Zenith Bank PLC
Annual Report - December 31, 2017
ZENITH BANK PLC
DIRECTORS, OFFICERS AND PROFESSIONAL ADVISERS
DIRECTORS
Mr.Jim Ovia, CON.
Alhaji Baba Tela
Prof. Chukuka Enwemeka
Mr.Jeffrey Efeyini
Prof.Oyewusi Ibidapo-Obe
Mr.Gabriel Ukpeh
Engr. Mustafa Bello *
Mr.Peter Amangbo
Ms. Adaora Umeoji
Mr.Ebenezer Onyeagwu
Mr.Oladipo Olusola **
Mr.Umar Ahmed
Dr. Temitope Fasoranti *
Mr. Dennis Olisa *
Chairman
Non-Executive Director/ Independent
Non-Executive Director
Non-Executive Director
Non-Executive Director/ Independent
Non-Executive Director/ Independent
Non-Executive Director/ Independent
Group Managing Director/CEO
Deputy Managing Director
Deputy Managing Director
Executive Director
Executive Director
Executive Director
Executive Director
* Appointed to the Board effective December 29, 2017.
** Retired from the Board effective August 30, 2017.
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 - December 31, 2017
ZENITH BANK PLC
Note
Page Note
Page
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
3 2.6 Financial instruments
2.7 Derivative instruments
2.8 Impairment of 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
6 Interest and similar income
7 Interest and similar expense
8 Impairment loss on financial assets
3
9
20
21
28
9 Fee and commission income
10 Other operating income
11 Trading gains
12 Operating expenses
13 Taxation
14 Earnings per share
29
15 Cash and balances with central banks
30
16 Treasury bills
32
34
34
34
35
35
39
40
41
41
45
45
46
46
47
48
48
50
50
51
51
52
53
53
53
53
54
54
55
56
99
105
105
105
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
22b Investment in associates
23 Deferred tax
24 Other assets
25 Property and equipment
26 Intangible assets
27 Customers' deposits
28 Other liabilities
29 On-lending facilities
30 Borrowings
31 Debt securities issued
32 Derivatives liabilities
33 Share capital
34 Share premium, retained earnings, and
other reserves
35 Pension contribution
36 Personnel expenses
.37 Group subsidiaries and related party
transactions
38 Contingent liabilities and commitments
39 Dividend per share
40 Cash and cash equivalents
41 Compliance with banking regulations
42 Events after reporting period
43 Comparatives
44 Statement of cashflow workings
Other National Disclosures
Value Added Statement
Five Year Financial Summary
-
-
105
106
106
106
107
109
110
110
111
111
112
112
116
119
120
124
125
126
128
132
132
133
134
135
138
138
139
139
140
140
141
143
144
145
145
145
145
146
150
151
153
2 Zenith Bank Plc Annual Report - December 31, 2017
ZENITH BANK PLC
Directors' Report for the Year Ended December 31, 2017
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 December 31, 2017.
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 June 16, 1990. The Bank was converted into a Public Limited Liability Company on 20 May 2004. The Bank’s
shares were listed on the floor of the Nigerian Stock Exchange on 21 October 2004. 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 obtaining deposits from the public, granting of loans and advances, corporate finance and money market
activities.
The Bank has six subsidiary companies namely, Zenith Bank (Ghana) Limited, Zenith Pensions Custodian Limited, Zenith Bank
(UK) Limited, Zenith Bank (Sierra Leone) Limited, Zenith Bank (The Gambia) Limited and Zenith Nominees Limited. During the
year, the Bank incorporated Zenith Nominees Limited but the entity is yet to commence operations. During the year, the Bank
opened one new branch. No branch was closed during the year.
3. Operating results
Gross earnings of the Group increased by 46.7% and profit before tax increased by 29.8% . 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-17
N' Million
31-Dec-16
N' Million
745,189
507,997
203,461
(25,528)
177,933
(319)
177,614
23,572
154,042
177,614
566
4.70
156,748
(27,096)
129,652
(218)
129,434
19,021
110,413
129,434
412
3.02
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 N2.45 per share which in addition to the N0.25 per share paid as
interim dividend amounts to N2.70 per share (2016: Interim of N0.25 per share and final of N1.77 per share) from the retained
earnings account as at December 31, 2017. This will be presented for ratification by the shareholders at the next Annual
General Meeting.
