Zenith Bank PLC
Annual Report - 31 December 2016
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
Prof.Oyewusi Ibidapo-Obe
Mr.Gabriel Ukpeh
Mr.Peter Amangbo
Ms. Adaora Umeoji
Mr.Ebenezer Onyeagwu
Mr.Oladipo Olusola
Mr.Umar Ahmed
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
Deputy Managing Director***
Deputy Managing Director***
Executive Director
Executive Director****
* Appointed to the Board effective February 24, 2016.
** Retired from the Board effective April 6, 2016.
*** Appointed Deputy Managing Director (DMD) by the Board with effect from October 01, 2016 and approved by the Central
Bank of Nigeria (CBN) on October 28, 2016.
****Appointed to the Board effective October 01, 2016.
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 2016
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
2.0a Change in accounting policies
2.0b 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
2.8a Impairment of financial assets
2.8b Impairment of non financial assets
2.9 Reclassification of financial instruments
2.10 Restructuring of financial instruments
2.11 Collateral
2.12 Property and equipment
2.13 Intangible assets
2.14 Leases
2.15 Provisions
2.16 Employee benefits
2.17 Share capital and reserves
2.18 Recognition of interest income and expense
2.19 Fees, commissions and other income
2.20 Net trading income
2.21 Operating expense
2.22 Current and deferred income tax
2.23 Earnings per share
2.24 Segment reporting
2.25 Fiduciary activities
3 Risk management
3.13 Sustainability report
4 Critical accounting estimate and judgements
5 Segment analysis
6 Interest and similar income
7 Interest and similar expense
8 Impairment loss on financial assets
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 National Disclosures
Value Added Statement
Five Year Financial Summary
3
9
21
22
23
31
32
33
35
37
37
37
37
38
39
40
41
41
45
45
46
47
47
47
47
48
49
49
50
51
51
52
52
52
52
53
53
53
54
97
98
99
103
103
103
103
104
104
105
105
107
108
108
109
109
110
110
114
116
117
121
122
123
124
126
126
127
127
129
131
131
132
132
133
134
134
136
137
137
138
138
139
143
144
146
2 Zenith Bank Plc Annual Report - 31 December 2016
ZENITH BANK PLC
Directors' Report for the Year Ended 31 Dec 2016
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 2016.
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. In August 2015, the Bank was
admitted into the premium Board 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 taking deposits from the public, granting of loans and advances, corporate finance and money market
activities.
The Bank has five subsidiary companies namely, Zenith Bank (Ghana) Limited, Zenith Pensions Custodian Limited, Zenith
Bank (UK) Limited, Zenith Bank (Sierra Leone) Limited, and Zenith Bank (The Gambia) Limited. During the year, the Group
opened eleven new branches. No branch was closed during the year.
3. Operating results
Gross earnings of the Group increased by 17.4% and profit before tax increased by 24.8% 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 tax
Non- controlling interest
Profit attributable to the equity holders of the parent
Appropriations
Transfer to statutory reserve
Transfer to retained earnings and other reserves
Basic and Diluted earnings per share (kobo)
Non-performing loan ratio %
4.
Dividends
31 Dec 2016
N' Million
31 Dec 2015
N' million
507,997
432,535
156,748
(27,096)
129,652
(218)
129,434
19,021
110,413
129,434
412
k
3.02
125,616
(19,953)
105,663
(132)
105,531
14,818
90,713
105,531
336
k
2.20
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 N1.77 kobo per share which in addition to the N0.25kobo per share
paid as interim dividend amounts to N2.02 kobo per share (31 Dec 2015: N1.80 kobo per share) from the retained earnings
account as at 31 Dec 2016. This will be presented to the shareholders for approval 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
N12.52 billion representing 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 the year ended 31 Dec 2016.
Payment of dividends is subject to withholding tax at a rate of 10% in the hand of qualified recipients.
3 Zenith Bank Plc Annual Report - 31 December 2016
ZENITH BANK PLC
Directors' Report for the Year Ended 31 Dec 2016
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 (CAMA) 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
Mr.Gabriel Ukpeh
Prof. Chukuka Enwemeka
Mr.Jeffrey Efeyini
Prof.Oyewusi Ibidapo-Obe
Ms. Adaora Umeoji
Mr.Ebenezer Onyeagwu
Mr.Oladipo Olusola
Mr. Umar Ahmed
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 *
Deputy Managing Director***
Deputy Managing Director***
Executive Director
Executive Director****
Number of Shareholding
31 Dec 2016 31 Dec 2015
2,946,199,395 2,946,199,395
5,000,000
4,768,836
3,752,853
250,880
-
127,137
541,690
-
26,620,141
2,500,000
2,000,000
-
5,000,000
4,768,836
3,752,853
250,880
-
127,137
541,690
267,856
31,620,141
3,106,918
2,000,000
1,133,927
* Appointed to the board effective February 24, 2016.
** Retired from the board effective April 6, 2016.
*** Appointed Deputy Managing Director (DMD) by the Board with effect from October 01, 2016 and approved by the Central
Bank of Nigeria (CBN) on October 28, 2016.
**** Appointed to the Board effective October 01, 2016.
6.
Directors' interests in contracts
For the purpose of section 277 of CAMA, all contracts with related parties during the year were conducted at arms length.
Information relating to related parties transactions are contained in Note 38 to the financial statements.
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.
4 Zenith Bank Plc Annual Report - 31 December 2016
ZENITH BANK PLC
Directors' Report for the Year Ended 31 Dec 2016
9.
Shareholding analysis
The shareholding pattern of the Bank as at 31 December, 2016 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
541,348
83,802
21,020
771
131
105
21
21
1
7
Percentage of
Shareholders
83.6411
%
12.9479
%
3.2477
%
0.1191
%
0.0202
%
0.0162
%
0.0032
%
0.0032
%
0.0002
%
0.0011
%
Number of
holdings
1,627,229,637
1,712,394,356
3,225,337,840
1,632,120,871
890,422,214
2,219,551,674
1,507,117,182
4,294,018,429
719,545,610
13,568,755,974
10.27
Percentage
Holdings (%)
%5.18
%5.45
%
%5.20
%2.84
%7.07
%4.80
%
%2.29
%
43.22
13.68
The shareholding pattern of the Bank as at December 31, 2015 is as stated below:
647,227
%100
31,396,493,787
%100
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
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
%
33.84
18.90
648,725
%100
31,396,493,786
%100
According to the register of members as at December 31, 2016, 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 - MAIN
Stanbic Nominees Nigeria Limited/C001 - TRAD
Number of
Shares Held
2,946,199,395
2,993,953,971
2,451,590,191
1,814,839,375
Number of
Shares Held
%9.38
%9.54
%7.81
%5.78
According to the register of members at December 31, 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/C001 - TRAD
Stanbic Nominees Nigeria Limited/C002 - TRAD
Number of
Shares Held
2,946,199,395
2,315,613,914
2,273,779,509
1,806,614,996
Number of
Shares Held
%9.38
%7.38
%7.24
%5.75
5 Zenith Bank Plc Annual Report - 31 December 2016
ZENITH BANK PLC
Directors' Report for the Year Ended 31 Dec 2016
11. Donations and charitable gifts
The Group made contributions to charitable and non-political organisations amounting to N2,557 million during the 2016
financial year.
The beneficiaries are as follows:
Committee Encouraging Corporate Philantrophy (mobile cancer machines)
Educational support to Nigerian schools
States' Security Trust Fund
Nigeria Institute of Journalism (NIJ)
Medical assistance to the underpriledged
ICT Centres for Education Institutions
The Nigeria Football Federation
Economic summits & conferences sponsorship for states
Nigerian Basketball Federation
Warri Wolves Football Club sponsorship
Musical Society of Nigeria
Healthcare centre IGA Idugaran LGHA
Others below N10 million
31 Dec 2016
N' Million
1,225
259
235
200
161
156
100
42
39
35
33
10
62
2,557
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 Education Institutions
Medical Assistance to the Underpriviledged
The Nigeria Football Federation
Nigerian 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
12. Events after the reporting period
31 Dec 2015
N' Million
324
151
131
66
50
43
30
24
23
15
10
9
47
923
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.
6 Zenith Bank Plc Annual Report - 31 December 2016
ZENITH BANK PLC
Directors' Report for the Year Ended 31 Dec 2016
13. Disclosure of customer complaints in financial statements for the period ended 31 Dec 2016
Description
Number
Amount claimed
Amount refunded
31 Dec 2016 31 Dec 2015 31 Dec 2016
N.
31 Dec 2015
N.
60 14,569,036,425 8,070,341,593
31 Dec 2016
N.
774,033,876
31 Dec 2015
N.
682,941,586
Pending complaint brought
forward
Received Complaints
Resolved Complaints
Unresolved Complaints
escalated to CBN for
Intervention
Unresolved Complaints
pending with the bank carried
forward
Unresolved Complaints
carried forward
64
343
253
-
-
212 2,465,265,125 14,872,147,292
624,257,449 1,089,886,664
208 15,462,483,784 8,373,452,460 1,386,713,078 1,012,531,806
5
59
- 2,490,301,871
- 12,078,734,554
154
64 1,571,817,766 14,569,036,425
11,578,247
14. Human resources
(i) Employment of disabled persons.
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.
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 training
programmes. These are complemented by on-the-job training.
7 Zenith Bank Plc Annual Report - 31 December 2016
ZENITH BANK PLC
Corporate Governance Report for the Year Ended 31 Dec 2016
1.
Introduction
Zenith Bank Plc is committed to maintaining the highest standards of Corporate Governance both within the Bank and the
Group .
The Bank's business is conducted in compliance with relevant laws and regulations and in line with global best practices. To
this end, the Bank constantly reappraises its processes to ensure that it's business conforms to best practice and market
discipline at all times.
2
The Directors and other key personnel
During the year under review, the Directors and other key personnel of the Bank complied with the following Codes of
Corporate Governance, which it subscribes to:
(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.
3.
Shareholding
The Bank has a diverse shareholding structure with no single ultimate individual beneficiary holding more than 10% of the
Bank’s total issued shares.
4.
Board of directors
The Board has the overall responsibility for setting the strategic direction of the Bank and also oversight of Senior Management.
It also ensures that good Corporate Governance processes and best practices are implemented across the Bank and the
Group.
The Board of the Bank consists of persons of mixed personages, diverse discipline and 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 abreast of their responsibilities and knowledgeable in the business and are therefore able to exercise good
judgment on issues relating to the Bank’s business. They have on the basis of this acted in good faith, with due diligence and
skill and in the overall best interest of the Bank and relevant stakeholders.
5.
Board structure
The board is made up of a non-executive Chairman, five (5) non-executive Directors and five (5) executive Directors including
the GMD/CEO. Three (3) of the non-executive Directors are independent directors, appointed in compliance with the Central
Bank of Nigeria (CBN) circular on Appointment of Independent Directors by Banks.
The Group Managing Director/Chief Executive is responsible for the day to day running of the Bank and oversees the Group
structure, assisted by the Executive Committee (EXCO). EXCO comprises the Executive Directors and the Group Managing
Director/Chief Executive, who chairs it.
6.
Responsibilities of the Board
The Board is responsible for:
(a)
reviewing and approving the Bank’s strategic plans for implementation by management;
(b)
reviewing and approving the Bank’s financial objectives, business plans and budgets, including capital allocations and
expenditures;
(c) monitoring corporate performance against the strategic plans and business, operating and capital budgets;
(d)
implementing the Bank’s succession planning;
(e)
approving acquisitions and divestitures of business operations, strategic investments and alliances, and major business
development initiatives;
(f)
approving delegation of authority for any unbudgeted expenditure;
9 Zenith Bank Plc Annual Report - 31 December 2016
ZENITH BANK PLC
Corporate Governance Report for the Year Ended 31 Dec 2016
(g)
setting the tone for supervising the Corporate Governance Structure of the Bank and;
(h)
assessing its own effectiveness in fulfilling its responsibilities, including monitoring the effectiveness of individual
directors.
The membership of the Board during the period is as follows:
Board of Directors
NAME
Mr. Jim Ovia, CON
Alhaji Baba Tela
Mr. Jeffrey Efeyini
Prof. Chukuka S. Enwemeka
Prof. Oyewusi Ibidapo-Obe*
Mr. Gabriel Ukpeh *
Mr. Peter Amangbo
Ms. Adaora Umeoji **
Mr. Ebenezer Onyeagwu **
Mr. Olusola Oladipo
Mr. Umar Ahmed***
Sir Steve Omojafor****
Mr. Babatunde Adejuwon****
POSITION
Chairman
Independent/Non-Executive Director
Non-Executive Director
Non-Executive Director
Independent/Non-Executive Director
Independent/Non-Executive Director
Group Managing Director/CEO
Deputy Managing Director
Deputy Managing Director
Executive Director
Executive Director
Non-Executive Director
Non-Executive Director
* Appointed to the Board with effect from February 24, 2016.
** Appointed Deputy Managing Director (DMD) with effect from October 01, 2016 approved by the Central Bank of Nigeria
(CBN) on October 28, 2016.
*** Appointed Executive Director by the Board with effect from October 01, 2016 and approved by the CBN on October 28,
2016.
**** Retired from the Board with effect from April 6, 2016.
NB: Biographical details of the directors can be found in the bank's website on www.zenithbank.com.
The Board meets at least every quarter but may hold extra-ordinary sessions to address urgent matters requiring the attention
of the Board.
7.
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.
Accordingly, the Board has set up various committees to assisst in attending to the specific matters reserved 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.
These Charters were forwarded to CBN for approval in line with extant CBN circulars.
The Committees of the Board meet quarterly but may hold extraordinary sessions as business of the Bank demand.
10 Zenith Bank Plc Annual Report - 31 December 2016
ZENITH BANK PLC
Corporate Governance Report for the Year Ended 31 Dec 2016
The following are the current standing Committees of the Board:
7.1 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/NED)
Alhaji Baba Tela - NED
Prof. Chukuka Enwemeka - NED
Mr. Peter Amangbo - MD/CEO
Mr. Ebenezer Onyeagwu - DMD
Mr. Olusola Oladipo - ED
Mr. Babatunde Adejuwon*
* - Retired from the Board with effect from April 6, 2016.
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.
7.2 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 relating to staff
welfare, discipline, staff remuneration and promotion.
The membership of the Committee during the half year is as follows:
Alhaji Baba Tela – (Chairman/NED)
Prof. Chukuka Enwemeka - NED
Prof. Oyewusi Ibidapo-Obe - NED
Mr. Peter Amangbo - MD/CEO
Ms. Adaora Umeoji - DMD
Sir. Steve Omojafor*
* Retired from the Board with effect from April 6, 2016.
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;
11 Zenith Bank Plc Annual Report - 31 December 2016
ZENITH BANK PLC
Corporate Governance Report for the Year Ended 31 Dec 2016
Consideration of the dividend policy of the Group and the declaration of dividends or other forms of distributions and
recommendation to the Board;
Review and approval of any employment-related contracts with the MD/CEO and other executive officers, if
applicable;
Consideration of senior management promotions as recommended by the MD/CEO;
Review and recommendations on recruitment, promotion, and disciplinary actions for senior management staff;
Review and agreement at the beginning of the period, 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;
To discharge the Board’s responsibility relating to oversight of the management of the health and welfare plans that
cover the company’s employees;
Review and recommendation to the Board, salary revisions and service conditions for senior management staff,
based on the recommendation of the Executives;
Oversight of broad-based employee compensation policies and programs;
7.3 Board risk management committee:
The Board Risk Management 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 Prof. Chukuka Enwemeka (a non Executive
Director), the Committee’s membership comprises the following:
Prof. Chukuka S. Enwemeka – (Chairman/NED)
Mr. Jeffrey Efeyini - NED
Mr. Gabriel Ukpeh ** - NED
Mr. Peter Amangbo - MD/CEO
Mr. Ebenezer Onyeagwu - DMD
Mr. Babatunde Adejuwon*
** Appointed to the Board effective February 24, 2016.
* Retired from the Board with effect from April 6, 2016.
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 perform such other duties and responsibilities as the Board of Directors may assign from time to time.
12 Zenith Bank Plc Annual Report - 31 December 2016
ZENITH BANK PLC
Corporate Governance Report for the Year Ended 31 Dec 2016
7.4 Board audit and compliance committee:
The Committee was created from the former Board Risk & Audit Committee on February 24, 2016 in line with the Central Bank
of Nigeria (CBN) regulations. The Board also on October 19, 2016 renamed same as Board Audit and Compliance Committee
to align its responsibilities with regulatory requirements.
The Committee is chaired by an Independent Non Executive Director - Mr. Gabriel Ukpeh, who is a Fellow of the Institute of the
Chartered Accountants of Nigeria (ICAN) and who is knowledgable in financial matters. The Chief Inspector and the Chief
Compliance officer has access to this Committee and make quarterly presentations for the consideration of the Committee.
Committee's membership comprises the following:
Mr. Gabriel Ukpeh - (Chairman/NED)*
Alhaji Baba Tela - NED
Mr. Jeffrey Efeyini - NED
* – Appointed to the board effective February 24, 2016.
Committee’s terms of reference
The Board Audit Committee shall have the following authority and responsibilities as delegated by the Board of Directors:
Ascertain whether the accounting and reporting policies of the Bank are in accordance with legal requirement and
acceptable ethical practices.
Review the scope and planning of audit requirements.
Review the findings on management matters (Management Letter) in conjunction with the external auditors and
Management’s responses thereon.
Keep under review the effectiveness of the Bank’s system of accounting and internal control.
Make recommendations to the Board with regard to the appointment, removal and remuneration of the external
auditors of the bank.
Authorize the internal auditor to carry out investigations into any activities of the Bank which may be of interest or
concern to the Committee.
Assist in the oversight of compliance with legal and other regulatory requirements, assessment of qualifications and
independence of the external auditors and performance of the Bank’s internal audit function as well as that of the
external auditors.
Ensure that the internal audit function is firmly established and that there are other reliable means of obtaining
sufficient assurance of regular review or appraisal of the system of internal control in the Bank.
Oversee management’s processes for the identification of significant fraud risks across the Bank and ensure that
adequate prevention, detection and reporting mechanisms are in place.
On a quarterly basis, obtain and review reports by the internal auditor on the strength and quality of internal controls,
including any issues or recommendations for improvement, raised during the most recent control review of the Bank.
Discuss and review the Bank’s unaudited quarterly and annual financial statements with management and external
and external auditors respectively to include disclosures, management control reports, independent reports and
external auditors’ reports before submission to the Board, in advance of publication.
Discuss policies strategies with respect to risk assessment and management.
Meet separately and periodically with management, the internal auditor and the external auditors, respectively.
Review and ensure that adequate whistle - blowing procedures are in place and that a summary of issues reported is
highlighted to the Board, where necessary
Review with external auditors, any audit scope limitations or problems encountered and management responses to
them.
Review the independence of the external auditors and ensure that they do not provide restricted services to the
bank.
Appraise and make recommendation to the Board on the appointment of internal auditor of the Bank and review
his/her performance appraisal annually.
Review the response of management to the observations and recommendation of the Auditors and Bank regulatory
authorities.
Agree Internal Audit Plan for the year annually with the Internal auditor and ensure that the internal audit function is
adequately resourced and has appropriate standing within the Bank.
Review quarterly Internal Audit progress against Plan for the period and review outstanding Agreed Actions and
follow up.
The Chief Inspector shall report to the Committee regularly on action of correction implemented by management
including provisions and improvement to systems and control where necessary.
13 Zenith Bank Plc Annual Report - 31 December 2016
ZENITH BANK PLC
Corporate Governance Report for the Year Ended 31 Dec 2016
To develop a comprehensive internal control framework for the Bank and obtain assurances on the operating
effectiveness of the Bank’s internal control framework.
To establish management’s processes for the identification of significant fraud risks across the Bank and ensure that
adequate prevention, detection and reporting mechanisms are in place.
To work with the Internal Auditor to develop the Internal Audit Plan for the year annually and ensure that the internal
audit function is adequately resourced to carry out the plan.
To review periodically the Internal Audit progress against Plan for the period and review outstanding Agreed Actions
and follow up.
The Chief Inspector, the Chief Compliance Officer, as well as the Chief Risk Officer shall submit quarterly reports to
the Committee, in addition to reporting to the Group Managing Director. The Chief Inspector, the Chief Compliance
Officer and the Chief Risk Officer shall also have unrestricted access to the Chairman of the Committee.
To perform such other duties and responsibilities as the Board of Directors may assign from time to time.
7.5 Board governance, nominations and remuneration committee:
The Committee is made up of five (5) Non Executive Directors and one of the non-Executive Directors chairs the committee .
The membership of the committee is as follows:
Mr. Jeffrey Efeyini - (Chairman)
Alhaji Baba Tela
Prof. Chukuka Enwemeka
Prof. Oyewusi Ibidapo Obe **
Mr. Gabriel Ukpeh **
Sir. Steve Omojafor*
Mr. Babatunde Adejuwon*
* Retired from the Board with effect from April 6, 2016.
** Appointed to the Committee effective February 24, 2016
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 amount 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;
Review and recommendation for Board ratification, all terminal compensation arrangements for Directors and senior
management;
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;
Recommendation of membership criteria for the Group Board, Board Committees and subsidiary companies Boards.
Identification 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;
Ensuring 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;
Review the Group’s organization structure and make recommendations to the Board for approval;
Review and agreement at the beginning of the year, of the key performance indicators for the Group MD and
Executive Directors;
14 Zenith Bank Plc Annual Report - 31 December 2016
ZENITH BANK PLC
Corporate Governance Report for the Year Ended 31 Dec 2016
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;
7.6 Audit committee of the Bank
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 is chaired by a shareholder's representative. The committee meets every quarter,
but could also meet at any other time, should the need arise.
All members of the committee are financially literate.
The membership of the Committee is as follows:
Shareholders' Representative
Mrs Uche Erobu** (Chairman)
Prof (Prince) L.F.O. Obika
Mr. Michael Olusoji Ajayi
Ms. Angela Agidi***
Non-Executive Directors
Alhaji Baba Tela
Mr. Jeffrey Efeyini
Mr. Gabriel Ukpeh*
Mr. Babatunde Adejuwon***
* Appointed to the Committee with effect from February 24, 2016
** Appointed to the Committee with effect from April 6, 2016
*** Retired from the Committee with effect from April 6, 2016.
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;
(d)
such other matters in connection with overseeing the financial reporting process and the maintenance of internal controls
as the committee shall deem appropriate.
(e)
To prepare the Committee's report for inclusion in the Bank's annual report;
(f)
To report to the entire Board at such times as the Committee shall determine.
15 Zenith Bank Plc Annual Report - 31 December 2016
ZENITH BANK PLC
Corporate Governance Report for the Year Ended 31 Dec 2016
7.7 Executive committee (EXCO)
The EXCO comprises of 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 first review platform for issues to be discussed at the Board level. 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.
7.8 Other committees
In addition to the afore-mentioned committees, the Bank has in place, other standing management committees. They include:
(a) Management Committee (MANCO);
(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.
The Committee meets weekly and as frequently as the need arises.
(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 Group Managing Director, the Executive Directors and all divisional and group heads.
16 Zenith Bank Plc Annual Report - 31 December 2016
ZENITH BANK PLC
Corporate Governance Report for the Year Ended 31 Dec 2016
(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 Group Managing Director/Chief Executive Officer;
Two (2) Executive Directors*;
Head of Treasury;
Head of Trade Services;
Chief Inspector;
Chief Risk Officer;
Chief Compliance Officer
Head of IT;
1
2
3
4
5 Marketing Groups Representatives;
6
7
8
9
10 Head of Infotech - Software;
11 Head of Infotech - Enginering;
12 Head of Card Services;
13 Group Head of Operations;
14 Group Head of IT Audit;
15 Head of e-Business; and
16 Head of Investigation.
The committee meets monthly or as the need arises.
