ENQUIRIES:
NMBZ HOLDINGS LIMITED
Gerald Gore, Chief Executive Officer, NMBZ Holdings Limited
Margret Chipunza, Chief Finance Officer, NMBZ Holdings Limited
geraldg@nmbz.co.zw
margretc@nmbz.co.zw
Website:
http://www.nmbz.co.zw
Email:
enquiries@nmbz.co.zw
Telephone: +263 8688003347
CONDENSED AUDITED
CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEAR ENDED 31 DECEMBER 2022
FINANCIAL SUMMARY
Inflation Adjusted
Historical Cost
2022
ZWL ’000
2021
ZWL ’000
2022
ZWL ’000
2021
ZWL ’000
Operating profit before impairment charge and loss on net
monetary position
22 927 602
11 860 115
30 169 029
4 102 729
Total comprehensive income
12 539 883
7 729 056
31 302 191
3 790 756
Basic earnings per share (cents)
Diluted earnings per share (cents)
3 014
2 939
1 592
1 574
6 396
6 237
728
720
Deposits from customers
53 215 217
35 840 230
53 215 217
10 425 947
Total gross loans and advances
46 285 257
32 948 046
46 285 257
9 584 609
Total shareholders’ funds and shareholders’ liabilities
43 589 169
31 026 146
39 155 091
7 297 154
CHAIRMAN’S STATEMENT
INTRODUCTION
The year 2022 started with the relaxation of Covid 19 restrictions and the opening up of borders and air spaces, resulting in steady recovery of
the local economy. Despite the drought experienced in 2021, the local economy was estimated to grow by 4% in 2022 on the back of improved
performance in agriculture and mining sectors. The global economy experienced sharper than expected slowdown as inflation, tightening
financial conditions in most developed regions, the Russia Ukraine Conflict and the lingering Covid-19 effects weighed heavily on the outlook.
Operating Environment
The economy continued to show signs of resilience and recovery in spite of the challenges experienced especially during the first half of the
year which saw month-on-month inflation reach a peak of 30.7%. However, timely intervention by the authorities through the mid-term Monetary
Policy Statement in July, resulted in an improved macroeconomic environment. The measures included the hiking of interest rates to curtail
speculative borrowing and issuance of gold coins as an investment option which both resulted in inflation dissipating as well as general stability
in prices and the exchange rate. Following the implementation of various measures, month-on-month inflation significantly dropped to 2.4% and
exchange rate premiums averaged 20% as of December 2022
Notwithstanding the economic headwinds, foreign currency receipts reached a record high of USD 11.6 billion as of December 2022 compared
to USD 9.8 billion recorded the previous year. Exports accounted for 64% of foreign currency receipts with international remittances contributing
25%, loans 9%, income receipts 1% and foreign direct investments (FDI) 1%.
CHIEF EXECUTIVE OFFICER’S STATEMENT
INTRODUCTION
In my first year in office, we rolled out a bold growth strategy with Group diversification taking centre stage. The Bank, which was the only
functional subsidiary, is now complemented by other operations namely a Property Development Company and Microfinance Division. A
broadened group structure, gives us a vantage position to participate in multiple sectors and maximize on pockets of opportunities that exist in
the different spaces. The Bank continued to pursue a digital bank model with a number of innovation and enhancements on our platforms. We
complimented our Digital thrust by launching an Agency Network after partnering with Zimpost. This means NMB Bank services can now be
accessed in over 100 of Zimpost branches. The bank’s growth trajectory was recognised in the market with NMB being awarded the Overall
Best Performing Bank in the year 2022.
During the first half of the year, the macro-economic environment was characterized by increasing inflation and a deteriorating exchange rate.
These were however reigned in after the authorities put in place a raft of measures to contain money supply and curb speculative behavior in
the economy. Consequently, year-on-year inflation closed the year on 243.7%, while month-on-month inflation averaged 2.4%. The exchange
rate ended the year at USD /ZWL 684.3339.
PERFORMANCE REVIEW
The year 2022 presented great opportunities which the Group took advantage of to deliver strong operational and financial performance. The
Group achieved total comprehensive income of ZWL 12.5 billion, which was a 62% increase compared to ZWL 7.7 billion for the previous year.
There continues to be pressure on operating costs which have increased by 57% from ZWL 12.1 billion for the year ended 31 December 2021
to ZWL 19 billion for the current year.
The banking subsidiary had two new off shore funding opportunities in which it signed two credit lines during the year, European Investment
Bank EUR12.5 million and Trade and Development Bank line of USD 10 million. This saw the Bank’s loan book increasing by 40% to end the
year at ZWL 46.3 billion compared to ZWL 42.5 billion in 2021.
BUSINESS REVIEW
The banking subsidiary continued to make inroads into new markets and cement relationships with existing clients through the following main
business units.
Digital Banking
NMB Bank Limited continues to focus on extending its leadership in technology and innovation, building trusted relationships, and developing
differentiated products and services to create more value for customers. Our entire customer journey is fully digitized, from account opening,
transacting and even cash operations.
Our digitized banking process have enabled us to offer unparalleled convenience to our customers. In 2022, we handled transactions worth
over ZWL 400 billion, compared to ZWL 170 billion the previous year. Our mobile banking platform saw 216% growth in volumes from 4.6
million transactions in 2021 to 14.7 million transactions in 2022. The Digital banking division continues to be seized with developing solutions to
address customer pain points. The division contributed gross income amounting to ZWL 7.3 billion in 2022.
Global Economic Developments
Consumer Banking
The global economy is projected to grow by 2.3% in 2023, compared to 3.3% in 2022, weighed down by elevated inflationary pressures,
high cost of capital, ongoing geopolitical tensions in Europe coupled with the resurgence of the Covid 19 pandemic in Asia. The slowdown in
economic activities in Asia and Europe will have profound implications for emerging and developing economies.
Through the Consumer Banking and Value-Added Services (CBVAS) unit, the Bank continues to focus on delighting and serving our customers
by providing simple, convenient and affordable banking, insurance and payments services. CBVAS also includes the digital banking services
offered through the use of our USSD (*241#) and NMBConnect platform, to enable our personal and Excellence customers to help them
manage their everyday banking needs. CBVAS contributed gross income amounting to ZWL 9.6 billion for the year ended 31 December 2022.
GROUP RESULTS
Financial Performance
The Group delivered strong operational and financial performance in 2022, driven by the implementation of our growth strategy.
Operating income increased from ZWL 23.9 billion to ZWL 41.9 billion for the year ended 31 December 2022, largely driven by continued growth
in transaction volumes and values during the period under review. Comprehensive income for the period amounted to ZWL 12.5 billion (Dec
2021 ZWL 7.7 billion).
The Group achieved profit after tax amounting to ZWL 12 billion compared to ZWL 6.4 billion for the previous year representing a growth of 69%.
Basic earnings per share amounted to 3014 cents (Dec 2021 –1592 cents).
Inflation pressures as well as the deteriorating exchange rate continued to pause a challenge on operating costs. This led to an increase in
costs by 57% from ZWL 12.1 billion for the year ended 31 December 2021 to ZWL 19 billion for the current period. The Group continues to
focus on revamping its process to increase efficiencies with the use of robotic process automation being key among other various initiatives.
Financial Position
The Group closed the year with total assets of ZWL 135.3 billion, up 34% from ZWL 100.9 billion as at 31 December 2021, funded by
strong growth in customer deposits and new credit lines signed during the year. Customer deposits increased by 48% reflecting the banking
subsidiary’s efforts in deepening existing liability relationships while acquiring new relationships.
The Group’s investment property portfolio was valued at ZWL 22.6 billion as at 31 December 2022 while property and equipment stood at ZWL
17.6 billion. The revaluation gains largely reflect the changes in the macro-economic environment and a deliberate strategy by the bank to
preserve value for shareholders.
Loans and advances stood at ZWL 46.3 billion as at 31 December 2022. The banking subsidiary maintained a high-quality loan book, closing
the year with an NPL ratio of 1.09%
The Bank maintained a sound liquidity position with a liquidity ratio of 50% and this was above the statutory minimum of 30%.
Capital
The capital adequacy ratio of the banking subsidiary remained strong at 25.29% compared to a regulatory minimum of 12%. The subsidiary
maintained adequate capital levels to cover all risks and was compliant with the minimum capital of the equivalent of USD 30 million.
DIVIDEND AND SHARE BUYBACK
Geographical Representation
To complement our physical reach through our branches, the bank entered into an agency banking relationship with Zimpost. This has
seen the bank increase its geographical reach to have one of the most expansive networks in the country, from 13 branches to 119
branches and agencies. We believe such partnerships are key for us to deliver services that require a physical touch point. The agency
arrangement has also assisted in decongesting our branches, complemented by our efficient digital service delivery platforms.
Business Banking
Our Business Banking division continued to be strongly focused on supporting export growth, agricultural production, infrastructure development
and productive sector operations. We delivered several highs as we saw impressive contributions on deposits and loans from new business
underwritten. The exporters’ book continues to grow through various partnerships created during the financial period in particular the foreign
credit lines. We deployed part of our lines of credit funding to support the horticulture sector. We are also leveraging the strength in Food and
Agriculture of one of our indirect shareholders, Rabobank (part of Arise B V) to support our farming and agriculture customers. Our lending
growth was above set targets and our focus on responsible practices ensures that both the Bank and its customers achieve sustainable growth.
STRATEGIC PRIORITIES
In pursuit of our exponential growth aspiration, the Group’s diversification thrust gathered momentum. The Group now has a new subsidiary to
add to the bank, namely the Property Development Company. The banking division also diversified its operations as we setup a Microfinance
division with the aim of providing more focused services to individuals and micro businesses. A Technology Services division was also set
up and is in various discussions with a number of banks in the region where we will become their technology partner to drive their digital
transformation agenda. This will be an additional source of foreign currency earnings for the Group. The new subsidiary and divisions have
opened up new markets for the Group and have a clear vision on how to establish themselves as formidable players in their domains. Capital
allocation was key and the new businesses were capitalised organically. All the Group’s subsidiaries are adequately capitalised and capacitated
to pursue their strategic goals.
Strengthening our core banking business, geographical representation were some the areas that received due attention. The banking business
continued to leverage on technology to deliver service more efficiently as we on-boarded more billers, introduced payment services like airtime/
data purchase and rolled out an agency banking system. The innovation on agency banking enabled us to seamlessly on-board the Zimpost
agency partnership. The banking subsidiary also increased it digital workforce as we deployed more robots largely in the accounts reconciliation
space via our Robotic process Automation section. The banking subsidiary is now focused on ensuring a comprehensive package of products
is offered through the agency network for the convenience of customers.
The main drivers for setting up these particular subsidiaries are income diversification, maximum utilisation of skills and capacity within the
Group, efficient use of capital and value preservation. All the subsidiaries will leverage the Group’s digital capabilities and superior customer
services.
An interim dividend of 45 cents a share was declared as at 30 June 2022 and paid out subsequent to that. For the second half of 2022, the
company is declaring a final dividend of 284 cents per share to bring the total dividend for the year 2022 to ZWL 1.33 billion.
During the year, the Bank successfully completed a ZWL 206 million off-market share buy-back following approval by shareholders in May 2022.
Overall, we have returned above ZWL 1.5 billion to our shareholders over the past 12 months through buy-backs and dividends. A separate
detailed notice to shareholders will be issued in this regard.
CORPORATE SOCIAL INVESTMENTS AND SUSTAINABILITY
The Corporate Social Investment thrust of NMB Bank Limited during the period under review was directed towards the development of children,
women in business and vulnerable members of society. In 2022, the Bank introduced the Skills for Success program that aims to bridge the soft
skills gap and better prepare the country’s future workforce. The program partners local high schools and institutions dealing with the betterment
of children and youth to offer relevant career guidance.
BLOCKED FUNDS
The banking subsidiary owed USD 13,840,412 to various line of credit providers as at 31 December 2022. In line with section 52 of the Finance
Act no 7 of 2021, the Bank received Government-backed zero-coupon Treasury Bills amounting to USD 9,644,148 by 31 December 2022. The
rest of Treasury Bills amounting to USD 4,196,264 were received subsequent to year end.
DIRECTORATE
Mr. Charles Chikaura and Ms. Sabinah Chitewe retired as directors of the Company effective 24 June 2022. I thank them for their sterling work
during their tenure. The two outgoing directors were ably replaced by Mrs. Emilia Chisango who was appointed to the Board on 26 May 2022
and Mr. Dzingira Matenga who was appointed to the Board on 19 July 2022. We look forward to their contribution.
OUTLOOK
The Group will focus on disciplined execution of its strategy which is anchored on broadening the Group structure and diversifying sources
of income. The Group will leverage on technology to deliver robust digital platforms and effectively deliver convenient financial solutions to its
customers. Raising of credit lines remains a key focus area as we continue to fund export oriented productive sectors of the economy as part
of our drive to support the growth of the Zimbabwean economy.
The bank’s support for KidsCan Zimbabwe continued this year. Further, a luncheon was held for vulnerable children in conjunction with Friends
of Dzikwa Trust where various items were donated. Friends of Dzikwa Society (FODS) is a sister organization to Dzikwa Trust Fund and is
responsible for fundraising for Dzikwa Trust activities. The Trust Fund supports gifted orphans and vulnerable children in Dzivarasekwa and also
feeds the vulnerable with their kitchen serving up to 650 mouths on average per day.
OUTLOOK AND STRATEGY
The operating environment is expected to remain challenging but also with some pockets of growth opportunities. Running an efficient and cost
effective business will be key in this environment and agility to move and close in on the opportunities remains key. The Group has capabilities
to take advantage of the opportunities presented by the environment and manage the attendant risks. The Bank was successful in raising lines
of credit in the previous year and we are looking forward to draw on more lines. The Group diversification drive will gather momentum in the
coming year as we fully operationalize the new subsidiaries.
APPRECIATION
I thank the NMB Bank team, Board and shareholders for their immense support during my first year in office. I am sincerely grateful to our valued
clients, funding partners, shareholders, stakeholders and regulatory authorities for their various contributions in our pursuit of delivering on our vision.
APPRECIATION
I thank our valued clients, depositors, shareholders, regulatory authorities and other key stakeholders for their continued support. To my fellow
board members, management and staff, I extend my heartfelt gratitude for their continued diligence, dedication and relentless efforts which
have culminated in the achievement of these commendable results.
MR. G. GORE
CEO
22 March 2023
MR. B. A. CHIKWANHA
CHAIRMAN
22 March 2023
1
IN PURSUIT OF EXCELLENCE
DIRECTORS’ REPORT EXTRACT
AUDITOR’S STATEMENT
1.
RESPONSIBILITY
The Directors of the Group are mandated by the Companies and Other Business Entities Act (Chapter 24:31) of Zimbabwe to maintain
adequate accounting records and to prepare consolidated and separate financial statements that present a true and fair view of the state of
affairs of the Group and Company at the end of each financial year. The information contained in these consolidated and separate financial
statements has been prepared on a going concern basis and is in accordance with the provisions of the Companies and Other Business Entities
Act (Chapter 24:31) of Zimbabwe, the Banking Act (Chapter 24:20) of Zimbabwe and International Financial Reporting Standards (IFRSs).
2.
INTERNAL FINANCIAL CONTROLS
The board is responsible for ensuring that effective internal control systems are implemented within the Group. The Group maintains internal
controls and systems designed to provide reasonable assurance of the integrity and reliability of its records, safeguard the assets of the Group
and prevent and detect fraud and errors. The Audit Committee in conjunction with the external and internal auditors of the Group reviews and
assesses the internal control systems of the Group in key risk areas.
3. GOING CONCERN
The Directors have assessed the ability of the Group and its subsidiaries to continue operating as a going concern and believe that the
preparation of these financial statements on a going concern is still appropriate.
4.
STATEMENT OF COMPLIANCE
The condensed consolidated financial statements are prepared with the aim of complying fully with International Financial Reporting Standards
(IFRSs) and have been prepared in the manner required by the Companies and Other Business Entities Act (Chapter 24:31) of Zimbabwe and
the Banking Act (Chapter 24:20) of Zimbabwe. The detailed impact of this adoption is disclosed in note 3.12 (Changes in accounting policy).
The Directors have been able to achieve full compliance with IFRSs in previous reporting periods up to 31 December 2017. However, the 31
December 2022 and the comparative periods dating back to the year ending 31 December 2018 financial reporting period could only achieve
partial compliance to the IFRS reporting framework due to developments detailed below.
The IFRS Conceptual Framework states that to achieve fair presentation to the financial statements, companies should consider the underlying
economic substance of the transaction over and above the legal form. International Accounting Standard (IAS 21) “The Effects of Changes in
Foreign Exchange Rates” requires the Directors to determine the functional currency of the reporting entity in preparing the entity’s financial
statements. In arriving at this conclusion, the entity is required to apply certain parameters which the Directors duly applied in their judgement.
Furthermore, IAS 21 also requires the reporting entity to make certain judgements in determining the appropriate exchange rates to apply for
certain transactions conducted in currencies other than the functional currency of the reporting entity.
As explained in Note 2.21, “Use of estimates, judgements and assumptions”, it is our opinion that following the Monetary Policy pronouncements
of 1 October 2018 and 20 February 2019, as well as the issuance of Exchange Control Directive RU 28 of 2019 on 22 February 2019, the
country’s functional currency appeared to have changed from the United States Dollar in terms of the IAS 21 considerations. However, the
Government of Zimbabwe issued Statutory Instrument (SI 33) of 2019 on 22 February 2019, which prescribes the rate of USD 1:RTGS$1 in
accounting for all transactions and events before the effective date of the statutory instrument.
Furthermore, it is our interpretation that the SI 33 of 2019 issued in terms of the Presidential Powers Temporary Measures Act [Chapter 10:20],
ranks supreme to any contrary legislation including quasi-legislations, which therefore implies that in preparing the financial statements, we
sought to comply with the provisions of SI 33 of 2019 ahead of the IAS 21 requirements; consequently, the Group could not fully apply the
requirements of IAS 8 “Accounting Policies, Changes in Accounting Estimates and Errors”.
This, in our opinion resulted in non-compliance with IAS 21 and IAS 8 and that non-compliance had a significant impact on the true and fair
presentation of the Group’s financial position and would therefore urge users of the financial statements to exercise due caution.
The consolidated and separate financial statements were approved by the Board of Directors on 22 March 2023.
MR. V. T. Mutandwa
COMPANY SECRETARY
22 March 2023
The Group’s consolidated inflation adjusted financial statements from which these abridged financial statements have been extracted, have
been audited by the Group’s external auditors Ernst & Young Chartered Accountants (Zimbabwe) ,who have issued a qualified audit opinion as
a result of the following matters: non-compliance with International Accounting Standard (IAS) 21, “The Effects of Changes in Foreign Exchange
Rates”, International Accounting Standard (IAS) 8, “Accounting Policies, Changes in Accounting Estimates and Errors”, IFRS 13, “Fair value
measurement” ,IFRS 9, “Financial instruments” and the consequential impact of applying IAS29 “Financial Reporting in Hyperinflationary
Economies” on the use of an incorrect base due to inappropriate valuation of investment property, freehold buildings and land in prior year and
the inappropriate accounting of blocked funds and treasury bills. The audit report also includes key audit matters in respect of impairment of
loans and advances, suspense accounts and presumed risk on revenue recognition. The auditor’s opinion on the Group’s consolidated inflation
adjusted financial results is available for inspection at the Holding Company’s registered office. The Audit Partner for this engagement is Mr
Walter Mupanguri (PAAB Practicing Number 0367).
CONSOLIDATED STATEMENT OF PROFIT OR LOSS AND OTHER COMPREHENSIVE INCOME
FOR THE YEAR ENDED 31 DECEMBER 2022
GROUP
Inflation Adjusted
Historical Cost*
31-Dec
2022
ZWL ’000
31-Dec
2021
ZWL ’000
31-Dec
2022
ZWL ’000
31-Dec
2021
ZWL ’000
21 070 430
10 798 064
15 800 168
2 568 881
( 6 377 309)
( 3 058 604)
( 4 591 382)
( 751 921)
Note
4
5
Interest income
Interest expense
Net interest income
14 693 121
7 739 460
11 208 786
1 816 960
Fee and commissions income
6.1
15 343 491
12 449 215
10 705 516
2 927 160
Net foreign exchange gains
3 819 011
538 676
4 048 384
76 799
Revenue
Other income
Operating income
Operating expenditure
33 855 623
20 727 351
25 962 686
4 820 919
6.2
8 075 039
3 206 818
17 940 335
2 107 419
41 930 662
23 934 169
43 903 021
6 928 338
7
( 19 003 060)
( 12 074 054)
( 13 733 992)
( 2 825 609)
Operating income before impairment charge
and loss on net monetary position
22 927 602
11 860 115
30 169 029
4 102 729
Impairment losses on financial assets measured
at amortised cost
16.3.3
( 332 198)
( 852 892)
( 1 191 393)
( 248 107)
Loss on net monetary position
( 6 524 513)
( 1 500 092)
-
-
Profit before tax
Taxation
16 070 891
9 507 131
28 977 636
3 854 622
8
( 4 068 542)
( 3 074 588)
( 3 509 130)
( 912 597)
Profit for the period
12 002 349
6 432 543
25 468 506
2 942 025
Other comprehensive income
Revaluation gains on land and buildings, net
of tax**
6.3
537 534
1 296 513
5 833 685
848 731
Total comprehensive income for the period
12 539 883
7 729 056
31 302 191
3 790 756
Earnings per share (ZWL cents)
- Basic
- Diluted
- Headline
9.3
9.3
9.3
3 014
2 939
1 456
1 592
1 574
1 035
6 396
6 237
2 952
728
720
343
* The Historical Cost information has been shown as supplementary information for the benefit of users. These are not required in terms of
International Accounting Standard (IAS) 29 “Financial Reporting in Hyperinflationary Economies”. The Auditors have not expressed an opinion
on the Historical Cost information.
** The revaluation gains on land and buildings will not be recycled into profit or loss in the subsequent reporting period. It will however be
recycled through equity.