If the proposed dividend is approved by the shareholders, the Bank will be liable to pay additional corporate tax estimated at
N21.08 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 December 31, 2017.
3 Zenith Bank Plc Annual Report - December 31, 2017
ZENITH BANK PLC
Directors' Report for the Year Ended December 31, 2017
Payment of dividends is subject to withholding tax at a rate of 10% in the hand of qualified recipients.
5.
Directors' shareholding
The direct and indirect 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
Number of Shareholding
December 31, 2017
December 31, 2016
Direct
Indirect
Direct
Indirect
2,946,199,395 1,593,494,151 2,946,199,395 1,593,494,151
11,000,000
-
-
-
-
-
-
1,710,123
-
-
-
-
-
5,000,000
250,880
32,660
127,137
541,690
321,426
-
31,620,141
7,000,000
2,000,000
1,077,343
1,875,000
4,122,316
5,000,000
250,880
-
127,137
541,690
267,856
-
31,620,141
3,106,918
2,000,000
1,133,927
-
-
2,300,000
-
-
-
-
-
-
1,710,123
-
-
-
-
-
Designation
Chairman / Non-Executive Director
Group Managing Director/CEO
Non Executive Director / Independent
Non-Executive Director /Independent
Director
Mr. Jim Ovia, CON.
Mr.Peter Amangbo
Alhaji Baba Tela
Mr.Gabriel Ukpeh
Prof. Chukuka Enwemeka Non-Executive Director
Mr.Jeffrey Efeyini
Non Executive Director
Prof.Oyewusi Ibidapo-Obe Non Executive Director / Independent
Non Executive Director / Independent
Engr. Mustafa Bello *
Deputy Managing Director
Ms. Adaora Umeoji
Deputy Managing Director
Mr.Ebenezer Onyeagwu
Executive Director
Mr.Oladipo Olusola **
Executive Director
Mr. Umar Ahmed
Executive Director
Dr. Temitope Fasoranti *
Executive Director
Mr. Dennis Olisa *
* Appointed to the Board effective December 29, 2017.
** Retired from the board effective August 30, 2017.
6.
Directors' interests in contracts
For the purpose of section 277 of CAMA, all contracts with related parties during the year were conducted at arm's length.
Information relating to related parties transactions are contained in Note 37 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 25 to the financial statements. In the opinion of the
directors, the market value of the Group’s property and equipment is not less than the value shown in the financial statements.
4 Zenith Bank Plc Annual Report - December 31, 2017
ZENITH BANK PLC
Directors' Report for the Year Ended December 31, 2017
9.
Shareholding analysis
The shareholding pattern of the Bank as at 31 December, 2017 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
539,481
81,858
20,122
736
118
89
21
22
2
6
Percentage of
Shareholders
83.9718
%
12.7414
%
3.1320
%
0.1146
%
0.0184
%
0.0139
%
0.0033
%
0.0034
%
0.0003
%
0.0009
%
Number of
holdings
1,621,763,173
1,698,673,987
3,211,097,112
1,649,481,195
879,516,903
2,210,108,463
1,435,220,409
4,880,206,479
2,421,682,932
11,388,743,134
10.23
Percentage
Holdings (%)
%5.17
%5.41
%
%5.25
%2.80
%7.04
%4.57
%
%7.71
%
15.54
36.27
The shareholding pattern of the Bank as at December 31, 2016 is as stated below:
642,455
%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
10,000,001 - 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
10. Substantial interest in shares
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
%
0.0012
%
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
%
13.68
43.22
647,227
%100
31,396,493,787
%100
According to the register of members as at December 31, 2017, 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
3,242,344,702
2,438,670,039
1,809,897,790
Number of
Shares Held
%9.38
%
%7.77
%5.76
10.33
According to the register of members 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/C001 - TRAD
Stanbic Nominees Nigeria Limited/C002 - 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
5 Zenith Bank Plc Annual Report - December 31, 2017
ZENITH BANK PLC
Directors' Report for the Year Ended December 31, 2017
11. Donations and charitable gifts
The Bank made contributions to charitable and non-political organisations amounting to N2,611 million during the year ended
December 31, 2017 (December 31, 2016: N 2,557 million) .
