Zenith Bank PLC
Annual Report - 31 December 2015
ZENITH BANK PLC
DIRECTORS, OFFICERS AND PROFESSIONAL ADVISERS
Directors
Mr.Jim Ovia, CON.
Sir Steve Omojafor
Mr.Babatunde Adejuwon
Alhaji Baba Tela
Prof. Chukuka Enwemeka
Mr.Jeffrey Efeyini
Chief (Mrs) Chinyere Asika
Dr Haruna Usman Sanusi
Mr.Peter Amangbo
Ms. Adaora Umeoji
Mr.Ebenezer Onyeagwu
Mr.Oladipo Olusola
Chairman
Non-Executive Director
Non-Executive Director
Non-Executive Director/ Independent
Non-Executive Director
Non-Executive Director
Non-Executive Director/ Independent *
Non-Executive Director/ Independent *
Group Managing Director/CEO
Executive Director
Executive Director
Executive Director
* Retired from the board effective March 26, 2015.
Company Secretary
Michael Osilama Otu
Registered office
Auditor
Zenith Bank Plc
Zenith Heights
Plot 87, Ajose Adeogun Street
Victoria Island, Lagos
KPMG Professional Services
KPMG Tower
Bishop Aboyade Cole street
Victoria Island
Lagos
Registrar and Transfer Office
Veritas Registrars Limited (formerly Zenith Registrars Limited)
Plot 89 A, Ajose Adeogun Street
Victoria Island
Lagos
1 Zenith Bank Plc Annual Report - 31 December 2015
ZENITH BANK PLC
Note
Directors' Report
Corporate Governance Report
Statement of Directors' Responsibilities
Report of the Audit Committee
Independent Auditor's Report
Consolidated and Separate Statement of Profit or Loss and
Other Comprehensive Income.
Consolidated and Separate Statements of Financial
Position
Consolidated and Separate Statements of Changes in
Equity
Consolidated and Separate Statements of Cash Flows
Notes to the Consolidated and Separate Financial
Statements
1 General information
2.0 Significant accounting policies
2.1 Basis of preparation
2.2 New standards, interpretations and amendments to existing
standard that are not yet effective
2.3 Basis of consolidation
2.4 Translation of foreign currencies
2.5 Cash and cash equivalents
2.6 Financial instruments
2.7 Derivative instruments and hedge accounting
2.8a Impairment of financial assets
2.8b Impairment of non financial assets
2.9 Reclassification of financial instruments
2.10 Collateral
2.11 Property and equipment
2.12 Intangible assets
2.13 Leases
2.14 Provisions
2.15 Employee benefits
2.16 Share capital and reserves
2.17 Recognition of interest income and expense
2.18 Fees, commissions and other income
2.19 Operating expense
2.20 Current and deferred income tax
2.21 Earnings per share
2.22 Segment reporting
2.23 Fiduciary activities
2.24 Discontinued operations
3 Risk management
3.12 Sustainability report
4 Critical accounting estimate and judgements
5 Segment analysis
6 Interest and similar income
7 Interest and similar expense
8 Impairment charge for credit losses
Page Note
Page
9 Fee and commission income
10 Trading income
11 Other income
12 Operating expenses
13 Taxation
14 Earnings per share
15 Cash and balances with central banks
16 Treasury bills
17 Assets pledged as collateral
18 Due from other banks
19 Derivative assets
20 Loans and advances
21 Investment securities
22a Investment in subsidiaries
22b Condensed financial statement
23 Investment in associates
24 Deferred tax
25 Other assets
26 Property and equipment
27 Intangible assets
28 Customers' deposits
29 Other liabilities
30 On-lending facilities
31 Borrowings
32 Debt securities issued
33 Derivatives liabilities
34 Share capital
35 Share premium, retained earnings, and
other reserves
36 Pension contribution
37 Personnel expenses
.38 Group subsidiaries and related party
transactions
39 Contingent liabilities and commitments
40 Dividend per share
41 Cash and cash equivalents
42 Compliance with banking regulations
43 Events after reporting period
44 Statement of cash flow workings
Other information
Value Added Statement
Five Year Financial Summary
3
9
19
20
21
23
24
25
27
29
29
29
29
31
32
33
33
36
37
38
39
39
39
40
40
41
42
42
43
44
44
44
45
45
45
45
46
85
91
93
96
96
96
97
97
97
98
98
100
101
101
101
102
102
103
106
108
109
113
114
115
117
119
119
120
120
122
123
124
124
124
125
125
126
128
129
129
130
130
131
136
137
139
2 Zenith Bank Plc Annual Report - 31 December 2015
ZENITH BANK PLC
Directors' Report for the Year Ended 31 December 2015
The directors present their report on the affairs of ZENITH BANK PLC, together with the financial statements and independent
auditor's report for the year ended 31 December 2015.
1.
Legal form
The Bank was incorporated in Nigeria under the Companies and Allied Matters Act as a private limited liability company on 30
May,1990. It was granted a banking licence in June 1990, to carry on the business of commercial banking and commenced
business on 16 June 1990. The Bank was converted into a Public Limited Liability Company on 20 May 2004. The Bank’s
shares were listed on the 21 October 2004 on the floor of the Nigerian Stock Exchange.
There have been no material changes to the nature of the group's business from the previous year.
2.
Principal activities and business review
The principal activity of the Bank is the provision of banking and other financial services to corporate and individual customers.
Such services include granting of loans and advances, corporate finance and money market activities.
The Bank has five subsidiary companies namely, Zenith Bank (Ghana) Limited, Zenith Pension Custodian Limited, Zenith Bank
(UK) Limited, Zenith Bank (Sierra Leone) Limited, and Zenith Bank (The Gambia) Limited. In line with regulatory directives on
the scope of banking operations in Nigeria, the Bank has concluded the divestment from its non-core banking operations
(excluding Zenith Pension Custodian Limited). During the year, the Group opened ten new branches. No branch was closed
during the year.
3. Operating results
Gross earnings of the Group increased by 7.2% and profit before tax increased by 4.9% respectively. Highlights of the Group’s
operating results for the year under review are as follows:
Gross earnings
Profit before tax
Income tax expense
Profit after taxation
Non- controlling interest
Profit attributable to the equity holders of the parent
Appropriations
Transfer to statutory reserve
Transfer to credit risk reserve
Transfer to retained earnings and other reserves
Basic and Diluted earnings per share (kobo)
Non-performing loan ratio %
4.
Dividends
31 Dec 2015
N' Million
432,535
31 Dec 2014
N' million
403,343
125,616
(19,953)
105,663
(132)
105,531
119,796
(20,341)
99,455
(180)
99,275
14,818
11,193
79,520
105,531
336
k
2.2
13,872
-
85,403
99,275
316
k
1.8
The Board of Directors, pursuant to the powers vested in it by the provisions of section 379 of the Companies and Allied
Matters Act (CAMA) of Nigeria, proposed a final dividend of N1.55 kobo per share which in addition to the N0.25 kobo per
share paid as interim dividend amounts to N1.80 per share. (31 December 2014: N1.75 kobo per share) from the retained
earnings account as at 31 December 2015. This is subject to approval by shareholders at the next Annual General Meeting.
If the proposed dividend is approved by the shareholders, the Bank will be liable to pay additional corporate tax estimated at
N13.39 billion, which represents the difference between the tax liability calculated at 30% of the dividend approved and the tax
charge reported in the statement of profit or loss and other comprehensive income for period ended 31 December 2015.
Payment of dividends is subject to withholding tax at a rate of 10% in the hand of recipients.
3 Zenith Bank Plc Annual Report - 31 December 2015
ZENITH BANK PLC
Directors' Report for the Year Ended 31 December 2015
5.
Directors' shareholding
The direct interests of directors in the issued share capital of Zenith Bank Plc as recorded in the register of directors
shareholding and/or as notified by the directors for the purposes of sections 275 and 276 of the Companies and Allied Matters
Act and the listing requirements of the Nigerian Stock Exchange is as follows:
Interests in shares
Director
Mr.Jim Ovia, CON.
Mr.Peter Amangbo
Sir Steve Omojafor
Mr.Babatunde Adejuwon
Alhaji Baba Tela
Dr Haruna Usman Sanusi
Prof. Chukuka Enwemeka
Mr.Jeffrey Efeyini
Chief (Mrs) Chinyere Asika
Ms. Adaora Umeoji
Mr.Ebenezer Onyeagwu
Mr.Oladipo Olusola
Designation
Chairman / Non-Executive Director
Group Managing Director/CEO
Non-Executive Director
Non Executive Director
Non Executive Director / Independent
Non-Executive Director/ independent *
Non-Executive Director
Non-Executive Director
Non-Executive Director / Independent *
Executive Director
Executive Director
Executive Director
Number of Shareholding
31 Dec 2015 31 Dec 2014
2,946,199,395 2,946,199,395
5,000,000
4,466,036
3,752,853
250,880
-
127,137
541,690
95,757
23,620,141
2,000,000
1,877,600
5,000,000
4,768,836
3,752,853
250,880
-
127,137
541,690
95,757
26,620,141
2,500,000
2,000,000
* Retired from the board effective March 26, 2015.
6.
Directors' interests in contracts
For the purpose of section 277 of the Companies and Allied Matters Act, none of the existing directors had direct or indirect
interest in contracts or proposed contracts with the Bank during the year.
7.
Acquisition of own shares
The shares of the Bank are held in accordance with the Articles of Association of the Bank. The Bank has no beneficial interest
in any of its shares.
8.
Property and equipment
Information relating to changes in property and equipment is given in Note 26 to the financial statements. In the opinion of the
directors, the market value of the Group’s properties is not less than the value shown in the financial statements.
9.
Shareholding analysis
The shareholding pattern of the Bank as at 31 December, 2015 is as stated below:
Share range
1-9, 999
10,000 - 50,000
50,001 - 1,000,000
1,000,001 - 5,000,000
5,000,001 - 10,000,000
10,000,001 - 50,000,000
50,000,001 - 100,000,000
100,000,001 - 500,000,000
500,000,001 - 1,000,000,000
Above 1,000,000,000
No. of
Shareholders
542,350
84,456
20,895
739
126
102
24
26
2
5
Percentage of
Shareholders
83.6025
%
13.0188
%
3.2209
%
0.1139
%
0.0194
%
0.0157
%
0.0037
%
0.0040
%
0.0003
%
0.0008
%
Number of
holdings
1,636,659,160
1,725,324,949
3,170,851,377
1,550,729,345
867,539,144
2,180,505,063
1,753,365,976
5,934,619,346
1,952,372,598
10,624,526,828
10.10
Percentage
Holdings (%)
%5.21
%5.50
%
%4.94
%2.76
%6.95
%5.58
%
%6.22
%
18.90
33.84
648,725
%100
31,396,493,786
%100
4 Zenith Bank Plc Annual Report - 31 December 2015
ZENITH BANK PLC
Directors' Report for the Year Ended 31 December 2015
The shareholding pattern of the Bank as at 31 December 2014 is as stated below:
Share range
1-9, 999
10,000 - 50,000
50,001 - 1,000,000
1,000,001 - 5,000,000
5,000,001 - 10,000,000
10,00,001 - 50,00,000
50,00,001 - 100,000,000
100,000,001 - 500,000,000
500,000,001 - 1,000,000,000
Above 1,000,000,000
10. Substantial interest in shares
No. of
Shareholders
543,289
85,238
20,824
736
125
107
26
28
3
5
Percentage of
Shareholders
83.5340
%
13.1058
%
3.2018
%
0.1132
%
0.0192
%
0.0165
%
0.0040
%
0.0043
%
0.0005
%
0.0007
%
Number of
holdings
1,648,448,849
1,741,932,851
3,134,187,886
1,544,809,379
858,481,233
2,302,183,124
1,805,880,013
5,742,873,132
1,928,683,683
10,689,013,636
Percentage
Holdings (%)
%5.25
%5.55
%9.98
%4.92
%2.73
%7.33
%5.75
%
%6.14
%
34.06
18.29
650,381
%100
31,396,493,786
%100
According to the register of members at 31 December 2015, the following shareholders held more than 5.0% of the issued
share capital of the Bank.
Jim Ovia, CON
Stanbic Nominees Nigeria Limited/C011 - MAIN
Stanbic Nominees Nigeria Limited/C002 - TRAD
Stanbic Nominees Nigeria Limited/C001 - TRAD
Number of
Shares Held
2,946,199,395
2,315,613,914
2,273,779,509
1,806,614,996
Percentage
Holdings (%)
%9.38
%7.38
%7.24
%5.75
According to the register of members at 31 December 2014, the following shareholders held more than 5.0% of the issued
share capital of the Bank.
Jim Ovia, CON
Stanbic Nominees Nigeria Limited/C001 - TRAD
Stanbic Nominees Nigeria Limited/C002 - TRAD
11. Donations and charitable gifts
Number of
Shares Held
2,946,199,395
2,134,940,725
2,975,554,502
Percentage
Holdings (%)
%9.38
%6.80
%9.48
The Group made contributions to charitable and non-political organisations amounting to N923 million during the 2015 financial
year.
The beneficiaries are as follows:
States' Security Trust Funds
Economic summits & conferences sponsorship
ICT Centres for Educational Institutions
Medical Assistance to the underprivileged
The Nigeria Football Federation
National Female Basketball League
Lagos Business School
Healthcare centre IGA Idugaran LGHA
Federal University of Agriculture Abeokuta
Warri Wolves Sponsorship
Plateau State ICT Development project
Musical society of Nigeria
Others below N9 million
31 Dec 2015
N' Million
324
151
131
66
50
43
30
24
23
15
10
9
47
923
5 Zenith Bank Plc Annual Report - 31 December 2015
ZENITH BANK PLC
Directors' Report for the Year Ended 31 December 2015
The Group made contributions to charitable and non-political organisations amounting to N1,102 million during the 2014
financial year.
The beneficiaries are as follows:
Fund Support for Victims of terrorism
ICT Centre nationwide
Security Trust Funds
Delta State Sports Commission
Nigeria Economic Summit Group
Nigerian Basketball Association
Veritas University of Nigeria
St. Savour School Ikoyi
Loyola Jesuit University Project
Kogi State Polytechnic Lokoja
Open National Sports Festival
Lagos Economic Summit Group
Others below N10 million
12. Events after the reporting period
31 Dec 2014
N' Million
270
180
386
60
40
35
20
20
10
13
10
10
48
1,102
There were no significant events after the balance sheet date that could affect the reported amount of assets and liabilities as
of the balance sheet date.
13. Disclosure of customer complaints in financial statements for the year ended 31 December 2015
Description
Number
Amount claimed
Amount refunded
31 Dec 2015 31 Dec 2014 31 Dec 2015
Pending complaint b/f
Received Complaints
Resolved Complaints
Unresolved Complaints
escalated to CBN for
Intervention
Unresolved Complaints
pending with the bank C/F
Unresolved Complaints C/F
14. Human resources
i) Employment of disabled persons.
60
212
208
5
59
64
31 Dec 2015
N.
682,941,586
117 14,872,147,292 15,619,444,423 1,089,886,664
19 8,070,341,593 2,444,644,790
31 Dec 2014
N.
N.
31 Dec 2014
N.
76 8,373,452,460 9,993,747,620 1,012,531,806 2,056,145,730
10 2,490,301,871 4,403,793,201
50 12,078,734,554
3,666,548,392
60 14,569,036,425 8,070,341,593
The Group continues to maintain a policy of giving fair consideration to the application for employment made by disabled
persons with due regard to their abilities and aptitude. The Group’s policy prohibits discrimination against disabled persons in
the recruitment, training and career development of its employees. In the event of members of staff becoming disabled, efforts
will be made to ensure that their employment continues and appropriate training arranged to ensure that they fit into the
Group's working environment.
ii) Health, safety and welfare at work.
The Group enforces strict health and safety rules and practices at the work environment, which are reviewed and tested
regularly. The Group retains top-class private hospitals where medical facilities are provided for staff and their immediate
families at the Group’s expense.
6 Zenith Bank Plc Annual Report - 31 December 2015
ZENITH BANK PLC
Directors' Report for the Year Ended 31 December 2015
Fire prevention and fire-fighting equipment are installed in strategic locations within the Group’s premises, while occassional
fire drills are conducted to create awareness amongst staff.
The Group operates both a Group Personal Accident and the Workmen’s Compensation Insurance covers for the benefit of its
employees. It also operates a contributory pension plan in line with the Pension Reform Act.
iii) Employee training and development.
The Group ensures, through various fora, that employees are informed on matters concerning them. Formal and informal
channels are also employed in communication with employees with an appropriate two-way feedback mechanism.
In accordance with the Group’s policy of continuous development, training facilities are provided in our well-equipped training
centres. In addition, employees of the Bank are nominated to attend both locally and internationally organized courses. These
are complemented by on-the-job training.
7 Zenith Bank Plc Annual Report - 31 December 2015
ZENITH BANK PLC
Corporate Governance Report for the Year Ended 31 December 2015
1.
Introduction
The Bank remains committed to promoting good corporate governance and best practices in the conduct of its business. This
is because we believe that good Corporate Governance engender public trust and ultimately ensures that the company meets
the expectation of all stakeholders.
Zenith Bank Plc has been generally adjudged a Corporate Governance compliant bank by the Nigerian Stock Exchange (NSE)
hence its recent listing on the Premium Board of the Exchange. The Bank recently won the award of “the Best Corporate
Governance Bank in Nigeria 2015” at the Global Banking and Financial Review Awards 2015.
The Bank will continue to sustain this and to reappraise its processes to ensure that our business conform to the highest global
standards at all times.
2.
Shareholding
The Bank has a diverse shareholding structure with no single ultimate individual beneficiary holding more than 10% of the
Bank’s total shares.
3.
Board of directors
The Board has the overall responsibility for setting the strategic direction of the Bank and also oversight of senior Management.
The Board consists of persons of mixed skills, chosen on the basis of professional background and expertise, business
experience and integrity as well as knowledge of the Bank’s business.
Directors are fully aware of their responsibilities and are also able to exercise good judgment on issues relating to the Bank’s
business.
4.
Board structure
The board is made up of a non-executive Chairman, five (5) nonexecutive Directors and four (4) executive Directors including
the GMD/CEO. One (1) of the non-executive Directors is an independent director, appointed in compliance with the Central
Bank of Nigeria (CBN) circular on Appointment of Independent Directors by Banks.
The Managing Director/Chief Executive is responsible for the day to day running of the Bank, assisted by the Executive
Committee (EXCO). EXCO comprises the Executive Directors and the Group Managing Director/Chief Executive, who chairs it.
5.
Responsibilities of the board
The Board is responsible for:
reviewing and approving the Bank’s strategic plans for implementation by management;
reviewing and approving the Bank’s financial objectives, business plans and budgets, including capital allocations and
expenditures;
monitoring corporate performance against the strategic plans and business, operating and capital budgets;
implementing the bank’s succession planning;
approving acquisitions and divestitures of business operations, strategic investments and alliances, and major business
development initiatives
approving delegation of authority for any unbudgeted expenditure; and
assessing its own effectiveness in fulfilling its responsibilities, including monitoring the effectiveness of individual
directors.
9 Zenith Bank Plc Annual Report - 31 December 2015
ZENITH BANK PLC
Corporate Governance Report for the Year Ended 31 December 2015
The membership of the Board during the year is as follows:
Board of Directors
NAME
Mr Jim Ovia, CON
Sir. Steve Omojafor
Mr Babatunde Adejuwon
Alhaji Baba Tela
Mr Jeffrey Efeyini
Prof. Chukuka S. Enwemeka
Chief (Mrs) Chinyere Asika*
Dr. Haruna Usman Sanusi*
Mr Peter Amangbo
Ms. Adaora Umeoji
Mr Ebenezer Onyeagwu
Mr Olusola Oladipo
POSITION
Chairman
Non-Executive Director
Non-Executive Director
Non-Executive Director / Independent
Non-Executive Director
Non-Executive Director
Non-Executive Director / Independent
Non-Executive Director / Independent
Group Managing Director/Chief Executive Officer
Executive Director
Executive Director
Executive Director
* Retired from the Board with effect from March 26, 2015.
The Board meets at least every quarter but may hold extra-ordinary sessions to address urgent matters requiring the attention
of the Board.
6.
Board committees
The Board carries out its oversight functions using its various Board committees. This makes for efficiency and allows for a
deeper attention to specific matters for the Board.
Membership of the committees of the Board is intended to make the best use of the skills and experience of non-executive
directors in particular.
The Board has established the various committees with well defined terms of reference and Charters defining their scope of
responsibilities in such a way as to avoid overlap or duplication of functions.
The committees of the Board meet quarterly but may hold extraordinary sessions as the business of the Bank demands.
The following are the current standing Committees of the Board:
6.1 Board credit committee
The committee is currently made up of six (6) members comprising three (3) Non-Executive Directors and three (3) Executive
Directors of the bank. The Board credit committee is chaired by a non-Executive Director who is well versed in credit matters.
The Committee considers loan applications above the level of Management credit committee. It also determines the credit
policy of the bank or changes therein.
The membership of the Committee during the year is as follows:
Mr Jeffrey Efeyini – (Chairman)
Mr Babatunde Adejuwon
Alhaji Baba Tela
Mr Peter Amangbo
Mr Ebenezer Onyeagwu
Mr Olusola Oladipo
10 Zenith Bank Plc Annual Report - 31 December 2015
ZENITH BANK PLC
Corporate Governance Report for the Year Ended 31 December 2015
Committee's terms of reference
To conduct a quarterly review of all collateral securities for Board consideration and approval;
To recommend criteria by which the Board of Directors can evaluate the credit facilities presented from various
customers;
To review the credit portfolio of the Bank;
To approve all credit facilities above Management approval limit;
To establish and periodically review the bank’s credit policy and portfolio in order to align organizational strategies,
goals and performance;
To evaluate on an annual basis the components of total credit facilities as well as market competitive data and other
factors as deemed appropriate, and to determine the credit level based upon this evaluation;
To make recommendations to the Board of Directors with respect to credit facilities based upon performance, market
competitive data, and other factors as deemed appropriate;
To recommend to the Board of Directors, as appropriate, new credit proposals, restructure plans, and amendments
to existing plans;
To recommend non-performing credits for write-off by the Board; and
To perform such other duties and responsibilities as the Board of Directors may assign from time to time.
6.2 Staff matters, finance and general purpose committee
This Committee is made up of five (5) members: three (3) Non-Executive Directors and two (2) Executive Directors. It is chaired
by a Non-executive Director. The committee considers large scale procurement by the Bank, as well as matters bordering on
staff welfare, discipline, staff remuneration and promotion.
The membership of the committee is as follows:
Alhaji Baba Tela – (Chairman)
Chief (Mrs) Chinyere Asika *
Prof. Chukuka Enwemeka
Sir. Steve Omojafor
Mr Peter Amangbo
Ms. Adaora Umeoji
(*) - Retired from the Board with effect from March 26, 2015
Committee's terms of reference
Approval of large scale procurements by the Bank and other items of major expenditure by the Bank;
Recommendation of the Bank’s Capital Expenditure (CAPEX) and major Operating Expenditure (OPEX) limits for
consideration by the Board;
Consideration of management requests for branch set up and other business locations;
Consideration of management request for establishment of offshore subsidiaries and other offshore business
offices.
Consideration of the dividend policy of the Group and the declaration of dividends or other forms of distributions and
recommendation to the Board;
Consideration of capital expenditures, divestments, acquisitions, joint ventures and other investments, and other
major capital transactions;
Review and approval of any employment-related contracts with the GMD/CEO and other executive officers, if
applicable;
Consideration of senior management promotions as recommended by the GMD/CEO;
Review and recommendations on recruitment, promotion, and disciplinary actions for senior management staff;
Review and agreement at the beginning of the year, of the key performance indicators for the Group MD and
Executive Directors;
Review and ratification of the performance appraisal of the Executive Directors as presented by the Group MD;
Review and agree the criteria for the performance review of the subsidiary companies Board of Directors and
subsidiary companies Managing Director;
Ensure annual review or appraisal of the performance of the Board is conducted. This review/appraisal covers all
aspects of the Board’s structure, composition, responsibilities, individual competencies, Board operations, Board’s
role in strategy setting, oversight over corporate culture, monitoring role and evaluation of management performance
and stewardship towards shareholders etc;
11 Zenith Bank Plc Annual Report - 31 December 2015
ZENITH BANK PLC
Corporate Governance Report for the Year Ended 31 December 2015
To discharge the Board’s responsibility relating to oversight of the management of the health and welfare plans that
cover the company’s employees.
6.3 Board risk and audit committee:
The Board risk and audit committee has oversight responsibility for the overall risk assessment of various areas of the Bank’s
operations and compliance.
The Chief Risk Officer, the Chief Inspector and the Chief Compliance Officer have access to this committee and make quarterly
presentations for the consideration of the committee. Chaired by Mr. Adejuwon (a Non-executive Director), the committee’s
membership comprises the following:
Mr Babatunde Adejuwon – (Chairman)
Mr Jeffrey Efeyini
Dr. Haruna Usman Sanusi*
Prof. Chukuka Enwemeka
Mr Peter Amangbo
Mr Ebenezer Onyeagwu
(*) – Retired from the Board with effect from March 26, 2015.
Committee's terms of reference
The primary responsibility of the Committee is to ensure that sound policies, procedures and practices are in place for
the risk-wide management of the Bank’s material risks and to report the results of the Committee’s activities to the Board
of Directors.
Design and implement risk management practices, specifically provide ongoing guidance and support for the refinement
of the overall risk management framework and ensuring that best practices are incorporated;
Ensure that management understands and accepts its responsibility for identifying, assessing and managing risk;
Ensure and monitor risk management practices, specifically determine which enterprise risks are most significant and
approve resource allocation for risk monitoring and improvement activities, assign risk owners and approve action plans;
Periodically review and monitor risk mitigation process and periodically review and report to the Board of Directors:
(a)
(b)
(c)
the magnitude of all material business risks;
the processes, procedures and controls in place to manage material risks; and
the overall effectiveness of the risk management process;
Facilitate the development of a comprehensive risk management framework for the Bank and develop the risk
management policies and processes and enforce its compliance.
To review the findings on management matters (Management Letter) to ensure that issues raised therein are addressed
in a timely manner.
Approve the bank’s Risk Appetite Policy and periodically review any material changes to such policy.
Review and discuss with Management the bank’s Risk Appetite and Strategy relating to key risks in the bank, as well as
the policies and processes for mitigation of such risks.
Receive reports on Risk appetite results with respect to the reference ranges.
Establish and periodically review the bank’s Risk portfolio in order to align organizational strategies, goals, and
performance.
Evaluate on a periodic basis the components of risk as well as market competitive data and other factors as deemed
appropriate, and determine the risk level based upon this evaluation.
12 Zenith Bank Plc Annual Report - 31 December 2015
ZENITH BANK PLC
Corporate Governance Report for the Year Ended 31 December 2015
Review the report of the Management Risk Committee on environmental and other risk issues affecting the bank and
recommend steps to be taken. To ensure adequate reach and authority, the Management Risk Committee include two
Executive Directors i.e. the Managing Director and the Executive Director overseeing the Risk Management Group.
Perform such other duties and responsibilities as the Board of Directors may assign from time to time.
6.4 Board governance, nominations and remuneration committee:
The Committee is made up of four (4) Non-Executive Directors. It is chaired by a Non-executive Director.
Membership of the committee is as follows:
Sir Steve Omojafor- (Chairman)
Chief (Mrs) Chinyere Asika *
Prof. Chukuka Enwemeka
Alhaji Baba Tela
Mr. Babatunde Adejuwon **
(*) – Retired from the Board with effect from March 26, 2015.
(**) – Appointed to the Committee on April 29, 2015.
Committee’s terms of reference
To determine a fair, reasonable and competitive compensation practice for executive officers and other key
employees of the Bank which are consistent with the Bank’s objectives.
Determining the quantum and structure of compensation and benefits for Non-Executive Directors, Executive
Directors and senior management of the Group;
Ensuring the existence of an appropriate remuneration policy and philosophy for Executive Directors, Non-Executive
Directors and staff of the Group;
Review and recommend to the Board, salary revisions and services conditions for senior management staff, based
on the recommendation of the Executives;
Review and recommend for Board ratification, all terminal compensation arrangements for Directors and senior
management;
Oversight of broad-based employee compensation policies and programs;
Recommendation of appropriate compensation for Non-Executive Directors for Board and Annual General Meeting
consideration;
Review and approval of any recommended compensation actions for the Company's Executive Committee
members, including base salary, annual incentive bonus, long-term incentive awards, severance benefits, and
perquisites;
Review and continuous assessment of the size and composition of the Board and Board Committees, and
recommend the appropriate Board structure, size, age, skills, competencies, composition, knowledge, experience
and background in line with needs of the Group and diversity required to fully discharge the Board’s duties;
Recommend membership criteria for the Group Board, Board Committees and subsidiary companies Boards.
Identify at the request of the Board of specific individuals for nomination to the Group and subsidiary companies
Boards and to make recommendations on the appointment and election of New Directors (including the Group MD)
to the Board, in line with the Group’s approved Director Selection criteria;
Review of the effectiveness of the process for the selection and removal of Directors and to make recommendations
where appropriate;
Ensure that there is an approved training policy for Directors, and monitor compliance with the policy;
Review and make recommendations on the Group’s succession plan for Directors and other senior management
staff for the consideration of the Board;
Regular monitoring of compliance with Group’s code of ethics and business conduct for Directors and staff;
Assess the Company's financial and non-financial goals versus actual performance, evaluate the CEO in light of this
performance, and recommend for approval of the independent members of the Board, the CEO's compensation
level based on this evaluation;
Review the Group’s organization structure and make recommendations to the Board for approval;
13 Zenith Bank Plc Annual Report - 31 December 2015
ZENITH BANK PLC
Corporate Governance Report for the Year Ended 31 December 2015
6.5 Audit committee
The committee is established in line with Section 359(6) of the Companies and Allied Matters Act, 1990. The committee’s
membership consists of three (3) representatives of the shareholders elected at the Annual General Meeting (AGM) and three
(3) non-executive Directors. The committee meets every quarter, but could also meet at any other time, if the need arises.
The membership of the Committee is as follows:
Shareholders' Representative
Prof. Leonard Obika – (Chairman)
Mr Michael Olusoji Ajayi
Ms. Angela Agidi
Non-Executive Directors
Mr Babatunde Adejuwon
Alhaji Baba Tela*
Jeffrey Efeyini
Chief (Mrs) Chinyere Asika**
* - Elected on March 26, 2015.
**-Retired from the Board with effect from March 26, 2015
Committee’s terms of reference
(a)
(b)
(c)
To meet with the Independent Auditors, Chief Financial Officer, Internal Auditor and any other Bank executive both
individually and/or together, as the committee deems appropriate at such times as the Committee shall determine to
discuss and review:
the Bank's quarterly and audited annual financial statements, including any related notes, the Bank's specific disclosures
and discussion under Management's Controls Report and the independent auditor's report, in advance of publication;
the performance and results of the external and internal audits, including the independent auditor's management letter,
and management's responses thereto;
the effectiveness of the Bank's system of internal controls, including computerized information systems and security; any
recommendations by the independent auditor and internal auditor regarding internal control issues and any actions taken
in response thereto; and, the internal control certification and attestation required to be made in connection with the
Bank's quarterly and annual financial reports; and
(d)
such other matters in connection with overseeing the financial reporting process and the maintenance of internal controls
as the committee shall deem appropriate.
To prepare the Committee's report for inclusion in the Bank's annual report.
To report to the Board at such times as the Committee shall determine.
6.6 Executive committee (EXCO)
The EXCO comprises the Managing Director, who chairs it and all Executive Directors. The committee meets twice weekly (or
such other times as business exigency may require) to deliberate and take policy decisions on the effective and efficient
management of the Bank. It also serves as a processing unit for issues to be discussed at the Board level. The EXCO’s
primary responsibility is to ensure the implementation of strategies approved by the Board, provide leadership to the
Management team and ensure efficient deployment and management of the Bank’s resources.Its Chairman is responsible for
the day-to-day running and performance of the Bank.
6.7 Other committees
In addition to the afore-mentioned committees, the Bank has in place, other standing management committees. They include:
(a) Management Committee (MANCO);
14 Zenith Bank Plc Annual Report - 31 December 2015
ZENITH BANK PLC
Corporate Governance Report for the Year Ended 31 December 2015
(b) Assets and Liabilities Committee (ALCO);
(c) Management Global Credit Committee (MGCC);
(d) Risk Management Committee (RMC)
(e) Information Technology (IT) Steering Committee
(a) Management committee (MANCO)
The Management Committee comprises the senior management of the Bank and has been established to identify, analyse,
and make recommendations on risks arising from day-to-day activities. They also ensure that risk limits as contained in the
Board and Regulatory policies are complied with. Members of the management committee make contributions to the respective
Board Committees and also ensure that recommendations of the Board Committees are effectively and efficiently
implemented. They meet weekly and as frequently as the need arises.
(b) Assets and liabilities committee (ALCO)
The ALCO is responsible for the management of a variety of risks arising from the Bank's business including market and
liquidity risk management, loan to deposit ratio analysis, cost of funds analysis, establishing guidelines for pricing on deposit
and credit facilities, exchange rate risks analysis, balance sheet structuring, regulatory considerations and monitoring of the
status of implemented assets and liability strategies. The members of the Committee include the Managing Director, Executive
Directors, the Treasurer, the Head of Financial Control, Group Head, Risk Management Group and a representative of the
Assets and Liability Management Unit. A representative of the Asset and Liability Management Department serves as the
secretary of this Committee.
(c) Management global credit committee (MGCC)
The Management Global Credit Committee is responsible for ensuring that the Bank complies with the credit policy guide as
established by the Board. The Committee also makes contributions to the Board Credit Committee. The Committee can
approve credit facilities to individual obligors not exceeding in aggregate a sum as pre-determined by the Board from time to
time. The Committee is responsible for reviewing and approving extensions of credit, including one-obligor commitments that
exceed an amount as may be determined by the Board. The Committee reviews the entire credit portfolio of the Bank and
conducts periodic assessment of the quality of risk assets in the Bank. It also ensures that adequate monitoring of performance
is carried out. The secretary of the committee is the Head of the Credit Administration Department.
The Committee meets weekly or fortnightly depending on the number of credit applications to be considered. The members of
the Committee include the Managing Director, and all divisional and group heads, including the Executive Directors.
(d) Risk management committee (RMC)
This Committee is responsible for regular analysis and consideration of risks other than credit risk in the Bank. It meets [at
least once in a month or as the need arises] to review environmental and other risk issues and policies affecting the Bank and
recommend steps to be taken. The Committee's approach is entirely risk based. The Committee makes contributions to the
Board Risk and Audit Committee and also ensures that the Committee's decisions and policies are implemented. The
members of the Committee include the Managing Director, two Executive Directors, the Chief Risk Officer and all divisional and
group heads.
(e) Information technology (IT) steering committee
The Information Technology (IT) Steering Committee is responsible for amongst others, development of corporate information
technology (IT) strategies and plans that ensure cost effective application and management of resources throughout the
organization.
Membership of the committee is as follows:
The Managing Director/Chief Executive;
Two (2) Executive Directors;
Head of Treasury;
Head of Trade Services;
1
2
3
4
5 Marketing Groups Representatives;
6
Chief Inspector;
15 Zenith Bank Plc Annual Report - 31 December 2015
ZENITH BANK PLC
Corporate Governance Report for the Year Ended 31 December 2015
Chief Risk Officer;
Head of IT;
Head of Infotech - Software;
7
8
9
10 Head of Infotech - Enginering;
11 Head of Card Services;
12 Group Head of Operations;
13 Group Head of IT Audit;
14 Head of e-Business; and
15 Head of Investigation.
The committee meets monthly or as the need arises.
7. Policy on trade in the Bank's securities
The Bank has put in place a policy on trading in the Bank's Securities by Directors and other key personnel of the Bank.
During the year under review, the Directors and other key personnel of the Bank complied with the terms of the policy and the
provisions of S.14 of the Amendment to the Listing Rules of the Nigeria Stock Exchange.
8. Code of Corporate Governance
The Bank subscribes to the following codes of Corporate Governance:
(a) Central Bank of Nigeria (CBN) Code of Corporate Governance for Banks in Nigeria 2014.
(b) Securities and Exchange Commission (SEC) Code of Corporate Governance.
During the year under review, the Bank complied with the provisions of both codes.
9. Relationship with shareholders
Zenith Bank maintains an effective communication with its shareholders, which enables them understand our business,
financial condition and operating performance and trends. Apart from our annual report and accounts, proxy statements and
formal shareholders’ meetings, we maintain a rich website (with suggestion boxes) that provide information on a wide range of
issues for all stakeholders.
Also, a quarterly publication of the bank and group performance is made in line with the disclosure requirements of the Nigeria
Stock Exchange.
The Bank has an Investors Relations Unit which holds regular forum to brief all stakeholders on operations of the bank.
The bank also, from time to time, holds briefing sessions with market operators (stockbrokers, dealers, institutional investors,
issuing houses, stock analysts, mainly through investors conference) to update them on the state of our business. These
professionals, as advisers and purveyors of information, relate with and relay to the shareholders useful information about us.
We also regularly brief the regulatory authorities, and file statutory returns which are usually accessible to the shareholders.
10. Directors remuneration policy
The Bank's remuneration policy is structured taking into account the environment in which it operates and the results it
achieves at the end of each financial year. It includes the following elements:
Non-executive directors
Components of remuneration is quarterly and sitting allowances which are based on levels of responsibilities.
Directors are also sponsored for trainings that they required to enhance their duties to the bank.
Executive directors
The remuneration policy for executive directors considers various elements, including the following:
16 Zenith Bank Plc Annual Report - 31 December 2015
ZENITH BANK PLC
Corporate Governance Report for the Year Ended 31 December 2015
Fixed remuneration, taking into account the level of responsibility, and ensuring this remuneration is competitive with
remuneration paid for equivalent posts in banks of equivalent status both within and outside Nigeria.
Variable annual remuneration linked to the Zenith Bank financial results. The amount of this remuneration is subject to
achieving specific quantifiable targets, aligned directly with shareholders' interests.
11. Schedule of board and board committees meeting held during the year
The table below shows the frequency of meetings of the Board of directors, board committees and members’ attendance at
these meetings during the year under review.
Directors
Board
Board credit
committee
Finance and
general purpose
committee
Board risk and
audit committee
Board governance,
nomination and
remuneration
committee
Attendance/no of meetings
Mr. Jim Ovia, CON
Sir Steve Omojafor
Mr Babatunde Adejuwon
Alhaji Baba Tela
Mr. Jeffrey Efeyini
Prof. Chukuka S.Enwemeka
Chief (Mrs) Chinyere Asika*
Dr. Haruna Usman Sanusi*
Ms. Adaora Umeoji
Mr. Ebenezer Onyeagwu
Mr. Olusola Oladipo
Mr. Peter Amangbo
5
5
5
5
5
5
5
2
2
5
5
5
5
Note:
5
N/A
N/A
5
5
5
N/A
N/A
N/A
N/A
5
5
5
4
N/A
4
N/A
4
N/A
4
1
N/A
4
N/A
N/A
4
4
N/A
N/A
4
N/A
4
4
N/A
1
N/A
4
N/A
4
4
N/A
4
3 **
4
N/A
4
1
N/A
N/A
N/A
N/A
N/A
* - Retired from the Board with effect from March 26, 2015.
** - Appointed as a member of Board Nomination & Remuneration Committee on April 29, 2015.
N/A - Not Applicable (Not a Committee member)
Date for Board and Board Committee meetings held during the year:
Board meetings
Board credit
committee
meeting
Finance and
general purpose
committee
Board risk and
audit committee
meeting
February 5, 2015
March 26, 2015
April 29, 2015
July 30, 2015
October 6, 2015
February 5, 2015
March 25, 2015
April 28, 2015
July 29, 2015
October 5, 2015
February 5, 2015
Nil
April 28, 2015
July 29, 2015
October 5, 2015
February 5, 2015
Nil
April 28, 2015
July 29, 2015
October 5, 2015
Board governance,
nominations and
remuneration
committee
February 5, 2015
Nil
April 28, 2015
July 29, 2015
October 5, 2015
Audit committee
meeting
February 5, 2015
Nil
April 28, 2015
July 29, 2015
October 5, 2015
17 Zenith Bank Plc Annual Report - 31 December 2015
ZENITH BANK PLC
Corporate Governance Report for the Year Ended 31 December 2015
AUDIT COMMITTEE
The table below shows the frequency of meetings of the audit committee and members’ attendance at these meetings during
the year under review.
Date of meetings held during the year:
Members
Number of Meetings attended
Total number of meetings (4)
Alhaji Hamis B. Musa * (SR)
Prof. (Prince) L.F.O Obika** (SR)
Alhaji Baba Tela** (NED)
Mr. Michael Olusoji Ajayi (SR)
Ms. Angela Agidi (SR)
Mr. Babatunde Adejuwon (NED)
Mr. Jeffrey Efeyini (NED)
Chief (Mrs) Chinyere Asika * (NED)
NED- Non-Executive Director.
SR - Shareholders representive
0
3
3
4
4
4
4
1
* - Retired with effect from March 26, 2015.
** - Elected member of the Committee with effect from March 26, 2015.
Analysis of Fraud and forgeries Returns
2015
2014
Nature of Fraud
No.
%
Loss
Actual Loss to
the Bank (N)
No.