2
IN PURSUIT OF EXCELLENCE Continued from Page 2
STATEMENT OF FINANCIAL POSITION
CONSOLIDATED STATEMENT OF CHANGES IN EQUITY
FOR THE YEAR ENDED 31 DECEMBER 2022
SHAREHOLDER’S FUNDS
NOTE
GROUP
Inflation Adjusted
Historical Cost*
31-Dec
2022
ZWL ‘000
31-Dec
2021
ZWL ‘000
31-Dec
2022
ZWL ‘000
Share capital
Share Premium
10
19 800
19 752
115
4 350 648
4 180 167
172 496
Treasury shares reserve
( 426)
( 29)
Functional currency translation reserve
1 588 744
1 588 744
( 394)
11 620
31-Dec
2021
ZWL ‘000
84
19 122
( 7)
11 620
5 525 808
4 988 274
7 749 682
1 915 997
257 242
113 606
129 569
27 768
Revaluation reserve
Share Option Reserve
Retained earnings
Share Capital
Share
Premium
Treasury
Shares
Functional
Currency
Translation
Reserve
Share Option
Reserve
Revaluation
Reserve
Retained
Earnings
Total
INFLATION ADJUSTED
Balance as at 1 January 2021
19 752
4 180 167
-
1 588 744
-
3 691 761
12 886 831
22 367 255
Profit for the year
Revaluation of land and buildings,
net of tax
Acquisition of treasury shares
Employee share schemes – value of
employee services
-
-
-
-
-
-
-
-
-
-
( 29)
-
-
-
-
-
-
-
-
113 606
-
6 432 543
6 432 543
1 296 513
-
-
-
-
-
1 296 513
( 29)
113 606
30 921 029
19 319 374
30 165 681
5 085 120
Balance at 31 December 2021
19 752
4 180 167
( 29)
1 588 744
113 606
4 988 274
19 319 374
30 209 888
-
-
-
-
-
-
-
-
ASSETS
Cash and cash equivalents
Investment securities
Loans and advances
Other assets
Assets held for sale
Trade and other investments
Current tax assets
Investment properties
Intangible assets
Property and equipment
Total assets
15
16.1
16.3
17
21
20
18
19
Total equity
42 662 846
30 209 888
38 228 768
7 059 704
Profit for the year
Revaluation of land and buildings,
net of tax
Redeemable ordinary shares
Subordinated term loan
10.2.2
12
-
926 323
49 279
766 979
-
14 335
Share options exercised
926 323
223 115
Share buy back
Total shareholders’ funds and shareholders’
liabilities
43 589 169
31 026 146
39 155 091
7 297 154
LIABILITIES
Deposits
Other liabilities
Borrowings
Current tax liabilities
Deferred tax liabilities
13
14
53 215 217
35 840 230
53 215 217
10 425 947
11 792 185
9 456 551
11 792 185
2 750 917
21 276 250
20 331 975
21 276 250
5 914 585
-
811 441
-
5 420 831
3 440 135
3 964 776
236 049
741 544
Total liabilities
91 704 483
69 880 332
90 248 428
20 069 042
Balance as at 1 January 2021
84
19 122
Total shareholder's funds and liabilities
135 293 652
100 906 478
129 403 519
27 366 196
-
-
0
-
2
-
-
-
8 992
-
-
-
-
( 397)
139 024
-
-
-
-
-
-
-
-
-
-
-
( 2 349)
-
-
-
-
145 985
-
12 002 349
12 002 349
537 534
-
-
-
-
-
-
-
-
537 534
6 644
( 210 923)
( 211 320)
( 139 027)
-
( 50 744)
( 50 744)
-
-
22 511
145 985
Scrip dividends paid
Dividend paid
Redeemable ordinary shares
46
22 465
Employee share schemes – value of
employee services
-
-
Balance at 31 December 2022
19 800
4 350 648
( 426)
1 588 744
257 242
5 525 808
30 921 029
42 662 846
Share Capital
Share
Premium
Treasury
shares
Functional
Currency
Translation
Reserve
Share Option
Reserve
Revaluation
Reserve
Retained
Earnings
Total
HISTORICAL COST*
Profit for the year
Revaluation of land and buildings,
net of tax
Acquisition of treasury shares
Employee share schemes – value of
employee services
-
-
-
-
-
-
-
-
-
-
-
( 7)
-
11 620
-
1 067 266
2 143 096
3 241 188
-
-
-
-
-
-
-
27 768
-
2 942 025
2 942 025
848 731
-
-
-
-
-
848 731
( 7)
27 768
Balance at 31 December 2021
84
19 122
( 7)
11 620
27 768
1 915 997
5 085 121
7 059 705
21 538 825
16 748 886
21 538 825
4 872 262
16 754 167
13 786 267
16 754 166
4 010 434
46 285 257
32 948 046
46 285 257
9 584 609
8 842 631
9 567 644
8 504 329
2 265 354
380 629
255 056
44 047
-
125 471
-
380 629
255 056
44 048
36 500
-
-
Profit for the year
22 618 160
12 093 934
22 618 160
3 518 134
990 757
1 264 733
23 147
13 409
17 584 123
14 371 497
12 999 902
3 065 495
Revaluation of land and buildings,
net of tax
Share options exercised
Share buy back
Scrip dividends paid
Dividend paid
-
-
0
-
2
-
-
-
5 727
-
-
-
-
( 387)
133 341
-
135 293 652
100 906 478
129 403 519
27 366 196
Redeemable ordinary shares
29
14 306
-
-
-
-
-
-
-
-
-
-
( 1 496)
-
-
-
-
103 297
-
25 468 506
25 468 506
5 833 685
-
-
-
-
-
-
-
-
5 833 685
4 231
( 205 933)
( 206 320)
( 133 343)
-
( 48 670)
( 48 670)
-
-
14 335
103 297
* The Historical Cost information has been shown as supplementary information for the benefit of users. These are not required in terms
of International Accounting” Standard (IAS) 29 “Financial Reporting in Hyperinflationary Economies.
Employee share schemes – value of
employee services
-
-
MR. B. A. CHIKWANHA
CHAIRMAN
22 March 2023
MR. G. GORE
CEO
22 March 2023
Balance at 31 December 2022
115
172 496
( 394)
11 620
129 569
7 749 682
30 165 681
38 228 768
* The Historical Cost information has been shown as supplementary information for the benefit of users. These are not required in terms
of International Accounting” Standard (IAS) 29 “Financial Reporting in Hyperinflationary Economies.
3
IN PURSUIT OF EXCELLENCE Continued from Page 3
STATEMENT OF CASH FLOWS
NOTES TO THE CONDENSED FINANCIAL STATEMENTS
GROUP
1.
GENERAL INFORMATION
Inflation Adjusted
Historical Cost*
The NMBZ Holdings Limited Group (the Group) comprises the company (NMBZ Holdings Limited) and the wholly owned banking
subsidiary, NMB Bank Limited (the Bank).
CASH FLOWS FROM OPERATING
ACTIVITIES
Note
31-Dec
2022
ZWL ‘000
31-Dec
2021
ZWL ‘000
31-Dec
2022
ZWL ‘000
31-Dec
2021
ZWL ‘000
Profit before taxation
16 070 891
9 507 131
28 977 636
3 854 622
Non-cash items:
- Net monetary Gain
- Depreciation(excluding right of use assets)
- Depreciation –Right of use assets
- Amortisation of intangible assets
- Impairment losses on financial assets
measured at amortised costs
7
7
7
6 524 513
1 500 092
-
-
608 925
290 370
222 437
65 922
262 154
170 109
71 926
38 606
289 691
12 711
4 395
2 865
2.1. BASIS OF PREPARATION
16.3.3
332 198
852 892
1 191 393
248 107
- Sundry income - non -cash
( 1 189 691)
-
( 1 189 691)
-
- Investment properties fair value gains
- Trade and other investments fair value gains
adjustment
- Profit on disposal of property and equipment
- Loss/(profit) on disposal of investment
properties
- Dividend income classified as investing
activities
20
6.2
6.2
( 6 830 600)
( 2 864 068)
( 16 380 731)
( 1 843 565)
( 118 074)
( 37 460)
( 218 556)
( 1 415)
( 2 002)
( 1 803)
( 8 445)
( 462)
34 152
( 23 384)
( 26 722)
( 5 788)
-
( 87 022)
-
( 17 177)
- Unrealised foreign exchange gain
( 4 689 059)
( 378 387)
( 4 689 059)
( 110 073)
- Non-cash employee benefits expense – share-
based payments
145 985
113 606
103 297
27 768
Operating cash flows before changes in
operating assets and liabilities
Changes in operating assets and liabilities
11 439 670
9 054 587
8 064 521
2 252 380
Increase/(decrease) in customer deposits
17 374 987
11 124 816
42 789 270
5 952 974
Increase/(decrease) in other liabilities
2 335 634
7 488 591
9 041 268
2 394 757
(Increase)/decrease in loans and advances
( 18 978 681)
( 19 198 480)
( 42 196 512)
( 7 302 019)
(Increase)/decrease in other assets
( 1 489 658)
( 1 590 880)
( 7 793 984)
( 821 727)
Net cash generated/(used) from operations
10 681 952
6 878 634
9 904 563
2 476 365
The Bank was established in 1993 as a merchant bank incorporated under the Companies and Other Business Entities Act (Chapter
24:31) of Zimbabwe and is now registered as a commercial bank in terms of the Banking Act (Chapter 24:20) of Zimbabwe. It operates
through a branch and agency v mainly in Harare, Bulawayo, Masvingo, Kwekwe, Mutare, Gweru, Bindura and Chinhoyi. Other agent
locations are spread throughout the country for the convenience of users.
The Holding Company is incorporated and domiciled in Zimbabwe and is an investment holding company. Its registered office address is
64 Kwame Nkrumah Avenue, Harare. Its principal operating subsidiary is engaged in commercial and retail banking. NMB Bank Limited
is a registered commercial bank and was incorporated in Zimbabwe on 16 October 1992 and commenced trading on 1 June 1993. The
Bank operated as an Accepting House until 6 December 1999 when the licence was converted to that of a Commercial Bank. The Bank
is exposed to the following risks in its operations: liquidity risk, credit risk, market risk, operational risk, foreign currency exchange rate
risk and interest rate risk.
2.
SUMMARY SIGNIFICANT ACCOUNTING POLICIES
The consolidated financial statements including comparatives, have been prepared under the inflation adjusted accounting basis to
account for changes in the general purchasing power of the ZWL . The restatement is based on the Consumer Price Index at the statement
of financial position date. The indices are derived from the monthly inflation rates which are issued by the Zimbabwe National Statistics
Agency (ZIMSTAT). The indices used are shown below. These condensed consolidated financial statements are reported in Zimbabwean
dollars and rounded to the nearest dollar.
Dates
31-Dec-18
31-Dec-19
31-Dec-20
31-Dec-21
31-Dec-22
Indices
88.81
551.63
2474.52
3977.46
13672.91
Conversion factor
153.9569
24.7864
5.5255
3.4376
1.0000
The indices have been applied to the historical costs of transactions and balances as follows:
• All comparative figures as of and for the periods ended 31 December 2018, 31 December 2019, 31 December 2020 and 31 December
•
2021 have been restated by applying the change in the index to 31 December 2022;
Income statement transactions have been restated by applying the change in the index from the approximate date of the transactions to
31 December 2022;
• Gains and losses arising from the monetary assets or liability positions have been included in the income statement;
• Non-monetary assets and liabilities have been restated by applying the change in the index from the date of the transaction to 31
December 2022;
• Property and equipment and accumulated depreciation have been restated by applying the change in the index from the date of their
purchase or re-assessment to 31 December 2022;
• Equity has been restated by applying the change in index from the date of issue to 31 December 2022;
The net impact of applying the procedures above is shown in the statement of comprehensive income as the gain or loss on net monetary
position.
IAS 29 discourages the publication of historical results as a supplement to the inflation adjusted results. However, historical results have been
published as additional information for the users of the Group’s financial statements. The Auditors have not expressed an opinion on the
historical results.
Functional and presentation currency
Taxation
Corporate tax paid
( 2 965 639)
( 1 847 201)
( 2 472 504)
( 505 915)
For the purposes of the condensed consolidated financial statements, the results and financial position of the Group are expressed in Zimbabwe
dollars (ZWL ) which is the functional currency of the Group, and the presentation currency for the consolidated financial statements.
Net cash inflow/(outflow) from operations
7 716 313
5 031 433
7 432 059
1 970 450
Comparative financial information
The interim financial statements comprise the consolidated and separate statements of financial position, comprehensive income, changes in
equity and cash flows. The comparative information covers a period of six months to 30 June 2021.
CASH FLOWS FROM INVESTING ACTIVITIES
2.2. BASIS OF CONSOLIDATION
Acquisition of intangible assets
18
( 15 714)
( 53 850)
( 14 133)
( 12 139)
Disposal/(Acquisition) of investment securities
( 16 544 014)
( 12 991 063)
( 6 143 914)
( 2 928 614)
The consolidated and separate financial statements comprise of the financial statements of the Group and company. All companies in the Group
have a December year end. Inter-group transactions, balances, income and expenses are eliminated on consolidation.
Proceeds on disposal of property and
equipment
Dividend income from trade and other
investments
Acquisition of trade and other investments
Acquisition of property and equipment
Proceeds on disposal of investment properties
Acquisition of investment properties
19
20
2 016
35 038
1 515
582
2.2.1. BUSINESS COMBINATIONS
-
-
87 022
( 87 022)
-
-
17 177
( 17 177)
( 2 512 079)
( 536 591)
( 2 162 776)
( 123 319)
155 843
144 995
134 369
34 553
( 3 848 480)
( 197 741)
( 2 764 347)
( 44 577)
Business combinations are accounted for using the acquisition method as at the acquisition date – i.e. when control is transferred to the Group.
The consideration transferred in the acquisition is generally measured at fair value, as are the identifiable net assets acquired.
Subsidiaries
Subsidiaries are those investees controlled by the Group. The Group controls an investee if it is exposed to, or has rights to variable returns
from its involvement with the investee and has the ability to affect those returns through its power over the subsidiary. The financial statements
of subsidiaries are included in the consolidated financial statements, using the acquisition method, from the date that control effectively
commences until the date that control effectively ceases.
Net cash (used)/generated in investing activities
( 22 762 428)
( 13 599 212)
( 10 949 286)
( 3 073 514)
In the holding company’s separate financial statements, investment in subsidiaries are accounted for at cost.
CASH FLOWS FROM FINANCING
ACTIVITIES
Repayment of lease liabilities
Cash dividend paid
Issue of shares
Repayments of borrowings
Increase in borrowings
Share buyback
( 66 271)
( 50 744)
6 644
( 330 841)
( 206 672)
-
-
-
( 70 173)
( 48 670)
4 231
( 322 394)
( 46 591)
-
-
-
2 464 807
11 575 101
16 873 751
4 329 774
( 211 349)
( 29)
( 206 320)
( 7)
Net cash outflow from financing activities
1 812 246
11 368 400
16 230 425
4 283 176
Any goodwill that arises is tested annually for impairment. Any gain on a bargain purchase is recognised in profit or loss immediately.
Transaction costs are expensed as incurred, except if they are related to the issue of debt or equity securities.
Any contingent consideration payable is measured at fair value at the acquisition date. If the contingent consideration is classified as equity,
then it is not re-measured and settlement is accounted for within equity. Otherwise subsequent changes in the fair value of the contingent
consideration are recognised in profit or loss.
Loss of control
When the Group loses control over a subsidiary, it derecognises the assets and liabilities of the subsidiary, and any related non-controlling
interests (NCI) and other components of equity. Any resulting gain or loss is recognised in profit or loss. Any interest retained in the former
subsidiary is measured at fair value when control is lost.
Transactions eliminated on consolidation
Intra-group balances and transactions, and any unrealised income and expenses arising from intra-group transactions, are eliminated in
preparing the consolidated financial statements. Unrealised losses are eliminated in the same way as unrealised gains, but only to the extent
that there is no evidence of impairment.
Net (decrease)/increase in cash and cash
equivalents
Net foreign exchange and monetary
adjustments on cash and cash equivalents
Cash and cash equivalents at beginning of
the year
( 13 233 869)
2 800 621
12 713 198
3 180 112
2.3. FOREIGN CURRENCY TRANSACTIONS
18 023 808
3 092 661
3 953 365
( 272 487)
Transactions in foreign currencies are translated into Zimbabwe Dollars (ZWL ), which is the respective functional currency of Group entities at
the spot exchange rates at the date of the transactions.
16 748 886
10 855 604
4 872 262
1 964 637
Cash and cash equivalents at the end of the
year
15
21 538 825
16 748 886
21 538 825
4 872 262
ADDITIONAL INFORMATION ON OPERATING
CASH FLOWS FROM INTEREST
Interest received
21 070 430
10 798 064
15 395 364
2 568 881
Monetary assets and liabilities denominated in foreign currencies at the reporting date are translated into the functional currency at the spot
exchange rate at that date. The foreign currency gain or loss on monetary items is the difference between the amortised cost in the functional
currency at the beginning of the year, adjusted . for effective interest and payments during the year, and the amortised cost in the foreign
currency translated at the spot exchange rate at the end of the year.
Non-monetary assets and liabilities that are measured at fair value in a foreign currency are translated into the functional currency at the spot
exchange rate at the date on which the fair value is determined. Non-monetary items that are measured based on historical cost in a foreign
currency are translated using the spot exchange rate at the date of the transaction.
Foreign currency differences arising on translation are generally recognised in profit or loss.
2.4. TAXATION
Income tax
Interest paid (including interest on lease
liabilities)
( 6 377 309)
( 3 058 604)
( 4 591 382)
( 751 921)
Income tax expenses comprise current, capital gains and deferred tax. Income tax is recognised in profit or loss except to the extent that it
relates to items recognised directly in equity or in other comprehensive income.
* The Historical Cost information has been shown as supplementary information for the benefit of users. These are not required in terms
of International Accounting” Standard (IAS) 29 “Financial Reporting in Hyperinflationary Economies.
Current tax
Current tax comprises expected tax payable or receivable on the taxable income or loss for the year and any adjustment to the tax payable or
receivable in respect of previous years. It is measured using rates enacted or substantively enacted at the reporting date in the country where
the Group operates and generates taxable income and any adjustment to tax payable in respect of previous years. Current income tax assets
and liabilities for the current period are measured at the amount expected to be recovered from or paid to the taxation authorities.
4
IN PURSUIT OF EXCELLENCE Continued from Page 4
Deferred tax
Deferred tax is recognised in respect of temporary differences between the carrying amounts of assets and liabilities for financial reporting
purposes and the amounts used for taxation purposes. Deferred tax is not recognised for:
•
•
•
temporary differences on the initial recognition of assets or liabilities in a transaction that is not a business combination and that affects
neither accounting nor taxable profit or loss;
temporary differences related to investments in subsidiaries to the extent that it is probable that they will not reverse in the foreseeable
future; and
taxable temporary differences arising on the initial recognition of goodwill.
Deferred tax assets are recognised for unused tax losses, unused tax credits and deductible temporary differences to the extent that it is
probable that future taxable profits will be available against which they can be used. 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. Deferred tax is measured at the tax rates
that are expected to be applied to temporary differences when they reverse, using tax rates enacted or substantively enacted at the reporting
date. The measurement of deferred tax reflects the tax consequences that would follow the manner in which the Group expects, at the reporting
date, to recover or settle the carrying amount of its assets and liabilities. For this purpose, the carrying amount of investment property measured
at fair value is presumed to be recovered through sale, and the Group has not rebutted this presumption.
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 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.
Additional taxes that arise from the distribution of dividends by the Bank are recognised at the same time as the liability to pay the related dividend
is recognised. These amounts are generally recognised in profit or loss because they generally relate to income arising from transactions that
were originally recognised in profit or loss.
2.5. FINANCIAL INSTRUMENTS
Measurement Methods
Amortised cost and effective interest rates
The amortised cost is the amount at which the financial asset or financial liability is measured at initial recognition minus the principal repayments,
plus or minus the cumulative amortisation using the effective interest method of any difference between that initial amount and the maturity
amount and, for financial assets, an adjustment for any loss allowance.
The effective interest rate is the rate that exactly discounts estimated future cash payments or receipts through the expected life of the financial
asset or financial liability to the gross carrying amount of a financial asset (i.e. its amortised cost before any impairment allowance) or to the
amortised cost of a financial liability. The calculation does not consider expected credit losses and includes transaction costs, premiums or
discounts and fees and points paid or received that are integral to the effective interest rate, such as origination fees. For purchased or originated
credit-impaired (‘POCI’) financial assets – assets that are credit-impaired at initial recognition - the Bank calculates the credit-adjusted effective
interest rate, which is calculated based on the amortised cost of the financial asset instead of its gross carrying amount and incorporates the
impact of expected credit losses in estimated future cash flows.
The Bank subsequently measures all equity investments at fair value through profit or loss, except where the Bank’s management has elected,
at initial recognition, to irrevocably designate an equity investment at fair value through other comprehensive income. The Bank policy is to
designate equity investments as FVOCI when those investments are held for purposes other than to generate investment returns. When
this election is used, fair value gains and losses are recognised in OCI and are not subsequently reclassified to profit or loss, including on
disposal. Impairment losses (and reversal of impairment losses) are not reported separately from other changes in fair value. Dividends, when
representing a return on such investments, continue to be recognised in profit or loss as other income when the Bank’s right to receive payments
is established.
Gains and losses on equity investments at FVPL are included in the ‘Other Income’ line in the statement of profit or loss.
(ii) Impairment
The Bank recognises loss allowances for Expected Credit Losses (ECLs) on the following financial instruments that are not measured at Fair
Value through
Profit or Loss (FVTPL):
loans and advances to banks;
loans and advances to customers;
•
•
• debt investment securities;
•
•
• financial guarantee contracts issued.
lease receivables;
loan commitments issued; and
No impairment loss is recognised on equity investments.
With the exception of POCI financial assets (which are considered separately below), ECLs are measured through a loss allowance at an
amount equal to:
• 12-month ECL, i.e. lifetime ECL that result from those default events on the financial instrument that are possible within 12 months after
the reporting date, (referred to as Stage 1); or
• Full lifetime ECL, i.e. lifetime ECL that result from all possible default events over the life of the financial instrument, (referred to as Stage
2 and Stage 3).
A loss allowance for full lifetime ECL is required for a financial instrument if the credit risk on that financial instrument has increased significantly
since initial recognition.
Expected Credit Losses
ECLs are a probability-weighted estimate of the present value of credit losses. These are measured as the present value of the difference
between the cash flows due to the Bank under the contract and the cash flows that the Bank expects to receive arising from the weighting of
multiple future economic scenarios, discounted at the asset’s Effective Interest Rate (EIR).
For undrawn loan commitments, the ECL is the difference between the present value of the difference between the contractual cash flows that
are due to the Bank if the holder of the commitment draws down the loan and the cash flows that the Bank expects to receive if the loan is
drawn down; and
When the Bank revises the estimates of future cash flows, the carrying amount of the respective financial assets or financial liability is adjusted
to reflect the new estimate discounted using the original effective interest rate. Any changes are recognised in profit or loss.
For financial guarantee contracts, the ECL is the difference between the expected payments to reimburse the holder of the guaranteed debt
instrument less any amounts that the Bank expects to receive from the holder, the debtor or any other party.
Interest Income
Interest income is calculated by applying the effective interest rate to the gross carrying amount of financial assets, except for:
a)
Purchased or originated credit-impaired (POCI) financial assets, for which the original credit-adjusted effective interest rate is applied to
the amortised cost of the financial asset.
Financial assets that are not ‘POCI’ but have subsequently become credit-impaired (or ‘stage 3’), for which interest revenue is calculated
by applying the effective interest rate to their amortised cost (i.e net of the expected credit loss provision).
b)
Initial recognition and measurement
Financial assets and financial liabilities are recognised when the entity becomes a party to the contractual provisions of the instrument. Regular
way purchases and sales of financial assets are recognised on trade-date, the date on which the Bank commits to purchase or sell the asset.
At initial recognition, the Bank measures a financial asset or financial liability at its fair value plus or minus, in the case of a financial asset
or financial liability not at fair value through profit or loss; transaction costs that are incremental and directly attributable to the acquisition or
issuance of the financial asset or financial liability respectively, such as fees and commissions. Transaction costs of financial assets and financial
liabilities carried at fair value through profit or loss are expensed in profit or loss. Immediately after initial recognition, an expected credit loss
allowance (ECL) is recognised for financial assets measured at amortised cost and investments in debt instruments measured at FVOCI, which
results in an accounting loss being recognised in profit or loss when an asset is newly originated.
When the fair value of financial assets and liabilities differs from the transaction price on initial recognition, the entity recognises the difference
as follows:
a) When the fair value is evidenced by a quoted price in an active market for an identical asset or liability (i.e. a Level 1 input) or based on
b)
a valuation technique that uses only data from observable markets, the difference is recognised as a gain or loss.
In all other cases, the difference is deferred and the timing of recognition of deferred day one profit or loss is determined individually. It
is either amortised over the life of the instrument, deferred until the instrument’s fair value can be determined using market observable
inputs, or realised through settlement.
Financial Assets
(i) Classification and subsequent measurement
The Bank measures ECL on an individual basis, or on a collective basis for portfolios of loans that share similar economic risk characteristics.
The measurement of the loss allowance is based on the present value of the asset’s expected cash flows using the asset’s original EIR,
regardless of whether it is measured on an individual basis or a collective basis.
Credit-impaired financial assets
A financial asset is credit-impaired when one or more events that have a detrimental impact on the estimated future cash flows of that financial
asset have occurred. Evidence that a financial asset is credit-impaired include observable data about the following events:
a)
b)
c)
significant financial difficulty of the issuer or the borrower;
a breach of contract, such as a default or past due event;
the lender(s) of the borrower, for economic or contractual reasons relating to the borrower’s financial difficulty, having granted to the
borrower a concession(s) that the lender(s) would not otherwise consider;
it becoming probable that the borrower will enter bankruptcy or other financial reorganisation;
the disappearance of an active market for that financial asset because of financial difficulties; or
the purchase or origination of a financial asset at a deep discount that reflects the incurred credit losses.
d)
e)
f)
It may not be possible to identify a single discrete event—instead, the combined effect of several events may have caused financial assets to
become credit-impaired.
Purchased or originated credit-impaired (POCI) financial assets
For POCI the Bank only recognises the cumulative changes in lifetime expected credit losses since initial recognition. At each reporting date, the
Bank recognises in profit or loss the amount of the change in lifetime expected credit losses as an impairment gain or loss. The Bank recognises
favourable changes in lifetime expected credit losses as an impairment gain, even if the lifetime expected credit losses are less than the amount
of expected credit losses that were included in the estimated cash flows on initial recognition.