The beneficiaries are as follows:
Educational support to Nigerian schools
Sports organisation
Security Trust Funds
Economic summits and conferences sponsorship
Private Sector Health Alliance
Medical Assistance to the Underpriviledged
The Africa Fundraiser Contribution
North-East Children Trust Fund
Relief support
Maternity clinic construction support
ICT Centres for Educational Institutions
Musical Society of Nigeria
Other donations individually below N10 million
31-Dec-17
N' Million
598
486
300
257
200
156
150
129
110
100
37
17
71
2,611
The Bank 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 Funds
Nigeria Institute of Journalism
Medical assistance to the underpriviledged
ICT Centres for Educational Institutions
The Nigerian Football Federation
Economic summits and conferences sponsorship
Nigerian Basketball Federation
Warri Wolves Football Club sponsorship
Musical Society of Nigeria
Healthcare centre IGA Idugaran LGHA
Other donations individually below N10 million
31-Dec-16
N' Million
1,225
259
235
200
161
156
100
42
39
35
33
10
62
2,557
12. Events after the reporting period
There were no significant events after the reporting date that could affect the reported amount of assets and liabilities as of the
reporting date.
6 Zenith Bank Plc Annual Report - December 31, 2017
ZENITH BANK PLC
Directors' Report for the Year Ended December 31, 2017
13. Disclosure of customer complaints in financial statements for the period ended December 31, 2017
Description
Number
Amount claimed
Amount refunded
31-Dec-17
31-Dec-16
31-Dec-17
N.
31-Dec-16
N.
31-Dec-17
N.
64 1,571,817,766 14,569,036,425
11,578,247
31-Dec-16
N.
774,033,876
343 10,045,190,151 2,465,265,125
253 1,833,595,716 15,462,483,784
37,941,563
624,257,449
346,672,659 1,386,713,078
Pending complaints brought
forward
Received Complaints
Resolved Complaints
Unresolved Complaints
carried forward
154
220
288
86
154 9,783,412,201 1,571,817,766
14. Human resources
(i) Employment of disabled persons
The Group maintains 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 well-equipped training
centres. In addition, employees of the Group 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 - December 31, 2017
ZENITH BANK PLC
Corporate Governance Report for the Year Ended December 31, 2017
1.
Introduction
Zenith Bank Plc maintains the highest standards of Corporate Governance and best practice both within the Bank and the
Group. This is reviewed from time to time to ensure we keep pace with global standards.
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 the Bank 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
In addition to the above Codes, the Bank complies with relevant disclosure requirements in other jurisdictions where it
operates.
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 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 during the period of review.
5.
Board structure
The Board is made up of a Non-Executive Chairman, Six (6) Non-Executive Directors and Six (6) Executive Directors including
the GMD/CEO. Four (4) 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, Deputy Managing Directors
as well as the Group Managing Director/Chief Executive as its Chairman.
6.
Responsibilities of the Board
The Board is responsible for the following amongst others:
(a)
reviewing and approving the Bank’s strategic plans for implementation by management;
(b)
review and approving the Bank’s financial Statements;
(c)
reviewing and approving the Bank’s financial objectives, business plans and budgets, including capital allocations and
expenditures;
(d) monitoring corporate performance against the strategic plans and business, operating and capital budgets;
(e)
implementing the Bank’s succession planning;
(f)
approving acquisitions and divestitures of business operations, strategic investments and alliances and major business
development initiatives;
(g)
approving delegation of authority for any unbudgeted expenditure;
9 Zenith Bank Plc Annual Report - December 31, 2017
ZENITH BANK PLC
Corporate Governance Report for the Year Ended December 31, 2017
(h)
(i)
setting the tone for and supervising the Corporate Governance Structure of the bank, including corporate structure of the
bank and the Board and any changes and strategic plans of the bank and the Group;
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
Engr. Mustafa Bello
Ms. Adaora Umeoji
Mr. Ebenezer Onyeagwu
Mr. Umar Shuaib Ahmed
Dr. Temitope Fasoranti
Mr. Dennis Olisa
Mr. Olusola Oladipo
Mr. Peter Amangbo
POSITION
Chairman
Independent/Non-Executive Director
Non-Executive Director
Non-Executive Director
Independent/Non-Executive Director
Independent/Non-Executive Director
Independent/Non-Executive Director *
Deputy Managing Director
Deputy Managing Director
Executive Director
Executive Director *
Executive Director *
Executive Director **
General Managing Director/CEO
* Appointed to the Board effective December 29, 2017.