* The two Executive Directors are Ebenezer Onyeagwu and Oladipo Olusola.
8. 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.
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 Nigeriia
Stock Exchange.
The Bank has an Investors Relations Unit which hold regular forum to brief all stakeholders on operations of the Bank.
The Bank also, from time to time, hold briefing sessions with market operators (stockbrokers, dealers, institutional investors,
issuing houses, stock analysts, mainly through investors conference) to update them with the state of our business. These
professionals, as advisers and purveyors of information, relates with and relay to the shareholders useful informtion about us.
We also regularly brief the regulatory authorities, and file statutory returns which are usually accessible to the shareholders.
17 Zenith Bank Plc Annual Report - 31 December 2016
ZENITH BANK PLC
Corporate Governance Report for the Year Ended 31 Dec 2016
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 annual fee and sitting allowances which are based on levels of responsibilities.
Directors are also sponsored for training programmes required to enable them improve in discharging their
responsibilities as directors.
Executive directors
The remuneration policy for executive directors considers various elements, including the following:
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 Bank's performance. 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
Board risk
management
committee
Board audit
and
compliance
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
Prof. Oyewusi Ibidapo-Obe **
Mr.Gabriel Ukpeh**
Ms. Adaora Umeoji***
Mr. Ebenezer Onyeagwu***
Mr. Olusola Oladipo
Mr. Peter Amangbo
4
4
2
2
4
4
4
3
2
4
4
4
4
Note:
4
N/A
N/A
2
4
4
2
N/A
N/A
N/A
4
4
4
* Retired from the Board with effect from April 6, 2016.
** Appointed to the Board effective February 24, 2016
4
N/A
2
N/A
4
N/A
4
2
N/A
4
N/A
N/A
4
2
N/A
N/A
2
N/A
2
2
N/A
N/A
N/A
2
N/A
2
4
N/A
2
2
4
2
4
2
1
N/A
N/A
N/A
N/A
2
N/A
N/A
2
2
2
2
N/A
1
N/A
2
N/A
2
2
N/A
N/A
2
2
2
N/A
N/A
1
N/A
N/A
2
2
*** Appointed Deputy Managing Director (DMD) by the Board with effect from October 01, 2016 and approved by the Central
Bank of Nigeria (CBN) on October 28, 2016.
N/A - Not Applicable (Not a Committee member)
18 Zenith Bank Plc Annual Report - 31 December 2016
ZENITH BANK PLC
Corporate Governance Report for the Year Ended 31 Dec 2016
Board audit and compliance committee was created from the Board risk & audit committee on February 24, 2016 and held two
(2) meetings during the year.
Board risk management committee was created from the Board risk & audit committee on February 24, 2016 and held two (2)
meetings during the year.
Dates for Board and Board Committee meetings held in 2016 financial year:
Board meetings
February 24, 2016 April 6, 2016
July 27, 2016
October 19, 2016
Board credit
committee
meeting
Finance and
general purpose
committee
Board risk and
audit committee
meeting
Board risk
management
committee
meeting
Board audit and
compliance
committee
meeting
Board
governance,
nominations and
remuneration
committee
Audit committee
meeting of the
bank
February 23, 2016 April 5, 2016
July 26, 2016
October 18, 2016
February 23, 2016 April 5, 2016
July 26, 2016
October 18, 2016
February 23, 2016 April 5, 2016
July 26, 2016
October 18, 2016
July 26, 2016
October 18, 2016
February 23, 2016 April 7, 2016
July 26, 2016
October 18, 2016
February 23, 2016 April 7, 2016
June 10, 2016
July 26, 2016
October 18, 2016
19 Zenith Bank Plc Annual Report - 31 December 2016
ZENITH BANK PLC
Corporate Governance Report for the Year Ended 31 Dec 2016
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.
Members
Number of Meetings attended
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)
Mr. Gabriel Ita Asuquo Ukpeh (NED) **
Mrs Uche Erobu (SR) ***
NED- Non-Executive Director
SR - Shareholders representive
5
5
5
1
1
5
2
3
* Retired from the committee with effect from April 6, 2016
** Appointed to the Committee with effect from February 24, 2016
*** Appointed to the Committee with effect from April 6, 2016
Analysis of Fraud and forgeries Returns
31 Dec 2016
31 Dec 2015
No.
% Loss Actual Loss to
Nature of Fraud
No.
%
Loss
Actual Loss to
the Bank (N)
Jan-Dec 2016
ATM/Electronic fraud
Staff Perpetrate
Impersonation
Stolen/Forged Instrument
Internet Banking
Others
Total
18
4
1
27
151
29
230
-
86
-
-
14
-
100
- 24
7,740,002 5
- 4
- 8
1,300,000 80
- 90
9,040,002 211
-
77
-
16
3
4
100
the Bank (N)
Jan-Dec 2015
-
155,727,899
-
31,482,925
5,328,712
7,983,900
200,523,436
20 Zenith Bank Plc Annual Report - 31 December 2016
ZENITH BANK PLC
Consolidated and Separate Statement of Profit or Loss and other
Comprehensive Income for the Year Ended 31 Dec 2016
Group
Bank
In millions of Naira
Note(s)
2016
2015
2016
2015
Gross earnings
507,997
432,535
454,808
396,653
Interest and similar income
Interest and similar expense
Net interest income
Impairment loss on financial assets
Net interest income after impairment loss on
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(a)
26
27
37
12
13(a)
384,557
(144,378)
240,179
(32,350)
348,179
(123,597)
224,582
(15,673)
343,556
(131,910)
211,646
(26,295)
317,419
(114,936)
202,483
(11,091)
207,829
68,444
28,398
26,598
-
(9,679)
(1,435)
(69,042)
(94,365)
156,748
(27,096)
129,652
208,909
60,904
18,150
5,302
228
(9,188)
(1,239)
(67,522)
(89,928)
125,616
(19,953)
105,663
185,351
55,619
28,398
27,235
-
(8,664)
(1,375)
(62,235)
(84,402)
139,927
(20,642)
119,285
191,392
50,313
17,884
11,037
-
(8,472)
(1,129)
(62,428)
(83,377)
115,220
(16,436)
98,784
Total comprehensive income for the year
166,626
104,548
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
Other comprehensive income for the year
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 (in kobo)
21(b)
6,636
(1,752)
6,636
(1,752)
30,338
36,974
637
(1,115)
129,434
218
105,531
132
-
-
6,636
125,921
119,285
-
(1,752)
97,032
98,784
-
166,236
390
104,467
81
125,921
-
97,032
-
14
412
336
380
315
The accompanying notes are an integral part of these consolidated and separate financial statements.
31 Zenith Bank Plc Annual Report - 31 December 2016
ZENITH BANK PLC
Consolidated and Separate Statement of Financial Position as at 31 Dec 2016
Group
Bank
In millions of Naira
Note(s) 31 Dec 2016
31 Dec 2015
31 Dec 2016
31 Dec 2015
Assets
Cash and balances with central banks
Treasury bills
Assets pledged as collateral
Due from other banks
Derivative assets
Loans and advances
Investment securities
Investment in subsidiaries
Investment in associates
Deferred tax assets
Other assets
Property and equipment
Intangible assets
Total assets
Liabilities
Customers' deposits
Derivative liabilities
Current income tax payable
Deferred income tax liabilities
Other liabilities
On-lending facilities
Borrowings
Debt securities issued
Total liabilities
Capital and reserves
Share capital
Share premium
Retained earnings
Other reserves
Attributable to equity holders of the parent
Non-controlling interest
Total shareholders' equity
Total liabilities and equity
15
16
17
18
19
20
21
22
23
24
25
26
27
28
33
13(b)
24
29
30
31
32
34
35
35
35
35
669,058
557,359
328,343
459,457
82,860
2,289,365
199,478
-
-
6,440
37,536
105,284
4,645
761,561
377,928
265,051
272,194
8,481
1,989,313
213,141
-
530
5,607
22,774
87,022
3,240
627,385
463,787
325,575
354,405
82,860
2,138,132
118,622
33,003
-
6,041
35,410
94,613
3,903
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
4,739,825
4,006,842
4,283,736
3,750,327
2,983,621
66,834
8,953
45
208,680
350,657
263,106
153,464
2,557,884
384
3,579
19
205,062
286,881
258,862
99,818
2,552,963
66,834
6,927
-
243,736
350,657
292,802
153,464
2,333,017
384
2,534
-
212,636
286,881
268,111
99,818
4,035,360
3,412,489
3,667,383
3,203,381
15,698
255,047
267,008
165,729
703,482
983
704,465
15,698
255,047
200,115
122,900
593,760
593
594,353
15,698
255,047
218,507
127,101
616,353
-
616,353
15,698
255,047
160,408
115,793
546,946
-
546,946
4,739,825
4,006,842
4,283,736
3,750,327
The accompanying notes are an integral part of these consolidated and separate financial statements.
The financial statements were approved by the Board of Directors for issue on 24 January, 2017 and signed on its behalf by:
Jim Ovia (Chairman)
FRC/2013/CIBN/00000002406
Peter Amangbo (Group Managing Director and Chief Executive)
FRC/2013/ICAN/00000001310
Ebenezer Onyeagwu (Deputy Managing Director)
FRC/2013/ICAN/00000003788
Stanley Amuchie (Chief Financial Officer)
FRC/2013/MULTI/00000001063
32 Zenith Bank Plc Annual Report - 31 December 2016
ZENITH BANK PLC
Consolidated and Separate Statement of Changes in Equity as at 31 Dec 2016
Group
In millions of Naira
Share
capital
Share
premium
Attributable to equity holders of the Bank
Statutory
reserve
Fair value
reserve
SMIEIS
reserve
Credit risk
reserve
Foreign
currency
translation
reserve
Retained
earnings
Total
Non-
controlling
interest
Total equity
At 1 January 2015
15,698
255,047
(2,389)
6,066
78,267
3,729
12,272
183,396
552,086
Profit for the year
Foreign currency translation
differences
Fair value movements on equity
instruments
Total comprehensive income for
the year
Transfer between reserves
Transactions with owners of the Bank
Dividends
At 31 Dec 2015
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
688
-
-
-
(1,752)
688
(1,752)
-
-
-
-
-
-
-
-
-
-
14,826
-
-
-
-
-
-
-
-
-
-
-
-
-
105,531
-
105,531
688
-
(1,752)
105,531
104,467
11,193
(26,019)
-
-
-
-
(62,793)
-
(62,793)
15,698
255,047
(1,701)
4,314
93,093
3,729
23,465
200,115
593,760
At 1 January 2016
15,698
255,047
4,314
93,093
3,729
23,465
200,115
593,760
Profit for the year
Foreign currency translation
differences
Fair value movements on equity
instruments
Total comprehensive income for
the year
Transfer between reserves
Transactions with owners of the Bank
Dividends
At 31 Dec 2016
-
-
-
-
-
-
-
-
-
-
-
-
(1,701)
-
30,166
-
-
-
6,636
30,166
6,636
-
-
-
-
-
-
-
-
19,021
-
-
-
-
-
-
-
129,434
-
129,434
30,166
-
6,636
-
-
-
-
129,434
166,236
390
166,626
(12,994)
(6,027)
-
-
(56,514)
(56,514)
-
-
-
(56,514)
552
132
(51)
-
81
-
-
(40)
593
593
218
172
-
552,638
105,663
637
(1,752)
104,548
-
-
(62,833)
594,353
594,353
129,652
30,338
6,636
15,698
255,047
28,465
10,950
112,114
3,729
10,471
267,008
703,482
983
704,465
33 Zenith Bank Plc Annual Report -31 December 2016
ZENITH BANK PLC
Consolidated and Separate Statement of Changes in Equity as at 31 Dec 2016
Bank
In millions of Naira
Share
capital
Share
premium
Fair value
reserve
Statutory
reserve
SMIEIS
reserve
Credit risk
reserve
Retained
earnings
Total equity
At 1 January 2015
15,698
255,047
Profit for the year
Fair value movements on equity
instruments
Total comprehensive income for
the year
Transfer between reserves
Transactions with owners of the Bank
Dividend
At 31 Dec 2015
Profit for the year
Fair value movements on equity
instruments
Total comprehensive income for
the year
Transfer between reserves
Transactions with owners of the Bank
Dividends
At 31 Dec 2016
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
At 1 January 2016
15,698
255,047
6,066
-
(1,752)
(1,752)
-
-
-
71,582
3,729
10,243
150,342
512,707
-
-
-
14,818
-
-
-
-
-
-
-
-
-
-
-
98,784
-
98,784
(1,752)
98,784
97,032
11,107
-
(25,925)
-
-
-
-
(62,793)
(62,793)
4,314
-
6,636
6,636
-
-
-
86,400
3,729
21,350
160,408
546,946
-
-
-
17,893
-
-
-
-
-
-
-
-
-
-
-
119,285
-
119,285
6,636
119,285
125,921
(13,221)
-
(4,672)
-
-
-
-
(56,514)
(56,514)
15,698
255,047
10,950
104,293
3,729
8,129
218,507
616,353
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.
34 Zenith Bank Plc Annual Report -31 December 2016
ZENITH BANK PLC
Consolidated and Separate Statement of Cash Flows
for the Year Ended 31 Dec 2016
In millions of Naira
Cash flows from operating activities
Group
Bank
Note(s)
2016
2015
2016
2015
Profit after tax for the year
129,652
105,663
119,285
98,784
Adjustments for:
Impairment loss
On overdrafts
On term loans
On on-lending
On leases
On other assets
On investment in associates
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 and equity securities
Tax expenses
Changes in operating asset and liabilities:
Net increase in loans and advances
Net increase in other assets
Net increase in treasury bills with maturities greater than
three months
Net increase in treasury bills (FVTPL)
Net increase in assets pledged as collateral
Net decrease/(increase) in investment securities
Net (increase)/decrease in restricted balances (cash
reserves)
Net increase in customer deposits
Net increase/(decrease) in other liabilities
Net (increase)/decrease in derivative assets
Net increase/{decrease) in derivative liabilities
Interest received
Dividend received
Interest paid
Tax paid
VAT paid
8
8
8
8
8
8
44(i)
44(iii)
26
27
11
32
6
7
23
11,
44(vii)
11
13
44(iv)
44(xi)
44(ii)
44(iii)
17
44(i)
15
44(v)
44(vi)
19
33
44 (ix)
11
44 (x)
13(b)
44(vi)
13,786
19,099
(1,336)
(13)
284
530
328
-
9,679
1,435
(349)
53,256
(384,557)
144,378
-
(236)
-
27,096
13,032
(298,548)
(15,046)
(111,193)
(20,683)
(63,292)
18,337
(124,630)
420,498
4,047
(74,379)
66,450
(185,407)
345,410
349
(139,139)
(22,444)
(429)
(178)
13,219
2,276
24
332
-
(707)
(878)
9,188
1,239
(545)
6,633
(348,179)
123,597
(228)
(39)
(1,615)
19,953
(70,245)
(261,371)
(1,651)
(165,203)
(51,658)
(113,305)
(16,768)
104,593
18,654
(82,336)
8,927
(5,689)
(636,052)
335,254
545
(121,678)
(26,356)
(2,460)
12,811
14,465
(1,336)
(13)
278
90
328
-
8,664
1,375
(3,949)
53,256
(343,556)
131,910
-
(172)
-
20,642
14,078
(283,807)
(14,015)
(63,608)
(20,683)
(61,255)
38,410
(124,563)
215,326
31,312
(74,379)
66,450
(276,734)
312,529
3,949
(127,290)
(17,159)
(212)
(3,108)
11,567
2,276
24
332
-
(707)
(878)
8,472
1,129
(4,505)
6,633
(317,419)
114,936
-
(27)
(1,615)
16,436
(67,670)
(266,809)
(2,612)
(142,469)
(51,658)
(112,574)
(60,533)
104,631
65,836
(57,630)
8,415
(5,689)
(588,762)
304,494
4,505
(113,017)
(20,409)
(2,460)
Net cash flows used in operations
(1,660)
(450,747)
(104,917)
(415,649)
35 Zenith Bank Plc Annual Report - 31 December 2016
ZENITH BANK PLC
Consolidated and Separate Statement of Cash Flows
for the Year Ended 31 Dec 2016
In millions of Naira
Cash flows from investing activities
Group
Bank
Note(s)
2016
2015
2016
2015
Purchase of property and equipment
Proceeds from sale of property and equipment
Purchase of intangible assets
Proceeds from sale of equity securities
26
44(vii)
27
44(viii)
(27,421)
603
(2,417)
681
(25,019)
96
(2,221)
3,211
(22,737)
360
(2,066)
-
(20,196)
95
(1,981)
3,211
Net cash (Used in)/from investing activities
(28,554)
(23,933)
(24,443)
(18,871)
Cash flows from financing activities
Borrowed funds
Inflow from long term borrowing
Repayment of long term borrowing
Net inflow from On-lending facilities
Repayment of debt securities issued interest
Dividends paid to shareholders
31
31
30
32
40
82,017
(77,773)
63,776
390
(56,514)
75,909
(15,113)
218,537
253
(62,793)
104,043
(79,352)
63,776
390
(56,514)
85,158
(15,113)
218,537
253
(62,793)
Net cash from financing activities
11,896
216,793
32,343
226,042
Decrease in cash and cash equivalents
(18,318)
(257,887)
(97,017)
(208,478)
Analysis of changes in cash and cash equivalents :
Cash and cash equivalent at the beginning of the year
(Decrease)/Increase in cash and cash equivalents
Effect of exchange rate movement on cash balances
709,714
(18,318)
36,003
965,723
(257,887)
1,878
663,375
(97,017)
-
871,853
(208,478)
-
Cash and cash equivalents at the end of the year
41
727,399
709,714
566,358
663,375
The accompanying notes are an integral part of these consolidated and separate financial statements.
36 Zenith Bank Plc Annual Report - 31 December 2016
ZENITH BANK PLC
Notes to the Consolidated and Separate Financial Statements
for the Year Ended 31 December 2016
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. In August 2015, the
Bank was admitted into the Premium Board of 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 Pensions Custodian Limited, Zenith
Bank (UK) Limited, Zenith Bank (Sierra Leone) Limited, and Zenith Bank (Gambia) Limited. The Bank also has
representative offices in South Africa and China in addition to operating a branch of Zenith Bank UK Limited in the United
Arab Emirates.
The consolidated financial statements for the year ended 31 Dec 2016 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 Dec 2016 were
approved for issue by the Board of Directors on 24 January 2017.
The Group does not have any unconsolidated structured entity.
2.0 (a) Changes in accounting policies
Except as noted below, the Group has consistently applied the accounting policies as set out in Note 2(b) to all periods
presented in these consolidated and separate financial statements.
The Group has adopted the following new standards and amendments including any consequential amendments to other
standards with initial date of application of 1 January 2016.
(i) Disclosure initiative (Amendments to IAS 1)
The amendments provide additional guidance on the application of materiality and aggregation when preparing financial
statements. The amendments also clarify presentation principles applicable to the order of notes, OCI of equity accounted
investees and subtotals presented in the statement of financial position, and statement of profit or loss and other
comprehensive income.
The Group has adopted the amendments in the preparation of these financial statements, however, the amendments did
not have any material impact on the Group's financial statements.
(b) Significant accounting policies
Except as noted in Note 2(a), 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 (IFRS) 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.
37 Zenith Bank Plc Annual Report - 31 December 2016
ZENITH BANK PLC
Notes to the Consolidated and Separate Financial Statements
for the Year Ended 31 December 2016
All financial assets are measured by the Group at:
(1) amortised cost if both of the following criteria are met:
(i) the asset is held within a business model with the objective of collecting the contractual cash flows, and
(ii) the contractual terms give rise on specified dates to cash flows that are solely payments of principal and
interest on the principal outstanding.
(2) fair value through other comprehensive income (FVTOCI);
Financial assets at fair value through other comprehensive income comprise:
(i) equity securities which are not held for trading and
(ii) debt securities where the contractual cash flows are solely principal and interest and the objective of the
company's business model is achieved by collecting contractual cash flows
(3) fair value through profit or loss (FVTPL);
The Group measures the following financial assets at fair value through profit or loss:
(i) debt instruments that do not qualify for measurement at either amortised cost or at fair value through other
comprehensive income
(ii) equity investments that are held for trading, and
(iii) equity investments for which the equity the Group has not elected to recognise fair value gains and losses
through other comprehensive income.
Financial liabilities within the Group are measured as follows:
Financial liabilities held for trading (e.g derivative liabilities) as well as loan commitments and financial guarantee
contracts that are designated as FVTPL are measured at fair value.
Non-derivative financial instruments, carried at fair value through profit or loss, are measured 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 earlier adopted by
the group in the preparation of its financial statements for the year ended 31 December, 2009.
A number of new standards, amendments to standards and interpretations are effective for annual periods beginning after 1
January 2016, 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.
(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.
38 Zenith Bank Plc Annual Report - 31 December 2016
ZENITH BANK PLC
Notes to the Consolidated and Separate Financial Statements
for the Year Ended 31 December 2016
This standard will probably have a significant impact on the Group impairment model. The impairment model has been
changed from “incurred loss” under IAS 39 to an “expected credit loss” model. This model 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 annual period commencing January 01, 2018.
(ii) 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.
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 2017.
The Group will adopt the amendments for the year ending 31 December 2018.
(iii) IFRS 16: Leases
This standard sets out the principles for the recognition, measurement, presentation and disclosure of leases for both
parties to a contract, i.e the customer ('lessee') and the supplier ('lessor'). IFRS 16 eliminates the classification of leases as
required by IAS 17 and introduces a single lease accounting model. Applying that model, a lessee is required to recognise:
assets and liabilities for leases with a term of more than 12 months, unless the underlying assets is of low value;
depreciation of lease assets seperately from interest on lease liabilities in profit or loss
For the lessor, IFRS 16 substantially carries forward the lessor accounting requirements in IAS 17. Accordingly, a lessor
continues to classify its leases or finance leases, and to account for these two types of leasers differently.
The Group is currently in the process of assessing the impact that the initial application would have on its business and will
adopt the standard for the year ending 31 December 2019.
2.3 Basis of Consolidation
(a) Subsidiaries
Subsidiaries are entities controlled by the Group. The Group controls an entity if it is exposed to, or has the rights to variable
returns from its involvement with the entity and has the ability to affect those returns through its power over the entity. 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 control 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.
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). When the proportion of the equity held by NCIs changes, the carrying amounts of
the controlling and NCIs are adjusted to reflect the changes in their relative interests in the Subsidiary. 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.
39 Zenith Bank Plc Annual Report - 31 December 2016
ZENITH BANK PLC
Notes to the Consolidated and Separate Financial Statements
for the Year Ended 31 December 2016
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 are measured at cost.
(b) Loss of Control
On loss of control, the Group derecognises the assets and liabilities of the subsidiary, any related non-controlling interests
and the other components of equity relating to a 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.
(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:
(i)
assets and liabilities for statement of financial position presented are translated at the closing rate at the reporting
date;
40 Zenith Bank Plc Annual Report - 31 December 2016
ZENITH BANK PLC
Notes to the Consolidated and Separate Financial Statements
for the Year Ended 31 December 2016
(ii)
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
(iii)
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 and are recognised in the profit
or loss. 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 reserve 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.