The Bank assesses on a forward-looking basis the expected credit losses (‘ECL’) associated with its debt instrument assets carried at amortised
cost and FVOCI and with the exposure arising from loan commitments and financial guarantee contracts. The Bank recognises a loss allowance
for such losses at each reporting date. The measurement of ECL reflects:
• An unbiased and probability-weighted amount that is determined by evaluating a range of possible outcomes;
• The time value of money; and
• Reasonable and supportable information that is available without undue cost or effort at the reporting date about past events, current
From 1 January 2018, the Group has applied IFRS 9 and classifies its financial assets in the measurement categories:
conditions and forecasts of future economic conditions.
• Fair value through profit or loss (FVPL);
• Fair value through other comprehensive income (FVOCI); or
• Amortised cost.
The classification requirements for debt and equity instruments are described below:
Debt instruments
For loan commitments and financial guarantee contracts, the loss allowance is recognised in other liabilities. The Bank keeps track of the
changes in the loss allowance for financial assets separately from those for loan commitments and financial guarantee contracts. However, if a
financial instrument includes both a loan (i.e. financial asset) and an undrawn commitment (i.e. loan commitment) component and the Bank does
not separately identify the expected credit losses on the loan commitment component from those on the financial asset component, the expected
credit losses on the loan commitment is recognised together with the loss allowance for the financial asset. To the extent that the combined
expected credit losses exceed the gross carrying amount of the financial asset, the expected credit losses is recognised in other liabilities.
Debt instruments are those instruments that meet the definition of a financial liability from the issuer’s perspective, such as loans, government
and corporate bonds and trade receivables purchased from clients in factoring arrangements without recourse.
Definition of default
Classification and subsequent measurement of debt instruments depend on:
•
•
the Bank’s business model for managing the asset; and
the cash flow characteristics of the asset.
Based on these factors, the Bank classifies its debt instruments into one of the following three measurement categories:
• Amortised cost: Assets that are held for collection of contractual cash flows where those cash flows represent solely payments of principal
and interest (‘SPPI’), and that are not designated at FVPL, are measured at amortised cost. The carrying amount of these assets is
adjusted by any expected credit loss allowance. Interest income from these financial assets is included in interest and similar income
using the effective interest rate method.
• Fair value through other comprehensive income (FVOCI): Financial assets that are held for collection of contractual cash flows and for
selling the assets, where the assets’ cash flows represent solely payments of principle and interest and that are not designated at FVPL,
are measured at fair value through other comprehensive income (FVOCI). Movements in the carrying amount are taken through OCI,
except for the recognition of impairment gains or losses, interest revenue and foreign exchange gains and losses on the instrument’s
amortised cost which are recognised in profit or loss. When the financial asset is derecognised, the cumulative gain or loss previously
recognised in OCI is reclassified from equity to profit or loss and recognised in “Net Investment Income’. Interest income from these
financial assets is included in ‘Interest Income’ using the effective interest rate method.
• Fair value through profit or loss: Assets that do not meet the criteria for amortised cost or FVOCI are measured at fair value through profit
or loss. A gain or loss on a debt investment that is subsequently measured at fair value through profit or loss and is not part of a hedging
relationship is recognised in profit or loss and presented in the profit or loss statement within ‘Net Trading Income” in the period in which
it arises, unless it arises from debt instruments that were designated at fair value or which are not held for trading, in which case they are
presented separately in ‘Net Investment Income’. Interest income from these financial assets is included in “Interest income” using the
effective interest rate method.
Business model: the business model reflects how the Bank manages the assets in order to generate cash flows. That is, whether the Bank’s
objective is solely to collect the contractual cash flows taking. These securities are classified in the ‘other’ business model and measured
at FVPL. from the assets or is to collect both the contractual cash flows and cash flows arising from the sale of assets. If neither of these is
applicable (e.g. financial assets are held for trading purposes), then the financial assets are classified as part of ‘other’ business model and
measured at FVPL. Factors considered by the Bank in determining the business model for a group of assets include past experience on how
the cash flows for these assets were collected, how the asset’s performance is evaluated and reported to key management personnel, how risks
are assessed and managed and how managers are compensated. Securities held for trading are held principally for the purpose of selling in the
near term or are part of a portfolio of financial instruments that are managed together and for which there is evidence of a recent actual pattern
of short-term profit-taking. These securities are classified in the ‘other’ business model and measured at FVPL.
Where the business model is to hold assets to collect contractual cash flows or to collect contractual cash flows and sell, the Bank assesses
whether financial instruments’ cash flows represent solely payments of principal and interest (the “SPPI” test). In making this assessment, the
Bank considers whether the contractual cash flows are consistent with a basic lending arrangement i.e. interest includes only consideration for
the time value of money, credit risk, other basic lending risks and a profit margin that is consistent with a basic lending arrangement. Where the
contractual terms introduce exposure to risk or volatility that are inconsistent with a basic lending arrangement, the related financial asset is
classified and measured at fair value through profit or loss.
The Bank reclassifies debt investments when and only when its business model for managing those assets changes. The reclassification takes
place from the start of the first reporting period following the change. Such changes are expected to be very infrequent and none occurred
during the period.
Equity instruments
Equity instruments are instruments that meet the definition of equity from the issuer’s perspective; that is, instruments that do not contain a
contractual obligation to pay and that evidence a residual interest in the issuer’s net assets. Examples of equity instruments include basic
ordinary shares.
Critical to the determination of ECL is the definition of default. The definition of default is used in measuring the amount of ECL and in the
determination of whether the loss allowance is based on 12-month or lifetime ECL, as default is a component of the probability of default (PD)
which affects both the measurement of ECLs and the identification of a significant increase in credit risk.
The Bank considers the following as constituting an event of default:
• The borrower is past due more than 90 days on any material credit obligation to the Bank or;
• The borrower is unlikely to pay its credit obligations to the Bank in full.
The definition of default is appropriately tailored to reflect different characteristics of different types of assets. Overdrafts are considered as
being past due once the customer has breached an advised limit or has been advised of a limit smaller than the current amount outstanding.
When assessing if the borrower is unlikely to pay its credit obligation, the Bank takes into account both qualitative and quantitative indicators.
The information assessed depends on the type of the asset, for example in corporate lending a qualitative indicator used is the breach of
covenants, which is not relevant for retail lending. Quantitative indicators, such as overdue status and non-payment on another obligation of the
same counterparty are key inputs in this analysis. The Bank uses a variety of sources of information to assess default which are either developed
internally or obtained from external sources.
Significant increase in credit risk
The Bank monitors all financial assets, undrawn loan commitments and financial guarantee contracts that are subject to the impairment
requirements to assess whether there has been a significant increase in credit risk since initial recognition. If there has been a significant
increase in credit risk the Bank will measure the loss allowance based on lifetime rather than 12-month ECL. The Bank’s accounting policy is not
to use the practical expedient that financial assets with ‘low’ credit risk at the reporting date are deemed not to have had a significant increase
in credit risk. As a result the Bank monitors all financial assets, undrawn loan commitments and financial guarantee contracts that are subject
to impairment for significant increase in credit risk.
In assessing whether the credit risk on a financial instrument has increased significantly since initial recognition, the Bank compares the risk of
a default occurring on the financial instrument at the reporting date based on the remaining maturity of the instrument with the risk of a default
occurring that was anticipated for the remaining maturity at the current reporting date when the financial instrument was first recognised. In
making this assessment, the Bank considers both quantitative and qualitative information that is reasonable and supportable, including historical
experience and forward-looking information that is available without undue cost or effort, based on the Bank’s historical experience and expert
credit assessment including forward-looking information.
Multiple economic scenarios form the basis of determining the probability of default at initial recognition and at subsequent reporting dates.
Different economic scenarios will lead to a different probability of default. It is the weighting of these different scenarios that forms the basis of a
weighted average probability of default that is used to determine whether credit risk has significantly increased.
For corporate lending, forward-looking information includes the future prospects of the industries in which the Bank’s lenders operate, obtained
from economic expert reports, financial analysts, governmental bodies and other similar organisations, as well as consideration of various
internal and external sources of actual and forecast economic information. For the retail portfolio, forward looking information includes the same
economic forecasts as the corporate portfolio with additional forecasts of local economic indicators, particularly for regions with a concentration
to certain industries, as well as internally generated information of customer payment behaviour. The Bank allocates its counterparties to a
relevant internal credit risk grade depending on their credit quality. The quantitative information is a primary indicator of significant increase in
credit risk and is based on the change in lifetime PD by comparing:
•
•
the remaining lifetime PD at the reporting date; with
the remaining lifetime PD for this point in time that was estimated based on facts and circumstances at the time of initial recognition of
the exposure.
The PDs used are forward looking and the Bank uses the same methodologies and data used to measure the loss allowance for ECL.
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IN PURSUIT OF EXCELLENCE
Continued from Page 5
The qualitative factors that indicate significant increase in credit risk are reflected in PD models on a timely basis. However, the Bank still
considers separately additional qualitative factors to assess if credit risk has increased significantly. For corporate lending there is particular
focus on assets that are included on the Bank’s ‘watch list’ and for the retail portfolio the Bank considers the expectation of forbearance and
payment holidays, credit scores and any other changes in the borrower’s circumstances which are likely to adversely affect one’s ability to meet
contractual obligations.
Given that a significant increase in credit risk since initial recognition is a relative measure, a given change, in absolute terms, in the PD will be
more significant for a financial instrument with a lower initial PD than compared to a financial instrument with a higher PD.
The Bank assumes that when an asset becomes 30 days past due, the Bank considers that a significant increase in credit risk has occurred and
the asset is in stage 2 of the impairment model, i.e. the loss allowance is measured as the lifetime ECL.
(iii) Modification of loans
The Bank sometimes renegotiates or otherwise modifies the contractual cash flows of loans to customers. When this happens, the Bank
assesses whether or not the new terms are substantially different to the original terms. The Bank does this by considering, among others, the
following factors:
•
If the borrower is in financial difficulty, whether the modification merely reduces the contractual cash flows to amounts the borrower is
expected to be able to pay.
• Whether any substantial new terms are introduced, such as a profit share/equity-based return that substantially affects the risk profile of
the loan.
• Significant extension of the loan term when the borrower is not in financial difficulty. Significant change in the interest rate.
• Change in the currency the loan is denominated in.
•
Insertion of collateral, other security or credit enhancements that significantly affect the credit risk associated with the loan.
If the terms are substantially different, the Bank derecognises the original financial asset and recognises a ‘new’ asset at fair value and
recalculates the new effective interest rate for the asset. The date of renegotiation is consequently considered to be the date of initial recognition
for impairment calculation purposes, including for the purpose of determining whether a significant increase in credit risk has occurred.
However, the Bank also assesses whether the new financial asset recognised is deemed to be credit-impaired at initial recognition, especially
in circumstances where the renegotiation was driven by the debtor being unable to make the originally agreed payments. Differences in the
carrying amount are also recognised in profit or loss as a gain or loss on derecognition.
Probability of Default (PD)
The Bank defines Probability of Default as the likelihood that a borrower will fail to meet their contractual obligations in the future. The Bank’s
PD models have been built using historical credit default experience, present credit information as well as forward looking factors which affect
the capacity of borrowers to meet their contractual obligations. The Bank used the logistic regression approach to construct PD models for
Corporate, SME, Retail and Treasury Bills portfolios while the Merton model was adopted for Interbank Placements. The PD models are used
at entity level to evaluate 12 - month PDs for Day 1 losses and for financial instruments with no significant deterioration in credit risk since initial
recognition, whilst lifetime PD is used for financial instruments for which significant increase in credit risk or default has occurred. 12 - month PDs
are derived using borrower present risk characteristics while lifetime PDs are derived using a combination of 12 - month PDs, present borrower
behaviour and forward looking macroeconomic factors.
Exposure at Default (EAD)
The Bank defines Exposure at Default as an estimation of the extent to which the Bank will be exposed to a counterparty in the event of a default.
The Bank’s EAD models have been built using historical experience of debt instruments that defaulted. The Bank used the linear regression
approach to construct EAD models for Corporate, SME and Retail portfolios. For TBs and Interbank Placements, the Bank took a conservative
approach of considering the full outstanding balance as the EAD at any given point in the lifetime of an instrument. The Bank’s EAD models
that use Credit Conversion Factors (CCFs) are applied on fully drawn down instruments while models that use Loan Equivalents (LEQs) are
applied on partly drawn instruments. The EAD models are used at entity level to evaluate the proportion of the exposure that will be outstanding
at the point of default.
Loss Given Default (LGD)
The Bank defines Loss Given Default as an estimate of the ultimate credit loss in the event of a default. The Bank’s LGD models were built
using historical experience of defaulted debt instruments and observed recoveries. The Bank used the linear regression approach to construct
LGD models for Corporate, SME and Retail portfolios. For Treasury Bills and Interbank Placements, the Bank took a conservative approach of
taking a fixed 100% as the LGD at any given point in the lifetime of an instrument. The LGD models are used at portfolio level to evaluate 12 -
month LGDs for financial instruments with no significant increase in credit risk since initial recognition and lifetime is applied LGDs for financial
instruments for which significant increase in credit risk has occurred. 12-month LGDs were derived as historical loss rates while lifetime LGDs
were derived using a combination of 12 - month LGDs and forward looking macroeconomic factors such as GDP and Inflation.
The Bank’s ECL model combines the output of the PD, EAD and LGD and computes an Expected Credit Loss that takes into account the time
value of money using the Effective Interest Rates (EIR) and time to maturity of the debt instruments.
If the terms are not substantially different, the renegotiation or modification does not result in derecognition, and the Bank recalculates the gross
carrying amount based on the revised cash flows of the financial asset and recognises a modification gain or loss in profit or loss. The new gross
carrying amount is recalculated by discounting the modified cash flows at the original effective interest rate (or credit-adjusted effective interest
rate for purchased or originated credit-impaired financial assets).
The final ECL is a probability-weighted amount that is determined by evaluating three (3) possible outcomes of Best Case ECL, Baseline Case
ECL and Worst Case ECL. The Bank has modelled these three cases in such a way that the Best Case represents a scenario of lower than
market average default rates, the Base Case represents scenarios of comparable market average default rates and the Worst Case represents
scenarios of higher than market average default rates.
(iv) Derecognition other than on a modification
Forward looking information
Financial assets, or a portion thereof, are derecognised when the contractual rights to receive the cash flows from the assets have expired, or
when they have been transferred and either:
•
•
the Bank transfers substantially all the risks and rewards of ownership, or
the Bank neither transfers nor retains substantially all the risks and rewards of ownership and the Bank has not retained control.
The Bank enters into transactions where it retains the contractual rights to receive cash flows to other entities and transfers substantially all of
the risks and rewards. These transactions are accounted for as ‘pass through’ transfers that result in derecognition if the Bank:
i)
ii)
iii)
Has no obligation to make payments unless it collects equivalent amounts from the assets;
Is prohibited from selling or pledging the assets; and
Has an obligation to remit any cash it collects from the assets without material delay.
Collateral (shares and bonds) furnished by the Bank under standard repurchase agreements and securities lending and borrowing transactions
are not derecognised because the Bank retains substantially all the risks and rewards on the basis of the predetermined repurchase price,
and the criteria for derecognition are therefore not met. This also applies to certain securitisation transactions in which the Bank retains a
subordinated residual interest.
Financial Liabilities
Classification and subsequent measurement
In its ECL models, NMB Bank relies on a broad range of forward looking information as macroeconomic inputs, such as:
Inflation Rate
This is the inflation of the country of Zimbabwe. The Bank approximates the impact of inflation on the future quality of the credit portfolio by
measuring the variation between the inflation rate at reporting date and the highest forecasted inflation rate for the period 2020-2023. Current
inflation data is collected from the Reserve Bank of Zimbabwe (RBZ) and Zimbabwe National Statistics Agency (ZIMSTAT) websites while
inflation forecast data is collected from the World Bank websites.
Unemployment Rates
The Bank defines this as the unemployed proportion of the country’s population. The Bank approximates the impact of unemployment on the
future quality of the credit portfolio by assessing the direction of the rate. Increasing unemployment rate tends to indicate economic downsizing
in the future while an improving unemployment rate ordinarily indicates economic growth.
Market Non-Performing Loans Rate
The Bank assesses the variance between its non-performing loans rate and the market average NPL rate as at reporting date. The variance
approximates the performance of the Bank against the market with respect to the ability of the Bank to underwrite low credit loans.
Producer Price Index (PPI)
In both the current and prior period, financial liabilities are classified as subsequently measured at amortised cost, except for:
Financial liabilities at fair value through profit or loss: this classification is applied to financial liabilities held for trading (e.g. short positions in the
trading booking) and other financial liabilities designated as such at initial recognition. Gains or losses on financial liabilities designated at fair
value through profit or loss are presented partially in other comprehensive income (the amount of change in the fair value of the financial liability
that is attributable to changes in the credit risk of that liability, which is determined as the amount that is not attributable to changes in market
conditions that give rise to market risk) and partially profit or loss (the remaining amount of change in the fair value of the liability). This is unless
such a presentation would create, or enlarge, an accounting mismatch, in which case the gains and losses attributable to changes in the credit
risk of the liability are also presented in profit or loss;
Financial liabilities arising from the transfer of financial assets which did not qualify for derecognition, whereby a financial liability is recognised
for the consideration received for the transfer. In subsequent periods, the Bank recognises any expense incurred on the financial liability.
The Bank assesses this as the cost of production for companies. The Bank approximates the impact of PPI on the future quality of the credit
portfolio by assessing the direction of the index. Increasing PPI tend to indicate economic downsizing in the future while decreasing PPI
ordinarily promotes economic growth in the future. PPI data is collected from the RBZ and ZIMSTAT websites.
Renegotiated loans and advances
Where possible, the Group seeks to restructure loans rather than to take possession of collateral. This may involve extending the payment
arrangements and the agreement of new loan conditions. Once the terms have been re-negotiated, any impairment is measured using the
original effective interest rate (EIR) as calculated before the modification of terms and the loan is no longer considered past due. Management
continuously renews re-negotiated loans to ensure that all criteria are met and that future payments are likely to occur. The loans continue to
be subject to an individual or collective impairment assessment, calculated using the loans original EIR.
Derecognition
Collateral valuation
Financial liabilities are derecognised when they are extinguished (i.e. when the obligation specified in the contract is discharged, cancelled or
expires).
The exchange between the Bank and its original lenders of debt instruments with substantially different terms, as well as substantial modifications
of the terms of existing financial liabilities, are accounted for as an extinguishment of the original financial liability and the recognition of a new
financial liability. The terms are substantially different if the discounted present value of the cash flows under the new terms, including any fees
paid net of any fees received and discounted using the original effective interest rate, is at least 10% different from the discounted present value
of the remaining cash flows of the original financial liability. In addition, other qualitative factors, such as the currency that the instrument is
denominated in, changes in the type of interest rate, new conversion features attached to the instrument and change in covenants are also taken
into consideration. If an exchange of debt instruments or modification of terms is accounted for as an extinguishment, any costs or fees incurred
are recognised as part of the gain or loss on the extinguishment. If the exchange or modification is not accounted for as an extinguishment, any
costs or fees incurred adjust the carrying amount of the liability and are amortised over the remaining term of the modified liability.
Financial guarantee contracts and loan commitments
Financial guarantee contracts are contracts that require the issuer to make specified payments to reimburse the holder for a loss it incurs
because a specified debtor fails to make payments when due, in accordance with the terms of a debt instrument. Such financial guarantees are
given to banks, financial institutions and others on behalf of customers to secure loans, overdrafts and other banking facilities.
Financial guarantee contracts are initially measured at fair value and subsequently measured at the higher of:
• The amount of the loss allowance; and
• The premium received on initial recognition less income recognised in accordance with the principles of IFRS 15.
Loan commitments provided by the Bank are measured as the amount of the loss allowance. The Bank has not provided any commitment to
provide loans at below-market interest rate, or that can be settled net in cash or by delivering or issuing another financial instrument.
For loan commitments and financial guarantee contracts, the loss allowance is recognised in other liabilities. However, for contracts that include
both a loan and an undrawn commitment and the Bank cannot separately identify the expected credit losses on the undrawn commitment
component from those on the loan component, the expected credit losses on the undrawn commitment are recognised together with the loss
allowance for the loan. To the extent that the combined expected credit losses exceed the gross carrying amount of the loan, the expected credit
losses are recognised in other liabilities.
Critical accounting estimates and judgements
The preparation of financial statements requires the use of accounting estimates which, by definition, will seldom equal the actual results.
Management also needs to exercise judgement in applying the Bank’s accounting policies.
Note 2.20 provides an overview of the areas that involve a higher degree of judgement or complexity, and major sources of estimation
uncertainty that have a significant risk of resulting in a material adjustment within the next financial year. Detailed information about each of
these estimates and judgements is included in the related notes together with information about the basis of calculation for each affected line
item in the financial statements.
Measurement of the expected credit loss allowance
The measurement of the expected credit loss allowance for financial assets measured at amortised cost and FVOCI is an area that requires
the use of complex models and significant assumptions about future economic conditions and credit behaviour (e.g. the likelihood of customers
defaulting and the resulting losses).
A number of significant judgements are also required in applying the accounting requirements for measuring ECL, such as:
Determining criteria for significant increase in credit risk;
• Choosing appropriate models and assumptions for the measurement of ECL;
• Establishing the number and relative weightings of forward-looking scenarios for each type of product/market and the associated ECL;
and
• Establishing groups of similar financial assets for the purposes of measuring ECL.
The Bank evaluates ECLs for 7 portfolios of audited corporates with overdraft limits, audited corporates without overdraft limits, unaudited
corporates with overdraft limits, unaudited corporates without overdraft limits, SMEs with limits, SMEs without limits and Retail loans.
The Group seeks to use collateral, where possible, to mitigate its credit risk on financial assets. The collateral comes in various forms such as
cash, securities, letters of credit/guarantees, real estate, receivables, inventories, other non-financial assets and credit enhancements such as
netting agreements. The fair value of collateral is generally assessed, at a minimum, at inception and based on the Group’s quarterly reporting
schedule, however, some collateral, for example, cash or securities relating to margining requirements, is valued daily. To the extent possible,
the Group uses active market data for valuing financial assets, held as collateral. Other financial assets which do not have a readily determinable
market value are valued using models. Non-financial collateral, such as real estate, is valued based on data provided by third parties such as
mortgage brokers, housing price indices, audited financial statements, and other independent sources.
Collateral repossessed
The Group’s policy is to determine whether a repossessed asset is best used for its internal operations or should be sold. Assets determined to
be useful for the internal operations are transferred to their relevant asset category at the lower of their repossessed value or the carrying value
of the original secured asset. Assets that are determined better to be sold, are immediately transferred to assets held for sale at their value at
the repossession date in line with the Group’s policy.
Offsetting financial instruments
Financial assets and financial liabilities are offset and the net amount reported in the statement of financial position if, and only if, there is a
currently enforceable legal right to offset the recognised amounts and there is an intention to settle on a net basis, or to realise the asset and
settle the liability simultaneously. This is not generally the case with master netting agreements, therefore, the related assets and liabilities are
presented gross in the statement of financial position.
Non-performing loans
Interest on loans and advances is accrued as income until such time as reasonable doubt exists about its recoverability, thereafter and until all
or part of the loan is written off, interest continues to accrue on customer’s accounts but is not included in income. The suspended interest is
recognised as a provision in the statement of financial position. Such suspended interest is deducted from loans and advances in the statement
of financial position. This policy meets the requirements of the Banking Regulations, Statutory Instrument, 205 of 2000.
2.6. CASH AND CASH EQUIVALENTS
Cash and cash equivalents include notes and coins on hand, unrestricted balances held with central bank and highly liquid financial assets with
original maturities of three months or less from the acquisition date that are subject to an insignificant risk of changes in their fair value, and are
used by the Group in the management of its short term commitments.
2.7. PROPERTY AND EQUIPMENT
Equipment is stated at cost less accumulated depreciation and accumulated impairment losses. Such cost includes the cost of replacing part
of the equipment when that cost is incurred, if the recognition criteria are met. Likewise, when a major inspection is performed, its cost is
recognised in the carrying amount of the equipment as a replacement if the recognition criteria are satisfied. The previous remaining carrying
amount is derecognized. All other repair and maintenance costs are recognised in the profit or loss as incurred.