** Retired from the Board with effect from August 30, 2017.
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.
Membership of the Committees of the Board is intended to make the best use of the skills and experience of non-executive
directors in particular.
The Board has established the various Committees with well defined terms of reference and Charters defining their scope of
responsibilities in such a way as to avoid overlap or duplication of functions.
The Committees of the Board meet quarterly but may hold extraordinary sessions as business of the Bank demand.
The following are the current standing Committees of the Board:
7.1 Board credit committee
The Committee is currently made up of Seven (7) members comprising four (4) 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 period is as follows:
Mr. Jeffrey Efeyini - Chairman/NED
Alhaji Baba Tela - NED
Prof. Chukuka Enwemeka - NED
Mr. Gabriel Ukpeh - NED
10 Zenith Bank Plc Annual Report - December 31, 2017
ZENITH BANK PLC
Corporate Governance Report for the Year Ended December 31, 2017
Mr. Peter Amangbo - MD/CEO
Mr. Ebenezer Onyeagwu - DMD
Ms. Adaora Umeoji - ED
Mr. Olusola Oladipo * - ED
* Retired from the Board with effect from August 30, 2017
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 six (6) members: three (3) Non-Executive Directors and three (3) 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 period 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
Mr. Umar Shuaib Ahmed - ED
Terms of reference
Approval of large scale procurements by the Bank and other items of major expenditure by the Bank;
Recommendation of the Bank’s Capital Expenditure (CAPEX) and major Operating Expenditure (OPEX) limits for
consideration by the Board;
Consideration of management requests for branch set up and other business locations;
Consideration of management request for establishment of offshore subsidiaries and other offshore business
offices;
Consideration of the dividend policy of the Bank and the declaration of dividends or other forms of distributions and
recommendation to the Board;
Consideration of capital expenditures, divestments, acquisitions, joint ventures and other investments, and other
major capital transactions;
Consideration of senior management promotions as recommended by the MD/CEO;
Review and recommendations on recruitment, promotion, and disciplinary actions for senior management staff;
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.
11 Zenith Bank Plc Annual Report - December 31, 2017
ZENITH BANK PLC
Corporate Governance Report for the Year Ended December 31, 2017
The Chief Risk Officer 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
Terms of reference
(a)
(b)
(c)
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:
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; and
To perform such other duties and responsibilities as the Board of Directors may assign from time to time.
7.4 Board audit and compliance committee:
The Committee comprises Non executive Directors only and 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 have 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
Committee’s terms of reference
The Board Audit and Compliance 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.
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.
12 Zenith Bank Plc Annual Report - December 31, 2017
ZENITH BANK PLC
Corporate Governance Report for the Year Ended December 31, 2017
.
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.
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.
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 the report of the Chief Compliance Officer as it relates to Anti-Money Laundering policies of the Bank and
other other law enforcement issues.
To review the report of the Chief Compliance Officer as it relates to Anti-Money Laundering policies of the Bank and
other law enforcement issues.
The Chief Inspector and the Chief Compliance Officer shall submit quarterly reports to the Committee, in addition to
reporting to the Group Managing Director. The Chief Inspector and the Chief Compliance 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
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 of the Group;
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.
13 Zenith Bank Plc Annual Report - December 31, 2017
ZENITH BANK PLC
Corporate Governance Report for the Year Ended December 31, 2017
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;
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.
The Chief Inspector, the Chief Financial Officer, as well as the External Auditors are invited from time to time to make
presentation to the Committee.
All members of the committee are financially literate.
The membership of the Committee is as follows:
Shareholders' Representative
Mrs. Adebimpe Balogun* (Chairman)
Prof (Prince) L.F.O. Obika
Mr. Michael Olusoji Ajayi
Non-Executive Directors
Alhaji Baba Tela
Mr. Jeffrey Efeyini
Mr. Gabriel Ukpeh
* Appointed to the Committee with effect from March 22, 2017
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;
14 Zenith Bank Plc Annual Report - December 31, 2017
ZENITH BANK PLC
Corporate Governance Report for the Year Ended December 31, 2017
(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.
7.7 Executive committee (EXCO)
The EXCO comprises of the Group Managing Director, Deputy Managing Directors as well as all the Executive Directors.
EXCO has the GMD/CEO as its Chairman. The Committee meets 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.