% Loss Actual Loss to
ATM/Electronic fraud
Staff Perpetrate
Impersonation
Stolen/Forged Instrument
Internet Banking
Others
Total
24
5
4
8
80
90
211
-
78
-
16
3
4
100
Jan-Dec 2015
-
155,727,899
-
31,482,925
5,328,712
7,983,900
200,523,436
-
-
-
-
-
-
-
11
1
1
1
23
8
45
1
29
-
23
35
12
100
the Bank (N)
Jan-Dec 2014
470,000
14,040,299
50,000
11,048,570
17,070,354
5,990,048
48,669,272
18 Zenith Bank Plc Annual Report - 31 December 2015
ZENITH BANK PLC
Consolidated and Separate Statements of Profit or Loss and other
Comprehensive Income for the Year Ended 31 December 2015
Group
Bank
In millions of Naira
Note(s)
2015
2014
2015
2014
Gross earnings
432,535
403,343
396,653
372,015
Interest and similar income
Interest and similar expense
Net interest income
Impairment charge for financial assets
Net interest income after impairment charge for
financial assets
Fee and commission income
Trading income
Other income
Share of profit of associates
Depreciation of property and equipment
Amortisation of intangible assets
Personnel expenses
Operating expenses
Profit before income tax
Income tax expense
Profit after tax
6
7
8
9
10
11
23
26
27
37
12
13
348,179
(123,597)
224,582
(15,673)
313,422
(106,919)
206,503
(13,064)
208,909
60,904
18,150
5,302
228
(9,188)
(1,239)
(67,522)
(89,928)
125,616
(19,953)
105,663
193,439
70,512
15,877
3,532
138
(9,087)
(728)
(72,320)
(81,567)
119,796
(20,341)
99,455
317,419
(114,936)
202,483
(11,091)
191,392
50,313
17,884
11,037
-
(8,472)
(1,129)
(62,428)
(83,377)
115,220
(16,436)
98,784
285,171
(99,439)
185,732
(12,392)
173,340
60,825
15,865
10,154
-
(8,417)
(704)
(67,848)
(75,366)
107,849
(15,370)
92,479
Other comprehensive income:
Items that will never be reclassified to profit or loss:
Fair value movements on equity instruments
Items that are or may be reclassified to profit or
loss:
Foreign currency translation differences for foreign
operations
Effective portion of changes in fair value of cash
flow hedges
Related tax expense
Other comprehensive income for the year, net of
tax
(1,752)
2,549
(1,752)
2,549
637
3,282
-
-
(1,115)
(2,771)
760
3,820
-
-
-
-
-
-
(1,752)
2,549
Total comprehensive income for the year
104,548
103,275
97,032
95,028
Profit attributable to:
Equity holders of the parent
Non controlling interest
Total comprehensive income attributable to:
Equity holders of the parent
Non-controlling interest
Earnings per share:
Basic and diluted
105,531
132
99,275
180
98,784
-
92,479
-
104,467
81
103,146
129
97,032
-
95,028
-
14
336
k
316
k
315
k
295
k
23 Zenith Bank Plc Annual Report - 31 December 2015
ZENITH BANK PLC
Consolidated and Separate Statements of Changes in Equity as at 31 December 2015
Group
In millions of Naira
At 1 January 2014
Profit for the year
Foreign currency translation
differences
Effective portion of changes in fair
value of cash flow net of tax
Fair value movements on equity
instruments, net of tax
Total comprehensive income for
the year
Transfer between reserves
Dividends
Changes in ownership interest in
subsidiaries
Share
capital
Share
premium
15,698
-
-
255,047
-
-
-
-
-
-
-
-
-
-
-
-
-
-
Foreign
currency
translation
reserve
(5,683)
-
3,294
-
-
-
-
-
At 31 December 2014
15,698
255,047
(2,389)
At 1 January 2015
Profit for the year
Foreign currency translation
differences
Fair value movements on equity
instruments, net of tax
Total comprehensive income for
the year
Transfer between reserves
Dividends
15,698
-
-
255,047
-
-
(2,389)
-
688
-
-
-
-
-
-
-
-
-
688
-
-
As at 31 December 2015
15,698
255,047
(1,701)
1,972
-
-
(1,972)
3,499
-
-
-
-
2,549
3,294
(1,972)
2,549
Hedging
reserve
Attributable to equity holders of the Bank
Revaluation
reserve
(investment
securities)
Contingency
reserve
Statutory
reserve
SMIEIS
reserve
Credit risk
reserve
Retained
earnings
Total
Non-
controlling
interest
Total equity
1,371
-
-
57,762
13,872
-
3,729
-
-
10,697
-
-
161,144
85,403
-
505,236
99,275
3,294
4,015
180
(12)
509,251
99,455
3,282
-
-
-
-
-
13,872
6,633
-
-
-
-
-
-
-
-
-
-
-
-
-
(1,972)
(39)
(2,011)
2,549
-
2,549
85,403
103,146
129
103,275
1,575
-
-
(8,208)
(54,943)
-
-
(54,943)
(1,353)
-
-
(3,592)
-
(54,943)
(4,945)
78,267
3,729
12,272
183,396
552,086
552
552,638
3,729
-
-
12,272
11,193
-
183,396
79,520
-
552,086
105,531
688
552
132
(51)
552,638
105,663
637
-
-
(1,752)
-
(1,752)
11,193
79,520
104,467
81
104,548
78,267
14,818
-
-
14,818
8
-
-
-
-
-
93,093
3,729
23,465
200,115
593,760
-
-
(8)
(62,793)
-
(62,793)
-
(40)
593
-
(62,833)
594,353
-
-
-
-
-
-
-
-
-
-
-
-
-
-
18
-
-
(1,371)
6,066
6,066
-
-
(1,752)
(1,752)
-
-
4,314
-
-
-
-
-
-
-
-
-
25 Zenith Bank Plc Annual Report -31 December 2015
ZENITH BANK PLC
Consolidated and Separate Statements of Changes in Equity as at 31 December 2015
Bank
In millions of Naira
At 1 January 2014
Profit for the year
Fair value movements on equity
instruments, net of tax
Total comprehensive income for
the year
Dividend
Share
capital
Share
premium
Revaluation
reserve
(Investment
Securities)
Statutory
reserve
SMIEIS
reserve
Credit risk
reserve
Retained
earnings
Total equity
15,698
-
-
255,047
-
-
3,517
-
2,549
57,710
13,872
-
3,729
-
-
10,243
-
-
126,678
78,607
-
472,622
92,479
2,549
-
-
-
-
2,549
13,872
-
-
-
-
-
-
78,607
95,028
(54,943)
(54,943)
At 31 December 2014
15,698
255,047
6,066
71,582
3,729
10,243
150,342
512,707
At 1 January 2015
Profit for the year
Fair value movements on equity
instruments, net of tax
Total comprehensive income for
the year
Dividends
15,698
-
-
255,047
-
-
6,066
-
(1,752)
71,582
14,818
-
3,729
-
-
10,243
11,107
-
150,342
72,859
-
512,707
98,784
(1,752)
-
-
-
-
(1,752)
14,818
-
-
-
-
11,107
72,859
97,032
-
(62,793)
(62,793)
At 31 December 2015
15,698
255,047
4,314
86,400
3,729
21,350
160,408
546,946
The accompanying notes are an integral part of these consolidated and separate financial statements.
26 Zenith Bank Plc Annual Report -31 December 2015
ZENITH BANK PLC
Consolidated and Separate Statements of Cash Flows
for the Year Ended 31 December 2015
In millions of Naira
Cash flows from operating activities
Group
Bank
Note(s)
2015
2014
2015
2014
Profit after tax for the year
105,663
99,455
98,784
92,479
Adjustments for:
Impairment loss
On overdrafts
On term loans
On on-lending
On leases
On other assets
Fair value changes in trading bond
Fair value changes in treasury bills
Depreciation of property and equipment
Amortisation of intangible assets
Dividend income
Net revaluation loss on debt securities issued
Interest income
Interest expense
Share of profit of associates
Profit on sale of property and equipment
Gain on disposal of subsidiary
Tax expenses
Changes in operating asset and liabilities:
Net increase in loans and advances
Net (increase)/decrease in other assets
Net (increase)/decrease in treasury bills with maturities
greater than three months
Net (increase)/decrease in treasury bills (FVTPL)
Net increase in assets pledged as collateral
Net decrease in debt securities
Net increase in restricted balances (cash reserve)
Net assets of subsidiary disposed
Net increase/(decrease) in customer deposits
Net decrease in other liabilities
Net increase in derivative assets
Net decrease in derivative liabilities
Interest received
Dividend received
Interest paid
Tax paid
VAT paid
Cash flow from discontinued operations
Net cash flows used in operations
8
8
8
8
8
44(i)
44(iii)
26
27
11
32
6
7
23
11
11
13
44(iv)
25
44(ii)
44(iii)
17
44(i)
15
44(xv)
44(v)
44(ix)
19
33
44 (xiii)
11
44 (xiv)
13
44(ixi)
44(vi)
(178)
13,219
2,276
24
332
(707)
(878)
9,188
1,239
(545)
6,886
(348,179)
123,597
(228)
(39)
(1,615)
19,953
10,929
2,145
-
(10)
-
-
-
9,087
728
(455)
-
(313,422)
106,919
(138)
(153)
(510)
20,341
(3,108)
11,567
2,276
24
332
(707)
(878)
8,472
1,129
(4,505)
6,886
(317,419)
114,936
-
(27)
(1,615)
16,436
10,257
2,145
-
(10)
-
-
-
8,417
704
(455)
-
(285,171)
99,439
-
(151)
(7,033)
15,370
(69,992)
(65,084)
(67,417)
(64,008)
(261,371)
(1,651)
(165,203)
(51,658)
(113,305)
(16,768)
104,593
-
18,654
(82,336)
8,927
(5,689)
(635,799)
335,254
545
(121,678)
(26,356)
(2,460)
-
(478,138)
14,783
145,163
(1,162)
(144,816)
104,487
(159,453)
(16,343)
258,288
79,155
(14,727)
6,073
(271,774)
300,159
455
(104,651)
(23,649)
(4,940)
(11,078)
(266,809)
(2,612)
(142,469)
(51,658)
(112,574)
(60,533)
104,631
-
65,836
(57,630)
8,415
(5,689)
(588,509)
304,494
4,505
(113,017)
(20,409)
(2,460)
-
(452,820)
12,022
142,128
(1,162)
(144,816)
122,400
(159,449)
-
183,132
76,092
(16,896)
6,073
(297,304)
271,908
455
(97,171)
(19,260)
(4,614)
-
(450,494)
(115,478)
(415,396)
(145,986)
27 Zenith Bank Plc Annual Report - 31 December 2015
ZENITH BANK PLC
Consolidated and Separate Statements of Cash Flows
for the Year Ended 31 December 2015
In millions of Naira
Cash flows from investing activities
Purchase of property and equipment
Proceeds from sale of property and equipment
Purchase of intangible assets
Proceeds from sale of equity securities
Investment in subsidiaries
Proceed from sale of subsidiaries
Cash flow from discontinued operations
Net cash (Used in)/from investing activities
Cash flows from financing activities
Borrowed funds
Inflow from long term borrowing
Repayment of long term borrowing
Net inflow from On-lending facilities
Inflow from debt securities issued
Dividends paid to shareholders
Net cash from changes in ownership interest in
subsidiaries
Group
Bank
Note(s)
2015
2014
2015
2014
26
44(xi)
27
44(xii)
22
44(xv)
44(vii)
(25,019)
96
(2,221)
3,211
-
-
-
(23,933)
(12,232)
232
(947)
685
-
10,935
3,970
2,643
(20,196)
95
(1,981)
3,211
-
-
-
(18,871)
(10,701)
252
(902)
685
(8,628)
10,935
-
(8,359)
31
31
30
32
40
44(ix)
75,909
(15,113)
218,537
-
(62,793)
-
149,626
(11,710)
8,816
92,932
(54,943)
3,548
85,158
(15,113)
218,537
-
(62,793)
-
149,626
(11,710)
8,816
92,932
(54,943)
-
Net cash from financing activities
216,540
188,269
225,789
184,721
(Decrease)/Increase in cash and cash equivalents
(257,887)
75,434
(208,478)
30,376
Analysis of changes in cash and cash equivalents :
Cash and cash equivalent at the start
(Decrease)/Increase in cash and cash equivalents
Cash and cash equivalents from discontinued operations 44(vii)
Effect of exchange rate movement on cash balances
965,723
(257,887)
-
1,878
866,721
75,434
23,451
117
871,853
(208,478)
-
-
841,477
30,376
-
-
Cash and cash equivalents at end of the year
41
709,714
965,723
663,375
871,853
The accompanying notes are an integral part of these.
28 Zenith Bank Plc Annual Report - 31 December 2015
ZENITH BANK PLC
Notes to the Consolidated and Separate Financial Statements
for the Year Ended 31 December 2015
1.1. General information
Zenith Bank Plc (the "Bank") was incorporated in Nigeria under the Companies and Allied Matters Act as a private limited
liability company on May 30, 1990. It was granted a banking licence in June 1990, to carry on the business of commercial
banking and commenced business on 16 June 1990. The Bank was converted into a Public Limited Liability Company on
May 20, 2004. The Bank’s shares were listed on October 21, 2004 on the Nigerian Stock Exchange.
The principal activity of the Bank is the provision of banking and other financial services to corporate and individual
customers. Such services include granting of loans and advances, corporate finance and money market activities.
The Bank has five subsidiary companies namely, Zenith Bank (Ghana) Limited, Zenith Pension Custodian Limited, Zenith
Bank (UK) Limited, Zenith Bank (Sierra Leone) Limited, and Zenith Bank (Gambia) Limited.
The consolidated financial statements as at year ended 31 December 2015 comprise the Bank and its subsidiaries
(together referred to as "the Group" and individually as "Group entities") and the Group's interest in associates. The
separate financial statements comprise the Bank. The consolidated and separate financial statements for the year ended
31 December 2015 were approved for issue by the Board of Directors on 24 February 2016.
The Group does not have any unconsolidated structured entity.
2.0 Significant accounting policies
The Group has consistently applied the following accounting policies to all periods presented in these consolidated and
separate financial statements, unless otherwise stated.
2.1 Basis of preparation
a. Statement of compliance
The financial statements are prepared in accordance with International Financial Reporting standards (IFRSs) as issued by
the International Accounting Standard Board (IASB) and in the manner required by the Companies and Allied Matters Act of
Nigeria, the Financial Reporting Council of Nigeria Act, 2011, the Banks and other Financial Institutions Act of Nigeria, and
relevant Central Bank of Nigeria circulars.
b. Basis of measurement
The financial statements have been prepared under the historical cost convention as modified by the measurement of
certain financial assets and financial liabilities held at fair value.
c. Use of estimates and judgements
The preparation of financial statements in conformity with IFRS requires the use of certain critical accounting estimates. It
also requires management to exercise its judgement in the process of applying the Group's accounting policies. The areas
involving a higher degree of judgment or complexity, or areas where assumptions and estimates are significant to the
consolidated and separate financial statements are disclosed in Note 4.
2.2 New standards, interpretations and amendments to existing standards that are not yet effective
IFRS 9 early adoption
IFRS 9, Financial Instruments (amended November 2013), which is available for early adoption has been early adopted by
the group in the preparation of these financial statement as permitted by the standard.
A number of new standards, amendments to standards and interpretations are effective for annual periods beginning after 1
January 2015, and have not been applied in preparing these consolidated and separate financial statements.
The Group plans to adopt these standards at their respective effective dates. Management is in the process of assessing
the impact of these standards on the Group.
29 Zenith Bank Plc Annual Report - 31 December 2015
ZENITH BANK PLC
Notes to the Consolidated and Separate Financial Statements
for the Year Ended 31 December 2015
(i) IFRS 9, Financial Instruments (Revised)
On 24 July 2014, the IASB issued the final IFRS 9 Financial Instruments Standard, which replaces earlier versions of IFRS
9 and completes the IASB’s project to replace IAS 39 Financial Instruments: Recognition and Measurement.
This standard will probably have a significant impact on the Group, which will include changes in the measurement bases of
the Group’s financial assets to amortised cost, fair value through other comprehensive income or fair value through profit or
loss. Even though these measurement categories are similar to IAS 39, the criteria for classification into these categories
are significantly different. In addition, the IFRS 9 impairment model has been changed from an “incurred loss” model from
IAS 39 to an “expected credit loss” model, which is expected to increase the impairment allowance for credit losses
recognised in the Group.
The amendments apply retrospectively. IFRS 9 allows users who have early adopted the first version of The Revised IFRS
9 to continue the adoption. The Group is therefore continuing with the early adoption of the initial IFRS 9 and will fully adopt
the revised IFRS 9 for the year ending 31 December 2018.
(ii) Equity method in separate financial statements (Amendments to IAS 27)
The amendments allow an entity to apply the equity method in its separate financial statements to account for its
investments in subsidiaries, associates and joint ventures.The Group will adopt the amendments for the year ending 31
December 2016.
The amendments apply retrospectively.
(iii) Disclosure initiative (Amendments to IAS 1)
The amendments provide additional guidance on the application of materiality and aggregation when preparing financial
statements.
(iv) Investment entities: Applying the consolidation exception (Amendments to IFRS10, IFRS 12 and IAS 28)
The amendment to IFRS 10 Consolidated Financial Statements clarifies which subsidiaries of an investment entity are
consolidated instead of being measured at fair value through profit and loss. The amendment also modifies the condition in
the general consolidation exemption that requires an entity’s parent or ultimate parent to prepare consolidated financial
statements. The amendment clarifies that this condition is also met where the ultimate parent or any intermediary parent of
a parent entity measures subsidiaries at fair value through profit or loss in accordance with IFRS 10 and not only where the
ultimate parent or intermediate parent consolidates its subsidiaries.
The amendment to IFRS 12 Disclosure of Interests in Other Entities requires an entity that prepares financial statements in
which all its subsidiaries are measured at fair value through profit or loss in accordance with IFRS 10 to make disclosures
required by IFRS 12 relating to investment entities.
The amendment to IAS 28 Investments in Associates and Joint Ventures modifies the conditions where an entity need not
apply the equity method to its investments in associates or joint ventures to align these to the amended IFRS 10 conditions
for not presenting consolidated financial statements. The amendments introduce relief when applying the equity method
which permits a non-investment entity investor in an associate or joint venture that is an investment entity to retain the fair
value through profit or loss measurement applied by the associate or joint venture to its subsidiaries.
The amendments apply retrospectively. the amendments to IFRS 10, IFRS 12 and IAS 28 are effective for annual periods
beginning on or after 1 January 2016.
(v) IFRS 15: Revenue from contracts with customers
This standard replaces IAS 11 Construction Contracts, IAS 18 Revenue, IFRIC 13 Customer Loyalty Programmes, IFRIC
15 Agreements for the Construction of Real Estate, IFRIC 18 Transfer of Assets from Customers and SIC-31 Revenue –
Barter of Transactions Involving Advertising Services.
The standard contains a single model that applies to contracts with customers and two approaches to recognising revenue:
at a point in time or over time. The model features a contract-based five-step analysis of transactions to determine whether,
how much and when revenue is recognised.
30 Zenith Bank Plc Annual Report - 31 December 2015
ZENITH BANK PLC
Notes to the Consolidated and Separate Financial Statements
for the Year Ended 31 December 2015
This new standard is not expected to have a significant impact on the Group. The Group is currently in the process of
performing a more detailed assessment of the impact of this standard on the Group and will provide more information in the
year ending December 2015.
The Group will adopt the amendments for the year ending 31 December 2018.
2.3 Basis of Consolidation
(a) Subsidiaries
Subsidiaries are investees controlled by the Group. The Group controls an investee if it is exposed to, or has the rights to
variable return from its involvement with the investee and has the ability to affect those returns through its power over the
investee. The Group reassesses whether it has control if there are changes to one or more elements of control. This
includes circumstances in which protective rights held become substantive and lead to the Group having power over an
investee.
The financial statements of subsidiaries are consolidated from the date the Group acquires control, up to the date that such
effective control ceases. For the purpose of these financial statements, subsidiaries are entities over which the Group has
exposure or rights to variable returns and the ability to affect those returns through its power over the subsidiary.
Changes in the Group’s interest in a subsidiary that do not result in a loss of control are accounted for as equity
transactions (transactions with owners). Any difference between the amount by which the non-controlling interest is
adjusted and the fair value of the consideration paid or received is recognised directly in equity and attributed to the Group.
Inter-company transactions, balances and unrealised gains on transactions between companies within the Group are
eliminated on consolidation. Unrealised losses are also eliminated in the same manner as unrealised gains, but only to the
extent that there is no evidence of impairment. Accounting policies of subsidiaries have been changed where necessary to
ensure consistency with the policies adopted by the Group.
In the separate financial statements, investments in subsidiaries and associates are measured at cost.
(b) Loss of Control
On loss of control, the Group derecognises the assets and liabilities of the subsidiary, any controlling interests and the other
components of equity related to the subsidiary. Any surplus or deficit arising on the loss of control is recognised in profit or
loss. If the Group retains any interest in the previous subsidiary, then such interest is measured at fair value at the date that
control is lost. Subsequently, that retained interest is accounted for as an equity-accounted investee or as an available-for-
sale financial asset depending on the level of influence retained.
(c) Associates
Associates are all entities over which the Group has significant influence but not control, generally accompanying a
shareholding of between 20% and 50% of the voting rights. Investments in associates are accounted for using the equity
method of accounting and are initially recognised at cost. The Group's investment in associates includes goodwill identified
on acquisition, net of any accumulated impairment loss.
The Group's share of its associates' post-acquisition profits or losses is recognised in profit or loss, and its share of post-
acquisition movements in reserves is recognised in reserves. The cumulative post-acquisition movements are adjusted
against the carrying amount of the investment. When the Group's share of losses in an associate equals or exceeds its
interest in the associate, including any other unsecured receivables, the Group does not recognise further losses, unless it
has incurred obligations or made payments on behalf of the associate.
Unrealised gains on transactions between the Group and its associates are eliminated to the extent of the Group's interest
in the associates. Unrealised losses are also eliminated unless the transaction provides evidence of an impairment of the
asset transferred. Accounting policies of associates have been changed where necessary to ensure consistency with the
policies adopted by the Group. Dilution gains and losses arising in investments in associates are recognised in profit or
loss.
31 Zenith Bank Plc Annual Report - 31 December 2015
ZENITH BANK PLC
Notes to the Consolidated and Separate Financial Statements
for the Year Ended 31 December 2015
(d) Non-controlling interests
Non-controlling interests are measured at their proportionate share of the acquiree's identifiable net assets at the
acquisition date. Changes in the Group's interest in a subsidiary that do not result in a loss of control are accounted for as
equity transactions.
2.4 Translation of foreign currencies
Foreign currency transactions and balances
(a) Functional and presentation currency
Items included in the financial statements of each of the Group’s entities are measured using the currency of the primary
economic environment in which the entity operates (functional currency). The parent entity’s functional currency (Nigerian
Naira) is adopted as the presentation currency for the consolidated financial statements. Except as otherwise indicated,
financial information presented in Naira has been rounded to the nearest million.
(b) Group companies
The results and financial position of all the Group entities (none of which has the currency of a hyper-inflationary economy)
that have a functional currency different from the presentation currency are translated into the presentation currency as
follows:
assets and liabilities for statement of financial position presented are translated at the closing rate at the
reporting date;
income and expenses for each statement of profit or loss and other comprehensive income are translated at
average exchange rates (unless this average is not a reasonable approximation of the cumulative effect of the
rates prevailing on the transaction dates, in which case income and expenses are translated at the rate on the
dates of the transactions); and
all resulting exchange differences are recognised in other comprehensive income and presented within equity as
foreign currency translation reserves.
On the disposal of a foreign operation, the Group recognises in profit or loss the cumulative amount of exchange
differences relating to that foreign operation. When a subsidiary that includes a foreign operation is partially disposed of or
sold, the Group re-attributes the proportionate share of the cumulative amount of the exchange differences recognised in
other comprehensive income to the non-controlling interests in that foreign operation. In the case of any other partial
disposal of a foreign operation, the Group reclassifies to profit or loss only the proportionate share of the cumulative amount
of exchange differences recognised in other comprehensive income.
Goodwill and fair value adjustments arising on the acquisition of a foreign entity are treated as assets and liabilities of the
foreign entity and translated at the closing rate at the reporting date.
(c) Transactions and balances
Foreign currency transactions are translated into the functional currency using the exchange rates prevailing at the dates of
the transactions or valuation where items are re-measured. Foreign exchange gains and losses resulting from the
settlement of such transactions and from the translation at period-end exchange rates of monetary assets and liabilities
denominated in foreign currencies are recognised in profit or loss.
Non-monetary assets and liabilities denominated in foreign currencies that are measured at historical cost are translated to
the functional currency using the exchange rate at the transaction date, and those measured at fair value are translated to
the functional currency at the exchange rate at the date that the fair value was determined. Exchange differences on non-
monetary assets are accounted for based on the classification of the underlying items.
Translation differences on equities measured at fair value through other comprehensive income are included in other
comprehensive income and transferred to the revaluation reserves in equity.
Foreign currency gains and losses on intra-group loans are recognised in profit or loss unless settlement of the loan is
neither planned nor likely to occur in the foreseeable future, in which case the foreign currency gains and losses are initially
recognised in the foreign currency translation reserve in the consolidated financial statements. Those gains and losses are
recognised in profit or loss at the earlier of settling the loan or at the time at which the foreign operation is disposed.
32 Zenith Bank Plc Annual Report - 31 December 2015
ZENITH BANK PLC
Notes to the Consolidated and Separate Financial Statements
for the Year Ended 31 December 2015
2.5 Cash and cash equivalents
For the purposes of the statement of cash flow, cash and cash equivalents comprise balances with less than three months’
maturity from the date of acquisition, including cash and non-restricted balances with central banks, treasury bills and other
eligible bills, amounts due from other banks and short-term government securities.
2.6 Financial instruments
(a) Initial recognition and measurement
Financial instruments are recognised initially when the Group becomes a party to the contractual provisions of the
instruments.
Regular way purchases of financial assets are accounted for at settlement date.
Financial instruments carried at fair value through profit or loss are recognised at fair value with transaction costs, which are
directly attributable to the acquisition or issue of the financial instruments, being recognised immediately through profit or
loss. Financial instruments that are not carried at fair value through profit or loss are initially measured at fair value plus
transaction costs that are directly attributable to the acquisition or issue of the financial instruments.
Financial instruments are recognised or de-recognised on the date the Group commits to purchase or sell the instruments
(trade day accounting).
(b) Subsequent measurement
Subsequent to initial measurement, financial instruments are measured either at fair value or amortised cost depending on
their classification.
(c) Classification
(i) Financial assets
The Group classifies its financial assets as subsequently measured at amortised cost or fair value.
A financial asset is subsequently measured at amortised cost if it is held within a business model whose objective is to hold
assets in order to collect contractual cash flows and the contractual terms of the financial asset give rise on specified dates
to cash flows that are solely payments of principal and interest on the principal amount outstanding. Interest in this context
is consideration for the time value of money and for the credit risk associated with the principal amount outstanding during a
particular period of time. Interest income is recognised in Interest and similar income in profit or loss.
The following instruments have been measured at amortised cost;
Loans and advances
Treasury bills and investment securities.
All other financial assets are subsequently measured at fair value. Financial assets which meet the requirement for
measurement at amortised cost may also be designated as measured at fair value through profit or loss if doing so
eliminates or significantly reduces a measurement or recognition inconsistency (accounting mismatch). Gains and losses
arising from changes in the fair value of financial assets subsequently measured at fair value are recognised in profit or loss
("FVTPL"), except where the Group present in other comprehensive income fair value gains and losses arising on
investments in equity instruments which are not held for trading but for strategic purposes ("Fair value through OCI"). Gains
and losses recognised directly in other comprehensive income are not subsequently transferred to profit or loss on disposal
of the equity instrument.
The following instruments have been measured at fair value through profit or loss, or other comprehensive income:
Financial guarantees measured at fair value through profit or loss.
Equity securities measured at fair value through other comprehensive income.
Trading debt securities measured at fair value through profit or loss.
Derivatives held for risk management purposes and hedge accounting measured at fair value through OCI
(effective portion of changes in fair value) and through profit or loss (ineffective portion of changes in fair value).
33 Zenith Bank Plc Annual Report - 31 December 2015
ZENITH BANK PLC
Notes to the Consolidated and Separate Financial Statements
for the Year Ended 31 December 2015
(ii) Financial liabilities
Financial liabilities consist of financial liabilities at fair value through profit or loss and other financial liabilities measured at
amortised cost.
Financial liabilities that are not classified at fair value through profit or loss are measured at amortised cost. Interest
expense is recognised in Interest and similar expense in the profit or loss. The financial liabilities that are carried at
amortised cost are customers' deposits, on-lending facilities, long term borrowings.
Derivatives liabilities have been classified as fair value through profit or loss at the reporting date.
(iii) Financial guarantees contracts
A financial guarantee contract is a contract that requires the Group (issuer) to make specified payments to reimburse the
holder for a loss it incurs because a specified debtor fails to make payment when due in accordance with the original or
modified terms of a debt instrument.
Financial guarantee liabilities are initially recognised at fair value, which is generally equal to the premium received, and
then amortised over the life of the financial guarantee. Subsequent to initial recognition, the financial guarantee liability is
measured at the higher of the present value of any expected payment, when a payment under the guarantee has become
probable, and the unamortised premium.
The Group conducts business involving commitments to customers. The majority of these facilities are set-off by
corresponding obligations of third parties. Contingent liabilities and commitments comprise usance lines and letters of
credit.
Usance and letters of credit are agreements to lend to a customer in the future subject to certain conditions. An acceptance
is an undertaking by a bank to pay a bill of exchange drawn on a customer.
Letters of credit are given as security to support the performance of a customer to third parties. As the Group will only be
required to meet these obligations in the event of the Customer’s default, the cash requirements of these instruments are
expected to be considerably below their nominal amounts.
Contingent liabilities and commitments are initially recognized at fair value which is also generally equal to the fees received
and amortized over the life of the commitment. The carrying amount of contingent liabilities are subsequently measured at
the higher of the present value of any expected payment, when a payment under the contingent liability has become
probable and the unamortised fee.
(iv) Debt securities issued
Deposits and debt securities issued are the Group’s sources of debt funding. Debt securities issued are initially measured
at fair value plus transaction costs, and subsequently measured at their amortised cost using the effective interest method.
(d) Determination of fair value
At initial recognition, the best evidence of the fair value of a financial instrument is the transaction price (i.e. the fair value of
the consideration paid or received), unless the fair value of that instrument is evidenced by comparison with other
observable current market transactions in the same instrument, without modification or repackaging, or based on valuation
techniques such as discounted cash flow models and option pricing models whose variables include only data from
observable markets.
Subsequent to initial recognition, the fair value of a financial instrument is based on quoted market prices or dealer price
quotation for financial instruments traded in an active market. If the market for a financial instrument is not active or the
instrument is not listed, the fair value is determined using valuation techniques. Refer to note 3.3.6(a) for a description of
the valuation techniques used by the Group.
34 Zenith Bank Plc Annual Report - 31 December 2015
ZENITH BANK PLC
Notes to the Consolidated and Separate Financial Statements
for the Year Ended 31 December 2015
(e) Derecognition
Financial assets are de-recognised when the contractual rights to receive the cash flows from these assets have expired or
the Group has transferred the financial asset in a transaction in which substantially all the risks and rewards of ownership of
the financial assets are transferred or which the Group neither retains substantially all the risks and rewards of ownership
and it does not retain control of the financial assets. Any interest in transferred financial assets that qualify for de-
recognition that is created or retained by the Group is recognised as a separate asset or liability in the statement of financial
position. On de-recognition of a financial asset, the difference between the carrying amount of the asset (or the carrying
amount allocated to the portion of the asset transferred), and consideration received (including any new asset obtained less
any new liability assumed) is recognised in profit or loss.
The Group enters into transactions whereby it transfers assets recognised in the statement of financial position, but retains
either all or substantially all of the risks and rewards of the transferred assets or a portion of them. If all or substantially all
risks and rewards are retained, then the transferred assets are not de-recognised. Transfers of assets with retention of all
or substantially all risks and rewards include, for example, securities lending and repurchase transactions.
In transactions in which the Group neither retains nor transfers substantially all the risks and rewards of ownership of a
financial asset and it retains control over the asset, the Group continues to recognise the asset to the extent of its
continuing involvement, determined by the extent to which it is exposed to changes in the value of the transferred asset.
The Group derecognises a financial liability when its contractual obligations are discharged, cancelled or expired.
(f) Offsetting
The Group has applied the right of set off if it is available at the date of preparation of the Statement of Financial Position
(SOFP). We do not apply the right of set off to contingent/future transactions in the preparation of the Statement of
Financial Position.
The Group also complied with the legally enforceable criterion by ensuring that the laws governing contracts give backing
(support) to the right to set off financial assets and financial liabilities where applicable.
Finally, the Group’s settlement process consists of settlement of financial assets and liabilities on a net basis, therefore, a
single net amount is reported in the financial statements.
Income and expenses are presented on a net basis only when permitted under IFRS, or for gains and losses arising from a
group of similar transactions. Gains and loss are presented separately if they are material.
(g) Amortised cost measurement
The amortised cost of a financial asset or liability is the amount at which the financial asset or liability is measured at initial
recognition, minus principal repayments, plus or minus the cumulative amortisation using the effective interest rate method
of any difference between the initial amount recognised and the maturity amount, minus any reduction for impairment.
(h) Fair value measurement
‘Fair value’ is the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between
market participants at the measurement date in the principal or, in its absence, the most advantageous market to which the
Group has access at that date. The fair value of a liability reflects its non performance risk.
If a market for a financial instrument is not active, then the Group establishes fair value using a valuation technique. The
chosen valuation technique makes maximum use of market inputs, relies as little as possible on estimates specific to the
Group, incorporates all factors that market participants would consider in setting a price and is consistent with accepted
economic methodologies for pricing financial instruments.
35 Zenith Bank Plc Annual Report - 31 December 2015
ZENITH BANK PLC
Notes to the Consolidated and Separate Financial Statements
for the Year Ended 31 December 2015
The best evidence of the fair value of a financial instrument at initial recognition is the transaction price – i.e. the fair value
of the consideration given or received. However, in some cases the initial estimate of fair value of a financial instrument on
initial recognition may be different from its transaction price. If this estimated fair value is evidenced by comparison with
other observable current market transactions in the same instrument (without modification or repackaging) or based on a
valuation technique whose variables include only data from observable markets, then the difference is recognised in profit
or loss on initial recognition of the instrument. In other cases, the fair value at initial recognition is considered to be the
transaction price and the difference is not recognised in profit or loss immediately but is recognised over the life of the
instrument on an appropriate basis or when the instrument is redeemed, transferred or sold, or the fair value becomes
observable.
If an asset or a liability measured at fair value has a bid price and an ask price, then the Group measures assets and long
positions at a bid price and liabilities and short positions at an ask price. Where the Bank has positions with offsetting risks,
mid market prices are used to measure the offsetting risk positions and a bid or ask price adjustment is applied only to the
net open position as appropriate.
The fair value of a demand deposit is not less than the amount payable on demand, discounted from the first date on which
the amount could be required to be paid.
The Group recognises transfers between levels of the fair value hierarchy as of the end of the reporting period during which
the change has occurred.
If a market for a financial instrument is not active, then the Group establishes fair value using a valuation technique.
Valuation techniques include using recent arm's length transactions between knowledgeable, willing parties (if available),
reference to the current fair value of other instruments that are substantially the same, discounted cash flow analyses and
option pricing models. The chosen valuation technique makes maximum use of market inputs, relies as little as possible on
estimates specific to the Group, incorporates all factors that market participants would consider in setting a price, and is
consistent with accepted economic methodologies for pricing financial instruments. Inputs into valuation techniques
reasonably represent market expectations and measures of the risk-return factors inherent in the financial instrument.
See note 3.3.6 (c) on fair valuation methods and assumptions.
(i) Assets pledged as collateral
Financial assets transferred to external parties that do not qualify for de-recognition are reclassified in the statement of
financial position from treasury bills and investment securities to assets pledged as collateral, if the transferee has received
the right to sell or re-pledge them in the event of default from agreed terms. Initial recognition of assets pledged as
collateral is at fair value, whilst subsequently measured at amortized cost or fair value as approriate. These transactions are
performed in accordance with the usual terms of securities lending and borrowing.
(j) Assets under repurchase agreement
Assets under repurchase agreement’ are transactions in which the Group sells a security and simultaneously agrees to
repurchase it (or an asset that is substantially the same) at a fixed price on a future date. The Group continues to recognise
the securities in their entirety in the statement of financial position because it retains substantially all of the risks and
rewards of ownership. The cash consideration received is recognised as a financial asset and a financial liability is
recognised for the obligation to pay the repurchase price. Because the Group sells the contractual rights to the cash flows
of the securities, it does not have the ability to use the transferred assets during the term of the arrangement.
2.7 Derivative instruments and hedge accounting
The Group recognizes the derivative instruments on the statement of financial position at their fair value. At inception, the
Group designates the derivative as (1) derivative held for risk management purposes, or (2) an instrument that is held for
trading or non-hedging purposes (a “trading” or “non-hedging” instrument).
(1) Derivatives held for risk management purposes and hedge accounting
Derivatives held for risk management purposes include all derivative assets and liabilities that are not classified as trading
assets or liabilities. Derivatives held for risk management purposes are measured at fair value in the statement of financial
position
36 Zenith Bank Plc Annual Report - 31 December 2015
ZENITH BANK PLC
Notes to the Consolidated and Separate Financial Statements
for the Year Ended 31 December 2015
The Group designates certain derivatives held for risk management as hedging instruments in qualifying hedging
relationships. On initial designation of the hedge, the Group formally documents the relationship between the hedging
instrument(s) and hedged item(s), including the risk management objective and strategy in undertaking the hedge, together
with the method that will be used to assess the effectiveness of the hedging relationship. The Group makes an assessment,
both at inception of the hedge relationship and on an ongoing basis, of whether the hedging instrument(s) is(are) expected
to be highly effective in offsetting the changes in the fair value or cash flows of the respective hedged item(s) during the
period for which the hedge is designated, and whether the actual results of each hedge are within acceptable profitable
range. The Group makes an assessment for a cash flow hedge of a forecast transaction, of whether the forecast
transaction is highly probable to occur and presents an exposure to variations in cash flows that could ultimately affect profit
or loss.
These hedging relationships are discussed below.
Cash flow hedges
When a derivative is designated as the hedging instrument in a hedge of the variability in cash flows attributable to a
particular risk associated with a recognised asset or liability that could affect profit or loss, the effective portion of changes
in the fair value of the derivative is recognised in OCI and presented in the hedging reserve within equity. Any ineffective
portion of changes in the fair value of the derivative is recognised immediately in profit or loss. The amount recognised in
OCI is reclassified to profit or loss as a reclassification adjustment in the same period as the hedged cash flows affect profit
or loss, and in the same line item in the statement of profit or loss and OCI.
If the hedging derivative expires or is sold, terminated, or exercised, or the hedge no longer meets the criteria for cash flow
hedge accounting, or the hedge designation is revoked, then hedge accounting is discontinued prospectively. However, if
the derivative is novated to a central counterparty by both parties as a consequence of laws or regulations without changes
in its terms except for those that are necessary for the novation, then the derivative is not considered as expired or
terminated.
(2) Trading or non-hedging derivatives assets and liabilities
Trading or non-hedging derivatives assets and liabilities are those derivative assets and liabilities such as swaps and
forward contracts that the Group acquires or incurs for the purpose of selling or purchasing in the near term, or holds as
part of a portfolio that is managed together for short-term profit or position taking.
Non-hedging derivative assets and liabilities are initially recognized and subsequently measured at fair value in the
statement of financial position. All changes in fair value are recognized as part of net trading income in profit or loss. Non-
hedging derivative assets and liabilities are not reclassified subsequent to their initial recognition.
2.8 (a) Impairment of Financial Assets carried at amortised cost
The Group assesses at each reporting date whether there is objective evidence that a financial asset or group of financial
assets not carried at fair value through profit or loss is impaired. A financial asset or a group of financial assets is impaired
and impairment losses are incurred only if there is objective evidence of impairment as a result of one or more events that
occurred after the initial recognition of the asset (a ‘loss event’) and that loss event (or events) has an impact on the
estimated future cash flows of the financial asset or group of financial assets that can be reliably estimated.
The criteria that the Group uses to determine that there is objective evidence of an impairment loss include:
Delinquency in contractual payments of principal or interest;
Cash flow difficulties experienced by the borrower (for example, equity ratio, net income percentage of sales);
Breach of loan covenants or conditions;
Initiation of bankruptcy proceedings;
Deterioration of the borrower’s competitive position;
Deterioration in the value of collateral; and
Downgrading below investment grade level.
The Group first assesses whether objective evidence of impairment exists individually for financial assets that are
individually significant, and individually or collectively for financial assets that are not individually significant. If the Group
determines that no objective evidence of impairment exists for an individually assessed financial asset, whether significant
or not, it includes the asset in a group of financial assets with similar credit risk characteristics and collectively assesses
them for impairment. Assets that are individually assessed for impairment and for which an impairment loss is or continues
to be recognised are not included in a collective assessment of impairment.
37 Zenith Bank Plc Annual Report - 31 December 2015
ZENITH BANK PLC
Notes to the Consolidated and Separate Financial Statements
for the Year Ended 31 December 2015
The amount of impairment loss for financial assets carried at amortised cost is measured as the difference between the
asset’s carrying amount and the present value of estimated future cash flows (excluding future credit losses that have not
been incurred) discounted at the financial asset’s original effective interest rate. The carrying amount of the asset is
reduced through the use of an allowance account and the amount of the loss is recognised in profit or loss. If a financial
instrument has a variable interest rate, the discount rate for measuring any impairment loss is the current effective interest
rate determined under the contract.
The calculation of the present value of the estimated future cash flows of a collateralised financial asset reflects the cash
flows that may result from foreclosure less costs for obtaining and selling the collateral, whether or not foreclosure is
probable.
For the purposes of a collective evaluation of impairment, financial assets are grouped on the basis of similar credit risk
characteristics (i.e. on the basis of the Group’s grading process that considers asset type, industry, geographical location,
collateral type, past-due status and other relevant factors). Those characteristics are relevant to the estimation of future
cash flows for groups of such assets by being indicative of the debtors’ ability to pay all amounts due according to the
contractual terms of the assets being evaluated.
Future cash flows in a group of financial assets that are collectively evaluated for impairment are estimated on the basis of
the contractual cash flows of the assets in the group and historical loss experience for assets with credit risk characteristics
similar to those in the group. Historical loss experience is adjusted on the basis of current observable data to reflect the
effects of current conditions that did not affect the period on which the historical loss experience is based and to remove the
effects of conditions in the historical period that do not currently exist.
Estimates of changes in future cash flows for groups of assets are reflected and directionally consistent with changes in
related observable data from period to period (for example, changes in unemployment rates, property prices, payment
status, or other factors indicative of changes in the probability of losses in the group and their magnitude). The methodology
and assumptions used for estimating future cash flows are reviewed regularly by the Group to reduce any differences
between loss estimates and actual loss experience.
When a loan is uncollectible, it is written off against the related provision for loan impairment. Such loans are written off
after all the necessary procedures including regulatory apprasial where necessary have been completed and the amount of
the loss has been determined.
