended 31 December 2017 Overview Business review Annual report & financial statements Other information Notes to the consolidated and separate financial statements For the year ended 31 December 2017 38. Retirement benefit obligations The group operates a defined contribution pension scheme in line with the provisions of the Pension Reform Act 2014, with contributions based on the sum of employees’ basic salary, housing and transport allowances in the ratio 8% by the employee and 10% by the employer. The amount contributed by the group and remitted to the Pension Fund Administrators during the year was N1,085 million (2016: N1,888 million). The group’s contribution to this scheme is charged to the income statement in the period to which it relates. Contributions to the 40. Compliance with banking regulation scheme are managed by Stanbic IBTC Pension Managers Limited, and other appointed pension managers on behalf of the beneficiary staff in line with the provisions of the Pension Reform Act. Consequently, the group has no legal or constructive obligations to pay further contributions if the funds do not hold sufficient assets to meet the related obligations to employees. Details of transactions between the group and the group’s postemployment contribution plans (that is, the contributory pension scheme) are listed below: 31 Dec 2017 Nmillion Deposits held with the group Interest paid Value of asset under management Number of Stanbic IBTC Holdings shares held 31 Dec 2016 Nmillion 5,000 - 848 1,459 19,112 13,735 - - •CBN imposed a penalty of N10million for the following breaches: (a) Deployment of an offsite ATM without CBN approval – E-business; (b) The returns for ATM cards sent to CBN on FinA were different from the returns provided for the examiners review at the bank- E-business; (c) Not fully complying with Section 3.8 of the Prudential Guidelines as it relates to the information requirement of the Credit print out-Credit; (d) CBN declined the clearance of a staff member who had been blacklisted, the staff member was still in the employment of the Bank as at the time of the examination. • C  BN imposed a penalty of N4 million for the following breaches: (a) Late reporting of twenty-nine (29) suspicious transactions in a timely manner to the relevant authorities; (b) Untimely reporting of Currency Transaction Reports (“CTRs”) to the relevant authorities. a.Employees The average number of persons employed by the group during the period by category: Group Management •CBN imposed a penalty of N200,000 for the late rendition of its daily FinA returns for 01 February 2017, 03 February 2017, 13 February 2017, 13 June, 14 June, 30 June, 18 July and 05 September 2017. • CBN imposed a penalty of N2 million for contravening the CBN circular which is in respect to the repatriation of exports proceeds. 