15 Zenith Bank Plc Annual Report - December 31, 2017
ZENITH BANK PLC
Corporate Governance Report for the Year Ended December 31, 2017
(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 Infotech;
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.
8. Policy on trade in the Bank's securities
The Bank has in place a policy on trading on the Bank’s Securities by Directors and other key personnel of the Bank. This is to
guide against situations where such personnel in possession of confidential and price sensitive information deal with bank’s
securities in a manner that amounts to insider trading.
9. Relationship with shareholders
Zenith Bank maintains an effective communication with its shareholders, which enables them understand our business,
financial condition and operating performance and trends. Apart from our annual report and accounts, proxy statements and
formal shareholders' meetings, we maintain a rich website (with suggestion boxes) that provide information on a wide range of
issues for all stakeholders.
Also, a quarterly publication of the Bank and group performance is made in line with the disclosure requirements of the Nigeria
Stock Exchange.
The Bank has an Investors Relations Unit which holds regular forum to brief all stakeholders on operations of the Bank.
The Bank also, from time to time, holds briefing sessions with market operators (stockbrokers, dealers, institutional investors,
issuing houses, stock analysts, mainly through investors conference) to update them with the state of business. These
professionals, as advisers and purveyors of information, relate with and relay to the shareholders useful informtion about the
Bank. The Bank also regularly briefs the regulatory authorities, and file statutory returns which are usually accessible to the
shareholders.
16 Zenith Bank Plc Annual Report - December 31, 2017
ZENITH BANK PLC
Corporate Governance Report for the Year Ended December 31, 2017
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 that they require to enhance their duties to the Bank.
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. Details of the policy can be found on the Bank's
website www.zenithbank.com.
11. Complaints management policy
The Bank has put in place a complaints management policy framework to resolve complaints arising from issues covered
under the Investments and Securities Act, 2007 (ISA). This can be found on the Bank's website.
12. 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 governance,
nomination and
remuneration
committee
Board risk
management
committee
Board audit
and
compliance
committee
Attendance/no of meetings
Mr. Jim Ovia, CON
Alhaji Baba Tela
Mr. Jeffrey Efeyini
Prof. Chukuka S.Enwemeka
Prof. Oyewusi Ibidapo-Obe
Mr.Gabriel Ukpeh
Engr.Mustafa Bello
Ms. Adaora Umeoji
Mr. Ebenezer Onyeagwu
Mr. Olusola Oladipo
Mr. Ahmed Umar Shuaib
Dr. Temitope Fasoranti
Mr. Dennis Olisa
Mr. Peter Amangbo
Note:
5
5
5
5
5
5
5
*
5
5
3**
5
*
*
5
4
N/A
4
4
4
N/A
N/A
N/A
4
3
***
4
4
N/A
4
N/A
4
4
N/A
4
N/A
N/A
2
4
4
N/A
4
4
4
4
4
N/A
N/A
N/A
N/A
N/A
N/A
* Appointed to the Board with effect from December 29, 2017
** Retired from the Board effect from August 30, 2017
*** Appointed to the committee after reconstitution of the committees on March 22, 2017
N/A - Not Applicable (Not a Committee member)
4
N/A
N/A
4
4
N/A
4
N/A
N/A
4
N/A
N/A
4
4
N/A
4
4
1
N/A
4
N/A
N/A
N/A
N/A
N/A
N
N/A
17 Zenith Bank Plc Annual Report - December 31, 2017
ZENITH BANK PLC
Corporate Governance Report for the Year Ended December 31, 2017
Dates for Board and Board Committee meetings held in 2017 financial year:
Board meetings
24-Jan-17
22-Mar-17
26-Jul-17
12-Sep-17
31-Oct-17
Board credit committee meeting
23-Jan-17
21-Mar-17
25-Jul-17
Finance and general purpose
committee
23-Jan-17
21-Mar-17
25-Jul-17
Board risk management committee
meeting
23-Jan-17
21-Mar-17
25-Jul-17
23-Jan-17
21-Mar-17
25-Jul-17
30-Oct-17
30-Oct-17
30-Oct-17
30-Oct-17
Board audit and compliance
committee meeting
Board governance, nomination and
remuneration committee
23-Jan-17
21-Mar-17
25-Jul-17
30-Oct-17
Audit committee meeting
23-Jan-17
21-Mar-17
25-Jul-17
30-Oct-17
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
Mrs. Adebimpe Balogun (SR)*
Prof. (Prince) L.F.O Obika (SR)
Mr. Michael Olusoji Ajayi (SR)
Alhaji Baba Tela (NED)
Mr. Jeffrey Efeyini (NED)
Mr. Gabriel Ukpeh (NED)
Mrs. Uche Erobu (SR)**
SR - Shareholders representive
3
4
4
4
4
4
1
* Elected to the committee with effect from March 21, 2017
** Deceased - Replaced with effect from March 22, 2017
18 Zenith Bank Plc Annual Report - December 31, 2017
ZENITH BANK PLC
Corporate Governance Report for the Year Ended December 31, 2017
Analysis of Fraud and Forgeries Returns
December 31, 2017
December 31, 2016
Nature of Fraud
No.