If, in a subsequent period, the amount of the impairment loss decreases and the decrease can be related objectively to an
event occurring after the impairment was recognised (such as an improvement in the debtor’s credit rating), the previously
recognised impairment loss is reversed by adjusting the allowance account. The amount of the reversal is recognised in
profit or loss under impairment charge for credit losses.
Amount reported as other assets are tested for impairment on an individual basis at the reporting date. In testing for
impairment, the Group assess whether there is objective evidence that a loss event has occur. If it is established that a loss
event has occured and the loss event has an impact on the recoverable amount of the asset, an impairment charge is
taking against the asset carrying amount.
2.8 (b) Impairment of non-financial assets
The carrying amounts of the Group's non-financial assets, other than deferred tax assets, are reviewed at each reporting
date to determine whether there is any indication of impairment. If any such indication exists, then the asset's recoverable
amount is estimated. For intangible assets that have indefinite useful lives or that are not yet available for use, the
recoverable amount is estimated each period at the same time.
An impairment loss is recognised if the carrying amount of an asset or its Cash Generating Unit (CGU) exceeds its
estimated recoverable amount. The recoverable amount is the higher of an asset’s fair value less costs 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 or
CGU. For the purposes of assessing impairment, assets that cannot be tested individually are grouped together into the
smallest group of assets that generates cash inflows from continuing use that are largely independent of the cash flows of
other assets or CGU.
The Group's corporate assets do not generate separate cash inflows and are utilised by more than one CGU. Corporate
assets are allocated to CGUs on a reasonable and consistent basis and tested for impairment as part of the testing of the
CGU to which the corporate asset is allocated.
38 Zenith Bank Plc Annual Report - 31 December 2015
ZENITH BANK PLC
Notes to the Consolidated and Separate Financial Statements
for the Year Ended 31 December 2015
Impairment losses are recognised in profit or loss. Impairment losses in respect of CGUs are allocated first to reduce the
carrying amount of any goodwill allocated to the CGU (group of CGUs) and then to reduce the carrying amount of the other
assets in the CGU (group of CGUs) on a pro rata basis.
Impairment losses recognised in prior periods are assessed at each reporting date for any indications that the loss has
decreased or no longer exists. An impairment loss is reversed if there has been a change in the estimates used to
determine the recoverable amount. An impairment loss is reversed only to the extent that the asset’s carrying amount does
not exceed the carrying amount that would have been determined, net of depreciation or amortisation, if no impairment loss
had been recognised. An impairment loss in respect of goodwill is not reversed.
2.9 Reclassification of financial instruments
Reclassifications are made at fair value as of the reclassification date. Fair value becomes the new cost or amortised cost
as applicable, and no reversals of fair value gains or losses recorded before reclassification date are subsequently made.
Effective interest rates for financial assets reclassified to loans and receivables and held-to-maturity categories are
determined at the reclassification date. Further increases in estimates of cash flows adjust effective interest rates
prospectively.
The Group may reclassify a financial instrument when its intentions and the characteristics of the financial instrument
changes.
2.10 Collateral
The Group obtains collateral where appropriate, from customers to manage their credit risk exposure to the customers. The
collateral normally takes the form of a lien over the customer’s assets and gives the Group a claim on these assets for
customers in the event that the customer defaults.
The Group may also use other credit instruments, such as derivative contracts in order to reduce their credit risk.
Collateral received in the form of securities is not recorded on the statement of financial position. Collateral received in the
form of cash is recorded on the statement of financial position with a corresponding liability see note 3.2.7(a)(i).
2.11 Property and equipment
Property and equipment are stated at historical cost less accumulated depreciation and accumulated impairment losses.
Historical cost includes expenditure that is directly attributable to the acquisition of the items. Where significant parts of an
item of property and equipment have different useful lives, they are accounted for as separate items (major components) of
property and equipment.
Subsequent costs are included in the asset's carrying amount or recognised as a separate asset, as appropriate, only when
it is probable that future economic benefits associated with the item will flow to the Group and the cost of the item can be
measured reliably. All other repairs and maintenance are charged to profit or loss during the financial year in which they are
incurred.
Property and equipment are depreciated on the straight line basis to their residual values over the estimated useful lives of
the assets. The assets’ residual values and useful lives are reviewed, and adjusted if appropriate at each reporting date and
the depreciation method is reviewed at each financial year end. Leasehold land and buildings are depreciated over the
period of the lease or over such lesser period as is considered appropriate.
Depreciation is calculated on a straight line basis to write down the cost of property and equipment to their residual values
over their estimated useful lives as follows:
Item
Leasehold land
Motor vehicles
Office equipment
Furniture and fittings
Computer hardware and equipment
Buildings
Leasehold improvement
Over the remaining lease period
4 years
5 years
5 years
3 years
50 years
Over the remaining lease period
39 Zenith Bank Plc Annual Report - 31 December 2015
ZENITH BANK PLC
Notes to the Consolidated and Separate Financial Statements
for the Year Ended 31 December 2015
Depreciation is included in profit or loss.
Work in progress consists of items of property and equipment that are not yet available for use. Work in progress is carried
at cost less any required impairment. Depreciation starts when assets are available for use. An impairment loss is
recognised if the asset’s recoverable amount is less than cost. The asset is reviewed for impairment when events or
changes in circumstances indicate that the carrying amount may not be recoverable. Once the items are available for use,
they are transferred to relevant classes of property and equipment as appropriate.
Property and equipment are derecognized on disposal, or when no future economic benefits are expected from their use or
disposal
Gains and losses on disposal are determined by comparing proceeds with carrying amount. These are included in profit or
loss.
Depreciation methods, useful lives and residual values are reassessed at each reporting date and adjusted if appropriate.
Borrowing Cost
Borrowing cost that is directly attributable to the acquisition or construction of a qualifying asset is capitalized as part of the
cost of the asset. Other borrowings, which the group undertakes in the normal course of business is expensed in the period
which it is incurred.
2.12 Intangible assets
(a) Computer software
Software not integral to the related hardware acquired by the Group is stated at cost less accumulated amortisation and
accumulated impairment losses.
Costs associated with maintaining computer software programmes are recognised as an expense as incurred.
Development costs that are directly attributable to the design and testing of identifiable and unique software products
controlled by the Group, are recognised as intangible assets when the following criteria are met:
it is technically feasible to complete the software product so that it will be available for use;
management intends to complete the software product and use or sell it;
there is an ability to use or sell the software product;
it can be demonstrated how the software product will generate probable future economic benefits;
adequate technical, financial and other resources to complete the development and to use or sell the software
product are available; and
the expenditure attributable to the software product during its development can be reliably measured.
Subsequent expenditure on computer software is capitalised only when it increases the future economic benefits embodied
in the specific asset to which it relates.
Amortisation is recognised in profit or loss on a straight-line basis over the estimated useful life of the software, from the
date that the asset is available for use since this most closely reflects the expected pattern of consumption of the future
economic benefits embodied in the asset. The estimated useful life is 5 years.
Amortisation methods, useful lives and residual values are reviewed at each financial period-end and adjusted if
appropriate.
Intangible assets are derecognized on disposal or when no furure economic benefits are expected from their use or
disposal.
2.13 Leases
(a) A Group company is the lessee
Leases, where the Group assumes substantially all the risks and rewards of ownership, are classified as finance leases.
Finance leases are capitalised at the inception of the lease at the lower of the fair value of the leased asset and the present
value of the minimum lease payments. Lease payments are separated using the interest rate implicit in the lease to identify
the finance cost, which is charged against income over the lease period, and the capital repayment, which reduces the
liability to the lessor.
40 Zenith Bank Plc Annual Report - 31 December 2015
ZENITH BANK PLC
Notes to the Consolidated and Separate Financial Statements
for the Year Ended 31 December 2015
Leases of assets are classified as operating leases if the lessor effectively retains all the risks and rewards of ownership.
Payments made under operating leases, net of any incentives received from the lessor, are charged to profit or loss on a
straight-line basis over the period of the lease. When an operating lease is terminated before the lease period has expired,
any payment required to be made to the lessor by way of penalty is recognised as an expense in the period in which
termination takes place.
(b) A Group company is the lessor
Lease and instalment sale contracts are primarily financing transactions in banking activities, with rentals and instalments
receivable, less unearned finance charges, being included in Loans and advances to customers in the statement of
financial position.
Finance charges earned are computed using the effective interest method which reflects a constant periodic return on the
investment in the finance lease. Initial direct costs paid are capitalised to the value of the lease amount receivable and
accounted for over the lease term as an adjustment to the effective rate of return.
Leases of assets under which the Group effectively retains all the risks and rewards of ownership are classified as
operating leases. Receipts of operating leases from properties held as investment properties in investment management
and life insurance activities, net of any incentives given to lessees, are accounted for as income on the straight-line basis
over the period of the lease. When an operating lease is terminated before the lease period has expired, any payment
required by the lessee by way of penalty is recognised as income in the period in which termination takes place.
2.14 Provisions
Provisions are recognised when the Group has a present legal or constructive obligation as a result of past events and it is
probable that an outflow of resources embodying economic benefits will be required to settle the obligation and a reliable
estimate of the amount of the obligation can be made. Provisions are determined by discounting the expected future cash
flows using a pre-tax discount rate that reflects current market assessments of the time value of money and, where
appropriate, the risks specific to the liability.
A provision for restructuring is recognised when the Group has approved a detailed formal plan, and the restructuring either
has commenced or has been announced publicly. Future operating costs or losses are not provided for. A provision for
onerous contracts is recognised when the expected benefits to be derived by the Group from a contract are lower than the
unavoidable cost of meeting its obligations under the contract. The provision is measured at the present value of the lower
of the expected cost of terminating the contract and the expected net cost of continuing with the contract. Before a provision
is established, the Group recognises any impairment loss on the assets associated with that contract.
Contingent liabilities are possible obligations that arise from past events whose existence will be confirmed only by the
occurrence, or non-occurrence, of one or more uncertain future events not wholly within the Group’s control. Contingent
liabilities are not recognised in the financial statements but are disclosed in the notes to the financial statements.
Provisions are recognised when the separate entities in the Group have a present or constructive obligation as a result of
past events and it is probable that an outflow of resources embodying economic benefits will be required to settle the
obligation and reliable estimate of the amount of the obligation can be made.
The Group recognises liability for a levy not earlier than when the activity that triggers payment occurs. Also, the Group
accrues liability on levy progressively only if the activity that triggers payment occurs over a period of time. However, for a
levy that is triggered upon reaching a minimum threshold, no liability is recognised before the specified minimum threshold
is reached.
41 Zenith Bank Plc Annual Report - 31 December 2015
ZENITH BANK PLC
Notes to the Consolidated and Separate Financial Statements
for the Year Ended 31 December 2015
2.15 Employee benefits
(a) Post-employment benefits
The Group has a defined contribution plan.
A defined contribution plan is a pension plan under which the Group pays fixed contributions into a separate entity. The
Group has no legal or constructive obligations to pay further contributions if the fund does not hold sufficient assets to pay
all employees the benefits relating to employee service in the current and prior periods. For defined contribution plans, the
Group makes contributions on behalf of qualifying employees to a mandatory scheme under the provisions of the Pension
Reform Act. The Group has no further payment obligations once the contributions have been paid. The contributions are
recognised as employee benefit expense when they are due. Prepaid contributions are recognised as an asset to the extent
that a cash refund or a reduction in the future payments is available. For entities operating in Nigeria, the contribution by
employees and the employing entities are 2.5% and 15.5% respectively of the employees' basic salary, housing and
transport allowances. Entities operating outside Nigeria contribute in line with the relevant pension laws in their jurisdictions.
(b) Short-term benefits
Short-term benefits consist of salaries, accumulated leave allowances, profit share, bonuses and any non-monetary
benefits.
Short-term employees’ benefits are measured on an undiscounted basis and are expensed as the related services are
provided.
A liability is recognised for the amount expected to be paid under short-term cash benefits such as accumulated leave and
leave allowances if the Group has a present legal or constructive obligation to pay this amount as a result of past services
provided by the employee and the obligation can be measured reliably.
(c) Termination benefits
The Group recognises termination benefits as an expense when the Group is demonstrably committed , without realistic
possibility of withdrawal, to a formal detailed plan to either terminate employment before the normal retirement date, or to
provide termination benefits as a result of an offer made to encourage voluntary redundancy. The Group settles termination
benefits within twelve months and are accounted for as short-term benefits.
2.16 Share capital and reserves
(a) Share issue costs
Incremental costs directly attributable to the issue of new shares or options or to the acquisition of a business are shown in
equity as a deduction, net of tax, from the proceeds.
(b) Dividends on ordinary shares
Dividends on ordinary shares are recognised in equity in the period in which they are approved by the Bank’s shareholders.
Dividends for the period that are declared after the end of the reporting period are dealt with in the subsequent events note.
(c) Share premium
Premiums from the issue of shares are reported in share premium.
(d) Statutory reserve
Nigerian banking regulations require the Bank to make an annual appropriation to a statutory reserve. As stipulated by
section 16(1) of the Bank and Other Financial Institutions Act of 1991 (amended), an appropriation of 30% of profit after tax
is made if the statutory reserve is less than the paid-up share capital and 15% of profit after tax if the statutory reserve is
greater than the paid-up share capital.
42 Zenith Bank Plc Annual Report - 31 December 2015
ZENITH BANK PLC
Notes to the Consolidated and Separate Financial Statements
for the Year Ended 31 December 2015
(e) SMIEIS reserve
The SMIEIS reserve is maintained to comply with the Central Bank of Nigeria (CBN) requirement that all licensed banks set
aside a portion of the profit after tax in a fund to be used to finance equity investments in qualifying small and medium scale
enterprises. Under the terms of the guideline (amended by CBN letter dated 11 July 2006), the contributions will be 10% of
profit after tax and shall continue after the first 5 years but banks’ contributions shall thereafter reduce to 5% of profit after
tax. The small and medium scale industries equity investment scheme reserves are nondistributable. Transfer to this
reserve is no longer mandatory.
(f) Statutory reserve for credit risk
The Nigerian banking regulator requires the bank to create a reserve for the difference between impaired charge
determined in line with the principles of IFRS and impaired charge determined in line with the prudential guidelines issued
by the Central Bank of Nigeria (CBN). This reserve is not available for distribution to shareholders.
(g) Retained earnings
Retained earnings comprise the undistributed profits from previous periods which have not been reclassified to any
specified reserves.
(h) Revaluation reserve
Comprises fair value movements on equity instruments.
(i) Foreign currency translation reserve
Comprises exchange differences resulting from the translation to Naira of the results and financial position of Group
companies that have a functional currency other than Naira.
2.17 Recognition of interest income and expense
Interest income and expense for all financial assets and financial liabilities carried at amortised cost are recognised in profit
or loss using the effective interest method.
The effective interest method is a method of calculating the amortised cost of a financial asset or a financial liability and of
allocating the interest income or interest expense over the relevant period. The effective interest rate is the rate that exactly
discounts estimated future cash payments or receipts through the expected life of the financial instrument or, when
appropriate, a shorter period to the net carrying amount of the financial asset or financial liability. Direct incremental
transaction costs incurred and origination fees received, including loan commitment fees, as a result of bringing margin-
yielding assets or liabilities in the statement of financial position, are capitalised to the carrying amount of financial
instruments, excluding financial instruments at fair value through profit or loss, and amortised as interest income or expense
over the life of the asset as part of the effective interest rate.
When calculating the effective interest rate, the Group estimates cash flows considering all contractual terms of the
financial instrument (for example, prepayment options) but does not consider future credit losses. The calculation includes
all fees and points paid or received between parties to the contract that are an integral part of the effective interest rate,
transaction costs and all other premiums or discounts. Where the estimated cash flows on financial assets are
subsequently revised, other than impairment losses, the carrying amount of the financial assets is adjusted to reflect actual
and revised estimated cash flows.
Where a financial asset or a Group of similar financial assets has been written down as a result of an impairment loss,
interest income is recognised using the rate of interest used to discount the future cash flows for the purpose of measuring
the impairment loss.
43 Zenith Bank Plc Annual Report - 31 December 2015
ZENITH BANK PLC
Notes to the Consolidated and Separate Financial Statements
for the Year Ended 31 December 2015
2.18 Fee, commission and other income
Fee and commission income and expense that are integral to the effective interest rate on a financial asset or liability are
included in the measurement of the effective interest rate. Other fees and commission income and expenses are generally
recognised on an accrual basis when the service has been provided. Loan commitment fees for loans that are likely to be
drawn down are deferred (together with related direct costs) and recognised as an adjustment to the effective interest rate
on the loan. Loan syndication fees are recognised as revenue when the syndication has been completed and the Group
has retained no part of the loan package for itself or has retained a part at the same effective interest rate as the other
participants. Commission and fees arising from negotiating, or participating in the negotiation of, a transaction for a third
party, are recognised on completion of the underlying transaction.
Dividend income is recognised in profit or loss in the period in which the right of receipt is established.
2.19 Operating expense
Expenses are decreases in economic benefits during the accounting period in the form of outflows, depletion of assets or
incurrence of liabilities that result in decrease in equity, other than those relating to distributions to equity participants.
Expenses are recognized on an accrual bases regardless of the time of spending cash. Expenses are recognized in the
income statement when a decrease in future economic benefit related to a decrease in an assets or an increase of a liability
has arisen that can be measured reliably.
Expenses are measured at historical cost. Assets are recorded at the amount of cash or cash equivalents paid or their fair
value of consideration given. Liabilities are recorded at the amount of proceeds received in exchange for the obligation.
Only the portion of cost of a previous period that is related to the income earned during the reporting period is recognized
as an expense. Expenses that are not related to the income earned during the reporting period, but expected to generate
future economic benefits, are recorded in the financial statement as assets. The portion of assets which is intended for
earning income in the future periods shall be recognized as an expense when the associated income is earned.
Expenses are recognized in the same reporting period when they are incurred in cases when it is not probable to directly
relate them to particular income earned during the current reporting period and when they are not expected to generate any
income during the coming years.
2.20 Current and deferred income tax
Current tax
The current income tax charge is calculated on the basis of the tax rates enacted or substantively enacted at the reporting
date in the countries where the Bank and its subsidiaries as well as associates operate and generate taxable income.
Current tax also includes any tax arising from dividend.
Current income tax is recognised as an expense for the period and adjustments to past periods except to the extent that
current tax related to items that are charged or credited in OCI or directly to equity.
Deferred tax
Deferred income tax is provided in full, using the liability method, on all temporary differences arising between the tax bases
of assets and liabilities and their carrying values for financial reporting purposes. Deferred income tax is determined using
tax rates enacted or substantively enacted at the reporting date and are expected to apply when the related deferred
income tax liability is settled.
Deferred tax is not recognised for the following temporary differences:
the initial recognition of goodwill;
the initial recognition of assets and liabilities in a transaction that is not a business combination, which affects
neither accounting nor taxable profits or losses; and
investments in subsidiaries where the group controls the timing of the reversal of temporary differences and it is
probable that these differences to the extent that it is probable that they will not reverse in the foreseeable future.
Deferred income tax assets are recognised on unused tax losses, unused tax credits and deductible temporary differences
only to the extent that it is probable that future taxable profits will be available against which the temporary differences can
be utilised.
44 Zenith Bank Plc Annual Report - 31 December 2015
ZENITH BANK PLC
Notes to the Consolidated and Separate Financial Statements
for the Year Ended 31 December 2015
Unrecognised deferred tax assets are reassessed at each reporting date and recognised to the extent that it has become
probable that future taxable profits will be available against which they can be used.
The amount of deferred tax provided is based on the expected manner of realisation or settlement of the carrying amount of
the asset or liability and is not discounted. 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 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 recognized. 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.
Deferred tax related to the fair value re-measurement of equity instruments which are charged or credited directly to other
comprehensive income, is also credited or charged directly to other comprehensive income and is not subsequently
transferred from equity to profit or loss.
2.21 Earnings per share
The Group presents basic earnings per share (EPS) for its ordinary shares. Basic EPS is calculated by dividing the profit or
loss attributable to ordinary shareholders of the Bank by the weighted average number of ordinary shares outstanding
during the period. where there are shares that could potentially affects the numbers of share issued, those shares are
considered in calculating the diluted earnings per share. There are currently no share that could potentially dilute the total
issued shares.
2.22 Segment reporting
An operating segment is a component of the Group engaged in business activities from which it can earn revenues, whose
operating results are regularly reviewed by the Group's Executive [Management/Board] in order to make decisions about
resources to be allocated to segments and assessing segment performance. The Group’s identification of segments and
the measurement of segment results is based on the Group’s internal reporting to management.
2.23 Fiduciary activities
The Group acts as trustees and in other fiduciary capacities through Zenith Pension Custodians that result in the holding or
placing of assets on behalf of individuals, trusts, retirement benefit plans and other institutions. These assets and income
arising thereon are excluded from these financial statements, as they are not assets of the Group.
2.24 Discontinued operations
A discontinued operation is a component of the Group's business that represents a separate major line of business or a
geographical area of operations that has been disposed of or is held for sale or distribution, or is a subsidiary acquired
exclusively with a view to resale. Classification as a discontinued operation occurs upon disposal or when the operation
meets the criteria to be classified as held for sale, if earlier. When an operation is classified as a discontinued operation, the
comparative statement of comprehensive income is re-presented as if the operation had been discontinued from the start of
the comparative period.
45 Zenith Bank Plc Annual Report - 31 December 2015
ZENITH BANK PLC
Notes to the Consolidated and Separate Financial Statements
for the Year Ended 31 December 2015
3.
Risk management
3.1 Enterprise Risk Management
The Zenith Bank Group adopts an integrated approach to risk management by bringing all risks together under a limited
number of oversight functions. The Group addresses the challenge of risks comprehensively through the Enterprise Risk
Management (ERM) Framework by applying practices that are supported by a governance structure consisting of board
level and executive management committees.
As part of its risk management policy, the Group segregates duties between market facing business units and risk
management functions while management is governed by well-defined policies which are clearly communicated across the
Group.
Risk related issues are taken into consideration in all business decisions and the Group continually strives to maintain a
conservative balance between risk and revenue consideration. Risk culture and education is on the ascendancy across the
group.
3.1.1 Risk Management Philisophy/Strategy
The group considers sound risk management practise to be the foundation of a long lasting financial institution.
The group continues to adopt a holistic and intergrated approach to risk management and therefore, brings all risks
together under one or a limited number of oversight functions.
Risk management is a shared responsibility.Therefore the Group aims to build a shared perspective on risks that is
grounded in consensus.
There is clear segregation of duties between market facing business units and risk management functions.
Risk Management is governed by well defined policies which are clearly communicated across the Group.
Risk related issues are taken into consideration in all business decisions. The Group shall continually strive to
maintain a conservative balance between risk and revenue consideration.
3.1.2 Risk Appetite
The Group's risk appetite is reviewed by the Board of Directors annually, at a level that minimizes erosion of earnings or
capital due to avoidable losses or from frauds and operational inefficiencies. This reflects the conservative nature of Zenith
Group as far as risk taking is concerned.
The Group’s risk appetite describes the quantum of risk that it would assume in pursuit of its business objectives at any
point in time. For the Group, it is the core instrument used in aligning its overall corporate strategy, its capital allocation and
risks.
The Group sets tolerance limits for identified key risk indicators (“KRIs”), which serve as proxies for the risk appetite for
each risk area and business/support unit. Tolerance levels for KRIs are jointly defined and agreed upon by the
business/support units and are subject to annual reviews.
3.1.3 Risk Management Approach
The Group addresses the challenge of risks comprehensively through an enterprise-wide risk management framework and
a risk governance policy by applying leading practices that are supported by a robust governance structure consisting of
board level and executive management committees. The Board drives the risk governance and compliance process through
its committees. The audit commitee provides oversight on the systems of internal control, financial reporting and
compliance. The Board credit commitee reviews the credit policies and approves all loans above the defined limits for
Executive Management. The Board Risk Committee sets the risk philosophy, policies and strategies as well as provides
guidance on the various risk elements and their management. The Board Risk Control Functions are supported by various
management committees and sub committees (Global Credit commitee and Management Risk committee) that help it
develop and implement various risk strategies. The Global Credit commitee manages the credit approval and
documentation activities. It ensures that the credit policies and procedures are aligned with the Group's business objectives
and strategies. The Management Risk committee drives the management of the financial risks (Market, Liquidity and Credit
Risk), operational risks as well as strategic and reputational risks.
46 Zenith Bank Plc Annual Report - 31 December 2015
ZENITH BANK PLC
Notes to the Consolidated and Separate Financial Statements
for the Year Ended 31 December 2015
In addition, Zenith Group manages its risks in a structured, systematic and transparent manner through a global risk policy
which embeds comprehensive risk management processes into the organisational structure and risk measurement and
monitoring activities. This structure ensures that the Group’s overall risk exposures are within the thresholds set by the
Board.
The key features of the Group’s risk management policy are:
The Board of Directors provides overall risk management direction and oversight.
The Group’s risk appetite is approved by the Board of Directors.
Risk management is embedded in the Group as an intrinsic process and is a core competence of all its
employees.
The Group manages its credit, market, operational and liquidity risks in a co-ordinated manner within the
organisation.
The Group’s risk management function is independent of the business divisions.
The Group’s internal audit function reports to the Board Audit Committee and provides independent validation of
the business units’ compliance with risk policies and procedures and the adequacy and effectiveness of the risk
management framework on an enterprise-wide basis.
The Group continually modifies and enhances its risk management policies and systems to reflect changes in markets,
products and international best practices. Training, individual responsibility and accountability, together with a disciplined
and cautious culture of control, is an intergral part of the Group’s management of risk.
The Board of Directors ensures strict compliance with relevant laws, rules and standards issued by the industry regulators
and other law enforcement agencies, market conventions, codes of practices promoted by industry associations and
internal policies.
The compliance function, under the leadership of the Chief Compliance Officer of the Bank has put in place a robust
compliance framework, which includes:
Comprehensive compliance manual detailing the roles and responsibilities of all stakeholders in the compliance
process,
Review and analysis of all relevant laws and regulations, which are adopted into policy statements to ensure
business is conducted professionally;
Review of the Bank's Anti Money Laundering Policy in accordance with changes in the Money Laudering
Prohibition Act 2011 and Anti Terrorism Act 2011 as amended;
Incorporation of new guidelines in the Bank's Know Your Customer policies in line with the increasing global
trend as outlined in the Central Bank of Nigeria's Anti Money Laundering/Combating Finance of Terrorism
Compliance Manual.
The Group's culture emphasizes high standard of ethical behaviour at all levels of the Group. Therefore the Group's board
of directors promotes sound organisation.
3.1.4 Methodology for Risk Rating
The risk management strategy is to develop an integrated approach to risk assessments, measurement, monitoring and
control that captures all risks in all aspects of the Group’s activities.
All activities in the Group have been profiled and the key risk drivers and threats in them identified. Mitigation and control
techniques are then determined in tackling each of these threats. These techniques are implemented as risk policies and
procedures that drive the strategic direction and risk appetite as specified by the board. Techniques employed in meeting
these objectives culminate in the following roles for the risk control functions of the Group:
Develop and implement procedures and practices that translate the board's goals, objectives, and risk tolerances
into operating standards that are well understood by staff.
Establish lines of authority and responsibility for managing individual risk elements in line with the Board’s overall
direction.
Risk identification, measurement, monitoring and control procedures.
Establish effective internal controls that cover each risk management process.
Ensure that the group’s risk management processes are properly documented.
Create adequate awareness to make risk management a part of the corporate culture of the Group.
Ensure that risk remains within the boundaries established by the Board.
Ensure that business lines comply with risk parameters and prudent limits established by the Board.
47 Zenith Bank Plc Annual Report - 31 December 2015
ZENITH BANK PLC
Notes to the Consolidated and Separate Financial Statements
for the Year Ended 31 December 2015
The CBN Risk Management Guidelines prescribes quantitative and qualitative criteria for the identification of significant
activities and sets a threshold of contributions for determining significant activities in Bank and its subsidiaries. This practice
is essentially to drive the risk control focus of financial institutions.
Zenith Bank applies a mix of qualitative and quantitative techniques in the determination of its significant activities under
prescribed broad headings. The criteria used in estimating the materiality of each activity is essentially based on the
following:
The strategic importance of the activity and sector.
The contribution of the activity/sector to the total assets of the Bank.
The net income of the sector.
The risk inherent in the activity and sector.
Risk Management structures and processes are continually reviewed to ensure, their adequacy and appropriateness for the
group’s risk and opportunities profile as well as bringing them up to date with changes in strategy, business environment,
evolving thoughts and trends in risk management.
3.1.5 Risk management strategies under the current economic conditions
Nigeria is the sixth largest producer of oil in the world and oil revenue constitutes over 70% of its revenue. The recent
volatility and decline of the crude oil prices has therefore significantly affected the country's revenue and capacity.
This has shown negatively in economic indicators with the following impacts:
i)
ii)
iii)
Reduced government earnings
The foreign exchange reserve has declined to $29.07bn as at 31 December 2015 compared to over $34bn in
corresponding period in 2014.
Inability of CBN to fund import requests from customers leading to reduced production capacity of most companies
and in some cases outright closure of business. There are therefore serious dollar liquidity challenges.
This situation has raised concerns around ability of banks and their customers to meet their obligations when they fall due.
These are mainly with the funding of oil and gas and power assets purchases and other exposures to foreign exchange
obligations.
There are also concerns with reduced capacity utilization in local industries and therefore possibility of NPL increase in the
year as customers may not be able to produce enough or do so at a higher cost which may affect sales and cash flows to
meet repayment arrangements.
Zenith Bank PLC has set out various strategies to deal with the outcome of this recent turbulence. Our financial indicators
and fundamentals are strong enough to withstand any resultant shocks.
We have also carried out stress tests analysis and scenario review of worsening situations against our current financial
positions and the results affirms our capacity to deal with them if they were to occur.
We strongly believe we are poised to deal with liquidity risk and funding challenges that may arise from these situations and
our capital and earnings capacity (profitability) can withstand any shock that may arise.
We will continue to support our customers as much as possible in terms of foreign exchange funding challenges; credit
performance obligations (restructuring repayments to match cash-flows, where necessary);
Some of the key risk management strategies in the year would include the following:
Continue to monitor impact of global economy in commodity pricing, FDI inflows and general behavior of local
economy to the changes in the global market.
Source for cheaper and stable funds
Drive other income sources - Increase marginal value of current assets utilization and their derivable income as much
as possible. Seek new sources and champions.
Pursue other government activities especially trapping utilization of government funds for projects and other activities
48 Zenith Bank Plc Annual Report - 31 December 2015
ZENITH BANK PLC
Notes to the Consolidated and Separate Financial Statements
for the Year Ended 31 December 2015
Further develop SME/Retail product sales and penetrations
Develop market hub initiative to host market players and drive retail participation
Ensure that the Net Interest Margin (NIM) is maintained for all changes in interest rates.
Create additional foreign exchange funding sources from the receipt of foreign exchange deposits from customers
especially export proceeds.
Pursue and support export strategies to assure expanded foreign exchange inflow.
Increased collections of payments (Deploy more friendly collection tools)
Improve customer service delivery through trainings, systems, communication, and compensation medium.
Stabilize the bank’s technology/Platforms – This is to increase and aids customers’ confidence, loyalty and bank’s
reputation.
Cautiously grow risk assets while maintaining adequate level of capital.
3.2 Credit Risk
Credit risk is the risk of a financial loss if an obligor does not fully honour its contractual commitments to the Group.
Obligors may be borrowers, issuers, counterparties or guarantors. Credit risk is the most significant risk facing the Bank in
the normal course of business. The Bank is exposed to credit risk not only through its direct lending activities and
transactions but also through commitments to extend credit, letters of guarantee, letters of credit, securities purchased
under reverse repurchase agreements, deposits with financial institutions, brokerage activities, and transactions carrying a
settlement risk for the Bank such as irrevocable fund transfers to third parties via electronic payment systems.
The Group has robust credit standards, policies and procedures to control and monitor intrinsic and concentration risks
through all credit levels of selection, underwriting, administration and control. Some of the policies are:
Credit is only extended to suitable and well identified customers and never where there is any doubt as to the
ethical standards and record of the intending borrower.
Exposures to any industry or customer will be determined by the regulatory guidelines, clearly defined internal
policies, debt service capability and balance sheet management guidelines.
Credit is not extended to customers where the source of repayment is unknown or speculative, and also where
the destination of funds is unknown. There must be clear and verifiable purpose for the use of the funds.
Credit is not given to a customer where the ability of the customer to meet obligations is based on the most
optimistic forecast of events. Risk considerations will always have priority over business and profit considerations
The primary source of repayment for all credits must be from an identifiable cash flow from the counterparty’s
normal business operations or other financial arrangements. The realization of security remains a fall back
option.
A pricing model that reflects variations in the risk profile of various credits to ensure that higher risks are
compensated by higher returns is adopted.
All insiders’ related credits are limited to regulatory and strict internal limits and are disclosed as required.
The consequences for non-compliance with the credit policy and credit indiscipline are communicated to all staff
and are implemented.
3.2.1 Credit Metrics and Measurement Tools
Zenith Bank and its subsidiaries have devoted resources and harnessed its credit data into developing models to improve
the determination of economic and financial threats due to credit risk. Before a sound and prudent credit decision can be
taken, the credit risk engendered by the borrower or counterparty must be accurately assessed. This is the first step in
processing credit applications. As a result some key factors are considered in credit risk assessment and measurement:
1. Adherence to the strict credit selection criteria which includes defined target market, credit history, the capacity and
character of customers.
2. Credit rating of obligor
3. The likelihood of failure to pay over the period stipulated in the contract.
49 Zenith Bank Plc Annual Report - 31 December 2015
ZENITH BANK PLC
Notes to the Consolidated and Separate Financial Statements
for the Year Ended 31 December 2015
4. The size of the facility in case default occurs.
5. Estimated Rate of Recovery which is a measure of the portion of the debt that can be regained through freezing of assets
and collateral should default occur.
3.2.2 Credit Rating Tools
The principal objective of the credit risk rating system is to produce a reliable assessment of the credit risk to which the
Group is exposed. As such, all loans and indirect credits such as guarantees and bonds as well as treasury investments
undergo a formal credit analysis process that would ensure the proper appraisal of the facility.
(a) Loans and advances and amounts due from banks
Each individual borrower is rated based on an internally developed rating model that evaluates risk based on financial,
qualitative and industry specific inputs. The associated loss estimate norms for each grade have been developed based on
the experience of the Bank and its various subsidiaries.
In order to allow for a meaningful distribution of exposures across grades with no excessive concentrations on the Group's
borrower-rating and its facility-rating scale, the Group maintains the under listed rating grade which is applicable to both
new and existing customers.
Zenith Group’s internal rating:
Zenith Group Rating
Description of the grade
AAA
AA
A
BBB
BB
B
CCC
CC
C
D
Unrated
Investment Risk (Extremely Low Risk)
Investment Risk (Very Low Risk)
Investment Risk (Low Risk)
Upper Standard Grade (Acceptable Risk)
Lower Standard Grade (Moderately High Risk)
Non Investment Grade (High Risk)
Non Investment Grade (Very High Risk)
Non Investment Grade (Extremely High Risk)
Non Investment Grade (High Likelihood of Default)
Non Investment Grade (Lost)
Unrated
Equivalent of external
rating
AAA
AA
A
BBB
BB
B
CCC
CC
C
D
Unrated
The credit rating system seeks to achieve the foundation level of the internal ratings based approach under Basel II,
through continuous validation exercises over the years.
(b) Other debt instruments
With respect to other debt instruments, the Group takes the following into consideration in the management of the
associated credit risk:
External ratings of such instruments/institutions by rating agencies like Fitch; Standard & Poor’s; Agusto & Co.
etc.
Internal and external research and market intelligence reports
Regulatory agencies reports
In addition to the above, we have put in place a conservative limits structure which is monitored from time to time in order to
limit our risk exposures on these securities.
Control mechanisms for the credit risk rating system
Zenith’s credit risk rating system is reviewed periodically to confirm that the rating criteria and procedures are appropriate
given the current portfolio and external conditions. Hence, in accordance with the Groups model risk policy, all models that
materially impact the risk rating process are reviewed.
Furthermore, the ratings accorded to customers are regularly reviewed, incorporating new financial information available
and the experience in the development of the banking relationship. The regularity of the reviews increases in the case of
clients who reach certain levels in the automated warning systems. The rating system is currently undergoing external
review with a view to enhancing its robustness.
50 Zenith Bank Plc Annual Report - 31 December 2015
ZENITH BANK PLC
Notes to the Consolidated and Separate Financial Statements
for the Year Ended 31 December 2015
3.2.3 Credit Processes
Zenith operates a Centralised Credit Approval Process System. Credits are originated from the branches/business groups
and subjected to reviews at various levels before presentation to the Global Credit Committee for approvals, and including
all documents and information defined for the proper assessment and decision of Credit. All credit presented for approval
are required to be in conformity with the documented and communicated Risk Acceptance Criteria(RAC).
As part of credit appraisal process, the Group will have to satisfy itself in the following areas:
a) Credit assessment of the borrower’s industry, and macro economic factors.
b) The purpose of credit and source of repayment.
c) The track record / repayment history of borrower.
d) Assess/evaluate the repayment capacity of the borrower.
e) The Proposed terms and conditions and covenants.
f) Adequacy and enforceability of collaterals.
g) Approval from appropriate authority.
3.2.4 Group Credit Risk Management
Zenith's dynamic and proactive approach in managing credit risk is a key element in achieving its strategic objective of
maintaining and further enhancing its asset quality and credit portfolio risk profile. The conservative, prudent and well-
established credit standards, policies and procedures, risk methodologies and framework, solid structure and infrastructure,
risk monitoring and control activities enable the Group to deal with the emerging risks and challenges with a high level of
confidence and determination.
The framework for Credit Risk at Zenith is well defined and institutionally predicated on:
Clear tolerance limits and risk appetite set at the Board level, well communicated to the business units and
periodically reviewed and monitored to adjust as appropriate.
Well-defined target market and risk asset acceptance criteria.
Rigorous financial, credit and overall risk analysis for each customer/transaction.
Portfolio quality examined on regular basis according to key performance indicators mechanism and periodic
stress testing.
Concentrations together with mitigation strategies are continuously assessed.
Early warning system is continually validated and modified to ensure proper functioning for risk identification.
Systematic and objective credit risk rating methodologies that are based on quantitative, qualitative and expert
judgment.
Systematic credit limits management enabling the Bank to monitor its credit exposure on daily basis at country,
borrower, industry, credit risk rating and credit facility type levels.
Solid documentation and collateral management process with proper coverage and top-up triggers and follow-
ups.
Annual and interim individual credit reviews to ensure detection of weakness signs or warning signals and
considering proper remedies.
Our rigorous credit processes are supplemented by sectoral portfolio reviews focused on countries, regions or specific
industries as well as multiple stress testing scenarios.
These are intended to identify any inherent risks in the portfolios resulting from changes in market conditions and are
supplemented by independent reviews from our Group Internal Audit.
Additionally, the Group continues to upgrade and fine-tune the above in line with the developments in the financial services
industry environment and technology.
3.2.5 Group Credit Risk Limits
The Group applies credit risk limits, among other techniques in managing credit risk. This is the practice of stipulating a
maximum amount that the individual or counterparty can obtain as loan. Internal and regulatory limits are strictly adhered
to.Through this, the Group not only protects itself, but also in a sense, protects the counterparty from borrowing more than
they are capable of paying.
The Group continues to focus on its concentration and intrinsic risks and further manage them to a more comfortable level.
This is very important due to the serious risk implications that intrinsic and concentration risk pose to the Group. A thorough
analysis of economic factors, market forecasting and prediction based on historical evidence is used to mitigate the
crystallization of these risks.
51 Zenith Bank Plc Annual Report - 31 December 2015
ZENITH BANK PLC
Notes to the Consolidated and Separate Financial Statements
for the Year Ended 31 December 2015
The Group has in place various portfolio concentration limits (which are subject to periodic review).These limits are closely
monitored and reported on from time to time.
The Group’s internal credit approval limits for the various authorities levels are as indicated below.
Zenith Group Rating
Board Credit Committee
Global Credit Committee
Approval limit (% of Shareholders' Fund)
N7 billion and above (Not exceeding 20% of Total Shareholders’ funds)
Below N7 billion
These internal approval limits are set and approved by the Group Board and are reviewed regularly as the state of affairs of
the Group and the wider financial environment demands.
3.2.6 Group Credit Risk Monitoring
The Group’s exposures are continuously monitored through a system of triggers and early-warning signals aimed at
detecting symptoms which could result in deterioration of credit risk quality. The triggers and early-warning systems are
supplemented by facility utilisation and collateral valuation monitoring together with a review of upcoming credit facility
expiration and market intelligence to enable timely corrective action by management. The results of the monitoring process
are reflected in the internal rating process in a quarterly review activity.
Credit risk is monitored on an ongoing basis with formal weekly,monthly and quarterly reporting to ensure senior
management's awareness of shifts in credit quality and portfolio performance along with changing external factors such as
economic and business cycles.
The capabilities of the credit review team is continously being improved in order to improve the facility monitoring activity
and assure good quality Risk Assets Portfolio accross the Group.
A specialised and focused loan recovery and workout team handles the management and collection of problem credit
facilities.
3.2.7 (a) Credit Risk Mitigation, Collateral and other Credit Enhancements
The Group’s approach to controlling various risks begins with optimizing the diversification of its exposures. Zenith uses a
variety of techniques to manage the credit risk arising from its lending activities.These techniques are set out in the Group's
internal policies and procedures. They are mainly reflected in the application of various exposure limits: credit concentration
limits by counterparty and credit concentration limits by industry, country, region and type of financial instrument.
Enforceable legal documentation establishes Zenith’s direct, irrevocable and unconditional recourse to any collateral,
security or other credit enhancements.
(i) Collateral Security
A key mitigation step employed by the Group in its credit risk management process includes the use of collateral securities
to secure its loans and advances as alternative sources of repayment during adverse conditions. All major credit facilities to
our customers are to be secured and the security instruments and documentations must be perfected and all conditions
precedent must be met before drawdown or disbursement is allowed. Collateral analysis includes a good description of the
collateral, its value, how the value was arrived at, and when the valuation was made. It is usually necessary to review the
potential adverse changes in the value of collateral security for the foreseeable future.