Land and buildings are measured at revalued amount less accumulated depreciation on buildings and impairment losses recognised after the
date of the revaluation. Revaluation of property is performed at the end of each reporting period, by a registered professional valuer.
Any revaluation surplus is recognised in other comprehensive income and accumulated in the revaluation reserve included in the equity section
of the statement of financial position, except to the extent that it reverses a revaluation decrease of the same asset previously recognised in
profit or loss, in which case the increase is recognised in profit or loss. A revaluation deficit is recognised in profit or loss, except to the extent
that it offsets an existing surplus on the same asset recognised in the asset revaluation reserve, the decrease in other comprehensive income
reduces the amount accumulated in equity as the asset revaluation reserve, the decrease in other comprehensive income reduces the amount
accumulated in equity as the asset revaluation reserve. Upon disposal, any revaluation reserve relating to the particular asset being sold is
transferred to retained earnings.
An annual transfer from the asset revaluation reserve to retained earnings is made for the difference between depreciation based on the
revalued carrying amount of the assets and depreciation based on the assets original cost. Additionally, accumulated depreciation as at the
revaluation date is eliminated against the gross carrying amount of the asset and the net amount is restated to the revalued amount of the asset.
Upon disposal, any revaluation reserve relating to the particular asset being sold is transferred to retained earnings.
The guiding principle of the Expected Credit Loss evaluation is to reflect the general pattern of deterioration or improvement in the credit quality
of financial instruments and allocate commensurate loss provisions. Under the general approach, there are two measurement bases:
An item of property and plant and equipment is derecognised upon disposal or when no future economic benefits are expected from its use or
disposal. Any gain or loss arising on derecognition of the asset (calculated as the difference between the net disposal proceeds and the carrying
amount of the asset) is included in profit or loss in the year the asset is derecognised.
• 12-month ECLs (Stage 1 ECLs) that is evaluated for all financial instruments with no significant deterioration in credit quality since initial
recognition.
• Lifetime ECLs (Stages 2 and 3 ECLs) that is evaluated for financial instruments for which significant increase in credit risk or default has
occurred on an individual or collective basis.
Residual values and the useful life of assets are reviewed at least at each financial year end. Where the residual value of an asset increases to
an amount that is equal to or exceeds its carrying amount, then the depreciation of the asset ceases. Depreciation will resume only when the
residual value decreases to an amount below the asset’s carrying amount.
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IN PURSUIT OF EXCELLENCE Continued from Page 6
Owned assets
on a straight line basis over the life of the guarantee, or in full, depending on the conditions attached to the guarantee.
The cost of self-constructed assets includes the cost of materials, direct labour and an appropriate proportion of attributable overheads which
are directly attributable to the assets.
2.14. WRITE-OFFS
Depreciation
Depreciable amount is the cost of an asset or other amount substituted for cost less its residual value. Depreciation is provided to write off
the depreciable amount of property and equipment over their estimated useful lives to their estimated residual values at the following rates per
annum, on a straight-line basis.
Financial assets are written off where the recovery efforts have been pursued actively over one year without success or when it is uneconomical
and inefficient to keep carrying the debt in the books as the chances of recovery become slim. Such accounts become subjects of write-backs
in the event of recovery.
Partial write-offs may be possible in cases where collateral security held is inadequate to expunge the debt in full.
Computers
Motor Vehicles
Furniture and Equipment
Buildings
Land and capital work-in-progress are not depreciated.
2.8. NON-CURRENT ASSETS HELD FOR SALE
2.15. FEES AND COMMISSION INCOME
20%
25%
20%
2%
Fees and commission income and expense that are integral to the effective interest rate on a financial asset or financial liability are included in
the measurement of the EIR.
Other fees and commission – including retail banking customer fees, corporate banking and credit related fees, fees from financial guarantee
contracts, commission from international banking activities and fees from corporate finance – are recognised as the related services are
performed. If a loan commitment is not expected to be drawn down of a loan, then the related commitment fees are recognised on a straight
line basis over the commitment period.
Other fees and commitment expense relate mainly to transaction and service fees, which are expensed as the services are received.
The performance obligations, as well as the timing of their satisfaction, are identified, and determined, at the inception of the contract.
The bank receives collateral from counter-parties in form of immovable property and other approved qualifying collateral as security against
loan advances in the normal course of the business. It is not the intention of the bank to recover loans advanced through collateral disposal,
as the bank will always consider all the options available to recover loans advanced to customers, by considering the borrowers’ changed
circumstances and cash flows and to find out whether restructuring options will result in the customers settling their outstanding obligations to
the bank.
However, in the unlikely event that the bank is left with no option, except to dispose the loan collateral security, and all the formalities have
been completed by the borrower to have the collateral transferred to the bank, such collateral will not become part of the bank’s asset portfolio.
The Bank will initiate the process of disposal of the recovered collateral in order to clear the customer’s outstanding obligations with the bank.
2.16. INTEREST INCOME
For all financial instruments measured at amortised cost and financial instruments designated at fair value through profit or loss, interest income
or expense is recorded using the effective interest rate (EIR), which is the rate that exactly discounts the estimated future cash payments or
receipts through the expected life of the financial instrument or a shorter period, where appropriate, to the net carrying amount of the financial
asset or liability.
Interest income includes income arising out of the banking activities of lending and investing.
Such immovable properties and the other approved qualifying collateral will be accounted for under Non-current assets held for sale, given the
timing differences between the dates the immovable asset is recovered by the bank and the time it will be finally disposed off.
2.17. INTEREST EXPENSE
Initial measurement is the fair value less cost to sell of which the fair values are through a professional valuer. Subsequently the bank will
measure the carrying amount subject to changes in fair value less cost to sale of these assets.
Interest expense arises from deposit taking and borrowings. The expense is recognised in profit or loss as it accrues, taking into account the
effective interest cost of the liability.
2.9.
INTANGIBLE ASSETS
2.18. EMPLOYEE BENEFITS
Intangible assets are initially recognised at cost. Subsequently the assets are measured at cost less accumulated amortisation and any
impairment loss.
Retirement benefits are provided for the Group’s employees through a defined contribution plan and the National Social Security Authority
Scheme.
Amortisation of intangible assets
Defined Contribution Plan
The depreciable amount of an intangible asset with a finite useful life is allocated on a straight line basis over its useful life. The amortisation
rate is as follows:
Obligations for contribution to the defined contribution pension plan are recognised as an expense in profit or loss as they are incurred.
Computer Software
2.10. LEASES
The determination of whether an arrangement is a lease, or it contains a lease is based on the substance of the arrangement and requires an
assessment of whether the fulfilment of the arrangement is dependent on the use of a specific asset or assets and the arrangement conveys
a right to use the asset.
As lessor
Leases where the Group does not transfer substantially all the risks and rewards of ownership of the assets are classified as operating leases.
Initial direct costs incurred in negotiating operating leases are added to the carrying amount of the leased asset and recognised over the lease
term on the same basis as rental income.
The cost of retirement benefits applicable to the National Social Security Authority, which commenced operations on 1 October 1994 is
determined by the systematic recognition of legislated contributions.
20%
Short term employee benefits/and share based payments
Short term employee benefits are expensed as the related service is provided. A liability is recognised for the amount expected to be paid 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.
Share based payments
The Group issues share options to certain employees in terms of the Employee Share Option Scheme which is an equity settled share-based
payment scheme. Share options are measured at fair value of the equity instruments at the grant date. The fair value determined at the
grant date of the options is expensed over the vesting period, based on the Group’s estimate of shares that will eventually vest. Fair value
is measured using the Black-Scholes option pricing model. The expected life used in the model is adjusted, based on management’s best
estimate, for the effects of non-transferability, exercise restrictions and other behavioural considerations.
As lessee
2.19. PROVISIONS
In terms of IFRS 16, the Group recognises lease liabilities in relation to leases which had previously been classified as ‘operating leases’ under
the principles of IAS 17, Leases. These liabilities are measured at the present value of the remaining lease payments, discounted using the
Group’s incremental borrowing rate.
Provisions are recognised when the Group has a present obligation (legal or constructive) as a result of a past event, and it is probable that an
outflow of resources embodying economic benefits will be required to settle the obligation and a reliable estimate can be made of the amount of
the obligation. The expense relating to any provision is presented in profit or loss net of any reimbursements.
The Group has neither enjoyed nor extended any lease payment holidays in its capacity as either lessee or lessor respectively due to COVID-19.
As such, there are no COVID-19 induced lease modifications applicable during the period under review.
2.20. SHAREHOLDERS’ FUNDS AND SHAREHOLDERS’ LIABILITIES
Measurement of right-of-use assets
The associated right-of-use assets for property leases are measured on a prospective basis. The right-of-use assets are measured at the
amount equal to the lease liability, adjusted by the amount of any prepaid or accrued lease payments relating to that lease recognised in the
consolidated statement of financial position.
Lease payments are allocated between principal and finance cost. The finance cost is charged to profit or loss over the lease period so as to
produce a constant periodic rate of interest on the remaining balance of the liability for each period.
Right-of-use assets are generally depreciated over the shorter of the asset’s useful life and the lease term on a straight-line basis. In
circumstances where the Group is reasonably certain to exercise a purchase option, the right-of-use asset is depreciated over the underlying
asset’s useful life. The Group revalues its land and buildings that are presented within property and equipment and it has elected not to do so
for the right-of-use buildings held by the Group.
2.11. IMPAIRMENT OF NON FINANCIAL ASSETS
The carrying amounts of the Group’s non-financial assets other than consumables are reviewed at each reporting date to determine whether
there is any indication of impairment. If any such indication exists, the assets’ recoverable amounts are estimated.
An impairment loss is recognised whenever the carrying amount of an asset or its cash-generating unit exceeds its recoverable amount. The
recoverable amount of assets is the greater of their fair value less cost to sell and value in use. 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. In determining fair value less costs to sell, an appropriate valuation model is used. Impairment losses
of continuing operations are recognised in profit or loss in those expense categories consistent with the functions of the impaired asset, except
for property previously revalued where the revaluation was taken to other comprehensive income. In this case, the impairment is also recognised
in other comprehensive income up to the amount of any previous revaluation. For assets excluding goodwill, an assessment is made at each
reporting date as to whether there is any indication that previously recognised impairment losses may no longer exist, or may have decreased.
If such an indication exists the bank estimates the assets or CGU’s recoverable amount.
A previously recognised impairment loss is reversed only if there has been a change in the assumptions used to determine the assets
recoverable amount since the last impairment loss was recognised.
The reversal is limited so that the carrying amount of the asset does not exceed its recoverable amount, nor exceeds the carrying amount
that would have been determined, net of depreciation, had no impairment loss been recognised for the asset in prior years. Such reversal is
recognised in profit or loss.
2.12. INVESTMENT PROPERTIES
Investment properties are measured initially at cost, including transaction costs. The carrying amount includes the cost of replacing part of an
existing investment property at the time that cost is incurred if the recognition criteria are met, and excludes the costs of day to day servicing of
an investment property. Subsequent to initial recognition, investment properties are stated at fair value, which reflects market conditions at the
reporting date. Rental income from investment properties is recognised as revenue on a straight-line basis over the term of the lease. Lease
incentives granted are recognised as an integral part of the total rental income, over the term of the lease. Gains or losses arising from changes
in the fair values of investment properties are included in profit or loss in the year in which they arise. Revaluation is done at the end of each
year by a registered independent professional valuer.
Investment properties are derecognised when either they have been disposed of or when the investment property is permanently withdrawn
from use and no future economic benefit is expected from its disposal. Any gains or losses on the retirement or disposal of an investment
property are recognised in profit or loss in the year of retirement or disposal.
Transfers are made to or from investment property only when there is a change in use. For a transfer from investment property to owner
occupied property, the deemed cost for subsequent accounting is the fair value at the date of change in use. If owner occupied property
becomes an investment property, the Group accounts for such property in accordance with the policy stated under property and equipment up
to the date of change in use.
2.13. FINANCIAL GUARANTEES
In the ordinary course of business, the banking subsidiary give financial guarantees, consisting of letters of credit, guarantees and acceptances.
Financial guarantees are initially recognised in the financial statements at fair value, being the premium received. Subsequent to initial
recognition, the Group’s liability under each guarantee is measured at the higher of the amount initially recognised less, where appropriate,
cumulative amortisation recognised in profit or loss, and the best estimate of expenditure required to settle any financial obligation arising as a
result of the guarantee.
Any increase in the liability relating to financial guarantees is recognised in the profit or loss. The premium received is recognised in profit or loss
Shareholders’ funds and shareholders’ liabilities refers to the total investment made by the shareholders in the Group and it consists of share
capital, share premium, share options reserve, functional currency translation reserve, retained earnings, redeemable ordinary shares and
subordinated loans. Incremental costs directly attributable to the issue of ordinary shares are recognised as a deduction from equity. Income tax
relating to transaction costs of an equity transaction is accounted for in accordance with IAS 12.
Treasury shares
Own equity instruments that are reacquired (treasury shares) are recognised at cost and deducted from equity. No gain or loss is recognised in
profit or loss on the purchase, sale, issue or cancellation of the Group’s own equity instruments. Any difference between the carrying amount
and the consideration, if reissued, is recognised in the share premium.
2.21. USE OF ESTIMATES, JUDGEMENTS AND ASSUMPTIONS
In preparation of the consolidated and separate financial statements, Directors have made judgments, estimates and assumptions that affect
the application of accounting policies and the reported amounts of assets, liabilities, income and expenses. Actual results may differ from these
estimates.
Estimates and underlying assumptions are reviewed on an ongoing basis. Revisions to estimates are recognised prospectively.
Information about assumptions and estimation uncertainties that have a significant risk of resulting in a material adjustment in the year ending
31 December 2021 is included in the following notes.
Land and buildings
The properties were valued by an independent professional valuer. The determined fair value of land and buildings is most sensitive to significant
unobservable inputs. The property market is currently not stable due to liquidity constraints.
Investment properties
Investment properties were valued by an independent professional valuer. The properties market is currently not stable due to liquidity
constraints.
Impairment losses on loans and advances
The Group reviews its individually significant loans and advances at each reporting date to assess whether an impairment loss should be
recorded in profit or loss. In particular, judgement by management is required in the estimation of the amount and timing of future cash flows
when determining the impairment loss.
In estimating these cash flows, the Group makes judgements about the borrower’s financial situation and the net realisable value of collateral.
These estimates are based on assumptions about a number of factors and actual results may differ, resulting in future changes to the allowance.
Loans and advances that have been assessed individually and found not to be impaired and all individually insignificant loans and advances are
then assessed collectively, in groups of assets with similar risk characteristics, to determine whether provision should be made due to incurred
loss events for which there is objective evidence but whose effects are not yet evident.
COVID-19
The Directors fully acknowledge the unprecedented challenges and uncertainties posed by the COVID-19 pandemic. In that regard, significant
judgments have generally been applied in light of the likely impacts of COVID-19 on the Group’s activities.
Going concern
The Directors have assessed the ability of the Group and Company to continue operating as a going concern and believe that the preparation
of these financial statements on a going concern basis is still appropriate.
Determination of the functional currency
The Government of Zimbabwe adopted a multi-currency regime in 2009. The British Pound, Euro, United States Dollar (USD ), South African
Rand (ZAR) and Botswana Pula were adopted as the multi-currency basket in February 2009. In January 2014, the Reserve Bank of Zimbabwe
(RBZ) issued a Monetary Policy Statement which added the Chinese Yuan, Australian Dollar, Indian Rupee, Japanese Yen into the basket of
multi-currencies. At the onset, the USD and the ZAR were the commonly used currencies, with the USD eventually gaining prominence resulting
in it being designated as the functional and presentation currency by the transacting public and the Monetary Authorities, including the Group.
Between 2014 and 2016, the Zimbabwean economy experienced a massive liquidity crisis which eventually prompted the Monetary Authorities
to introduce the bond notes in November 2016 whilst encouraging the public to continue using the other currencies in the multi-currency basket.
The bond notes were introduced at an official fixed exchange rate of 1:1 with the USD and the Monetary Authorities specifically directed financial
institutions not to open separate vault and cash accounts for the USD and the bond notes. The introduction of the bond notes gave rise to a
three (3) tier pricing system wherein sellers and service providers would quote three (3) separate prices (USD , bond notes and RTGS/electronic
7
IN PURSUIT OF EXCELLENCE Continued from Page 7
transfers) for their merchandise and services respectively. Significant discounts were being offered for USD payments whilst a premium would
be added for prices quoted in bond notes or electronic settlement via the Real Time Gross Settlement System (RTGS). These developments
triggered a debate around the functional currency of Zimbabwe. It should be noted that the Group never participated in the three tier pricing and
none of its products had multiple prices during the same period.
In October 2018, the Monetary Authorities instructed financial institutions to separate bond notes and USD accounts and indicated that
corporates and individuals could proceed to open Nostro Foreign Currency Accounts (FCA), for foreign currency holdings, which were now being
exclusively distinguished from the existing RTGS based accounts. However, it should be noted that at the time of this policy pronouncement, the
Monetary Authorities did not state that they had introduced a new currency for Zimbabwe, which actually meant that the USD remained as the
currency of reference. By 31 December 2018, there had been no pronouncement by the Monetary Authorities to the effect that there had been
a new currency introduced, which could be considered as the country’s functional currency.
Standard
Effective Date
Executive Summary
Amendment to IAS 1,
‘Presentation of
Financial
Statements’ on
Classification
of Liabilities as
Current or
Non-current
Annual periods
beginning on or after
1 January 2023
The amendment clarifies that liabilities are classified as either current or non-current, depending
on the rights that exist at the end of the reporting period. A number of requirements are required to
be met in conjunction with this amendment.
(Published Jan 2020)
On 22 February 2019, the Reserve Bank of Zimbabwe (RBZ) issued an Exchange Control Directive, RU 28 of 2019 which established an
interbank foreign exchange market to formalise the buying and selling of foreign currency through the Banks and Bureaux de change. In order
to establish an exchange rate between the current monetary balances and foreign currency, the Monetary Authorities denominated the existing
RTGS balances in circulation as RTGS Dollars.
Initial trades on 22 February 2019 were at USD 1: RTGS$2.5. On the same date, Statutory Instrument 33 of 2019 was also issued and it
specified that for accounting and other purposes, all assets and liabilities that were in USD immediately before the 22nd of February 2019 were
deemed to have been valued in RTGS Dollars at a rate of 1:1 with the USD .
Amendments to IAS 12,
Income Taxes: Deferred
Tax
related to Assets and
Liabilities
arising from a Single
Transaction
Annual periods
beginning on or after
1 January 2023.
Earlier application
is permitted.
(Published May 2021)
On 24 June 2019, the Monetary Authorities announced that the multi-currency regime, which the country was operating in since February 2009
had been discontinued and the country had adopted a mono-currency regime meaning that the sole legal tender would be the Zimbabwe Dollar
(ZWL ).
On 26 March 2020, the Reserve Bank of Zimbabwe in a press statement announced various interventions in response to the financial
vulnerabilities caused by the COVID-19 pandemic. One of the measures announced therein was the authorization of the use of free-funds in
paying for goods and services, in terms of Statutory Instrument (SI) 85 of 2020. On 24 July 2020, the Government of Zimbabwe issued Statutory
Instrument (SI) 185 of 2020, which granted permission to display, quote or offer prices for all goods and services in both Zimbabwe dollars and
foreign currency at the interbank exchange rate.
On 23 June 2020, the Reserve Bank of Zimbabwe introduced the Foreign Exchange Auction System, effectively abandoning the fixed foreign
currency exchange rate regime which had been prevailing for the greater part of 2020. Significant trades have been recorded on the platform
and significant movements in the exchange rate have been resultantly recorded.
Annual periods
beginning on or after
1 January 2023.
Earlier application
is permitted.
(Published February
2021)
Narrow scope
amendments to
IAS 1 ‘Presentation of
Financial Statements’,
Practice statement 2
and IAS 8
‘Accounting Policies,
Changes
in Accounting Estimates
and
Errors’
In February 2022, the authorities announced multi-currency regime where other basket of currency were acceptable for transaction purposes.
3.
SEGMENT INFORMATION
The amendments require companies to recognise deferred tax on transactions that, on initial
recognition give rise to equal amounts of taxable and deductible temporary differences.
The amendments aim to improve accounting policy disclosures and to help users of the financial
statements to distinguish changes in accounting policies from changes in accounting estimates.
In light of the developments summarised above, the Directors concluded that the Group’s functional currency remains the Zimbabwe dollar (ZWL
) following its change from USD with effect from 22 February 2019.
Lease arrangements
The Directors have exercised significant judgement on determining whether the various contractual relationships which the Group is party to,
contain lease arrangements which fall into the scope of IFRS 16. Significant judgement was also exercised in determining whether the Group
is reasonably certain that it will exercise extension options present in lease contracts as well.
2.22. STANDARDS ISSUED AND EFFECTIVE
a)
International Financial Reporting Standards and amendments effective for the first time for December 2022 year-end
Standard
Effective Date
Executive Summary
IFRS 16, ‘Leases’
COVID-19-
Related Rent
Concessions
Amendment
Amendment to IFRS 3,
‘Business combinations’
Asset
or liability in a business
combination clarity
Annual periods
beginning on or after
1 April 2021
(early adoption is
permitted)
(Published
March 2021)
Annual periods
beginning on or after
1 January 2022
The IASB has provided lessees (but not lessors) with relief in the form of an optional exemption from
assessing whether a rent concession related to COVID-19 is a lease modification, provided that the
concession meets certain conditions. On 31 March 2021, the IASB published an additional
amendment to extend the date of the practical expedient from 30 June 2021 to 30 June 2022.
Lessees can elect to account for such rent concessions in the same way as they would if they were
not lease modifications. In many cases, this will result in accounting for the concession as variable
lease payments in the period(s) in which the event or condition that triggers the reduced payment
occurs. The March 2021 amendment will only be available if an entity chose to apply the May 2020
optional practical expedient.
The amendment to IAS 16 prohibits an entity from deducting from the cost of an item of PPE any
proceeds received from selling items produced while the entity is preparing the asset for its intended use
(for example, the proceeds from selling samples produced when testing a machine to see if it is
functioning properly). The proceeds from selling such items, together with the costs of producing them,
are recognised in profit or loss.
Amendments to IAS 37
‘Provisions, Contingent
Liabilities and Contingent
Assets’ on Onerous
Contracts—Cost of
Fulfilling a
Contract
Annual periods
beginning on or after
1 January 2022
The amendment clarifies which costs an entity includes in assessing whether a contract will be
loss-making. This assessment is made by considering unavoidable costs, which are the lower of the net
cost of exiting the contract and the costs to fulfil the contract. The amendment clarifies the meaning of
‘costs to fulfil a contract’. Under the amendment, costs to fulfil a contract include incremental costs and
the allocation of other costs that relate directly to fulfilling the contract.
Annual improvements
cycle
2018 -2020
Annual periods
beginning on or after
1 January 2022
These amendments include minor changes to:
- IFRS 1, ‘First time adoption of IFRS’ has been amended for a subsidiary that becomes a first-time
adopter after its parent. The subsidiary may elect to measure cumulative translation differences for
foreign operations using the amounts reported by the parent at the date of the parent’s transition to IFRS.
- IFRS 9, ‘Financial Instruments’ has been amended to include only those costs or fees paid between the
borrower and the lender in the calculation of “the 10% test” for derecognition of a financial liability. Fees
paid to third parties are excluded from this calculation.
- IFRS 16, ‘Leases’, amendment to the Illustrative Example 13 that accompanies IFRS 16 to remove the
illustration of payments from the lessor relating to leasehold improvements. The amendment intends to
remove any potential confusion about the treatment of lease incentives.
- IAS 41, ‘Agriculture’ has been amended to align the requirements for measuring fair value with those of
IFRS 13. The amendment removes the requirement for entities to exclude cash flows for taxation when
measuring fair value.
Annual periods
beginning on or after
1 January 2022
The amendment clarifies that liabilities are classified as either current or non-current, depending on the
rights that exist at the end of the reporting period. Classification is unaffected by expectations of the entity
or events after the reporting date (for example, the receipt of a waiver or a breach of covenant).