39. Employees and directors Executive directors The group was penalised by the Central Bank of Nigeria (“CBN”), the Securities and Exchange Commission (“SEC”) and The Nigerian Stock Exchange (“The NSE”) during the year as follows: 31 Dec 2017 Number 31 Dec 2016 Number 5 5 • CBN imposed a penalty of N4 million for consummating 518 505 2,508 2,416 41. Enterprise Risk Review 3,031 2,926 Kindly refer to page 65 of this annual report - - N1,000,001-N2,000,000 311 486 N2,000,001-N3,000,000 513 468 N3,000,001-N4,000,000 306 202 N4,000,001-N5,000,000 212 232 N5,000,001-N6,000,000 174 166 Non-management Below N1,000,001 N6,000,001 and above 1,515 1,372 3,031 2,926 a transaction of N16.35 billion without obtaining CBN approval and for contravening CBN circular. • T  he CBN imposed a fine of N2 million for the breach of section 4.1 of the revised Guidance Notes on Regulatory Capital Computation. • CBN imposed a penalty of N14 million for failure to notify the CBN within thirty days of the re-deployment of staff members of Stanbic IBTC to the Bank. •The NSE imposed a fine of N1,984,500 for failure to disclose material information to The Exchange as at when due. • SEC observed violations of the Section 135 (1) & (2) of the Investment and Securities Act 2007 and imposed a penalty of N100,000. •The SEC imposed a penalty of N480,000 for some observed violations of the section 323 (17) & (20) and 279 (2) (6) of the SEC Rules. •SEC imposed a penalty of N4,510,000 for the failure to obtain the approval of SEC to utilise the custodian function of the Bank and to hold securities owned by its clients in a nominee account and accept payment on behalf of its clients from individual issuers of securities in contravention of Rule 61 (2a) of SEC Rules and Regulations. • Pencom imposed a penalty of N500,000 for Incomplete Rendition of Risk Management and Analysis System (“RMAS”) Returns for the Month Ended 31 December 2016. 243
  123. 244 Annual report & financial statements Stanbic IBTC Annual group financial statements for the year ended 31 December 2017 Annexure A: Statement of value added Group 31 Dec 2017 Nmillion Gross earnings % Company 31 Dec 2016 Nmillion % 31 Dec 2017 Nmillion % 31 Dec 2016 Nmillion 212,434 156,425 29,922 2,528 (35,115) (24,998) (1,095) (97) % Interest paid: local foreign (4,209) (4,610) - - (39,324) (29,608) (1,095) (97) (45,176) (35,058) (692) (430) Administrative overhead: local foreign (780) (370) - - (45,956) (35,428) (692) (430) Provision for losses (25,577) (19,803) - - Value added 101,577 100 71,586 100 28,135 100 2,001 36,282 36 30,173 42 590 2 500 25 12,785 12 8,689 12 2,380 8 892 45 Distribution Employees & directors Salaries and benefits Government Taxation The future Asset replacement (depreciation) 4,129 4,204 - - Expansion (retained in the business) 48,381 28,520 25,165 609 Total 52,510 52 32,724 46 25,165 90 609 30 101,577 100 71,586 100 28,135 100 2,001 100 Overview Business review Annual report & financial statements Other information 245
  124. 246 Annual report & financial statements Stanbic IBTC Annual group financial statements for the year ended 31 December 2017 Overview Business review Annual report & financial statements 247 Other information Annexure B: Financial summary Statement of financial position Statement of profit or loss Group Assets Cash and cash equivalents Company Group 31 Dec 2017 Nmillion 31 Dec 2016 Nmillion 31 Dec 2015 Nmillion 31 Dec 2014 Nmillion 31 Dec 2013 Nmillion 31 Dec 2017 Nmillion 31 Dec 2016 Nmillion 31 Dec 2015 Nmillion 31 Dec 2014 Nmillion 31 Dec 2013 Nmillion 401,348 301,351 211,481 143,171 120,312 7,545 1,768 8 784 2,722 31 Dec 2017 Nmillion Net operating income 85,232 28,827 2,431 10,982 14,320 9,137 (58,472) (1,282) (930) (1,083) (1,422) (921) 61,166 37,209 23,651 43,527 26,760 27,545 1,501 9,899 12,898 8,216 (12,785) (8,689) (4,760) (9,068) (4,547) (2,380) (892) (28) 238 116 48,381 28,520 18,891 34,459 22,213 25,165 609 9,871 13,136 8,332 2,186 3,878 3,393 2,772 2,163 - - - - - Equity holders of the parent 46,195 24,642 15,498 31,687 20,050 25,165 609 9,871 13,136 8,332 Profit for the period 48,381 28,520 18,891 34,459 22,213 25,165 609 9,871 13,136 8,332 460k 246k 155k 317k 200k 250k 6k 99k 131k 83k - - - Trading assets 151,479 16,855 37,956 96,345 40,711 - - - - - Profit before tax Pledged assets 43,240 28,303 86,570 34,172 24,733 - - - - - Taxation 316,641 252,823 162,695 204,502 139,304 1,625 920 658 58 - Profit after taxation 114 112 262 - - - - - - - Loans and advances to banks 9,623 15,264 26,782 8,814 94,180 - - - - - Profit attributable to: Loans and advances to customers 372,088 352,965 353,513 398,604 289,747 - - - - - Non-controlling interests Deferred tax assets 8,901 8,638 8,342 5,737 6,059 - - 555 484 118 Equity Investment in group companies - - - - - 85,539 85,539 69,191 69,151 68,951 49,442 39,220 23,741 21,710 19,891 2,148 2,226 2,996 2,541 1,038 605 713 - - - - - - - - 21,883 22,962 25,311 24,004 24,988 517 2,404 2,494 2,653 2,572 937,564 941,919 761,451 97,374 92,857 75,902 75,671 75,401 5,025 5,000 5,000 5,000 5,000 5,025 5,000 5,000 5,000 5,000 177,035 132,102 118,726 111,021 92,888 87,629 67,970 67,360 67,990 66,846 3,158 3,696 5,241 4,223 3,321 - - - - - 2,592 11,788 383 2,677 1,085 - - - - - 62,449 5,325 24,101 85,283 66,960 - - - - - Equity and liabilities Share capital Reserves Non-controlling interest Derivative liabilities Trading liabilities Deposits from banks 61,721 53,766 95,446 59,121 51,686 - - - - - 753,642 560,969 493,513 494,935 416,352 - - - - - Other borrowings 74,892 96,037 81,107 70,151 48,764 - 16,404 - - - Subordinated debt 29,046 27,964 23,699 22,973 6,399 - - - - - Current tax liabilities 12,240 9,508 8,727 9,847 7,681 157 68 60 129 2 Deposits from customers Deferred tax liabilities Provisions & other liabilities Acceptances and guarantees 120 47 120 111 256 - 9 204,496 147,321 81,501 76,577 61,059 4,563 3,406 3,482 2,552 3,553 1,386,416 1,053,523 937,564 941,919 761,451 97,374 92,857 75,902 75,671 75,401 153,377 54,143 49,973 65,563 44,615 - - - - - 31 Dec 2013 Nmillion (61,118) - 1,053,523 31 Dec 2014 Nmillion 104,645 - 1,386,416 31 Dec 2015 Nmillion 100,648 1,526 Property and equipment 31 Dec 2016 Nmillion (76,997) 4,860 Intangible assets 31 Dec 2017 Nmillion 126,053 911 Other assets 31 Dec 2013 Nmillion (88,844) 14,317 Asset held on sale 31 Dec 2014 Nmillion 172,769 11,052 Financial investments Company 31 Dec 2015 Nmillion (111,603) Operating expenses and provisions Derivative assets 31 Dec 2016 Nmillion Statistical information Earnings per share (EPS) - basic
  125. 249 The skills to in the face of challenges Change is inevitable , and often looked at as a negative, when Stanbic IBTC will always see it as an opportunity. It is during testing times that we can show true leadership, discover new solutions and chart fresh courses of action. It is the problems that we face that produce better practices and directions for our customers. This is what drives us at Stanbic IBTC Other information 250 254 258 Management team Branch network Contact information