Collateral securities that are pledged must be in negotiable form and usually fall under the following categories:
Real estate, plant and equipment collateral (usually all asset or mortgage debenture or charge) which have to be
registered and enforceable under Nigerian law;
Collateral consisting of inventory, accounts receivable, machinery equipment, patents, trademarks, farm
products, general intangibles, etc. These require a security agreement (usually a floating debenture) which has
to be registered and, must be enforceable under Nigerian law;
Stocks and shares of publicly quoted companies;
Domiciliation of contracts proceeds;
Documents of title to goods such as shipping documents consigned to the order of Zenith Bank or any of its
subsidiaries; and
Letter of lien.
52 Zenith Bank Plc Annual Report - 31 December 2015
ZENITH BANK PLC
Notes to the Consolidated and Separate Financial Statements
for the Year Ended 31 December 2015
Collateral securities are usually valued and inspected prior to disbursement and on a regular basis thereafter until full
repayment of the exposure. We regularly conduct a review of all collateral documentation in respect of all credits in the
Bank and specific gaps in the collateral documentation are advised to the Lending Group/Zones/Branch for appropriate
action and follow-up. Borrowers are required to confirm adherence to covenants including confirmation of collateral values
on a periodic basis, which are used by the Bank to provide early warning signals of collateral value deterioration. Periodic
inspections of physical collateral are performed where appropriate and where reasonable means of doing so are available.
The type and size of collateral held as security for financial assets other than loans and advances is usually a function of
the nature of the instrument. Our debt securities, treasury and other eligible bills are normally unsecured but our comfort is
on the issuer’s credit rating which is the Federal Government of Nigeria (FGN).
Details of collateral held and their carrying amounts as at 31 December 2015 are as follows:
In millions of Naira
Group
Bank
Secured against real estate
Secured by shares of quoted companies
Cash Collateral, lien over fixed and floating assets
Unsecured
Total
exposure
147,919
7,467
950,009
926,861
Value of
collateral
92,030
1,782
676,105
-
Total
exposure
135,822
7,467
919,475
822,177
Value of
collateral
87,451
1,782
539,951
-
2,032,256
769,917
1,884,941
629,184
Details of collateral held and their carrying amounts as at 31 December 2014 are as follows:
In millions of Naira
Group
Bank
Secured against real estate
Secured by shares of quoted companies
Cash Collateral, lien over fixed and floating assets
Unsecured
(ii) Balance Sheet Netting Arrangements
Total
exposure
215,506
4,814
1,016,830
521,185
Value of
collateral
199,745
2,571
696,287
-
Total
exposure
214,165
4,814
867,594
519,008
Value of
collateral
198,361
2,571
569,264
-
1,758,335
898,603
1,605,581
770,196
Risk reduction by way of current account set-off is recognised for exposures to highly rated and creditworthy customers.
Customers are required to enter into formal agreements giving Zenith Bank Plc the unfettered right to set-off gross credit
and debit balances in their nominated accounts to determine the Groups net exposure. Cross-border set-offs are not
permitted.
(iii) Guarantees and Standby Letters of Credit
Guarantees and Standby Letters of Credit are considered to carry about the same level of credit risk as loans and
advances. And in accordance with the Group’s credit policies, banks and creditworthy companies and individuals with high
net worth are accepted as guarantor, subject to credit risk assessment. Furthermore Zenith Bank Plc only recognises
unconditional irrevocable guarantees or standby letters of credit provided they are not related to the underlying obligor.
3.2.7 (b) Maximum Exposure to Credit Risk Before Collateral Held or Credit Enhancements
The Group's maximum exposure to credit risk at 31 December 2015 and 31 December 2014 respectively, is represented by
the net carrying amounts of the financial assets, with the exception of financial and other guarantees issued by the Group
for which the maximum exposure to credit risk is represented by the maximum amount the Group would have to pay if the
guarantees are called on (refer to note 39 Contingent liabilities and commitments).
3.2.8 Concentration of Risks of Financial Assets with Credit Risk Exposure
The Group monitors concentrations of credit risk by geographical location and by industry sector. An analysis of
concentrations of credit risk at 31 December 2015 and 31 December 2014 respectively for loans and advances to
customers and amounts due from banks, is set out below:
53 Zenith Bank Plc Annual Report - 31 December 2015
ZENITH BANK PLC
Notes to the Consolidated and Separate Financial Statements
for the Year Ended 31 December 2015
(a) Geographical sectors
The following table breaks down the Group’s main credit exposure at their gross amounts ( "Due from banks" at carrying
amount), as categorised by geographical region at 31 December 2015 and 31 December 2014 respectively. For this table,
the Group has allocated exposures to regions based on the region of domicile of our counterparties.
In millions of Naira
31 December 2015
Nigeria
Rest of Africa
Outside Africa
In millions of Naira
31 December 2014
Nigeria
Rest of Africa
Outside Africa
(b) Industry sectors
In millions of Naira
Agriculture
Oil and gas
Consumer Credit
Manufacturing
Real estate and construction
Finance and Insurance
Government
Power
Other public utilities
Transportation
Communication
Education
General Commerce
Others
Total
Group
Loans and
Due from
advances to
banks
customers
1,884,941
63,178
84,137
105,090
34,673
132,431
1,990,031
97,851
216,568
Total
Bank
Loans and
Due from
advances to
banks
customers
1,884,941
-
-
12,002
-
254,892
1,896,943
-
254,892
272,194
2,032,256
2,304,450
266,894
1,884,941
2,151,835
Total
Group
Loans and
Due from
advances to
banks
customers
1,605,581
79,483
73,271
232,188
12,039
262,341
1,837,769
91,522
335,612
Total
Bank
Loans and
Due from
advances to
banks
customers
1,605,581
-
-
147,923
-
322,216
1,753,504
-
322,216
506,568
1,758,335
2,264,903
470,139
1,605,581
2,075,720
Group
31 Dec 2015 31 Dec 2014
Loans and
Loans and
advances to
advances to
customers
customers
112,616
42,089
389,926
362,489
25,943
2,820
298,831
462,805
103,656
109,617
35,946
82,222
151,489
251,248
69,449
55,753
6,913
2
94,714
81,757
150,515
107,574
5,700
7,741
108,921
464,916
203,716
1,223
Bank
31 Dec 2015 31 Dec 2014
Loans and
Loans and
advances to
advances to
customers
customers
82,453
39,698
383,416
337,006
10,578
2,729
290,205
444,585
100,439
105,450
32,928
81,404
151,383
250,751
52,874
55,753
25
-
75,445
47,750
146,947
106,678
4,652
7,741
80,759
405,396
193,477
-
2,032,256
1,758,335
1,884,941
1,605,581
The group's credit risk exposure from "due from banks" is categorized under the "finance and insurance" sector.
54 Zenith Bank Plc Annual Report - 31 December 2015
ZENITH BANK PLC
Notes to the Consolidated and Separate Financial Statements
for the Year Ended 31 December 2015
3.2.9 Credit quality
In millions of Naira
At 31 December 2015
Neither past due nor
impaired
Past due but not impaired
Impaired
Individually impaired
Collectively impaired
Gross
Impairment allowance
Specific impairment
Collective impairment *
In millions of Naira
At 31 December 2014
Neither past due nor
impaired
Past due but not impaired
Impaired
Individually impaired
Collectively impaired
Gross
Impairment allowance
Specific impairment
Collective impairment *
Due from
banks
Group
Loans and
advances to
customers
1,977,748
272,194
Financial
guarantee
Due from
banks
Bank
Loans and
advances to
customers
1,844,263
266,894
Financial
guarantee
-
-
-
10,195
25,148
19,165
121,637
-
-
-
-
-
-
9,807
21,023
9,848
121,637
-
-
-
272,194
2,032,256
121,637
266,894
1,884,941
121,637
-
-
(22,390)
(20,553)
-
-
-
-
(16,116)
(19,600)
-
-
272,194
1,989,313
121,637
266,894
1,849,225
121,637
Due from
banks
Group
Loans and
advances to
customers
1,723,497
506,568
Financial
guarantee
Due from
banks
Bank
Loans and
advances to
customers
1,575,358
470,139
Financial
guarantee
-
-
-
4,068
11,862
18,908
82,663
-
-
-
-
-
-
3,816
7,922
18,485
82,663
-
-
-
506,568
1,758,335
82,663
470,139
1,605,581
82,663
-
-
(10,065)
(18,763)
-
-
-
-
(7,480)
(17,851)
-
-
506,568
1,729,507
82,663
470,139
1,580,250
82,663
*Loans that are not individually significant are subjected to collective impairment.
3.2.9.1 Non-Performing Loans by Industry
In millions of Naira
Agriculture
Oil and Gas
Capital Market
Consumer Credit
Manufacturing
Real Estate and Construction
Finance and Insurance
Government
Power
Other Public Utilities
Transportation
Communication
Education
General Commerce/Trading
Group
Bank
31 Dec 2015
3,518
5,046
3,916
477
7,443
6,557
65
219
566
2
1,168
119
46
15,754
31 Dec 2014
2,161
146
4,769
2,866
2,660
4,869
75
174
1,833
1
21
1,090
107
9,998
31 Dec 2015
1,490
1,013
3,916
433
6,048
5,976
-
219
566
-
41
-
46
11,123
31 Dec 2014
2,114
60
4,769
2,866
1,061
4,244
6
174
1,833
1
21
1,009
106
8,143
44,896
30,770
30,871
26,407
55 Zenith Bank Plc Annual Report - 31 December 2015
ZENITH BANK PLC
Notes to the Consolidated and Separate Financial Statements
for the Year Ended 31 December 2015
3.2.9.2 Non-Performing Loans by Geography
In millions of Naira
South South
South West
South East
North Central
North West
North East
Rest of Africa
Outside Africa
(a) Geographical Sectors
Group
Bank
31 Dec 2015
2,414
24,364
818
2,367
140
768
8,972
5,053
31 Dec 2014
926
23,018
488
1,195
96
684
4,363
-
31 Dec 2015
2,414
24,364
818
2,367
140
768
-
-
31 Dec 2014
926
23,018
488
1,195
96
684
-
-
44,896
30,770
30,871
26,407
The following table breaks down the Group’s main credit exposure at their carrying amounts, as categorised by
geographical region at 31 December 2015 and 31 December 2014. For this table, the Group has allocated exposures to
regions based on the domicile region of our counterparties.
In millions of Naira
South South
South West
South East
North Central
North West
North East
Rest of Africa
Outside Africa
Group
Bank
Loans and
advances to
customers
31 Dec 2015
115,400
1,607,883
40,138
25,766
25,281
70,473
63,178
84,137
Loans and
advances to
customers
31 Dec 2014
108,445
1,352,177
43,350
73,793
8,073
19,743
79,483
73,271
Loans and
advances to
customers
31 Dec 2015
115,400
1,607,883
40,138
25,766
25,281
70,473
-
-
Loans and
advances to
customers
31 Dec 2014
108,445
1,352,177
43,350
73,793
8,073
19,743
-
-
2,032,256
1,758,335
1,884,941
1,605,581
All other financial assets are neither past due nor impaired, except other assets. NGN 73.07 billion of financial assets which
are neither past due nor impaired have been renegotiated (31 December 2014: NGN 6.61 billion).
56 Zenith Bank Plc Annual Report - 31 December 2015
ZENITH BANK PLC
Notes to the Consolidated and Separate Financial Statements
for the Year Ended 31 December 2015
In millions of Naira
(b) Credit portfolio neither past due nor impaired
The credit quality of the portfolio of loans and advances and amounts due from banks that were neither past due nor
impaired can be assessed by reference to the internal rating system adopted by the Group.
At 31 December 2015
AAA
AA to A
BBB to BB
Below B
Unrated
At 31 December 2014
AAA
AA to A
BBB to BB
Below B
Unrated
Due from
banks
Group
Loans and
advances to
customers
316,904
758,487
515,880
387,232
3,453
272,194
-
-
-
-
Bank
Loans and
Due from
advances to
banks
customers
184,904
758,216
515,300
387,200
3,438
266,894
-
-
-
-
272,194
1,981,956
266,894
1,849,058
Due from
banks
Group
Loans and
advances to
customers
253,665
729,064
622,512
28,309
89,947
506,568
-
-
-
-
Bank
Loans and
Due from
advances to
banks
customers
231,628
665,727
568,431
25,849
83,723
470,139
-
-
-
-
The credit quality of cash and balances with central banks, treasury bills, investment securities and assets pledged as
collateral that were neither past due nor impaired can also be assessed by reference to the internal rating system adopted
by the Group.
506,568
1,723,497
470,139
1,575,358
At 31 December
2015
AAA
AA to A
BBB to BB
Below B
Unrated
Cash and
balances
with central
banks
761,561
-
-
-
-
Group
Assets
pledged as
collateral
Investment
securities
Treasury
bills
377,928
-
-
-
-
195,737
17,404
-
-
-
265,051
-
-
-
-
265,051
761,561
377,928
213,141
Treasury
bills
Investment
securities
Bank
Assets
Cash and
pledged as
balances
collateral
with central
banks
735,946
-
-
-
-
330,900
-
-
-
-
264,320
-
-
-
-
134,002
16,722
-
-
-
735,946
330,900
150,724
264,320
At 31 December 2014
AAA
AA to A
BBB to BB
Below B
Unrated
Group Bank
Cash and
balances
with central
banks
752,580
-
-
-
-
Treasury
bills
Investment
securities
Assets
pledged as
collateral
295,397
-
-
-
-
186,544
13,535
-
-
-
151,746
-
-
-
-
Cash and
balances
with central
banks
728,291
-
-
-
-
Treasury
bills
Investment
securities
Assets
pledged as
collateral
253,414
-
-
-
-
79,469
13,363
-
-
-
151,746
-
-
-
-
752,580
295,397
200,079
151,746
728,291
253,414
92,832
151,746
The credit risk associated with other financial assets that were neither past due nor impaired are considered to be low at 31
December 2015 and 31 December 2014.
57 Zenith Bank Plc Annual Report - 31 December 2015
ZENITH BANK PLC
Notes to the Consolidated and Separate Financial Statements
for the Year Ended 31 December 2015
In millions of Naira
(c) Credit portfolio past due but not impaired
Past due up to 30 days
Past due 30 - 60 days
Past due 60 - 90 days
(c) Credit rating of past due but not impaired
A
BB
In millions of Naira
(d) Credit portfolio individually impaired
Gross amount
BB
Grade: Below BB
Specific impairment
Restructuring policy
Group
Bank
Loans and
advances to
customers
31 Dec 2015
8,010
558
1,627
Loans and
advances to
customers
31 Dec 2014
3,228
530
310
Loans and
advances to
customers
31 Dec 2015
7,954
540
1,313
Loans and
advances to
customers
31 Dec 2014
3,133
454
229
10,195
4,068
9,807
3,816
5,084
5,111
10,195
3,906
162
4,068
5,027
4,780
9,807
3,695
121
3,816
Group
Bank
Loans and
advances to
customers
31 Dec 2015
Loans and
advances to
customers
31 Dec 2014
Loans and
advances to
customers
31 Dec 2015
Loans and
advances to
customers
31 Dec 2014
18,749
6,399
(22,390)
2,758
6,103
5,759
(10,065)
1,797
18,749
2,274
(16,116)
4,907
5,508
2,414
(7,480)
442
Loans with renegotiated terms are loans that have been restructured because the Group has made concessions by
agreeing to terms and conditions that are more favorable for the customer than the Group has provided initially. The Group
implements restructuring policy in order to maximize collections opportunities and minimize the risk of default.
The Group’s credit committee may from time to time grant approval for restructuring of certain facilities due to the following
reasons:
i. Where the execution of the loan purpose and the repayment is no longer realistic in light of new cash flows.
ii, To avoid unintended default arising from adverse business conditions .
iii. To align loan repayment with new pattern of achievable cash flows.
iv. Where there are proven cost over runs that may significantly impair the project repayment capacity.
v. Where there is temporary downturn in the customer’s business environment .
vi. Where the customer’s going concern status is NOT in doubt or threatened.
The revised terms of restructured facilities usually include extended maturity, changing timing of interest payments and
amendments to the terms of the loan agreement.
58 Zenith Bank Plc Annual Report - 31 December 2015
ZENITH BANK PLC
Notes to the Consolidated and Separate Financial Statements
for the Year Ended 31 December 2015
Write-off policy
The Group writes off a loan balance when the Group’s credit department determines that the loan is uncollectable and had
been declared delinquent and subsequently classified as lost. This determination is made after considering information
such as the continuous deterioration in the customer’s financial position, such that the customer can no longer pay the
obligation, or that proceeds from the collateral will not be sufficient to pay back the entire exposure. Board approval is
required for such write-off. For insider related, CBN approval is required. The loan recovery department continues with its
recovery efforts and any loan subsequently recovered is treated as other income.
3.3 Market risk
Market risk is the risk of potential losses in both on and off balance-sheet positions arising from movements in market
prices. Market risks can arise from adverse changes in interest rates, foreign exchange rates, equity prices, commodity
prices and other relevant factors such as Market Volatilities.
The Group undertakes activities which give rise to some level of market risks exposures. The objective of market risk
management activities is to continually identify, manage and control market risk exposure within acceptable parameters,
while optimizing the return on risks taken.
3.3.1 Management of market risk
The Group has an independent Market Risk Management unit which assesses, monitors, manages and reports on market
risk taking activities across the Group. The Group has continued to enhance its Market Risk Management Framework. The
operations of the unit is guided by the mission of "inculcating enduring market risk management values and culture, with a
view to reducing the risk of losses associated with market risk-taking activities, and optimizing risk-reward trade-off.”
The Group's market risk objectives, policies and processes are aimed at instituting a model that objectively identifies,
measures and manages market risks in the Group and ensure that:
1. The individuals who take or manage risk clearly understand it.
2. The Group's risk exposure is within established limits.
3. Risk taking decisions are in line with business strategy and objectives set by the Board of Directors.
4. The expected payoffs compensate for the risks taken.
5. Sufficient capital, as a buffer, is available to take risk.
The Group proactively manages its Market risk exposures in both the trading and non-trading books within the acceptable
levels.
The Group's Market Risks exposures are broadly categorised into:
(i) Trading Market Risks - These are risks that arise primarily through trading activities and Market Making activities. These
include position taking in foreign exchange and fixed income securities (Bonds and Treasury Bills).
(ii) Non Trading Market Risks -These are risks that arise from assets and liabilities that are usually on the books for a longer
period of time, but where the Intrinsic value is a function of the movement of financial market parameter.
59 Zenith Bank Plc Annual Report - 31 December 2015
ZENITH BANK PLC
Notes to the Consolidated and Separate Financial Statements
for the Year Ended 31 December 2015
The table below sets out the allocation of assets and liabilities subject to market risk between trading and non-trading
portfolis
'In millions of Naira
Group
Assets
Cash and balances with central
banks
Treasury bills
Assets pledged as collateral
Due from other banks
Derivative assets
Loans and advances
Investment securities
Financial assets
Liabilities
Customer deposits
Derivative liabilities
Financial liabilities
On-lending facilities
Borrowings
Debt securities issued
Bank
Assets
Cash and balances with central
banks
Treasury bills
Assets pledged as collateral
Due from other banks
Derivative assets
Loans and advances
Investment securities
Financial assets
Liabilities
Customer deposits
Derivative liabilities
Financial liabilities
On-lending facilities
Borrowings
Debt securities issued
Note Carrying
amount
At 31 December 2015
Trading
Non-trading
At 31 December 2014
Trading
Non-trading
Carrying
amount
15
16
17
18
19
20
21
25
28
33
29
30
31
32
15
16
17
18
19
20
21
25
28
33
29
30
31
32
761,561
377,928
265,051
272,194
8,481
1,989,313
213,141
10,064
2,557,884
384
186,111
286,881
258,862
99,818
-
53,698
48,638
-
8,481
-
6,707
-
761,561
324,230
216,413
272,194
-
1,989,313
206,434
10,064
752,580
295,397
151,746
506,568
17,408
1,729,507
200,079
8,241
-
384
-
-
-
-
2,557,884
-
186,111
272,194
258,862
99,818
2,537,311
6,073
272,289
68,344
198,066
92,932
-
1,162
-
-
16,896
-
-
-
751,580
294,235
151,746
506,568
512
1,729,507
200,079
8,241
-
6,073
-
-
-
-
2,537,311
-
272,289
68,344
198,066
92,932
At 31 December 2015
Trading
Non-trading
Carrying
amount
At 31 December 2014
Trading
Non-trading
Carrying
amount
735,946
330,900
264,320
266,894
8,481
1,849,225
150,724
10,139
2,333,017
384
197,208
286,881
268,111
99,818
-
53,698
48,638
-
8,481
-
6,707
-
735,946
277,202
215,682
266,894
-
1,849,225
144,017
10,139
728,291
253,414
151,746
470,139
16,896
1,580,250
92,832
7,076
-
1,162
-
-
16,896
-
-
-
728,291
252,252
151,746
470,139
-
1,580,250
92,832
7,076
-
384
-
-
-
-
2,333,017
-
197,208
266,894
268,111
99,818
2,265,262
6,073
270,068
68,344
198,066
92,932
-
6,073
-
-
-
-
2,265,262
-
270,068
68,344
198,066
92,932
3.3.2 Measurement of Market Risk
The Group adopts Non-VAR (Value at risk) approach for quantitative measurement and control of market risks in both
trading and non trading books. The Non -VAR (Value at risk) measurements includes: Duration;Factor Sensitivities (Pv01),
Stress Testing, Aggregate Open Position etc. The measured risks are therefore monitored against the pre-set limits on a
daily basis. All exceptions are investigated and reported in line with internal policies and guidelines.
Limits are sets to reflect the risk appetite that is approved by the Board of Directors.These limits are reviewed, at least,
annually or at a more frequent interval. Some of the limits include; Net Open Position (NOP- for foreign exchange);
Aggregate Control Limits (for Securities); Management Action Trigger (MAT); Duration; Factor Sensitivities (Pv01);
Permitted Instrument and Tenor Limits; Holding Period and Off Market Rate Tolerance limit.
60 Zenith Bank Plc Annual Report - 31 December 2015
ZENITH BANK PLC
Notes to the Consolidated and Separate Financial Statements
for the Year Ended 31 December 2015
Stress testing is an important risk management tool that is used by the Group as part of its enterprise-wide risk
management. It is the evaluation of the Group’s financial position under severe but plausible scenarios to assist in decision
making. Stress testing provides the Group with the opportunity to spot emerging risks, uncover weak spots and take
preventive action. It also alerts management to adverse unexpected outcomes related to a variety of risks and provides an
indication of how much capital might be needed to absorb losses should large shocks occur. The Group adopts both single
factor and multifactor stress testing approaches (sensitivity and scenario based) in conducting stress testing within the risk
areas of liquidity, foreign exchange, interest rate, market and credit risks. Stress testing is conducted both on a regular and
ad-hoc basis in response to changing financial, regulatory and economic environment/circumstances.
Zenith Group generally does not offer very complex derivative products. However, with the setting up of Financial Market
Dealers Quotation Plc (FMDQ), it is expected that more sophisicated products will be introduced into the market. We will
ensure that adequate capacity (both systems and training/knowledge base) are in place to handle these products as at
when they are introduced. The overall size of the trading book is maintained at a very manageable size.
3.3.3 Foreign exchange risk
Fluctuations in the prevailing foreign currency exchange rates can affect the groups financial position and cash flows - 'On'
and 'Off' Balance Sheet. The Group manages part of the Foreign exchange risks through basic derivatives products and
hedges (such as FX, fwd and swap). The risk is also managed by ensuring that all risk taken by the Group are within
approved limits. In addition to adherence to regulatory limits, Zenith Group established various Internal limits (such as the
banks non-VAR models, overall Overnight and Intra-day positions), Dealer limits, as well as individual currency among
others limits which are monitored by the Market Risk Department on a regular basis. These limits are set with the aim of
minimizing the Group's risk exposures to exchange rates volatilities to an acceptable level. The Group's transactions are
carried out majorly in four (4) foreign currencies with a significant percentage of transactions involving US Dollars. The
Group uses the average interbank exchange rate for each foreign currency to value assets and liabilities denorminated in
foreign currencies.
(a) Group
The table below summarizes the Group’s exposure to foreign currency exchange rate risk at 31 December 2015 and 31
December 2014. Included in the table are the Group’s financial instruments at carrying amounts (except for loans and
advances to customers and other assets which are shown at their gross amount), categorised by currency.
In millions of Naira
At 31 December 2015
Assets
Cash and balances with central
banks
Treasury bills
Assets pledged as collaterals
Due from other banks
Derivative assets
Loans and advances to
customers (gross)
Investment securities
Financial assets (gross)
Liabilities
Customer's deposits
Derivative liabilities
Financial liabilities
On-lending facilities
Borrowings
Debt securities issued
Naira
Dollar
GBP
Euro
Others
Total
655,118
330,900
264,320
45,345
-
1,162,092
149,703
14,018
80,360
24,583
-
196,060
8,481
827,965
37,599
141
198
-
-
9,059
-
1,210
-
-
270
3,537
-
21,607
-
4,996
-
875
25,615
18,908
731
123
-
35,993
25,839
-
761,561
377,928
265,051
272,194
8,481
2,032,256
213,141
15,034
2,621,496
1,175,189
10,467
31,285
107,209
3,945,646
1,898,795
-
74,836
286,881
-
-
637,191
384
85,461
-
258,862
99,818
2,260,512
1,081,716
10,430
-
6,107
-
-
-
16,537
11,317
-
19,707
-
-
-
31,024
151
-
-
-
-
-
151
2,557,884
384
186,111
286,881
258,862
99,818
3,389,940
Net on-balance sheet position
360,984
93,473
(6,070)
261
107,058
555,706
61 Zenith Bank Plc Annual Report - 31 December 2015
ZENITH BANK PLC
Notes to the Consolidated and Separate Financial Statements
for the Year Ended 31 December 2015
At 31 December 2014
Assets
Cash and balances with CBN
Treasury bills
Assets pledged as collaterals
Due from other banks
Derivative assets
Loans and advances to
customers (gross)
Investment securities
Financial assets (gross)
Liabilities
Customer's deposits
Derivative liabilities
Financial liabilities
On-lending facilities
Borrowings
Debt securities issued
Net on-balance sheet position
Naira
Dollar
GBP
Euro
Others
Total
303,262
184,008
151,746
286,050
-
994,377
160,344
12,879
397,743
31,578
-
203,660
17,408
692,352
33,014
-
5,693
-
-
-
-
199
-
-
29,492
-
-
4,547
-
6,531
-
-
16,390
79,811
-
12,311
-
64,876
6,721
-
752,580
295,397
151,746
506,568
17,408
1,758,335
200,079
12,879
2,092,666
1,375,755
5,892
40,570
180,109
3,694,992
1,726,872
-
272,289
68,344
-
-
2,067,505
25,161
682,394
6,073
-
-
198,066
92,932
979,465
396,290
4,100
-
-
-
-
-
4,100
1,792
14,403
-
-
-
-
-
14,403
26,167
109,542
-
-
-
-
-
2,537,311
6,073
272,289
68,344
198,066
92,932
109,542
3,175,015
70,567
519,977
The Group’s exposure to foreign currency risk is largely concentrated in the US Dollar. Movement in exchange rate between
the US Dollar, and the Nigerian Naira affects reported earnings through revaluation gain or loss and statement of financial
position size through increase or decrease in the revalued amounts of assets and liabilities denominated in US Dollars.
The table below shows the impact on the Group’s profit or loss and statements of financial position size if the exchange rate
between the US Dollars, and Nigerian Naira had increased or decreased by 10%, with all other variables held constant.
US Dollar effect of 10% up or (down) movement on profit before tax and balance sheet
size (In millions of Naira)
31 Dec 2015 31 Dec 2014
9,347
16,369
62 Zenith Bank Plc Annual Report - 31 December 2015
ZENITH BANK PLC
Notes to the Consolidated and Separate Financial Statements
for the Year Ended 31 December 2015
(b) Bank
The table below summarizes the Bank’s exposure to foreign currency exchange rate risk at 31 December 2015 and 31
December 2014. Included in the table are the Banks’s financial instruments at carrying amounts, categorised by currency.
In millions of Naira
At 31 December 2015
Assets
Cash and balances with central
banks
Treasury bills
Assets pledged as collaterals
Due from other banks
Derivative assets
Loans and advances to
customers (gross)
Investment securities
Financial assets (gross)
Liabilities
Customer's deposit
Derivative liabilities
Financial liabilities
On-lending facilities
Borrowings
Debt securities issued
Net on-balance sheet position
In millions of Naira
At 31 December 2014
Assets
Cash and balances with central
banks
Treasury bills
Assets pledged as collaterals
Due from other banks
Derivative assets
Loans and advances to
customers (gross)
Investment securities
Financial assets (gross)
Liabilities
Customer's deposits
Derivative liabilities
Financial liabilities
On-lending facilities
Borrowings
Debt securities issued
Net on-balance sheet position
Naira
Dollar
GBP
Euro
Others
Total
655,118
330,900
264,320
45,346
-
1,162,092
149,703
14,968
2,622,447
1,898,795
-
65,586
286,881
-
-
2,251,262
371,185
80,360
-
-
190,882
8,481
718,397
1,021
141
999,282
423,935
384
106,902
-
268,111
99,818
899,150
100,132
198
-
-
9,059
-
-
-
-
270
-
-
21,607
-
4,452
-
-
9,257
26,329
3,942
-
5,013
-
-
-
8,955
302
6,345
-
19,707
-
-
-
26,052
277
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
735,946
330,900
264,320
266,894
8,481
1,884,941
150,724
15,109
3,657,315
2,333,017
384
197,208
286,881
268,111
99,818
3,185,419
471,896
Naira
Dollar
GBP
Euro
Others
Total
308,437
253,414
151,746
338,329
-
1,065,892
91,872
11,714
387,006
-
-
131,346
16,896
533,994
960
-
5,054
-
-
-
-
199
-
-
27,647
-
-
464
-
5,496
-
-
147
-
-
-
-
728,291
253,414
151,746
470,139
16,896
-
-
-
1,605,581
92,832
11,714
2,221,404
1,070,202
5,253
33,607
147
3,330,613
1,726,872
-
270,068
68,344
-
-
2,065,284
156,120
526,229
6,073
-
-
198,066
92,932
823,300
246,902
3,443
-
-
-
-
-
3,443
1,810
8,718
-
-
-
-
-
8,718
-
-
-
-
-
-
-
2,265,262
6,073
270,068
68,344
198,066
92,932
2,900,745
24,889
147
429,868
The Bank’s exposure to foreign currency risk is largely concentrated in the US Dollar. Movement in exchange rate between
the US Dollar,and the Nigerian Naira affects reported earnings through revaluation gain or loss and statement of financial
position size through increase or decrease in the revalued amounts of assets and liabilities denominated in US Dollars.
The table below shows the impact on the Bank’s profit and statement of financial position size if the exchange rate between
the US Dollars, and Nigerian Naira had increased or decreased by 10%, with all other variables held constant.
63 Zenith Bank Plc Annual Report - 31 December 2015
ZENITH BANK PLC
Notes to the Consolidated and Separate Financial Statements
for the Year Ended 31 December 2015
In millions of Naira
US Dollar effect of 10% up or (down) movement on profit before tax and balance sheet
size
31 Dec 2015 31 Dec 2014
10,132
21,016
3.3.4 Interest Rate Risk
The Group is exposed to a considerable level of interest rate risk-especially on the banking book (i.e. the risk that the future
cash flows of a financial instrument will fluctuate because of changes in market interest rates). Interest rate was quite
volatile within the period (especially in the Nigerian environment) in various geographical regions where the bank operates.
The combined effect of the increase in Monetary Policy Rate (MPR) 11% (from 12%), Foreign Exchange Rate N199.05
(from N185.79), Cash Reserve Ratio (CRR) on Public Deposit 20% (from 75%) and Private deposits 25% (from 20%) by the
Central Bank of Nigeria (CBN) resulted in huge jump in the market rates and market volatility. The Monetary Policy rate was
moved up twice in Ghana within the year. It was first moved from 21% to 22% in May 2015 and then to 26% in November
2015. The increase was aimed at containing inflationary pressures and to realign interest rates in favour of domestic assets.
The rate was largely flat in Gambia, Sierra-Leone and United Kingdom. These changes could have a negative impact on
the Net Interest Income, if not properly managed. The Group however, has a significant portion of its liabilities in non-rate
sensitive liabilities. This helps it in minimising the impact of the exposure to interest rate risks. The Group also enjoys some
form of flexibility in adjusting both lending and deposits rates to reflect current realities.
(a) Group
The table below summarizes the Group's interest rate gap position:
In millions of Naira
At 31 December 2015
Assets
Cash and balances with central banks
Treasury and other eligible bills (Amortized cost)
Assets pledged as collateral
Due from other banks
Derivative assets
Loans and advances to customers (gross)
Investment securities (Amortized cost and Fair value through OCI)
Financial assets (gross)
Liabilities
Customer deposits
Derivative liabilities
Financial liabilities
On-lending facilities
Borrowings
Debt securities issued
Total interest repricing gap
Note Carrying
amount
Rate
sensitive
Non rate
sensitive
15
16
17
18
19
20
21
25
28
28
29
30
31
32
761,561
377,928
265,051
272,194
8,481
2,032,256
213,141
15,034
7,500
377,928
265,051
272,194
8,481
2,032,256
202,444
-
3,945,646
3,165,854
2,557,884
384
186,111
286,881
258,862
99,818
2,017,265
384
-
286,881
258,862
99,818
3,389,940
2,663,210
555,706
502,644
754,061
-
-
-
-
-
10,697
15,034
779,792
540,619
-
186,111
-
-
-
726,730
53,062
64 Zenith Bank Plc Annual Report - 31 December 2015
ZENITH BANK PLC
Notes to the Consolidated and Separate Financial Statements
for the Year Ended 31 December 2015
At 31 December 2015
Assets
Cash and balances with central
banks
Treasury bills
Assets pledged as collateral
Due from other banks
Derivative assets
Loans and advances to
customers (gross)
Investment securities (Amortized
cost and Fair value through OCI)
Liabilities
Customer deposits
Derivative liabilities
On-lending facilities
Borrowings
Debt securities issued
Total interest repricing gap
Up to 1
month
7,500
32,858
4,435
268,582
-
735,259
1 - 3 months 3 - 6 months
6 - 12
months
Over 1 year
Total rate
sensitive
-
-
-
-
7,500
46,655
20,134
1,871
239
88,294
133,141
15,548
-
5,224
45,498
165,274
52,848
-
3,018
53,984
-
172,086
1,741
-
1,109,221
377,928
265,051
272,194
8,481
2,032,256
21
28
36
1,732
200,627
202,444
1,048,655
157,221
199,447
276,856
1,483,675
3,165,854
921,169
-
17,975
-
-
939,144
109,511
70,578
5
71,269
-
-
141,852
4,466
379
2,615
-
-
7,460
1,744
-
10,922
528
293
1,019,308
-
184,100
258,334
99,525
2,017,265
384
286,881
258,862
99,818
13,487
1,561,267
2,663,210
15,369
191,987
263,369
(77,592)
502,644
65 Zenith Bank Plc Annual Report - 31 December 2015
ZENITH BANK PLC
Notes to the Consolidated and Separate Financial Statements
for the Year Ended 31 December 2015
At 31 December 2014
Assets
Cash and balances with central banks
Treasury and other eligible bills (Amortized cost)
Assets pledged as collaterals
Due from other banks
Derivative assets
Loans and advances to customers (gross)
Investment securities (Amortized cost and Fair value through OCI)
Financial assets (gross)
Liabilities
Customer deposits
Derivative liabilties
On-lending facilities
Borrowings
Financial liabilities
Debt securities issued
Note Carrying
amount
Rate
sensitive
Non rate
sensitive
15
16
17
17
19
20
21
25
28
33
30
31
29
32
752,580
295,397
151,746
506,568
17,408
1,758,335
200,079
12,879
336,650
295,397
151,746
506,568
17,408
1,758,335
200,079
-
3,694,992
3,266,183
2,537,311
6,073
68,344
198,066
272,289
92,932
2,082,611
6,073
68,344
198,066
-
92,932
3,175,015
2,448,026
415,930
-
-
-
-
-
-
12,878
428,808
454,700
-
-
-
272,289
-
726,989
Total interest repricing gap
519,977
818,157
(298,181)
In millions of Naira
At 31 December 2014
Assets
Cash and balances with central
banks
Treasury bills
Assets pledged as collateral
Due from other banks
Derivative assets
Loans and advances to
customers (gross)
Investment securities (Amortized
cost and Fair value through OCI)
Liabilities
Customer deposits
Derivative liabilities
On-lending facilities
Borrowings
Debt securities issued
Total interest repricing gap
Up to 1
month
107,500
68,010
19,756
491,747
1,523
628,811
1 - 3 months 3 - 6 months
6 - 12
months
Over 1 year
Total rate
sensitive
-
-
229,150
-
336,650
141,089
56,699
6,961
2
111,588
54,823
21,377
2,100
12,986
30,161
31,475
50
5,074
2,897
63,964
-
53,864
686
-
923,811
295,397
151,746
506,568
17,408
1,758,335
-
33,527
31,715
13,763
121,074
200,079
1,317,347
349,866
153,162
346,373
1,099,435
3,266,183
1,020,568
1,242
-
-
-
1,021,810
295,537
66,301
260
-
67,255
-
133,816
216,050
1,140
4,300
-
3,302
-
8,742
298
271
-
1,560
-
2,129
994,304
-
68,344
125,949
92,932
2,082,611
6,073
68,344
198,066
92,932
1,281,529
2,448,026
144,420
344,244
(182,094)
818,157
The management of interest risk against interest rate gap limits is supplemented by monitoring the sensitivity of the Group’s
financial assets and liabilities to various scenarios. Interest rate movement affects reported income by causing an increase
or decrease in net interest income and fair value changes.
The table below shows the impact on the Group’s profit before tax if interest rates on financial instruments held at amortized
cost or at fair value had increased or decreased by 100 basis points, with all other variables held constant.
In millions of Naira
Effect of 100 basis points movement on profit before tax
31 Dec 2015 31 Dec 2014
9,216
7,495
66 Zenith Bank Plc Annual Report - 31 December 2015
ZENITH BANK PLC
Notes to the Consolidated and Separate Financial Statements
for the Year Ended 31 December 2015
(b) Bank
The table below summarizes the Bank's interest rate gap position:
In millions of Naira
At 31 December 2015
Assets
Cash and balances with central banks
Treasury and other eligible bills (Amortized cost)
Assets pledged as collateral
Due from other banks
Derivative assets
Loans and advances to customers (gross)
Investment securities (Amortized cost and Fair value through OCI)
Financial assets (gross)
Note Carrying
amount
Rate
sensitive
Non-rate
sensitive
15
16
17
18
19
20
21
28
33
29
30
31
23
735,946
330,900
264,320
266,894
8,481
1,884,941
150,724
15,109
7,500
330,900
264,320
266,894
8,481
1,884,941
140,709
-
3,657,315
2,903,745
2,333,017
384
197,208
286,881
268,111
99,818
1,792,398
384
-
286,881
268,111
99,818
3,185,419
2,447,592
471,896
456,153
728,446
-
-
-
-
-
10,015
15,109
753,570
540,619
-
197,207
-
-
-
737,826
15,744
Liabilities
Customer deposits
Derivative liabilities
Financial liabilities
On-lending facilities
Borrowings
Debt securities issued
Total interest repricing gap
In millions of Naira
At 31 December 2015
Assets
Cash and balances with central
banks
Treasury bills
Assets pledged as collateral
Due from other banks
Derivative assets
Loans and advances to
customers (gross)
Investment securities (Amortized
cost and Fair value through OCI)
Liabilities
Customer deposits
Derivative liabilities
On-lending facilities
Borrowings
Debt securities
Total interest repricing gap
Up to 1
month
7,500
28,066
4,435
263,282
-
683,739
1 - 3 months 3 - 6 months
6 - 12
months
Over 1 year
Total rate
sensitive
-
-
-
-
7,500
35,913
20,134
1,871
239
88,293
118,025
15,548
-
5,224
45,436
148,896
52,848
-
3,018
53,991
-
171,355
1,741
-
1,013,482
330,900
264,320
266,894
8,481
1,884,941
-
-
-
1,395
139,314
140,709
987,022
146,450
184,233
260,148
1,325,892
2,903,745
864,026
-
17,975
-
-
882,001
105,021
53,935
5
71,269
-
-
125,209
2,475
379
2,615
-
-
5,469
866
-
10,922
529
293
871,096
-
184,100
267,582
99,525
1,792,398
384
286,881
268,111
99,818
12,610
1,422,303
2,447,592
21,241
178,764
247,538
(96,411)
456,153
67 Zenith Bank Plc Annual Report - 31 December 2015
ZENITH BANK PLC
Notes to the Consolidated and Separate Financial Statements
for the Year Ended 31 December 2015
In millions of Naira
At 31 December 2014
Assets
Cash and balances with central banks
Treasury and other eligible bills (Amortized cost)
Assets pledged as colaterals
Due from other banks
Derivative assets
Loans and advances to customers (gross)
Investment securities (Amortized cost and Fair value through OCI)
Financial assets (gross)
Liabilities
Customer deposits
Financial liabilities
Derivative liabilities
On-lending facilities
Borrowings
Debt securities issued
Note Carrying
amount
Rate
sensitive
Non rate
sensitive
15
16
19
18
20
21
25
28
29
30
31
728,291
253,414
151,746
470,139
16,896
1,605,581
92,832
11,714
329,550
253,414
151,746
470,139
16,896
1,605,581
92,832
-
3,330,613
2,920,158
2,265,262
270,068
6,073
68,344
198,066
92,932
1,861,172
-
6,073
68,344
198,066
92,932
2,900,745
2,226,587
398,741
-
-
-
-
-
-
11,713
410,454
404,090
270,068
-
-
-
-
674,158
Total interest repricing gap
429,868
693,571
(263,704)
At 31 December 2014
Assets
Cash and balances with central
banks
Treasury bills
Assets pledged as collateral
Due from other banks
Derivative assets
Loans and advances to
customers ( gross)
Investment securities (Amortized
cost and Fair value through OCI)
Liabilities
Customer deposits
Derivative liabilities
On-lending facilities
Borrowings
Debt securities issued
Total interest repricing gap
Up to 1
month
1 - 3 months 3 - 6 months
6 - 12
months
Over 1 year
Total rate
sensitive
98,865
60,725
19,756
455,318
1,523
-
118,775
71,699
6,961
2
-
47,250
21,377
2,100
12,474
230,685
26,664
50
5,074
2,897
-
-
38,864
686
-
329,550
253,414
151,746
470,139
16,896
606,998
109,254
27,607
56,820
804,902
1,605,581
-
-
31,715
8,577
52,540
92,832
1,243,185
306,691
142,523
330,767
896,992
2,920,158
950,986
1,242
-
-
-
952,228
290,957
62,263
260
-
67,255
-
129,778
176,913
1,068
4,300
-
3,302
-
8,670
296
271
-
9,245
-
9,812
846,559
-
68,344
118,264
92,932
1,861,172
6,073
68,344
198,066
92,932
1,126,099
2,226,587
133,853
320,955
(229,107)
693,571
The management of interest risk against interest rate gap limits is supplemented by monitoring the sensitivity of the Group’s
financial assets and liabilities to various scenarios. Interest rate movement affects reported income by causing an increase
or decrease in net interest income and fair value changes.