Amendment to IAS 1
‘Presentation of
Financial
Statements’ on
Classification
of Liabilities as
Current or
Non-current
b)
International Financial Reporting Standards, interpretations and amendments issued but not effective
Retail banking
Individual customers deposits and consumer loans, overdrafts, credit card facilities and funds transfer facilities.
Corporate banking
Loans and other credit facilities and deposit and current accounts for corporate and institutional customers.
Treasury
Money market investment, securities trading, accepting and discounting of instruments and foreign currency trading.
International banking
Handles the Group’s foreign currency denominated banking business and manages relationships with correspondent banks.
Digital Banking
Handles the Bank’s Digital Banking products including Card and POS services.
Management monitors the operating results of its business units separately for the purpose of making decisions about resource allocation and
performance assessment. Segment performance is evaluated based on operating profit or loss which in certain respects is measured differently
from operating profit or loss in the consolidated financial statements. Income taxes are managed on a Group basis and are not allocated to
operating segments.
Interest income is reported net as management primarily relies on net interest revenue as a performance measure, not the gross income and
expense.
Transfer prices between operating segments are on arm’s length basis in a manner similar to transactions with third parties.
No revenue from transactions with a single external customer or counterparty amounted to 10% or more of the Group’s total revenue in 2021
or 2022.
4.
INTEREST INCOME
Inflation Adjusted
Historical Cost*
2022
ZWL ‘000
2021
ZWL ‘000
2022
ZWL ‘000
2021
ZWL ‘000
Loans and advances to banks
Loans and advances to customers
Investment securities
1 032 566
17 456 080
2 581 785
101 620
8 926 654
1 769 790
959 558
13 085 358
1 755 252
23 027
2 124 634
421 220
21 070 430
10 798 064
15 800 168
2 568 881
5.
INTEREST EXPENSE
Inflation Adjusted
Historical Cost*
2022
ZWL ‘000
2021
ZWL ‘000
2022
ZWL ‘000
2021
ZWL ‘000
Due to banks
Due to customers
Other borrowed funds
4 736 698
1 324 489
123 193
6 184 380
2 511 764
3 578 448
382 573
115 686
742 178
157 325
3 010 023
4 477 951
615 311
39 112
84 648
739 071
Lease liability finance costs*
192 929
48 580
113 430
12 850
6 377 309
3 058 602
4 591 381
751 920
* Finance costs related to the lease liability do not represent the cost of funding asset creation that is the Loan book. The prior year amounts
were previously included in administration costs as part of operating expenditure of the group.
Standard
Effective Date
Executive Summary
6.
NON-INTEREST INCOME AND OTHER COMPREHENSIVE INCOME
IFRS 17, ‘Insurance
contracts’
Annual periods
beginning on or
after 1 January
2023
Early application is
permitted for
entities that apply
IFRS 9, ‘Financial
Instruments’, and
IFRS 15, ‘Revenue
from Contracts with
Customers’, at or
before the date of
initial application of
IFRS 17.
The IASB issued IFRS 17, ‘Insurance contracts’, and thereby started a new epoch of accounting for
insurers. Whereas the current standard, IFRS 4, allows insurers to use their local GAAP, IFRS 17 defines
clear and consistent rules that will significantly increase the comparability of financial statements. For
insurers, the transition to IFRS 17 will have an impact on financial statements and on key performance
indicators.
Under IFRS 17, the general model requires entities to measure an insurance contract at initial recognition
at the total of the fulfilment cash flows (comprising the estimated future cash flows, an adjustment to
reflect the time value of money and an explicit risk adjustment for non-financial risk) and the contractual
service margin. The fulfilment cash flows are remeasured on a current basis each reporting period. The
unearned profit (contractual service margin) is recognised over the coverage period.
Aside from this general model, the standard provides, as a simplification, the premium allocation
approach. This simplified approach is applicable for certain types of contract, including those with a
coverage period of one year or less.
For insurance contracts with direct participation features, the variable fee approach applies. The variable
fee approach is a variation on the general model. When applying the variable fee approach, the entity’s
share of the fair value changes of the underlying items is included in the contractual service margin. As a
consequence, the fair value changes are not recognised in profit or loss in the period in which they occur
but over the remaining life of the contract.
Given the Bancassurance arm of the Group systems are being set up to ensure implemtation is
successful on the effective date.
IFRS 17, Insurance
contracts
Amendments
Annual periods
beginning on or
after 1 January
2023
In response to some of the concerns and challenges raised, the Board developed targeted amendments
and a number of proposed clarifications intended to ease implementation of IFRS 17, simplify some
requirements of the standard and ease transition. The amendments relate to eight areas of IFRS 17, and
they are not intended to change the fundamental principles of the standard or unduly disrupt
implementation already underway.
6.1. Fees and commission income
Inflation Adjusted
Historical Cost*
2022
ZWL ‘000
2021
ZWL ‘000
2022
ZWL ‘000
2021
ZWL ‘000
Retail banking customer fees
Corporate banking credit related fees
Financial guarantee fees
International banking commissions
5 339 810
606 606
1 101 117
676 912
2 664 586
4 053 093
590 317
497 453
742 423
420 603
828 010
370 983
Digital banking fees
7 619 047
7 954 437
5 032 826
15 343 491
12 449 215
10 705 516
634 061
136 990
114 700
171 405
1 870 004
2 927 160
8
IN PURSUIT OF EXCELLENCE Continued from Page 8
6.2. Other Income
8.2. Current tax liabilities / (assets)
Inflation Adjusted
Historical Cost
Inflation Adjusted
Historical Cost*
2022
ZWL ‘000
2021
ZWL ‘000
2022
ZWL ‘000
2021
ZWL ‘000
2022
ZWL ‘000
2021
ZWL ‘000
811 441
( 289 447)
262 116
2 225 576
316 087
( 11 372)
-
2022
ZWL ‘000
236 049
-
54 928
2021
ZWL ‘000
57 205
-
-
Trade and other investments fair value gains
59 037
37 460
218 556
8 445
At 1 January
Fair value gains on investment properties
6 830 600
2 864 068
16 380 730
2 029 063
Monetary adjustment
Profit on disposal of property and equipment
(Loss)/ profit on disposal of investment properties
Rental income
Recoveries
1 415
( 34 152)
92 529
8 482
2 002
23 384
59 062
43 474
1 803
26 722
95 645
5 894
Other operating income
1 117 128
177 368
1 210 985
462
Effect of exchange rate movement
5 788
Charge for the year
13 972
Payments during the year
( 2 965 639)
( 1 847 201)
( 2 472 504)
( 505 915)
10 812
38 877
44 047
811 441
44 049
236 049
2 353 927
2 225 576
684 759
8 075 039
3 206 818
17 940 335
2 107 419
9.
EARNINGS PER SHARE
6.3. Other comprehensive income
Inflation Adjusted
Historical Cost*
2022
ZWL ‘000
2021
ZWL ‘000
2022
ZWL ‘000
Revaluations of land and buildings
714 046
1 722 254
7 749 051
Tax effect
( 176 512)
( 425 741)
( 1 915 366)
537 534
1 296 513
5 833 685
Basic earnings per share is calculated by dividing the profit for the period attributable to ordinary equity holders of NMBZ Holdings Limited by
the weighted average number of ordinary shares outstanding during the period.
Diluted earnings per share is calculated by dividing the profit attributable to ordinary equity holders of NMBZ Holdings Limited adjusted for the
after tax effect of:
a) any dividends or other items related to dilutive potential ordinary shares deducted in arriving at profit or loss attributable to ordinary equity
holders of the parent entity;
b) any interest recognised in the period related to dilutive potential ordinary shares; and
c) any other changes in income or expense that would result from the conversion of the dilutive potential ordinary shares; by the weighted
average number of ordinary shares outstanding during the year plus the weighted average number of ordinary shares that would be issued
on the conversion of all the dilutive potential ordinary shares into ordinary shares.
9.1. Earnings
2021
ZWL ‘000
1 408 660
( 559 929)
848 731
7.
OPERATING EXPENDITURE
The net operating income is after charging the following:
Inflation Adjusted
Historical Cost*
2022
ZWL ‘000
2021
ZWL ‘000
2022
ZWL ‘000
2021
ZWL ‘000
Inflation Adjusted
Historical Cost*
2022
ZWL ‘000
2021
ZWL ‘000
2022
ZWL ‘000
2021
ZWL ‘000
Profit for the period
12 002 351
6 432 543
25 468 506
Headline earnings for the period
5 944 875
4 229 162
12 055 490
2 942 025
1 403 484
Administration costs
6 761 843
5 672 706
4 826 405
1 310 682
Audit fees:
- Current year
- Prior year
Amortisation of intangible assets
Depreciation (excluding right of use assets)
Depreciation – right of use assets
Directors’ remuneration
- Fees for services as directors
- Services rendered
- Expenses
159 128
83 006
114 704
-
289 691
608 925
262 154
175 916
165 060
-
10 856
-
12 711
290 370
170 109
100 355
96 363
-
3 992
-
4 395
222 437
71 926
129 973
122 188
-
7 785
20 774
-
2 865
65 922
38 606
22 665
21 688
-
977
Staff costs – salaries, allowances and related
costs*
10 745 403
5 744 797
8 364 152
1 364 095
9.2. Number of shares
9.2.1. Basic earnings per share
Weighted average number of ordinary shares for
basic earnings per share
Inflation Adjusted
Historical Cost*
2022
2021
2022
2021
Number of shares at beginning of period
404 157 689
404 171 689
404 157 689
404 171 689
Share options exercised
Shares issued - scrip dividend
176 402
1 999 625
-
-
176 402
1 999 625
-
-
Share buy back
( 8 138 535)
( 14 000)
( 8 138 535)
( 14 000)
398 195 181
404 157 689
398 195 181
404 157 689
19 003 060
12 074 054
13 733 992
2 825 609
9.2.2. Diluted earnings per share
**Included in Staff costs - salaries, allowances and related costs are employee benefit costs relating share based payments amounting to ZWL
254 354 000 (2021: ZWL nil).
8.
TAXATION
Inflation Adjusted
Historical Cost*
2022
2021
2022
2021
Inflation Adjusted
Historical Cost*
Effect of dilution:
Income Tax Charge
2022
ZWL ‘000
2021
ZWL ‘000
2022
ZWL ‘000
Current tax
Deferred tax
2 225 576
1 842 965
4 068 542
2 353 927
720 661
3 074 588
2 225 576
1 283 553
3 509 130
2021
ZWL ‘000
684 759
227 838
912 597
Share options approved but not granted (ESOS)
10 141 568
4 614 841
10 141 568
4 614 841
408 336 749
408 772 530
408 336 749
408 772 530
9.2.3. Headline earnings
Inflation Adjusted
Historical Cost*
2022
2021
2022
2021
Number of shares for basic earnings
398 195 181
404 157 689
398 195 181
404 157 689
8.1. Reconciliation of income tax charge/(credit)
Profit for the period
12 002 349
6 432 543
25 468 506
2 942 025
Income Tax Expense/(Credit)
2022
ZWL ‘000
2021
ZWL ‘000
2022
ZWL ‘000
2021
ZWL ‘000
Trade and other investments fair value gains
( 59 037)
( 37 460)
( 218 556)
( 8 445)
Fair value gains on investment property
( 6 830 600)
( 2 864 068)
( 16 380 730)
( 2 029 063)
Inflation Adjusted
Historical Cost*
Add/(deduct) non-recurring items
Based on results for the period at a rate of
24.72% (2021:24.72%)
Tax effect of:
3 972 724
2 350 163
7 163 272
952 863
Profit on disposal of property and equipment
( 1 415)
( 2 002)
( 1 803)
Non - recurring sundry income
( 1 189 691)
-
( 1 189 691)
34 152
1 989 118
5 944 875
( 23 384)
723 533
( 26 722)
4 404 487
4 229 162
12 055 490
1 403 484
( 462)
-
( 5 788)
505 217
- Income not subject to tax*
( 2 147 150)
( 1 722 391)
- Non-deductible expenses**
8 627 351
2 446 816
( 979 237)
3 709 480
( 388 284)
Loss/(profit) on disposal of investment
properties
348 018
Tax effect thereon
- Change in tax bases***
( 6 384 384)
-
( 6 384 384)
-
4 068 541
3 074 588
3 509 130
912 597
9.3. Earnings per share (ZWL cents)
*Income not subject to tax includes coupon interest from Treasury Bills and income from mortgages for the Group as well as non-deductible
income attributable to the unwinding of share based payments for the company.
** Non-deductible expenses include provisions, disallowable pension deductions and depreciation.
***The change in tax bases arose from the legislative pronouncement in the Finance (No.2 ) Act of 2020 which resulted in the rebasing of
unredeemed foreign currency capital balances on assets ranking for capital allowances using the USD /ZWL official exchange rate prevailing
on 1 January 2020.
Inflation Adjusted
Historical Cost*
2022
(ZWL cents)
2021
(ZWL cents)
2022
(ZWL cents)
2021
(ZWL cents)
3014
2939
1456
1592
1574
1035
6396
6237
2952
728
720
343
Basic
Diluted
Headline
10. SHARE CAPITAL
10.1. Authorised
Inflation Adjusted
Historical Cost*
31-Dec
2022
Shares
million
31-Dec
2021
Shares
million
31-Dec
2022
ZWL ‘000
31-Dec
2021
ZWL ‘000
Ordinary shares of ZWL 0.00028 each
600
600
168
168
9
IN PURSUIT OF EXCELLENCE Continued from Page 9
10.2. Issues and fully paid
10.2.1.
Ordinary shares
Balance at 01 January
Share options exercised
Share buy back
Redeemable ordinary shares
Shares issued - scrip dividend
Balance at 31 December
Balance at 01 January
Share options exercised
Share buy back
Redeemable ordinary shares
Shares issued – scrip dividend
Consequently, the Group registered its legacy debts, which included the subordinated term loan and offshore lines of credit and transferred the
ZWL equivalent of these debts at a rate of USD /ZWL 1:1 to the RBZ in terms of the RBZ directive. During the year USD 1 400 000 Treasury
Bills were received by the Bank at 0% coupon rate with a three year maturity profile.
As at 31 December 2022, there was communication to the effect that the USD Libor will cease to be a reference rate for the offshore borrowings
with effect from 30 June 2023. As such, the Group’s creditors have chosen to move to the Secured Overnight Accommodation Rate (SOFR) as
the reference rate on borrowings by the Group effective 01 July 2023. Accordingly all agreements between the Group and the creditors shall be
amended to accommodate the new reference rate terms, which date shall be on or before 30 June 2023.
31-Dec
2022
ZWL ‘000
31-Dec
2021
ZWL ‘000
19 752
19 752
13. DEPOSITS
13.1. Deposits and current accounts from customers
0
-
46
2
-
-
-
-
Inflation Adjusted
Historical Cost*
2022
ZWL ‘000
2021
ZWL ‘000
2022
ZWL ‘000
2021
ZWL ‘000
Inflation Adjusted
31-Dec
2021
Shares
million
300
-
( 0)
-
-
300
19 800
19 752
GROUP
Historical Cost*
31-Dec
2021
Shares
million
300
-
( 0)
-
-
31-Dec
2022
ZWL ‘000
84
0
-
29
2
31-Dec
2021
ZWL ‘000
84
-
-
-
-
Current and deposit accounts from customers
53 215 217
35 840 230
53 215 217
10 425 947
13.2. Maturity analysis
Inflation Adjusted
Historical Cost*
2022
ZWL ‘000
2021
ZWL ‘000
2022
ZWL ‘000
2021
ZWL ‘000
Less than 1 month
47 046 998
28 500 384
47 046 998
8 290 781
31-Dec
2022
Shares
million
300
0
( 8)
104
8
404
31-Dec
2022
Shares
million
300
0
( 8)
104
8
Balance at 31 December
404
300
115
84
1 to 3 months
3 to 6 months
6 493 557
7 285 417
6 493 557
2 119 333
706
11 526
706
10.2.2.
Redeemable ordinary shares
Balance at 01 January
Conversion to ordinary shares
Balance at 31 December
Balance at 01 January
Conversion to ordinary shares
Balance at 31 December
31-Dec
2022
Shares
million
104
( 104)
-
31-Dec
2022
Shares
million
104
( 104)
-
Inflation Adjusted
31-Dec
2021
Shares
million
104
-
104
Historical Cost*
31-Dec
2021
Shares
million
104
-
104
31-Dec
2022
ZWL ‘000
100
( 100)
-
31-Dec
2022
ZWL ‘000
29
( 29)
-
31-Dec
2021
ZWL ‘000
100
-
100
31-Dec
2021
ZWL ‘000
29
-
29
Of the unissued ordinary shares of 92 million shares (2021 - 196 million), options which may be granted in terms of the 2023 and 2024 ESOS
amount to 10 141 568 (2021 – 4 614 8419). During the year 302 424 options were exercised at a price of $13.99.
6 months to 1 year
927 087
27 972
927 087
1 to 5 years
Over 5 years
23 784
13 458
23 784
-
1 474
-
13.3. Sectoral analysis of deposits
54 492 132
35 840 230
54 492 132
10 425 947
Inflation Adjusted
Historical Cost*
2022
ZWL ‘000
2021
ZWL ‘000
2022
ZWL ‘000
2021
ZWL ‘000
3 353
8 137
3 914
429
Agriculture
Banks and other financial institutions
Distribution
Individuals
Manufacturing
Mining companies
7 057 450
5 501 425
11 319 809
4 335 092
5 625 352
-
4 768 876
-
5 116 054
4 861 083
4 411 777
917 603
Municipalities and parastatals
6 057 553
11 032 104
7 057 450
5 501 425
11 319 809
4 335 092
5 625 352
-
6 057 553
8 351 989
4 966 547
1 387 269
-
1 488 264
1 414 092
1 283 389
266 931
3 209 246
677 878
698 878
53 215 217
35 840 230
53 215 217
10 425 947
Inflation Adjusted
Historical Cost*
2022
ZWL ‘000
2021
ZWL ‘000
2022
ZWL ‘000
2021
ZWL ‘000
Subject to the provisions of section 214 of the Companies and Other Business Entities Act (Chapter 24:31) of Zimbabwe, the unissued shares
are under the control of the directors.
Services
Transport and telecommunications
8 351 989
4 966 547
2 330 271
2 402 462
11. REDEEMABLE ORDINARY SHARES
Inflation Adjusted
Historical Cost*
2022
ZWL ‘000
2021
ZWL ‘000
2022
ZWL ‘000
2021
ZWL ‘000
14. BORROWINGS
Nominal value (note 10.2.2)
Share premium
Conversion to ordinary shares
29
14 306
( 14 335)
100
49 179
29
14 306
-
( 14 335)
-
49 279
-
29
14 306
-
14 335
On 30 June 2013, the Group received USD 14 831 145 capital from Nederlandse Financierings-Maatschappij Voor Ontiwikkelingslanden N.V.
(FMO), Norwegian Investment Fund for Developing Countries (Norfund) and AfricInvest Financial Sector Holdings (AfricInvest) who were
allocated 34 571 429 shares each (total 103 714 287) for individually investing USD 4 943 715. This amount, net of share issue expenses, was
used to recapitalise the Bank in order to contribute towards the minimum capital requirements previously set by the Reserve Bank of Zimbabwe
of ZWL 200 million by 31 December 2020. FMO and Norfund came together with Rabobank to form ARISE which is a development finance
institution primarily focusing on investing in African financial institutions to support and enhance financial service delivery in Africa.
NMBZ Holdings Limited (NMBZ) entered into a share buy-back agreement with Norfund, FMO and AfricInvest, where these three strategic
investors have a right at their own discretion at any time after the 5th anniversary (30 June 2018) but before the 9th anniversary (30 June 2022)
of its first subscription date, to request NMBZ to buy back all or part of its NMBZ shares at a price to be determined using the agreed terms
as entailed in the share buy-back agreement. It is a condition precedent that at any point when the share buy-back is being considered, the
proceeds used to finance the buy-back should come from the distributable reserves which are over and above the minimum regulatory capital
requirements. Further, no buy-back option can be exercised by any investor after the 9th anniversary (30 June 2022) of the effective date. As
at 30 June 2022, none of the parties had given notice to the company for the redemption of these shares. The shares have therefore reverted
to ordinary share status.
12. SUBORDINATED TERM LOAN
Banks and financial institutions
Offshore borrowings
Other institutions
600 000
19 076 270
1 599 980
5 159 837
9 921 310
5 250 828
600 000
19 076 270
1 599 980
21 276 250
20 331 975
21 276 250
1 501 000
2 886 116
1 527 469
5 914 585
*Included in Offshore borrowings are loan balances of ZWL5 641 749 953 (2021 ZWL1 310 2876 160), ZWL958 067 460 (2021 ZWL677 596
574) and ZWL3 158 604 705 (2021 ZWL898 231 833) due to Nederlandse Financierings-Maatschappij Voor Ontiwikkelingslanden (FMO),
Norfund and Swedfund respectively. The carrying amounts of deposits from other banks and other financial institutions approximate the related
fair values. All the loan balances except for Afreximbank are part of the Group’s Blocked Funds which were registered with the Reserve Bank of
Zimbabwe (RBZ) for an orderly expunging of the debts. In 2021, the Government of Zimbabwe assumed the obligation to settle these Blocked
Funds in terms of Part XIII of the Finance Act No. 7 of 2021 under section 52. The Blocked funds are listed under Annex 1 of the Finance Act
no 7 of 2021. In 2019, the Group transferred the ZWL equivalent of the legacy debts at a rate of US$/ZWL1:1 to the RBZ as per requirement
of the Exchange Control directive RU 28 of 2019. In terms of section 52 of the Finance Act no 7 of 2021, outstanding blocked funds were to
be liquidated through the issuance of Government-backed zero coupon or non-interest bearing foreign exchange savings bonds or such other
debt instruments denominated in foreign currency. During the year US$8 244 148 Treasury Bills were received by the Bank at 0% coupon rate
with maturity varying maturity profiles of between three to twenty years in respect of the legacy debts in favour of Nederlandse Financierings-
Maatschappij Voor Ontiwikkelingslanden N.V. (FMO)’s principal portion of the liability.
Subsequent to year end Treasury bills have been issued in respect of the amount owing to Swedfund.
Inflation Adjusted
Historical Cost*
The line of credit balances have been translated at 31 December 2022 at the closing rate of USD / ZWL 684.3339.
2022
ZWL ‘000
2021
ZWL ‘000
2022
ZWL ‘000
2021
ZWL ‘000
15. CASH AND CASH EQUIVALENTS
GROUP
At 1 January
Monetary adjustment
Exchange revaluation
766 979
732 862
223 115
132 633
( 1 117 749)
( 367 253)
1 277 093
926 323
401 371
766 979
-
703 208
926 323
-
90 482
223 115
In 2013, the Bank received a subordinated term loan amounting to USD 1.4 million from a Development Financial Institution which attracts
an interest rate of 3 months USD LIBOR plus 10% and has a seven year maturity date (13 June 2020) from the first disbursement date. The
average 3 months USD LIBOR Rate stood at 2.405% (2021 - 0.161%).
The above liability would, in the event of the winding up of the issuer, be subordinated to the claims of depositors and all other creditors of the
issuer. The Group defaulted on principal repayments with respect to this subordinated loan during the year ended 31 December 2019 as a result
of the prevailing nostro funding challenges affecting the economy. There was a breach on the Aggregate Unhedged Open Foreign Currency
Positions Ratio covenant which stood at 19.05% (instead of a maximum 10%) between the Group and the Development Financial Institution at
the reporting date of 31 December 2022. However, there were no defaults on interest payments.
On 22 February 2019, the Reserve Bank of Zimbabwe (RBZ) issued an Exchange Control directive, RU 28 of 2019 which established an
interbank foreign exchange market to formalise the buying and selling of foreign currency through the Banks and Bureaux de change. In order
to establish an exchange rate between the current monetary balances and foreign currency, the Monetary Authorities denominated the existing
RTGS balances in circulation, as RTGS dollars. The RBZ pegged the initial trades at USD /RTGS$1:2.5. In order to manage the transition, the
RBZ also advised on the same date that all foreign liabilities or legacy debts due to suppliers and service providers, declared dividends e.t.c
would be treated separately after registering such debts with the RBZ Exchange Control Department for an orderly expunging of these debts.