2.5 Cash and cash equivalents
For the purposes of the statement of cash flow, cash and cash equivalents comprise balances with original maturities of
three (3) months or less than three months from the date of acquisition that are subject to an insignificant risk of changes in
their fair value, and are used by the Group in the management of its short-term commitments. They include 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 initially 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.
41 Zenith Bank Plc Annual Report - 31 December 2016
ZENITH BANK PLC
Notes to the Consolidated and Separate Financial Statements
for the Year Ended 31 December 2016
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 amortised cost or fair value depending on
their classification category.
(c) Classification
(i) Financial assets
Subsequent to initial recognition, all financial assets within the Group are measured at:
amortised cost;
fair value through other comprehensive income (FVOCI); or
fair value through profit or loss (FVTPL)
The Group classifies its financial assets as subsequently measured at amortised cost if it meets both of the following
criteria:
'Hold to collect' business model test - The asset is held within a business model whose objective is to hold the
financial asset in other to collect contractual cash flows and
'SPPL' contractual cash flow characteristics test - The contractual terms of the financial asset give rise to cash flows
that are solely payments of principal and interest (SPPL) on the principal amount outstanding on a specified date.
Interest in this context is the consideration for the time value of money and for the credit risk associated with the
principal amount outstanding during a particular period of time.
Debt instruments are measured at fair value through other comprehensive income (FVOCI) by the Group if they meet both
of the following criteria:
'Hold to collect and sell' business model test: The asset is held within a business model whose objective is achieved
by both holding the financial asset in order to collect contractual cash flows and selling the financial asset, and
'SPPI' contractual cash flow characteristics test: 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.
All other financial assets (equity investments) are measured at fair value.
Financial asset is classified and measured at fair value through profit or loss (FVTPL) by the Group if the financial asset is:
A debt instrument that does not qualify to be measured at amortised cost or FVOCI
An equity investment which the entity has not elected to classify as at FVOCI
A financial asset where the entity has elected to measure the asset at FVTPL under the fair value option.
(ii) Financial liabilities
Financial liabilities are either classified by the Group as:
Financial liabilities at amortised cost; or
Financial liabilities as at fair value through profit or loss (FVTPL).
Financial liabilities are measured at amortised cost by the Group unless either:
42 Zenith Bank Plc Annual Report - 31 December 2016
ZENITH BANK PLC
Notes to the Consolidated and Separate Financial Statements
for the Year Ended 31 December 2016
The financial liability is held for trading and is therefore required to be measured at FVTPL, or
The entity elects to measure the financial liability at FVTPL (using the fair value option).
(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.
(d) Derecognition
(i) Financial assets
Financial assets are de-recognised when the contractual rights to receive the cash flows from the 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.
(ii) Financial liabilities
The Group derecognises a financial liability when its contractual obligations are discharged, cancelled or expired.
43 Zenith Bank Plc Annual Report - 31 December 2016
ZENITH BANK PLC
Notes to the Consolidated and Separate Financial Statements
for the Year Ended 31 December 2016
(e) 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.
(f) 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.
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.
Subsequent to initial recognition, the fair value of a financial instrument is based on quoted market prices or dealer price
quotation for financial instruments. 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 3.5 on fair valuation methods and assumptions.
(g) 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.
44 Zenith Bank Plc Annual Report - 31 December 2016
ZENITH BANK PLC
Notes to the Consolidated and Separate Financial Statements
for the Year Ended 31 December 2016
(h) 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
The Group recognizes the derivative instruments on the statement of financial position at their fair value. At inception, the
Group designates the derivative as:
(a)
derivative held for risk management purposes or
(b)
an instrument that is held for trading or non-hedging purposes (a “trading” or “non-hedging” instrument).
(a) Derivatives held for risk management purposes
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
(b) 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 Impairment
(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;
(i)
(ii)
(iii)
(iv)
(v)
(vi) Deterioration in the value of collateral; and
(vii) 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.
45 Zenith Bank Plc Annual Report - 31 December 2016
ZENITH BANK PLC
Notes to the Consolidated and Separate Financial Statements
for the Year Ended 31 December 2016
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 financial 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 occurred. 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 taken against the asset carrying amount.
(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.
46 Zenith Bank Plc Annual Report - 31 December 2016
ZENITH BANK PLC
Notes to the Consolidated and Separate Financial Statements
for the Year Ended 31 December 2016
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
Reclassification of financial instruments is limited to financial assets since financial liabilities must never be reclassified.
Financial assets are required to be reclassified in certain rare circumstances between the amortised cost, FVOCI and
FVTPL categories. When the Group changes its business model for managing financial assets, the Group reclassifies all
affected financial assets in accordance with the new model. The reclassification is applied prospectively from the
reclassification date. Accordingly, any previously recognised gains, losses or interest are not be reinstated. Changes in the
business model for managing financial assets are expected to be very infrequent.
2.10 Restructuring of financial instruments
Financial instruments are restructured when the contractual terms are renegotiated or modified or an existing financial
instrument is replaced with a new one due to financial diffculties of the borrower. Restructured loans represent loans whose
repayment periods have been extended due to changes in the business dynamics of the borrowers. For such loans, the
borrowers are expected to pay the principal amounts in full within extended repayment period and all interest, including
interest for the original and extended terms.
If the terms of a financial asset is restructured due to financial difficulties of the borrower, then an assessment is made of
whether the financial asset should be derecognized:
If the expected restructuring will not result in derecognition of the existing asset, then the expected cash flows arising
from the modified financial asset is included in calculating the cash shortfalls from the existing asset.
If the expected restructuring will result in derecognition of the existing asset, then the expected fair value of the new
asset is treated as the final cash flow from the existing financial asset at the time of derecognition. This amount is
included in calculating the cash shortfalls from the existing financial asset that is discounted from the expected date
of derecognition to the reporting date using the original effective interest rate of the existing financial asset.
2.11 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).
2.12 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.
47 Zenith Bank Plc Annual Report - 31 December 2016
ZENITH BANK PLC
Notes to the Consolidated and Separate Financial Statements
for the Year Ended 31 December 2016
Property and equipment are depreciated on the straight line basis to their residual values over the estimated useful lives of
the assets. 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
Depreciation is included in profit or loss.
Over the remaining lease period
4 years
5 years
5 years
3 years
50 years
Over the remaining lease period
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 Costs
Borrowing costs that are directly attributable to the acquisition or construction of a qualifying asset is capitalized as part of
the cost of the asset. Other costs relating to borrowings which the group undertakes in the normal course of business are
expensed in the period which they are incurred.
2.13 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:
(i)
(ii)
(iii)
(iv)
(v)
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
(vi)
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 for computer software is 5 years.
48 Zenith Bank Plc Annual Report - 31 December 2016
ZENITH BANK PLC
Notes to the Consolidated and Separate Financial Statements
for the Year Ended 31 December 2016
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.
2.14 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.
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 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.
2.15 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.
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.
49 Zenith Bank Plc Annual Report - 31 December 2016
ZENITH BANK PLC
Notes to the Consolidated and Separate Financial Statements
for the Year Ended 31 December 2016
2.16 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 employee benefits are measured on an undiscounted basis and are expensed as the related services are
provided. They are included in personal expenses in the profit or loss.
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.
2.17 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 Banks 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.
50 Zenith Bank Plc Annual Report - 31 December 2016
ZENITH BANK PLC
Notes to the Consolidated and Separate Financial Statements
for the Year Ended 31 December 2016
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 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.
(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.
2.18 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.
51 Zenith Bank Plc Annual Report - 31 December 2016
ZENITH BANK PLC
Notes to the Consolidated and Separate Financial Statements
for the Year Ended 31 December 2016
2.19 Fees, 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. Usually, this is the
ex-dividend date for quoted securities.
2.20 Net Trading income
Net trading income comprises gains less losses relating to trading assets and liabilities and includes all fair value changes,
interest, dividends and foreign exchange differences.
2.21 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.
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.
2.22 Current and deferred income tax
(a) 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.
(b) 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:
(i)
(ii)
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
52 Zenith Bank Plc Annual Report - 31 December 2016
ZENITH BANK PLC
Notes to the Consolidated and Separate Financial Statements
for the Year Ended 31 December 2016
(iii)
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.
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.
2.23 Earnings per share
The Group presents basic and diluted 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.
2.24 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.
2.25 Fiduciary activities
The Group acts as trustees and in other fiduciary capacities through Zenith Pensions Custodian 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. The fees earned on
these activities are recognised as assets based fees.
53 Zenith Bank Plc Annual Report - 31 December 2016
ZENITH BANK PLC
Notes to the Consolidated and Separate Financial Statements
for the Year Ended 31 Dec 2016
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. Continuous education and awareness of risk management
has strengthen the risk management culture 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.
(a)
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.
(b) Risk management is a shared responsibility.Therefore the Group aims to build a shared perspective on risks that is
grounded in consensus.
(c)
There is clear segregation of duties between market facing business units and risk management functions.
(d) Risk Management is governed by well defined policies which are clearly communicated across the Group.
(e) Risk related issues are taken into consideration in all business decisions.
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.
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.
54 Zenith Bank Plc Annual Report - 31 December 2016
ZENITH BANK PLC
Notes to the Consolidated and Separate Financial Statements
for the Year Ended 31 Dec 2016
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:
(a)
The Board of Directors provides overall risk management direction and oversight.
(b)
The Group’s risk appetite is approved by the Board of Directors.
(c) Risk management is embedded in the Group as an intrinsic process and is a core competence of all its employees.
(d)
The Group manages its credit, market, operational and liquidity risks in a co-ordinated manner within the organisation.
(e)
The Group’s risk management function is independent of the business divisions.
(f)
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:
(a) Comprehensive compliance manual detailing the roles and responsibilities of all stakeholders in the compliance
process,
(b) Review and analysis of all relevant laws and regulations, which are adopted into policy statements to ensure business
is conducted professionally;
(c) 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;
(d)
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:
(a) 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.
(b) Establish lines of authority and responsibility for managing individual risk elements in line with the Board’s overall
direction.
(c) Risk identification, measurement, monitoring and control procedures.
55 Zenith Bank Plc Annual Report - 31 December 2016
ZENITH BANK PLC
Notes to the Consolidated and Separate Financial Statements
for the Year Ended 31 Dec 2016
(d) Establish effective internal controls that cover each risk management process.
(e) Ensure that the group’s risk management processes are properly documented.
(f)
Create adequate awareness to make risk management a part of the corporate culture of the Group.
(g) Ensure that risk remains within the boundaries established by the Board.
(h) Ensure that business lines comply with risk parameters and prudent limits established by the Board.
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 the 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:
(a)
The strategic importance of the activity and sector.
(b)
The contribution of the activity/sector to the total assets of the Bank.
(c)
The net income of the sector.
(d)
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:
(a) Reduced government earnings
(b)
Low foreign exchange reserve position currently at about US$25.8bn as at December 31, 2016.
(c) Acute shortage of Forex liquidity, inability of CBN to fund import requests from customers leading to reduced
production capacity of many companies and in some cases outright closure of business.
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 Non-Performing
Loans increase in the period 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. According to the Central Bank of Nigeria's prudential guidelines, a
loan is said to be non-performing when the principal and or interest remain outstanding for more than 90 days and other
qualitative measures also indicate that the borrower may not be able to service the loan.
The Central Bank of Nigeria introduced a market driven Foreign Currency Exchange Rate Policy in the month of June 2016.
The policy is already seen having the following effects among others:
(a)
Inflation- increase in the prices of some items particularly those that enjoyed special allocation from the CBN at N197
to a US dollar before now.
(b) Government Spending- The policy will make more money available to the government especially at this time when it
needs to reflate the economy. There will be more money from both the oil and non-oil sources in addition to the
proceeds from the Naira conversion of the external borrowing. This is because of the higher exchange rate. This will
better position the government to fund the 2017 budget.
56 Zenith Bank Plc Annual Report - 31 December 2016
ZENITH BANK PLC
Notes to the Consolidated and Separate Financial Statements
for the Year Ended 31 Dec 2016
(c) Corporate Earnings- Companies with U.S Dollar receivables will benefit from this policy change. Meanwhile,
companies with Naira receivables but with dollar denominated financial obligations without any hedging strategy in
place will record exchange rate losses.
(d) External Reserve- The external reserves will decrease as the Central Bank strives to meet outstanding Fx Settlement
obligations. However, very recently, the external reserves position is improving marginally as oil output improves.
(e) Demand/Supply of FX- The introduction of the FX Futures market has assisted in some measures in moderating the
frontloading of FX and consequently in the spot market. On the supply side, this policy is yet to produce the much
expected result of increasing significantly the supply of FX from Foreign Portfolio Investors (FPIs) and Foreign Direct
Investors (FDIs).
(f)
Interest Rate- With the introduction of a new market driven foreign exchange policy, interest rate is expected to
continue to hover at current levels with an increased double digit outlook (especially in view of the high level of
inflation).
The Bank 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.
The Bank strongly believe it is 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.
Zenith Bank Plc will continue to support its 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 period would include the following:
(a) Continue to monitor impact of global economy in commodity pricing, Foreign Direct Investment (FDI) inflows and
general behavior of local economy to the changes in the global market.
(b) Source for cheaper and stable funds
(c) Drive other income sources - Increase marginal value of current assets utilization and their derivable income as much
as possible. Seek new sources and champions.
(d) Pursue other government activities especially trapping utilization of government funds for projects and other activities
(e)
Further develop SME/Retail product sales and penetrations
(f)
Develop market hub initiative to host market players and drive retail participation
(g) Ensure that the Net Interest Margin (NIM) is maintained for all changes in interest rates.
(h) Create additional foreign exchange funding sources from the receipt of foreign exchange deposits from customers
especially export proceeds.
(i)
(j)
Pursue and support export strategies to assure expanded foreign exchange inflow.
Increased collections of payments (Deploy more friendly collection tools)
(k)
Improve customer service delivery through trainings, systems, communication, and compensation medium.
(l)
Stabilize the Bank’s technology/platforms – This is to increase and aids customers’ confidence, loyalty and Bank’s
reputation.
(m) Cautiously grow risk assets while maintaining adequate level of capital.
57 Zenith Bank Plc Annual Report - 31 December 2016
ZENITH BANK PLC
Notes to the Consolidated and Separate Financial Statements
for the Year Ended 31 Dec 2016
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:
(a) 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.
(b) 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.
(c) 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.
(d) 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
(e)
(f)
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.
(g) All insiders’ related credits are limited to regulatory and strict internal limits and are disclosed as required.
(h)
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:
(a) Adherence to the strict credit selection criteria which includes defined target market, credit history, the capacity and
character of customers.
(b) Credit rating of obligor
(c)
The likelihood of failure to pay over the period stipulated in the contract.
(d)
The size of the facility in case default occurs.
(e) Estimated Rate of Recovery which is a measure of the portion of the debt that can be regained through realisation 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.
58 Zenith Bank Plc Annual Report - 31 December 2016
ZENITH BANK PLC
Notes to the Consolidated and Separate Financial Statements
for the Year Ended 31 Dec 2016
(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 (Standard &
Poor's)
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:
(i)
(ii)
(iii)
External ratings of such instruments/institutions by rating agencies like Fitch; Standard & Poor’s; Agusto & Co.
Internal and external research and market intelligence reports
Regulatory agencies reports
In addition to the above, we have put in place 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.
59 Zenith Bank Plc Annual Report - 31 December 2016
ZENITH BANK PLC
Notes to the Consolidated and Separate Financial Statements
for the Year Ended 31 Dec 2016
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).
The purpose of credit and source of repayment.
The track record / repayment history of borrower.
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)
(c)
(d) Assess/evaluate the repayment capacity of the borrower.
The proposed terms and conditions and covenants.
(e)
(f)
Adequacy and enforceability of collaterals.
(g) Approval from appropriate authority.
3.2.4 Group Credit Risk Management
Zenith's 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 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:
(a) 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.
(b) Well-defined target market and risk asset acceptance criteria.
(c) Rigorous financial, credit and overall risk analysis for each customer/transaction.
(d) Portfolio quality examined on regular basis according to key performance indicators mechanism and periodic stress
testing.
(e) Concentrations together with mitigation strategies are continuously assessed.
(f)
Early warning system is continually validated and modified to ensure proper functioning for risk identification.
(g) Systematic and objective credit risk rating methodologies that are based on quantitative, qualitative and expert
judgment.
(h) 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.
(i)
(j)
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.
The 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.
60 Zenith Bank Plc Annual Report - 31 December 2016
ZENITH BANK PLC
Notes to the Consolidated and Separate Financial Statements
for the Year Ended 31 Dec 2016
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 these risks.
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.
61 Zenith Bank Plc Annual Report - 31 December 2016
ZENITH BANK PLC
Notes to the Consolidated and Separate Financial Statements
for the Year Ended 31 Dec 2016
Collateral securities that are pledged must be in negotiable form and usually fall under the following categories:
(a) Real estate, plant and equipment collateral (usually all asset or mortgage debenture or charge) which have to be
registered and enforceable under Nigerian law;
(b) 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;
(c) Stocks and shares of publicly quoted companies;
(d) Domiciliation of contracts proceeds;
(e) Documents of title to goods such as shipping documents consigned to the order of Zenith Bank or any of its
subsidiaries; and
(f)
Letter of lien.
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 pledged by customers against the carrying amount of loans and advances as at 31 Dec 2016 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 Gross amount
Specific allowance for impairment
Collective allowance for impairment
Net carrying amount
Total
exposure
98,000
52,333
1,180,353
1,030,123
2,360,809
(32,896)
(38,548)
2,289,365
Value of
collateral
32,971
31,535
859,993
-
924,499
-
-
924,499
Total
exposure
95,990
52,332
1,157,333
887,569
2,193,224
(17,607)
(37,485)
2,138,132
Value of
collateral
31,131
31,367
778,503
-
841,001
-
-
841,001
Details of collateral pledged by customers against carrying amount of loans and advances as at December 31, 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 Gross amount
Specific allowance for impairment
Collective allowance for impairment
Net carrying amount
Total
exposure
147,919
7,467
950,009
926,861
2,032,256
(22,390)
(20,553)
1,989,313
Value of
collateral
92,030
1,782
676,105
-
769,917
-
-
769,917
Total
exposure
135,822
7,467
919,475
822,177
1,884,941
(16,116)
(19,600)
Value of
collateral
87,451
1,782
539,951
-
629,184
-
-
1,849,225
629,184
62 Zenith Bank Plc Annual Report - 31 December 2016
ZENITH BANK PLC
Notes to the Consolidated and Separate Financial Statements
for the Year Ended 31 Dec 2016
(ii) Balance Sheet Netting Arrangements
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 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.
(ii) 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 Dec 2016 and 31 December 2015 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 Dec 2016 and 31 December 2015 respectively for loans and advances to customers and
amounts due from banks, is set out below:
(a) Geographical sectors
The following table breaks down the Group’s main credit exposure at their carrying amounts, as categorised by
geographical region at 31 Dec 2016 and 31 December 2015 respectively. For this table, the Group has allocated exposures
to regions based on the regions the counterparties are domiciled. Financial assets included in the table below represents
other assets excluding prepayment.
In millions of Naira
31 Dec 2016
Nigeria
Rest of Africa
Outside Africa
In millions of Naira
December 31, 2015
Nigeria
Rest of Africa
Outside Africa
Group Bank
Due from
banks
Treasury
bills
Investment
securities
168,203 463,787
93,572
-
12,039
279,215
118,922
98
80,459
Other
financial
assets
27,583
109
339
Due from
banks
Treasury
bills
Investment
securities
17,537 463,787
-
-
-
336,868
118,622
-
-
Other
financial
assets
27,583
-
-
459,457 557,359
199,479
28,031
354,405 463,787
118,622
27,583
Group Bank
Due from
banks
Treasury
bills
Investment
securities
105,090 330,900
47,028
-
34,673
132,431
150,724
62,417
-
Other
financial
assets
15,034
-
-
Due from
banks
Treasury
bills
Investment
securities
12,002 330,900
-
-
-
254,892
150,724
-
-
Other
financial
assets
15,109
-
-
272,194 377,928
213,141
15,034
266,894 330,900
150,724
15,109
63 Zenith Bank Plc Annual Report - 31 December 2016
ZENITH BANK PLC
Notes to the Consolidated and Separate Financial Statements
for the Year Ended 31 Dec 2016
Gross loans and advances to customers and the Non-performing loan portion per geographical region as at 31 Dec 2016
*Carrying amount in the table below is determined as gross loans less impairment allowance.
In millions
of Naira
Gross
loans
163,722
66,252
71,015
1,771
South South
South West 1,776,162 52,300
533
South East
2,153
North
Central
North West
North East
Rest of
Africa
Outside
Africa
32,978
83,094
91,586
180
640
7,796
76,000
6,001
Group
Bank
NPL Collective
impair.
allowance
1,761
31,080
452
3,716
Specific
impair.
allowance
928
16,679
-
-
Carrying
amount
Gross
loans
161,033
1,728,403
65,800
67,299
163,722
1,771
1,776,162 52,300
533
2,153
66,252
71,015
NPL Collective
impair.
allowance
1,761
31,080
452
3,716
Specific
impair.
allowance
928
16,679
-
-
Carrying
amount
161,033
1,728,403
65,800
67,299
162
314
788
275
-
-
7,545
32,816
82,780
83,253
32,979
83,094
-
180
640
-
7,744
67,981
-
-
162
314
-
-
-
-
-
-
32,817
82,780
-
-
2,360,809 71,374
38,548
32,896
2,289,365
2,193,224 57,577
37,485
17,607
2,138,132
Gross loans and advances and Non-performing portion per geographical region as at 31 December 2015
Group
Bank
Gross
loans
NPL Collective
impair.
allowance
1,270
Specific
impair.
allowance
1,193
Carrying
amount
Gross
loans
112,937
115,400
NPL Collective
impair.
allowance
1,270
2,414
Specific
impair.
allowance
1,193
Carrying
amount
112,937
2,414
115,400
40,138
25,766
South
South
South West 1,607,883 24,364
818
South East
2,367
North
Central
North West
North East
Rest of
Africa
Outside
Africa
25,281
70,473
63,178
140
768
8,972
84,137
5,053
16,498
502
461
13,649
-
1,274
1,577,736
39,636
24,031
1,607,883 24,364
818
2,367
40,138
25,766
16,498
502
461
13,649
-
1,274
1,577,736
39,636
24,031
227
642
826
127
-
-
5,933
25,054
69,831
56,419
25,281
70,473
-
140
768
-
341
83,669
-
-
227
642
-
-
-
-
-
-
25,054
69,831
-
-
2,032,256 44,896
20,553
22,390
1,989,313
1,884,941 30,871
19,600
16,116
1,849,225
(b) Industry sectors
Gross loans and advances to customers and the Non-performing loan portion per industry sector as at 31 Dec 2016
*Carrying amount in the table below is determined as gross loans less impairment allowance.
64 Zenith Bank Plc Annual Report - 31 December 2016
ZENITH BANK PLC
Notes to the Consolidated and Separate Financial Statements
for the Year Ended 31 Dec 2016
In millions of
Naira
Group
Bank
Loans and advances to customers
Loans and advances to customers
Agriculture
Oil and gas
Consumer Credit
Manufacturing
Real estate and
construction
Finance and
Insurance
Government
Power
Transportation
Communication
Education
General Commerce
Gross
loans
70,029
654,962
6,081
523,170
138,216
NPL Collective
impair.
allow.
586
15,294
444
3,829
2,919
1,636
10,821
552
4,824
3,636
Specific
impair.
allow.
941
6,543
-
2,804
646
Carrying
amount
Gross
loans
NPL Collective
68,502
633,125
5,637
516,537
134,651
66,669
602,263
5,621
497,763
130,820
1,619
4,606
552
4,052
2,670
impair.
allow.