The table below shows the impact on the Bank’s profit before tax if interest rates on financial instruments held at amortized
cost or at fair value had increased or decreased by 100 basis points, with all other variables held constant.
In millions of Naira
Effect of 100 basis points movement on profit before tax
31 Dec 2015 31 Dec 2014
9,640
7,985
68 Zenith Bank Plc Annual Report - 31 December 2015
ZENITH BANK PLC
Notes to the Consolidated and Separate Financial Statements
for the Year Ended 31 December 2015
The effect of 100 basis points movement on profit is considered moderate and we do not expect all the rates to move at the
same time and in the same direction. This risk can largely be handled by the flexibility in the changing/adjusting rates on
loans and deposits.
3.3.5 Equity and commodity price risk
The Group is exposed to equity price risk by holding investments quoted on the Nigerian Stock Exchange (NSE) and other
non-quoted investments. Equity securities quoted on the NSE are exposed to movement based on the general movement
of the all share index and movement in prices of specific securities held by the Group.
Unquoted equity security held by the Group is mainly 5% equity holding in African Finance Corporation (AFC) valued at N
8.9 billion (cost N6.4 billion) as at 31 December 2015. The AFC is a private sector-led investment bank and development
finance institution which has the Central Bank of Nigeria (CBN) as the single major shareholder (42.5%) with other African
financial institutions and investors holding the remaining shares. The AFC operates a US Dollar denominated statement of
financial position and provides financing in this currency.
The Group does not deal in commodities and is therefore not exposed to any commodity price risk.
3.3.6 Fair value of financial assets and liabilities
IFRS 7 specifies a hierarchy of valuation techniques based on whether the inputs to those valuation techniques are
observable or unobservable. Observable inputs reflect market data obtained from independent sources; unobservable
inputs reflect the Group's market assumptions. These two types of inputs have created the following fair value hierarchy.
1 Level 1: Quoted prices (unadjusted) in active markets for identical assets or liabilities.
2 Level 2: Inputs other than quoted prices included within Level 1 that are observable for the asset or liability, either
directly (i.e. as prices) or indirectly (i.e. derived from prices).
3 Level 3: Inputs for the asset or liability that are not based on observable market data (unobservable inputs).
This hierarchy requires the use of observable market data when available. The Group considers relevant and observable
market prices in its valuations where possible.
Financial instruments not measured at fair value.
Group
In millions of Naira
Note At 31 December 2015
Fair value
hierarchy
Carrying
value
Fair value
At 31 December 2014
Fair value
Fair value
Carrying
hierarchy
value
15
16
Assets
Cash and balances with
central banks
Treasury bills (Amortized
cost)
Assets pledged as collateral 17
18
Due from other banks
20
Loans and advances to
customers (gross)
Investment securities
Financial assets (gross)
21
25
761,561
761,561
324,230
355,556
265,051
272,194
2,032,256
304,804
272,194
1,487,515
195,737
15,034
229,542
15,034
Liabilities
Customer's deposits
Financial liabilities
On-lending facilities
Borrowings
Debt securities issued
28
29
30
31
32
2,557,884
186,111
286,881
258,862
99,818
2,551,143
186,111
275,641
263,268
82,667
2
1
1
2
3
2
3
2
3
2
3
2
752,580
752,580
294,235
282,536
151,746
506,568
1,758,335
152,100
506,568
1,305,066
186,544
12,879
193,846
12,879
2,537,311
272,289
68,344
198,066
92,932
2,534,441
272,289
63,985
188,829
87,005
2
1
1
2
3
2
3
2
3
2
3
2
69 Zenith Bank Plc Annual Report - 31 December 2015
ZENITH BANK PLC
Notes to the Consolidated and Separate Financial Statements
for the Year Ended 31 December 2015
Note Carrying
At 31 December 2015
Fair value
Fair value
hierarchy
Carrying
value
At 31 December 2014
Fair value
Fair value
hierarchy
Bank
In millions of Naira
16
15
Assets
Cash and balances with
central banks
Treasury bills (Amortized
cost)
Assets pledged as collateral 17
18
Due from other banks
20
Loans and advances to
customers (gross)
Investment securities
Financial assets (gross)
21
25
value
735,946
735,946
277,202
277,350
264,320
266,894
1,884,941
304,193
266,894
1,385,377
134,002
15,109
157,145
15,109
Liabilities
Customer's deposits
Financial liabilities
On-lending facilities
Borrowings
Debt securities issued
28
29
30
31
32
2,333,017
197,208
286,881
268,111
99,818
2,326,960
197,207
275,641
263,268
82,667
2
1
1
2
3
1
3
2
3
2
3
2
728,291
728,291
252,252
242,516
151,746
470,139
1,605,581
152,100
470,139
1,308,623
79,469
11,714
79,469
11,713
2,265,262
270,068
68,344
198,066
92,932
2,262,566
270,068
63,985
189,071
87,005
2
1
1
2
3
1
3
2
3
2
3
2
Where available, the fair value of loans and advances is based on observable market transactions. Where observable
market transactions are not available, fair value is estimated using valuation models, such as discounted cash flow
techniques. Input into the valuation techniques includes expected lifetime credit losses, interest rates, prepayment rates
and primary origination or secondary market spreads. For collateral – dependent impaired loans, the fair value is measured
based on the value of the underlying collateral.
The fair value of deposits from banks and customers is estimated using discounted cash flow techniques, applying the rates
that are offered for deposits of similar maturities and terms. The fair value of deposits payable on demand is the amount
payable at the reporting date.
No fair value disclosures are provided for equity investment securities of N71 million (31 December 2014: N 152 million)
that are measured at cost because their fair value cannot be measured reliably.
70 Zenith Bank Plc Annual Report - 31 December 2015
ZENITH BANK PLC
Notes to the Consolidated and Separate Financial Statements
for the Year Ended 31 December 2015
Financial instruments measured at fair value
At 31 December 2015
In millions of Naira
Financial assets
Treasury bills (FVTPL)
Debt securities (FVTPL)
Derivative assets
Derivative liabilities
Investment securities (unquoted)
Reconciliation of Level 3 items
At 31 December 2014
Gains/(losses) recognised through profit or loss
Gains/(losses) recognised through other comprehensive income
Disposal of equity securities
At 31 December 2015
At 31 December 2014
In millions of Naira
Financial assets
Derivative assets held for risk management
Bonds (FVTPL)
Investment securities (unquoted)
Reconciliation of Level 3 items
At 31 December 2013
Gains/(losses) recognised through profit or loss
Gains/(losses) recognised through other comprehensive income
At 31 December 2014
Level 3 fair value measurements
a. Unobservable inputs used in measuring fair value
Level 1
Level 2
Level 3
53,698
6,707
-
-
-
-
-
8,481
384
-
-
-
-
-
10,697
13,535
510
(1,752)
(1,596)
10,697
Level 1
Level 2
Level 3
-
1,162
-
1,162
17,408
-
-
17,408
-
-
13,535
13,535
10,654
332
2,549
13,535
The table below sets out information about significant unobservable inputs used at 31 December 2015 and 31 December 2014
in measuring financial instruments categorized as level 3 in the fair value hierarchy
Type of financial
instrument
Significant
unobservable input
Fair values at 31
Dec 2015
Valuation
technique
Range of estimates
(average) for
unobservable
inputs
Fair value
measurement
sensitivity to
unobservable
inputs
Unquoted equity
investment
N9.9 billion
Equity DCF
model.
-Discount rate.
-Estimate cash flow.
Risk premium of
11.44-11.68%
(11.96%) above risk-
free interest rate
(2.23%) (December
2014:9.23-11.29%
(10.26%) above risk
free rate (2.17%))
5-year Compound
Annual Growth Rate
(CAGR) of cash flow
of 16-17% (12%)
(December 2014: 17-
19% (18%))
A significant increase
in the risk premium
above the risk rate
would result in a
lower fair value.
A significant increase
in the CAGR of cash
flow would result in a
higher fair value
Risk premium is determined by adding country risk premium to the product of market premium and equity beta.
71 Zenith Bank Plc Annual Report - 31 December 2015
ZENITH BANK PLC
Notes to the Consolidated and Separate Financial Statements
for the Year Ended 31 December 2015
b. The effect of unobservable inputs on fair value measurements.
Although the Group believes that its estimates of fair value are appropriate, the use of different methodologies or
assumptions could lead to different measurements of fair value. For fair value measurement in Level 3, changing one or
more of the assumptions would have the following effects.
Effect on OCI
At 31 December 2015
In millions of Naira
Unquoted investment securities
At 31 December 2015
At 31 December 2014
Favourable
changes
Un-
favourable
changes
Favourable
changes
Un-
favourable
changes
2.00
(0.64)
12.00
(4.00)
The favourable and unfavourable effects of using reasonably possible alternative assumptions for valuation of unquoted
equity securities have been calculated by recalibrating the model values using unobservable inputs based on upper and
lower quartile respectively of the Group’s range of possible estimates. Key inputs and assumptions used in the model at 31
December 2015 included a risk premium 11.56% above the risk-free interest rate of 2.23% (with reasonably possible
alternative assumptions of 11.44% and 11.68%) (31 December 2014: 10.26, 9.23 and 11.29 % respectively above risk free
rate of 2.17%), and a 5-year CAGR of 19% (with reasonable possible alternative assumptions of 18 and 20%) (31
December 2014: 18, 17, 19 % respectively).
The fair values of quoted equity securities are determined by reference to quoted prices (unadjusted) in active markets for
identical instruments. For unquoted equity securities, where observable market transactions are not available, fair value is
estimated using valuation models, such as discounted cash flow techniques. The fair value of our unquoted equity holding
in African Finance Corporation (AFC) is determined using equity discounted cash flow model. Inputs into the model include
estimated future cash flows to equity, valuation horizon and Capital Asset Pricing Model (CAPM) discount rate (Risk free
rate plus risk premium).
(c) Fair valuation methods and assumptions
(i) Cash and balances with central banks
Cash and balances with Central banks represent cash held (including mandatory cash reserve requirements of 31
December 2015: N404 billion, 31 December 2014: N 508 billion) with Central banks of the various jurisdictions in which the
Group operates. The fair value of these balances is their carrying amounts.
(ii) Due from other banks
Due from other banks represents balances with local and correspondence banks, inter-bank placements and items in the
course of collection. The fair value of the current account balances, floating placements and overnight deposits are their
carrying amounts.
(iii) Treasury bills and investment securities
Treasury bills represent short term instruments issued by the Central banks of the jurisdiction where the Group has
operations. The fair value of treasury bills and bonds at fair value through profit or loss are determined with reference to
quoted prices (unadjusted) in active markets for identical assets. The estimated fair value of treasury bills and bonds at
amortized cost represents the discounted amount of estimated future cash flows expected to be received. Expected cash
flows are discounted at current market rates to determine fair value.
The fair values of quoted equity securities are determined by reference to quoted prices (unadjusted) in active markets for
identical instruments. The fair value of the unquoted equity holding in AFC is determined on the basis of the discounted
cashflow methodology which takes into account the discounted stream of future income and free cashflows of the
investment. Subsequently,the percentage holding of the Bank is then applied on the derived company value.
(iv) Loans and advances to customers
Loans and advances are carried at amortized cost net of provision for impairment. The estimated fair value of loans and
advances represents the discounted amount of estimated future cash flows expected to be received. Expected cash flows
are discounted at current market rates to determine fair value.
72 Zenith Bank Plc Annual Report - 31 December 2015
ZENITH BANK PLC
Notes to the Consolidated and Separate Financial Statements
for the Year Ended 31 December 2015
(v) Other assets
Other assets represent monetary assets which usually has a short recycle period and as such the fair values of these
balances approximate their carrying amount.
(vi) Customer deposits and borrowings
The estimated fair value of deposits with no stated maturity, which includes non-interest-bearing deposits, is the amount
repayable on demand. The estimated fair values of fixed interest-bearing deposits and borrowings are determined using a
discounted cash flow model based on a current yield curve appropriate for the remaining term to maturity.
(vii) Derivatives
The Group uses widely recognised valuation models for determing the fair value of common and simple financial
instruments, such as interest rate and currency swaps that use only observable market data and require little management
judgement and estimation. Observable prices or model inputs are usually available in the market for listed debt and equity
securities, exchange traded derivatives and simple OTC derivatives such as interest rate swaps. Availability of observable
market prices and model inputs reduces the need for management judgement and estimation and also reduces the
uncertainty associated with determing fair values. Availability of observable markets prices and inputs varies depending on
the products and markets and is prone to changes based on specific events and general conditions in the financial markets.
3.4 Liquidity risk
Liquidity risk is the potential loss arising from the Group’s inability to meet its obligations as they fall due or to fund
increases in assets without incurring unacceptable cost or losses. Liquidity risk is not viewed in isolation, because financial
risks are not mutually exclusive and liquidity risk is often triggered by consequences of other bank risks such as credit,
market and operational risks.
3.4.1 Liquidity risk management process
The Group has a sound and robust liquidity risk management framework that ensures that sufficient liquidity, including a
cushion of unencumbered and high quality liquid assets are maintained at all times, to enable the Group withstand a range
of stress events, including those that might involve loss or impairment of funding sources.
The Group’s liquidity risk exposure is monitored and managed by the Asset and Liability Management Committee (ALCO)
on a regular basis. This process includes:
(a) Projecting cash flows and considering the level of liquid assets necessary in relation thereto;
(b) Monitoring balance sheet liquidity ratios against internal and regulatory requirements;
(c) Maintaining a diverse range of funding sources with adequate back-up facilities;
(d) Managing the concentration and profile of debt maturities;
(e) Monitoring depositor concentration in order to avoid undue reliance on large individual depositors and ensure a
satisfactory overall funding mix;
(f) Maintaining up to date liquidity and funding contingency plans. These plans identify early indicators of stress
conditions and describe actions to be taken in the event of difficulties arising from systemic or other crises while
minimizing any adverse long-term implications for the business.
(g) Regular conduct of stress testing, coupled with testing of contingency funding plans from time to time.
The Maximum Cumulative Outflow has remained positive all through the short tenor maturity buckets. Assessments are
carried out on Contractual basis. These reveal very sound and robust liquidity position of the Group.
The Group maintains adequate liquid assets and marketable securities sufficient to manage any liquidity stress situation.
The liquidity ratio remains one of the best among the peer banks and is far above the regulatory limits.
73 Zenith Bank Plc Annual Report - 31 December 2015
ZENITH BANK PLC
Notes to the Consolidated and Separate Financial Statements
for the Year Ended 31 December 2015
3.4.2 Stress testing and contingency funding
Stress testing
Zenith Bank Plc considers different liquidity risk mitigation tools, including a system of limits and liquidity buffers in order to
be able to withstand a range of different stress events and adequately diversify funding structure and access to funding
sources. Those events are regularly reviewed and monitored by the Asset and Liability Committee (ALCO). Alternative
scenarios on liquidity positions and on risk mitigants are considered. In line with standard risk Management practise and
global best practise, the Bank:
1. Conducts on a regular basis appropriate stress tests so as to:
(a) Identify sources of potential liquidity strain;
(b) Ensure that current liquidity exposures continue to conform to the liquidity risk tolerance established by the board
2. Analyses the separate and combined impact of possible future liquidity stresses on:
(a) Cash flows;
(b) Liquidity position;
(c) Profitability.
The Board and the Asset and Liability Committee (ALCO) reviews regularly the stresses and scenarios tested to ensure that
their nature and severity remain appropriate and relevant to the Bank . This reviews takes into the account the followings:
1.
2.
3.
Changes in market conditions;
Changes in the nature, scale or complexity of the Bank's business model and activities;
The Bank's practical experience in periods of stress.
The Bank considers the potential impact of idiosyncratic (Institution Specific), market-wide and combined alternative
scenarios while carrying out the test so as to ensure that all areas are appropriately covered. In addition, the Bank also
considers the impact of severe stress scenarios.
Contingency Funding Plan
The Bank maintains a contingency funding plan which sets out strategies for addressing liquidity
(a)
outlines strategies, policies and plans to manage a range of stresses;
(b)
establishes a clear allocation of roles and clear lines of management responsibility;
(c)
Is formally documented;
(d)
includes clear invocation and escalation procedures;
(e)
Is regularly tested and the result shared with the ALCO and Board;
(f)
Outlines that banks operational arrangements for managing a huge funding run;
(g)
is sufficiently robust to withstand simultaneous disruptions in a range of payment and settle
(h) Outlines how the bank will manage both internal communications and those with its external
(i)
Establishes mechanisms to ensure that the board and Senior Management receive management
As part of the contingency funding plan process, the bank maintains committed credit lines that can be drawn in case of
liquidity crises . These lines are renewed as at when due.
74 Zenith Bank Plc Annual Report - 31 December 2015
ZENITH BANK PLC
Notes to the Consolidated and Separate Financial Statements
for the Year Ended 31 December 2015
3.4.3 Funding approach
Our sources of liquidity are regularly reviewed by both the ALCO and the Treasury Group in order to avoid undue reliance
on large individual depositors and ensure that a satisfactory overall funding mix is maintained at all times. The funding
strategy is geared toward ensuring effective diversification in the sources and tenor of funding. The Group however places
greater emphasis on demand deposits as against purchased funds in order to minimize the cost of funding.
As part of the management of liquidity risk arising from financial liabilities, the Group holds liquid assets comprising cash
and cash equivalents, and debt securities issued by sovereigns, which can be readily sold to meet liquidity requirements. In
addition, the Group maintains agreed lines of credit with other banks.
(i) Exposure to liquidity risk
The key measure used by the Group for managing liquidity risk is the ratio of net liquid assets to deposits from customers.
For this purpose, ‘net liquid assets’ includes cash and cash equivalents and investment-grade debt securities for which
there is an active and liquid market less any balances with foreign banks and regulatory restricted cash. Customers' deposit
excludes deposit denominated in foreign currencies. Details of the reported Group ratio of net liquid assets to deposits from
customers at the reporting date and during the reporting period were as follows.
Group
Group
Bank
Bank
At 31 December 2015
Average for the period
Maximum for the period
Minimum for the period
31 Dec 2015 31 Dec 2014
31 Dec 2015 31 Dec 2014
51.37%
46.80%
47.74%
48.11%
49.24%
46.95%
41.17%
42.77%
56.83%
57.55%
50.16%
49.89%
43.35%
37.30%
33.85%
35.99%
(ii) Liquidity reserve
The table sets out the component of the Group's liquidity reserve.
Group
31 Dec 2015 31 Dec 2015
31 Dec 2014 31 Dec 2014
In millions of naira
Carrying
value
Fair value
Carrying
value
Fair value
Cash and balances with CBN
358,007
358,007
244,434
244,434
Treasury Bills
377,928
355,556
295,397
295,397
Balances with other banks
93,087
84,844
232,188
232,188
Investment securities
166,690
181,011
148,673
148,673
Assets pledged as collaterals
Total
Bank
104,701
207,528
151,746
152,100
1,100,413
1,186,946
1,072,438
1,072,792
Cash and balances with CBN
332,502
332,502
220,216
220,216
Treasury Bills
330,900
277,350
253,414
253,414
Balances with other banks
31,576
38,577
147,923
147,923
Investment securities
105,863
157,145
123,672
123,672
Assets pledged as collaterals
Total
104,581
144,454
151,746
152,100
905,422
950,028
896,971
897,325
75 Zenith Bank Plc Annual Report - 31 December 2015
ZENITH BANK PLC
Notes to the Consolidated and Separate Financial Statements
for the Year Ended 31 December 2015
(iii) Financial assets available to support funding
The table below sets out the availabilty of the Group's financial assets to support future funding
'In millions of Naira
Group
Cash and balances with central
banks
Treasury bills
Assets pledged as collateral
Due from other banks
Loans and advances
Investment securities
Financial assets (gross)
At 31 December 2015
At 31 December 2014
Note Encumbered Unencumbered
15
Total
Encumbered Unencumbered
Total
16
17
18
20
21
25
403,554
-
265,051
-
-
-
-
358,007
377,928
-
272,194
1,989,313
213,141
15,034
761,561
377,928
265,051
272,194
1,989,313
213,141
15,034
508,146
-
151,746
-
-
-
-
244,434
295,397
-
506,568
1,729,507
200,079
12,879
752,580
295,397
151,746
506,568
1,729,507
200,079
12,879
'In millions of Naira
Bank
Cash and balances with central
banks
Treasury bills
Assets pledged as collateral
Due from other banks
Loans and advances
Investment securities
Financial assets (gross)
At 31 December 2015
At 31 December 2014
Note Encumbered Unencumbered
15
Total
Encumbered Unencumbered
Total
16
17
18
20
21
25
403,444
-
264,320
-
-
-
-
332,502
330,900
-
266,894
1,849,225
150,724
15,109
735,946
330,900
264,320
266,894
1,849,225
150,724
15,109
508,075
-
151,746
-
-
-
-
220,216
253,414
-
470,139
1,580,250
92,832
11,714
728,291
253,414
151,746
470,139
1,580,250
92,832
11,714
(iv) Financial assets pledged as collateral
The total financial assets recognised in the statement of financial position that has been pledged as collateral for liabilities
as at 31 December 2015 and 31 December 2014 are shown above. Financial assets are pledged as collateral as part of
sales and repurchases, borrowing transaction and collection agency transactions under terms that are usual for such
activities.
The Group does not hold any financial assets accepted as collateral that the Group is permitted to sell or repledge in the
absence of default.
3.4.4 Liquidity gap analysis
The table below presents the cash flows of the Group's financial assets and liabilities and other liabilities by their remaining
contractual maturities at the statement of financial position date. The amounts disclosed in the table are the contractual
undiscounted cash flows, whereas the Group manages the inherent liquidity risk based on expected undiscounted cash
flows.
The Group's loan disbursement and availment process is centralized and controlled by Credit Risk Management Group
(CRMG) of each banking subsidiary. All loan commitments advised to customers in offer letters are contingent on the
satisfaction of conditions precedent to draw down and availability of funds. Additionally, the Group retains control of
drawings on approved loan facilities, through a referral method, where any such drawings must be sanctioned before it is
processed. This ensures that the Group's commitments on any loan is to the extent of the drawn amount at any point in
time.
76 Zenith Bank Plc Annual Report - 31 December 2015
ZENITH BANK PLC
Notes to the Consolidated and Separate Financial Statements
for the Year Ended 31 December 2015
(a) Group
At 31 December 2015
In millions of Naira
Note Up to 1
month
1 - 3
months
3 - 6
months
6 - 12
months
Over 1
year
Carrying
amount
Gross
nominal
inflow/
(outflow)
Assets
Non-derivative assets
Cash and balances with central
banks
Treasury bills
Assets pledged as collateral
Due from other banks
Loans and advances to customers
(gross)
Investment securities
Financial assets (gross)
Derivative assets
Trading:
Inflow
Outflow
Risk management:
Inflow
Outflow
Liabilities
Non-derivative liabilities
Customer's deposits
Financial liabilities
On-lending facilities
Borrowings
Debt securities issued
Financial guarantees contracts
Derivative liabilities
Trading:
inflow
outflow
Risk management:
inflow
outflow
15
16
17
18
20
21
25
19
28
29
30
31
32
39
33
350,646
32,859
4,435
268,838
736,565
21
15,034
-
- 403,554
-
754,200
761,561
46,655 133,141 165,273
15,548
20,134
1,871
-
45,498
88,294
377,928
-
265,051
52,848 172,086
272,450
1,741
53,984 1,109,221 2,033,562
-
377,928
265,051
272,194
1,989,313
28
-
36
-
1,732 177,673
-
-
179,490
15,034
213,141
15,034
1,408,398
156,982 194,223 677,391 1,460,721 3,897,715
6,387,032
-
-
-
-
-
-
-
-
-
(9,940)
-
16,727
(40)
-
4,451
(61)
-
-
-
-
-
-
-
-
-
(9,940)
16,687
4,390
-
-
-
-
-
-
-
-
21,178
(10,041)
-
-
-
8,481
-
-
-
-
-
11,137
6,395,513
2,475,614
186,111
17,945
-
-
-
70,578
-
71,269
-
-
11,577
4,466
-
2,615
-
-
14,520
1,723
-
-
10,922 184,100
27 267,582
529 289,492
60,440
35,100
19 2,552,400
186,111
286,851
267,609
290,021
121,637
2,557,884
186,111
286,881
258,862
99,818
121,637
2,679,670
153,424
21,601
48,301 801,633 3,704,629
3,511,193
-
-
-
-
-
-
1,985
-
10,200
-
-
-
-
-
-
-
1,985
10,200
-
-
-
-
-
-
-
-
-
-
-
-
12,185
-
-
-
-
384
-
-
-
-
-
12,185
3,511,577
77 Zenith Bank Plc Annual Report - 31 December 2015
ZENITH BANK PLC
Notes to the Consolidated and Separate Financial Statements
for the Year Ended 31 December 2015
At 31 December 2014
In millions of Naira
Note Up to 1
month
1 - 3
months
3 - 6
months
6 - 12
months
Over 1
year
Carrying
amount
Gross
nominal
inflow/
(outflow)
Assets
Non-derivative assets
Cash and balances with central
banks
Treasury bills
Assets pledged as collateral
Due from other banks
Loans and advances to customers
(gross)
Investment securities
Financial assets (gross)
Derivative assets
Trading:
Inflow
Outflow
Risk management:
Inflow
Outflow
Liabilities
Non-derivative liabilities
Customer's deposits
Financial liabilities
On-lending facilities
Borrowings
Debt securities issued
Financial guarantees contracts
Derivative liabilities
Trading:
Outflow
Inflow
Risk management:
Outflow
Inflow
15
16
17
18
20
21
25
19
28
29
30
31
32
39
33
229,325
66,781
19,399
490,513
628,498
-
- 523,255
-
752,580
752,580
138,539
55,674
6,943
111,533
53,834
20,991
2,094
30,146
30,906
49
5,060
290,060
149,003
505,294
63,931 923,351 1,757,459
-
52,890
684
295,397
151,746
506,568
1,758,335
-
12,878
33,470
-
31,661
-
13,739 120,867
-
-
199,737
12,878
200,079
12,879
1,447,394
346,159 138,726 636,940 1,097,792 3,667,011
3,677,584
-
14,817
(70,251)
-
-
-
(55,434)
-
-
-
-
-
-
-
-
-
(33,787)
-
-
(40,150)
-
-
-
-
-
-
(33,787)
(40,150)
-
-
-
-
-
-
-
-
14,817
(144,188)
17,408
-
-
-
-
-
-
-
-
(129,371)
3,694,992
2,469,564
272,289
-
-
-
3,630
66,301
-
-
62,547
-
11,100
1,140
-
-
3,071
-
7,370
306
-
-
- 2,537,311
272,289
-
48,684
48,684
184,202
1,451 117,133
92,650
92,650
82,663
39,890
-
20,673
2,537,311
272,289
68,344
198,066
92,932
82,663
2,745,483
139,948
11,581
22,430 298,357 3,217,799
3,251,605
-
(366)
18,148
-
-
-
17,782
-
-
-
-
-
-
-
-
-
1,409
-
-
44,817
-
-
4,769
-
(366)
69,143
-
-
-
-
-
-
-
-
-
-
-
-
6,073
-
-
-
-
-
1,409
44,817
4,769
68,777
3,257,678
78 Zenith Bank Plc Annual Report - 31 December 2015
ZENITH BANK PLC
Notes to the Consolidated and Separate Financial Statements
for the Year Ended 31 December 2015
(a) Bank
At 31 December 2015
In millions of Naira
Note Up to 1
month
1 - 3
months
3 - 6
months
6 - 12
months
Over 1
year
Carrying
amount
Gross
nominal
inflow/
(outflow)
Assets
Non-derivative assets
Cash and balances with central
banks
Treasury bills
Assets pledged as collateral
Due from other banks
Loans and advances to customers
(gross)
Investment securities
Financial assets (gross)
Derivative assets
Trading:
Inflow
Outflow
Risk management:
Inflow
Outflow
Liabilities
Non-derivative liabilities
Customer's deposits
Financial liabilities
On-lending facilities
Borrowings
Debt securities issued
Financial guarantees contracts
Derivative liabilities
Trading:
inflow
outflow
Risk management:
inflow
outflow
15
16
17
18
20
21
25
19
28
29
30
31
32
39
33
325,141
28,067
4,435
263,538
685,045
-
15,109
-
- 403,444
-
728,585
735,946
35,913 118,025 148,895
15,548
20,134
1,871
-
45,436
88,293
330,900
-
264,320
52,848 171,355
267,150
1,741
53,991 1,013,482 1,886,247
-
330,900
264,320
266,894
1,884,941
-
-
-
-
1,395 115,678
-
-
117,073
15,109
150,724
15,109
1,321,335
146,211 179,009 660,573 1,302,256 3,609,384
5,897,433
-
-
-
-
-
-
-
-
-
(9,940)
-
16,727
(40)
-
4,451
(61)
-
-
-
-
-
-
-
-
-
(9,940)
16,687
4,390
-
-
-
-
-
-
-
-
21,178
(10,041)
-
-
-
8,481
-
-
-
-
-
11,137
5,905,914
2,270,277
197,207
17,945
-
-
-
53,935
-
71,269
-
-
11,577
2,475
-
2,615
-
-
14,520
846
-
- 2,327,533
197,207
-
286,851
10,922 184,100
267,609
27 267,582
98,831
98,538
121,637
60,440
293
35,100
2,333,017
197,208
286,881
268,111
99,818
121,637
2,485,429
136,781
19,610
47,188 610,660 3,299,668
3,306,672
-
-
-
-
-
-
-
-
1,985
-
-
10,200
-
-
-
-
-
-
-
1,985
10,200
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
12,185
-
-
-
-
384
-
-
-
-
-
12,185
3,307,056
79 Zenith Bank Plc Annual Report - 31 December 2015
ZENITH BANK PLC
Notes to the Consolidated and Separate Financial Statements
for the Year Ended 31 December 2015
At 31 December 2014
In millions of Naira
Note Up to 1
month
1 - 3
months
3 - 6
months
6 - 12
months
Over 1
year
Carrying
amount
Gross
nominal
inflow/
(outflow)
Assets
Non-derivative assets
Cash and balances with central
banks
Treasury bills
Assets pledged as collateral
Due from other banks
Loans and advances to customers
(gross)
Investment securities
Financial assets (gross)
Derivative assets
Trading:
Inflow
Outflow
Risk management:
Inflow
Outflow
Liabilities
Non-derivative liabilities
Customer's deposits
Financial liabilities
On-lending facilities
Borrowings
Debt securities issued
Financial guarantees contracts
Derivative liabilities
Trading:
Outflow
Inflow
Risk management:
Outflow
Inflow
15
16
17
18
20
21
25
19
28
29
30
31
32
39
33
220,216
59,628
19,399
455,318
606,696
-
11,713
-
- 508,075
-
728,291
728,291
116,628
55,674
6,962
109,200
46,396
20,991
2,100
27,594
26,181
49
5,074
248,833
149,003
470,139
56,791 804,500 1,604,781
-
52,890
685
253,414
151,746
470,139
1,580,250
-
-
46,635
-
8,563
-
37,475
-
92,673
11,713
92,832
11,714
1,372,970
288,464 143,716 604,733 895,550 3,305,433
3,288,386
-
14,152
(6,781)
-
-
-
7,371
-
-
-
-
-
-
-
-
-
(91,615)
-
-
(27,048)
-
-
-
-
-
-
(91,615)
(27,048)
-
-
-
-
-
-
-
-
14,152
(125,444)
16,896
-
-
-
-
-
-
-
-
(111,292)
3,305,282
2,201,626
270,068
-
-
-
3,630
62,264
-
-
62,547
-
11,100
1,068
-
-
3,071
-
7,370
304
-
-
- 2,265,262
270,068
-
48,684
48,684
184,201
1,451 117,132
92,650
92,650
82,663
39,890
-
20,673
2,265,262
270,068
68,344
198,066
92,932
82,663
2,475,324
135,911
11,509
22,428 298,356 2,943,528
2,977,335
-
(366)
18,148
-
-
-
17,782
-
-
-
-
-
-
-
-
-
1,409
-
-
44,817
-
-
4,769
-
(366)
69,143
-
-
-
-
-
-
-
-
-
-
-
-
6,073
-
-
-
-
-
1,409
44,817
4,769
68,777
2,983,408
80 Zenith Bank Plc Annual Report - 31 December 2015
ZENITH BANK PLC
Notes to the Consolidated and Separate Financial Statements
for the Year Ended 31 December 2015
Maturity analysis for financial assets and financial liabilities (continued)
The amounts in the table above have been compiled as follows.
Type of financial instrument
Basis on which amounts compiled
Non-derivative financial liabilities and financial assets
Undiscounted cash flows, which include estimated interest
payments.
Issued financial guarantee contracts, and unrecognised
loan commitments
Derivative financial liabilities and financial assets held
for risk management purposes
Trading derivative liabilities and assets forming part of
the Group’s proprietary trading operations that are
expected to be closed out before contractual maturity
Trading derivative liabilities and assets that are entered
into by the Group with its customers
Earliest possible contractual maturity. For issued financial
guarantee contracts, the maximum amount of the guarantee is
allocated to the earliest period in which the guarantee could
be called.
Contractual undiscounted cash flows. The amounts shown are
the gross nominal inflows and outflows for derivatives that
have simultaneous gross settlement (e.g. forward exchange
contracts and currency swaps) and the net amounts for
derivatives that are net settled.
Fair values at the date of the statement of financial position.
This is because contractual maturities are not reflective of the
liquidity risk exposure arising from these positions. These fair
values are disclosed in the ‘less than one month’ column.
Contractual undiscounted cash flows. This is because these
instruments are not usually closed out before contractual
maturity and so the Group believes that contractual maturities
are essential for understanding the timing of cash flows
associated with these derivative positions.
The Group’s expected cash flows on some financial assets and financial liabilities vary significantly from the contractual
cash flows. The principal differences are as follows:
• demand deposits from customers are expected to remain stable or increase;
• unrecognised loan commitments are not all expected to be drawn down immediately; and
As part of the management of liquidity risk arising from financial liabilities, the Group holds liquid assets comprising cash
and cash equivalents, and debt securities issued by sovereigns, which can be readily sold to meet liquidity requirements.
In addition, the Group maintains agreed lines of credit with other banks and holds unencumbered assets eligible for use as
collateral with central banks (these amounts are referred to as the ‘Group’s liquidity reserves’).
81 Zenith Bank Plc Annual Report - 31 December 2015
ZENITH BANK PLC
Notes to the Consolidated and Separate Financial Statements
for the Year Ended 31 December 2015
3.5 Capital management
The strategy for assessing and managing the impact of our business plans on present and future regulatory capital forms
an integral part of the Group’s strategic plan. Specifically, the Group considers how the present and future capital
requirements will be managed and met against projected capital requirements. This is based on the Group's assessment
and against the supervisory/regulatory capital requirements taking account of the Group business strategy and value
creation to all its stakeholders.
The Group prides itself in maintaining very healthy capital adequacy ratio in all its areas of operations. Capital levels are
determined either based on internal assesments or regulatory requirements.
The Capital Adequacy of the Group is reviewed regularly to meet regulatory requirements and standard of international best
practises in order to adopt and implement the decisions necessary to maintain the capital at a level that ensures the
realisation of the business plan with a certain safety margin.
The Group undertakes a regular monitoring of capital adequacy and the application of regulatory capital by deploying
internal systems based on the guidelines provided by the Central Bank of Nigeria (CBN) and the regulatory authorities of
the subsidiaries for supervisory purposes.
The group has consistently met and surpassed the minimum capital adequacy requirments applicable in all areas of
operations.
Most of the Group's capital is Tier 1 (Core Capital) which consists of essentially share capital, and reserves created by
appropriations of retained earnings.
Banking subsidiaries in the Group, not incorporated in Nigeria, are directly regulated and supervised by their local banking
supervisor and are required to meet the capital requirement directive of the local regulatory jurisdiction. Parental support
and guidance are given at the Group level where the risk level in the Group in relation to capital level and adequacy is
closely monitored. The Group supports and meet all capital requests from these regulatory jurisdictions and determine the
adequacy based on its expansion strategies and internal capital assessments.
The Group’s capital plan is linked to its business expansion strategy which anticipates the need for growth and expansion in
its branch network and IT infrastructure. The capital plan sufficiently meets regulatory requirements as well as providing
adequate cover for the Group’s risk profile. The Group's capital adequacy remains strong and the capacity to generate and
retain reserves continues to grow.
The Group will only seek additional capital where it finds compellling business need for it and with the expectation that the
returns would adequately match the efforts and risks undertaken.
The following sources of funds are available to the group to meet its capital growth requirements:
1. Profit from Operations :The Group has consistently reported good profit which can easily be retained to support the
capital base.
2. Issue of Shares: The Group can successfully access the capital market to raise desired funds for its operations and
needs.
3. Bank Loans (Long Term/short Term).
In 2014 financial year, Zenith Bank commenced capital computations in accordance with Basel II standard under the
guidelines issued by the Central Bank of Nigeria. The guidelines require capital adequacy computations based on the
Standardized Measurement Approach for Credit Risk and Market Risk while Basic Indicator Measurement Approach was
advised for Operational Risk. The capital requirement for the Bank has been set at 15% and an addition of 1% as a
Systemically Important Bank (SIB) in accordance with the guidelines.
82 Zenith Bank Plc Annual Report - 31 December 2015
ZENITH BANK PLC
Notes to the Consolidated and Separate Financial Statements
for the Year Ended 31 December 2015
The table below shows the computation of the Group's capital adequacy ratio for the year ended 31 December 2015 as
well as the 31 December 2014 comparatives. During those two years, the individual entities within the Group complied with
all of the externally imposed capital requirements to which they are subject.
The Group and Bank's capital adequacy ratio are above the minimum statutory requirement.
Group
Bank
In millions of Naira
Tier 1 capital
Share capital
Share premium
Statutory reserves
SMEIES reserve
Retained earnings
31 Dec 2014
31 Dec 2015
Basel II Basel II
15,698
255,047
78,267
3,729
183,396
15,698
255,047
93,093
3,729
200,115
31 Dec 2014
31 Dec 2015
Basel II Basel II
15,698
255,047
71,582
3,729
150,342
15,698
255,047
86,400
3,729
160,408
Total qualifying Tier 1 capital
567,682
536,137
521,282
496,398
Deferred tax assets
Intangible assets
Investment in capital and financial subsidiaries
(5,607)
(3,240)
-
(6,449)
-
-
(5,131)
(2,753)
(28,689)
(6,333)
-
(26,937)
Adjusted Total qualifying Tier 1 capital
558,835
529,688
484,709
463,128
Tier 2 capital
Other comprehensive income (OCI)
Total qualifying Tier 2 capital
Investment in capital and financial subsidiaries
Net Tier 2 capital
Total regulatory capital
Risk-weighted assets
Credit risk
Market risk
Operational risk
2,613
2,613
-
2,613
4,229
4,229
-
4,229
4,314
4,314
6,066
6,066
(4,314)
(6,066)
-
-
561,448
533,917
484,709
463,128
2,078,727
17,670
540,020
2,187,827
7,685
484,443
1,876,380
6,983
509,493
1,970,896
2
462,264
Total risk-weighted assets
2,636,417
2,679,955
2,392,856
2,433,162
Risk-weighted Capital Adequacy Ratio (CAR)
%21
%20
%20
%19
83 Zenith Bank Plc Annual Report - 31 December 2015
ZENITH BANK PLC
Notes to the Consolidated and Separate Financial Statements
for the Year Ended 31 December 2015
3.6 Operational risk
Operational Risk is the risk of loss resulting from inadequate and /or failed internal processes, people and systems or from
external events, including legal risk and any other risks that is deemed fit on an ongoing basis but exclude reputation &
strategic risk. Operational risk exists in all products and business activities.
The Group has a broad Operational Risk management framework which defines the set of activities designed to proactively
identify, assess and manage all operational risk by aligning the people, technology and processes with best risk
management practices towards enhancing stake holder's value and sustaining industry leadership.
Operational risk objectives include the following:
To provide clear and consistent direction in all operations of the group
To provide a standardised framework and appropriate guidelines for creating and managing all operational risk
exposures
To enable the group identify and analyse events (both internal and external) that impact on its business.
The Operational Risk unit constantly carry-out reviews to identify and assess the operational risk inherent in all material
products, activities, processes and sytems. It also ensures that all business unit within the Bank monitor their operational
risk using set standards and indicators. Siginificant issues and exceptions are reported to Risk Management and are also
picked up by the independent risk function for discussion at the risk management committee.
Disaster recovery procedures, business continuity planning, self compliance assurance and internal audit also form an
integral part of our operational risk management process.
There was no significant financial loss resulting from operational risk incidence during the financial year across the group.
However, the terorrist activities in the North-East part of Nigeria impacted on business operation in those locations to a
certain extent.
3.7 Strategic risk
Strategic risk is a possible source of loss that might arise from the pursuit of an unsuccessful business plan. Strategic risk
examines the impact of design and implementation of business models and decisions, on earnings and capital as well as
the responsiveness to industry changes. This responsibility is taken quite seriously by the Board and Executive
Management of the Group and deliberate steps are taken to ensure that the right models are employed and appropriately
communicated to all decision makers in the Group. The execution, processes and constant reviews ensures that strategic
objectives are achieved. This has essentially driven the Group’s sound banking culture and performance record to date.
3.8 Legal risk
Legal risk is defined as the risk of loss due to defective contractual arrangements, legal liability (both criminal and civil)
incurred during operations by the inability of the organisation to enforce its rights, or by failure to address identified
concerns to the appropriate authorities where changes in the law are proposed.
The Group manages this risk by monitoring new legislation, creation of awareness of legislation amongst employees,
identification of significant legal risks as well as assessing the potential impact of these.
Legal risks management in the Group is also being enhanced by appriopriate product risk review and management of
contractual obligations via well documented Service Level Agreements and other contractual documents.