  126. 250 Other information Stanbic IBTC Annual group financial statements for the year ended 31 December 2017 Overview Business review Annual report & financial statements Other information Management team* Duke Abanum Jumoke Adejumobi Adeniyi Adeleye Shuaib Audu Yomi Balogun Kobby Bentsi-Enchill Head, Operational Risk Head, Financial Institutions Coverage Executive Director, Stanbic IBTC Capital Limited Chief Executive, Stanbic IBTC Investments Limited Head, Global Markets Sales Executive Director, Stanbic IBTC Capital Limited Emmanuel Aihevba Adewale Aina Pat Ajewole Funso Akere Sola Carrena Bunmi Dayo-Olagunju Olu Delano Steve Elusope Head, Lagos Island Zone Head, Human Capital Service Chief Executive, Stanbic IBTC Bureau de Change Limited Chief Executive, Stanbic IBTC Capital Limited Head, Financial Advisory Chief Executive, Stanbic IBTC Asset Management Limited Head, Client Coverage Executive Director, Stanbic IBTC Pension Managers Limited Kunle Akinbowale Oyinda Akinyemi Inwang Akpan Abiodun Gbadamosi Anslem Igbo Head, Personal & Business Banking Operations Head, Equity Capital Markets Head, Transactional Products & Services Head, PBB & IT Audit Chief Executive, Stanbic IBTC Insurance Brokers Limited *Arranged alphabetically 251
  127. 252 Other information Stanbic IBTC Annual group financial statements for the year ended 31 December 2017 Overview Business review Annual report & financial statements Other information Management team* Busola Jejelowo Iretiola Lawal Babatunde Majiyagbe Matthew Onifade Benjamin Osho Remy Osuagwu Head, Wealth & Investment Coverage Head, Personal & Business Banking Products Executive Director, Stanbic IBTC Nominees Limited Head, South West Zone Head, Personal & Business Banking Credit Head, Business Banking Binta Max-Gbinije Babalola Obilana Titi Ogungbesan Nkolika Okoli Olorundare Otitoju Adebanjo Otukomaya Ladi Oyefuga Akeem Oyewale Chief Executive, Stanbic IBTC Trustees Limited Executive Director, Stanbic IBTC Asset Management Limited Chief Executive, Stanbic IBTC Stockbrokers Limited Head, Personal Banking Head, Global Markets Trading Head, Lagos Mainland Zone Head, Market Risk Chief Executive, Stanbic IBTC Nominees Limited Bunmi Olarinoye Dolu Olugbenjo Bayo Olujobi Temitope Popoola Oladele Sotubo Joyce Uredi Executive Director, Stanbic IBTC Stockbrokers Limited Head, Diversified Lending and Leverage Finance Head, Corporate & Investment Banking Finance Head, Corporate & Investment Banking Human Capital Executive Director, Stanbic IBTC Pension Managers Limited Head, Customer Channels *Arranged alphabetically 253
  128. 254 Other information Stanbic IBTC Annual group financial statements for the year ended 31 December 2017 Overview Business review Annual report & financial statements Other information Stanbic IBTC Bank Branch network Lagos Island region 1. Idejo Plot 1712, Adeola Odeku, Victoria Island, Lagos 2. Awolowo Road Branch 85, Awolowo Road, Ikoyi Lagos 3. Idumagbo Branch 61a, Idumagbo Avenue, Lagos Island 4. Broad Street Branch 143/145, Broad Street, Lagos 5. Oke Arin Mini Branch 120, Alakoro Street, Marina, Lagos Island, Lagos 6. Oyingbo Mini Branch 7, Coates Street, Oyingbo, Lagos 7. Herbert Macaulay Branch 220, Herbert Macaulay Way, Yaba 8. Head Office Branch IBTC Place, Walter Carrington Crescent, Victoria Island, Lagos 9. Adetokunbo Ademola Branch 76, Adetokunbo Ademola Street, Victoria Island, Lagos 10. Ajah Mini