566
15,208
444
3,752
2,707
Specific
impair.
allow.
Carrying
amount
928
482
-
337
-
65,175
586,573
5,177
493,674
128,113
23,486
3,804
348
1,984
21,154
22,941
3,804
341
1,984
20,616
307,049
108,272
55,859
116,082
9,347
348,256
854
30,676
1,052
134
161
13,224
363
4,766
220
839
524
8,416
357
12,306
1,415
26
21
5,853
306,329
91,200
54,224
115,217
8,802
333,987
305,651
89,500
43,853
101,768
6,979
319,396
286
30,676
15
23
161
9,113
363
4,765
55
738
524
8,022
-
12,306
-
-
-
1,570
305,288
72,429
43,798
101,030
6,455
309,804
2,360,809
71,374
38,548
32,896 2,289,365
2,193,224
57,577
37,485
17,607 2,138,132
Gross loans and advances to customers and the Non-performing loan portion per industry sector as at 31 December 2015
In millions of Naira
Group
Bank
Loans and advances to customers
Loans and advances to customers
Agriculture
Oil and gas
Consumer Credit
Manufacturing
Real estate and
construction
Finance and Insurance
Government
Power
Transportation
Communication
Education
General Commerce
NPL Collective
impair.
allow.
Gross
loans
42,089
362,489
2,820
462,805
109,617
7,430
1,134
477
7,443
6,557
82,222
251,248
55,753
81,757
107,574
7,741
3,981
219
566
1,168
119
46
466,141 15,756
Specific
impair.
allow.
643
4,069
-
4,998
3,719
2,430
-
-
-
788
-
5,743
Carrying
amount
Gross
loans
NPL Collective
impair.
allow.
Specific
impair.
allow.
Carrying
amount
40,690
353,819
2,579
455,030
105,640
79,571
250,026
52,156
81,359
105,420
7,548
455,475
39,698
337,006
2,729
444,585
105,450
1,490
1,013
433
6,048
5,976
81,404
250,751
55,753
47,750
106,678
7,741
3,916
219
566
41
-
46
405,396 11,122
756
4,594
241
2,727
253
95
1,222
3,597
398
1,207
193
4,317
643
1,237
-
4,767
3,353
2,761
-
-
-
-
-
3,355
38,299
331,175
2,488
437,091
101,844
78,548
249,529
52,156
47,352
105,471
7,548
397,724
756
4,601
241
2,777
258
221
1,222
3,597
398
1,366
193
4,923
2,032,256 44,896
20,553
22,390 1,989,313
1,884,941 30,871
19,600
16,116 1,849,225
The group's credit risk exposure from "other financial assets" is categorized under the "finance and insurance", and
government sector.
65 Zenith Bank Plc Annual Report - 31 December 2016
ZENITH BANK PLC
Notes to the Consolidated and Separate Financial Statements
for the Year Ended 31 Dec 2016
3.2.9 Credit quality
In millions of Naira
At 31 Dec 2016
Neither past due nor
impaired
Past due but not impaired
Individually impaired
Collectively impaired
Gross
Impairment allowance
Specific impairment
Collective impairment *
In millions of Naira
At December 31, 2015
Neither past due nor
impaired
Past due but not impaired
Individually impaired
Collectively impaired
Gross
Impairment allowance
Specific impairment
Collective impairment *
Due from
banks
Group
Loans and
advances to
customers
2,235,055
459,457
Financial
guarantee
Due from
banks
Bank
Loans and
advances to
customers
2,087,589
354,405
Financial
guarantee
-
-
-
54,380
58,703
12,671
560,704
-
-
-
-
-
-
48,058
47,411
10,166
513,832
-
-
-
459,457
2,360,809
560,704
354,405
2,193,224
513,832
-
-
(32,896)
(38,548)
-
-
-
-
(17,607)
(37,485)
-
-
459,457
2,289,365
560,704
354,405
2,138,132
513,832
Due from
banks
Group
Loans and
advances to
customers
1,977,165
272,194
Financial
guarantee
Due from
banks
Bank
Loans and
advances to
customers
1,844,263
266,894
Financial
guarantee
-
-
-
10,195
25,148
19,748
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
*Loans that are not individually significant are subjected to collective impairment.
All other financial assets are neither past due nor impaired. Loans and advances to customers of NGN 249.09 billion which
are neither past due nor impaired have been renegotiated (31 December 2015: NGN 73.07 billion).
66 Zenith Bank Plc Annual Report - 31 December 2016
ZENITH BANK PLC
Notes to the Consolidated and Separate Financial Statements
for the Year Ended 31 Dec 2016
In millions of Naira
(a) Credit portfolio neither past due nor impaired
The credit quality of the portfolio of loans and advances, amounts due from banks and other financial assets that were
neither past due nor impaired can be assessed by reference to the internal rating system adopted by the Group.
At 31 Dec 2016
AAA
AA to A
BBB to BB
Below B
Unrated
At December 31, 2015
AAA
AA to A
BBB to BB
Below B
Unrated
Group
Bank
Due from
banks
459,457
-
-
-
-
Loans and
advances to
customers
232,561
534,659
947,752
379,217
140,866
459,457
2,235,055
Other
financial
assets
-
-
-
-
22,777
22,777
Due from
banks
354,405
-
-
-
-
Loans and
advances to
customers
232,541
534,659
882,992
379,112
58,285
354,405
2,087,589
Other
financial
assets
-
-
-
-
39,291
39,291
Group
Bank
Due from
banks
272,194
-
-
-
-
Loans and
advances to
customers
316,321
758,487
515,880
383,024
3,453
272,194
1,977,165
Other
financial
assets
-
-
-
-
10,064
10,064
Due from
banks
266,894
-
-
-
-
Loans and
advances to
customers
184,904
758,216
515,300
382,405
3,438
266,894
1,844,263
Other
financial
assets
-
-
-
-
10,139
10,139
The credit quality of cash and balances with central banks, treasury bills, derivative assets 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.
At 31 Dec 2016
AAA
AA to A
BBB to BB
Below B
Unrated
Cash and
balances
with central
banks
669,058
-
-
-
-
Group
Assets
pledged as
collateral
Derivative
assets
Treasury
bills
Bank
Assets
pledged as
collateral
Derivative
assets
Treasury
bills
557,359
-
-
-
-
-
82,860
-
-
-
82,860
328,343
-
-
-
-
328,343
463,787
-
-
-
-
-
82,860
-
-
-
325,575
-
-
-
-
669,058
557,359
627,385
463,787
82,860
325,575
At December 31,
2015
AAA
AA to A
BBB to BB
Below B
Unrated
Cash and
balances
with central
banks
761,561
-
-
-
-
Group Bank
Treasury
bills
Derivative
assets
Assets
pledged as
collateral
Treasury
bills
Derivative
assets
Assets
pledged as
collateral
377,928
-
-
-
-
-
8,481
-
-
-
8,481
265,051
-
-
-
-
265,051
330,900
-
-
-
-
-
8,481
-
-
-
8,481
264,320
-
-
-
-
264,320
761,561
377,928
735,946
330,900
Cash and
balances
with central
banks
627,385
-
-
-
-
Cash and
balances
with central
banks
735,946
-
-
-
-
67 Zenith Bank Plc Annual Report - 31 December 2016
ZENITH BANK PLC
Notes to the Consolidated and Separate Financial Statements
for the Year Ended 31 Dec 2016
The table below shows the credit quality of investment securities
At 31 Dec 2016
Group
Investment securities
Bank
Investment securities
AAA
AA to A
BBB to BB
Below B
Unrated
Total
Federal
Govt.
Bonds
138,013
9,702
-
-
-
147,715
State Govt.
Bonds
Corporate
bonds
-
31,996
-
-
-
31,996
-
3,115
-
-
-
3,115
182,826
Federal
Govt.
Bonds
57,457
9,702
-
-
-
67,159
State Govt.
Bonds
Corporate
bonds
-
31,696
-
-
-
31,696
-
3,115
-
-
-
3,115
101,970
At December 31, 2015
Group
Investment securities
Bank
Investment securities
AAA
AA to A
BBB to BB
Below B
Unrated
Total
Federal
Govt.
Bonds
160,798
6,707
-
-
-
167,505
State Govt.
Bonds
Corporate
bonds
-
32,114
-
-
-
32,114
-
2,825
-
-
-
2,825
202,444
Federal
Govt.
Bonds
99,063
6,707
-
-
-
105,770
State Govt.
Bonds
Corporate
bonds
-
32,114
-
-
-
32,114
-
2,825
-
-
-
2,825
140,709
68 Zenith Bank Plc Annual Report - 31 December 2016
ZENITH BANK PLC
Notes to the Consolidated and Separate Financial Statements
for the Year Ended 31 Dec 2016
In millions of Naira
(b) 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
31 Dec
31 Dec
2015
2016
8,010
39,519
558
2,563
1,627
12,298
Loans and advances
31 Dec
31 Dec
2015
2016
7,954
38,259
540
1,250
1,313
8,549
54,380
10,195
48,058
9,807
38,292
16,088
54,380
5,084
5,111
10,195
37,921
10,137
48,058
5,027
4,780
9,807
Group
Bank
Loans and advances
31 Dec
31 Dec
2015
2016
Loans and advances
31 Dec
31 Dec
2015
2016
22,397
36,307
(32,896)
25,808
18,749
6,399
(22,390)
2,758
16,354
31,057
(17,607)
29,804
18,749
2,274
(16,116)
4,907
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:
(a) Where the execution of the loan purpose and the repayment is no longer realistic in light of new cash flows.
(b)
To avoid unintended default arising from adverse business conditions.
(c)
To align loan repayment with new pattern of achievable cash flows.
(d) Where there are proven cost over runs that may significantly impair the project repayment capacity.
(e) Where there is temporary downturn in the customer’s business environment.
(f) Where the customer’s going concern status is NOT in doubt or threatened.
(g)
The revised terms of restructured facilities usually include extended maturity, changing timing of interest payments
and amendments to the terms of the loan agreement.
69 Zenith Bank Plc Annual Report - 31 December 2016
ZENITH BANK PLC
Notes to the Consolidated and Separate Financial Statements
for the Year Ended 31 Dec 2016
(h) 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 loan (loans by the bank to its own officers and directors), 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:
(a)
The individuals who take or manage risk clearly understand it.
(b)
The Group's risk exposure is within established limits.
(c) Risk taking decisions are in line with business strategy and objectives set by the Board of Directors.
(d)
The expected payoffs compensate for the risks taken.
(e) 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.
The introduction of the new flexible FX market policy is expected to restore confidence to the Nigerian forex Market while
attracting more FX supply from Foreign Portfolio Investors (FPIs) and Foreign Direct Investors (FDIs). Also, FX request for
future obligations can now be accommodated by the Non-Deliverable Futures product, the non-deliverable futures product
stem the tides of frontloading of FX and reduce the pressure on Spot FX deals. However, the speculative rate at the parallel
market is expected to gradually slide down. The risk of dollar liquidity amid increasing demand and future maturing
obligations still persists. The new policy also introduced different limits for Overall Short and Long Net Open Position. It is
pertinent to note that the policy comes with its attendant volatilities (stemming from the liberalisation –allowing market to
determine the price of Naira) which we will continue to monitor in transaction processing and position taking in a guided
manner.
70 Zenith Bank Plc Annual Report - 31 December 2016
ZENITH BANK PLC
Notes to the Consolidated and Separate Financial Statements
for the Year Ended 31 Dec 2016
The table below sets out the allocation of assets and liabilities subject to market risk between trading and non-trading
portfolios:
'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 Dec 2016
Trading
Non-trading
At December 31, 2015
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
669,058
557,359
328,343
459,457
82,860
2,289,365
199,478
22,777
2,983,621
66,834
190,458
350,657
263,106
153,464
Carrying
amount
627,385
463,787
325,575
354,405
82,860
2,138,132
118,622
22,335
2,552,963
66,834
233,532
350,657
292,802
153,464
-
74,381
113,544
-
82,860
-
9,702
-
669,058
482,978
214,799
459,457
-
2,289,365
189,776
22,777
761,561
377,928
265,051
272,194
8,481
1,989,313
213,141
10,064
-
66,834
-
-
-
-
2,983,621
-
190,458
350,657
263,106
153,464
2,557,884
384
193,411
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
-
384
-
-
-
-
2,557,884
-
193,411
286,881
258,862
99,818
At 31 Dec 2016
Trading
Non-trading
At December 31, 2015
Trading
Non-trading
Carrying
amount
-
74,381
-
-
82,860
-
9,702
-
627,385
389,406
325,575
354,405
-
2,138,132
108,920
22,335
735,946
330,900
264,320
266,894
8,481
1,849,225
150,724
10,139
-
53,698
48,638
-
8,481
-
6,707
-
735,946
277,202
215,682
266,894
-
1,849,225
144,017
10,139
-
66,834
-
-
-
-
2,552,963
-
233,532
350,657
292,802
153,464
2,333,017
384
197,208
286,881
268,111
99,818
-
384
-
-
-
-
2,333,017
-
197,208
286,881
268,111
99,818
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.
71 Zenith Bank Plc Annual Report - 31 December 2016
ZENITH BANK PLC
Notes to the Consolidated and Separate Financial Statements
for the Year Ended 31 Dec 2016
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.
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 derivative products and
hedges (such as forward and swap). The risk is also managed by ensuring that all risks 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 limits 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.
Group
The table below summarizes the Group’s exposure to foreign currency exchange rate risk at 31 Dec 2016 and December
31, 2015. 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 Dec 2016
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
Other financial assets
Liabilities
Customer's deposits
Derivative liabilities
Other financial liabilities
On-lending facilities
Borrowings
Debt securities issued
Naira
Dollar
GBP
Euro
Others
Total
606,079
463,787
325,575
17,538
-
1,298,192
117,055
25,557
40,877
34,959
-
392,618
82,860
969,109
43,984
-
11,131
-
-
2,855
-
878
-
-
10,971
-
-
14,499
-
8,177
-
-
-
58,613
2,768
31,947
-
84,453
38,439
2,474
669,058
557,359
328,343
459,457
82,860
2,360,809
199,478
28,031
2,853,783
1,564,407
14,864
33,647
218,694
4,685,395
2,003,939
-
24,877
350,657
-
-
917,730
66,834
115,050
-
263,106
153,464
2,379,473
1,516,184
14,137
-
10,972
-
-
-
25,109
18,168
-
39,559
-
-
-
57,727
29,647
-
-
-
-
-
2,983,621
66,834
190,458
350,657
263,106
153,464
29,647
4,008,140
Net on-balance sheet position
474,310
48,223
(10,245)
(24,080)
189,047
677,255
72 Zenith Bank Plc Annual Report - 31 December 2016
ZENITH BANK PLC
Notes to the Consolidated and Separate Financial Statements
for the Year Ended 31 Dec 2016
At December 31, 2015
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
Other financial assets
Liabilities
Customer's deposits
Derivative liabilities
Other 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
85,199
24,583
-
196,060
8,481
827,965
37,599
141
323
-
-
9,059
-
1,210
-
-
2,759
3,537
-
21,607
-
4,996
-
875
18,162
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
1,180,028
10,592
33,774
99,756
3,945,646
1,834,795
-
65,586
286,881
-
-
637,191
384
94,711
-
258,862
99,818
2,187,262
1,090,966
10,430
-
6,107
-
-
-
16,537
11,317
-
19,707
-
-
-
31,024
2,750
64,151
-
-
-
-
-
2,557,884
384
186,111
286,881
258,862
99,818
64,151
3,389,940
35,605
555,706
Net on-balance sheet position
434,234
89,062
(5,945)
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 15% and 30%, with all other variables held
constant.
US Dollar effect of 15% up or (down) movement on profit before tax and statement of
financial position size (In millions of Naira)
31 Dec 2016 31 Dec 2015
7,233
9,347
US Dollar effect of 30% up or (down) movement on profit before tax and statement of
financial position size (In millions of Naira)
14,467
17,201
73 Zenith Bank Plc Annual Report - 31 December 2016
ZENITH BANK PLC
Notes to the Consolidated and Separate Financial Statements
for the Year Ended 31 Dec 2016
Bank
The table below summarizes the Bank’s exposure to foreign currency exchange rate risk at 31 Dec 2016 and December 31,
2015. Included in the table are the Banks’s financial instruments at carrying amounts, categorised by currency.
In millions of Naira
At 31 Dec 2016
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
Other financial assets
Liabilities
Customer's deposit
Derivative liabilities
Financial liabilities
On-lending facilities
Borrowings
Debt securities issued
Naira
Dollar
GBP
Euro
Others
Total
606,079
463,787
325,575
17,538
-
1,298,192
117,055
27,241
15,154
-
-
323,227
82,860
890,607
1,567
342
3,623
-
-
2,470
-
-
-
-
2,529
-
-
10,243
-
4,425
-
-
-
-
-
927
-
627,385
463,787
325,575
354,405
82,860
-
-
-
2,193,224
118,622
27,583
2,855,467
1,313,757
6,093
17,197
927
4,193,441
2,003,939
-
25,171
350,657
-
-
536,332
66,834
196,845
-
292,802
153,464
2,379,767
1,246,277
5,388
-
563
-
-
-
5,951
142
7,304
-
10,953
-
-
-
18,257
-
-
-
-
-
-
-
2,552,963
66,834
233,532
350,657
292,802
153,464
3,650,252
(1,060)
927
543,189
Net on-balance sheet position
475,700
67,480
In millions of Naira
At December 31, 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
Other financial assets
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
The Bank’s exposure to foreign currency risk is largely concentrated in 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 15% and 30%, with all other variables held constant.
74 Zenith Bank Plc Annual Report - 31 December 2016
ZENITH BANK PLC
Notes to the Consolidated and Separate Financial Statements
for the Year Ended 31 Dec 2016
In millions of Naira
US Dollar effect of 15% up or (down) movement on profit before tax and balance sheet
size
31 Dec 2016 31 Dec 2015
10,122
10,013
US Dollar effect of 30% up or (down) movement on profit before tax and statement of
financial position size (In millions of Naira)
20,244
-
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) to 14% (from 12%), Foreign Exchange Rate to N305.25
(from N199.05) and Cash Reserve Ratio (CRR) on total Naira Deposit 27.5% (from 25%) by the Central Bank of Nigeria
(CBN) resulted in huge jump in the market rates and market volatility. The corresponding rates were largely flat in Ghana,
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.
Group
The table below summarizes the Group's interest rate gap position:
In millions of Naira
At 31 Dec 2016
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)
Other financial assets
Liabilities
Customer deposits
Derivative liabilities
Other 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
33
29
30
31
32
669,058
557,359
328,343
459,457
82,860
2,360,809
199,478
28,031
7,500
557,359
328,343
459,457
82,860
2,360,809
182,826
-
4,685,395
3,979,154
2,983,621
66,834
190,458
350,657
263,106
153,464
2,502,388
66,834
-
350,657
263,106
153,464
4,008,140
3,336,449
677,255
642,705
661,558
-
-
-
-
-
16,652
28,031
706,241
481,233
-
190,458
-
-
-
671,691
75 Zenith Bank Plc Annual Report - 31 December 2016
ZENITH BANK PLC
Notes to the Consolidated and Separate Financial Statements
for the Year Ended 31 Dec 2016
At 31 Dec 2016
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
Up to 1
month
7,500
35,474
9,988
459,380
2,503
975,732
1 - 3 months 3 - 6 months
6 - 12
months
Over 1 year
Total rate
sensitive
-
-
-
-
7,500
91,594
22,003
-
3,792
54,642
132,917
75,101
77
47,364
14,729
297,404
41,481
-
29,201
45,090
-
179,770
-
-
1,270,616
557,389
328,343
459,457
82,860
2,360,809
11
26
68,183
735
113,871
182,826
1,490,588
172,057
338,371
413,911
1,564,257
3,979,184
977,723
1,575
32,293
30,968
-
1,042,559
104,904
4,117
64,710
45,995
-
219,726
20,332
45,534
629
62,926
-
1,231
15,608
9,000
59,398
839
1,398,198
-
244,025
63,819
152,626
2,502,388
66,834
350,657
263,106
153,465
129,421
86,076
1,858,668
3,336,449
Total interest repricing gap
448,029
(47,669)
208,950
327,835
(294,411)
642,734
76 Zenith Bank Plc Annual Report - 31 December 2016
ZENITH BANK PLC
Notes to the Consolidated and Separate Financial Statements
for the Year Ended 31 Dec 2016
At December 31, 2015
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)
Other financial assets
Note Carrying
amount
Rate
sensitive
Non rate
sensitive
15
16
17
18
19
20
21
25
28
33
30
31
29
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
286,881
258,862
186,111
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
Liabilities
Customer deposits
Derivative liabilties
On-lending facilities
Borrowings
Financial liabilities
Debt securities issued
Total interest repricing gap
In millions of Naira
At December 31, 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
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 300 basis points, with all other variables held constant.
In millions of Naira
Effect of 300 basis points movement on profit before tax
31 Dec 2016 31 Dec 2015
5,114
27,647
77 Zenith Bank Plc Annual Report - 31 December 2016
ZENITH BANK PLC
Notes to the Consolidated and Separate Financial Statements
for the Year Ended 31 Dec 2016
Bank
The table below summarizes the Bank's interest rate gap position:
In millions of Naira
At 31 Dec 2016
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)
Other financial assets
Liabilities
Customer deposits
Derivative liabilities
Other financial liabilities
On-lending facilities
Borrowings
Debt securities issued
Note Carrying
amount
Rate
sensitive
Non-rate
sensitive
15
16
17
18
19
20
21
25
28
33
29
30
31
32
627,385
463,787
325,575
354,405
82,860
2,193,224
118,622
27,583
7,500
463,787
325,575
354,405
82,860
2,193,224
101,970
-
4,193,441
3,529,321
2,552,963
66,834
233,532
350,657
292,802
153,464
2,070,809
66,834
-
350,657
292,802
153,464
3,650,252
2,934,566
619,885
-
-
-
-
-
16,652
27,583
664,120
482,154
-
233,532
-
-
-
715,686
Total interest repricing gap
543,189
594,755
(51,566)
In millions of Naira
At 31 Dec 2016
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
30,869
9,988
354,329
2,503
933,926
1 - 3 months 3 - 6 months
6 - 12
months
Over 1 year
Total rate
sensitive
-
-
-
-
7,500
81,706
22,003
-
3,792
54,134
101,096
75,101
76
47,364
14,480
250,116
41,481
-
29,201
44,844
-
177,002
-
-
1,145,840
463,787
325,575
354,405
82,860
2,193,224
-
-
13,839
517
87,614
101,970
1,339,115
161,635
251,956
366,159
1,410,456
3,529,321
880,983
1,575
32,293
30,968
-
945,819
393,296
75,973
4,117
64,710
45,995
-
14,194
45,534
629
62,926
-
210
15,608
9,000
59,398
839
1,099,449
-
244,025
93,515
152,625
2,070,809
66,834
350,657
292,802
153,464
190,795
123,283
85,055
1,589,614
2,934,566
(29,160)
128,673
281,104
(179,158)
594,755
78 Zenith Bank Plc Annual Report - 31 December 2016
ZENITH BANK PLC
Notes to the Consolidated and Separate Financial Statements
for the Year Ended 31 Dec 2016
In millions of Naira
At December 31, 2015
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)
Other financial assets
Note Carrying
amount
Rate
sensitive
Non rate
sensitive
15
16
17
18
19
20
21
25
28
29
33
30
31
32
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
197,208
384
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
197,208
-
-
-
-
737,827
15,743
Up to 1
month
1 - 3 months 3 - 6 months
6 - 12
months
Over 1 year
Total rate
sensitive
7,500
28,066
4,435
263,282
-
-
35,913
20,134
1,871
239
-
118,025
15,548
-
5,224
-
148,896
52,848
-
3,018
-
-
171,355
1,741
-
7,500
330,900
264,320
266,894
8,481
683,739
88,293
45,436
53,991
1,013,482
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
Liabilities
Customer deposits
Financial liabilities
Derivative liabilities
On-lending facilities
Borrowings
Debt securities issued
Total interest repricing gap
At December 31, 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
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 300 basis points, with all other variables held constant.