84 Zenith Bank Plc Annual Report - 31 December 2015
ZENITH BANK PLC
Notes to the Consolidated and Separate Financial Statements
for the Year Ended 31 December 2015
3.9 Reputational risk
Reputation risk is defined as the risk of indirect losses arising from a decline in the bank’s reputation amongst one or
multiple bank stakeholders. The risk can expose the bank to litigation, financial loss or damage to its reputation. The
Reputation risk management philosophy of the Bank involves anticipating, acknowledging and responding to changing
values and behaviours on the part of a range of stakeholders. Accordingly, the following are the roles and responsibilities:
(a) Board and senior management overseeing the proper set-up and effective functioning of the Reputational risk
management framework
(b) Enterprise Risk Management Policy/Strategy (ERSP) is responsible for supporting the Board and senior management
in overseeing the implementation of reputational risk management framework.
(c) Corporate Communications is responsible for managing both the internal and external communications that may
impact the reputation of the Bank
The process of reputation risk management within the Bank encompasses the following steps:
Identification: Recognizing potential reputational risk as a primary and consequential risk
Assessment: Qualitative assessment of reputational risk based on the potential events that have been identified as
reputational risk.
Monitoring: Frequent monitoring of the reputational risk drivers
Mitigation and Control: Preventive measures and controls for management of reputational risk and regular tracking of
mitigation actions
Independent review: The reputational risk measures and mitigation techniques shall be subject to regular independent
review by the Internal Auditors and/or Statutory Auditors.
Reporting: Regular, action-oriented reports for management on reputational risk.
.
3.10 Taxation risk
Taxation risk refers to the risk that new taxation laws will adversely affect the Group and/or the loss of non-compliance with
tax laws.
The taxation risk is managed by monitoring applicable tax laws, maintaining operational policies that enable the Group to
comply with taxation laws and, where required, seeking the advice of tax specialists.
This risk is well managed across the group.
3.11 Regulatory risk
The Group manages the regulatory risk it is potentially exposed to by monitoring new regulatory rules and applicable laws,
and the identification of significant regulatory risks. The Group strives to maintain appropriate procedures, processes and
policies that enable it to comply with applicable regulation.
The Group has continued to maintain zero tolerance posture for any regulatory breaches in all its area of operations.
3.12 Sustainability Report
Our sustainability journey started with the establishment of the Zenith Philanthropy unit, which was charged with the
responsibility of seeking out worthy projects that positively impacts the lives of people and the communities at large.
Learning from our long experience in philanthropic community development and support, the Group realized the opportunity
to achieve greater impacts by delivering on its community commitment through a more strategic approach and established
a Corporate Social Responsibility (CSR) vision and mission.
85 Zenith Bank Plc Annual Report - 31 December 2015
ZENITH BANK PLC
Notes to the Consolidated and Separate Financial Statements
for the Year Ended 31 December 2015
Later as global awareness on sustainable development became prevalent, the Bank was quick to realize the benefits of
sustainability to its core business. Today, we continue to expand on our community initiatives, but are striving to integrate
sustainability into everything we do. Under our newly developed sustainability strategy and framework we are working to
entrench the Nigerian Sustainability Banking Principles (NSBP) into the DNA of our business. Based on the Nine Principles
of the NSBP, we have achieved the following:
3.12.1 Principle 1: Managing environmental and social risks in our business decisions
Our lending policies have been redesigned to ensure that facilities are not extended to industries that engage in illegal
activities, pollute the environment, have no proper pollution control methods, are involved in manufacturing and selling
arms, as well as those engaged in activities that involve harmful or exploitative forms of forced labour or child labour.
We also have in place an Environmental and Social Management System (ESMS) where the Bank does a social and
environmental risk analysis for borrowers and takes measures to avoid, mitigate and minimise the risks identified. The
ESMS of the Bank identifies Environmental & Social (E&S) risks in the projects/companies the bank finances and
encourages mitigating action by these groups to minimize such risks at a very early stage of the credit evaluation.
3.12.2
Principle 2: Managing the bank’s own environmental and social footprints
As a financial institution, Zenith Bank’s direct environmental impacts occur through the occupation, operation and
maintenance of buildings, fleet, data centres and ATMs. This includes environmental impacts associated with energy use,
water use and waste. The Bank also bears a burden on outsourced technical activities carried out on its behalf. An example
is in the provision of network links, construction activities and advertising.
All required regulations are complied with in outsourcing these services as the providers of solutions and suppliers of
equipment’s and tools are requested to obtain the necessary licenses and comply with relevant laws and regulations. The
internal environmental management developed in Zenith Bank can be illustrated as follows:
(i) Paper consumption
Paper is one of the most largely consumed natural resources in the bank. It is used both internally and to send information
to customers, in advertising, publications, etc. Though the use of paper is relevant; its reduction and rational use is of
particular interest to the Bank as regards the environmental impact of our business.
Actions
Use of Board IQ- Electronic documentation for Board Meetings since 2013
A co-ordinated campaign to encourage employees to limit their printing.
Use of Intranet for different information flows (communications to employees, press releases, employees’ newssheet,
etc.)
Multi-use envelopes for internal correspondence.
Use of recycled paper.
Scanner in branches / offices to digitalize documents.
Bank statements printed on both sides.
Correspondence to customers replaced with electronic documents / Sending single receipts to customers / Alerts to
cell phones, where possible.
Reduced paper consumption in statements of account entries in ATMs and use of e-statements.
Installation of paper and cardboard containers for subsequent collection by external companies for recycling.
86 Zenith Bank Plc Annual Report - 31 December 2015
ZENITH BANK PLC
Notes to the Consolidated and Separate Financial Statements
for the Year Ended 31 December 2015
(ii) Water consumption
Actions
Cisterns with optional reduced discharge
Posters encouraging rational use of water in WC
Reduced flow in push-button taps
Renewal of cooling equipment to save on consumption
(iii) Energy consumption
Zenith Bank has taken action to save energy. Apart from the environmental aspect, this also means economic savings.
Different initiatives have thus been taken in this regard:
Substitution of low-consumption monitors.
Automatic shutdown of equipment where possible
Replacement of conventional lighting with lights with a greater lighting efficiency
(iv) Branch Expansion
The Bank will continue to drive efficiency in its expanding property portfolio to internationally recognized green building
certification system, providing a framework for identifying, and implementing, practical and measurable green building
design features. In addition, Zenith Bank will:
Continue to build its flagship buildings to high standards of environmental efficiency
Promote the reduction in energy consumption in all branches
Continue to develop the use of renewable technology to reduce carbon emissions
Use lower power generating sets at off-peak periods.
(v) Emissions Control
Travel control
Control of emissions in air-conditioning installations according to the Kyoto Protocol
Monitoring of generators for efficiency, reduction of emissions and discharges
Monitoring of noise and vibrations
vi) Waste Control
This section is important to Zenith, although the Bank does not produce highly polluting waste, they do produce waste in
large quantities. Consequently, the Bank contracts specialized firms to collect and recycle that waste.
Selective waste collection
Contract with confidential paper destruction and waste management firms
Toner refills for reuse
Collection of hazardous waste (fluorescent lights, expired extinguishers, generators batteries)
Collection of bio-sanitary waste
Collection of electric/electronic waste for reuse
87 Zenith Bank Plc Annual Report - 31 December 2015
ZENITH BANK PLC
Notes to the Consolidated and Separate Financial Statements
for the Year Ended 31 December 2015
Collection of cell phones
Collection of used batteries
Collection of rubble at suitable places
Specifically, for electronic waste control, effort is made to encourage recycling of the disposed units at the Ojota dump site
in Lagos where low scale recycling has commenced.
(vii) Actions regarding purchases and suppliers
They must be committed to aligning their operations with the acceptable standards in the areas of human rights,
labour, environment and anti-corruption.
They must comply with environmental and waste management laws
Environmentally responsible purchase criteria of material suppliers
(viii) Actions regarding training and awareness
Since Zenith Bank requires vast human resources, the bank has contacts with large numbers of individuals. Thus, Zenith
has a huge potential to influence people, promoting environment-friendly habits and conduct. In an effort to increase our
employees’ environmental conscience and awareness, Zenith Bank has developed several training programmes and
actions, including:
Key Environmental Risk Management unit in the Bank and appointment of Environmental Coordinators for the Bank.
Specialized training (technicians, internal auditors, cleaning staff on waste management)
Environment awareness programmes for all employees. Memorandums encouraging energy saving and reduced
consumption
Environment awareness programmes for new employees
Employee environment manual in Intranet and environmental procedures. Code of conduct and best practices among
employees
Promotion of volunteer work among employees
88 Zenith Bank Plc Annual Report - 31 December 2015
ZENITH BANK PLC
Notes to the Consolidated and Separate Financial Statements
for the Year Ended 31 December 2015
ix) Occupational Health and Safety
The health and safety of employees, customers and other stakeholders is of paramount importance to the Bank. The Group
constantly seeks to identify and reduce the potential for accidents or injuries in all its operations. There is on-going training
of health and safety officers in line with the Bank’s health and safety policy. There is also adequate communication of the
health and safety policies across the Bank to ensure staff are conversant with its content.
3.12.3 Principle 3: Safeguarding Human Rights in our Business Operations and Business Activities.
Zenith Group upholds human rights in our Business Operations and Business Activities, which reflects in our dealings with
employees, suppliers and third-party contractors. The Bank remains committed to the protection of human rights in the
workforce and will continue to provide a level playing field, giving equal platform for all to thrive.
We recognize the need to promote a diverse workforce as a means to attracting top-flight talent and enhancing our
competitive advantage. We further recognize that each employee brings to the workplace experiences and capabilities that
are as unique as the individual; hence the Bank treats all employees fairly. All employees and applicants for employment
will be treated and evaluated according to their job-related skills, qualifications, abilities and aptitudes. Decisions based on
attributes unrelated to job performance (for example, race, colour, gender, religion, personal associations, national origin,
age, disability, political beliefs, marital status, sexual orientation, and family responsibilities) constitute unlawful
discrimination and are prohibited.
The recruitment of disabled people is a pivotal aspect of the bank’s diversity policy. The bank ensures that all available
positions are open to disabled people and as a matter of recruitment priority; the bank encourages qualified disabled
persons to apply to join its workforce.
Zenith Bank has developed and disseminated a Code of Conduct policy which is a common reference point for defining
how each of us is expected to act when conducting Zenith Bank business. All employees must adhere to the principles and
requirements contained in the Code and take reasonable steps to ensure that other individuals or groups that conduct
business on behalf of Zenith Bank, including contractors, agents, consultants and other business partners do likewise.
Employees must also have a detailed understanding of Zenith Bank policies, procedures and other Bank requirements that
apply to their work.
Zenith Bank will only collect and retain personal information that is necessary to meet business requirements, and as
permitted by law in places where we operate.
3.12.4 Principle 4: Promoting women’s economic participation/empowerment through our Business Activities.
Zenith Group promotes women’s economic empowerment through a gender inclusive workplace culture in our Business
Operations and seeks to provide products and services designed specifically for women through our Business Activities.
As testament to our belief in female empowerment, the bank consciously took steps to assure that women continue to have
access to opportunities within the organisation and are upwardly mobile within the system at all managerial levels within the
bank - achievement of 44% female gender balance within management workforce.
Zenith Bank is also implementing female mentoring framework a program under which talented female staff who have
distinguished themselves over the years in the employment of Zenith Bank and have demonstrated immense leadership
potentials are assigned mentors at the top echelon of the Bank (General Manager to Executive Director level) with a view to
groom them for top flight positions within the Bank or its subsidiaries right up to board level.
In fulfilment of the Banker’s Committee Recommendation on Women Economic Empowerment, the Bank shall organize a
minimum of one female leadership training at least once annually with a view to maximize the career potential of female
employees with high leadership promise. In the coming year, Zenith Bank will create working plans that are flexible so as to
assist working mothers contribute meaningfully to the bank whilst also meeting the demanding requirements of a mother.
Flexi plans do not imply lower standards for working mothers, rather it provides for flexible working hours around the “core”
working hours and employees are allowed to build their working hours around the “core” working hours but the total hours
worked is the same for all employees.
The Bank will consider partnerships with relevant organizations such as the Women in Business (WIMBIZ) to target
promising women entrepreneurs and design products that will effectively meet their needs. Zenith has also empowered
female participation in sports with our titled sponsorship of the Zenith National Female Basketball League. Several of the
beneficiaries of this initiative now ply their basketball trade in different teams and leagues in the United States and Europe.
89 Zenith Bank Plc Annual Report - 31 December 2015
ZENITH BANK PLC
Notes to the Consolidated and Separate Financial Statements
for the Year Ended 31 December 2015
3.12.5 Principle 5: Promoting financial inclusion of community and groups with limited access to the formal
financial sector.
Zenith Group as a key stakeholder in the Nigerian financial services landscape supports efforts to promote financial
inclusion and literacy and views same as a responsibility it owes the un-banked public. We have taken steps to reduce the
preponderance of adults without access to suitable financial products and explore opportunities to promote financial
literacy.
In Zenith Bank, the overall goal of our financial literacy strategy is to assist the attainment of financial independence and
financial stability through the empowerment of citizens with knowledge of various types of financial products and services
available;
We realize that some groups are disadvantaged with respect to access to financing. Available data has shown that women,
persons with disabilities, vulnerable groups, people in rural areas and the un-banked, etc have limited or no access to
credit. Furthermore, an analysis of Bank products shows that women and disadvantaged persons tend to be limited to
savings (basic) accounts only, thus limiting the velocity and range of transactions that these groups can carry out.
The Bank’s has developed some products to support this initiative:
Zenith Children's Account (ZECA)
Zenith Integrated Student Account (ZISA)
Aspire Account
EazySave Classic Accounts
EazySave Premium Accounts
EazyMoney – Mobile Phone enabled
Agent Banking
Zenith Mobile Banking
The Bank believes that strategic development and deployment of e-banking products and platforms will be a key
competitive factor in the banking industry in Nigeria as these products are expected to enable the Bank to reach out to
existing and potential customers even in areas where the Bank may not have a physical presence.
The Bank also anticipates using its e- banking products to gain customers who did not previously use banking services, the
so-called ‘un- banked’ population, by providing easy access to banking services through their mobile telephones. The Bank
therefore sees its deployment of e-banking services as a key driver to expanding the Bank’s Financial Inclusion Strategy.
The Bank is also planning to expand its network of ATM, POS, branches and business offices throughout Nigeria to
maintain its position amongst the top five banks in Nigeria.
3.12.6 Principle 6: Meeting the imperatives for good governance, transparency and accountability.
The Bank has since established an E&S governance structure in support of its sustainable banking approach. Also, the
Bank's Environmental Risk Policy and process details clear roles, lines of responsibility, authority and accountability relating
to assessing, categorising and managing of environmental risk.
Nevertheless, to further strengthen our governance structure and bring it at par to best practices, we are currently working
towards institutionalising the following:
1.
2.
The formation of a standalone Sustainability Department.
Formation of a Board-level Sustainable Banking Governance Committee to oversee the development of
Sustainable Banking commitments.
90 Zenith Bank Plc Annual Report - 31 December 2015
ZENITH BANK PLC
Notes to the Consolidated and Separate Financial Statements
for the Year Ended 31 December 2015
3.12.7 Principle 7: Supporting capacity building.
Zenith has in the past conducted E&S introductory training for staff of key business units and back-office functions. Some
staffs of key departments have also enjoyed external E&S training even though locally. Most recently, we developed a
sustainability portal on the intranet for the specific purpose of creating awareness on E&S issues and making available all
information relating to the Banks E&S governance, policies and processes.
Nevertheless, the Bank is working to further improve in our capacity building plan by exploring the following:
1.
2.
Developing a tailor-made Sustainable Banking training session specific for Board and senior management.
A bank-wide E&S e-learning programme across all levels and operational functions.
3.12.8 Principle 8: Promoting collaborative partnership to accelerate sector progress.
Zenith is a member of United Nations Environment Programme Finance Initiative (UNEPFI) and continues to foster other
partnership arrangements to accelerate the growth of sustainability within the sector. The Bank played an active role in the
development of ‘Nigeria Sustainable Banking Principles’ in collaboration with other financial institutions. The Bank is also a
Member of the Steering Committee on Sustanability.
Other initiatives taken up by the bank include:
Compliance with building codes and environmental criteria in the construction and management of properties used as
business facilities. This includes impact on traffic flow and the layout of the branches.
The construction and maintenance of roads and other facilities at host communities where we operate. For example
construction and maintenance of Ajose Adeogun street where our Head Office is located for over 7years.
Participate in other CSR activities – Youth Empowerment, provision of laptops to schools, Sports sponsorship,
construction of IT Centres, renovation of schools and City Social Centres, etc.
3.12.9 Principle 9: Reporting
As a signatory to the Nigerian Sustainable Banking Principle (NSBP), Zenith remains fully committed to its reporting
framework as mandated by the CBN. We have complied with the CBN’s request for one-off reports on the NSBP and will
continue to report on the subsequent semi-annual reporting which commenced in 2015. While we continue to enhance our
E&S methodologies in other to strengthen our internal reporting capacity, we have for the past three (3) years reported
exclusively on sustainability in our published annual financials.
Going forward, our strategy is to benchmark and align the extent of the Banks sustainability reporting (internal and external)
to other international and best practice standards like the Equator Principles and Global Reporting Initiative (GRI).
The Group believes that social and environmental issues will continue to grow in importance in the coming years and Zenith
aims to develop a greater understanding of the risks associated with these issues, and the effect they will have on its
clients, through investigation and research and, where appropriate, through engagement with relevant industry and
regulatory bodies.
4
Critical accounting estimate and judgements
The Group makes estimates and assumptions that affect the reported amounts of assets and liabilities within the next
financial year. Estimates and judgements are continually evaluated and are based on historical experience and other
factors, including expectations of future events that are believed to be reasonable under the circumstances.
4.1 Impairment losses on loans and advances
The Group reviews its loan portfolios to assess impairment at least on half yearly basis. In determining whether an
impairment loss should be recognised, the Group makes judgements as to whether there is any observable data indicating
that there is a measurable decrease in the estimated future cash flows from a portfolio of loans before the decrease can be
identified with an individual loan in that portfolio. This evidence may include observable data indicating that there has been
an adverse change in the payment status of borrowers in a group, or national or local economic conditions that correlate
with defaults on assets in the group. Management uses estimates based on historical loss experience for assets with credit
risk characteristics and objective evidence of impairment similar to those in the portfolio when scheduling its future cash
flows. The methodology and assumptions used for estimating both the amount and timing of future cash flows are reviewed
regularly to reduce any differences between loss estimates and actual loss experience.
91 Zenith Bank Plc Annual Report - 31 December 2015
ZENITH BANK PLC
Notes to the Consolidated and Separate Financial Statements
for the Year Ended 31 December 2015
The specific component of total allowance for impairment applies to credits evaluated individually for impairment and is
based upon management’s best estimate of the present value of the cash flows that are expected to be received. In
estimating these cash flows, management makes judgment about a customer’s financial situation and the net realizable
value of any underlying collateral. Each impaired asset is assessed on its merits, and the workout strategy and estimates of
cash flows considered recoverable are independently reviewed and approved.
Collectively assessed impairment allowances cover credit losses inherent in portfolios with similar economic characteristics
when there is objective evidence to suggest that they contain impaired claims, but the individual impaired items cannot be
identified. In assessing the need for collective loan assessment, management considers factors such as credit quality,
portfolio size, concentrations, and economic factors. In estimating the required allowance, assumptions are made to define
how inherent losses are modelled and to determine the required input parameter, based on historical experience and
current economic conditions. The accuracy of allowance depends on how well future cash flows and the model assumptions
and parameters are estimated. Loans that are above N500 million are considered significant.
4.2 Determining fair values
The determination of fair value for financial assets and liabilities for which there is no observable market prices requires the
use of valuation techniques as described in note 3.3.6(a). For financial instruments that trade infrequently and have little
price transparency, fair value is less objective, and requires varying degrees of judgment depending on liquidity,
concentration, uncertainty of market factors, pricing assumptions and other risks affecting the specific instrument.
The Group measures fair values using the following fair value hierarchy that reflects the significance of the inputs used in
making the measurements.
i) Level 1 : Quoted market price(unadjusted) in an active market for an identical instrument.
ii) Level 2 : Valuation techniques based on observable inputs, either directly - i.e , as prices - or indirectly - i.e derived from
prices. This category includes instruments valued using : quoted market prices in active markets for similar instruments ;
quoted prices for identical or similar instruments in markets that are considered less than active; or other valuation
techniques where all significant inputs are directly or indirectly observable from market data.
iii) Level 3 : Valuation techniques using significant unobservable inputs. This category includes all instruments where the
valuation technique includes inputs not based on observable data and the unobservable inputs have a significant effect on
the instrument's valuation. This category includes instrument that are valued based on quoted prices for similar instruments
where significant unobservable adjustments or assumptions are requried to reflect differences between the instruments.
4.3 Income taxes
The Group is subject to income taxes in numerous jurisdictions. Significant estimates are required in determining the
groupwide provision for income taxes. There are many transactions and calculations for which the ultimate tax
determination is uncertain during the ordinary course of business. The Group recognises liabilities for anticipated tax audit
issues based on estimates of whether additional taxes will be due. Where the final tax outcome of these matters is different
from the amounts that were initially recorded, such differences will impact the income tax and deferred tax provisions in the
period in which such determination is made.
4.4 Prudential Adjustments
Provisions under prudential guidelines are determined using the time based provisioning prescribed by the Revised Central
Bank of Nigeria (CBN) Prudential Guidelines. This is at variance with the incurred loss model required by IFRS under IAS
39. As a result of the differences in the methodology/provision, there will be variances in the impairments allowances
required under the two methodologies.
Paragraph 12.4 of the revised Prudential Guidelines for Deposit Money Banks in Nigeria stipulates that Banks would be
required to make provisions for loans as prescribed in the relevant IFRS when IFRS is adopted. However, Banks would be
required to comply with the following:
(a) Provisions for loans recognised in the profit and loss account should be determined based on the requirements of IFRS.
However, the IFRS provision should be compared with provisions determined under prudential guidelines and the expected
impact/changes in general reserves should be treated as follows:
Prudential Provisions is greater than IFRS provisions; the excess provision resulting should be transferred from
the general reserve account to a "regulatory risk reserve".
Prudential Provisions is less than IFRS provisions; IFRS determined provision is charged to the statement of
comprehensive income. The cumulative balance in the regulatory risk reserve is thereafter reversed to the
general reserve account.
92 Zenith Bank Plc Annual Report - 31 December 2015
ZENITH BANK PLC
Notes to the Consolidated and Separate Financial Statements
for the Year Ended 31 December 2015
(b) The non-distributable reserve should be classified under Tier 1 as part of the core capital.
In the guidelines to IFRS implementation, the Central Bank of Nigeria (CBN) directed banks to maintain a regulatory credit
risk reserve in the event that the impairment on loans determine using the CBN prudential guideline is higher than the
impairment determine using IFRS principles. As a result of this directive, the Bank holds total credit risk reserves of
N21,350 million as at 31 December 2015.
Provision for loan losses per prudential guidelines
In millions of Naira
Loans and advances
Other financial assets
Impairment assessment under IFRS
Loans and advances
Specific allowance for impairment
Collective allowance for impairment
Other financial assets
Specific allowance for impairment on associated companies
Specific allowance for impairment on other assets
Required credit reserve as at year end
5.
Segment analysis
31 Dec 2015 31 Dec 2014
57,066
6,192
63,258
16,116
19,600
35,716
1,222
4,970
41,908
21,350
34,761
6,117
40,878
7,480
17,851
25,331
1,222
4,637
31,190
9,688
20
20
23
25
The Group's strategic divisions offer different products and services, and are managed seperately based on the Group's
management and internal reporting structure. For each of the strategic divisions, the Group's Executive Management (
Chief Operating Decision Maker) reviews internal management reports on a monthly basis.
The Group's operations are primarily organised on the basis of its products and service offerings in Nigeria, while the
banking operations outside Nigeria are reported seperately for Africa and Europe. The following summary describes each of
the Group's reportable segments:
(i) Corporate, Retail Banking and Pension Custodial services - Nigeria
This segment provides a broad range of banking and pension custodial services to a diverse group of corporations,
financial institutions, investment funds, governments and individuals.
(ii) Treasury and Investment Management - Nigeria
Provision of investment advisory, financial planning services and investment product offerings (primarily through separately
managed accounts such as mutual funds and private investment funds) to a diverse group of institutions and individuals. It
also includes brokerage services, financing services and securities lending services to institutional clients, including mutual
funds, pension funds and to high-net-worth individuals.
(iii) Outside Nigeria Banking - Africa and Europe
These segments provide a broad range of banking services to a diverse group of corporations, financial institutions,
investment funds, governments and individuals outside Nigeria. The reportable segments covers banking operations in
other parts of Africa (Ghana, Sierra Leone and The Gambia) and Europe (the United Kingdom).
(iv) All other segments
These segments provide share registration and funds trusteeship services in Nigeria. None of these individual activities or
services constitutes a separate reportable segment.
Transactions between the business segments are on normal commercial terms and conditions.
93 Zenith Bank Plc Annual Report - 31 December 2015
ZENITH BANK PLC
Notes to the Consolidated and Separate Financial Statements
for the Year Ended 31 December 2015
In millions of Naira
31 December 2015
Revenue:
Derived from external customers
Derived from other business segments
Total revenue*
Share of profit of associates
Interest expense
Impairment charge for credit losses
Admin and operating expenses
Profit before tax
Tax expense
Profit after tax
In millions of Naira
31 December 2015
Capital expenditure**
Identifiable assets
Identifiable liabilities
Nigeria
Banking and
pension
custodian
services
212,357
191,301
403,658
-
(114,936)
(11,091)
(156,311)
121,320
(17,782)
103,538
Nigeria
Banking and
pension
custodian
services
Outside Nigeria Banking
Africa
Europe
Eliminations Consolidated
Total
reportable
segments
-
27,147
27,147
-
(9,378)
(2,930)
(8,220)
6,619
(1,819)
4,800
-
10,686
10,686
-
(4,281)
(1,652)
(3,346)
1,407
(352)
1,055
212,357
229,134
441,491
-
(128,595)
(15,673)
(167,877)
129,346
(19,953)
109,393
-
(8,956)
(8,956)
228
4,998
-
-
(3,730)
-
(3,730)
212,357
220,178
432,535
228
(123,597)
(15,673)
(167,877)
125,616
(19,953)
105,663
Outside Nigeria Banking
Africa
Europe
Eliminations Consolidated
Total
reportable
segments
23,292
3,766,960
3,204,679
3,770
157,613
131,583
178
27,240
-
27,240
229,587
4,154,160
(147,318)
4,006,842
191,664
3,527,926
(115,437)
3,412,489
* Revenues are allocated based on the location of the operations. ** Capital expenditure consists of expenditure on intangible assets and property and equipment during the period.
94 Zenith Bank Plc Annual Report -31 December 2015
ZENITH BANK PLC
Notes to the Consolidated and Separate Financial Statements
for the Year Ended 31 December 2015
In millions of Naira
31 December 2014
Revenue:
Derived from external customers
Derived from other business segments
Total revenue*
Share of profit of associates
Interest expense
Impairment charge for credit losses
Admin and operating expenses
Profit before tax
Tax expense
Profit after tax
In millions of Naira
31 December 2014
Capital expenditure**
Identifiable assets
Identifiable liabilities
Nigeria
Banking and
pension
custodian
services
370,111
7,623
377,734
-
(99,439)
(12,392)
(153,141)
112,762
(16,526)
96,236
Nigeria
Banking and
pension
custodian
services
11,603
3,433,382
2,906,097
Outside Nigeria Banking
Africa
Europe
Eliminations Consolidated
Total
reportable
segments
24,717
1,913
26,630
-
(7,640)
(672)
(8,064)
10,254
(3,047)
7,207
7,690
2,932
10,622
-
(4,963)
-
(2,491)
3,168
(768)
2,400
402,518
12,468
414,986
-
(112,042)
(13,064)
(163,696)
126,184
(20,341)
105,843
-
(11,643)
(11,643)
402,518
825
403,343
138
5,123
-
(6)
(6,388)
-
(6,388)
138
(106,919)
(13,064)
(163,702)
119,796
(20,341)
99,455
Outside Nigeria Banking
Africa
Europe
Eliminations Consolidated
Total
reportable
segments
(94)
38
11,547
-
11,547
204,273
180,707
297,431
3,935,086
(179,822)
3,755,264
263,023
3,349,827
(147,201)
3,202,626
* Revenues are allocated based on the location of the operations. ** Capital expenditure consists of expenditure on intangible assets and property and equipment during the year.
95 Zenith Bank Plc Annual Report -31 December 2015
ZENITH BANK PLC
Notes to the Consolidated and Separate Financial Statements
for the Year Ended 31 December 2015
In millions of Naira
6.
Interest and similar income
Loans and advances to customers
Placements with banks and discount houses
Treasury bills
Government and other bonds
Derivative held for risk management
Group
Bank
2015
2014
2015
2014
255,140
6,232
51,809
34,998
-
348,179
212,964
10,026
56,463
31,997
1,972
313,422
238,349
8,478
42,481
28,111
-
317,419
200,541
13,266
47,781
23,583
-
285,171
Total interest income, calculated using the effective interest rate method reported above that relates to financial assets not
carried at fair value through profit or loss are N348,179 million (31 December 2014: N310,301 million) and N317,419 million
(31 December 2014: N283,704 million) for Group and Bank respectively.
Included in interest income on loans and advances are amounts totalling N2,840 million (31 December 2014: N2,752
million) and N2,768 million (31 December 2014: N2,315 million) for the Group and Bank respectively which represent
interest income on impaired financial assets, recognised using the rate of interest used to discount the future cash flows for
the purpose of measuring the impairment loss.
7.
Interest and similar expense
Current accounts
Savings accounts
Time deposits
Borrowed funds
4,638
10,771
90,591
17,597
4,020
6,183
85,156
11,560
4,491
10,705
83,652
16,087
123,597
106,919
114,935
3,940
6,128
80,844
8,527
99,439
Total interest expense, calculated using the effective interest rate method reported above does not include interest expense
on financial liabilities carried at fair value through profit or loss.
8.
Impairment charge for financial assets
Overdraft (see note 20)
Term loan (see note 20)
On lending (see note 20)
Advances under finance lease (see note 20)
Other financial assets (see note 25)
(178)
13,219
2,276
24
332
15,673
10,929
2,145
-
(10)
-
13,064
(3,108)
11,567
2,276
24
332
11,091
10,257
2,145
-
(10)
-
12,392
96 Zenith Bank Plc Annual Report - 31 December 2015
ZENITH BANK PLC
Notes to the Consolidated and Separate Financial Statements
for the Year Ended 31 December 2015
In millions of Naira
9.
Fee and commission income
Credit related fees
Commission on turnover
Income from financial guarantee contracts issued
Fees on electronic products
Foreign currency transaction fees and commissions
Asset based fees
Auction fees income
Corporate finance fees
Foreign withdrawal charges
Commission on agency and collection services
Group
Bank
2015
2014
2015
2014
17,466
14,051
2,257
3,261
1,290
5,239
989
8,282
5,365
2,704
60,904
16,201
27,115
2,776
2,686
1,718
4,345
3,115
6,001
4,953
1,602
70,512
15,103
12,967
1,907
2,870
974
-
989
8,132
5,365
2,006
50,313
13,664
26,168
2,559
2,391
1,231
-
3,065
5,797
4,903
1,047
60,825
The fees and commission income reported above excludes amount included in determining effective interest rates on
assets that are not carried at fair value throught profit or loss.
10. Trading income
Foreign exchange trading income/(loss)
Treasury bill trading income
Bond trading income
(1,962)
19,218
894
18,150
14,074
1,467
336
15,877
(2,228)
19,218
894
17,884
14,062
1,467
336
15,865
Foreign exchange trading income is principally made up of trading income on foreign currencies, as well as gains and
losses from revaluation of trading position. The amount reported above are totally from financial assets carried at fair value
throught profit or loss.
11. Other income
Dividend income from equity investments
Gain on disposal of property and equipment (see note
44(xi))
Gain on disposal of equity securities (see note 44(xii))
Gain on disposal of subsidiary (see note 44 (xv))
Income on cash handling
Foreign currency revaluation gain
545
39
1,615
-
289
2,814
5,302
455
153
-
510
246
2,168
3,532
4,505
27
1,615
-
289
4,601
455
151
-
7,033
246
2,269
11,037
10,154
97 Zenith Bank Plc Annual Report - 31 December 2015
ZENITH BANK PLC
Notes to the Consolidated and Separate Financial Statements
for the Year Ended 31 December 2015
In millions of Naira
12. Operating expenses
Directors' emoluments (see note 37 (b))
Auditors' remuneration
Deposit insurance premium
Professional fees
Training and development
Information technology
Operating lease
Advertisement
Bank charges
Fuel and maintenance
Insurance
Licenses, registrations and subscriptions
Travel and hotel expenses
Printing and stationery
Security and cash handling
Fraud and forgery
Expenses on electronic products
Fines & Penalties
Donations
AMCON premium
Telephone and postages
Corporate promotions
Provision for claims
Other expenses
13. Taxation
(a) Major components of the tax expense
Income tax expense
Corporate tax
Information technology tax
Excess dividend tax (see note (i) below)
Prior year (over)/under provision
Tertiary Education tax
CGT on Subsidiary disposal
Effect of tax rates in foreign juridictions
Current income tax (see note 13b)
Deferred tax expense:
Origination/(reversal) of temporary differences
Income tax expense
Total income tax
Group
Bank
2015
2014
2015
2014
1,145
546
9,358
2,455
2,698
3,989
2,722
3,325
1,644
10,360
1,387
1,334
1,807
1,345
10,190
201
2,112
60
970
17,119
1,690
1,868
9,766
1,837
89,928
7,135
1,223
11,620
(1,550)
592
-
110
19,130
823
19,953
19,953
630
460
9,375
2,671
2,322
3,368
2,529
4,543
853
10,629
1,287
2,457
1,248
956
10,373
-
4,218
12
857
14,393
2,422
1,058
-
4,906
81,567
8,512
1,068
13,299
1,628
826
708
-
26,041
(5,700)
20,341
20,341
461
447
9,358
2,199
2,521
3,676
2,045
3,198
1,529
8,813
1,313
1,222
1,442
1,045
10,022
201
1,969
60
923
17,119
1,493
1,782
9,766
773
83,377
3,564
1,141
11,445
(1,445)
529
-
-
15,234
1,202
16,436
16,436
425
391
9,375
2,347
2,215
3,126
1,928
4,419
753
8,812
1,225
2,323
989
736
10,224
-
4,096
12
852
14,393
2,372
1,008
-
3,345
75,366
4,174
1,068
13,299
1,628
826
708
-
21,703
(6,333)
15,370
15,370
(i) During the year, the Bank was liable to excess dividend tax of N16.48 billion, representing 30% of N54.94 billion dividend
paid as the Nigerian tax laws requires companies to pay tax calculated at 30% of the higher of taxable profit and dividend
paid. For the 2014 financial year, income tax payable based on taxable profit was N4.7 billion. Therefore, total income tax
paid based on dividend in 2015 was N15.62 billion, which was net of tax credits amounting to N0.86 billion. The difference
between income tax payable assessed on dividend and income tax payable assessed on taxable profit amounted to N11.45
billion which was charged as tax expense in 2015 financial statements.
98 Zenith Bank Plc Annual Report - 31 December 2015
ZENITH BANK PLC
Notes to the Consolidated and Separate Financial Statements
for the Year Ended 31 December 2015
Group
Bank
2015
2014
2015
2014
In millions of Naira
13. Taxation (continued)
Reconciliation of effective tax rate
Profit before income tax
125,616
119,796
115,220
107,849
Tax calculated at the weighted average Group rate of
30% (2014: 30%)
37,685
35,939
34,566
32,355
Tax effect of adjustments on taxable income
CGT on disposal of subsidiary
Effect of tax rates in foreign jurisdictions
Non-deductable expenses
Tax exempt income
Balancing charge
Tax loss effect
Information technology levy
Excess dividend tax paid
Tertiary Education tax
Changes in estimate relating to prior year
Tax expense
Tax charge as a percentage of profit before tax
Tax rate computation
Effect of tax rates in foreign jurisdictions
Non-deductible expenses
Tax exempt income
Tertiary education tax
Information technology tax levy
Excess dividend tax paid
Changes in estimate relating to prior year
CGT on disposal of subsidiary
Standard rate of tax
-
127
5,264
(34,859)
18
-
1,191
11,445
632
(1,550)
19,953
%
16.00
-
(4.00)
28.00
(1.00)
(1.00)
(9.00)
1.00
-
30
708
633
6,927
(40,849)
50
(8)
1,117
13,299
897
1,628
20,341
%
15.90
0.50
0.40
26.90
(0.70)
(0.90)
(11.10)
(1.40)
0.60
30
-
-
4,385
(34,203)
18
-
1,141
11,445
529
(1,445)
16,436
%
14.00
-
(4.00)
30.00
-
(1.00)
(10.00)
1.00
-
30
708
-
6,446
(41,002)
50
(8)
1,068
13,299
826
1,628
15,370
%
14.30
-
2.00
30.10
(0.80)
(1.00)
(12.30)
(1.50)
(0.70)
30
(b) The movement in the current income tax payable
balance is as follows:
At start of the year
Tax paid
Tax effect of translation
Minimum tax
Income tax charge (see note 13a)
At end of the year
31 Dec 2015
31 Dec 2014
31 Dec 2015
31 Dec 2014
10,042
(26,356)
763
-
19,130
3,579
7,017
(23,649)
633
-
26,041
10,042
7,709
(20,409)
-
-
15,234
2,534
5,266
(19,260)
-
-
21,703
7,709
99 Zenith Bank Plc Annual Report - 31 December 2015
ZENITH BANK PLC
Notes to the Consolidated and Separate Financial Statements
for the Year Ended 31 December 2015
Group
Bank
2015
2014
2015
2014
In millions of Naira
14. Earnings per share
Basic earnings per share
Basic earnings per share (EPS) is calculated by dividing the net profit attributable to shareholders by the weighted average
number of ordinary shares in issue during the year. Where a stock split or bonus share issue has occurred, the number of
shares in issue in the prior year is adjusted to achieve comparability.
Profit attributable to shareholders of the Bank (N'million)
Number of shares in issue at end of the year (millions)
Weighted average number of ordinary shares in issue
(millions)
105,531
31,396
31,396
99,275
31,396
31,396
98,784
31,396
31,396
92,479
31,396
31,396
Basic and diluted earnings per share (Kobo)
336
316
315
295
Basic and diluted earnings per share are the same, as there are no dilutive shares.
100 Zenith Bank Plc Annual Report - 31 December 2015
ZENITH BANK PLC
Notes to the Consolidated and Separate Financial Statements
for the Year Ended 31 December 2015
In millions of Naira
15. Cash and balances with central banks
Cash and balances with central banks consist of:
Cash
Operating accounts with Central Banks
Mandatory reserve deposits with central bank (cash
reserves)
Current
Non current
Group
Bank
2015
2014
2015
2014
41,649
316,358
403,554
761,561
761,561
-
761,561
70,084
174,350
508,146
752,580
752,580
-
752,580
35,544
296,958
403,444
735,946
735,946
-
735,946
63,792
156,424
508,075
728,291
728,291
-
728,291
Mandatory reserve deposits with central banks represents a percentage of customers' deposits ( prescribed from time to
time by the central bank) which are not available for daily use. For the purposes of the Statement of cashflow, these
balances are excluded from cash and cash equivalents.
16
Treasury bills
Treasury bills (FVTPL)
Treasury bills (Amortized cost)
Classified as:
Current
Non-current
The following treasury bills have maturities less than
three months and are classified as cash and cash
equivalents for purposes of the statements of cash
flows (Note 41).
17. Assets pleged as collateral
Treasury bills pledged as collateral
Bonds pledged as collateral
Treasury bills under repurchase agreement
Bonds under repurchase agreement
53,698
324,230
377,928
377,928
-
377,928
1,162
294,235
295,397
295,397
-
295,397
53,698
277,202
330,900
330,900
-
330,900
1,162
252,252
253,414
253,414
-
253,414
79,513
214,721
63,979
181,498
611
104,701
48,638
111,101
265,051
85,601
66,145
-
-
151,746
-
104,581
48,638
111,101
264,320
85,601
66,145
-
-
151,746
The above assets were pledged as collateral to Nigeria Interbank Settlement System (NIBBS), Federal Inland Revenue
Services, V-Pay, Interswitch Limited, the Bank of Industry (Nigeria) for on-lending facilities, E- Tranzact and CBN Real Sector
Support Fund (RSSF).
Assets under repurchase agreement includes, JP Morgan, CITIBANK, Standard Bank and ABSA.
Classified as:
Current
Non-current
92,965
172,086
265,051
97,882
53,864
151,746
92,965
171,355
264,320
97,882
53,864
151,746
101 Zenith Bank Plc Annual Report - 31 December 2015
ZENITH BANK PLC
Notes to the Consolidated and Separate Financial Statements
for the Year Ended 31 December 2015
In millions of Naira
18. Due from other banks
Current balances with banks within Nigeria
Current balances with banks outside Nigeria
Placements with banks and discount houses
Due from other banks under repurchase agreement
Classified as:
Current
Group
Bank
2015
2014
2015
2014
15,244
172,106
77,843
7,001
272,194
54
274,380
232,134
-
506,568
-
228,317
31,576
7,001
266,894
-
322,216
147,923
-
470,139
272,194
506,568
266,894
470,139
Included in balances with banks outside Nigeria is the amount of N71.93 billion and N71.91 billion for the Group and Bank
respectively (31 December 2014: N84.88 billion and N84.85 billion for the Group and Bank respectively) which represents
the Naira value of foreign currency balances held on behalf of customers in respect of letters of credit. The corresponding
liabilities are included in other liabilities (See Note 29). These balances are not available for the day to day operations of the
banks within the Group.
19. Derivative assets
Instrument types:
Forward contracts
(a) Fair value of assets
Swap contracts
(b) Fair value of assets
Total (a+b)
8,481
16,896
8,481
16,896
-
8,481
512
17,408
-
8,481
-
16,896
Non-hedging derivative assets and liabilities
The Group enters into currency forward contracts with counterparties. On initial recognition, the Group estimates the fair
value of derivatives transacted with the counterparties using valuation techniques (see Note 3.3.6 C(vii)). In many cases, all
significant inputs into the valuation techniques are wholly observable-e.g with reference to similar transactions in the
wholesale dealer market.