Branch 4a, Megawaves Plaza, Addo Road, Ajah Lagos 11. Ajose Adeogun Branch Plot 290e, Ajose Adeogun Street, Victoria Island, Lagos 12. Ikota Branch 194 Road 5, Ikota Shopping Complex, VGC, Lagos 13. Lekki 1 Branch 1, Bis Way, Off Lekki-Epe Expressway, Lekki, Lagos 14. Lekki 2 Branch G & M Plaza, Km 18, Lekki–Epe Express Way, Igbo-Efon, Lekki, Lagos Lagos Mainland region 15. Lekki Admiralty Branch 1, Babatunde Masha Street, Lekki Admiralty Way, Lekki Phase 1, Lagos 16. Afribank Street Branch Churchgate Building: Pc 30, Churchgate Street, Victoria Island, Lagos 17. Lagos Service Centre Plot 1321, Karimu Kotun Street, Victoria Island, Lagos 18. Igando Branch 51, Lasu-Iba Expressway, Igando, Lagos. 19. Alaba Branch H48/49, Alaba Intl Mkt, Ojo – Lagos 20. Balogun Business Association Branch Plaza 3a, Portion C, Opposite Sokoto Plaza BBA, Trade Fair Complex 21. Festac Branch Gacoun Plaza, 23 Road, Opp. K’ Close, Festac Town, Lagos 22. Nigerian Ports Authority Branch Accounts Block, Nig. Ports Authority, Wharf Road, Apapa, Lagos 23. Tincan Island Branch 8, Apapa Oshodi Express Way, Coconut B/Stop, Apapa, Lagos. 24. Trade Fair Branch Hall 2, Olusegun Obasanjo Hall, Aspamda Plaza, Tradefair Lagos 25. Warehouse Road, Apapa Branch 10/12, Warehouse Road, Apapa, Lagos 26. Yinka Folawiyo Plaza, Apapa Branch 38, Warehouse Road, Apapa, Lagos 27. Satellite Town Plot 389, Old Ojo Road, Abule Ado, Satellite Town, Lagos 1. Oba Akran 20, Oba Akran Avenue, Ikeja 2. Ogba 32, Ijaye Road, Ogba 3. Egbeda 38, Shasha Road, Egba 4. Agege 75, Old Abeokuta Road 5. Oko Oba 327, Old Abeokuta Road 6. Ejigbo 91, Isolo Ikotun Road 7. Ikotun 45, Idimu Road, Ikotun, Lagos State 8. Abule Egba 633, Lagos Abeokuta Road 9. Ipaja 142, Ipaja Road 10. Oshodi Plot 14, Oshodi Apapa Express way 11. Alausa IPML Avenue, Alausa, Ikeja 12. Okota 1, Alhaji Adenekan Street 13. Surulere 84, Adeniran Ogunsanya 14. Ojuwoye 214, Agege Motor Road, Ojuwoye 15. Lawanson 35, Lawanson Road, Surulere 16. Tejuosho 77, Ojuelegba Road 17. Orile Coker 104, Market Street, Odunade Market North Central region 18. Akoka 100, St. Finbarrs Road, Akoka 19. Aguda 1/3, Enitan Street, Aguda 20. Shomolu 22, Market Street, Shomolu 21. Ladipo Mushin 103, Ladipo Street, Mushin, Lagos 22. Gbagada 15, Diya Street, Ifako, Gbagada 23. Allen Avenue 31, Allen Avenue, Ikeja 24. NAHCO NAHCO complex, Off MMIA 25. Toyin Street 36A, Toyin Street Ikeja 26. Opebi 43, Opebi Road, Ikeja 27. Ikorodu Town 108, Lagos Road, Ikorodu 28. Ketu 463, Ikorodu Road 29. Maryland 10, Mobolaji Bank Anthony Way, Mary land 30. Osolo Way 61, Osolo Way 31. Ojodu 102, Isheri Road, Ojodu 32. Ogudu 54, Ogudu Road, Ogudu 33. Ikeja City Mall Shop L55, Ikeja City Mall 1. Grand Tower Mall Branch Shop 9/10, Apo Mall, Abuja 2. Utako Branch 37, Ekukinam Street, Opp. ABC Transport, Utako, Abuja 3. Maitama Branch Plot 2777, Aguiyi Ironsi Way, Maitama Abuja 4. Abuja Service Centre 75, Ralph Sodeinde Street, CBD, Abuja 5. Abuja NNPC Hebert Macaulay Way, Central Business District, Abuja 6. Wuse II, Abuja Plot 1387, Aminu Kano Crescent, Wuse 11, Abuja 7. Nigeria Immigration Service Nigeria Immigrations H/Qtrs, Sauka Air Port Rd, Abuja 8. Ahmadu Bello Centre 1049 Ahmadu Bello Way Garki Abuja 9. Deidei Shop W-9, Dei-Dei International Building Material Market, Dei-Dei, Abuja 10. Abuja Garki Area 3 Infinity House 