In millions of Naira
Effect of 300 basis points movement on profit before tax
31 Dec 2016 31 Dec 2015
246
28,918
79 Zenith Bank Plc Annual Report - 31 December 2016
ZENITH BANK PLC
Notes to the Consolidated and Separate Financial Statements
for the Year Ended 31 Dec 2016
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 non-quoted equity investments. Unquoted equity security held by the
Group is mainly 4.59% equity holding in African Finance Corporation (AFC) valued at N16.65 billion (cost N6.4 billion) as at
31 Dec 2016. 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. The sensitivity analysis
of unquoted equity is stated on section 3.5.
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 comprehensive liquidity risk management framework that ensures that adequate 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 liquid assets and marketable securities adequate within regulatory limits to manage liquidity stress
situation.
80 Zenith Bank Plc Annual Report - 31 December 2016
ZENITH BANK PLC
Notes to the Consolidated and Separate Financial Statements
for the Year Ended 31 Dec 2016
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:
(a). Conducts on a regular basis appropriate stress tests so as to:
(i)
(ii)
Identify sources of potential liquidity strain;
Ensure that current liquidity exposures continue to conform to the liquidity risk tolerance established by the
board
(b). Analyses the separate and combined impact of possible future liquidity stresses on:
(i)
(ii)
Cash flows;
Liquidity position;
(iii)
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;
(a) Changes in market condition;
(b) Changes in the nature, scale or complexity of the Bank's business model and activities;
(c)
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 settlement;
(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.
81 Zenith Bank Plc Annual Report - 31 December 2016
ZENITH BANK PLC
Notes to the Consolidated and Separate Financial Statements
for the Year Ended 31 Dec 2016
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.
(a) 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.
At 31 Dec 2016
Average for the period
Maximum for the period
Minimum for the period
Group
Bank
31 Dec 2016
31 Dec 2015
31 Dec 2016
31 Dec 2015
59.59%
51.37%
44.03%
47.74%
60.28%
49.24% .
54.94%
41.17%
70.76%
56.83%
63.27%
.50.16%
53.09%
43.35%
44.03%
33.85%
(b) Liquidity reserve
The table sets out the component of the Group's liquidity reserve.
Group
31 Dec 2016
31 Dec 2016
31 Dec 2015 31 Dec 2015
In millions of naira
Carrying
value
Fair value
Carrying
value
Fair value
Cash and balances with Central Banks
140,874
140,874
358,007
358,007
Treasury Bills
482,978
375,552
377,928
355,556
Balances with other banks
155,859
155,859
93,087
84,844
Investment securities
182,826
304,806
166,690
181,011
Assets pledged as collaterals
328,343
310,778
104,701
207,528
Total
Bank
1,290,880
1,287,869
1,100,413
1,186,946
Cash and balances with Central Banks
99,378
99,378
332,502
332,502
Treasury Bills
389,406
375,552
330,900
277,350
Balances with other banks
17,537
17,537
31,576
38,577
Investment securities
101,970
165,557
105,863
157,145
Assets pledged as collaterals
325,575
310,778
104,581
144,454
Total
933,866
968,802
905,422
950,028
82 Zenith Bank Plc Annual Report - 31 December 2016
ZENITH BANK PLC
Notes to the Consolidated and Separate Financial Statements
for the Year Ended 31 Dec 2016
(c) 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
At 31 Dec 2016
Note Encumbered Unencumbered
15
Total
Encumbered Unencumbered
Total
At December 31, 2015
16
17
18
20
21
25
528,184
-
328,343
-
-
-
-
140,875
557,359
-
459,457
2,289,365
199,478
22,777
669,059
557,359
328,343
459,457
2,289,365
199,478
22,777
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
'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
At 31 Dec 2016
Note Encumbered Unencumbered
15
Total
Encumbered Unencumbered
Total
At December 31, 2015
16
17
18
20
21
25
528,007
-
325,575
-
-
-
-
99,379
463,787
-
354,405
2,138,132
118,622
22,335
627,386
463,787
325,575
354,405
2,138,132
118,622
22,335
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
(d) Financial assets pledged as collateral
The total financial assets recognised in the statement of financial position that have been pledged as collateral for liabilities
as at 31 Dec 2016 and 31 December 2015 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.
83 Zenith Bank Plc Annual Report - 31 December 2016
ZENITH BANK PLC
Notes to the Consolidated and Separate Financial Statements
for the Year Ended 31 Dec 2016
Group
At 31 Dec 2016
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
Investment securities
Other financial assets
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
Risk management:
Inflow
Outflow
15
16
17
18
20
21
25
19
28
29
30
31
32
39
33
140,874
38,385
19,959
440,108
975,732
2,888
4,466
-
- 528,184
-
669,058
669,058
93,888 139,939 314,543
81,943
22,543
16,808
7,379
14,729
54,642
78,868
3,148
-
-
586,755
-
740,766
75,244 541,077
15,154
481,483
2,034
45,0901,270,634 2,360,827
291,181
22,777
7,744 198,533
-
18,311
557,359
328,343
459,457
2,289,365
199,478
22,777
1,622,412
181,600 332,287 1,004,2702,012,278 5,152,847
4,525,837
-
46,546
-
-
-
-
-
-
46,120 178,821 109,806
-
-
-
-
-
36,399
-
-
417,692
-
82,860
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
46,546
46,120 178,821 109,806
36,399
417,692
82,860
2,857,864
117,857
32,293
30,934
-
560,704
104,904
-
64,710
45,981
-
-
20,332
-
629
63,034
4,770
-
1,283
67,984
70,994
9,000 244,025
93,446
4,770 166,934
-
160 2,984,543
256,835
350,657
292,853
176,474
560,704
59,458
-
2,983,621
190,458
350,657
263,106
153,464
560,704
3,599,652
215,595
88,765 142,495 575,559 4,622,066
4,502,010
45,531
-
-
-
45,531
41,042 183,080
-
-
-
-
-
-
23,306
-
-
-
24,267
-
-
-
317,226
-
-
-
41,042 183,080
23,306
24,267
317,226
66,834
-
-
-
-
66,834
84 Zenith Bank Plc Annual Report - 31 December 2016
ZENITH BANK PLC
Notes to the Consolidated and Separate Financial Statements
for the Year Ended 31 Dec 2016
At December 31, 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)
15
16
17
18
20
21
25
19
28
29
30
31
32
39
33
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
Investment securities
Other financial assets
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
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
36
28
-
-
-
377,928
52,848 172,086
265,051
272,450
1,741
53,9841,109,221 2,033,562
179,490
15,034
1,732 177,673
-
-
-
377,928
265,051
272,194
1,989,313
213,141
15,034
1,408,398
156,982 194,223 677,3911,460,721 3,897,715
3,894,222
-
-
-
-
-
-
-
239
5,224
3,018
-
(9,940)
16,727
(40)
4,451
(61)
-
-
-
-
-
-
-
-
-
(9,940)
16,687
4,390
-
-
-
-
-
-
-
-
8,481
21,178
(10,041)
-
-
-
11,137
-
-
-
-
-
-
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
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
384
12,185
-
-
-
-
12,185
-
-
-
-
-
-
85 Zenith Bank Plc Annual Report - 31 December 2016
ZENITH BANK PLC
Notes to the Consolidated and Separate Financial Statements
for the Year Ended 31 Dec 2016
Bank
At 31 Dec 2016
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
Investment securities
Other financial assets
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
Risk management:
Inflow
Outflow
15
16
17
18
20
21
25
19
28
29
30
31
32
39
33
99,379
-
- 528,006
-
627,385
627,385
31,012
19,959
313,030
933,926
2,877
6,435
84,030 108,119 267,255
81,943
22,543
16,808
7,379
14,480
54,134
24,524
3,122
-
-
490,416
-
740,766
75,244 541,077
15,154
354,405
2,034
44,8431,145,840 2,193,224
210,325
22,335
7,526 172,276
15,900
-
463,787
325,575
354,405
2,193,224
118,622
22,335
1,406,618
171,208 245,874 938,0281,877,127 4,638,856
4,105,333
-
46,546
-
-
-
-
-
-
46,120 178,821 109,806
-
-
-
-
-
36,399
-
-
417,692
-
82,860
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
46,546
46,120 178,821 109,806
36,399
417,692
82,860
2,462,534
117,751
32,293
30,934
-
513,832
75,973
-
64,710
45,981
-
-
14,195
262
- 110,512
59,458
55,092
9,000 244,025
93,446
4,770 166,934
-
-
- 2,552,964
283,355
350,657
292,853
176,474
513,832
2,552,963
233,532
350,657
292,802
153,464
513,832
629
63,034
4,770
-
3,157,344
186,664
82,628 184,002 559,497 4,170,135
4,097,250
-
45,531
-
-
-
45,531
-
-
41,042 183,080
-
-
-
-
-
-
-
23,306
-
-
-
-
24,267
-
-
-
-
317,226
-
-
-
41,042 183,080
23,306
24,267
317,226
66,834
-
-
-
-
66,834
86 Zenith Bank Plc Annual Report - 31 December 2016
ZENITH BANK PLC
Notes to the Consolidated and Separate Financial Statements
for the Year Ended 31 Dec 2016
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
Investment securities
Other financial assets
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
Risk management:
Outflow
Inflow
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
52,848 171,355
264,320
267,150
1,741
53,9911,013,482 1,886,247
117,073
15,109
1,395 115,678
-
-
-
330,900
264,320
266,894
1,884,941
150,724
15,109
1,321,335
146,211 179,009 660,5731,302,256 3,609,384
3,648,834
-
-
-
-
-
-
-
-
-
(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
384
87 Zenith Bank Plc Annual Report - 31 December 2016
ZENITH BANK PLC
Notes to the Consolidated and Separate Financial Statements
for the Year Ended 31 Dec 2016
Liquidity gap analysis (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
Issued financial guarantee contracts
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
Undiscounted cash flows, which include estimated interest
payments.
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 difference is on demand deposits from customers which are expected to remain stable or
increase.
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’).
88 Zenith Bank Plc Annual Report - 31 December 2016
ZENITH BANK PLC
Notes to the Consolidated and Separate Financial Statements
for the Year Ended 31 Dec 2016
3.5 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.
(a)
Level 1: Quoted prices (unadjusted) in active markets for identical assets or liabilities.
(b)
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).
(c)
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.
Classification of financial assets and liabilities
Group
The table below sets out the Group's classification of each class of its financial assets and liabilities.
Note Carrying
At 31 Dec 2016
Fair value
Fair value
hierarchy
Carrying
value
At December 31, 2015
Fair value
Fair value
hierarchy
In millions of Naira
Assets
Carried at FVTPL:
Treasury bills
Investment securities (FGN
bonds)
Derivative assets
Carried at FVOCI:
Investment securities
(Unquoted)
value
16
21
19
21
74,381
9,702
74,381
9,702
82,860
82,860
16,652
16,652
15
Carried at amortized cost:
Cash and balances with
central banks
16
Treasury bills
Assets pledged as collateral 17
18
Due from other banks
20
Loans and advances to
customers (gross)
Investment securities
Other financial assets
21
25
669,058
669,058
482,978
328,343
459,457
2,360,809
375,552
277,189
459,457
3,377,671
173,124
22,777
254,861
10,715
Liabilities
Carried at FVTPL
Derivative liabilities
Carried at amortized cost:
Customer's deposits
Other financial liabilities
On-lending facilities
Borrowings
Debt securities issued
33
28
29
30
31
32
66,834
66,834
2,983,621
190,458
350,657
263,106
153,464
2,766,629
191,040
288,682
523,465
128,034
1
1
2
3
-
1
1
2
3
1
-
2
-
-
3
3
2
53,698
6,707
53,698
6,707
8,481
8,481
10,697
10,697
761,561
761,561
324,230
265,051
272,194
2,032,256
355,556
304,804
272,194
1,487,515
195,737
15,034
229,542
15,034
384
384
2,557,884
186,111
286,881
258,862
99,818
2,551,143
186,111
275,641
263,268
82,667
1
1
2
3
-
1
1
2
3
1
-
2
-
-
3
3
2
89 Zenith Bank Plc Annual Report - 31 December 2016
ZENITH BANK PLC
Notes to the Consolidated and Separate Financial Statements
for the Year Ended 31 Dec 2016
Bank
The table below sets out the Bank''s classification of each class of its financial assets and liabilities.
Note Carrying
At 31 Dec 2016
Fair value
Fair value
hierarchy
Carrying
value
At December 31, 2015
Fair value
Fair value
hierarchy
In millions of Naira
Assets
Carried at FVTPL:
Treasury bills
Investment securities (FGN
bonds)
Derivative assets
Carried at FVOCI:
Investment securities
(Unquoted)
value
16
21
19
21
74,381
9,702
74,381
9,702
82,860
82,860
16,652
16,652
15
Carried at amortized cost:
Cash and balances with
central banks
Treasury bills
16
Assets pledged as collateral 17
18
Due from other banks
20
Loans and advances to
customers (gross)
Investment securities
Other financial assets
21
25
627,385
627,385
389,406
325,575
354,405
2,193,224
375,552
277,189
354,405
1,411,876
92,268
22,335
167,231
10,268
Liabilities
Carried at FVTPL
Derivative liabilities
Carried at amortized cost:
Customer's deposits
Other financial liabilities
On-lending facilities
Borrowings
Debt securities issued
33
28
29
30
31
32
66,834
66,834
2,552,963
233,532
350,657
292,802
153,464
2,369,752
234,108
288,682
241,053
128,034
1
-
2
3
-
1
1
-
3
1
-
2
-
-
3
3
2
53,698
6,707
53,698
6,707
8,481
8,481
10,015
10,015
735,946
735,946
277,202
264,320
266,894
1,884,941
277,350
304,193
266,894
1,385,377
134,002
15,109
157,145
15,109
384
384
2,333,017
197,208
286,881
268,111
99,818
2,326,960
197,207
275,641
263,268
82,667
1
1
2
3
-
1
1
-
3
1
-
2
-
-
3
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.
90 Zenith Bank Plc Annual Report - 31 December 2016
ZENITH BANK PLC
Notes to the Consolidated and Separate Financial Statements
for the Year Ended 31 Dec 2016
Financial instruments measured at fair value
At 31 Dec 2016
In millions of Naira
Financial assets
Treasury bills (FVTPL)
Investment securities (FVTPL) -FGN Bonds
Derivative assets
Derivative liabilities
Investment securities (Unquoted)
Reconciliation of Level 3 items
At 1 January 2016
Disposal recognised through profit or loss
Gains recognised through other comprehensive income
At 31 Dec 2016
At December 31, 2015
In millions of Naira
Financial assets
Treasury bills (FVTPL)
Investment securities (FVTPL)-FGN bonds
Derivative assets
Derivative liabilities
Investment securities -Unquoted
Reconciliation of Level 3 items
At 1 January 2015
Gains/(losses) recognised through profit or loss
Gains/(losses) recognised through other comprehensive income
Disposal of equity securities
At December 31, 2015
Level 3 fair value measurements
(a) Unobservable inputs used in measuring fair value
16
21
19
33
21
16
21
19
33
21
Level 1
Level 2
Level 3
74,381
9,702
-
-
-
84,083
-
-
82,860
66,834
-
149,694
-
-
-
-
16,652
16,652
10,697
(681)
6,636
16,652
Level 1
Level 2
Level 3
53,698
6,707
-
-
-
60,405
-
-
8,481
384
-
8,865
-
-
-
-
10,697
10,697
13,535
510
(1,752)
(1,596)
10,697
The table below sets out information about significant unobservable inputs used at 31 Dec 2016 and 31 December 2015 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 2016
Valuation
technique
Range of estimates
(average) for
unobservable
inputs
Fair value
measurement
sensitivity to
unobservable
inputs
Unquoted equity
investment
N16.65 billion
Equity DCF
model.
-Discount rate.
-Estimate cash flow.
Risk premium of
11.50 -12.50%
(12.09%) above risk-
free interest rate
(2.49%) (December
2015:11.44-11.68%
(11.96%) above risk
free rate (2.23%))
4-year Compound
Annual Growth Rate
(CAGR) of cash flow
of 16-17% (14.4%)
(December 2015: 16-
17% (12%))
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
91 Zenith Bank Plc Annual Report - 31 December 2016
ZENITH BANK PLC
Notes to the Consolidated and Separate Financial Statements
for the Year Ended 31 Dec 2016
Risk premium is determined by adding country risk premium to the product of market premium and equity beta.
(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
In millions of Naira
Unquoted investment securities
Favourable
changes
At 31 Dec 2016
Un-
favourable
changes
At December 31, 2015
Favourable
changes
Un-
favourable
changes
0.90
(0.83)
2.00
(0.64)
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
Dec 2016 included a risk premium 12.09% above the risk-free interest rate of 2.49% (with reasonably possible alternative
assumptions of 11.96% and 12.21%) (31 December 2015: 11.56, 11.44 and 11.68% respectively above risk free rate of
2.23%), and a 5-year CAGR of 19% (with reasonable possible alternative assumptions of 18 and 20%) (31 December 2015:
18, 17, 19 % respectively).
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 Dec
2016: N528 billion, 31 December 2015: N404 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.
(v) Other financial assets/financial liabilities
92 Zenith Bank Plc Annual Report - 31 December 2016
ZENITH BANK PLC
Notes to the Consolidated and Separate Financial Statements
for the Year Ended 31 Dec 2016
Other financial assets/financial liabilities 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.
93 Zenith Bank Plc Annual Report - 31 December 2016
ZENITH BANK PLC
Notes to the Consolidated and Separate Financial Statements
for the Year Ended 31 Dec 2016
3.6 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 assessments or regulatory requirements. The Group maintained capital levels above
the regulatory minimum prescribed in all its operating jurisdictions. The recent technical Naira devaluation impacted the
capital adequacy ratio (CAR) via the increase in the naira equivalent of exposures denominated in Foreign Currencies.
However, actual and projected increase in the exchange rate, sees the group’s Capital Adequacy Ratio at comfortable
region.
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 compelling 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:
(a) Profit from Operations :The Group has consistently reported good profit which can easily be retained to support the
capital base.
(b)
Issue of Shares: The Group has successfully assessed the capital market to raise equity, and more recently the Group
raised US $500 million Eurobond, with such experiences the Group is confident that it could access the capital market
when the need arises.
(c) 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.
94 Zenith Bank Plc Annual Report - 31 December 2016
ZENITH BANK PLC
Notes to the Consolidated and Separate Financial Statements
for the Year Ended 31 Dec 2016
The table below shows the computation of the Group's capital adequacy ratio for the year ended 31 Dec 2016 as well as
the 31 December 2015 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 2015
31 Dec 2016
Basel II Basel II
15,698
255,047
93,093
3,729
200,115
15,698
255,047
112,114
3,729
267,008
31 Dec 2015
31 Dec 2016
Basel II Basel II
15,698
255,047
86,400
3,729
160,408
15,698
255,047
104,293
3,729
218,507
Total qualifying Tier 1 capital
653,596
567,682
597,274
521,282
Deferred tax assets
Intangible assets
Investment in capital and financial subsidiaries
(6,440)
(4,645)
-
(5,607)
(3,240)
-
(6,041)
(3,903)
(22,053)
(5,131)
(2,753)
(28,689)
Adjusted Total qualifying Tier 1 capital
642,511
558,835
565,277
484,709
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
39,415
39,415
-
39,415
681,926
2,613
2,613
10,950
10,950
4,314
4,314
-
(10,950)
(4,314)
2,613
561,448
-
-
565,277
484,709
2,406,800
17,684
554,772
2,078,727
17,670
540,020
2,109,275
5,875
509,493
1,876,380
6,983
509,493
Total risk-weighted assets
2,979,256
2,636,417
2,624,643
2,392,856
Risk-weighted Capital Adequacy Ratio (CAR)
%23
%21
%22
%20
95 Zenith Bank Plc Annual Report - 31 December 2016
ZENITH BANK PLC
Notes to the Consolidated and Separate Financial Statements
for the Year Ended 31 Dec 2016
3.7 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:
(a)
To provide clear and consistent direction in all operations of the group
(b)
To provide a standardised framework and appropriate guidelines for creating and managing all operational risk
exposures
(c)
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 period 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.
3.8 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. Processes and procedures have been established to ensure that the right models
are employed and appropriately communicated to all decision makers in the Group on issues relating to strategic risk
management. This has essentially driven the Group’s sound banking culture and performance record to date.
3.9 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.
96 Zenith Bank Plc Annual Report - 31 December 2016
ZENITH BANK PLC
Notes to the Consolidated and Separate Financial Statements
for the Year Ended 31 Dec 2016
3.10 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:
(a)
Identification: Recognizing potential reputational risk as a primary and consequential risk
(b) Assessment: Qualitative assessment of reputational risk based on the potential events that have been identified as
reputational risk.
(c) Monitoring: Frequent monitoring of the reputational risk drivers
(d) Mitigation and Control: Preventive measures and controls for management of reputational risk and regular tracking of
mitigation actions
(e)
Independent review: The reputational risk measures and mitigation techniques shall be subject to regular independent
review by the Internal Auditors and/or Statutory Auditors.
(f)
Reporting: Regular, action-oriented reports for management on reputational risk.
3.11 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.
3.12 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.
3.13 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.
As global awareness on sustainable development became prevalent, the Group commenced a project to increase it's level
of environmental compliance. 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. A detailed report covering our
landmark achievements as well as our desired growth aspirations on sustainability was issued in August 2016 and is
available on our website.
97 Zenith Bank Plc Annual Report - 31 December 2016
ZENITH BANK PLC
Notes to the Consolidated and Separate Financial Statements
for the Year Ended 31 Dec 2016
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.
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 such as forward contracts, swaps etc. 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.
98 Zenith Bank Plc Annual Report - 31 December 2016
ZENITH BANK PLC
Notes to the Consolidated and Separate Financial Statements
for the Year Ended 31 Dec 2016
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:
(i)
(ii)
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.
(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 determined using IFRS principles. As a result of this directive, the Bank holds total credit risk reserves of
N8,129 million as at 31 Dec 2016.
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
Note 31 Dec 2016 31 Dec 2015
62,680
7,101
69,781
17,607
37,485
55,092
1,312
5,248
61,652
8,129
57,066
6,192
63,258
16,116
19,600
35,716
1,222
4,970
41,908
21,350
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:
(a) 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.
99 Zenith Bank Plc Annual Report - 31 December 2016
ZENITH BANK PLC
Notes to the Consolidated and Separate Financial Statements
for the Year Ended 31 Dec 2016
(b) 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).