During the year, various forward contracts entered into by the Bank generated net losses of N2.43 billion (31 December
2014 net gain of N0.83 billion) which were recognized in the statement of comprehensive income. These net losses related
to the fair values of the forward contracts, producing derivative assets and liabilities of N8.5 and N0.38 billion respectively
(31 December 2014 N16.9 and N6.1 billion respectively).
Derivative assets held for risk management purposes
Zenith Bank (Ghana) Limited used cross-currency swaps to hedge its foreign currency risks arising from its indebtedness in
foreign currency. Included in the derivative assets is the fair value of the swap derivative at the reporting date.
The Group through its subsidiary, Zenith Bank Ghana entered into a swap deal with the Bank of Ghana (BoG) where Zenith
Bank gave BoG USD200 million on July 2014 in exchange for Ghanian cedis (GHC) of 640,020,000. The forward rate
agreed on maturity in July 20, 2015 was GHC/US Dollars 3.5057. The expected cash flows are the USD 200 million and
Ghc 701,140,000.
Zenith Bank (Ghana) Limited, used cross-currency swaps to hedge its foreign currency risks arising from the swap
transaction with BoG. Included in the derivative assets is the fair value of the swap derivative at the reporting date.
All derivative assets are current.
102 Zenith Bank Plc Annual Report - 31 December 2015
ZENITH BANK PLC
Notes to the Consolidated and Separate Financial Statements
for the Year Ended 31 December 2015
In millions of Naira
20. Loans and advances
Overdrafts
Term loans
On-lending facilities
Advances under finance lease
Gross loans and advances to customers
Less: Allowance for impairment
Specific allowances for impairment
Collective allowance for impairment
Overdrafts
Gross Overdrafts
Less: Allowances for impairment
Specific allowances for impairment
Collective allowance for impairment
Term loans
Gross Term loans
Less: Allowances for impairment
Specific allowances for impairment
Collective allowance for impairment
On-lending facilities
Gross On-lending facilities
Less: Allowances for impairment
Collective allowance for impairment
Advances under finance lease
Net investment in finance lease
Less: collective allowance for impairment
Gross Loans classified as:
Current
Non-current
Group
Bank
2015
2014
2015
2014
507,512
1,226,277
287,937
10,530
2,032,256
(42,943)
(22,390)
(20,553)
493,463
1,171,848
80,024
13,000
1,758,335
(28,828)
(10,065)
(18,763)
473,203
1,113,622
287,937
10,179
1,884,941
(35,716)
(16,116)
(19,600)
451,318
1,061,373
80,024
12,866
1,605,581
(25,331)
(7,480)
(17,851)
1,989,313
1,729,507
1,849,225
1,580,250
507,512
(18,880)
(10,088)
(8,792)
488,632
493,463
(19,943)
(7,372)
(12,571)
473,520
473,203
(13,312)
(5,474)
(7,838)
459,891
451,318
(16,446)
(4,787)
(11,659)
434,872
1,226,277
(21,310)
1,171,848
(8,432)
1,113,622
(19,651)
1,061,373
(8,432)
(12,302)
(9,008)
(2,693)
(5,739)
(10,642)
(9,009)
(2,693)
(5,739)
1,204,967
1,163,416
1,093,971
1,052,941
287,937
(2,673)
(2,673)
285,264
80,024
(397)
(397)
79,627
287,937
(2,673)
(2,673)
285,264
80,024
(397)
(397)
79,627
10,530
(80)
10,450
13,000
(56)
12,944
10,179
(80)
10,099
12,866
(56)
12,810
923,035
1,109,221
834,524
923,811
871,459
1,013,482
692,758
912,823
2,032,256
1,758,335
1,884,941
1,605,581
103 Zenith Bank Plc Annual Report - 31 December 2015
Notes to the Consolidated and Separate Financial Statements
for the Year Ended 31 December 2015
In millions of Naira
Reconciliation of impairment allowance on loans and advances to customers:
Group
Balance at 1 January 2015
Specific impairment
Collective impairment
Additional impairment for the year (see note 8)
Specific impairment
Collective impairment
Write-backs
Foreign currency translation and other adjustments
Write-offs (collective)
Balance at 31 December 2015
Specific impairment
Collective impairment
Balance at 1 January 2014
Specific impairment
Collective impairment
Additional impairment for the year
Specific impairment
Collective impairment
Write-backs
Foreign currency translation and other adjustments
Write-offs (specific)
Write-offs (collective)
Balance at 31 December 2014
Overdrafts
Term loans
On-lending
facilities
Advances under
finance lease
Total
19,943
7,372
12,571
(178)
3,460
(3,638)
1,486
(858)
(1,513)
18,880
10,088
8,792
15,634
5,867
9,767
10,929
-
10,929
347
204
(5,848)
(1,323)
19,943
8,432
2,693
5,739
13,219
13,972
(753)
-
7
(348)
21,310
12,302
9,008
8,280
1,926
6,354
2,145
2,145
-
-
(19)
(450)
(1,524)
8,432
397
-
397
2,276
-
2,276
-
-
-
2,673
-
2,673
714
179
535
-
-
-
-
-
-
(317)
397
56
-
56
24
-
24
-
-
-
80
-
80
139
-
139
(10)
-
(10)
-
-
-
(73)
56
28,828
10,065
18,763
15,341
17,432
(2,091)
1,486
(851)
(1,861)
42,943
22,390
20,553
24,767
7,972
16,795
13,064
2,145
10,919
347
185
(6,298)
(3,237)
28,828
* Impaired loans that are not individually significant are included in the collective impairment. Therefore, when such loans are written off, the cumulative impairment on them are taken from the collective
impairment reserve.
104 Zenith Bank Plc Annual Report -31 December 2015
Notes to the Consolidated and Separate Financial Statements
for the Year Ended 31 December 2015
In millions of Naira
Reconciliation of impairment allowance on loans and advances to customers:
Bank
Balance at 1 January 2015
Specific impairment
Collective impairment
Additional impairment for the year (see note 8)
Specific impairment
Collective impairment
Write-backs
Write-offs (Collective)
Balance at 31 December 2015
Specific impairment
Collective impairment
Balance at 1 January 2014
Specific impairment
Collective impairment
Additional impairment for the year
Specific impairment
Collective impairment
Write-backs
Write-offs (Specific)
Write-offs (Collective)
Balance at 31 December 2014
Overdrafts
Term loans
On-lending
facilities
Advances under
finance lease
Total
16,446
4,787
11,659
(3,108)
688
(3,796)
1,486
(1,512)
13,312
5,474
7,838
12,890
3,695
9,195
10,257
-
10,257
347
(5,725)
(1,323)
16,446
8,432
2,693
5,739
11,567
8,298
3,269
-
(348)
19,651
10,642
9,009
8,076
1,726
6,350
2,145
2,145
-
-
(265)
(1,524)
8,432
397
-
397
2,276
-
2,276
-
-
2,673
-
2,673
714
179
535
-
-
-
-
-
(317)
397
56
-
56
24
-
24
-
-
80
-
80
139
-
139
(10)
-
(10)
-
-
(73)
56
25,331
7,480
17,851
10,759
8,986
1,773
1,486
(1,860)
35,716
16,116
19,600
21,819
5,600
16,219
12,392
2,145
10,247
347
(5,990)
(3,237)
25,331
* Impaired loans that are not individually significant are included in the collective impairment. Therefore, when such loans are written off, the cumulative impairment on them are taken from the collective
impairment reserve.
105 Zenith Bank Plc Annual Report -31 December 2015
Notes to the Consolidated and Separate Financial Statements
for the Year Ended 31 December 2015
In millions of Naira
Advances under finance lease
Gross investment
Less: Unearned income
Net Investment
The net investment may be analysed as follows:
No later than 1 year
Later than 1 year and no later than 5 years
Reconciliation of gross investment to minimum
lease rental payments
Gross investment
Less: Unearned income
Net Investment
Impaiment on leases
Present value of minimum lease payments
The nature of security in respect of loans and
advances is as follows:
Secured against real estate
Secured by shares of quoted companies
Cash collateral, lien over fixed and floating assets.
Unsecured
21.
Investment securities
(a) Analysis of investments
Debt securities (measured at amortised cost)
Debt securities (measured at fair value through profit or
loss)
Equity securities (measured at fair value through other
comprehensive income)
Classified as:
Current
Non-current
Group
Bank
2015
2014
2015
2014
11,653
(1,123)
10,530
1,561
8,969
10,530
16,212
(5,682)
10,530
(80)
10,450
14,978
(1,978)
13,000
1,947
11,053
13,000
18,808
(5,808)
13,000
(56)
12,944
11,267
(1,088)
10,179
1,478
8,701
10,179
15,776
(5,597)
10,179
(80)
10,099
14,824
(1,958)
12,866
1,925
10,941
12,866
18,659
(5,793)
12,866
(56)
12,810
147,919
7,467
950,009
926,861
215,506
4,814
1,016,830
521,185
135,822
7,467
919,475
822,177
214,165
4,814
867,594
519,008
2,032,256
1,758,335
1,884,941
1,605,581
195,737
186,544
134,002
79,469
6,707
10,697
213,141
1,817
211,324
213,141
-
6,707
-
13,535
200,079
10,015
150,724
94,065
106,014
200,079
1,395
149,329
150,724
13,363
92,832
55,293
37,539
92,832
The Group holds equity investments in unquoted entities which the Group has elected to carry at fair value through other
comprehensive income. These investments are held for strategic purposes rather than for trading purposes.
106 Zenith Bank Plc Annual Report - 31 December 2015
Notes to the Consolidated and Separate Financial Statements
for the Year Ended 31 December 2015
In millions of Naira
(b.) Movement in investment securities
Group
Bank
2015
2014
2015
2014
The movement in investment securities may be summarised as follows:
Group
At 1 January 2015
Exchange differences
Additions
Disposals (sale and redemption)
Gains from changes in fair value recognised in profit
or loss
Gains from changes in fair value recognised in other
comprehensive income
Interest accrued
Coupon interest received
Debt
securities at
fair value
through profit
or loss
Debt
securities at
amortised
cost
Equity
securities at
fair value
through other
comprehensive
income
Total
-
(52)
5,865
-
894
-
-
-
186,544
(1,523)
91,797
(84,849)
-
13,535
-
510
(1,596)
-
200,079
(1,575)
98,172
(86,445)
894
-
(1,752)
(1,752)
34,998
(31,230)
-
-
34,998
(31,230)
At 31 December 2015
6,707
195,737
10,697
213,141
At 1 January 2014
Exchange differences
Additions
Disposals (sale and redemption)
Gains from changes in fair value recognised in profit or
loss (Note10)
Gains from changes in fair value recognised in other
comprehensive income
Interest accrued
Coupon interest received
At 31 December 2014
2,280
(25)
-
(2,591)
336
290,191
(1,415)
58,195
(178,796)
10,654
-
1,017
(685)
303,125
(1,440)
59,212
(182,072)
-
-
336
-
-
-
-
-
31,997
(13,628)
186,544
2,549
-
-
2,549
31,997
(13,628)
13,535
200,079
The movement in investment securities may be summarised as follows:
107 Zenith Bank Plc Annual Report - 31 December 2015
Notes to the Consolidated and Separate Financial Statements
for the Year Ended 31 December 2015
In millions of Naira
Bank
At 1 January 2015
Additions
Disposals (sale and redemption)
Gains from changes in fair value recognised in profit
or loss
Gains from changes in fair value recognised in other
comprehensive income
Interest accrued
Coupon interest received
Group
Bank
2015
2014
2015
2014
Debt
securities at
fair value
through profit
or loss
Debt
securities at
amortised
cost
Equity
securities at
fair value
through other
comprehensive
income
Total
-
5,813
-
894
-
-
-
79,469
85,917
(31,715)
-
13,363
-
(1,596)
-
92,832
91,730
(33,311)
894
-
(1,752)
(1,752)
28,111
(27,780)
-
-
28,111
(27,780)
At 31 December 2015
6,707
134,002
10,015
150,724
At 1 January 2014
Additions
Disposals (sale and redemption)
Gains from changes in fair value recognised in profit or
loss
Gains from changes in fair value recognised in other
comprehensive income
Interest accrued
Coupon interest received
At 31 December 2014
589
-
(925)
336
-
-
-
-
201,280
46,351
(178,796)
10,654
845
(685)
212,523
47,196
(180,406)
-
-
336
-
23,583
(12,949)
79,469
2,549
-
-
13,363
2,549
23,583
(12,949)
92,832
22.
Investment in subsidiaries
The following table lists the entities which are controlled by the group, either directly or indirectly through subsidiaries.
Bank
Name of company
Zenith Bank (Ghana) Limited
Zenith Bank (UK) Limited
Zenith Bank (Sierra Leone) Limited
Zenith Bank (Gambia) Limited
Zenith Pensions Custodian Limited
All investments in subsidiaries are non-current.
31 Dec 2015
Ownership
interest %
98.0700
100.0000
99.9900
99.9600
99.0000
31 Dec 2015
31 Dec 2014
Carrying amount
6,444
21,482
2,059
1,038
1,980
33,003
6,444
21,482
2,059
1,038
1,980
33,003
108 Zenith Bank Plc Annual Report - 31 December 2015
ZENITH BANK PLC
Notes to the Consolidated and Separate Financial Statements
for the Year Ended 31 December 2015
In millions of Naira
22.
Investment in subsidiaries (continued)
b. Condensed results of consolidated entities
In millions of Naira
31 December 2015
Condensed statement of profit or loss
Operating income
Share of profit of associates
Operating expenses
Inpairment charge for financial assets
Profit before tax
Taxation
Profit for the year
Condensed statement of financial position
Assets
Cash and balances with central banks
Treasury bills
Assets pledged as collateral
Due from other banks
Derivative asset held for risk management
Loans and advances
Investment securities
Investment in subsidiaries
Investments in associates
Deferred tax asset
Other assets
Property and equipment
Intangible assets
Zenith Group Elimination
entries
Zenith Bank
Plc
Zenith Bank
Ghana
Zenith Bank
UK
Zenith Bank
SierraLeone
Zenith Bank
Gambia
Zenith
Pension
Custodian
432,535
228
(291,474)
(15,673)
125,616
(19,953)
105,663
(8,957)
-
7,550
(2,553)
(3,960)
-
(3,960)
396,653
-
(270,342)
(11,091)
115,220
(16,436)
98,784
24,954
-
(18,588)
(314)
6,052
(1,682)
4,370
761,561
377,928
265,051
272,194
8,481
1,989,313
213,141
-
530
5,607
22,774
87,022
3,240
-
-
-
(91,125)
-
-
681
(33,003)
440
-
(24,311)
-
-
735,946
330,900
264,320
266,894
8,481
1,849,225
150,724
33,003
90
5,131
21,673
81,187
2,753
23,005
36,172
731
12,618
-
55,917
877
-
-
422
420
4,816
109
10,686
-
(7,627)
(1,652)
1,407
(352)
1,055
6
-
-
61,752
-
82,480
60,859
-
-
40
23,979
289
182
1,093
-
(960)
(47)
86
-
86
1,630
7,223
-
5,394
-
720
-
-
-
14
175
292
3
4,006,842
(147,318)
3,750,327
135,087
229,587
15,451
1,100
-
(602)
(16)
482
(136)
346
956
3,633
-
1,138
-
971
-
-
-
-
80
235
62
7,075
7,006
-
(905)
-
6,101
(1,347)
4,754
18
-
-
15,523
-
-
-
-
-
-
758
203
131
16,633
109 Zenith Bank Plc Annual Report -31 December 2015
ZENITH BANK PLC
Notes to the Consolidated and Separate Financial Statements
for the Year Ended 31 December 2015
In millions of Naira
22.
Investment in subsidiaries (continued)
In millions of Naira
31 December 2015
Liabilities & Equity
Customer deposits
Derivative liabilities
Current income tax
Deferred income tax liabilities
Other liabilities
On-lending facilities
Borrowings
Debt securities issued
Equity and reserves
Condensed cash flow
Net cash (used in)/from operating activities
Net cash (used in)/from financing activities
Net cash (used in)/from investing activities
Increase in cash and cash equivalents
Zenith Group Elimination
entries
Zenith Bank
Plc
Zenith Bank
Ghana
Zenith Bank
UK
Zenith Bank
SierraLeone
Zenith Bank
Gambia
Zenith
Pension
Custodian
2,557,884
384
3,579
19
205,062
286,881
258,862
99,818
594,353
(348)
-
-
-
(105,840)
-
(9,249)
-
(31,881)
2,333,017
384
2,534
-
212,636
286,881
268,111
99,818
546,946
105,451
-
(260)
-
7,135
-
-
-
22,761
4,006,842
(147,318)
3,750,327
135,087
101,336
-
-
-
90,328
-
-
-
37,923
229,587
(450,494)
216,540
(23,933)
(6,588)
3,959
(23,548)
(415,396)
225,789
(18,871)
(257,887)
(26,177)
(208,478)
(6,729)
(9,028)
19,358
3,601
(22,817)
-
(2,575)
(25,392)
13,760
-
11
-
10
-
-
-
1,670
15,451
(263)
-
(89)
(352)
7,359
-
7,007
4,668
-
108
8
692
-
-
-
1,599
7,075
(1,195)
(180)
(46)
(1,421)
3,500
-
2,079
-
-
1,186
11
101
-
-
-
15,335
16,633
2,494
(4,000)
1,838
332
34
-
366
332
Cash and cash equivalents
At start of year
Exchange rate movements on cash and cash equivalents
At end of year
965,723
1,878
709,714
(32,601)
1,878
(56,900)
871,853
-
663,375
32,190
-
35,791
83,388
-
57,996
(257,887)
(26,177)
(208,478)
3,601
(25,392)
(352)
(1,421)
110 Zenith Bank Plc Annual Report -31 December 2015
ZENITH BANK PLC
Notes to the Consolidated and Separate Financial Statements
for the Year Ended 31 December 2015
In millions of Naira
22.
Investment in subsidiaries (continued)
In millions of Naira
31 December 2014
Condensed statement of profit or loss
Operating income
Share of profit of associate
Operating expenses
Impairment charge for financial assets
Profit before tax
Taxation
Profit for the year
In millions of Naira
31 December 2014
Condensed statement of financial position
Assets
Cash and balances with central banks
Treasury bills
Assets pledged as collateral
Due from other banks
Derivative asset held for risk management
Loans and advances
Investment securities
Investment in subsidiaries
Investments in associates
Deferred tax asset
Other assets
Property and equipment
Intangible assets
Zenith Group Elimination
entries
Zenith Bank
Plc
Zenith Bank
Ghana
Limited
Zenith Bank
UK Limited
Zenith Bank
SierraLeone
Limited
Zenith Bank
Gambia
Limited
Zenith
Pension
Custodian
Limited
403,343
138
(270,621)
(13,064)
119,796
(20,341)
99,455
(5,121)
-
5,121
-
-
-
-
372,015
-
(251,774)
(12,392)
107,849
(15,370)
92,479
25,128
-
(14,076)
(666)
10,386
(2,987)
7,399
10,622
-
(7,454)
-
3,168
(768)
2,400
816
-
(1,084)
(4)
(272)
(2)
(274)
686
-
(548)
(2)
136
(58)
78
5,720
-
(806)
-
4,914
(1,156)
3,758
Zenith Group Elimination
entries
Zenith Bank
Plc
Zenith Bank
Ghana
Zenith Bank
UK
Zenith Bank
SierraLeone
Zenith Bank
Gambia
752,580
295,397
151,746
506,568
17,408
1,729,507
200,079
-
302
6,449
21,455
71,571
2,202
-
1
-
(89,629)
-
-
171
(33,003)
212
76
(63,983)
-
-
728,291
253,414
151,746
470,139
16,896
1,580,250
92,832
33,003
90
6,333
19,393
69,531
1,901
22,023
33,226
-
14,578
512
70,082
43,630
-
-
-
414
1,205
109
10
-
-
90,841
-
77,895
63,446
-
-
40
64,903
100
195
1,124
6,721
-
3,655
-
816
-
-
-
-
144
277
4
3,755,264
(186,155)
3,423,819
185,779
297,430
12,741
1,128
2,035
-
1,875
-
464
-
-
-
-
98
201
60
5,861
Zenith
Pension
Custodian
4
-
-
15,109
-
-
-
-
-
-
486
257
42
15,898
111 Zenith Bank Plc Annual Report -31 December 2015
ZENITH BANK PLC
Notes to the Consolidated and Separate Financial Statements
for the Year Ended 31 December 2015
In millions of Naira
22.
Investment in subsidiaries (continued)
In millions of Naira
31 December 2014
Liabilities & Equity
Customer deposits
Derivative liabilities
Current income tax
Deferred income tax liabilities
Other liabilities
On-lending facilities
Borrowings
Debt securities issued
Equity and reserves
31 December 2014
Condensed cash flow
Net cash from operating activities
Net cash from financing activities
Net cash from investing activities
Increase in cash and cash equivalents
31 December 2014
Cash and cash equivalents
At start of year
Cash and cash equivalents from discontinued operations
Exchange rate movements on cash and cash equivalents
At end of year
Zenith Group Elimination
entries
Zenith Bank
Plc
Zenith Bank
Ghana
Limited
Zenith Bank
UK Limited
Zenith Bank
SierraLeone
Limited
Zenith Bank
Gambia
Limited
Zenith
Pension
Custodian
Limited
2,537,311
6,073
10,042
-
289,858
68,344
198,066
92,932
552,638
(15,108)
-
-
(394)
(132,225)
-
-
-
(29,136)
2,265,262
6,073
7,709
-
272,726
68,344
198,066
92,932
512,707
3,755,264
(176,863)
3,423,819
157,972
-
1,123
340
5,642
-
-
-
21,063
186,140
114,007
-
-
-
142,742
-
-
-
34,408
291,157
(115,933)
188,269
3,098
75,434
(31,325)
(5,742)
18,005
(19,062)
(146,441)
184,721
(7,904)
30,376
12,925
-
(468)
12,457
38,851
9,290
(6,733)
41,408
866,721
23,451
117
965,723
75,434
(47,274)
23,451
117
(42,768)
(19,062)
841,477
-
-
871,853
30,376
23,883
-
-
36,340
12,457
36,045
-
-
77,453
41,408
11,016
-
15
-
266
-
-
-
1,444
12,741
4,485
-
513
4,998
6,479
-
-
11,477
4,998
4,162
-
45
34
561
-
-
-
1,059
5,861
1,431
-
(40)
1,391
1,593
-
-
2,984
1,391
-
-
1,150
20
146
-
-
-
11,093
12,409
4,141
-
(275)
3,866
4,518
-
-
8,384
3,866
112 Zenith Bank Plc Annual Report -31 December 2015
ZENITH BANK PLC
Notes to the Consolidated and Separate Financial Statements
for the Year Ended 31 December 2015
In millions of Naira
22.
Investment in subsidiaries (continued)
Group
Bank
2015
2014
2015
2014
Apart from Zenith Bank Pensions Custodian Limited which is incorporated in Nigeria, the remaining subsidiaries are
incorporated in their respective countries.
Zenith Bank (Ghana) Limited provides Corporate and Retail Banking services. It was incorporated on April 15, 2005 and
commenced operations on September 16, 2005.
Zenith Pensions Custodian Limited provides pension funds custodial services to Licensed Pension Fund Administrators
(PFAs) and Closed Pension Funds Administrators under the Pension (Reform) Act, 2004. It was incorporated on 1 March
2005. The name was changed from "Zenith Pensions Limited" to "Zenith Pensions Custodian Limited" on September 20,
2005. It was licensed by the National Pension Commission as a custodian of pension funds and assets on 7 December
2005 and commenced operations in December 2005 .
Zenith Bank (UK) Limited provides a range of commercial, wholesale, investment, retail banking and financial services in
the United Kingdom. It was incorporated on 17 February 2006 and commenced operations on 30 March 2007.
Zenith Bank (Sierra Leone) Limited provides Corporate and Retail Banking services. It was incorporated in Sierra Leone on
17 September 2007 and granted an operating license by the Bank of Sierra Leone on 10 September 2008. It commenced
banking operations on 15 September 2008. This subsidiary was tested for impairment, and was not impaired.
Zenith Bank (Gambia) Limited provides corporate and retail banking services. It was incorporated in The Gambia on 24
October 2008 and granted an operating licence by the Central Bank of Gambia on 30 December 2009. It commenced
banking operations on 18 January 2010.
There are no significant restrictions on the ability of subsidiaries to transfer funds to the Group in the form of cash dividends
or repayment of loans and advances.
23.
Investment in associates
The Group's investments under the Small and Medium Enterprises Equity Investment Scheme ("SMEEIS") is in compliance
with the Policy Guidelines for 2001 Fiscal Year (Monetary Policy Circular No. 35). The Group generally holds 20 percent or
more of the voting power of the investee and is therefore presumed to have significant influence over the investee. In
instances where the Group holds less than 20 percent of the voting power of the investee, the Group concluded that it has
significant influence due to the Group's representation on the board of the relevant investee, with such board generally
limited to a small number of board members.
Gross investment
Share of profit b/f
Share of profit for the year
Disposals
Diminution in investment
Balance at end of the year
Classified as:
Current
Non-current
Group
31 Dec 2015 31 Dec 2014 31 Dec 2015 31 Dec 2014
Bank
1,312
212
228
-
(1,222)
530
-
530
530
1,822
74
138
(510)
(1,222)
302
-
302
302
1,312
-
-
-
(1,222)
90
-
90
90
1,822
-
-
(510)
(1,222)
90
-
90
90
There were no published price quotations for any associates of the Group. Furthermore, there are no significant restrictions
on the ability of associates to transfer funds to the Group in the form of cash dividends or repayment of loans and
advances.The aggregate summary of results of the immaterial associates are presented below.
113 Zenith Bank Plc Annual Report - 31 December 2015
ZENITH BANK PLC
Notes to the Consolidated and Separate Financial Statements
for the Year Ended 31 December 2015
In millions of Naira
23.
Investment in associates (continued)
Summarised financial information of associates
Group
Bank
2015
2014
2015
2014
The aggregate amounts of assets, liabilities, revenue and profits of associates are shown below;
In millions of Naira
Total assets
Total liabilities
Total revenue
Profit before tax
24. Deferred tax
Group
31 December 2015
Assets:
Movements in temporary differences during the year:
Property and equipment
Other assets
Unutilized capital allowances
Allowances for loan losses
Tax loss carry forward
Foreign exchange differences
Liabilities :
Movements in temporary differences during the year:
Property and equipment
Allowances for loan losses
31 Dec 2014
Assets:
Movements in temporary differences during the year:
Property and equipment
Other assets
Allowances for loan losses
Unutilized capital allowances
Tax loss carry forward
Foreign exchange differences
Reversal of timing difference
Charged to profit or loss
31 Dec 2015
17,580
8,520
34,247
5,589
31 Dec 2014
9,567
7,685
20,381
3,567
1 January
2015
(3,376)
(11)
4,357
5,355
116
8
Recognised in
profit or loss
(1,286)
13
(452)
1,001
-
(118)
6,449
(842)
31 Dec 2015
(4,662)
2
3,905
6,356
116
(110)
5,607
1 January
2015
-
-
Recognised in
profit or loss
11
8
-
19
31 Dec 2015
11
8
19
1 January
2014
-
-
-
-
749
-
Recognised in
profit or loss
(3,376)
(11)
5,355
4,357
(633)
90
749
-
-
5,782
(82)
5,700
31 Dec 2014
(3,376)
(11)
5,355
4,357
116
90
6,531
(82)
6,449
114 Zenith Bank Plc Annual Report - 31 December 2015
ZENITH BANK PLC
Notes to the Consolidated and Separate Financial Statements
for the Year Ended 31 December 2015
In millions of Naira
24. Deferred tax (continued)
Liabilities
Movements in temporary differences during the
year:
Property and equipment
Other assets
Foreign exchange differences
Effective Portion of change in fair value of cash flow
hedge
Bank
Movements in temporary differences during the year:
Property and equipment
Other assets
Allowances for loan losses
Unutilized capital allowances
31 December 2014
Movements in temporary differences during the year:
Property and equipment
Allowances for loan losses
Unutilised capital allowance
All deferred tax are non current.
25. Other assets
Non financial assets
Prepayments
Financial assets
Electronic card related receivables
Intercompany receivables
Receivables
Deposits for shares
Gross financial assets
Less: Specific impairment
Net financial assets
1 January
2014
(3)
11
(90)
Recognised in
profit or loss
3
(11)
90
Recognised in
OCI
-
-
-
760
678
-
82
(760)
(760)
31 Dec 2014
-
-
-
-
-
1 January
2015
(3,379)
-
5,355
4,357
Recognised in
profit or loss
(1,288)
13
525
(452)
6,333
(1,202)
31 Dec 2015
(4,667)
13
5,880
3,905
5,131
1 January
2014
-
-
-
Recognised in
profit or loss
(3,379)
5,355
4,357
-
6,333
31 Dec 2014
(3,379)
5,355
4,357
6,333
Group
Bank
31 Dec 2015
31 Dec 2014
31 Dec 2015
31 Dec 2014
12,710
13,214
11,534
12,317
10,446
-
4,588
-
15,034
(4,970)
10,064
5,475
-
7,404
-
12,879
(4,638)
8,241
9,118
753
4,588
650
15,109
(4,970)
10,139
3,928
403
6,733
650
11,714
(4,638)
7,076
Total other assets
22,774
21,455
21,673
19,393
115 Zenith Bank Plc Annual Report - 31 December 2015
ZENITH BANK PLC
Notes to the Consolidated and Separate Financial Statements
for the Year Ended 31 December 2015
In millions of Naira
25. Other assets (continued)
Classified as:
Current
Non-current
Movement in specific impairment:
At start of the year
Charge for the year (see note 8)
At end of the year
Group
Bank
2015
2014
2015
2014
17,820
4,954
22,774
21,455
-
21,455
16,775
4,898
21,673
19,393
-
19,393
4,638
332
4,970
4,638
-
4,638
4,638
332
4,970
4,638
-
4,638
116 Zenith Bank Plc Annual Report - 31 December 2015
ZENITH BANK PLC
Notes to the Consolidated and Separate Financial Statements
for the Year Ended 31 December 2015
In millions of Naira
26. Property and equipment
Group
Cost
At start of the year
Additions
Reclassifictions
Disposals
Foreign exchange movements
At the end of the year
Accumulated Depreciation
At start of the year
Charge for the year
Reclassifications
Disposals
Foreign exchange movements
At the end of the year
Net book amount
At 31 December 2015
At 31 December 2014
Leasehold
land
Buildings
Leasehold
improvements
Furniture and
fittings and
equipment
Computer
equipment
Motor Vehicles
Work in
progress
Total
17,657
3,275
1,365
-
-
22,297
22,574
7,299
392
(49)
(99)
30,117
13,687
841
228
-
(11)
14,745
40,545
3,504
226
(480)
(136)
43,659
22,918
1,157
(48)
(62)
(100)
23,865
15,847
1,175
-
(2,080)
(84)
14,858
18,790
7,768
(2,163)
-
(113)
24,282
152,018
25,019
-
(2,671)
(543)
173,823
Leasehold
land
Buildings
Leasehold
improvements
Furniture and
fittings and
equipment
Computer
equipment
Motor Vehicle
Work in
progress
Total
1,521
187
-
-
-
1,709
20,588
16,136
3,574
470
(5)
-
(5)
4,034
26,083
19,000
11,543
1,120
1
-
(18)
12,646
2,099
2,144
30,621
4,506
4
(542)
(106)
34,483
9,176
9,924
21,308
1,080
-
(68)
(51)
22,269
1,596
1,610
11,880
1,825
-
(2,004)
(41)
11,660
3,198
3,967
-
-
-
-
-
-
24,282
18,790
80,447
9,188
-
(2,614)
(221)
86,801
87,022
71,571
There were no impairment losses on any class of property and equipment during the year (31 December 2014 :Nil)
There were no capitalised borrowing costs related to the acquisition of property and equipment during the year (31 December 2014:Nil).
All property and equipment are non current.
None of the Groups assets were financed from borrowings, consequently no borrowing cost has been capitalized as part of asset cost.
117 Zenith Bank Plc Annual Report -31 December 2015
ZENITH BANK PLC
Notes to the Consolidated and Separate Financial Statements
for the Year Ended 31 December 2015
In millions of Naira
26 Property and equipment (continued)
Bank
Cost
At start of the year
Additions
Reclassifications
Disposals
At the end of the year
Accumulated depreciation
At start of the year
Charge for the year
Reclassifications
Disposals
At the end of the year
Net book amount
At 31 December 2015
At 31 December 2014
Leasehold land
Buildings
Leasehold
improvements
Furniture
fittings and
equipment
Computer
Equipment
Motor Vehicle
Work in
progress
Total
17,657
3,275
1,365
-
22,297
22,272
7,190
392
(1)
29,853
12,145
644
178
-
12,967
39,321
3,116
226
(420)
42,243
21,884
1,037
2
(29)
22,894
14,944
949
-
(2,025)
13,868
18,545
3,985
(2,163)
(1)
20,366
146,768
20,196
-
(2,476)
164,488
Leasehold land
Buildings
Leasehold
improvements
Furniture
fittings and
equipment
Computer
equipment
Motor vehicle
Work in
progress
Total
1,521
187
-
-
1,709
20,588
16,136
3,556
464
(5)
-
4,014
25,839
18,716
10,672
982
1
-
11,655
1,312
1,473
29,650
4,175
4
(413)
33,416
8,827
9,671
20,548
1,001
-
(30)
21,519
1,375
1,336
11,290
1,663
-
(1,965)
10,988
2,880
3,654
-
-
-
-
-
20,366
18,545
77,237
8,472
-
(2,408)
83,301
81,187
69,531
There were no impairment losses on any class of property and equipment during the year (31 December 2014 :Nil)
There were no capitalised borrowing costs related to the acquisition of property and equipment during the year (31 December 2014:Nil).
All property and equipment are non current.
None of the groups assets were financed from borrowings, consequently no borrowing cost has been capitalized as part of asset cost
118 Zenith Bank Plc Annual Report -31 December 2015
ZENITH BANK PLC
Notes to the Consolidated and Separate Financial Statements
for the Year Ended 31 December 2015
In millions of Naira
27.
Intangible assets
Computer software
Cost
At start of the year
Exchange difference
Reclassification
Additions
At end of the year
Accumulated amortization
At start of the year
Exchange difference
Reclassification
Charge for the year
At the end of the year
Carrying amount at end of the year
All intangible assets are non current.
Group
Bank
2015
2014
2015
2014
6,142
179
219
2,221
8,761
3,940
123
219
1,239
5,521
3,240
5,159
36
-
947
6,142
3,224
(12)
-
728
3,940
2,202
5,255
-
-
1,981
7,236
3,354
-
-
1,129
4,483
2,753
4,353
-
-
902
5,255
2,650
-
-
704
3,354
1,901
All intangible assets of the Group have finite useful life and are amortised over 5 years.
28. Customers' deposits
Demand
Savings
Term
Domiciliary
Classified as:
Current
Non-current
1,282,559
246,113
556,375
472,837
1,292,394
213,435
461,551
569,931
1,153,442
222,035
521,219
436,321
1,102,904
191,097
432,871
538,390
2,557,884
2,537,311
2,333,017
2,265,262
2,557,884
-
2,537,311
-
2,333,017
-
2,265,262
-
2,557,884
2,537,311
2,333,017
2,265,262
119 Zenith Bank Plc Annual Report - 31 December 2015
ZENITH BANK PLC
Notes to the Consolidated and Separate Financial Statements
for the Year Ended 31 December 2015
In millions of Naira
29. Other liabilities
Financial liabilities
Customer deposits for letters of credit
Settlement payables
Managers' cheques
Due to banks for clean letters of credit
Customers' funds for foreign currency purchases
Deferred income on financial guarantee contracts
Tax collections
Sales and other collections
Premium payables
Electronic card related payables
Customer's foreign transactions payables
Total other financial liabilities
Non financial liabilities
Provision for claims (see note (a) below)
Other payables
Total other non financial liabilities
Total other liabilities
Classified as:
Current
Non-current
Group
Bank
2015
2014
2015
2014
71,927
21,232
12,016
53,016
-
441
1,803
19,895
-
1,449
4,332
186,111
9,766
9,185
18,951
205,062
84,878
10,664
12,156
130,680
8
254
1,553
9,029
9,654
1,805
11,608
272,289
-
17,569
17,569
289,858
71,913
21,282
11,663
66,673
-
441
1,673
19,895
-
1,392
2,276
197,208
9,766
5,662
15,428
212,636
84,847
10,161
11,833
130,680
-
254
1,473
9,029
9,654
1,811
10,326
270,068
-
2,658
2,658
272,726
205,062
-
205,062
278,721
11,137
289,858
212,636
-
212,636
263,841
8,885
272,726
The amounts above for financial guarantee contracts represents the amounts initially recognised less cumulative
amortisation.
Subsequent to year end unclaimed dividend amounting to N3.2 billion was returned to the bank by Veritas Registrars
Limited.
(a) Reconciliation of provision for claims
At start of the year
Charge for the year (see note 12)
At end of the year
-
9,766
9,766
-
-
-
-
9,766
9,766
-
-
-
The provision represents amount reserved for claims that the bank is currently reconciling with the claimants.
30. On-lending facilities
This comprises:
Central Bank of Nigeria (CBN) Commercial Agriculture
Credit Scheme Loan (i)
Bank of Industry (BOI) Intervention Loan (ii)
Central Bank of Nigeria (CBN) / Bank of Industry(BOI) -
Power & Aviation intervention Funds (iii)
CBN MSMEDF Deposit (iv)
FGN SBS Intervention Fund (v)
Excess Crude Loan Facilty Deposit (vi)
33,482
23,943
33,482
23,943
58,755
11,798
1,561
111,194
70,091
286,881
30,947
13,203
251
-
-
68,344
58,755
11,798
1,561
111,194
70,091
286,881
30,947
13,203
251
-
-
68,344
120 Zenith Bank Plc Annual Report - 31 December 2015
ZENITH BANK PLC
Notes to the Consolidated and Separate Financial Statements
for the Year Ended 31 December 2015
In millions of Naira
Classified as:
Current
Non-current
Group
Bank
2015
2014
2015
2014
-
286,881
286,881
-
68,344
68,344
-
286,881
286,881
-
68,344
68,344
Movement in on-lending facilities
At beginning of the year
Addition during the year
Repayment during the year
At end of the year
68,344
219,942
(1,405)
286,881
59,528
16,781
(7,965)
68,344
68,344
219,942
(1,405)
286,881
59,528
16,781
(7,965)
68,344
(i) The fund received under the Central Bank of Nigeria (CBN) Commercial Agriculture Credit Scheme represent a credit
line granted to the Bank for the purpose of providing concessionary funding to the agricultural sector. The facility has a
tenor of 16 years with effect from 2009 to expire by September 2025. The facility attracts an interest rate of 2% per annum
and the Bank is under obligation to on-lend to customers at an all-in interest rate of not more than 9% per annum. Based on
the structure of the facility, the Bank assumes the default risk of all amounts lent to the Bank's customers.
(ii) The Central Bank of Nigeria (CBN) / Bank of Industry (BOI) - SME / Manufacturing Intervention Fund represents an
intervention credit granted to the Bank for the purpose of refinancing / restructuring existing loans to Small and Medium
Scale Enterprises (SMEs) and Manufacturing Companies. The total facility is secured by Nigerian Government Securities.
The value of Government securities pledged as collateral is N61.5 billion (31 December 2014: N59.6 billion). The maximum
tenor for term loan under the programme is 15 years while the tenor for working capital is one year, renewable annually
subject to a maximum tenor of five years. A management fee of 1% per annum deductible at source in the first year, and
quarterly in arrears thereafter, is paid by the Bank under the Intervention programme and the Bank is under obligation to
on-lend to customers at an all-in interest rate of 7% per annum. The Bank is the primary obligor to CBN / BOI and assumes
the risk of default. Treasury bills and Federal Government bonds amounting to N61.5 billion have been pledged as
collateral for the facility.
(iii) The purpose of granting new loans and refinancing / restructuring existing loans to companies in the power and aviation
industries is to support Federal Government focus on the sectors. The facility is secured by Irrevocable Standing Payment
Order (ISPO). The maximum tenor for term loan under the programme is 15 years while the tenor for working capital is one
year, renewable annually subject to a maximum tenor of five years. The facility attracts an interest rate of 1% per annum
payable quarterly in arrears and the Bank is under obligation to on-lend to customers at an all-in interest rate of 7% per
annum.
(iv) The Micro Small & Medium Scale Enterprises Development Fund (MSMEDF) is an intervention fund with the objective
of channelling low interest funds to the MSME sub-sector of the Nigerian economy. The facility attracts an interest rate of
2% per annum and the Bank is under obligation to on-lend to the SMEs at 9% per annum. The maximum tenor is 5 years
while the tenor for working capital is 1 year.
(v) The Salary Bailout Scheme is approved by the Federal Government to assist State Governments clear outstanding
salaries owed their workers. Funds are disbursed to Banks nominated by beneficiary States at 2% for on-lending at 9% to
the beneficiaries and the loans have a tenor of 20 years. Repayment is to be deducted at source, by the Accountant
General of the Federation, as a first line charge against each beneficiary State’s monthly Statutory Allocation.
(vi) Excess Crude Account (ECA) facilities are loans of N10billion to each State with a tenor of 10-years at 9% per annum
interest rate to the beneficiaries. Repayment is to be deducted at source, by the Accountant General of the Federation, as a
first line charge against each beneficiary State’s monthly Statutory Allocation.
121 Zenith Bank Plc Annual Report - 31 December 2015
ZENITH BANK PLC
Notes to the Consolidated and Separate Financial Statements
for the Year Ended 31 December 2015
In millions of Naira
31. Borrowings
Long term borrowing comprise:
Due to ADB (i)
Due to KEXIM (ii)
Due to EIB (iii)
Due to PROPARCO (iv)
Due to SCB
Due to CITIBANK (v)
Due to ABSA Bank (vi)
Due to J P morgan Chase Bank (vii)
Due to Standard Bank (viii)
Due to First Rand Bank (ix)
Due to Commerz Bank (x)
Due to IFC (xi)
Due to British Arab Bank (xii)
Due to Zenith Bank (UK) (xiii)
Group
Bank
2015
2014
2015
2014
25,013
9,996
5,491
13,758
-
9,958
40,097
14,941
49,962
7,740
59,259
20,034
2,613
-
25,672
5,632
5,111
14,053
4,166
18,710
18,637
27,955
13,977
8,981
55,172
-
-
-
25,013
9,996
5,491
13,758
-
9,958
40,097
14,941
49,962
7,740
59,259
20,034
2,613
9,249
25,672
5,632
5,111
14,053
4,166
18,710
18,637
27,955
13,977
8,981
55,172
-
-
-
258,862
198,066
268,111
198,066
The Group has not had any defaults of principal, interest or other breaches with respect to their liabilities during the year
(Dec 2014: nil).