11, Kaura Namoda Street, Off Faskari Crescent, Area 3 11. Garki Model Plot 2, Ladoke Akintola Boulevard, Garki II, Abuja 12. Gwagwalada Plot 415, Teaching Hospital Road, Gwagwalada, Abuja 13. Kubwa Plot 71/72, Gado Nasko Way, Kubwa, Abuja 14. Suleja Opposite Division ‘A’ Police Station, Minna Road, Suleja, Niger State 15. Lokoja Opp. Kogi State Specialist Hospital, Lokoja 16. Bauchi 16, Yandoka Road, Bauchi, Bauchi State 17. Jos 34, Ahmadu Bello Way, Jos 18. Nyanya Bomma Plaza, Sharp Corner, Opposite The Young Shall Grow Park, Mararaba, Abuja-Keffi Road, Nasarawa State. 19. Minna Beside Central Mosque, Bosso Road, Minna 20. Kontagora Opposite Hamson Nig Ltd, Lagos Kaduna Road, Kontagora, Niger State 21. Mararaba A1, Kwad Mall, Adjacent Mama Cass Eatery, Abuja -Keffi Road, Mararaba, Nasarawa State 22. Makurdi 5, Ogiri Oko Road, Makurdi 23. Lafia Plot 1, Opposite Fatima House, Jos Road, Lafia. 24. Jalingo 22, Hammaruwa Way, Jalingo 25. Gboko 37, Captain Downs Street, Adekaa, Gboko 26. Otukpo Enugu - Makurdi Road, Otukpo 27. Yola 1, Mohammed Mustapha Way 28. Maiduguri 35, Sir Kashim Ibrahim Way, Maiduguri 29. Damaturu Plot 591a, Njiwaji Layout, Damaturu, Yobe State. 30. Gombe No 22, Biu Road Gombe 31. Mautech Modibbo Adama University of Technology Yola 255
  129. 256 Other information Stanbic IBTC Annual group financial statements for the year ended 31 December 2017 Overview Business review Annual report & financial statements Other information Stanbic IBTC Bank Branch network North West region 1. Kaduna Main 14, Ahmadu Bello Way, Kaduna 2. Kaduna Central 1, Bayajidda Road 3. Kachia Road A7, Kachia Road 4. Kaduna Nnpc Km 16, Kachia Road, Kaduna. 5. Kasuwa Barci Ah6, Gamagira Road, T/Wada Kaduna 6. Kawo Mando Jaas Plaza, Zaria Road, Kawo, Kaduna 7. Sabon Tasha 32, Kachia Road, Sabon Tasha Kaduna 8. Samaru 2, Sokoto Road, Samaru, Zaria, Kaduna 9. Sabon Gari Zaria 7a, Aminu Road, Sabon Gari, Zaria 10. Zaria City 90, Angwan Mallam Sule Bakin Kasuwa, Zaria City 11. Katsina 175, Kurfi House, IBB Way, Katsina 12. Gusau 68, Ahmadu Bello Way 13. Sokoto 68, Maiduguri Road 14. Kebbi Branch 68, Ahmadu Bello Way, Birnin Kebbi 15. Zaria Main 9, Kaduna Road, PZ Zaria 16. Bayero University Gwarzo Road, Bayero University New Campus, Kano 17. Sabon Gari Kano 1, Galadima Road Sabon Gari-Kano, Kano 18. Dutse 14/15 Sani Abacha Way, Dutse 19. Kantin Kwari No 71a Fagge Takudu Kantin Kwari 20. Bello Road 31/32 Bello Road 21. Kano Service Centre 3 Bank Road 22. Shauchi Umma Bayero House Shauchi 23. Hotoro Maiduguri Road Hotoro South South region South East region South West region 1. Trans Amadi 2 1. Ariaria 1. Oyo 87, Trans Amadi Industrial Layout 2. Trans-Amadi 1 7, Trans-Amadi Road,Port Harcourt 3. Port Harcourt Service Center 133a Olu Obasanjo Road, Port Harcourt. 4. Eleme Branch Iepcl Eleme, Port Harcourt, Rivers State 5. Aba Road 171, Aba Road, Port Harcourt 6. Port Harcourt Airport Phc Int’l Airport, Omagwa 7. Artillery 234, Aba Road, Port Harcourt 8. Yenagoa 623, Melford Okilo Road, Yenagoa 9. Oyigbo Kilometre 37, Aba-Port Harcourt Express Road, Oyigbo, Port Harcourt, Rivers State 10. Calabar 71, Marian Road, Calabar, Cross River State 11. Uyo 65, Nwaniba Road, Uyo 12. Eket Branch 2, Grace Bill Road, Eket Town 13. Whatt Market 45, Bedwell Street, Calabar 14. Airport Road Warri 23, Ogunu Road, Warri 