100 Zenith Bank Plc Annual Report - 31 December 2016
ZENITH BANK PLC
Notes to the Consolidated and Separate Financial Statements
for the Year Ended 31 Dec 2016
In millions of Naira
31 Dec 2016
Revenue:
Derived from external customers
Derived from other business segments
Total revenue*
Interest expense
Impairment loss on financial assets
Admin and operating expenses
Profit before tax
Tax expense
Profit after tax
In millions of Naira
31 Dec 2016
Capital expenditure**
Identifiable assets
Identifiable liabilities
Outside Nigeria Banking
Africa
Europe
Eliminations Consolidated
Total
reportable
segments
39,737
-
39,737
(12,183)
(973)
(11,434)
15,147
(4,417)
10,730
11,253
757
12,010
(2,364)
(5,075)
(3,911)
660
(132)
528
511,593
2,084
513,677
(146,457)
(32,350)
(173,397)
161,473
(27,096)
134,377
(3,596)
(2,084)
(5,680)
2,079
-
-
(4,725)
-
(4,725)
507,997
-
507,997
(144,378)
(32,350)
(173,397)
156,748
(27,096)
129,652
Outside Nigeria Banking
Africa
Europe
Eliminations Consolidated
Total
reportable
segments
Nigeria
Corporate
retail and
pensions
custodian
services
460,603
1,327
461,930
(131,910)
(26,302)
(158,052)
145,666
(22,547)
123,119
Nigeria
Corporate
retail and
pensions
custodian
services
24,803
4,301,426
3,619,485
2,684
281,933
235,853
66
27,553
(132)
27,421
402,890
4,986,249
(246,424)
4,739,825
327,745
4,183,083
(147,723)
4,035,360
* 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.
101 Zenith Bank Plc Annual Report -31 December 2016
ZENITH BANK PLC
Notes to the Consolidated and Separate Financial Statements
for the Year Ended 31 Dec 2016
In millions of Naira
31 Dec 2015
Revenue:
Derived from external customers
Derived from other business segments
Total revenue*
Share of profit of associates
Interest expense
Impairment loss on financial assets
Admin and operating expenses
Profit before tax
Tax expense
Profit after tax
In millions of Naira
December 31, 2015
Capital expenditure**
Identifiable assets
Identifiable liabilities
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
7,726
2,961
10,687
-
(4,281)
(1,652)
(3,346)
1,408
(352)
1,056
436,495
4,997
441,492
-
(128,595)
(15,673)
(167,877)
129,347
(19,953)
109,394
(3,960)
(4,997)
(8,957)
228
4,998
-
-
(3,731)
-
(3,731)
432,535
-
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
Nigeria
Corporate
retail and
pensions
custodian
services
401,622
2,036
403,658
-
(114,936)
(11,091)
(156,311)
121,320
(17,782)
103,538
Nigeria
Corporate
retail and
pensions
custodian
services
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.
102 Zenith Bank Plc Annual Report -31 December 2016
ZENITH BANK PLC
Notes to the Consolidated and Separate Financial Statements
for the Year Ended 31 Dec 2016
In millions of Naira
6.
Interest and similar income
Loans and advances to customers
Treasury bills
Government and other bonds
Placements with banks and discount houses
Group
Bank
2016
2015
2016
2015
273,351
60,187
48,730
2,289
384,557
255,140
51,809
34,998
6,232
348,179
252,834
44,347
45,286
1,089
343,556
238,349
42,481
28,111
8,478
317,419
Total interest income, calculated using the effective interest rate method reported above relates to financial assets not
carried at fair value through profit or loss are N384,557 million (31 Dec 2015: N348,179 million) and N343,556 million (31
Dec 2015: N317,419 million) for Group and Bank respectively.
Included in interest income on loans and advances are amounts totalling N2.66 billion (31 Dec 2015: N2,840 million) and
N2.17 billion (31 Dec 2015: N2,768 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
4,125
12,516
94,369
33,368
4,638
10,771
90,591
17,597
3,808
12,379
83,989
31,734
4,491
10,705
83,653
16,087
144,378
123,597
131,910
114,936
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 loss on financial assets
Overdraft (see note 20(b))
Term loan (see note 20(b))
On lending (see note 20(b))
Advances under finance lease (see note 20(b))
Other financial assets (see note 25)
Investment in Associates (see note 23(b))
9.
Fee and commission income
Credit related fees
Commission on turnover
Account maintenance fee
Income from financial guarantee contracts issued
Fees on electronic products
Foreign currency transaction fees and commissions
Asset management fees
Auction fees income
Corporate finance fees
Foreign withdrawal charges
Commission on agency and collection services
13,786
19,099
(1,336)
(13)
284
530
32,350
18,512
934
17,374
2,997
10,687
1,724
6,224
772
2,123
3,004
4,093
68,444
(178)
13,219
2,276
24
332
-
15,673
15,521
14,051
-
2,257
9,986
1,290
5,238
989
3,431
5,365
2,776
60,904
12,811
14,465
(1,336)
(13)
278
90
26,295
16,214
-
16,863
2,574
9,954
1,156
-
772
2,064
3,004
3,018
55,619
(3,108)
11,567
2,276
24
332
-
11,091
13,158
12,967
-
1,907
9,462
974
-
989
3,398
5,365
2,093
50,313
103 Zenith Bank Plc Annual Report - 31 December 2016
ZENITH BANK PLC
Notes to the Consolidated and Separate Financial Statements
for the Year Ended 31 Dec 2016
Group
Bank
2016
2015
2016
2015
In millions of Naira
9.
Fee and commission income (continued)
The fees and commission income reported above excludes amount included in determining effective interest rates on
financial 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/(loss)
20,077
8,649
(328)
28,398
(1,962)
19,218
894
18,150
20,077
8,649
(328)
28,398
(2,228)
19,218
894
17,884
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(vii))
Gain on disposal of equity securities (see note 44(viii))
Income on cash handling
Foreign currency revaluation gain
349
236
-
426
25,587
26,598
545
39
1,615
289
2,814
5,302
3,949
172
-
426
22,688
27,235
4,505
27
1,615
289
4,601
11,037
Dividend income from equity investments represent dividend received in equity instruments held for strategic purposes and
for which the Group has elected to present the fair value and loss in Other Comprehensive Income .
Foreign currency revaluation gain represent gains realised from the revaluation of foreign currencies denominated assets
and liabilities held in the bankin books.
104 Zenith Bank Plc Annual Report - 31 December 2016
ZENITH BANK PLC
Notes to the Consolidated and Separate Financial Statements
for the Year Ended 31 Dec 2016
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 write-off
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
Effect of tax rates in foreign juridictions
Current income tax
Deferred tax expense:
Origination/(reversal) of temporary differences
Income tax expense
Total income tax
Group
Bank
2016
2015
2016
2015
1,057
626
10,393
3,323
3,215
5,856
3,288
4,991
1,461
14,021
1,907
1,770
2,998
1,627
3,322
33
3,818
16
2,564
18,752
1,530
2,450
-
5,347
94,365
12,726
1,448
12,909
(189)
1,009
-
27,903
(807)
27,096
27,096
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
7,245
1,223
11,620
(1,550)
592
-
19,130
823
19,953
19,953
404
486
10,393
2,957
3,012
5,425
2,077
4,801
1,331
10,911
1,799
1,573
2,513
1,227
3,060
33
3,661
16
2,557
18,752
1,277
2,323
-
3,814
84,402
6,530
1,385
12,909
(189)
917
-
21,552
(910)
20,642
20,642
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
(i) During the year, the Bank was liable to excess dividend tax of N16.95 billion, representing 30% of N56.51 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 2016 financial year, income tax payable based on taxable profit was N3.65 billion. However, total Companies
Income tax paid based on dividend for 2015 financial year was N16.95 billion and the Bank had tax credits amounting to
N0.494 billion. The difference between income tax payable assessed on dividend and income tax payable assessed on
taxable profit amounted to N12.91 billion which was charged as tax expense in 2016 financial year.
105 Zenith Bank Plc Annual Report - 31 December 2016
ZENITH BANK PLC
Notes to the Consolidated and Separate Financial Statements
for the Year Ended 31 Dec 2016
Group
Bank
2016
2015
2016
2015
In millions of Naira
13. Taxation (continued)
(a) Reconciliation of effective tax rate
Profit before income tax
156,748
125,616
139,927
115,220
Tax calculated at the weighted average Group rate of
30% (2015: 30%)
47,024
37,685
41,978
34,566
Tax effect of adjustments on taxable income
Non-deductable expenses
Tax exempt income
Balancing charge
Tax loss effect
Information technology levy
Excess dividend tax paid
Tertiary education tax
Prior year (over)/under provision
Tax expense
Tax charge as a percentage of profit before tax
Tax rate computation
Non-deductible expenses
Tax exempt income
Information technology tax levy
Excess dividend tax paid
Changes in estimate relating to prior year
Tertiary education tax
Standard rate of tax
12,940
(48,112)
65
2
1,448
12,909
1,009
(189)
27,096
%
17.00
(8.00)
31.00
(1.00)
(8.00)
-
(1.00)
30
5,391
(34,859)
18
-
1,191
11,445
632
(1,550)
19,953
%
16.00
(4.00)
28.00
(1.00)
(9.00)
-
-
30
11,500
(47,923)
65
-
1,385
12,909
917
(189)
20,642
%
15.00
(8.00)
34.00
(1.00)
(9.00)
-
(1.00)
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
(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
Current income tax charge (see note 13a)
At end of the year
31 Dec 2016
31 Dec 2015
31 Dec 2016
31 Dec 2015
3,579
(22,444)
(85)
-
27,903
8,953
10,042
(26,356)
763
-
19,130
3,579
2,534
(17,159)
-
-
21,552
6,927
7,709
(20,409)
-
-
15,234
2,534
106 Zenith Bank Plc Annual Report - 31 December 2016
ZENITH BANK PLC
Notes to the Consolidated and Separate Financial Statements
for the Year Ended 31 Dec 2016
Group
Bank
2016
2015
2016
2015
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 period
(millions)
Weighted average number of ordinary shares in issue
(millions)
129,434
105,531
119,285
98,784
31,396
31,396
31,396
31,396
31,396
31,396
31,396
31,396
Basic and diluted earnings per share (Kobo)
412
336
380
315
Basic and diluted earnings per share are the same, as there are no dilutive shares.
107 Zenith Bank Plc Annual Report - 31 December 2016
ZENITH BANK PLC
Notes to the Consolidated and Separate Financial Statements
for the Year Ended 31 Dec 2016
In millions of Naira
31 Dec 2016
31 Dec 2015
31 Dec 2016 31 Dec 2015
Group
Bank
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
reserve) (see note (a))
Special Cash Reserve Requirement (see note (b))
Current
Non current
36,953
103,921
447,495
80,689
669,058
669,058
-
669,058
41,649
316,358
403,554
-
761,561
761,561
-
761,561
24,342
75,036
447,318
80,689
627,385
627,385
-
627,385
35,544
296,958
403,444
-
735,946
735,946
-
735,946
(a) 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.
(b) Special Cash Reserve Requirement represents a 5% special intervention reserve held with the Central Bank of
Nigeria as a regulatory requirement.
16
Treasury bills
Treasury bills (FVTPL)
Treasury bills (Amortized cost)
Classified as:
Current
Non-current
74,381
482,978
557,359
557,359
-
557,359
53,698
324,230
377,928
377,928
-
377,928
74,381
389,406
463,787
463,787
-
463,787
53,698
277,202
330,900
330,900
-
330,900
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).
127,068
79,513
112,575
63,979
108 Zenith Bank Plc Annual Report - 31 December 2016
ZENITH BANK PLC
Notes to the Consolidated and Separate Financial Statements
for the Year Ended 31 Dec 2016
In millions of Naira
31 Dec 2016
31 Dec 2015
31 Dec 2016 31 Dec 2015
Group
Bank
17. Assets pledged as collateral
Treasury bills pledged as collateral
Bonds pledged as collateral
Treasury bills under repurchase agreement
Bonds under repurchase agreement
2,768
76,428
113,544
135,603
328,343
611
104,701
48,638
111,101
265,051
-
76,428
113,544
135,603
325,575
-
104,581
48,638
111,101
264,320
The assets pledged as collateral were given to the counter parties without transferring the ownership to them. These are
held by the counterparty for the term of the transaction being collateralized. These 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 exchanged under repurchase agreement are with the following counterparties (see note 31):
Counterparties
JP Morgan
ABSA
Standard Bank
Citi Group Global Market
Carrying value
of assets
54,748
81,452
102,751
10,196
Carrying value
of liabilities
22,908
45,985
71,541
15,362
Carrying value
of assets
54,748
81,452
102,751
10,196
Carrying value
of liabilities
22,908
45,985
71,541
15,362
249,147
155,796
249,147
155,796
Assets exchanged under repurchase agreement (December 31, 2015) are with the following counterparties (see note 31):.
Counterparties
JP Morgan
ABSA
Standard Bank
Citi Bank
Classified as:
Current
Non-current
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
Carrying value
of assets
25,220
56,978
71,844
5,697
Carrying value
of liabilities
14,941
40,097
49,962
9,958
Carrying value
of assets
25,220
56,978
71,844
5,697
Carrying value
of liabilities
14,941
40,097
49,962
9,958
159,739
114,958
159,739
114,958
148,573
179,770
328,343
92,965
172,086
265,051
148,573
177,002
325,575
92,965
171,355
264,320
12,344
291,254
155,859
-
459,457
15,244
172,106
77,843
7,001
272,194
-
336,868
17,537
-
354,405
-
228,317
31,576
7,001
266,894
459,457
272,194
354,405
266,894
Included in balances with banks outside Nigeria is the amount of N104.63 billion and N104.53 billion for the Group and
Bank respectively (31 December 2015: N71.93 billion and N71.91 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.
109 Zenith Bank Plc Annual Report - 31 December 2016
ZENITH BANK PLC
Notes to the Consolidated and Separate Financial Statements
for the Year Ended 31 Dec 2016
In millions of Naira
31 Dec 2016
31 Dec 2015
31 Dec 2016 31 Dec 2015
Group
Bank
19. Derivative assets
Instrument types:
Forward contracts
Fair value of assets
Futures contracts
Fair value of assets
Total
18,093
-
64,767
82,860
8,481
-
-
8,481
18,093
-
64,767
82,860
8,481
-
-
8,481
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 the Discounted Mark to Market technique. 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 gains of N20.08 billion (31 Dec 2015 net
gain of N2.43 billion) which were recognized in the statement of comprehensive income. These net gains related to the fair
values of the forward contracts, producing derivative assets and liabilities of N82.9 billion and N66.8 billion respectively (31
December 2015 N8.5 and N0.38 billion respectively).
All derivative assets are current.
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
591,219
1,417,860
345,940
5,790
2,360,809
(71,444)
(32,896)
(38,548)
507,512
1,226,277
287,937
10,530
2,032,256
(42,943)
(22,390)
(20,553)
551,798
1,289,864
345,940
5,622
2,193,224
(55,092)
(17,607)
(37,485)
473,203
1,113,622
287,937
10,179
1,884,941
(35,716)
(16,116)
(19,600)
2,289,365
1,989,313
2,138,132
1,849,225
591,219
(30,567)
(14,737)
(15,830)
560,652
507,512
(18,880)
(10,088)
(8,792)
488,632
551,798
(22,245)
(7,478)
(14,767)
529,553
473,203
(13,312)
(5,474)
(7,838)
459,891
1,417,860
(39,472)
1,226,277
(21,310)
1,289,864
(31,443)
1,113,622
(19,651)
(18,159)
(21,313)
(12,302)
(9,008)
(10,129)
(21,314)
(10,642)
(9,009)
1,378,388
1,204,967
1,258,421
1,093,971
110 Zenith Bank Plc Annual Report - 31 December 2016
ZENITH BANK PLC
Notes to the Consolidated and Separate Financial Statements
for the Year Ended 31 Dec 2016
In millions of Naira
31 Dec 2016
31 Dec 2015
31 Dec 2016 31 Dec 2015
Group
Bank
On-lending facilities
Gross On-lending facilities
Less: Allowances for impairment
Collective allowance for impairment
Advances under finance lease
Gross investment in finance lease
Less: collective allowance for impairment
Gross Loans classified as:
Current
Non-current
345,940
(1,337)
(1,337)
287,937
(2,673)
(2,673)
345,940
(1,337)
(1,337)
287,937
(2,673)
(2,673)
344,603
285,264
344,603
285,264
5,790
(67)
5,723
10,530
(80)
10,450
5,622
(67)
5,555
10,179
(80)
10,099
1,090,193
1,270,616
923,035
1,109,221
1,047,384
1,145,840
871,459
1,013,482
2,360,809
2,032,256
2,193,224
1,884,941
111 Zenith Bank Plc Annual Report - 31 December 2016
Notes to the Consolidated and Separate Financial Statements
for the Year Ended 31 Dec 2016
In millions of Naira
Reconciliation of impairment allowance on loans and advances to customers:
Group
Balance at January 01, 2016
Specific impairment
Collective impairment
Additional impairment for the year (see note 8)
Specific impairment
Collective impairment
Foreign currency translation and other adjustments
Write-offs (collective)
Balance at 31 Dec 2016
Specific impairment
Collective impairment
Balance at January 01, 2015
Specific impairment
Collective impairment
Additional impairment for the year (see note 8)
Specific impairment
Collective impairment
Foreign currency translation and other adjustments
Write-offs (collective)
Balance at December 31, 2015
Overdrafts
Term loans
On-lending
facilities
Advances under
finance lease
Total
18,880
10,088
8,792
13,786
6,482
7,304
3,783
(5,882)
30,567
14,737
15,830
19,943
7,372
12,571
(178)
3,460
(3,638)
(858)
(27)
18,880
21,310
12,302
9,008
19,099
9,024
10,075
2,323
(3,260)
39,472
18,158
21,314
8,432
2,693
5,739
13,219
13,972
(753)
7
(348)
21,310
2,673
-
2,673
(1,336)
-
(1,336)
-
-
1,337
-
1,337
397
-
397
2,276
-
2,276
-
-
2,673
80
-
80
(13)
-
(13)
-
-
67
-
67
56
-
56
24
-
24
-
-
80
42,943
22,390
20,553
31,536
15,506
16,030
6,106
(9,142)
71,444
32,895
38,548
28,828
10,065
18,763
15,341
17,432
(2,091)
(851)
(375)
42,943
* 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.
112 Zenith Bank Plc Annual Report -31 December 2016
Notes to the Consolidated and Separate Financial Statements
for the Year Ended 31 Dec 2016
In millions of Naira
Reconciliation of impairment allowance on loans and advances to customers:
Bank
Balance at January 01, 2016
Specific impairment
Collective impairment
Additional impairment for the year (see note 8)
Specific impairment
Collective impairment
Write-offs (Collective)
Balance at 31 Dec 2016
Specific impairment
Collective impairment
Balance at January 01, 2015
Specific impairment
Collective impairment
Additional impairment for the year
Specific impairment
Collective impairment
Write-offs (Collective)
Balance at December 31, 2015
Overdrafts
Term loans
On-lending
facilities
Advances under
finance lease
Total
13,312
5,474
7,838
12,811
5,762
7,049
(3,878)
22,245
7,478
14,767
16,446
4,787
11,659
(3,108)
688
(3,796)
(26)
13,312
19,651
10,642
9,009
14,465
5,843
8,622
(2,673)
31,443
10,129
21,314
8,432
2,693
5,739
11,567
8,298
3,269
(348)
19,651
2,673
-
2,673
(1,336)
-
(1,336)
-
1,337
-
1,337
397
-
397
2,276
-
2,276
-
2,673
80
-
80
(13)
-
(13)
-
67
-
67
56
-
56
24
-
24
-
80
35,716
16,116
19,600
25,927
11,605
14,322
(6,551)
55,092
17,607
37,485
25,331
7,480
17,851
10,759
8,986
1,773
(374)
35,716
* 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.
113 Zenith Bank Plc Annual Report -31 December 2016
Notes to the Consolidated and Separate Financial Statements
for the Year Ended 31 Dec 2016
In millions of Naira
31 Dec 2016
31 Dec 2015
31 Dec 2016 31 Dec 2015
Group
Bank
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
Impairment 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
5,896
(106)
5,790
-
5,790
5,790
5,843
(53)
5,790
(67)
5,723
11,653
(1,123)
10,530
1,561
8,969
10,530
16,212
(5,682)
10,530
(80)
10,450
5,728
(106)
5,622
-
5,622
5,622
5,675
(53)
5,622
(67)
5,555
11,267
(1,088)
10,179
1,478
8,701
10,179
15,776
(5,597)
10,179
(80)
10,099
98,000
52,333
1,180,353
1,030,123
147,919
7,467
950,009
926,861
95,990
52,332
1,157,333
887,569
135,822
7,467
919,475
822,177
2,360,809
2,032,256
2,193,224
1,884,941
173,124
195,737
92,268
134,002
9,702
6,707
9,702
6,707
16,652
199,478
10,697
213,141
16,652
118,622
10,015
150,724
-
199,478
199,478
1,817
211,324
213,141
-
118,622
118,622
1,395
149,329
150,724
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.
114 Zenith Bank Plc Annual Report - 31 December 2016
Notes to the Consolidated and Separate Financial Statements
for the Year Ended 31 Dec 2016
In millions of Naira
31 Dec 2016
31 Dec 2015
31 Dec 2016 31 Dec 2015
Group
Bank
(b) Movement in investment securities
The movement in investment securities for the group may be summarised as follows:
Group
At January 01, 2016
Exchange differences
Additions
Disposals
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
6,707
-
9,702
(6,379)
(328)
195,737
(953)
75,794
(112,739)
-
Equity
securities at
fair value
through other
comprehensive
income
10,697
-
-
(681)
-
Total
213,141
(953)
85,496
(119,799)
(328)
-
-
-
-
6,636
6,636
29,567
(14,282)
-
-
29,567
(14,282)
At 31 Dec 2016
9,702
173,124
16,652
199,478
At January 01, 2015
Exchange differences
Additions
Disposals
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 December 31, 2015
-
(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
-
-
-
-
34,998
(31,230)
6,707
195,737
(1,752)
-
-
10,697
(1,752)
34,998
(31,230)
213,141
The movement in investment securities for the bank may be summarised as follows:
115 Zenith Bank Plc Annual Report - 31 December 2016
Notes to the Consolidated and Separate Financial Statements
for the Year Ended 31 Dec 2016
In millions of Naira
31 Dec 2016
31 Dec 2015
31 Dec 2016 31 Dec 2015
Group
Bank
Bank
At January 01, 2016
Additions
Disposals
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 Dec 2016
At January 01, 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
At December 31, 2015
Debt
securities at
fair value
through profit
or loss
Debt
securities at
amortised
cost
6,707
9,702
(6,379)
(328)
134,002
52,351
(101,739)
-
Equity
securities at
fair value
through other
comprehensive
income
10,015
1
-
-
Total
150,724
62,054
(108,118)
(328)
-
-
-
9,702
-
5,813
-
894
-
6,636
6,636
21,597
(13,943)
92,268
-
-
21,597
(13,943)
16,652
118,622
79,469
85,917
(31,715)
13,363
-
(1,596)
92,832
91,730
(33,311)
-
-
894
-
-
-
-
28,111
(27,780)
6,707
134,002
(1,752)
-
-
10,015
(1,752)
28,111
(27,780)
150,724
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 2016
Ownership
interest %
98.0700
100.0000
99.9900
99.9600
99.0000
31 Dec 2016
Carrying amount
31 Dec 2015
6,444
21,482
2,059
1,038
1,980
33,003
6,444
21,482
2,059
1,038
1,980
33,003
116 Zenith Bank Plc Annual Report - 31 December 2016
ZENITH BANK PLC
Notes to the Consolidated and Separate Financial Statements
for the Year Ended 31 Dec 2016
In millions of Naira
22.