%
Loss
Actual Loss to
the Bank (N)
No.
% Loss Actual Loss to
ATM/Electronic fraud
Staff Perpetrate
Impersonation
Stolen/Forged Instrument
Internet Banking
Others
Total
39
19
166
34
1
20
279
-
34
37
25
-
4
100
Jan-Dec 2017
-
11,689,602
12,789,868
8,644,515
-
1,624,830
34,748,815
18
4
1
27
151
29
230
-
86
-
-
14
-
100
the Bank (N)
Jan - Dec 2016
-
7,740,002
-
-
1,300,000
-
9,040,002
19 Zenith Bank Plc Annual Report - December 31, 2017
ZENITH BANK PLC
Consolidated and Separate Statements of Profit or Loss and other
Comprehensive Income for the Year Ended December 31, 2017
In millions of Naira
Group
Bank
Note(s)
31-Dec-17
31-Dec-16
31-Dec-17
31-Dec-16
Gross earnings
745,189
507,997
673,636
454,808
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 gains
Other operating income
Depreciation of property and equipment
Amortisation of intangible assets
Personnel expenses
Operating expenses
Profit before tax
Minimum tax
Income tax expense
Profit for the year after tax
Other comprehensive income:
6
7
8
9
11
10
25
26
36
12
474,628
(216,637)
257,991
(98,227)
159,764
90,143
157,974
22,444
(12,428)
(1,631)
(64,459)
(148,346)
384,557
(144,378)
240,179
(32,350)
207,829
68,444
28,398
26,598
(9,679)
(1,435)
(59,326)
(104,081)
203,461
156,748
420,210
(200,672)
219,538
(95,244)
124,294
72,846
157,974
22,606
(11,059)
(1,431)
(55,672)
(135,995)
173,563
343,556
(131,910)
211,646
(26,295)
185,351
55,619
28,398
27,235
(8,664)
(1,375)
(52,519)
(94,118)
139,927
13a
13a
(4,350)
(21,178)
-
(27,096)
(4,350)
(12,068)
-
(20,642)
177,933
129,652
157,145
119,285
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/(loss) for the year
21(b)
(2,551)
6,636
(2,551)
6,636
5,233
2,682
30,338
36,974
-
-
(2,551)
6,636
Total comprehensive income for the year
180,615
166,626
154,594
125,921
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 (kobo)
177,614
319
129,434
218
157,145
-
119,285
-
180,281
334
166,236
390
154,594
-
125,921
-
14
566
412
501
380
The accompanying notes are an integral part of these consolidated and separate financial statements.