Classified as:
Current
Non-current
Movement in borrowings
At beginning of the year
Addition during the year
Repayment during the year
At end of the year
529
258,333
258,862
72,117
125,949
198,066
529
267,582
268,111
72,117
125,949
198,066
198,066
75,909
(15,113)
258,862
60,150
149,626
(11,710)
198,066
198,066
85,158
(15,113)
268,111
60,150
149,626
(11,710)
198,066
(i) The amount due to African Development Bank (AfDB) of N25.01 billion ($125.00 million) represents the dollar facility
granted by AfDB in September 2014 which is repayable over 7 years. Interest is payable half-yearly at the rate of LIBOR +
3.6% per annum. The facility which has three (3) years moratorium will mature in 2021.
(ii)The amount of N9.996 billion (US $50.22 million) represents the outstanding balances from six short term loan facilities
of US $25.2 million, US $12 million, US $9 million, US $10.2million, US $7.2 million, and US $ 17.4 million granted by The
Export-Import Bank of Korea (KEXIM) in January, August, September, November(US $ 10.2 and 7.2 million) and December
2015. Interest is payable monthly at LIBOR+ 1.65% ( for US $25.2million and US $12million), LIBOR+1.73% (for US
$9million and US $7.2 million), LIBOR+ 1.68 ( for US $10.2million) and LIBOR +1.71% ( for US $17.4million) The
outstanding balances are US $2.10 million, US $8million, US $6.75million, US $9.35million, US $6.6million, and US $17.41
million respectively. Final repayments on these facilities are due in January, August, September, November(US $ 10.2 and
7.2 million) and December 2016 respectively.
(iii) The amount of N5.49 billion ($27.322 million) represents a 6-year dollar facility, with two (2) years moratorium, granted
by the European Investment Bank (EIB) in 2013. Interest is payable at the rate of 6 months' LIBOR plus 2.74% per annum.
The facility will mature in 2019.
(iv) The amount of N13.75 billion ($68.75 million) represents the outstanding balance of two tranches of the credit facilities
of $25m and $50m granted by Promotion et Participation pour la Coopération économique (PROPARCO) in February 2013
and December 2013 respectively. The facilities are priced at Libor+3.76% and Libor+3.71% per annum and will mature in
April 2020 and April 2021 respectively. Interest on each of the facilities are payable semi-annually.
122 Zenith Bank Plc Annual Report - 31 December 2015
ZENITH BANK PLC
Notes to the Consolidated and Separate Financial Statements
for the Year Ended 31 December 2015
In millions of Naira
Group
Bank
2015
2014
2015
2014
(v) The amount of N9.96 billion (US $50.03 million) represents the amount payable by the Bank from a term loan facility of
US $ 100 million granted by CitiBank in Dec 2013. Interest is payable quarterly at the rate of LIBOR + 3.5% p.a and the
facility will mature in December 2016.
(vi) The amount of N40.1 billion (US $201.44 million) represents the amount payable by the Bank from two term loan facility
of US $ 100 million and US $ 100 million granted by ABSA in September 2015 and November 2015 respectively. Interest is
payable quarterly at the rate of LIBOR + 3.75% and 3.85% p.a respectively. The facility will mature in September 2016 and
November 2016 respectively.
(vii) The amount due to JP Morgan Chase Bank of N14.94 billion ($75million) represents the outstanding balance of two
tranches of dollar facilities in the sums of $100 million and $50 million. Both tranches are being rolled over on a monthly
basis. Interest is payable monthly at the rate of LIBOR + 2.25% per annum on each of the tranches.
(viii) The amount of N49.96 billion ($75 million) represents a Dollar Term Loan from Standard Bank granted in September
2014 and is priced at Libor +3.50%. The facility of which interest is payable quarterly has a maturity date of April 2017.
(ix) The amount of N7.74 billion ($38.89 million) represents a Dollar Term Loan from First Rand Bank granted in August
2014 and is priced at Libor +3.50%. The facility of which interest is payable quarterly has a maturity date of August 2017.
(x) The amount of N59.23 billion (US $297.71 million) represents the amount payable by the Bank from a term loan facility
of US $ 300 million granted to the Bank through a Commerzbank loan facility agreement. Interest is payable quarterly at the
rate of LIBOR + 3.2% p.a and the facility will mature on 30 December 2016.
(xi) The amount of N20.03 billion (US $101.41 million) represents the amount payable by the Bank from a term loan facility
of US $ 100 million granted by International Finance Corporation (IFC) in June 2015. Interest is payable semi annually at
4.78% per annum and the facility will mature in October 2022.
(xii) The amount N2.63 billion ($13 million) represents a Dollar Term Loan from British Arab Bank granted in October 2015.
It is priced at Libor+4.5% with interest payable quarterly and has a final maturity date of April, 2015.
(xiii) The amount N9.25 billion ($46 million) represents a Dollar Term Loan Zenith Bank UK granted in September 2015. It is
priced at Libor+4.0% with interest payable quarterly and has a final maturity date of March, 2016. This amount has been
eliminated on consolidation.
32. Debt securities issued
Due to Euro bond holders
99,818
99,818
92,932
92,932
99,818
99,818
92,932
92,932
The amount of N99.8 billion ($500 million) represents the Eurobond issued by Zenith Bank Plc on April 22, 2014 with a maturity
date of April 22, 2019 and a yield of 6.50% .The rate of interest (coupon) is 6.25% payable semi-annually with bullet repayment
of the Principal sum at maturity. The total amount is non-current.
The Group has not had any defaults of principal, interest or other breaches with respect to the debt securities during the period
(31 December 2014: Nil).
Classified as:
Current
Non-current
293
99,525
99,818
-
92,932
92,932
293
99,525
99,818
-
92,932
92,932
123 Zenith Bank Plc Annual Report - 31 December 2015
ZENITH BANK PLC
Notes to the Consolidated and Separate Financial Statements
for the Year Ended 31 December 2015
In millions of Naira
33. Derivative liabilities
Instrument types:
Forward contracts
Fair value of liabilities
Classified as:
Current
Non-current
Group
Bank
2015
2014
2015
2014
384
384
6,073
6,073
-
384
-
384
-
6,073
-
6,073
384
384
-
384
-
384
6,073
6,073
-
6,073
-
6,073
The Group enters into currency forward contracts with counterparties. On initial recognition, the Group estimates the fair
value of derivatives transacted with the counterparties using valuation techniques (see Note 3.3.6 C(vii)). In many cases, all
significant inputs into the valuation techniques are wholly observable-e.g with reference to similar transactions in the
wholesale dealer market.
During the year, various forward contracts entered into by the Bank generated net loss of N2.43 billion which were
recognized in the statement of comprehensive income. These net losses related to the fair value of the forward contracts,
producing derivative assets value of N8.5 billion with a resultant derivative liabilities of N0.38 billion (31 December 2014:
N6,073 billion).
34. Share capital
Authorised
40,000,000,000 ordinary shares of 50k each
(31 Dec 2014: 40,000,000,000)
Issued and fully paid
31,396,493,786 ordinary shares of 50k each
(31 Dec 2014: 31,396,493,786)
20,000
20,000
20,000
20,000
15,698
15,698
15,698
15,698
There was no movement in the share capital account during the year.
35. Share premium, retained earnings and other reserves
(a) There was no movement in the Share premium account during the current and prior year.
Share premium
255,047
255,047
255,047
255,047
The nature and purpose of the reserves in equity are as follows:
(b) Share premium: Premiums from the issue of shares are reported in share premium.
(c) Retained earnings: Retained earnings comprise the undistributed profits from previous years which have not been
reclassified to the other reserves noted below.
(d) Statutory reserve: Nigerian banking regulations require the Bank to make an annual appropriation to a statutory reserve.
As stipulated by section 16(1) of the Bank and Other Financial Institutions Act of 1991 (amended), an appropriation of 30%
of profit after tax is made if the statutory reserve is less than the paid-up share capital and 15% of profit after tax if the
statutory reserve is greater than the paid-up share capital.
124 Zenith Bank Plc Annual Report - 31 December 2015
ZENITH BANK PLC
Notes to the Consolidated and Separate Financial Statements
for the Year Ended 31 December 2015
In millions of Naira
Group
Bank
2015
2014
2015
2014
(e) SMIEIS reserve: The SMIEIS reserve is maintained to comply with the Central Bank of Nigeria (CBN) requirement that
all licensed banks set aside a portion of the profit after tax in a fund to be used to finance equity investments in qualifying
small and medium scale enterprises. Under the terms of the guideline (amended by CBN letter dated 11 July 2006), the
contributions will be 10% of profit after tax and shall continue after the first 5 years but banks’ contributions shall thereafter
reduce to 5% of profit after tax. The small and medium scale industries equity investment scheme reserves are non-
distributable. Transfer to this reserve is no longer mandatory.
(f) Revaluation reserve: Comprises fair value movements on equity instruments.
(g) Foreign currency translation reserve: Comprises exchange differences resulting from the translation to Naira of the
results and financial position of Group companies that have a functional currency other than Naira.
(h) Regulatory reserve for credit risk: The Nigerian banking regulator requires the bank to create a reserve for the difference
between impairment charge determined in line with the principles of IFRS and impairment charge determined in line with
the prudential guidelines issued by the Central Bank of Nigeria (CBN). This reserve is not available for distribution to
shareholders.
36. Pension contribution
In accordance with the provisions of the Pensions Reform Act 2014, the Bank and its subsidiaries commenced a
contributory pension scheme in January 2005. For entities operating in Nigeria, the contribution by employees and the
employing entities are 2.5% and 15.5% respectively of the employees' basic salary, housing and transport allowances.
Entities operating outside Nigeria contribute in line with the relevant pension laws in their jurisdictions. The contribution by
the Group and the Bank during the year were N3.49 billion and N3.06 billion respectively (31 December 2014: N3.50 billion
and N 3.15 billion).
37. Personnel expenses
Compensation for the staff (excluding executive directors) are as follows:
Salaries and wages
Other staff costs
Pension contribution
56,595
7,439
3,488
67,522
55,689
13,132
3,499
72,320
52,004
7,369
3,055
62,428
51,610
13,089
3,149
67,848
(a) The average number of persons employed during the year by category:
Executive directors
Management
Non-management
Number Number Number
Number
11
545
6,860
7,416
10
510
6,758
7,278
4
435
5,847
6,286
4
452
5,903
6,359
The table below shows the number of employees (excluding Directors), whose earnings during the year, fell within the
ranges shown below:
N300,001 - N2,000,000
N2,000,001 - N2,800,000
N2,800,001 - N4,000,000
N4,000,001 - N6,000,000
N6,000,001 - N8,000,000
N8,000,001 - N9,000,000
N9,000,001 - and above
Number
Number
Number
Number
708
245
1,024
1,580
1,331
919
1,609
7,416
721
118
1,114
1,817
1,219
882
1,407
7,278
412
-
806
1,337
1,302
903
1,526
6,286
376
-
910
1,561
1,189
864
1,459
6,359
125 Zenith Bank Plc Annual Report - 31 December 2015
Notes to the Consolidated and Separate Financial Statements
for the Year Ended 31 December 2015
Group
Bank
2015
2014
2015
2014
In millions of Naira
37. Personnel expenses (continued)
(b) Directors' emoluments
The remuneration paid to directors are as follows:
Salaries and other short term benefits
Fees and sitting allowances
Retirement Benefit costs
Fees and other emoluments disclosed above include amounts paid to:
The chairman
The highest paid director
595
519
31
1,145
25
78
414
205
11
630
15
76
200
256
5
461
25
65
245
174
6
425
15
62
The number of directors who received fees and other emoluments (excluding pension contributions and reimbursable
expenses) in the following ranges was:
N5,500,001 and above
Number
Number
Number
Number
11
35
4
8
38. Group subsidiaries and related party transactions
Parent:
Zenith Bank Plc (incorporated in Nigeria) is the ultimate parent company of the Group.
Subsidiaries:
Transactions between Zenith Bank Plc and its subsidiaries which are eliminated on consolidation are not separately
disclosed in the consolidated financial statements. The Group's effective interests and investments in subsidiaries as at 31
December 2015 are shown below.
Entity
Foreign / banking subsidiaries:
Zenith Bank (Ghana) Limited
Zenith Bank (UK) Limited
Zenith Bank (Sierra Leone) Limited
Zenith Bank (Gambia ) Limited
Zenith Pensions Custodian Limited
Effective
holding
%
Nominal share
capital held
98.07
100.00
99.99
99.96
99.00
%
%
%
%
%
6,444
21,482
2,059
1,038
1,980
Transactions and balances with subsidiaries
In millions of naira
Receivable
from
Payable to
Income
received from
Expense
paid to
Zenith Bank (UK) Limited
Zenith Bank (Ghana) Limited
Zenith Bank (Sierra leone) Limited
Zenith Bank (Gambia) Limited
Zenith Pension Custodians Limited
82,738
661
23
721
-
22,906
-
-
-
348
2,959
-
-
-
3,960
-
-
-
-
2,036
126 Zenith Bank Plc Annual Report - 31 December 2015
Notes to the Consolidated and Separate Financial Statements
for the Year Ended 31 December 2015
In millions of Naira
Significant restrictions
Group
Bank
2015
2014
2015
2014
The Group does not have significant restrictions on its ability to access or use its assets and settle its liabilities other than
those resulting from the supervisory frameworks within which banking subsidiaries operate. The supervisory frameworks
require banking subsidiaries to keep certain levels of regulatory capital and liquid assets, limit their exposure to other parts
of the Group and comply with other ratios. See notes 3.4, 3.5 and 4.4b for disclosures on liquidity, capital adequacy, and
credit risk reserve requirements respectively. The carrying amounts of banking subsidiaries' assets and liabilities are
N403.83 billion and N324.55 billion respectively (31 December 2014: N501.70 billion and N443.73 billion respectively).
Non controlling interest in subsidiaries
The Group does not have any subsidiary that has material non controlling interest.
Key management personnel
Key management personnel is defined as the Group's executive management, including their close members of family and
any entity over which they exercise control. Close members of family are those family members who may be expected to
influence, or be influenced by that individual in their dealings with the Group.
Key management compensation
Salaries and other short-term benefits
Retirement benefit cost
Fees and sitting allowances
Loans and advances
At start of the year
Granted during the year
Repayment during the year
At end of of the year
Interest earned
595
31
519
787
6
(234)
559
24
414
11
205
888
6
(107)
787
33
200
5
256
735
-
(213)
522
20
245
6
174
821
-
(86)
735
29
Loans to key management personnel include mortgage loans and other personal loans which are given under terms that
are no more favourable than those given to other staff. No impairment has been recognised in respect of loans granted to
key management (31 December 2014: Nil) as they are performing. Mortgage loans amounting to N497 million (31
December 2014: N520 million) are secured by the underlying assets. All other loans are unsecured.
31 December 2015
Name of company
Visafone Communication Limited
Quantum Fund Management *
Relationship/
Name
Common
directorship
/Jim Ovia
Common
directorship
/Jim Ovia
Loans
Deposits
Interest
received
Interest paid
-
1,177
4,499
31
4,499
1,208
-
585
585
6
-
6
* The total loan oustanding for Quantum Fund Management was fully paid down on 5th January, 2016
31 December 2014
Name of company
Visafone Communication Limited
Quantum Fund Management
Relationship Loans
Deposits
Interest
received
Interest paid
Common
directorship /
Jim Ovia
Common
directorship /
Jim Ovia
345
8,741
9,086
193
12
205
52
1,049
1,101
17
7
24
127 Zenith Bank Plc Annual Report - 31 December 2015
Notes to the Consolidated and Separate Financial Statements
for the Year Ended 31 December 2015
In millions of Naira
Group
Bank
2015
2014
2015
2014
Interest charged on loans to related parties and interest and other fees paid to related parties are similar to what would be
charged in an arms' length transaction. Loans granted to related parties are secured over real estate and other assets of
the respective borrowers. No impairment has been recognised in respect of loans granted to related parties (31 December
2014: Nil).
During the year, Zenith Bank Plc paid N1,278 million as insurance premium to Zenith General Insurance Limited (31
December 2014: N804 million). Also, the Bank paid a total of N 235 million to Visafone Communication Limited for provision
of telecommunication services (31 December 2014:N 364 million). These expenses were reported as operating expenses.
39. Contingent liabilities and commitments
(a) Legal proceedings
The Group is presently involved in 131 (31 December 2014:107) litigation suits in the ordinary course of business. The total
amount claimed in the cases against the Group is estimated at N11.68 billion (31 December 2014: N6.15 billion). The
actions are being contested and the Directors are of the opinion that none of the aforementioned cases is likely to have a
material adverse effect on the Group and are not aware of any other pending or threatened claims and litigations.
(b) Capital commitments
At the balance sheet date, the Group had capital commitments amounting to N3.80 billion (31 December 2014: N3.22
billion) in respect of authorized and contracted capital projects.
(c) Confirmed credits and other obligations on behalf of customers
In the normal course of business the Group is a party to financial instruments with off-balance sheet risk. These instruments
are issued to meet the credit and other financial requirements of customers. The contractual amounts of the off-balance
sheet financial instruments are:
Performance bonds and guarantees
Usance
Letters of credit
Pension Funds (See Note (below))
Group
Bank
31 Dec 2015 31 Dec 2014 31 Dec 2015 31 Dec 2014
794,021
128,123
232,837
1,997,182
627,458
156,791
216,634
1,732,565
763,891
128,123
187,947
1,997,182
603,520
156,791
156,511
1,732,565
3,152,163
2,733,448
3,077,143
2,649,387
The transaction related performance bonds and guarantees are, generally, short-term commitments to third parties which
are not directly dependent on the customer's creditworthiness. As at 31 December 2015, performance bonds and
guarantees worth N181 billion (31 December 2014: N50.4 billion) are secured by cash while others are otherwise secured.
Usance and Letters of credit are agreements to lend to a customer in the future, subject to certain conditions. Such
commitments are either made for a fixed period, or have no specific maturity dates, but are cancellable by the Group (as
lender) subject to notice requirements. These Letters of credit are provided at market-related interest rates and cannot be
settled net in cash. Usance and letters of credit are secured by different types of collaterals similar to those accepted for
actual credit facilities.
The amount of N1,997.18 billion (31 December 2014: N1,732.57 billion) represents the full amount of the Group's
guarantee for the assets held by its subsidiary, Zenith Pensions Custodian Limited under the latter's custodial business as
required by the National Pensions Commission of Nigeria.
128 Zenith Bank Plc Annual Report - 31 December 2015
ZENITH BANK PLC
Notes to the Consolidated and Separate Financial Statements
for the Year Ended 31 December 2015
In millions of Naira
40. Dividend per share
Group
Bank
2015
2014
2015
2014
Dividend proposed
Number of shares in issue and ranking for dividend
Proposed dividend paid per share
Interim dividend paid
Final dividend per share proposed
2014 dividend paid during the year
2015 interim dividend paid during the year
Total dividend paid during the year
Group
31 Dec 2015 31 Dec 2014 31 Dec 2015 31 Dec 2014
Bank
56,513
31,396
180
k
k25
155
k
54,943
7,850
62,793
54,943
31,396
175
k
-
-
54,943
-
54,943
56,513
31,396
180
k
k25
k
155
54,943
7,850
62,793
54,943
31,396
175
-
-
54,943
-
54,943
The Board of Directors, pursuant to the powers vested in it by the provisions of section 379 of the Companies and Allied
Matters Act of Nigeria, Cap C20 LFN 2004, proposed a final dividend of N1.55 kobo per share which in addition to the
N0.25 kobo per share paid as interim dividend amounts to N1.80 per share. (31 December 2014: N1.75 per share) from the
retained earnings account as at 31 December 2015. This is subject to approval by shareholders at the next Annual General
Meeting.
If the proposed dividend is approved by the shareholders, the Bank will be liable to pay additional corporate tax estimated at
N13.39 billion, which represents the difference between the tax liability calculated at 30% of the dividend approved and the
tax charge reported in the statement of comprehensive income for the year ended 31 December 2015.
The number of shares in issue and ranking for dividend represents the outstanding number of shares as at 31 December
2015 and 31 December 2014 respectively.
Payment of dividends to shareholders is subject to withholding tax at a rate of 10% in the hand of recipients.
41. Cash and cash equivalents
For the purposes of the statement of cash flow, cash and cash equivalents include cash and non-restricted balances with
central banks, treasury bills maturing within three months, operating account balances with other banks, amounts due from
other banks.
Cash and cash balances with central bank (less
mandatory reserve deposits (see note 15))
Treasury bills (maturing within 3 months (see note 16))
Due from other banks (see note 18)
31 Dec 2015
31 Dec 2014
31 Dec 2015
31 Dec 2014
358,007
244,434
332,502
220,216
79,513
272,194
709,714
214,721
506,568
965,723
63,979
266,894
663,375
181,498
470,139
871,853
129 Zenith Bank Plc Annual Report - 31 December 2015
ZENITH BANK PLC
Notes to the Consolidated and Separate Financial Statements
for the Year Ended 31 December 2015
In millions of Naira
Group
Bank
2015
2014
2015
2014
42. Compliance with banking regulations
During the year, the Bank paid the following fines and penalties;
S/N Descriptons
Amount Paid in
(N)
2,000,000
2,000,000
1
2
3
4
5
6
7
8
9
Penalty imposed on the Bank for infraction arising from risk assets examination as at
December 31, 2014.
Penalty imposed on Zenith Bank for late rendition of fraud and forgeries returns -
February 2015.
Fraudulent NIBBS instant pay (NIP) from account in Enterprise Bank to the Valluci
Properties Ltd.
10,000,000
Penalty imposed on Zenith Bank for late rendition of returns in respect of CDL.
Penalty imposed on Zenith Bank for AML/CFT spot check exception.
Penalty imposed on Zenith Bank for TSA deadline exception.
Penalty imposed on Zenith Bank for late rendition of returns
4,000,000
4,000,000
4,000,000
100,000
Penalty imposed on Zenith Bank in relation to reporting of public sector deposit.
32,000,000
Failure to implement auditor's recommendation contained in management letter.
2,000,000
60,100,000
43. Events after the reporting period
No significant event that requires special disclosure occured between the reporting date and the date when the financial
statements were issued.
130 Zenith Bank Plc Annual Report - 31 December 2015
ZENITH BANK PLC
Notes to the Consolidated and Separate Financial Statements
for the Year Ended 31 December 2015
Group
Bank
In millions of Naira
44. Statement of cash flow workings
(i) Debt securities (see note 22)
31 December 2015
At 1 January 2015
Gains from changes in fair value recognised in profit
or loss (note 10)
Exchange differences
Additions
Disposals (sale and redemption)
Interest accrued
Coupon received
Unrealised bond FV gain
Movement for cash flow statement
Realised bond fair value gain
Recognised in Cashflow statement
31 December 2014
At 1 January 2014
Gains from changes in fair value recognised in other
comprehensive income
Exchange differences
Additions
Disposals (sale and redemption)
Interest accrued
Coupon received
Debt
securities at
fair value
through profit
or loss
Debt
securities at
amortised
cost
Debt
securities at
fair value
through profit
or loss
Debt
securities at
amortised
cost
-
186,544
-
79,469
894
(52)
5,865
-
-
-
6,707
707
5,865
187
-
(1,523)
91,797
(84,849)
34,998
(31,230)
195,737
-
10,716
894
-
5,813
-
-
-
6,707
707
5,813
187
-
-
85,917
(31,715)
28,111
(27,780)
134,002
-
54,533
-
-
(16,768)
-
(60,533)
Debt
securities at
fair value
through profit
or loss
Debt
securities at
amortised
cost
Debt
securities at
fair value
through profit
or loss
Debt
securities at
amortised
cost
2,280
290,191
589
201,280
336
(25)
-
(2,591)
-
-
-
(1,415)
58,195
(178,796)
31,997
(13,628)
-
186,544
336
-
-
(925)
-
-
-
-
-
46,351
(178,796)
23,583
(12,949)
79,469
Movement for cash flow statement
(2,255)
(102,232)
(589)
(121,811)
Recognised in Cashflow statement
-
104,487
-
122,400
(ii) Treasury bills (Amortised cost) (see note 16)
31 December 2015
Treasury bills (Amortised cost)
Treasury bills (with 3 months maturity)
Changes
Recognised in Cashflow
31 Dec 2015 31 Dec 2014 31 Dec 2015 31 Dec 2014
252,252
(181,498)
70,754
294,235
(214,721)
79,514
324,230
(79,513)
244,717
277,202
(63,979)
213,223
(165,203)
(142,469)
131 Zenith Bank Plc Annual Report - 31 December 2015
ZENITH BANK PLC
Notes to the Consolidated and Separate Financial Statements
for the Year Ended 31 December 2015
Group
Bank
In millions of Naira
31 December 2014
Treasury bills (Amortized cost)
Treasury bills (with 3 months maturity)
Changes
Recognised in Cashflow
(iii) Treasury bills (FVTPL) (see note 16)
31 December 2015
Treasury bills
Unrealised fair value gain
Recognised in Cashflow
31 December 2014
Treasury bills (Amortized cost)
Recognised in Cashflow
(iv) Loans and advances (see note 20)
31 December 2015
Gross loans and advances
Changes
Write-back
Write-back (specific)
Interest receivables
31 December 2014
Gross loans and advances
Changes
Write-back
Write-back (specific)
Write-back (specific)
Interest receivables
31 Dec 2014 31 Dec 2013 31 Dec 2014 31 Dec 2013
565,668
(352,786)
212,882
252,252
(181,498)
70,754
579,511
(354,834)
224,677
294,235
(214,721)
79,514
145,163
142,128
31 Dec 2015 31 Dec 2014 31 Dec 2015 31 Dec 2014
1,162
-
53,698
878
53,698
878
1,162
-
(51,658)
(51,658)
31 Dec 2014 31 Dec 2013 31 Dec 2014 31 Dec 2013
-
-
1,162
1,162
(1,162)
(1,162)
31 Dec 2015 31 Dec 2014 31 Dec 2015 31 Dec 2014
1,605,581
-
1,884,941
(279,360)
2,032,256
(273,921)
1,758,335
-
1,486
(1,861)
12,925
(261,371)
-
-
-
-
1,486
(1,860)
12,925
(266,809)
-
-
-
-
31 Dec 2014 31 Dec 2013 31 Dec 2014 31 Dec 2013
1,148,378
-
1,605,581
(457,203)
1,758,335
(482,213)
1,276,122
-
347
(6,298)
(3,237)
13,263
(478,138)
-
-
-
-
-
347
(5,990)
(3,237)
13,263
(452,820)
-
-
-
-
-
132 Zenith Bank Plc Annual Report - 31 December 2015
ZENITH BANK PLC
Notes to the Consolidated and Separate Financial Statements
for the Year Ended 31 December 2015
Group
Bank
In millions of Naira
(v)Customer deposits
31 December 2015
As per financial statement
Changes
Interest payables
31 December 2014
As per financial statement
Changes
Interest payables
31 Dec 2015 31 Dec 2014
2,537,311
-
-
2,557,884
20,573
(1,919)
31 Dec 2015 31 Dec 2014
2,265,262
-
-
2,333,017
67,755
(1,919)
18,654
-
65,836
-
31 Dec 2014 31 Dec 2013
2,276,755
-
-
2,537,311
260,556
(2,268)
31 Dec 2014 31 Dec 2013
2,079,862
-
-
2,265,262
185,400
(2,268)
258,288
-
183,132
-
(vi)Cash flow from discontinued operation (operating activities)
31 December 2014
Loan and advances
Reinsurance assets and insurance liabilities
Deferred tax assets
Other assets
Claims payable
Current income tax
Deferred income tax liabilites
Other payables
Liabilities on insurance contracts
(vii) Cash flow from discontinued operations (investing activities)
31 December 2015
Investing activities
Investment securities
Property and equipment
Intangible assets
31 December 2014
Investing activities
Investment securities
Property and equipment
Intangible assets
31 Dec 2014 31 Dec 2013 Changes
-
-
-
-
-
-
-
-
-
-
59
1,112
1
1,861
2,084
1,405
295
6,274
4,053
59
1,112
1
1,861
(2,084)
(1,405)
(295)
(6,274)
(4,053)
(11,078)
31 Dec 2015 31 Dec 2014 Changes
-
-
-
-
-
-
-
-
-
-
-
31 Dec 2014 31 Dec 2013 Changes
-
-
-
-
2,915
1,026
29
3,970
2,915
1,026
29
3,970
133 Zenith Bank Plc Annual Report - 31 December 2015
ZENITH BANK PLC
Notes to the Consolidated and Separate Financial Statements
for the Year Ended 31 December 2015
Group
Bank
In millions of Naira
(viii) Cash and cash equivalents from discontinued operations (see note 27)
31 December 2015
Cash and balances with central banks
Treasury bills
Due from other banks
31 December 2014
Cash and balances with central banks
Treasury bills
Due from other banks
(ix) Other liabilities (see note 29)
31 December 2015
As per statement of financial position
Changes
Vat paid
Net cash movement
31 December 2014
As per statement of financial position
Changes
Vat paid
Net cash movement
(x) Net cash from changes in ownership interest in subsidiaries
Disposal of investment (NCI)
(xi) Profit on disposal of property and equipment
Cost (see note 26)
Accummulated depreciation (see note 26)
Net book value
Sales proceed
Profit on Disposal (see note 11)
31 Dec 2015 31 Dec 2014
-
-
-
-
-
-
-
Changes
-
-
-
-
31 Dec 2014 31 Dec 2013 Changes
500
11,076
11,875
500
11,076
11,875
-
-
-
-
23,451
23,451
31 Dec 2015 31 Dec 2014 31 Dec 2015 31 Dec 2014
272,726
-
289,858
-
212,636
60,090
205,062
84,796
(2,460)
(82,336)
-
-
(2,460)
(57,630)
-
-
31 Dec 2014 31 Dec 2013 31 Dec 2014 31 Dec 2013
201,265
-
289,858
(74,215)
272,726
(71,478)
215,643
-
(4,940)
79,155
-
-
(4,614)
76,092
31 Dec 2015 31 Dec 2014
-
3,548
-
3,548
-
-
-
-
-
-
-
-
31 Dec 2015 31 Dec. 2014 31 Dec 2015
31 Dec. 2014
2,671
2,614
57
96
39
1,998
1,919
79
232
153
2,476
2,408
68
95
27
1,815
1,714
101
252
151
134 Zenith Bank Plc Annual Report - 31 December 2015
ZENITH BANK PLC
Notes to the Consolidated and Separate Financial Statements
for the Year Ended 31 December 2015
Group
Bank
In millions of Naira
(xii) Proceed from sale of equity securities
Cost of equity securities disposed (see note 21b)
Gain on disposal of equity secuirities (see note 11)
Group
31 Dec 2015
1,596
1,615
Group
31 Dec 2014
685
-
Bank
31 Dec 2015
1,596
1,615
Bank
31 Dec 2014
685
-
Recognised in cash flow
3,211
685
3,211
685
(xiii) Interest received
Interest income as per financial statement
Interest receivables
Recognised in cash flow
(xiv) Interest paid
Interest expense as per financial statement
Interest payables
Group
31 Dec 2015
348,179
(12,925)
Group
31 Dec 2014
313,422
(13,263)
Bank
31 Dec 2015
317,419
(12,925)
Bank
31 Dec 2014
285,171
(13,263)
335,254
300,159
304,494
271,908
Group
31 Dec 2015
(123,597)
1,919
Group
31 Dec 2014
(106,919)
2,268
Bank
31 Dec 2015
(114,936)
1,919
Bank
31 Dec 2014
(99,439)
2,268
Recognised in cash flow
(121,678)
(104,651)
(113,017)
(97,171)
(xv) Proceeds from sale of subsidiaries
Cash proceeds
Cost of retained interest
Cost of disposal
Contingency and revaluation reserve
Fair value of retained interest
Carrying amount of NCI
(Gain)/Loss
Recognised in cash flow
Group
31 Dec 2015
-
-
-
-
-
-
-
Group
31 Dec 2014
10,935
845
-
1,353
172
3,548
(510)
Bank
31 Dec 2015
-
-
-
-
-
-
-
Bank
31 Dec 2014
10,935
-
(3,902)
-
-
-
(7,033)
-
16,343
-
-
135 Zenith Bank Plc Annual Report - 31 December 2015
ZENITH BANK PLC
Other Information
136
ZENITH BANK PLC
Other Information
Value Added Statement
In millions of Naira
Group
Gross income
Interest expense
- Local
- Foreign
Impairment charge for financial assets
Bought-in materials and services
- Local
- Foreign
Value added
Distribution
Employees
Salaries and benefits
Government
Income tax
31 Dec 2015 31 Dec 2015 31 Dec 2014 31 Dec 2014
%
%
432,535
403,343
(107,344)
(16,253)
308,938
(15,673)
293,265
(87,106)
(2,594)
(91,722)
(15,197)
296,424
(13,064)
283,360
(78,835)
(2,594)
203,565
100
201,931
100
67,522
19,953
10,427
56,513
49,150
33
10
5
28
24
72,320
20,341
9,815
54,943
44,512
36
10
5
27
22
Retained in the Group
Replacement of property and equipment / intangible assets
To pay proposed dividend
Profit for the year (including statutory, small scale industry, and non-
controling interest)
Total Value Added
203,565
100
201,931
100
Value added represents the additional wealth which the company has been able to create by its own and employees efforts.
137 Zenith Bank Plc Annual Report - 31 December 2015
ZENITH BANK PLC
Other Information
Value Added Statement
In millions of Naira
Bank
Gross income
Interest expense
- Local
- Foreign
Impairment charge for financial assets
Bought-in materials and services
- Local
- Foreign
Value added
Distribution
Employees
Salaries and benefits
Government
Income tax
Retained in the Bank
Replacement of property and equipment / intangible assets
To pay proposed dividend
Profit for the year (including statutory, and small scale industry)
Total Value Added
2015
2015
%
2014
2014
%
396,653
372,015
(112,342)
(2,594)
281,717
(11,091)
270,626
(80,800)
(2,577)
(96,845)
(2,594)
272,576
(12,392)
260,184
(72,789)
(2,577)
187,249
100
184,818
100
62,428
16,436
9,601
56,513
42,271
187,249
33
9
5
30
23
100
67,848
15,370
9,121
54,943
37,536
184,818
37
8
5
30
20
100
Value added represents the additional wealth which the company has been able to create by its own and employees efforts.
138
ZENITH BANK PLC
Other Information
Five Year Financial Summary
In millions of Naira
31 Dec 2015 31 Dec 2014 31 Dec 2013 31 Dec 2012 31 Dec 2011
Group
Statement of Financial Position
Assets
Cash and balances with central banks
Treasury bills
Assets pledged as collateral
Due from other banks
Derivative assets
Loans and advances
Assets classified as held for sale
Investment securities
Investments in associates
Deferred tax assets
Other assets
Investment property
Property and equipment
Intangible assets
761,561
377,928
265,051
272,194
8,481
1,989,313
-
213,141
530
5,607
22,774
-
87,022
3,240
752,580
295,397
151,746
506,568
17,408
1,729,507
-
200,079
302
6,449
21,455
-
71,571
2,202
603,851
579,511
6,930
256,729
2,681
1,251,355
30,454
303,125
165
749
36,238
-
69,410
1,935
332,515
669,164
-
182,020
-
989,814
31,943
299,343
420
432
28,665
-
68,782
1,406
223,187
510,738
-
234,521
-
893,834
52,482
308,231
1,756
186
25,510
7,114
68,366
770
Total assets
4,006,842
3,755,264
3,143,133
2,604,504
2,326,695
Liabilities
Customers deposits
Derivative liabilities
Current tax payable
Deferred income tax liabilities
Other liabilities
On-lending facilities
Borrowings
Liabilities classified as held for sale
Debt securities issued
Total liabilities
Net assets
Equity
Share capital
Share premium
Retained earnings
Other Reserves
Attributable to equity holders of the parent
Non-controlling interest
2,557,884
384
3,579
19
205,062
286,881
258,862
-
99,818
2,537,311
6,073
10,042
-
289,858
68,344
198,066
-
92,932
2,276,755
-
7,017
678
215,643
59,528
60,150
14,111
-
1,929,244
-
6,577
5,584
117,355
56,066
15,138
11,584
-
1,655,458
-
13,348
10,742
152,836
49,370
21,070
29,603
-
3,412,489
3,202,626
2,633,882
2,141,548
1,932,427
594,353
552,638
509,251
462,956
394,268
15,698
255,047
200,115
122,900
593,760
593
15,698
255,047
183,396
97,945
552,086
552
15,698
255,047
161,144
73,347
505,236
4,015
15,698
255,047
130,153
58,786
459,684
3,272
15,698
255,047
75,072
45,765
391,582
2,686
Total shareholders' equity
594,353
552,638
509,251
462,956
394,268
139 Zenith Bank Plc Annual Report - 31 December 2015
ZENITH BANK PLC
Other Information
Five Year Financial Summary
In millions of Naira
31 Dec 2015 31 Dec 2014 31 Dec 2013 31 Dec 2012 31 Dec 2011
STATEMENT OF COMPREHENSIVE INCOME
Gross earnings
Share of profit / (loss) of associates
Interest expense
Operating and direct expenses
Impairment charge for financial assets
Profit before taxation
Income tax
Profit after tax
Foreign currency translation differences
Fair value movements on equity instruments
Related tax
Effective portion of changes in fair value of cash
flow hedges
Related tax
Total comprehensive income
Earning per share:
Basic and diluted
31 Dec 2015
31 Dec 2014
31 Dec 2013
31 Dec 2012
31 Dec 2011
432,535
228
(123,597)
(167,877)
(15,673)
125,616
(19,953)
105,663
637
(1,752)
-
-
-
(1,115)
104,548
403,343
138
(106,919)
(163,702)
(13,064)
119,796
(20,341)
99,455
3,282
2,549
-
(2,771)
760
3,820
103,275
351,470
118
(70,796)
(159,019)
(11,176)
110,597
(15,279)
95,318
(2,070)
324
890
2,771
(760)
1,155
96,473
307,082
23
(64,561)
(130,999)
(9,445)
102,100
(1,419)
100,681
(2,424)
297
(91)
-
-
(2,218)
98,463
243,948
45
(34,906)
(124,256)
(17,391)
67,440
(18,736)
48,704
(421)
705
(212)
-
-
72
48,776
336
K
316
K
301
K
319
K
154
K
140
ZENITH BANK PLC
Other Information
Five Year Financial Summary
In millions of Naira
31 Dec 2015 31 Dec 2014 31 Dec 2013 31 Dec 2012 31 Dec 2011
Bank
Statement of Financial Position
Assets
Cash and balances with central banks
Treasury bills
Assets plegeds as collateral
Due from other banks
Derivative assets
Loans and advances
Investment securities
Investments in subsidiaries
Investments in associates
Deferred tax assets
Other assets
Assets classified as held for sale
Investment property
Property and equipment
Intangible assets
735,946
330,900
264,320
266,894
8,481
1,849,225
150,724
33,003
90
5,131
21,673
-
-
81,187
2,753
728,291
253,414
151,746
470,139
16,896
1,580,250
92,832
33,003
90
6,333
19,393
-
-
69,531
1,901
587,793
565,668
6,930
249,524
-
1,126,559
212,523
24,375
90
-
31,415
4,749
-
67,364
1,703
313,546
647,474
-
203,791
-
895,354
256,905
24,375
463
-
16,814
10,338
-
66,651
1,175
211,098
494,253
-
246,364
-
827,035
267,050
19,345
1,822
-
17,616
10,838
7,114
65,877
661
Total assets
3,750,327
3,423,819
2,878,693
2,436,886
2,169,073
Liabilities
Customers deposits
Derivative liabilities
Current tax payable
Deferred income tax liabilities
Other liabilities
On-lending facilities
Borrowings
Debt securities issued
Total liabilities
Net assets
Equity
Share capital
Share premium
Retained earnings
Other reserves
Attributable to equity holders of the parent
2,333,017
384
2,534
-
212,636
286,881
268,111
99,818
2,265,262
6,073
7,709
-
272,726
68,344
198,066
92,932
2,079,862
-
5,266
-
201,265
59,528
60,150
-
1,802,008
-
5,071
5,573
115,027
56,066
15,138
-
1,577,290
-
11,934
10,732
126,660
49,370
21,070
-
3,203,381
2,911,112
2,406,071
1,998,883
1,797,056
546,946
512,707
472,622
438,003
372,017
15,698
255,047
160,408
115,793
546,946
15,698
255,047
150,342
91,620
512,707
15,698
255,047
126,678
75,199
472,622
15,698
255,047
106,010
61,248
438,003
15,698
255,047
55,028
46,244
372,017
Total shareholders' equity
546,946
512,707
472,622
438,003
372,017
141
ZENITH BANK PLC
Other Information
Five Year Financial Summary
In millions of Naira
31 Dec 2015 31 Dec 2014 31 Dec 2013 31 Dec 2012 31 Dec 2011
STATEMENT OF COMPREHENSIVE INCOME
Gross earnings
Interest expense
Operating and direct expenses
Impairment charge for financial assets
Profit before tax
Income tax
Profit after tax
Other comprehensive income
Fair value movements on equity instruments
Tax effect of equity instruments at fair value
Total comprehensive income
Earning per share:
Basic and diluted
31 Dec 2015
31 Dec 2014
31 Dec 2013
31 Dec 2012
31 Dec 2011
396,653
(114,936)
(155,406)
(11,091)
115,220
(16,436)
98,784
(1,752)
-
(1,752)
97,032
372,015
(99,439)
(152,335)
(12,392)
107,849
(15,370)
92,479
2,549
-
2,549
95,028
311,275
(68,471)
(138,789)
(9,907)
94,108
(10,694)
83,414
549
890
1,439
84,853
279,042
(65,352)
(111,644)
(7,998)
94,048
1,755
95,803
15
(5)
10
214,980
(33,407)
(108,529)
(15,900)
57,144
(15,843)
41,301
705
(211)
494
95,813
41,795
315
K
295
K
266
K
305
K
132
K
142