Investment in subsidiaries (continued)
(b) Condensed results of consolidated entities
31 Dec 2016
Condensed statement of profit or loss
Operating income
Operating expenses
Inpairment charge for financial assets
Profit before tax
Taxation
Profit / loss 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
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
507,997
(318,899)
(32,350)
156,748
(27,096)
129,652
(5,680)
957
-
(4,723)
-
(4,723)
454,808
(288,145)
(26,736)
139,927
(20,642)
119,285
35,590
(21,260)
(866)
13,464
(4,137)
9,327
12,010
(6,715)
(4,635)
660
(132)
528
669,058
557,359
328,343
459,457
82,860
2,289,365
199,478
-
6,440
37,536
105,284
4,645
(1)
1
1
(158,506)
-
(1)
(1)
(33,003)
-
(56,913)
-
1
627,385
463,787
325,575
354,405
82,860
2,138,132
118,622
33,003
6,041
35,410
94,613
3,903
36,356
74,261
2,767
42,816
-
81,103
98
-
302
647
9,215
180
4,739,825
(248,422)
4,283,736
247,745
10
-
-
196,942
-
67,971
80,459
-
51
56,897
371
170
402,871
2,412
(1,534)
(106)
772
-
772
3,359
11,159
-
7,237
-
831
-
-
46
156
392
36
23,216
1,735
(824)
(1)
910
(280)
630
1,881
8,151
-
1,002
-
1,318
-
-
-
156
373
108
12,989
7,122
(1,378)
(6)
5,738
(1,905)
3,833
68
-
-
15,561
-
11
300
-
-
1,183
320
247
17,690
117 Zenith Bank Plc Annual Report -31 December 2016
ZENITH BANK PLC
Notes to the Consolidated and Separate Financial Statements
for the Year Ended 31 Dec 2016
In millions of Naira
22.
Investment in subsidiaries (continued)
31 Dec 2016
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 / decrease in cash and cash equivalents
Cash and cash equivalents
At start of year
Exchange rate movements on cash and cash equivalents
At end of year
Zenith Group Elimination
entries
Zenith Bank
Plc
Zenith Bank
Ghana
Zenith Bank
UK
Zenith Bank
SierraLeone
Zenith Bank
Gambia
Zenith
Pension
Custodian
2,983,621
66,834
8,953
45
209,080
350,657
263,106
153,464
704,465
(3,401)
-
-
-
(182,318)
-
(29,696)
-
(35,001)
2,552,963
66,834
6,927
-
243,737
350,657
292,802
153,464
616,353
194,892
-
(111)
-
11,935
-
-
-
41,027
4,740,225
(250,416)
4,283,737
247,743
210,151
-
-
-
133,947
-
-
-
58,771
402,869
(1,660)
11,896
(28,554)
131,767
(7,239)
(22,597)
(104,917)
32,343
(24,443)
(18,318)
101,931
(97,017)
(6,729)
(9,028)
19,358
3,601
(22,817)
-
(2,575)
(25,392)
709,714
36,003
727,399
(80,132)
36,003
57,802
663,375
-
566,358
32,190
-
35,791
83,388
-
57,996
20,348
-
(7)
-
144
-
-
-
2,728
23,213
(263)
-
(89)
(352)
7,359
-
7,007
8,668
-
264
34
999
-
-
-
3,023
12,988
(1,195)
(180)
(46)
(1,421)
3,500
-
2,079
-
-
1,880
11
636
-
-
-
15,164
17,691
2,494
(4,000)
1,838
332
34
-
366
332
Increase / decrease in cash and cash equivalents
(18,318)
101,931
(97,017)
3,601
(25,392)
(352)
(1,421)
118 Zenith Bank Plc Annual Report -31 December 2016
ZENITH BANK PLC
Notes to the Consolidated and Separate Financial Statements
for the Year Ended 31 Dec 2016
In millions of Naira
22.
Investment in subsidiaries (continued)
31 December 2015
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
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
432,535
228
(291,474)
(15,673)
125,616
(19,953)
105,663
(8,957)
-
4,997
-
(3,960)
-
(3,960)
396,653
-
(270,342)
(11,091)
115,220
(16,436)
98,784
24,954
-
(16,035)
(2,867)
6,052
(1,682)
4,370
10,686
-
(7,627)
(1,652)
1,407
(352)
1,055
1,093
-
(960)
(47)
86
-
86
1,100
-
(602)
(16)
482
(136)
346
7,006
-
(905)
-
6,101
(1,347)
4,754
Zenith Group Elimination
entries
Zenith Bank
Plc
Zenith Bank
Ghana
Zenith Bank
UK
Zenith Bank
SierraLeone
Zenith Bank
Gambia
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
6
-
-
61,752
-
82,480
60,859
-
-
40
23,979
289
182
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
956
3,633
-
1,138
-
971
-
-
-
-
80
235
62
7,075
Zenith
Pension
Custodian
18
-
-
15,523
-
-
-
-
-
-
758
203
131
16,633
119 Zenith Bank Plc Annual Report -31 December 2016
ZENITH BANK PLC
Notes to the Consolidated and Separate Financial Statements
for the Year Ended 31 Dec 2016
In millions of Naira
22.
Investment in subsidiaries (continued)
December 31, 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 from operating activities
Net cash from financing activities
Net cash from investing activities
Zenith Group Elimination
entries
Zenith Bank
Plc
Zenith Bank
Ghana
Limited
Zenith Bank
UK Limited
Zenith Bank
SierraLeone
Limited
Zenith Bank
Gambia
Limited
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
13,760
-
11
-
10
-
-
-
1,670
15,451
4,668
-
108
8
692
-
-
-
1,599
7,075
Zenith
Pension
Custodian
Limited
-
-
1,186
11
101
-
-
-
15,335
16,633
Decrease/Increase in cash and cash equivalents
(257,887)
(26,177)
(208,478)
(450,494)
216,540
(23,933)
(6,588)
3,959
(23,548)
(415,396)
225,789
(18,871)
(6,729)
(9,028)
19,358
3,601
(22,817)
-
(2,575)
(25,392)
(263)
-
(89)
(352)
(1,195)
(180)
(46)
(1,421)
2,494
(4,000)
1,838
332
Cash and cash equivalents
At start of year
Exchange rate movements on cash and cash equivalents
At start of year
965,723
1,878
709,714
(32,601)
1,878
(56,900)
871,853
-
663,375
Decrease/Increase in cash and cash equivalents
(257,887)
(26,177)
(208,478)
32,190
-
35,791
3,601
83,388
-
57,996
7,359
-
7,007
3,500
-
2,079
(25,392)
(352)
(1,421)
34
-
366
332
120 Zenith Bank Plc Annual Report -31 December 2016
ZENITH BANK PLC
Notes to the Consolidated and Separate Financial Statements
for the Year Ended 31 Dec 2016
In millions of Naira
31 Dec 2016
31 Dec 2015
31 Dec 2016 31 Dec 2015
Group
Bank
22.
Investment in subsidiaries (continued)
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
(a) 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 year
Diminution in investment
Balance at end of the year
Classified as:
Current
Non-current
Group
Bank
31 Dec 2016 31 Dec 2015 31 Dec 2016 31 Dec 2015
1,312
440
-
(1,752)
-
-
-
-
1,312
212
228
(1,222)
530
-
530
530
1,312
-
-
(1,312)
1,312
-
-
(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.
(b) Movement in impairment on investment in associates
At start of the year
Charge for the year (see note 8)
At end of the year
1,222
530
1,752
1,222
-
1,222
1,222
90
1,312
1,222
-
1,222
121 Zenith Bank Plc Annual Report - 31 December 2016
ZENITH BANK PLC
Notes to the Consolidated and Separate Financial Statements
for the Year Ended 31 Dec 2016
In millions of Naira
31 Dec 2016
31 Dec 2015
31 Dec 2016 31 Dec 2015
Group
Bank
23.
Investment in associates (continued)
Summarised financial information of associates
The aggregate amounts of assets, liabilities, revenue and profits of associates are shown below;
Total assets
Total liabilities
Total revenue
Profit before tax
24. Deferred tax
Group
31 Dec 2016
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 2015
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
Liabilities
Movements in temporary differences during the year
Property and equipment
Allowances for loan losses
31 Dec 2016
17,750
8,620
18,630
2,841
31 Dec 2015
17,580
8,520
34,247
5,589
1 January
2016
(4,662)
2
3,905
6,356
116
(110)
Recognised in
profit or loss
(2,374)
(2)
(1,737)
4,890
(116)
172
5,607
833
31 Dec 2016
(7,036)
-
2,168
11,246
-
62
6,440
1 January
2016
11
8
Recognised in
profit or loss
26
-
19
26
31 Dec 2016
37
8
45
1 January
2015
(3,376)
(11)
5,355
4,357
116
8
Recognised in
profit or loss
(1,286)
13
1,001
(452)
-
(118)
6,449
(842)
31 Dec 2015
(4,662)
2
6,356
3,905
116
(110)
5,607
1 January
2015
-
-
Recognised in
profit or loss
11
8
-
19
31 Dec 2015
11
8
19
122 Zenith Bank Plc Annual Report - 31 December 2016
ZENITH BANK PLC
Notes to the Consolidated and Separate Financial Statements
for the Year Ended 31 Dec 2016
In millions of Naira
24. Deferred tax (continued)
Bank
December 2016
Assets
Movements in temporary differences during the year
Property and equipment
Other assets
Allowances for loan losses
Unutilized capital allowances
31 December 2015
Movements in temporary differences during the year:
Property and equipment
Other assets
Allowances for loan losses
Unutilised capital allowance
All deferred tax are non current.
25. Other assets
Non financial assets
Prepayments
Other financial assets
Electronic card related receivables
Intercompany receivables
Receivables
Deposits for shares
Gross financial assets
Less: Specific impairment
Net financial assets
1 January
2016
(4,667)
13
5,880
3,905
5,131
Recognised in
profit or loss
(2,706)
(13)
5,366
(1,737)
910
31 Dec 2016
(7,373)
-
11,246
2,168
6,041
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
Group
Bank
31 Dec 2016
31 Dec 2015
31 Dec 2016
31 Dec 2015
14,759
12,710
13,075
11,534
10,533
-
17,498
-
28,031
(5,254)
22,777
10,446
-
4,588
-
15,034
(4,970)
10,064
8,207
929
17,797
650
27,583
(5,248)
22,335
9,118
753
4,588
650
15,109
(4,970)
10,139
Total other assets
37,536
22,774
35,410
21,673
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
37,536
-
37,536
17,820
4,954
22,774
35,410
-
35,410
16,775
4,898
21,673
4,970
284
5,254
4,638
332
4,970
4,970
278
5,248
4,638
332
4,970
123 Zenith Bank Plc Annual Report - 31 December 2016
ZENITH BANK PLC
Notes to the Consolidated and Separate Financial Statements
for the Year Ended 31 Dec 2016
In millions of Naira
26. Property and equipment
Group
Cost
At the start of the year
Additions
Reclassification/transfer from WIP
Reclassifications between fixed assets
Disposals
Foreign exchange movements
At the end of the year
Accumulated Depreciation
At the start of the year
Charge for the year
Reclassifications between fixed assets
Disposals
Foreign exchange movements
At the end of the year
Net book amount
At 31 Dec 2016
At December 31, 2015
Leasehold
land
Buildings
Leasehold
improvements
Furniture and
fittings and
equipment
Computer
equipment
Motor Vehicles
Work in
progress
Total
22,297
677
1,993
-
-
48
25,015
30,117
2,222
2,751
(60)
-
-
35,030
14,745
1,239
174
(5)
(168)
99
16,084
43,659
7,433
1,328
52
(510)
436
52,398
23,865
2,891
30
9
(97)
(31)
26,667
14,858
4,693
-
4
(1,399)
317
18,473
24,282
8,266
(6,735)
-
(104)
1,330
27,039
173,823
27,421
(459)
-
(2,278)
2,199
200,706
Leasehold
land
Buildings
Leasehold
improvements
Furniture and
fittings and
equipment
Computer
equipment
Motor Vehicle
Work in
progress
Total
1,709
240
-
-
-
1,949
23,066
20,588
4,034
673
49
-
(33)
4,723
30,307
26,083
12,646
712
(51)
(67)
364
13,604
2,480
2,099
34,483
4,497
3
(462)
81
38,602
13,796
9,176
22,269
1,448
(1)
(91)
318
23,943
2,724
1,596
11,660
2,109
-
(1,291)
123
12,601
5,872
3,198
-
-
-
-
-
-
86,801
9,679
-
(1,911)
853
95,422
27,039
24,282
105,284
87,022
There were no impairment losses on any class of property and equipment during the year (31 December 2015 :Nil)
There were no capitalised borrowing costs related to the acquisition of property and equipment during the year (31 December 2015:Nil).
All property and equipment are non current. None of the Group's assets were financed from borrowings, consequently no borrowing cost has been capitalized as part of asset cost.
The reclassification balance of N459 million represents reclassification of software from WIP to intangible assets.
124 Zenith Bank Plc Annual Report -31 December 2016
ZENITH BANK PLC
Notes to the Consolidated and Separate Financial Statements
for the Year Ended 31 Dec 2016
In millions of Naira
26 Property and equipment (continued)
Bank
Cost
At the start of the year
Additions
Reclassification/transfer from WIP
Reclassifications between fixed assets
Disposals
At the end of the year
Accumulated depreciation
At the start of the year
Charge for the year
Reclassifications between fixed assets
Disposals
At the end of the year
Net book amount
At 31 Dec 2016
At 31 December 2015
Leasehold land
Buildings
Leasehold
improvements
Furniture
fittings and
equipment
Computer
Equipment
Motor Vehicle
Work in
progress
Total
22,297
677
1,993
47
-
25,014
29,853
2,174
2,751
(107)
-
34,671
12,967
728
174
(5)
(2)
13,862
42,243
7,088
1,328
52
(431)
50,280
22,894
2,324
30
9
(9)
25,248
13,868
4,310
-
4
(1,249)
16,933
20,366
5,436
(6,735)
-
(104)
18,963
164,488
22,737
(459)
-
(1,795)
184,971
Leasehold land
Buildings
Leasehold
improvements
Furniture
fittings and
equipment
Computer
equipment
Motor vehicle
Work in
progress
Total
1,709
240
-
-
1,949
23,065
20,588
4,014
633
42
-
4,689
29,982
25,839
11,655
644
(40)
(1)
12,258
1,604
1,312
33,416
4,096
(2)
(411)
37,098
13,182
8,827
21,519
1,236
-
(8)
22,747
2,501
1,375
10,988
1,815
-
(1,187)
11,616
5,317
2,880
-
-
-
-
-
18,963
20,366
83,301
8,664
-
(1,607)
90,358
94,613
81,187
There were no impairment losses on any class of property and equipment during the year (31 December 2015 :Nil)
There were no capitalised borrowing costs related to the acquisition of property and equipment during the year (31 December 2015: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
The reclassification balance of N459 million represents reclassification of software from WIP to intangible assets.
125 Zenith Bank Plc Annual Report -31 December 2016
ZENITH BANK PLC
Notes to the Consolidated and Separate Financial Statements
for the Year Ended 31 Dec 2016
In millions of Naira
31 Dec 2016
31 Dec 2015
31 Dec 2016 31 Dec 2015
Group
Bank
27.
Intangible assets
Computer software
Cost
At start of the year
Exchange difference
Reclassification
Disposal
Additions
At end of the year
Accumulated amortization
At start of the year
Exchange difference
Reclassification
Disposal
Charge for the year
At the end of the year
Carrying amount at end of the year
8,761
410
460
(50)
2,417
11,998
5,521
442
-
(45)
1,435
7,353
4,645
6,142
179
219
-
2,221
8,761
3,940
123
219
-
1,239
5,521
3,240
7,236
-
459
-
2,066
9,761
4,483
-
-
-
1,375
5,858
3,903
5,255
-
-
-
1,981
7,236
3,354
-
-
-
1,129
4,483
2,753
All intangible assets are non current. All intangible assets of the Group have finite useful life and are amortised over 5
years.
The Group does not have internally generated intangible assets.
The reclassification balance of N459 million represents reclassification from WIP to intangible assets.
28. Customers' deposits
Demand
Savings
Term
Domiciliary
Classified as:
Current
Non-current
1,463,144
358,951
555,547
605,979
1,282,559
246,113
556,375
472,837
1,215,533
285,250
502,418
549,762
1,153,442
222,035
521,219
436,321
2,983,621
2,557,884
2,552,963
2,333,017
2,983,621
-
2,557,884
-
2,552,963
-
2,333,017
-
2,983,621
2,557,884
2,552,963
2,333,017
126 Zenith Bank Plc Annual Report - 31 December 2016
ZENITH BANK PLC
Notes to the Consolidated and Separate Financial Statements
for the Year Ended 31 Dec 2016
In millions of Naira
31 Dec 2016
31 Dec 2015
31 Dec 2016 31 Dec 2015
Group
Bank
29. Other liabilities
Other financial liabilities
Customer deposits for letters of credit
Settlement payables
Managers' cheques
Due to banks for clean letters of credit
Deferred income on financial guarantee contracts
Tax collections
Sales and other collections
Unclaimed dividend
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
104,631
35,962
13,724
9,720
906
2,495
11,594
2,932
1,580
6,914
190,458
8,404
9,818
18,222
208,680
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
104,530
35,898
12,952
57,077
906
2,358
11,594
2,932
1,458
3,827
233,532
8,404
1,800
10,204
243,736
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
208,680
205,062
243,736
212,636
The amounts above for financial guarantee contracts represents the amounts initially recognised less cumulative
amortisation.
(a) Reconciliation of provision for claims
At start of the year
Charge for the year
Amount reversed during the year
At end of the year
9,766
-
(1,362)
8,404
-
9,766
-
9,766
9,766
-
(1,362)
8,404
-
9,766
-
9,766
The provision represents amount reserved for claims that the bank is currently reconciling with the claimants.
30. On-lending facilities
(a) 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)
Classified as:
Current
Non-current
40,908
33,482
40,908
33,482
53,919
9,476
1,665
147,170
97,519
350,657
-
350,657
350,657
58,755
11,798
1,561
111,194
70,091
286,881
-
286,881
286,881
53,919
9,476
1,665
147,170
97,519
350,657
-
350,657
350,657
58,755
11,798
1,561
111,194
70,091
286,881
-
286,881
286,881
127 Zenith Bank Plc Annual Report - 31 December 2016
ZENITH BANK PLC
Notes to the Consolidated and Separate Financial Statements
for the Year Ended 31 Dec 2016
In millions of Naira
31 Dec 2016
31 Dec 2015
31 Dec 2016 31 Dec 2015
Group
Bank
(b) Movement in on-lending facilities
At beginning of the year
Addition during the year
Repayment during the year
At end of the year
286,881
70,934
(7,158)
350,657
68,344
219,942
(1,405)
286,881
286,881
70,934
(7,158)
350,657
68,344
219,942
(1,405)
286,881
(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 N61.66 billion (31 December 2015: N61.5 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 N61.66 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.
128 Zenith Bank Plc Annual Report - 31 December 2016
ZENITH BANK PLC
Notes to the Consolidated and Separate Financial Statements
for the Year Ended 31 Dec 2016
In millions of Naira
31 Dec 2016
31 Dec 2015
31 Dec 2016 31 Dec 2015
Group
Bank
31. Borrowings
Long term borrowing comprise:
Due to ADB (i)
Due to KEXIM (ii)
Due to EIB (iii)
Due to PROPARCO (iv)
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 Citi Global Markets (xii)
Due to British Arab Bank (xiii)
Due to Zenith Bank (UK)
Due to Zenith Bank Ghana
38,924
4,066
6,370
17,205
-
45,985
22,908
71,541
5,114
-
31,016
15,362
4,615
-
-
25,013
9,996
5,491
13,758
9,958
40,097
14,941
49,962
7,740
59,259
20,034
-
2,613
-
-
38,924
4,066
6,370
17,205
-
45,985
22,908
71,541
5,114
-
31,016
15,362
4,615
7,670
22,026
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
-
263,106
258,862
292,802
268,111
The Group has not had any defaults of principal, interest or other breaches with respect to their liabilities during the year (31
Dec 2015: 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
199,287
63,819
263,106
529
258,333
258,862
199,287
93,515
292,802
529
267,582
268,111
258,862
82,017
(77,773)
263,106
198,066
75,909
(15,113)
258,862
268,111
104,043
(79,352)
292,802
198,066
85,158
(15,113)
268,111
The Bank has not had any defaults of principal, interest or other breaches with respect to their liabilities during the year:
(i) Due to ADB
The amount due to African Development Bank (AfDB) of N38.92 billion (US $127.51 million) represents the outstanding
balances from a dollar term loan facilities of US $125 million granted by ADB in September 3, 2014. The facility is repayable
over 7 years. Interest is payable half-yearly at the rate of LIBOR + 3.6% per annum. The outstanding blance of US $127.51
million from the facility will mature in August 2021.
(ii) Due to KEXIM
The amount of N4.06 billion (US $13.32 million) represents the outstanding balances from five short term loan facilities of
US $4.5 million, US $.52 million, US $2.55 million, US $3.496 million, and US $2.25 million granted by The Export-Import
Bank of Korea (KEXIM) in December, January, July, September and November 2016. Interest is payable monthly at
LIBOR+ 1.65%, (for US $4.5million and US $2.25million), LIBOR+1.73%, (for US $0.52million), LIBOR+1.63% (for US
$2.55million) and LIBOR+1.74% (for US $3.496 million). Final repayments on these facilities are due in October, January,
May, July and September 2017 respectively.
129 Zenith Bank Plc Annual Report - 31 December 2016
ZENITH BANK PLC
Notes to the Consolidated and Separate Financial Statements
for the Year Ended 31 Dec 2016
In millions of Naira
31 Dec 2016
31 Dec 2015
31 Dec 2016 31 Dec 2015
Group
Bank
(iii) Due to European Investment Bank
The amount of N6.37billion (US $20.86 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+2.74% per annum. The
facility will mature in July 2019.
(iv) Due to Proparco
The amount of N17.21 billion (US $56.36 million) represents the outstanding balances of two tranches of the credit facilities
of US $14.8million and US $41.56million 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.
(v) Due to ABSA
The amount of N45.99billion (US $150.647million) represents the amount payable by the Bank from two term loan facilities
of US $75.38million and US $75.26million granted by ABSA in September 2016 and November 2016 respectively. Interest
is payable quarterly at the rate of LIBOR+5%, and 5.5% per annum respectively. The facility will mature in March 2017 and
May 2017 respectively. (See note 17 for assets pledged as collateral)
(vi) Due to First Rand Bank
The amount of N5.1billion (US $16.75million) represents a Dollar Term Loan from First Rand Bank granted in August 2014
and priced at LIBOR+3.5%. The facility of which interest is payable quarterly has a maturity date of August 2017.
(vii) Due to IFC
The amount of N31.02billion (US $101.6million) 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 September 2022.
(viii) Due to British Arab Commercial Bank
The amount N4.61billion (US $15.115million) represents a Dollar Term Loan from British Arab Bank granted in November
2016. It is priced at LIBOR+4.0% with interest payable at the maturity date of May 2016.
(ix) Due to J.P. Morgan
The amount N22.91billion (US $75.045million) represents the amount payable by the Bank from two term loan facilities of
US $25.03million and US $50.01million granted by J.P. Morgan in December 2016. Interest is payable monthly at 2.95%
and 3.01% respectively. The facilities will mature in September 2017. (See note 17 for assets pledged as collateral).