Inflation Adjusted
Historical Cost*
2022
ZWL ‘000
2021
ZWL ‘000
2022
ZWL ‘000
2021
ZWL ‘000
Balances with the Central Bank**
6 922 379
3 202 127
6 922 379
931 501
Current, nostro accounts* and cash
12 467 091
11 415 447
12 467 091
3 320 761
Interbank placements
2 149 354
2 131 312
2 149 354
620 000
Expected Credit loss allowance
-
-
-
-
21 538 825
16 748 886
21 538 825
4 872 262
*Nostro accounts are foreign domiciled bank accounts operated by the Bank for the facilitation of offshore transactions on behalf of clients.
**Balances with the Central Bank, other banks and cash are used to facilitate customer and the Bank’s transactions which include payments
and cash withdrawals.
10
IN PURSUIT OF EXCELLENCE Continued from Page 10
16. FINANCIAL INSTRUMENTS
16.1. Investment Securities
Amortised cost – Gross
Additions
Monetary adjustment
Inflation Adjusted
Historical Cost
2022
ZWL ‘000
2021
ZWL ‘000
2022
ZWL ‘000
2021
ZWL ‘000
16.3. TOTAL LOANS AND ADVANCES
Inflation Adjusted
Historical Cost*
2022
ZWL ‘000
2021
ZWL ‘000
2022
ZWL ‘000
2021
ZWL ‘000
Impairment allowance – Stage 1 (20.3)
-
-
13 786 267
5 977 600
4 010 434
23 143 832
12 991 063
12 743 732
( 20 175 931)
( 5 182 397)
-
-
Fixed term loans – Corporate
36 474 938
19 752 866
36 474 938
Fixed term loans – Retail
Mortgages
Overdrafts
1 081 820
2 928 614
-
-
9 267 515
531 634
11 170
6 941 389
948 541
5 305 250
9 267 515
531 634
11 170
46 285 257
32 948 046
46 285 257
5 746 122
2 019 255
275 931
1 543 301
9 584 609
16 754 167
13 786 267
16 754 166
4 010 434
46 285 257
32 948 046
46 285 257
9 584 609
The Group holds Treasury Bills and Government Bonds amounting to ZWL 16 754 167 000 ( 2021 - ZWL 13 786 267 000) with interest rates
ranging from 0% to 18%. The Treasury Bills are measured at amortised cost in line with the Bank’s business model to collect contractual
cashflows and the contractual terms are such that the financial assets give rise to cashflows that are solely payments of principal and interest.
Of this amount a total of ZWL 6 599 817 413 are with respect to blocked funds.
16.3.1.
Maturity analysis
Included in interest income is interest from Investment securities held by the Bank
Inflation Adjusted
Historical Cost*
2022
ZWL ‘000
2021
ZWL ‘000
2022
ZWL ‘000
2021
ZWL ‘000
Interest income from investment securities
2 581 785
1 769 790
1 755 252
421 220
16.2. 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, the Group determines fair values using other valuation techniques.
For financial instruments that trade infrequently and have little price transparency, fair value is less objective, and requires varying degrees
of judgement depending on liquidity, concentration, uncertainty of market factors, pricing assumptions and other risks affecting the specific
instrument.
The objective of valuation techniques is to arrive at a fair value measurement that reflects the price that would be received to sell the asset or
paid to transfer the liability in an orderly transaction between market participants at the measurement date.
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:
inputs that are quoted market prices (unadjusted) in active markets for identical instruments;
Level 2:
Level 3:
inputs other than quoted prices included within Level 1 that are observable either directly (i.e. as prices) or indirectly (i.e. derived from
prices). This category includes instruments valued using: quoted market prices in active markets for similar instruments; quoted prices for
identical or similar instruments in markets that are considered less than active; or other valuation techniques in which all significant inputs
are directly or indirectly observable from market data; and
inputs that are unobservable. This category includes all instruments for which 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 for which significant unobservable adjustments or assumptions are
required to reflect differences between the instruments.
Less than 1 month
1 to 3 months
3 to 6 months
6 months to 1 year
1 to 5 years
Over 5 years
Allowances for impairment losses on loans and
advance
ECL at 1 January
Monetary adjustment
Inflation Adjusted
Historical Cost
2022
ZWL ‘000
2021
ZWL ‘000
2022
ZWL ‘000
2021
ZWL ‘000
7 662 476
17 465 825
1 739 818
13 013 761
43 627 023
-
8 255 019
4 920 832
698 015
8 209 978
8 761 709
3 519 503
7 662 476
17 465 825
1 739 818
13 013 761
43 627 023
-
83 508 903
34 365 056
83 508 903
( 1 603 602)
( 1 417 010)
( 1 603 602)
( 1 417 010)
( 844 210)
( 412 209)
2 401 391
1 431 473
203 053
2 388 288
2 548 787
1 023 826
9 996 818
( 412 209)
( 152 784)
1 004 801
318 999
-
-
ECL charged through profit or loss
( 1 523 591)
( 907 853)
( 1 523 591)
( 264 095)
Bad debts written off
332 198
16 054
332 198
4 670
Suspended interest on credit impaired financial
assets
-
-
-
-
81 905 301
32 948 046
81 905 301
9 584 609
Other assets
8 842 631
9 567 644
8 504 329
2 265 354
90 747 933
42 515 690
90 409 630
11 849 963
The objective of valuation techniques is to arrive at a fair value measurement that reflects the price that would be received to sell the asset or
paid to transfer the liability in an orderly transaction between market participants at the measurement date.
16.3.2.
Sectoral analysis of utilisations
During the reporting periods ended 31 December 2022 and 31 December 2021, there were no transfers between Level 1 and Level 2 fair value
measurements, and no transfers into and out of Level 3 fair value measurements.
Financial instruments measured at fair value – fair value hierarchy
Inflation Adjusted
2022
ZWL ‘000
Level 1
ZWL ‘000
Level 2
ZWL ‘000
Trade and other investments
255 056
Trade and other investments
125 471
-
-
-
-
Historical Cost*
Agriculture
Distribution
Individuals
Manufacturing
Mining
Services and other
Level 3
ZWL ‘000
255 056
125 471
2022
ZWL ‘000
Level 1
ZWL ‘000
Level 2
ZWL ‘000
Level 3
ZWL ‘000
Trade and other investments
255 056
Trade and other investments
36 500
Financial instruments not measured at fair value
-
-
-
-
255 056
Agriculture
36 500
Distribution
Individuals
Manufacturing
Mining
Below is a list of the Group’s financial investments not measured at fair value, but whose carrying amounts approximate fair value.
Services and other
2022
ZWL ‘000
12 245 045
9 567 480
8 130 098
1 699 351
993 094
13 650 189
46 285 257
2022
ZWL ‘000
12 245 045
9 567 480
8 130 098
1 699 351
993 094
13 650 189
46 285 257
Inflated Adjusted
%
26%
21%
18%
4%
2%
29%
100%
2021
ZWL ‘000
7 970 387
6 621 300
10 004 413
4 161 153
677 455
4 930 348
%
23%
19%
29%
12%
2%
14%
34 365 056
100%
Historical Cost*
%
26%
21%
18%
4%
2%
29%
100%
2021
ZWL ‘000
2 318 591
1 926 141
2 910 290
1 210 482
197 072
1 434 242
9 996 818
%
23%
19%
29%
12%
2%
14%
100%
Inflation Adjusted
Historical Cost*
2022
ZWL ‘000
2021
ZWL ‘000
2022
ZWL ‘000
2021
ZWL ‘000
The material concentration of loans and advances is with Services and other at 29% (2021 - 14%) and agriculture sector at 26% (2021 - 23%).
Assets
Cash and cash equivalents
21 538 825
16 748 886
21 538 825
Loans, advances and other accounts
46 285 257
32 948 046
46 285 257
Investment securities
16 754 167
13 786 267
16 754 166
4 872 262
9 584 609
4 010 434
Total
Liabilities
84 578 249
63 483 199
84 578 249
18 467 305
Deposits and other liabilities
53 215 217
35 840 230
53 215 217
10 425 947
53 215 217
35 840 230
53 215 217
10 425 947
11
IN PURSUIT OF EXCELLENCE Continued from Page 11
16.3.3.
Impairment analysis of financial assets measured at amortised cost
Inflation Adjusted
Stage 1
Stage 2
Stage 3
Total
Gross carrying amount at 1 January 2022
42 820 563
653 409
458 727
43 932 699
Monetary adjustment
( 29 073 035)
( 778)
( 318 537)
( 29 392 350)
Transfers
- to 12 months to ECL
- to lifetime ECL not credit impaired
- to lifetime ECL credit impaired
( 543 394)
460 211
140 069
( 132 752)
( 620 655)
( 62 808)
622 423
( 29 460)
83 183
( 7 317)
( 1 768)
92 268
-
-
-
-
Inflation Adjusted
Stage 1
Stage 2
Stage 3
Total
Gross carrying amount at 1 January 2021
21 777 096
Monetary adjustment
( 13 204 404)
140 024
( 88 137)
36 840
21 953 960
( 23 189)
( 13 315 730)
Transfers
- to 12 months to ECL
- to lifetime ECL not credit impaired
- to lifetime ECL credit impaired
( 736 992)
447 300
180 336
( 165 696)
( 630 425)
( 286 903)
631 103
( 18 107)
289 692
( 14 639)
( 679)
305 010
-
1
( 1)
-
Net movement in financial assets
34 984 863
154 222
155 384
35 294 469
Net movement in financial assets
40 332 790
106 491
298 553
40 737 834
Balance as at 31 December 2021
42 820 563
653 409
458 727
43 932 699
Balance as at 31 December 2022
53 536 924
1 219 333
521 926
55 278 183
-
-
-
Loss allowance analysis
At 1 January 2022
- ECL – Loans, advances & guarantees
- Guarantees and facilities approved not drawn
down
- ECL – Investment securities
- ECL – Interbank placements
1 168 375
1 117 060
( 25 960)
51 408
25 867
62 544
62 544
186 090
186 090
-
-
-
Monetary adjustment
535 295
287 610
Transfers
- to 12 month ECL
- to lifetime ECL not credit impaired
- to lifetime ECL credit impaired
Net increase/(decrease) in ECL
Loans and advances
Guarantees and facilities approved not drawn
down
Investment securities
Interbank placements
Bad debts written off
( 16 118)
15 533
( 30 862)
( 789)
66 427
67 464
15 223
46 218
( 62 478)
-
Revaluation exchange on loans and advances
ECL
( 822 905)
17 853
( 12 551)
31 944
( 1 540)
98 075
101 372
-
693
( 3 990)
-
-
Loss allowance analysis
At 1 January 2021
- ECL – Loans, advances & guarantees
- Guarantees and facilities approved not drawn
down
- ECL – Investment securities
- ECL – Interbank placements
755 067
715 295
10 943
23 097
5 732
50 861
50 861
-
-
-
38 282
38 282
-
-
-
844 210
804 438
10 943
23 097
5 732
Monetary adjustment
( 296 429)
989
( 18 080)
( 313 520)
Transfers
- to 12 month ECL
- to lifetime ECL not credit impaired
- to lifetime ECL credit impaired
Net increase/(decrease) in ECL
Loans and advances
Guarantees and facilities approved not drawn
down
Investment securities
Interbank placements
Bad debts written off
Revaluation exchange on loans and advances
ECL
( 139 931)
2 404
( 52 665)
( 89 670)
816 240
804 697
( 36 903)
28 311
20 135
-
33 428
34 303
( 2 354)
52 720
105 628
( 50)
( 55)
( 16 063)
105 733
( 23 609)
( 23 609)
60 260
60 260
-
-
-
-
-
-
-
-
-
-
-
-
-
-
852 891
841 348
( 36 903)
28 311
20 135
-
33 428
Balance as at 31 December 2021
1 168 375
62 544
186 090
1 417 009
1 417 009
1 365 694
( 25 960)
51 408
25 867
822 905
-
-
-
-
332 198
331 623
15 223
62 583
( 77 231)
-
( 822 905)
-
-
-
-
( 1 735)
( 2 982)
( 1 082)
2 329
167 696
162 786
-
15 672
( 10 763)
-
-
Balance as at 31 December 2022
931 074
466 083
352 051
1 749 207
Loans and advances
880 796
469 379
347 141
1 697 317
Guarantees and facilities approved not drawn
down
Investment securities
Interbank placements
( 10 737)
97 626
( 36 611)
-
693
( 3 990)
-
15 672
( 10 763)
( 10 737)
113 991
( 51 364)
Loans and advances
1 117 060
62 544
186 090
1 365 694
Guarantees and facilities approved not drawn
down
Investment securities
Interbank placements
( 25 960)
51 408
25 867
-
-
-
-
-
-
( 25 960)
51 408
25 867
1 168 375
62 544
186 090
1 417 009
931 074
466 083
352 051
1 749 207
16.3.4.
Loans to officers and executive directors
Inflation Adjusted
Historical Cost
2022
ZWL ‘000
2021
ZWL ‘000
2022
ZWL ‘000
2021
ZWL ‘000
Included in advances and other accounts (note
20) are loans to officers:-
At 1 January
Monetary adjustment
Net additions during the year
267 258
357 878
( 269 574)
( 148 185)
178 164
175 848
57 565
267 258
77 745
-
98 103
175 848
64 768
-
12 977
77 745
Expected credit loss allowance on loans to
officers
-
-
-
-
175 848
267 258
175 848
77 745
17. OTHER ASSETS
Services deposits*
Prepayments and stocks**
Collateral repossessions***
Other receivables****
Inflation Adjusted
Historical Cost
2022
ZWL ‘000
2021
ZWL ‘000
2022
ZWL ‘000
2021
ZWL ‘000
2 366 005
75 010
3 923 843
2 477 774
8 842 631
1 912 339
825 176
-
6 830 129
9 567 644
2 366 005
100 682
3 923 843
2 113 799
8 504 329
556 301
204 784
-
1 504 269
2 265 354
* Service deposits relate to amounts pledged as collateral for VISA and the RTGS accounts.
** Prepayments and stocks are in respect of services, utilities and consumables for the Group.
*** Collateral repossession assets are in relation to a commodity which the Group holds for sale as part of collateral exercise
**** Included in other receivables is ZWL 2 996 645 017 (2021: ZWL1 507 838 292) placed with the RBZ for the facilitation of legacy debts
settlement in terms of regulatory directives. Nil impairment has been recognised. During the month of March 2023 an equivalent US$ Treasury
Bills have been issued to the Bank by Government in lieu of the deposit.
12
IN PURSUIT OF EXCELLENCE Continued from Page 12
18.
INTANGIBLE ASSETS
Cost
Balance 1 January 2021
Inflation adjustment
Acquisitions
Carrying amount
At 31 December 2022
19. PROPERTY AND EQUIPMENT
Cost/Revaluation amount
At 1 January 2021
Additions
Inflation Adjusted
Historical Cost
31 Dec
2022
ZWL ‘000
1 226 159
1 027 386
53 850
31 Dec
2021
ZWL ‘000
1 226 159
1 027 386
53 850
31 Dec
2022
ZWL ‘000
31 Dec
2021
ZWL ‘000
9 122
9 122
Cost/Revaluation amount
At 1 January 2021
Additions
12 139
12 139
Remeasurement – Right of use assets
-
( 24 265)
-
-
Capitalisations
Disposals
Revaluations
Historical Cost*
Capital work
in progress
Computers
Motor
Vehicles
Furniture &
Equipment
Right of Use
Assets**
Freehold
Land &
Buildings*
Total
ZWL ‘000
ZWL ‘000
ZWL ‘000
ZWL ‘000
ZWL ‘000
ZWL ‘000
ZWL ‘000
8 615
83 148
3 392
44 827
33 330
1 457 224
1 630 536
49 832
55 340
18 148
-
-
-
-
61 811
-
-
123 320
61 811
-
-
-
24 265
-
-
( 758)
1 408 660
1 408 660
-
-
-
-
-
-
( 695)
( 63)
-
-
Balance at 31 December 2021
2 307 395
2 307 395
Acquisitions
15 714
15 714
21 261
14 133
21 261
14 133
Balance at 31 December 2022
2 323 109
2 323 109
35 394
35 394
Accumulated amortisation
Balance 1 January 2021
Amortisation for the year
1 029 950
1 029 950
12 712
12 712
Balance at 31 December 2021
Amortisation for the year
1 042 662
289 691
1 042 662
289 691
4 988
2 865
7 853
4 395
4 988
2 865
7 853
4 395
Balance at 31 December 2022
1 332 353
1 332 353
12 248
12 248
At 31 December 2021
1 264 733
1 264 733
13 409
13 409
990 757
990 757
23 147
23 147
Charge for period – Right of use assets
Capital work
in progress
Computers
Motor
Vehicles
Furniture &
Equipment
Right of Use
Assets**
Freehold
Land &
Buildings*
Inflation Adjusted
ZWL ‘000
ZWL ‘000
ZWL ‘000
ZWL ‘000
ZWL ‘000
ZWL ‘000
ZWL ‘000
2 379 404
2 394 559
250 494
1 272 192
597 559
8 051 892
14 946 100
Total
Charge for the year – Property and
equipment
Charge for period – Right of use assets
Remeasurement – Right of use assets
Disposals
At 31 December 2021
34 182
137 793
3 329
62 975
95 141
2 890 149
3 223 569
Additions
1 056 283
740 557
263 968
101 967
-
Remeasurement – Right of use assets
Capitalisations
Disposals
Revaluations
-
-
-
-
-
-
-
-
( 331)
( 76)
-
-
-
-
-
-
277 945
-
-
-
-
-
-
-
2 162 776
277 945
-
( 407)
7 749 051
7 749 051
At 31 December 2022
1 090 465
878 019
267 221
164 942
373 086
10 639 200
13 412 932
Accumulated depreciation
At 1 January 2021
Charge for the year – Property and
equipment
Disposals
At 31 December 2021
-
-
-
-
-
-
-
-
-
-
10 044
1 200
5 993
9 891
15 230
42 358
22 699
662
10 872
-
29 216
63 449
-
-
-
-
( 695)
( 63)
-
-
-
37 881
15 145
-
-
-
-
37 881
15 145
( 758)
32 048
1 799
16 865
62 917
44 446
158 075
77 470
20 885
16 965
-
103 029
218 350
-
-
-
-
( 44)
( 76)
-
-
-
71 926
( 35 200)
-
-
-
-
71 926
( 35 200)
( 120)
201 991
251 506
Remeasurement – Right of use assets
-
Capitalisations
Revaluations
Disposals
( 92 688)
-
-
-
-
-
( 2 630)
( 14 095)
-
-
-
-
83 095
-
-
-
-
-
142 891
-
-
-
-
-
536 592
142 891
92 688
-
At 31 December 2022
-
109 475
22 608
33 830
99 643
147 475
413 030
Carrying amount
1 722 254
1 722 254
At 31 December 2022
1 090 465
768 545
244 612
131 113
273 443
10 491 724
12 999 902
-
( 16 725)
At 31 December 2021
34 182
105 745
1 530
46 110
32 224
2 845 703
3 065 493
At 31 December 2021
2 488 707
2 643 435
236 399
1 355 287
740 450
9 866 834
17 331 112
Additions
1 056 283
978 623
350 713
126 460
-
Remeasurement – Right of use assets
Capitalisations
Revaluations
Disposals
-
-
-
-
-
-
-
-
-
-
( 952)
( 17 122)
-
-
-
-
844 868
-
-
-
-
-
-
2 512 079
844 868
-
714 046
714 046
-
( 18 074)
At 31 December 2022
3 544 990
3 621 106
569 990
1 481 747
1 585 318
10 580 880
21 384 031
Accumulated depreciation
At 1 January 2021
Charge for the year – Property and
equipment
Charge for period – Right of use assets
Disposals
-
-
-
-
1 349 771
206 520
911 171
137 977
84 152
2 689 591
78 074
2 275
35 999
-
292
116 640
-
-
( 2 630)
( 14 095)
-
-
170 109
-
-
-
170 109
( 16 725)
At 31 December 2021
-
1 425 215
194 700
947 170
308 086
84 444
2 959 615
20.
INVESTMENT PROPERTIES
GROUP
At 1 January
Additions
Disposals
Fair value gains
Inflation Adjusted
Historical Cost
2022
ZWL ‘000
2021
ZWL ‘000
2022
ZWL ‘000
2021
ZWL ‘000
12 093 934
3 848 480
( 154 855)
6 830 600
9 136 396
197 741
( 104 271)
3 518 133
2 764 347
( 45 050)
1 653 496
44 577
( 23 505)
2 864 068
16 380 731
1 843 565
At 31 December
22 618 160
12 093 934
22 618 161
3 518 133
Investment properties comprise commercial properties and residential properties that are leased out to third parties and land held for future
development. No properties were encumbered.
Rental income amounting to ZWL 151 565 630 (2021: ZWL 47 699 896) was received and no operating expenses were incurred on the leased
investment properties in the current year due to the net leasing arrangement on the properties.
The Bank has no restrictions on the realisability of its investment properties and no contractual obligations to purchase, construct or develop the
investment properties or for repairs, maintenance and enhancements.
Charge for the year – Property and
equipment
Charge for period – Right of use assets
Remeasurement – Right of use assets
Disposals
-
-
-
-
418 649
57 326
115 527
-
4 712
596 213
Measurement of fair value
-
-
-
-
( 952)
( 17 122)
-
-
-
262 154
-
-
-
-
-
262 154
Fair value hierarchy
-
( 18 074)
The fair value of the Bank’s investment properties as at 31 December 2022 has been arrived at on the basis of valuations carried out by
independent professional valuers, Integrated Properties Real Estate (Private) Limited. The valuation which conforms to International Valuation
Standards, was in terms of the policy as set out in the accounting policies section and was derived with reference to market information close
to the date of the valuation.
At 31 December 2022
-
1 842 913
234 903
1 062 697
570 240
89 156
3 799 908
Level 3
Carrying amount
At 31 December 2022
3 544 990
1 778 194
335 087
419 051
1 015 078
10 491 724
17 584 123
The fair value for investment properties of ZWL 22 618 160 000 (2021: ZWL 12 093 934 000) has been categorised under level 3 in the fair value
hierarchy based on the inputs used for the valuation technique described below.
At 31 December 2021
2 488 707
1 218 220
41 699
408 117
432 364
9 782 390
14 371 497
Inflation Adjusted
Historical Cost
( 0)
21. NON-CURRENT ASSETS HELD FOR SALE
*Assets measured using the revaluation model
** Right-of-Use Assets recognised in respect of leased properties in which the Group is a lessee. The Right-of-Use Assets are depreciated over
the shorter of the lease term including extension options where the Group is certain to exercise such and the useful life of the underlying asset.
Balance at 1 January
Additions during the year
Monetary adjustment
Reclassification from/(to) investment property
31 Dec
2022
ZWL ‘000
-
380 629
-
-
Balance at 31 December
380 629
31 Dec
2021
ZWL ‘000
-
-
-
-
-
31 Dec
2022
ZWL ‘000
-
380 629
-
-
380 629
31 Dec
2021
ZWL ‘000
-
-
-
-
-
The non-current assets held for sale comprise of immovable property, and other qualifying assets which the bank used to hold as part of
collateral for loans and advances and have now been recovered from customers for borrowings from the bank. The Bank is in the process of
realising these assets. During the year there no transfers from non-current assets held for sale to the Bank’s fixed assets portfolio.
13
IN PURSUIT OF EXCELLENCE Continued from Page 13
22. CONTINGENT LIABILITIES
Inflation Adjusted
Historical Cost*
GROUP
Guarantees
Facilities approved but not drawn down
Expected credit losses on facilities approved but
not drawdown
2022
ZWL ‘000
742 746
-
-
Expected credit losses on guarantees
( 15 223)
2021
ZWL ‘000
962 327
223 183
( 6 793)
( 5 985)
2022
ZWL ‘000
742 746
-
-
( 15 223)
2021
ZWL ‘000
279 941
64 924
( 1 976)
1 741
Balance at 31 December
727 523
1 172 732
727 523
344 630
The Group enters into various irrevocable commitments and contingent liabilities in its normal course of business in order to meet financial
needs of customers. These obligations are not recognised on the statement of financial position, but contain credit risk and are therefore part
of the overall risk of the Group.
Guarantees commit the Group to make payments on behalf of clients in the event of specified acts. Guarantees carry the same credit risk as
loans and advances to customers.