15. Warri Main 98, Effurun/Sapele Road, Effurun, Delta State 16. Olu Obasanjo 58, Olu Obasanjo Road, Port Harcourt 189, Faulks Road, Aba 2. Umuahia 2, Market Road, By Library Avenue, Umuahia 3. Aba Main 7, Factory Road, Aba, Abia State 4. Sapele Road 131a, Sapele Road, Benin City, Edo State 5. New Benin 174, Upper Mission Road, By Constain Junction, Benin City 6. Benin Main 71, Akpapava Street, Benin 7. Uniben Bank Road, University of Benin, Ugbowo Campus 8. Awka 49, Zik Avenue Awka 9. Onitsha Main 13, Bright Street, Main Market, Onitsha 10. Onitsha Head Bridge 56, Port Harcourt Road, Onitsha 11. Enugu 1 Garden Avenue, Besides EEDC Regional Office, Okpara Avenue, Enugu 12. Abakaliki 10, Old Ogoja Road, Abakaliki 13. Polomall Shop 56, Polo Park Mall, Abakaliki Road, Enugu 14. Owerri 81, Okigwe Road, Owerri, Imo State. 15. Aba Market 7, Duru Street, Off Cemetery Road, Aba 16. A saba 206, Nnebisi Road, Asaba Oyo/Ogbomoso Road, Oyo Town 2. Agodi Gate Inaolaji Business Complex, Agodi Gate, Ibadan 3. UI Road UI Road, Sayora Building, Opposite UI 2nd Gate, Ibadan 4. Ibadan Main UCH-Secretariat Road, By Total Garden, Ibadan 5. Iwo Road Baloon House, Iwo Road, Ibadan 6. Iwo Town 147, Ejigbo Road, Araromi - Sabo, Iwo Town 7. Iyana Church Ibitola Plaza, Iyana Church, Ibadan, Oyo State 8. Saki Beside Saki West Local Government Secretariat, Sango - Ajegunle Road Saki, Oyo State 9. New Gbagi Bashmus and Ayimur Plaza, Opp Texaco Station, Gbagi, Ibadan 10. Aleshinloye Eleyele Road, Nigerian Army Housing Scheme, Ibadan 11. Mokola 18b, Oyo Road, Mokola, Ibadan 12. Gbagi Aje House Annexe, Opposite Obisesan Hall, Lebanon Street, Old Gbagi, Ibadan 13. Abeokuta 2a, Lantoro Road, Isale-Ake, Abeokuta 14. Agbara Agbara Estate Shopping Mall, Agbara Industrial Estate, Agbara 15. Challenge 127, Orita Challenge, Ibadan, Oyo State 16. Sango Otta 2 Km 38, Abeokuta Expressway, Sango Otta, Ogun State 17. Shagamu 167, Akarigbo Road, Shagamu, Ogun State 18. Sapon 2a, Lantoro Road, Isale-Ake, Abeokuta 19. Ring Road 1b, Moshood Abiola Road, Ring Road, Ibadan, Oyo State 20. Sango Otta 1 101, Idi Iroko Otta Road, Sango Otta, Ogun State 21. Ijebu Ode 58, Ibadan Road, Ijebu-Ode, Ogun 22. Ife 5, Obalufon-Lagere Road, Lagere Junction, Lle-lfe 23. Ilesha 1a198, Osogbo Road, Ishokun, Ilesha, Osun State 24. Ilorin 11, Unity Road (Amosu House) 25. Ojatuntun A171, Abdulazeez Attah Road, Surulere, Ilorin 26. Kwara Mall 11, Unity Road, Ilorin, Kwara State 27. Ogbomoso Ilorin-Ogbomoso Road, Sabo Area, Ogbomoso Town 28. Ado Ekiti Ado-lyin Express Road, Ado Ekiti, Ekiti State 29. Ondo 62, Yaba Road, Ondo Town, Ondo State 30. Akure GNI Building, Off Old Ado/Owo Road, Akure 31. Oshogbo 201, Gbogan – Ibadan Road, Osogbo, Osun State 257
  130. 258 Other information Stanbic IBTC Annual group financial statements for the year ended 31 December 2017 Contact information Idris Toriola Adekunle Adedeji Chidi Okezie Head , Investor Relations & Strategy Chief Financial Officer Company Secretary T: +234 1 4228501 E: idris.toriola@stanbicibtc.com T: T: +234 1 4228767 E: kunle.adedeji@stanbicibtc.com T: +234 1 4228695 E: chidi.okezie@stanbicibtc.com Registered address I.B.T.C. Place Walter Carrington Crescent P.O. Box 71707 Victoria Island, Lagos Nigeria E: InvestorRelationsNigeria@stanbicibtc.com
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