(x) Due to Citi Global Market
The amount of N15.36billion (US $50.327million) represents the amount payable by the Bank from two term loan facilities of
US $21.7million and US $28.62million granted by Citi Global Market in November 2016. Interest is payable on maturity at
LIBOR+4.7%. The facility will mature in August 2017. (See note 17 for assets pledged as collateral).
(xi) Due to Standard Bank
The amount of N71.54billion (US $234.36million) represents the amount payable by the Bank from nine term loan facilities
of US $75.687million, US $10million, US $15.58million, US $11.61million, US $10.3million, US $75.29million, US
$22.54million, US $8.36million and August 2016 (US $22.54million, US $8.36million and US $4.99million granted by
Standard Bank in September 2016, December 2016, February 2016(US $15.58million and US $10.3million), November
2016, June 2016 and August 2016 (US $22.54million, US $8.36million and US $4.99million) respectively. Interest is payable
at maturity at LIBOR+3.5% for the first facility and LIBOR+4.25% for others. The facilities will mature in April 2017, January
2017, October 2017, March 2017, June 2017 and July 2017 respectively. (See note 17 for assets pledged as collateral).
130 Zenith Bank Plc Annual Report - 31 December 2016
ZENITH BANK PLC
Notes to the Consolidated and Separate Financial Statements
for the Year Ended 31 Dec 2016
In millions of Naira
(xii) Due to Zenith Bank UK
Group
Bank
31 Dec 2016
31 Dec 2015
31 Dec 2016 31 Dec 2015
The amount of N7.67 billion (US $25.129million) represents a Dollar Term Loan from Zenith Bank UK granted in September
2016. It is priced at LIBOR+4.0%. with interest payable quarterly and has a final maturity date of September 2017. This
amount has been eliminated on consolidation.
(xiii) Due to Zenith Bank Ghana
The amount of N22.025billion (US $72.155million) represents three Dollar Term Loan of US $20.59million, US $41.33million
and US $10.227million that Zenith Bank Ghana granted in August (US $20.59million and US $41.33million) and September
2016 respectively. It is priced at LIBOR+7.7% (US $20.59million, US $41.33million and US $10.227million) with interest
payable at maturity date of August 2017. This amount has been eliminated on consolidation.
32. Debt securities issued
Due to Euro bond holders
153,464
153,464
99,818
99,818
153,464
153,464
99,818
99,818
The carrying amount of N153.46billion (US $502.749million) represents the Eurobond issued by Zenith Bank Plc on April
22, 2014 with a maturity date of April 22, 2019 and a yield of 6.5%. 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 Dec 2015: Nil).
Movement in debt securities issued
At start of the year
Revaluation loss for the year
Contractual repayment
Accrued interest during the year
At end of the year
Classified as:
Current
Non-current
33. Derivative liabilities
Instrument types:
Forward contracts
Fair value of liabilities
Futures contracts
Fair value of liabilities
Classified as:
Current
Non-current
99,818
53,256
(9,539)
9,929
153,464
92,932
6,633
(6,307)
6,560
99,818
99,818
53,256
(9,539)
9,929
153,464
92,932
6,633
(6,307)
6,560
99,818
-
153,464
153,464
293
99,525
99,818
-
153,464
153,464
293
99,525
99,818
9,887
-
56,947
66,834
384
-
-
384
9,887
-
56,947
66,834
66,834
-
66,834
384
-
384
66,834
-
66,834
384
-
-
384
384
-
384
131 Zenith Bank Plc Annual Report - 31 December 2016
ZENITH BANK PLC
Notes to the Consolidated and Separate Financial Statements
for the Year Ended 31 Dec 2016
In millions of Naira
31 Dec 2016
31 Dec 2015
31 Dec 2016 31 Dec 2015
Group
Bank
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. 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 gains of N20.08 billion (31 Dec 2015 net
gain of N2.43 billion) which were recognized in the statement of comprehensive income. These net gains related to the fair
values of the forward contracts, producing derivative assets and liabilities of N82.9 and N66.8 billion respectively (31
December 2015 N8.5 and N0.38 billion respectively).
34. Share capital
Authorised
40,000,000,000 ordinary shares of 50k each
( 2015: 40,000,000,000 )
Issued and fully paid
31,396,493,786 ordinary shares of 50k each
(31 Dec 2015: 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. The holders of ordinary shares are entitled to receive
dividends as declared from time to time, and are entitled to one vote per share at meetings of the Bank. All ordinary shares
rank equally with regards to the Group's residual assets.
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.
(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) Fair 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.
132 Zenith Bank Plc Annual Report - 31 December 2016
Notes to the Consolidated and Separate Financial Statements
for the Year Ended 31 Dec 2016
Group
Bank
2016
2015
2016
2015
In millions of Naira
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 N3.52 billion and N2.97 billion respectively (31 Dec 2015: N3.49 billion and N
3.06 billion).
37. Personnel expenses
Compensation for the staff are as follows:
Salaries and wages
Other staff costs
Pension contribution
60,536
4,982
3,524
69,042
56,595
7,439
3,488
67,522
54,365
4,901
2,969
62,235
52,004
7,369
3,055
62,428
(a) The average number of persons employed during the period by category:
Executive directors
Management
Non-management
Number Number Number
Number
11
442
6,667
7,120
11
545
6,860
7,416
5
403
5,562
5,970
4
435
5,847
6,286
The table below shows the number of employees, whose earnings during the period, fell within the ranges shown below:
Number
Number
Number
Number
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
(b) Directors' emoluments
The remuneration paid to directors are as follows:
Executive compensation
Fees and sitting allowances
Retirement Benefit costs
Fees and other emoluments disclosed above include amounts paid to:
The chairman
The highest paid director
811
58
787
1,798
1,225
798
1,643
7,120
403
625
29
1,057
52
88
708
245
1,024
1,580
1,331
919
1,609
7,416
595
519
31
1,145
25
78
472
-
759
1,645
1,009
670
1,415
5,970
169
230
5
404
34
88
412
-
806
1,337
1,302
903
1,526
6,286
200
256
5
461
25
65
133 Zenith Bank Plc Annual Report - 31 December 2016
Notes to the Consolidated and Separate Financial Statements
for the Year Ended 31 Dec 2016
Group
Bank
2016
2015
2016
2015
In millions of Naira
37. Personnel expenses (continued)
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
33
11
11
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
Dec 2016 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
134 Zenith Bank Plc Annual Report - 31 December 2016
Notes to the Consolidated and Separate Financial Statements
for the Year Ended 31 Dec 2016
In millions of Naira
31 Dec 2016
Group
Bank
31 Dec 2016
31 Dec 2015
31 Dec 2016 31 Dec 2015
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 Pensions Custodian Limited
31 Dec 2015
109,842
700
480
739
-
16,097
-
-
-
3,809
460
-
-
-
-
-
-
-
-
595
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 Pensions Custodian Limited
82,738
661
23
721
-
22,906
-
-
-
348
2,959
-
-
-
3,960
-
-
-
-
2,036
The receivables between the group subsidiaries and related parties that are based on contractual terms are contained in
note 31 of the financial statements.
Significant restrictions
The Group does not have significant restrictions on its ability to access or use its assets and settle its liabilities other than
those resulting from the 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
N704.42 billion and N583.79 billion respectively (31 December 2015: N403.83 billion and N324.55 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
31 Dec 2016
31 Dec 2015
31 Dec 2016
31 Dec 2015
Executive compensation
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
403
625
29
1,057
595
31
519
1,145
169
230
5
404
200
5
256
461
31 Dec 2016
31 Dec 2015
31 Dec 2016
31 Dec 2015
559
-
(267)
292
29
787
6
(234)
559
24
522
-
(258)
264
26
735
-
(213)
522
20
135 Zenith Bank Plc Annual Report - 31 December 2016
Notes to the Consolidated and Separate Financial Statements
for the Year Ended 31 December 2016
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 2015: Nil) as they are performing. Mortgage loans amounting to N715 million (31
December 2015: N497 million) are secured by the underlying assets. All other loans are unsecured.
Loans
Deposits
Interest
received
Interest paid
31 Dec 2016
Name of company
Quantum Fund Management *
Zenith General Insurance company Ltd
Zenith Trustees Ltd
Directors and relations
Relationship/
Name
Common
directorship
/Jim Ovia
Common
directorship/Ji
m Ovia
Common
directorship
-
31 Dec 2015
Name of company
Visafone Communication Limited
Quantum Fund Management
Common
directorship /
Jim Ovia
Common
directorship /
Jim Ovia
-
-
-
-
-
303
704
5
440
1,452
-
1,177
-
-
-
-
-
-
2
2
4
2
10
Interest paid
6
-
6
Relationship Loans
Deposits
Interest
received
4,499
31
4,499
1,208
585
585
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 Dec 2015: Nil).
During the year, Zenith Bank Plc paid N1,822 million as insurance premium to Zenith General Insurance Limited (31 Dec
2015: N1,278 million). These expenses were reported as operating expenses.
The amount of N2,362.35 billion (31 December 2015: N1,997.18 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.
39. Contingent liabilities and commitments
(a) Legal proceedings
The Group is presently involved in 133 litigation suits in the ordinary course of business. The total amount claimed in the
cases against the Group is estimated at N18.32 billion (31 December 2015: N11.68 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 N6.5 billion (31 December 2015: N3.80 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:
136 Zenith Bank Plc Annual Report - 31 December 2016
ZENITH BANK PLC
Notes to the Consolidated and Separate Financial Statements
for the Year Ended 31 Dec 2016
In millions of Naira
31 Dec 2016
31 Dec 2015
31 Dec 2016 31 Dec 2015
Group
Bank
39. Contingent liabilities and commitments (continued)
Performance bonds and guarantees
Usance
Letters of credit
Pension Funds (See Note (below))
Group
Bank
31 Dec 2016 31 Dec 2015 31 Dec 2016 31 Dec 2015
560,704
98,761
311,681
2,362,349
794,021
128,123
232,837
1,997,182
513,832
98,761
215,839
2,362,349
763,891
128,123
187,947
1,997,182
3,333,495
3,152,163
3,190,781
3,077,143
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 Dec 2016, performance bonds and guarantees
worth N275 billion (31 December 2015: N181 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 N2,362.35 billion (31 December 2015: N1,997.18 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.
40. Dividend per share
Dividend proposed
Number of shares in issue and ranking for dividend
Proposed dividend per share
Interim dividend paid
Final dividend per share proposed
Dividend paid during the year
Interim dividend paid during the year
Total dividend paid during the year
31 Dec 2016 31 Dec 2015 31 Dec 2016 31 Dec 2015
63,421
31,396
202
k
k25
177
k
48,664
7,850
56,514
56,513
31,396
180
k
25
155
62,793
7,850
62,793
63,421
31,396
202
k
k25
k
177
48,664
7,850
56,514
56,513
31,396
180
25
155
62,793
7,850
62,793
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 N1.77 kobo per share which in addition to the
N0.25kobo per share paid on interim dividend amounts to N2.02 per share (31 December 2015: N1.80 per share) from the
retained earnings account as at 31 Dec 2016. This is subject to approval by shareholders at the next Annual General
Meeting.
The number of shares in issue and ranking for dividend represents the outstanding number of shares as at 31 Dec 2016
and December 31, 2015 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.
137 Zenith Bank Plc Annual Report - 31 December 2016
ZENITH BANK PLC
Notes to the Consolidated and Separate Financial Statements
for the Year Ended 31 Dec 2016
In millions of Naira
31 Dec 2016
31 Dec 2015
31 Dec 2016 31 Dec 2015
Group
Bank
41. Cash and cash equivalents (continued)
Cash and cash balances with central bank (less
mandatory reserve deposits)
Treasury bills (maturing within 3 months)
Due from other banks
42. Compliance with banking regulations
31 Dec 2016
31 Dec 2015
31 Dec 2016
31 Dec 2015
140,874
358,007
99,378
332,502
127,068
459,457
727,399
79,513
272,194
709,714
112,575
354,405
566,358
63,979
266,894
663,375
During the year, the Bank incurred the following on contraventions of the regulation of the Banks and Other Financial
Institutions Act, 1991.
S/N Descriptons
1
2
3
Penalty on returns of foreign currency transactions.
Penalty for contravening DMO Act of 2003 on lending to tiers of Government.
Penalty for incomplete customers' documentation.
Amount Paid in
(N)
2,000,000
4,000,000
10,000,000
16,000,000
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.
138 Zenith Bank Plc Annual Report - 31 December 2016
ZENITH BANK PLC
Notes to the Consolidated and Separate Financial Statements
for the Year Ended 31 Dec 2016
Group
Bank
In millions of Naira
44. Statement of cash flow workings
(i) Debt securities (see note 21)
31 Dec 2016
At 1 January 2016
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
Recognised in Cashflow statement
31 Dec 2015
At 1 January 2015
Gains from changes in fair value recognised in other
comprehensive income
Exchange differences
Additions
Disposals (sale and redemption)
Interest accrued
Coupon received
Unrealised bond FV gain
Movement for cash flow statement
Realised bond FV gain
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
6,707
195,737
6,707
134,002
(328)
-
9,702
(6,379)
-
-
9,702
(328)
3,323
-
(953)
75,794
(112,739)
29,567
(14,282)
173,124
-
(21,660)
(328)
-
9,702
(6,379)
-
-
9,702
(328)
3,323
-
-
52,351
(101,739)
21,597
(13,943)
92,268
-
(41,734)
-
18,337
-
38,410
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
-
Recognised in Cashflow statement
-
(16,768)
-
(60,533)
(ii) Treasury bills (Amortised cost) (see note 16)
31 Dec 2016
Treasury bills (Amortised cost)
Treasury bills (with 3 months maturity)
Changes
Recognised in Cashflow
31 Dec 2016 31 Dec 2015 31 Dec 2016 31 Dec 2015
277,202
(63,979)
213,223
389,406
(112,575)
276,831
482,978
(127,068)
355,910
324,230
(79,513)
244,717
(111,193)
(63,608)
139 Zenith Bank Plc Annual Report - 31 December 2016
ZENITH BANK PLC
Notes to the Consolidated and Separate Financial Statements
for the Year Ended 31 Dec 2016
Group
Bank
In millions of Naira
31 Dec 2015
Treasury bills (Amortized cost)
Treasury bills (with 3 months maturity)
Changes
Recognised in Cashflow
(iii) Treasury bills (FVTPL) (see note 16)
31 Dec 2016
Treasury bills (FVTPL)
Recognised in Cashflow
31 Dec 2015
Treasury bills (FVTPL)
Unrealised fair value gain
Recognised in Cashflow
(iv) Loans and advances (see note 20)
31 Dec 2016
Gross loans and advances
Changes
Write-back (collective)
Interest receivables
31 Dec 2015
Gross loans and advances
Changes
Write-back
Write-back (specific)
Interest receivables
31 Dec 2015 31 Dec 2014 31 Dec 2015 31 Dec 2014
252,252
(181,498)
70,754
295,397
(214,721)
79,514
324,230
(79,513)
244,717
277,202
(63,979)
213,223
(165,203)
(142,469)
31 Dec 2016 31 Dec 2015 31 Dec 2016 31 Dec 2015
53,698
53,698
74,381
74,381
(20,683)
(20,683)
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 2016 31 Dec 2015 31 Dec 2016 31 Dec 2015
1,884,941
-
2,360,809
(328,553)
2,193,224
(308,283)
2,032,256
-
(9,142)
39,147
(298,548)
-
-
-
(6,551)
31,027
(283,807)
-
-
-
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)
-
-
-
-
140 Zenith Bank Plc Annual Report - 31 December 2016
ZENITH BANK PLC
Notes to the Consolidated and Separate Financial Statements
for the Year Ended 31 Dec 2016
Group
Bank
In millions of Naira
(v)Customer deposits
31 Dec 2016
As per financial statement
Changes
Interest payables
31 Dec 2015
As per financial statement
Changes
Interest payables
(vi) Other liabilities (see note 29)
31 Dec 2016
As per statement of financial position
Changes
Vat payable
Net cash movement
31 Dec 2015
As per statement of financial position
Changes
Vat payable
Net cash movement
(vii) 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 2016 31 Dec 2015
2,557,884
-
-
2,983,621
425,737
(5,239)
31 Dec 2016 31 Dec 2015
2,333,017
-
-
2,552,963
219,946
(4,620)
420,498
-
215,326
-
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 2016 31 Dec 2015 31 Dec 2016 31 Dec 2015
212,636
-
208,680
(3,618)
243,736
(31,100)
205,062
-
(429)
4,047
-
-
(212)
31,312
-
-
31 Dec 2015 31 Dec 2014 31 Dec 2015 31 Dec 2014
272,726
-
289,858
-
205,062
84,796
212,636
60,090
(2,460)
(82,336)
-
-
(2,460)
(57,630)
-
-
31 Dec 2016 31 Dec 2015 31 Dec 2016 31 Dec 2015
2,476
2,408
68
95
2,671
2,614
57
96
1,795
1,607
188
360
2,278
1,911
367
603
236
39
172
27
141 Zenith Bank Plc Annual Report - 31 December 2016
ZENITH BANK PLC
Notes to the Consolidated and Separate Financial Statements
for the Year Ended 31 Dec 2016
Group
Bank
In millions of Naira
(viii) 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 2016
681
-
Group
31 Dec 2015
1,596
1,615
Bank
31 Dec 2016
-
-
Bank
31 Dec 2015
1,596
1,615
Recognised in cash flow
681
3,211
-
3,211
(ix)
Interest received
Interest income as per financial statement
Interest receivables
Recognised in cash flow
(x)
Interest paid
Interest expense as per financial statement
Interest payables
Recognised in cash flow
(xi) Other assets
Other assets
Changes
Charge for the year
Recognised in cash flow
Other assets
Changes
Charge for the year
Recognised in cash flow
Group
31 Dec 2016
384,557
(39,147)
Group
31 Dec 2015
348,179
(12,925)
Bank
31 Dec 2016
343,556
(31,027)
Bank
31 Dec 2015
317,419
(12,925)
345,410
335,254
312,529
304,494
Group
31 Dec 2016
144,378
(5,239)
Group
31 Dec 2015
123,597
(1,919)
Bank
31 Dec 2016
131,910
(4,620)
Bank
31 Dec 2015
114,936
(1,919)
139,139
121,678
127,290
113,017
Group
31 Dec 2016
37,536
(14,762)
(284)
Group
31 Dec 2015
22,774
-
-
Bank
31 Dec 2016
35,410
(13,737)
(278)
Bank
31 Dec 2015
21,673
-
-
(15,046)
-
(14,015)
-
Group
31 Dec 2015
22,774
(1,318)
(333)
Group
31 Dec 2014
21,456
-
-
Bank
31 Dec 2015
21,673
(2,279)
(333)
Bank
31 Dec 2014
19,394
-
-
(1,651)
-
(2,612)
-
142 Zenith Bank Plc Annual Report - 31 December 2016
Other National Disclosures
ZENITH BANK PLC
Other National Disclosures
Value Added Statement
In millions of Naira
Group
Gross income
Interest expense
- Local
- Foreign
Impairment loss on financial assets
Bought-in materials and services
- Local
- Foreign
Value added
Distribution
Employees
Salaries and benefits
Government
Income tax
31 Dec 2016
31 Dec
2016
%
31 Dec
2015
31 Dec
2015
%
507,997
432,535
(127,237)
(17,141)
363,619
(32,350)
331,269
(91,771)
(2,594)
(107,344)
(16,253)
308,938
(15,673)
293,265
(87,106)
(2,594)
236,904
100
203,565
100
69,042
27,096
11,114
63,421
66,231
29
11
5
27
28
67,522
19,953
10,427
54,944
50,719
33
10
5
27
25
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
236,904
100
203,565
100
Value added represents the additional wealth which the group has been able to create by its own and employees efforts.
144 Zenith Bank Plc Annual Report - 31 December 2016
ZENITH BANK PLC
Other National Disclosures
Value Added Statement
In millions of Naira
Bank
Gross income
Interest expense
- Local
- Foreign
Impairment loss on 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)
31 Dec
2016
31 Dec
2016
%
31 Dec
2015
31 Dec
2015
%
454,808
396,653
(129,316)
(2,594)
322,898
(26,736)
296,162
(81,825)
(2,577)
(112,342)
(2,594)
281,717
(11,091)
270,626
(80,800)
(2,577)
211,760
100
187,249
100
62,235
20,642
10,039
63,421
55,864
29
10
5
30
26
62,428
16,436
9,601
54,944
43,840
33
9
5
29
23
100
Total Value Added
212,201
100
187,249
Value added represents the additional wealth which the bank has been able to create by its own and employees efforts.
145 Zenith Bank Plc Annual Report -31 December 2016
ZENITH BANK PLC
Other National Disclosures
Five Year Financial Summary
In millions of Naira
31 Dec 2016 31 Dec 2015 31 Dec 2014 31 Dec 2013 31 Dec 2012
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
Property and equipment
Intangible assets
669,058
557,359
328,343
459,457
82,860
2,289,365
-
199,478
-
6,440
37,536
105,284
4,645
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
Total assets
4,739,825
4,006,842
3,755,264
3,143,133
2,604,504
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
2,983,621
66,834
8,953
45
208,680
350,657
263,106
-
153,464
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
-
4,035,360
3,412,489
3,202,626
2,633,882
2,141,548
704,465
594,353
552,638
509,251
462,956
15,698
255,047
267,008
165,729
703,482
983
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
Total shareholders' equity
704,465
594,353
552,638
509,251
462,956
146 Zenith Bank Plc Annual Report - 31 December 2016
ZENITH BANK PLC
Other National Disclosures
Five Year Financial Summary
In millions of Naira
31 Dec 2016 31 Dec 2015 31 Dec 2014 31 Dec 2013 31 Dec 2012
STATEMENT OF PROFIT OR LOSS AND OTHER 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
507,997
-
(144,378)
(174,521)
(32,350)
156,748
(27,096)
129,652
30,338
6,636
-
-
-
36,974
166,626
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
Earning per share:
Basic and diluted
412
K
336
K
316
K
301
K
319
K
147 Zenith Bank Plc Annual Report -31 December 2016
ZENITH BANK PLC
Other National Disclosures
Five Year Financial Summary
In millions of Naira
31 Dec 2016 31 Dec 2015 31 Dec 2014 31 Dec 2013 31 Dec 2012
Bank
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
Investment securities
Investments in subsidiaries
Investments in associates
Deferred tax assets
Other assets
Assets classified as held for sale
Property and equipment
Intangible assets
627,385
463,787
325,575
354,405
82,860
2,138,132
118,622
33,003
-
6,041
35,410
-
94,613
3,903
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
Total assets
4,283,736
3,750,327
3,423,819
2,878,693
2,436,886
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
2,552,963
66,834
6,927
-
243,736
350,657
292,802
153,464
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
-
3,667,383
3,203,381
2,911,112
2,406,071
1,998,883
616,353
546,946
512,707
472,622
438,003
15,698
255,047
218,507
127,101
616,353
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
Total shareholders' equity
616,353
546,946
512,707
472,622
438,003
148 Zenith Bank Plc Annual Report -31 December 2016
ZENITH BANK PLC
Other National Disclosures
Five Year Financial Summary
In millions of Naira
31 Dec 2016 31 Dec 2015 31 Dec 2014 31 Dec 2013 31 Dec 2012
STATEMENT OF PROFIT OR LOSS AND OTHER 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 2016
31 Dec 2015
31 Dec 2014
31 Dec 2013
31 Dec 2012
454,808
(131,910)
(156,676)
(26,295)
139,927
(20,642)
119,285
6,636
-
6,636
125,921
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
95,813
380
K
315
K
295
K
266
K
305
K
149 Zenith Bank Plc Annual Report -31 December 2016