Facilities approved but not drawn down represent contractual commitments to advance loans and revolving credits. These have fixed expiry
dates and may expire without being drawn upon, hence total contract amounts do not necessarily represent future cash requirements.
23. EXCHANGE RATES
The Group continues to access its various credit lines including the receipt of USD3.5 Million and ZWL2 Billion from some of its lenders. There
were no other material events after the reporting date which could significantly affect the consolidated financial statements of the Group.
During the month of March 2023, US$4 196 264.00 Treasury Bills at 0% coupon were received by the Bank in lie of the RBZ deposit in relation
to Swedfund(One of the Group’s off shore creditors). This is part of the Government’s legacy debt framework.
United States Dollar
USD
British Sterling
South African Rand
European Euro
Botswana Pula
GBP
ZAR
EUR
BWP
31-Dec-22
Mid - rate
ZWL
684.3339
824.7971
15.9250
123.0211
9.2264
31-Dec-21
Mid - rate
ZWL
108.6660
146.6994
15.9250
123.0211
9.2264
24. EVENTS AFTER THE REPORTING PERIOD
The Group continues to access its various credit lines including the receipt of USD3.5 Million and ZWL2 Billion from some of its lenders. There
were no other material events after the reporting date which could significantly affect the consolidated financial statements of the Group.
During the month of March 2023, US$4 196 264.00 Treasury Bills at 0% coupon were received by the Bank in lie of the RBZ deposit in relation
to Swedfund (One of the Group’s off shore creditors). This is part of the Government’s legacy debt framework.
14
IN PURSUIT OF EXCELLENCE Continued from Page 14
STATEMENT OF PROFIT OR LOSS AND OTHER COMPREHENSIVE INCOME
STATEMENT OF CHANGES IN EQUITY
Inflation Adjusted
Historical Cost*
Inflation Adjusted
Note
31-Dec
2022
ZWL ‘000
31-Dec
2021
ZWL ‘000
31-Dec
2022
ZWL ‘000
31-Dec
2021
ZWL ‘000
Share Capital
Share
Premium
Functional
Currency
Translation
Reserve
Revaluation
Reserve
Share Option
Reserve
Retained
Earnings
Total
21 070 430
10 798 064
15 800 168
2 568 881
Balance as at 1 January 2021
4 013
7 114 764
1 588 744
3 691 761
Profit for the period
Revaluation gains on land and buildings, net of tax**
-
-
-
-
-
-
-
1 296 169
-
-
-
10 035 178
22 434 460
6 521 026
6 521 026
-
1 296 169
Interest income
Interest expense
Net interest income
Fee and commissions income
Net foreign exchange gains
Revenue
Other income
Operating income
Operating expenditure
a
b
( 6 184 379)
( 3 010 024)
( 4 477 951)
( 739 071)
14 886 051
7 788 040
11 322 216
1 829 810
15 343 491
12 449 215
10 705 516
2 927 160
3 819 011
538 676
4 048 386
76 799
34 048 554
20 775 932
26 076 118
4 833 769
8 072 530
3 206 817
17 937 925
2 107 419
Balance at 31 December 2021
4 013
7 114 764
1 588 744
4 987 930
-
16 556 204
30 251 655
Profit for the period
Dividends declared
Employee scheme - value of employee services
Revaluation gains on land and buildings, net of tax**
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
254 350
537 391
-
11 527 302
11 527 302
( 300 000)
( 300 000)
-
-
254 350
537 391
42 121 083
23 982 749
44 014 044
6 941 188
( 19 304 354)
( 12 009 028)
( 13 872 200)
( 2 810 691)
Balance at 31 December 2022
4 013
7 114 764
1 588 744
5 525 321
254 350
27 783 506
42 270 698
Operating income before impairment charge
and loss on net monetary position
22 816 729
11 973 721
30 141 844
4 130 497
Historical Cost
Share Capital
Share
Premium
Functional
Currency
Translation
Reserve
Revaluation
Reserve
Share Option
Reserve
Retained
Earnings
Total
Impairment losses on financial assets measured
at amortised cost
( 1 191 393)
( 852 892)
( 1 191 393)
( 248 107)
Balance as at 1 January 2021
17
31 475
11 620
1 067 266
Loss on net monetary position
( 6 029 492)
( 1 525 215)
-
-
Profit before tax
15 595 844
9 595 614
28 950 450
3 882 390
Profit for the period
Revaluation gains on land and buildings, net of tax**
-
-
-
-
-
-
-
848 731
Taxation
( 4 068 542)
( 3 074 588)
( 3 509 130)
( 912 597)
Balance at 31 December 2021
17
31 475
11 620
1 915 997
Profit for the period
11 527 302
6 521 026
25 441 320
2 969 793
Profit for the period
Dividends declared
Employee scheme - value of employee services
Revaluation gains on land and buildings, net of tax**
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
5 833 685
-
-
-
-
-
-
-
128 073
2 142 926
3 253 304
2 969 793
2 969 793
-
848 731
5 112 719
7 071 828
25 441 320
25 441 320
( 300 000)
( 300 000)
-
-
128 073
5 833 685
Other comprehensive income
Revaluation gains on land and buildings, net
of tax**
Total comprehensive income for the period
Earnings per share (ZWL cents)
- Basic
c
d
537 391
1 296 169
5 833 685
848 731
Balance at 31 December 2022
17
31 475
11 620
7 749 682
128 073
30 254 039
38 174 906
12 064 693
7 817 196
31 275 005
3 818 524
* The Historical Cost information has been shown as supplementary information for the benefit of users. These are not required in terms of
International Accounting Standard (IAS) 29 “Financial Reporting in Hyperinflationary Economies”.
69 837
39 507
154 133
17 992
* The Historical Cost information has been shown as supplementary information for the benefit of users. These are not required in terms of
International Accounting Standard (IAS) 29 “Financial Reporting in Hyperinflationary Economies”. The Auditors have not expressed an opinion
on the Historical Cost information.
** The revaluation gains on land and buildings will not recycled into profit or loss in the subsequent reporting period. It will however be recycled
through equity.
STATEMENT OF FINANCIAL POSITION
Inflation Adjusted
Historical Cost*
SHAREHOLDER’S FUNDS
Share capital
Share Premium
Note
31-Dec
2022
ZWL ‘000
31-Dec
2021
ZWL ‘000
e
4 013
4 013
7 114 764
7 114 764
Functional currency translation reserve
1 588 744
1 588 744
31-Dec
2022
ZWL ‘000
17
31 475
11 620
31 Dec
2021
ZWL
17
31 475
11 620
Revaluation reserve
5 525 321
4 987 930
7 749 682
1 915 997
Employee share option reserve
254 350
-
128 073
-
Retained earnings
27 783 506
16 556 204
30 254 039
5 112 719
Total shareholders’ funds
42 270 698
30 251 655
38 174 906
7 071 828
Weather the uncertainties with an
insurance partner that is there to
keep your farm going.
LIABILITIES
Deposits
Other liabilities
Borrowings
Current tax liabilities
Deferred tax liabilities
Subordinated term loan
53 426 931
35 831 854
53 426 931
10 423 510
12 092 185
9 456 551
12 092 185
2 750 917
21 276 250
20 331 975
21 276 250
5 914 585
( 43 972)
811 700
( 43 972)
5 420 831
3 440 135
3 964 790
926 323
766 979
926 323
236 124
741 557
223 115
2 143
Amount owing to Holding company
( 212 009)
7 367
( 212 009)
Total liabilities
92 886 540
70 646 562
91 430 499
20 291 951
Total shareholder's funds and liabilities
135 157 238
100 898 216
129 605 405
27 363 779
ASSETS
Cash and cash equivalents
f
21 538 825
16 748 886
21 538 825
4 872 262
Investment securities
Loans and advances
Other assets
Assets held for sale
Trade and other investments
Investment properties
Intangible assets
Property and equipment
Total Assets
16 754 167
13 786 267
16 754 167
4 010 435
46 531 191
32 939 785
46 531 190
9 582 192
8 504 329
9 567 644
8 504 329
2 265 354
380 629
255 056
-
125 470
380 629
255 056
-
36 500
22 618 160
12 093 934
22 618 160
3 518 133
g
990 757
1 264 733
23 147
13 408
17 584 123
14 371 496
12 999 902
3 065 494
135 157 238
100 898 216
129 605 405
27 363 779
* The Historical Cost information has been shown as supplementary information for the benefit of users. These are not required in terms of
International Accounting Standard (IAS) 29 “Financial Reporting in Hyperinflationary Economies”.
15
IN PURSUIT OF EXCELLENCE Continued from Page 15
STATEMENT OF CASH FLOWS
CASH FLOWS FROM OPERATING
ACTIVITIES
Inflation Adjusted
Historical Cost*
31-Dec
2022
ZWL ‘000
31 Dec 2021
ZWL
31 Dec 2022
ZWL
31 Dec 2021
ZWL
A) Other income
Profit before taxation
15 595 844
9 595 614
28 950 450
3 882 390
Profit on disposal of property and equipment
Trade and other investments fair value gains
Inflation Adjusted
Historical Cost*
2022
ZWL ‘000
59 037
( 32 737)
2021
ZWL ‘000
37 460
2 002
2022
ZWL ‘000
218 556
28 525
2021
ZWL ‘000
8 445
462
Fair value gains on investment properties
6 830 600
2 864 066
16 380 730
2 029 063
- Depreciation(excluding right of use assets)
- Depreciation –Right of use assets
- Amortisation of intangible assets
- Impairment losses on financial assets
measured at amortised costs
Non-cash items:
- Net monetary (Loss)/Gain
6 029 492
1 525 215
Profit/(Loss) on disposal of investment properties
-
Rental income
608 925
262 154
289 691
290 370
170 109
12 711
-
222 437
71 926
4 395
Recoveries
65 922
38 606
2 865
Other operating income
1 114 618
177 368
1 208 575
-
92 529
8 482
23 384
59 062
43 474
-
95 645
5 894
5 788
13 972
10 812
38 877
332 198
852 892
1 191 393
248 107
8 072 530
3 206 816
17 937 926
2 107 419
- Sundry income - non -cash
( 1 189 691)
-
( 1 189 691)
-
B) OPERATING EXPENDITURE
- Investment properties fair value gains
( 6 830 600)
( 2 864 068)
( 16 380 731)
( 1 843 565)
The net operating income is after charging the following:
- Trade and other investments fair value gains
adjustment
- Profit on disposal of property and equipment
- Loss/(profit) on disposal of investment
properties
- Dividend received
- Non-cash employee benefits expense – share-
based payments
( 118 074)
( 1 415)
34 152
-
( 37 460)
( 2 002)
( 23 384)
87 022
( 218 556)
( 1 803)
( 26 722)
-
( 8 445)
( 462)
( 5 788)
17 177
254 350
-
128 073
-
- Unrealised foreign exchange gain
( 4 689 059)
( 378 387)
( 4 689 059)
( 110 073)
Operating cash flows before changes in
operating assets and liabilities
10 577 966
9 228 632
8 062 111
2 286 735
Changes in operating assets and liabilities
Increase/(decrease) in deposits
17 374 987
11 130 494
42 789 270
Increase/(decrease) in other liabilities
2 335 634
7 488 591
9 041 268
5 953 080
2 394 757
(Increase)/decrease in loans and advances
( 18 978 681)
( 19 198 480)
( 42 196 512)
( 7 302 019)
(Increase)/decrease in other assets
( 1 489 658)
( 1 590 880)
( 7 793 984)
( 821 727)
Administration costs
7 063 138
5 721 286
4 964 614
1 323 532
Inflation Adjusted
Historical Cost*
31-Dec
2022
ZWL ‘000
31 Dec 2021
ZWL
31 Dec 2022
ZWL
31 Dec 2021
ZWL
Audit fees:
- Current year
- Prior year
Amortisation of intangible assets
Depreciation (excluding right of use assets)
Depreciation – right of use assets
Directors’ remuneration
- Fees for services as directors
- Services rendered
- Expenses
159 128
83 006
114 704
-
289 691
608 925
262 154
175 916
165 060
-
10 856
-
12 711
290 370
170 109
100 355
96 363
-
3 992
-
4 395
222 437
71 926
129 973
122 188
-
7 785
20 774
-
2 865
65 922
38 606
22 665
21 688
-
977
Net cash generated/(used) from operations
9 820 247
7 058 357
9 902 152
2 510 826
Staff costs – salaries, allowances and related
costs*
10 745 403
5 631 191
8 364 151
1 336 328
Taxation
Corporate tax paid
( 2 965 639)
( 1 847 201)
( 2 472 504)
( 505 915)
Net cash inflow/(outflow) from operations
6 854 608
5 211 156
7 429 648
2 004 911
** Included in Staff costs - salaries, allowances and related costs are employee benefit costs relating share based payments amounting to ZWL
254 354 000 (2021: ZWL nil). The Scheme is administered at Group level for the benefit of the mainly Bank employees.
19 304 354
12 009 028
13 872 200
2 810 692
CASH FLOWS FROM INVESTING ACTIVITIES
Acquisition of intangible assets
( 15 714)
( 53 850)
( 14 133)
( 12 139)
Disposal/(Acquisition) of investment securities
( 16 544 014)
( 12 991 063)
( 6 143 914)
( 2 928 614)
Proceeds on disposal of property and
equipment
Acquisition of trade and other investments
37 563
-
Acquisition of property and equipment
( 2 512 079)
35 452
( 87 022)
( 536 591)
1 515
-
( 2 162 776)
Proceeds on disposal of investment properties
155 843
144 995
134 369
Acquisition of investment properties
( 3 848 480)
( 197 741)
( 2 764 347)
462
( 17 177)
( 123 319)
34 553
( 44 577)
Net cash (used)/generated in investing activities
( 22 726 881)
( 13 685 820)
( 10 949 286)
( 3 090 811)
C) OTHER COMPREHENSIVE INCOME
Revaluations of land and buildings
Inflation Adjusted
Historical Cost*
2022
ZWL ‘000
670 234
2021
ZWL ‘000
2022
ZWL ‘000
1 616 582
7 749 051
Tax effect
( 132 843)
( 320 413)
( 1 915 366)
537 391
1 296 169
5 833 685
2021
ZWL ‘000
1 058 537
( 209 806)
848 731
D) EARNINGS PER SHARE
The calculation of earnings per share is based on the following figures:
CASH FLOWS FROM FINANCING
ACTIVITIES
Repayment of lease liabilities
Repayments of borrowings
Increase in borrowings
( 66 271)
( 330 841)
( 206 672)
-
( 70 173)
( 322 394)
( 46 591)
d.1. Earnings
-
Profit for the year
2 464 807
11 575 101
16 873 751
4 329 774
d.2. Number of shares
Inflation Adjusted
Historical Cost*
2022
ZWL ‘000
2021
ZWL ‘000
2022
ZWL ‘000
2021
ZWL ‘000
11 527 302
6 521 026
25 441 320
2 969 793
Net cash outflow from financing activities
2 067 696
11 368 429
16 481 184
4 283 183
Weighted average shares in issue
16 506 050
16 506 050
16 506 050
16 506 050
( 13 804 577)
2 893 765
12 961 545
3 197 284
d.3. Earnings per share (ZWL cents)
Basic and diluted
69 837
39 507
154 133
17 992
Net (decrease)/increase in cash and cash
equivalents
Net foreign exchange and monetary
adjustments on cash and cash equivalents
Cash and cash equivalents at beginning of
the year
Cash and cash equivalents at the end of
the year
ADDITIONAL INFORMATION ON OPERATING
CASH FLOWS FROM INTEREST
18 594 517
2 999 517
3 705 016
3 197 284
16 748 886
10 855 604
4 872 263
1 964 637
21 538 825
16 748 886
21 538 825
4 872 263
Interest received
21 070 430
10 798 064
15 800 168
2 568 881
Interest paid (including interest on lease
liabilities)
( 6 184 379)
( 3 010 024)
( 4 477 951)
( 739 071)
There are no material differences between the Bank and the Holding company as the Bank is the principal operating subsidiary of the Group.
The notes to the financial statements under NMBZ Holdings Limited are therefore the same as those of the Bank in every material respect
where applicable.
16
E.
SHARE CAPITAL
E.1. Authorised
The authorised ordinary share capital at 31 December 2022 is at the historical cost figure of ZWL 25 000 (2021 - ZWL 25 000) comprising 25
million ordinary shares of ZWL 0.001 each.
E.2.
Issued and fully paid
The issued share capital at 31 December 2022 is at the inflation adjusted figure of ZWL 1 167 413 (2021 restated – ZWL 1 167 413) and
historical cost of ZWL 16 506 (2021 – 16 506) comprising 16 506 050 (2021 – 16 506 050) ordinary shares of ZWL 0.001 each in historical
cost terms.
F. CASH AND CASH EQUIVALENTS
Inflation Adjusted
Historical Cost*
2022
ZWL ‘000
2021
ZWL ‘000
2022
ZWL ‘000
2021
ZWL ‘000
Balances with the Central Bank**
6 922 379
3 202 127
6 922 379
Current, nostro accounts* and cash
14 616 446
11 415 447
14 616 446
Interbank placements
Expected Credit loss allowance
-
-
2 131 312
-
-
-
931 501
3 320 761
620 000
-
21 538 825
16 748 886
21 538 825
4 872 262
* Nostro accounts are foreign domiciled bank accounts operated by the Bank for the facilitation of offshore transactions on behalf of clients.
** Balances with the Central Bank, other banks and cash are used to facilitate customer and the Bank’s transactions which include payments
and cash withdrawals.
IN PURSUIT OF EXCELLENCE Continued from Page 16
G)
INVESTMENT PROPERTIES
3.2. BOARD COMMITTEES
At 1 January
Additions
Disposals
Fair value gains
At 31 December
Inflation Adjusted
Historical Cost*
2022
ZWL ‘000
2021
ZWL ‘000
2022
ZWL ‘000
2021
ZWL ‘000
12 093 934
9 136 396
3 518 133
1 653 496
3 848 480
197 741
2 764 347
44 577
( 154 855)
( 104 271)
( 45 050)
( 23 506)
In order to make the decision-making process more efficient and to support the vision relating to corporate governance, the Board set up the
following Committees:
Audit Committee:
The Committee oversees the Group’s financial reporting process, monitoring the integrity and appropriateness of the Group’s financial
statements; evaluating the adequacy of the Group’s financial and operational processes, compliance, internal controls and risk management
processes. Both the internal and external auditors have unrestricted access to the audit committee to ensure their independence and objectivity.
6 830 600
2 864 068
16 380 731
1 843 565
The Committee is satisfied that it has fulfilled its responsibilities in accordance with its terms of reference for the reporting period.
22 618 160
12 093 934
22 618 161
3 518 132
Credit Committee
Investment properties comprise commercial properties and residential properties that are leased out to third parties and land held for future
development. No properties were encumbered.
The Credit Committee’s main responsibilities are to consider loan applications beyond the discretionary limits of the Executive Credit Committee
and to direct the formulation of, review and monitor the credit principles and policies of the Group. The Chief Banking Officer and Head of Credit
Management are invitees and resource persons at every meeting.
Rental income amounting to ZWL 14 617 316 (2020: ZWL 7 610 897) was received and no operating expenses were incurred on the leased
investment properties in the current year due to the net leasing arrangement on the properties.
The Committee is satisfied that it has fulfilled its responsibilities in accordance with its terms of reference for the reporting period.
The Bank has no restrictions on the realisability of its investment properties and no contractual obligations to purchase, construct or develop the
investment properties or for repairs, maintenance and enhancements.
H) CORPORATE GOVERNANCE AND RISK MANAGEMENT
1.
RESPONSIBILITY
These condensed financial statements are the responsibility of the directors. This responsibility includes the setting up of internal control and
risk management processes, which are monitored independently. The information contained in these condensed financial statements has
been prepared on the going concern basis and is in accordance with the provisions of the Companies and Other Business Entities Act (Chapter
24:31), the Banking Act (Chapter 24:20) and International Financial Reporting Standards.
2.
CORPORATE GOVERNANCE
The Bank adheres to some principles of corporate governance derived from the King IV Report, the United Kingdom Combined Code and RBZ
corporate governance guidelines. The Bank is cognisant of its duty to conduct business with due care and in good faith in order to safeguard
all stakeholders’ interests.
3.
BOARD OF DIRECTORS
Board appointments are made to ensure a variety of skills and expertise on the Board. Non-executive directors are of such calibre as to provide
independence to the Board. The Chairman of the Board is an independent non-executive director. The Board is supported by mandatory
committees in executing its responsibilities. The Board meets at least quarterly to assess risk, review performance and provide guidance to
management on both operational and policy issues.
The Board conducts an annual peer based evaluation on the effectiveness of its activities. The process involves the members evaluating
each other collectively as a board and individually as members. The evaluation, as prescribed by the RBZ, takes into account the structure
of the board, effectiveness of committees, strategic leadership, corporate social responsibility, attendance and participation of members and
weaknesses noted. Remedial plans are invoked to address identified weaknesses with a view to continually improve the performance and
effectiveness of the Board and its members.
3.1. Directors Attendance Register
NAME OF DIRECTOR
MAIN BOARD
AUDIT
CREDIT
ALCO & FINANCE
No. of Meetings Held
B A Chikwanha
C Chikaura*
S Chitehwe*
D Matenga**
E Chisango***
G Taputaira
J Maguranyanga
C Glover****
J Tichelaar
J de la Fargue
G Gore
M Chipunza
6
6
2
3
2
3
6
6
6
5
6
6
6
I
I
I
I
I
I
I
NE
NE
NE
E
E
6
N
4
4
N
2
6
5
N
N
N
N
N
4
4
2
N
N
2
N
N
N
N
4
4
N
4
N
1
2
2
2
N
N
4
4
4
4
4
ALCO & Finance
The ALCO & Finance Committee is responsible for deriving the most appropriate strategy for the Group in terms of the mix of assets and
liabilities given its expectations of the future and the potential consequences of interest-rate movements, liquidity constraints, foreign exchange
exposure and capital adequacy.
The Committee is satisfied that it has fulfilled its responsibilities in accordance with its terms of reference for the reporting period.
Loans Review
The Loans Review Committee assesses compliance of the loan book with the lending policy and the Banking Regulations. The Committee
conducts loan reviews independent of any person or committee responsible for sanctioning credit.
The Committee is satisfied that it has fulfilled its responsibilities in accordance with its terms of reference for the reporting period.
Human Capital, Remuneration & Nominations Committee
The committee is responsible for setting the Group’s remuneration philosophy and reviews the overall remuneration structures of the Group,
including all material remuneration proposals and packages for Executive Directors and senior personnel. The committee is also responsible for
the nomination, election and appointment of board members. The group’s remuneration policy is to provide remuneration packages that attract
and retain high performing individuals. The group’s remuneration package is primarily made up of basic salaries, share options and performance
related bonuses. The Chief Executive Officer and Head of Human Capital are invitees and resource persons at every meeting.
The Committee is satisfied that it has fulfilled its responsibilities in accordance with its terms of reference for the reporting period.
Risk & Compliance Committee
The Risk and Compliance Management Committee oversees the quality, integrity and reliability of the Group’s enterprise risk management
systems and reviews all group-wide risks.
The Committee is satisfied that it has fulfilled its responsibilities in accordance with its terms of reference for the reporting period.
ICT & Digital Banking Committee
The IT & Digital Banking Committee provides governance and oversight on the technology-related investments, operations and strategies and
their alignment with the Group’s overall strategy. It also oversees the Group’s technology risk management and security framework and its
effectiveness (in conjunction with the Risk & Compliance Committee).
The Committee is satisfied that it has fulfilled its responsibilities in accordance with its terms of reference for the reporting period.
4.
RISK MANAGEMENT
The Board of Directors has overall responsibility for the establishment and oversight of the Bank’s risk management framework. The Board has
established the Board Asset and Liability Management Committee (ALCO) and Board Risk and Compliance Committee, which are responsible
for defining the Group’s risk universe, developing policies and monitoring implementation.
Risk management is linked logically from the level of individual transactions to the Bank level. Risk management activities broadly take place
simultaneously at the following different hierarchy levels:
a) Strategic Level: This involves risk management functions performed by senior management and the board of directors. It includes
the definition of risk, ascertaining the Bank’s risk appetite, formulating strategy and policy for managing risk and establishes adequate
systems and controls to ensure overall risk remains within acceptable levels and is adequately compensated.
b) Macro Level: It encompasses risk management within a business area or across business lines. These risk management functions are
performed by middle management.
c) Micro Level: This involves “On-the-line” risk management where risks are actually created. These are the risk management activities
performed by individuals who assume risk on behalf of the organization such as Treasury Front Office, Corporate Banking, Retail banking
etc. The risk management in these areas is confined to operational procedures set by management.
Risk management is premised on four (4) mutually reinforcing pillars, namely:
a) adequate board and senior management oversight;
b) adequate strategy, policies, procedures and limits;
c) adequate risk identification, measurement, monitoring and information systems; and
d) comprehensive internal controls and independent reviews.
NAME OF DIRECTOR
LOANS REVIEW
HUMAN CAPITAL, REMUNERATION
& NOMINATIONS
RISK & COMPLIANCE
ICT & DIGITAL
4.1. Credit risk
4
4
2
N
N
2
N
4
2
3
4
4
N
4
N
2
N
2
N
4
4
4
N
3
4
N
4
4
N
2
2
N
4
N
4
2
N
4
N
No. of Meetings Held
B A Chikwanha
C Chikaura*
S Chitehwe*
D Matenga**
E Chisango***
G Taputaira
J Maguranyanga
C Glover****
J Tichelaar
J de la Fargue
G Gore
M Chipunza
4
N
N
2
2
N
4
4
2
3
N
4
N
I
I
I
I
I
I
I
NE
NE
NE
E
E
KEY
- N = Not a Member
- I = Independent Non-Executive Director
- NE = Non-Executive Director
- E = Executive Director
* C. Chikaura and S. Chitehwe retired from the Company with effect from 24 June 2022
** D Matenga joined the board with effect from 19 July 2022.
*** E. Chisango joined the board with effect from 26 May 2022.
Credit risk is the risk that a financial contract will not be honoured according to the original set of terms. The risk arises when borrowers or
counterparties to a financial instrument fail to meet their contractual obligations. The Bank’s general credit strategies centre on sound credit
granting process, diligent credit monitoring and strong loan collection and recovery. There is a separation between loan collection and recovery.
There is a separation between loan granting and credit monitoring to ensure independence and effective management of the loan portfolio. The
Board has put in place sanctioning committees with specific credit approval limits. The Credit Management department does the initial review
of all applications before recommending them to the Executive Credit Committee and finally the Board Credit Committee depending on the loan
amount. The Bank has in place a Board Loans Review Committee responsible for reviewing the quality of the loan book and adequacy or loan
loss provisions.
The Bank has automated credit processes from loan origination, appraisal, monitoring and collections. The system has a robust loan monitoring
and reporting module which is critical in managing credit risk. In view of the Bank’s move into the mass market, retail credit has become a key
area of focus. The Bank has put in place robust personal loan monitoring systems and structures to mitigate retail loan delinquencies.
Credit Management
• Responsible for evaluating & approving credit proposals from the business units.
• Together with business units, has primary responsibility on the quality of the loan book.
• Reviewing credit policy for approval by the Board Credit Committee.
• Reviewing business unit level credit portfolios to ascertain changes in the credit quality of individual customers or other counterparties as
well as the overall portfolio and detect unusual developments.
• Approve initial customer internal credit grades or recommend to the Credit Committees for approval.
• Setting the credit risk appetite parameters.
• Ensure the Group adheres to limits, mandates and its credit policy.
• Ensure adherence to facility covenants and conditions of sanction e.g. annual audits, gearing levels, management accounts.
• Manage trends in asset and portfolio composition, quality and growth and non-performing loans.
• Manage concentration risk both in terms of single borrowers or group as well as sector concentrations and the review of such limits.
Credit Monitoring and Financial Modelling
Independent credit risk management.
Independent on-going monitoring of individual credit and portfolios.
•
•
• Triggers remedial actions to protect the interests of the Group, if appropriate (e.g. in relation to deteriorated credits).
• Monitors the on-going development and enhancement of credit risk management across the Group.
• Reviews the Internal Credit Rating System.
• On-going championing of the Basel II methodologies across the Group.
• Ensures consistency in the rating processes and performs independent review of credit grades to ensure they conform to the rating
standards.
• Confirm the appropriateness of the credit risk strategy and policy or recommends necessary revisions in response to changes/trends
identified.
**** C. Glover stepped down from the Loans Review Committee and became a member of the Human Capital, Remuneration & Nominations
Committee in July 2022.
Credit Administration
• Prepares and keeps custody of all facility letters.
• Security registration.
• Safe custody of security documents.
• Ensures all conditions of sanction are fulfilled before allowing drawdown or limit marking.
• Review of credit files for documentation compliance e.g. call reports, management accounts.
Recoveries
The recoveries unit is responsible for all collections and ensures that the Group maximises recoveries from Non-Performing Loans (NPLs) and
loans and advances written off.
4.2. Market risk
This is the exposure of the Group’s on and off balance sheet positions to adverse movement in market prices resulting in a loss in earnings and
17
IN PURSUIT OF EXCELLENCE
Continued from Page 17
capital. The market prices will range from money market (interest rate risk), foreign exchange and equity markets in which the bank operates.
The Group has in place a Management Asset and Liability Committee (ALCO) which monitors market risk and recommends the appropriate
levels to which the Group should be exposed at any time. Net Interest Margin is the primary measure of interest rate risk, supported by periodic
stress tests to assess the Group’s ability to withstand stressed market conditions. On foreign exchange risk, the bank monitors currency
mismatches and make adjustments depending on exchange rate movement forecast. The mismatches per currency are contained within 5%
of the Group’s capital position.
Management ALCO meets on a monthly basis and operates within the prudential guidelines and policies established by the Board ALCO. The
Board ALCO is responsible for setting exposure thresholds and limits, and meets on a quarterly basis. The following table demonstrates the
sensitivity to a reasonable change in interest rates, with all other variables held constant, of the Group’s statement of comprehensive income.
The sensitivity of the statement of comprehensive income is the effect of the assumed changes in interest rates on the profit or loss for the year,
based on the variable and fixed interest rate financial assets and liabilities held at 31 December 2021.
4.3. Liquidity risk
KEY
High
Level of Inherent Risk
Moderate/Acceptable
Low
Low – reflects a lower than average probability of an adverse impact on a banking institution’s capital and earnings. Losses in a functional area
with low inherent risk would have little negative impact on the banking institution’s overall financial condition.
Moderate – could reasonably be expected to result in a loss which could be absorbed by a banking institution in the normal course of business.
High – reflects a higher than average probability of potential loss. High inherent risk could reasonably be expected to result in a significant and
harmful loss to the banking institution.
Adequacy of Risk Management Systems
Liquidity risk is the risk of financial loss arising from the inability of the Group to fund asset increases or meet obligations as they fall due without
incurring unacceptable costs or losses. The Group identifies this risk through maturity profiling of assets and liabilities and assessment of
expected cash flows and the availability of collateral which could be used if additional funding is required.
Weak – risk management systems are inadequate or inappropriate given the size, complexity and risk profile of the banking institution.
Institution’s risk management systems are lacking in important ways and therefore a cause of more than normal supervisory attention. The
internal control systems will be lacking in important aspects particularly as indicated by continued control exceptions or by the failure to adhere
to written policies and procedures.
The daily liquidity position is monitored and regular liquidity stress testing is conducted under a variety of scenarios covering both normal and
more severe market conditions. All liquidity policies and procedures are subject to review and approval by the Board ALCO.
The key measure used by the bank for managing liquidity risk is the ratio of net liquid assets to deposits to customers. The Group also actively
monitors its loans to deposit ratio against a set threshold in a bid to monitor and limit funding risk. The group monitors funding concentration risk
by reviewing the ratio of top 20 depositors to the total funding. Funding mix is also monitored by monitoring the contribution of wholesale and
demand deposits to the total funding for the bank. Liquidity risk is monitored through a daily liquidity reports produced by the Risk Management
department. This is augmented by a monthly management ALCO and a quarterly board ALCO meetings.
Acceptable – management of risk is largely effective but lacking to some modest degree. While the institution might be having some minor risk
management weaknesses, these have been recognised and are being addressed. Management information systems are generally adequate.
Strong - management effectively identifies and controls all types of risk posed by the relevant functional areas or per inherent risk. The board
and senior management are active participants in managing risk and ensure appropriate policies and limits are put in place. The policies
comprehensively define the bank’s risk tolerance, responsibilities and accountabilities are effectively communicated.
Overall Composite Risk
The key measure used by the Group for managing liquidity risk is the ratio of net liquid assets to deposits from customers. The Group monitors
its liquidity ratio in compliance with Banking Regulations to ensure that it is not less than 30% of the liabilities to the public. Liquid assets consist
of cash and cash equivalents, short term bank deposits and liquid investment securities available for immediate sale.
Low – would be assigned to low inherent risk areas. Moderate risk areas may be assigned a low composite risk where internal controls and risk
management systems are strong and effectively mitigate much of the risk.
4.4. Operational risk
This risk is inherent in all business activities and is the risk of loss arising from inadequate or failed internal processes, people, systems or from
external events. The Bank utilises monthly Key Risk Indicators to monitor operational risk in all units. Further to this, the Bank has an elaborate
Operational Loss reporting system in which all incidents with a material impact on the well-being of the Bank are reported to risk management.
The risk department conducts periodic risk assessments on all the units within the Bank aimed at identifying the top risks and ways to minimise
their impact. There is a Board Risk and Compliance Committee whose function is to ensure that this risk is minimized. The Committee, with the
assistance of the internal audit function and the Risk Management department assesses the adequacy of the internal controls and makes the
necessary recommendations to the Board.
4.5. Legal and compliance risk
Legal risk is risk from uncertainty due to legal actions or uncertainty in the applicability or interpretation of contracts, laws or regulations. Legal
risk may entail such issues as contract formation, capacity and contract frustration. Compliance risk is the risk arising from non - compliance with
laws and regulations. To manage this risk, permanent relationships are maintained with firms of legal practitioners and access to legal advice
is readily available to all departments. The Bank has an independent compliance function which is responsible for identifying and monitoring all
compliance issues and ensures the Bank complies with all regulatory and statutory requirements.
During the period under review, the bank complied with all regulations including the Banking Regulations 2000 as well as the Banking Act
Chapter 24:03. However, it was penalized for the late publication of financial results (ZWL 420 000), violation of exchange control rules and
regulations (ZWL 106 652) and (USD 25 204.22). The Bank has put in place measures to avoid non-compliance in future.
4.6. Reputational risk
Reputation risk is the risk of loss of business as a result of negative publicity or negative perceptions by the market with regards to the way
the Bank conducts its business. To manage this risk, the Bank strictly monitors customers’ complaints, continuously train staff at all levels,
conducts market surveys and periodic reviews of business practices through its Internal Audit department. The directors are satisfied with the
risk management processes in the Bank as these have contributed to the minimisation of losses arising from risky exposures.
Moderate – risk management systems appropriately mitigates inherent risk. For a given low risk area, significant weaknesses in the risk
management systems may result in a moderate composite risk assessment.
On the other hand, a strong risk management system may reduce the risk so that any potential financial loss from the activity would have only
a moderate negative impact on the financial condition of the organisation.
High – risk management systems do not significantly mitigate the high inherent risk. Thus, the activity could potentially result in a financial loss
that would have a significant impact on the bank’s overall condition.
Direction of Overall Composite Risk
Increasing – based on the current information, risk is expected to increase in the next 12 months.
Decreasing – based on current information, risk is expected to decrease in the next 12 months.
Stable – based on the current information, risk is expected to be stable in the next 12 months.
4.8.2. External Credit Ratings
The external credit ratings were given by Global Credit Rating (GCR), a credit rating agency accredited with the Reserve Bank of Zimbabwe.
Security Class
Long Term
2022
BB+
2021
BB+
2020
-
The 2020 rating which was due to expire in August 2020 was withdrawn by GCR on 23 June 2020 following the Bank’s waiver of external
ratings. The Bank waived the 2020/2021 external ratings in line with a general dispensation extended by the Reserve Bank of Zimbabwe due
to the COVID-19 pandemic.
The 2021/2022 external ratings were obtained during the month of February 2022 with a long term rating of BB+.
4.9. Regulatory Compliance
4.7. Strategic risk
The Group has generally complied with all regulatory requirements that govern its operations. In line with its capital preservation strategy, the
Bank is holding a portfolio of investment property under authorization from the Reserve Bank of Zimbabwe.
This refers to current and prospective impact on a Bank’s earnings and capital arising from adverse business decisions or implementing
strategies that are not consistent with the internal and external environment. To manage this risk, the Bank always has a strategic plan
that is adopted by the Board of Directors. Further, attainment of strategic objectives by the various departments is monitored periodically at
management level.
4.8. Risk Ratings
4.8.1. Reserve Bank of Zimbabwe Ratings
The Reserve Bank of Zimbabwe conducted an onsite inspection on the Group’s banking subsidiary on 24 June 2021. Below are the final ratings
from the onsite examination.
4.8.1.1.
CAMELS* Ratings
CAMELS Component
Capital Adequacy
Asset Quality
Management
Earnings
Liquidity
Sensitivity to Market Risk
Composite Rating
Latest RBS**
Ratings
30/06/21
Previous RBS
Ratings
24/11/2016
Previous RBS
Ratings
30/06/2013
Previous RBS
Ratings
31/01/2008
2
2
2
2
2
2
2
2
3
3
2
3
2
3
2
4
3
2
2
2
3
4
2
3
3
3
3
3
* CAMELS is an acronym for Capital Adequacy, Asset quality, Management, Earnings, Liquidity and Sensitivity to Market Risk. CAMELS rating
system uses a rating scale of 1-5, where ‘1’ is Strong, ‘2’ is Satisfactory, ‘3’ is Fair, ‘4’ is Weak and ‘5’ is Critical.
** RBS stands for Risk-Based Supervision.
4.8.1.2.
Summary RAS ratings
RAS Component
Overall Inherent Risk
Latest RBS**
Ratings
30/06/21
Previous RBS
Ratings
24/11/2016
Previous RBS
Ratings
30/06/2013
Previous RBS
Ratings
31/01/2008
Moderate
High
High
High
Overall Risk Management Systems
Acceptable
Acceptable
Acceptable
Acceptable
Overall Composite Risk
Moderate
Moderate
Moderate
Moderate
Direction of Overall Composite Risk
Stable
Stable
Stable
Stable
*** RAS stands for Risk Assessment System.
4.8.1.3.
Summary risk matrix – 30 June 2021 on - site examination
Level of Inherent
Risk
Adequacy of Risk
Management
Systems
Overall
Composite
Risk
Direction of Overall
Composite Risk
Moderate
Moderate
Low
Moderate
Moderate
Moderate
Moderate
Moderate
Acceptable
Acceptable
Strong
Strong
Acceptable
Acceptable
Acceptable
Acceptable
Moderate
Moderate
Low
Low
Moderate
Moderate
Moderate
Moderate
Stable
Stable
Stable
Stable
Stable
Stable
Stable
Stable
Moderate
Acceptable
Moderate
Stable
Type of Risk
Credit
Liquidity
Interest Rate
Foreign Exchange
Strategic Risk
Operational Risk
Legal & Compliance
Reputation
Overall
18
IN PURSUIT OF EXCELLENCE Continued from Page 18
5.
CAPITAL MANAGEMENT
5.1. Holding company
The capital allocation to the subsidiary units is in accordance with the regulatory requirements of the business undertaken
by the subsidiary.
5.2. Banking subsidiary
The primary objective of the Bank’s capital management is to ensure that the Bank complies with the RBZ requirements.
In implementing the current capital requirements, the RBZ requires the Banking subsidiary to maintain a prescribed ratio of
total capital to total risk weighted assets.
Regulatory capital consists of Tier 1 capital, which comprises share capital, share premium, retained earnings (including
current year profit), statutory reserve and other equity reserves.
The other component of regulatory capital is Tier 2 capital, which includes subordinated term debt, revaluation reserves
and portfolio provisions.
Tier 3 capital relates to an allocation of capital to market and operational risk.
6.
SEGMENT INFORMATION
The following table presents income and profit and certain asset and liability information regarding the Group’s operating segments and service
units:
Retail banking
Corporate banking
Treasury
International banking
Digital Banking
Other
Individual customers deposits and consumer loans, overdrafts, credit card facilities and funds transfer facilities.
Loans and other credit facilities and deposit and current accounts for corporate and institutional customers.
Money market investment, securities trading, accepting and discounting of instruments and foreign currency trading.
Handles the Group’s foreign currency denominated banking business and manages relationships with correspondent
banks.
Handles the Bank’s Digital Banking products including Card and POS services.
Includes other items like real estate, head office related transactions and developing business lines for the Group
Management monitors the operating results of its business units separately for the purpose of making decisions about resource allocation and
performance assessment. Segment performance is evaluated based on operating profit or loss which in certain respects is measured differently
from operating profit or loss in the consolidated financial statements. Income taxes are managed on a Group basis and are not allocated to
operating segments.
Interest income is reported net as management primarily relies on net interest revenue as a performance measure, not the gross income and
expense.
Various limits are applied to elements of the capital base. The core capital (Tier 1) shall comprise not less than 50% of the
capital base and the regulatory reserves and portfolio provisions are limited to 1.25% of total risk weighted assets.
Transfer prices between operating segments are on arm’s length basis in a manner similar to transactions with third parties.
The Bank’s regulatory capital position at 31 December was as follows:
Share capital
Share premium
Retained earnings
Inflation Adjusted
Historical Cost*
2022
ZWL ‘000
2021
ZWL ‘000
4 013
4 013
7 114 764
7 114 764
2022
ZWL ‘000
17
31 475
2021
ZWL ‘000
17
31 475
27 783 506
16 556 204
30 254 039
5 112 719
Functional currency translation reserve
1 588 744
1 588 744
11 620
11 620
No revenue from transactions with a single external customer or counterparty amounted to 10% or more of the Group’s total revenue in 2022
or 2021.
The following table presents income and profit and certain asset and liability information regarding the bank’s operating segments and service
units:
Consumer
Banking & Value
Added Services
ZWL ‘000
Business
Banking
ZWL ‘000
Treasury
Banking
ZWL ‘000
International
Banking
ZWL ‘000
Digital Banking
ZWL ‘000
Other
ZWL ‘000
Total
ZWL ‘000
Inflation Adjusted
Inflation adjusted
For the year ended 31 December 2022
Income
Less: capital allocated for market and
operational risk
36 491 027
25 263 725
30 297 151
5 155 831
Third party income
9 584 292
15 354 372
3 198 911
633 582
7 279 726
12 257 091
48 307 974
Interest and similar expense
( 1 265 257)
( 2 026 986)
( 422 300)
( 83 641)
-
( 2 578 260)
( 6 376 444)
( 5 135 505)
( 1 035 501)
( 5 135 505)
( 187 404)
8 319 035
13 327 386
2 776 612
549 940
7 279 726
9 678 831
41 931 531
Tier 1 capital
31 355 522
24 228 224
25 161 647
4 968 427
Net operating income
Tier 2 capital (subject to limit as per Banking
Regulations)
Fair valuation gains on land and buildings
Subordinated debt
Stage 1 & 2 ECL provisions – (limited to 1,25%
of risk weighted asset
3 391 719
537 391
926 323
3 262 273
1 296 169
766 979
8 688 013
5 833 685
926 323
1 420 672
848 731
223 115
Other material non-cash items
Impairment losses on financial assets measured
at amortised cost
( 203 536)
( 128 422)
Depreciation of property and equipment
( 78 542)
( 1 722)
Depreciation of right of use assets
Amortisation of intangible assets
-
-
-
-
( 239)
( 42)
-
-
-
-
1 697 892
1 365 694
( 351)
( 43 013)
( 94 680)
( 218 350)
-
-
-
-
( 71 925)
( 71 925)
( 289 691)
( 289 691)
1 928 005
1 199 125
1 928 005
348 826
Segment profit/(loss)
3 188 396
5 107 922
1 064 178
228 563
2 790 065
3 690 556
16 069 679
Tier 1 & 2 capital
34 747 241
27 490 497
33 849 660
6 389 099
Income tax charge
Tier 3 capital (sum of market and operational
risk capital)
5 135 505
1 035 501
5 135 505
187 404
Revaluation of land and buildings, net of tax
-
-
-
-
-
-
-
-
-
-
( 4 068 542)
( 4 068 542)
-
537 534
Total capital base
39 882 746
28 525 998
38 985 164
6 576 503
Total comprehensive income for the year
3 188 396
5 107 922
1 064 178
228 563
2 790 065
( 377 986)
12 538 671
Total risk weighted assets
154 240 369
83 054 572
154 240 369
24 160 630
Tier 1 ratio
Tier 2 ratio
Tier 3 ratio
Total capital adequacy ratio
RBZ minimum required
20.33%
2.20%
3.33%
25.86%
12.00%
29.17%
3.93%
1.25%
34.35%
12.00%
16.31%
5.63%
3.33%
25.28%
12.00%
20.56%
5.88%
0.78%
27.22%
12.00%
As at 31 December 2022
Assets and liabilities
Capital expenditure (property and equipment and
intangible assets)
Total assets
Total liabilities
-
-
-
-
-
-
-
21 553 869
34 053 990
19 582 797
6 635 472
720 413
52 747 112
135 293 652
37 799 907
26 756 481
17 178 293
2 530 306
-
7 439 496
91 704 483
The following table presents income and profit and certain asset and liability information regarding the Group’s operating segments and service
units:
Consumer
Banking & Value
Added Services
ZWL ‘000
Business
Banking
ZWL ‘000
Treasury
Banking
ZWL ‘000
International
Banking
ZWL ‘000
Digital Banking
ZWL ‘000
Other
ZWL ‘000
Total
ZWL ‘000
Inflation Adjusted
Inflation adjusted
For the year ended 31 December 2021
Income
Third party income
4 256 817
6 355 799
1 239 094
470 664
3 683 905
( 3 440 546)
12 565 733
Interest and similar expense
( 675 672)
( 1 009 865)
( 153 427)
( 287 074)
-
( 932 566)
( 3 058 604)
3 581 145
5 345 934
1 085 667
183 590
3 683 905
( 4 373 112)
9 507 129
Net operating income
Other material non-cash items
Impairment losses on financial assets measured
at amortised cost
( 471 586)
( 360 101)
( 21 205)
-
-
-
( 852 892)
Depreciation of property and equipment
( 22 869)
( 141)
( 103)
( 65)
-684
( 92 778)
( 116 640)
Depreciation of right of use assets
Amortisation of intangible assets
-
-
-
-
-
-
-
-
-
-
( 9 891)
( 9 891)
( 12 712)
( 12 712)
Segment profit/(loss)
3 220 673
4 808 746
1 085 667
183 525
1 501 987
( 1 293 467)
9 507 131
Income tax charge
Revaluation of land and buildings, net of tax
-
-
-
-
-
-
-
-
-
-
( 3 074 588)
( 3 074 588)
1 296 513
1 296 513
Total comprehensive income for the year
3 220 673
4 808 746
1 085 667
183 525
1 501 987
( 3 071 542)
7 729 056
As at 31 December 2021
Assets and liabilities
Capital expenditure (property and equipment and
intangible assets)
Total assets
Total liabilities
351 394
23 503
-
3 143
50 991
283 547
712 578
16 075 588
25 398 591
14 605 497
4 948 954
537 308
39 340 539
100 906 477
28 804 154
20 388 881
13 090 143
1 928 135
-
5 669 019
69 880 332
19
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Continued from Page 19
7.
GEOGRAPHICAL INFORMATION
The Bank operates in one geographical market, Zimbabwe.
SECRETARY AND REGISTERED OFFICE
Company Secretary: V. T. MUTANDWA
Registered Offices
NMB Head Office
19207 Liberation Legacy Way (formerly Borrowdale Road)
Borrowdale
Harare
Zimbabwe
NMB Centre
George Silundika Avenue / Leopold Takawira Street
Bulawayo
Zimbabwe
Telephone: +263 08688003347 / 08677008565 - 6
Website: http://www.v.co.zw
Email: enquiries@nmbz.co.zw
Transfer Secretaries
First Transfer Secretaries
1 Armagh Avenue
(Off Enterprise Road)
Eastlea
P O Box 11
Harare
Zimbabwe
20
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