28 Zenith Bank Plc Annual Report - December 31, 2017
ZENITH BANK PLC
Consolidated and Separate Statements of Changes in Equity as at December 31, 2017
In millions of Naira
Group
In millions of Naira
Attributable to equity holders of the Parent
Share
capital
Share
premium
Foreign
currency
translation
reserve
Fair value
reserve
Statutory
reserve
SMIEIS
reserve
Credit risk
reserve
Retained
earnings
Total
Non-
controlling
interest
Total equity
At January 1, 2016
15,698
255,047
(1,701)
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 Parent
Dividends
-
-
-
-
-
-
-
-
-
-
-
-
-
30,166
-
-
-
6,636
30,166
6,636
-
-
-
-
-
-
-
-
19,021
-
-
-
-
-
-
-
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 Parent
Dividends
-
-
-
-
-
-
-
-
-
-
-
-
-
5,218
-
-
-
(2,551)
5,218
(2,551)
-
-
-
-
-
-
-
-
23,572
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
129,434
-
129,434
30,166
-
6,636
593
218
172
-
594,353
129,652
30,338
6,636
129,434
166,236
390
166,626
(12,994)
(6,027)
-
-
(56,514)
(56,514)
-
-
-
(56,514)
177,614
-
177,614
5,218
983
319
15
704,465
177,933
5,233
-
(2,551)
-
(2,551)
177,614
180,281
334
180,615
(8,129)
(15,443)
-
-
(63,422)
(63,422)
-
-
-
(63,422)
At December 31, 2016
15,698
255,047
28,465
10,950
112,114
3,729
10,471
267,008
703,482
983
704,465
At January 1, 2017
15,698
255,047
28,465
10,950
112,114
3,729
10,471
267,008
703,482
At December 31, 2017
15,698
255,047
33,683
8,399
135,686
3,729
2,342
365,757
820,341
1,317
821,658
30 Zenith Bank Plc Annual Report - December 31, 2017
ZENITH BANK PLC
Bank
In millions of Naira
Share
capital
Share
premium
Fair value
reserve
Statutory
reserve
SMIEIS/AGS
MEIS reserv
e
Credit risk
reserve
Retained
earnings
Total equity
86,400
3,729
21,350
160,408
546,946
Balance at January 1, 2016
15,698
255,047
Profit for the year
Fair value movements on equity
instruments
Total comprehensive income for
the year
Transfer between reserves
Dividend
-
-
-
-
-
-
-
-
-
-
4,314
-
6,636
6,636
-
-
-
-
-
17,893
-
-
-
-
-
-
-
-
-
119,285
-
119,285
6,636
119,285
125,921
(13,221)
-
(4,672)
(56,514)
-
(56,514)
At December 31, 2016
15,698
255,047
10,950
104,293
3,729
8,129
218,507
616,353
At 1 January, 2017
15,698
255,047
10,950
104,293
3,729
8,129
218,507
616,353
Profit for the year year
Fair value movements on equity
instruments
Total comprehensive income for
the year
Transfer between reserves
Dividends
-
-
-
-
-
-
-
-
-
-
-
(2,551)
(2,551)
-
-
-
-
-
23,572
-
-
-
-
-
-
-
-
-
157,145
-
157,145
(2,551)
157,145
154,594
(8,129)
-
(15,443)
(63,422)
-
(63,422)
Balance at December 31, 2017
15,698
255,047
8,399
127,865
3,729
-
296,787
707,525
The accompanying notes are an integral part of these consolidated and separate financial statements.
31 Zenith Bank Plc Annual Report - December 31, 2017
ZENITH BANK PLC
Consolidated and Separate Statement of Cash Flows
for the Year Ended December 31, 2017
Group
Bank
Note(s)
2017
2016
2017
2016
In millions of Naira
Cash flows from operating activities
Profit after tax for the year
177,933
129,652
157,145
119,285
Adjustments for:
Impairment loss/(reversal)
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
Foreign exchange loss on debt securities issued
Interest income
Interest expense
Profit on sale of property and equipment
Tax expenses
Changes in operating assets and liabilities:
Net decrease/(increase) in loans and advances
Net increase in other assets
Net decrease/(increase) in treasury bills with maturities
greater than three months
Net increase in treasury bills (FVTPL)
Net increase in assets pledged as collateral
Net (increase)/decrease in investment securities
Net (increase) in restricted balances (cash reserves)
Net decrease in customer deposits
Net decrease/(increase) in other liabilities
Net increase/(decrease) in derivative assets
Net {decrease)/increase in derivative liabilities
Interest received
Dividend received
Interest paid
Tax paid
VAT paid
8
8
8
8
8
8
44(i)
44(iii)
25
26
10
31
6
7
10
13
44(iv)
44(xi)
44(ii)
44(iii)
17
44(i)
15
44(v)
44(vi)
19
32
44 (ix)
10
44 (x)
13(b)
44(vi)
31,305
65,905
925
69
23
-
-
-
12,428
1,631
(900)
6,064
(474,628)
216,637
(57)
25,528
13,786
19,099
(1,336)
(13)
284
530
328
-
9,679
1,435
(349)
53,256
(384,557)
144,378
(236)
27,096
30,748
63,502
925
69
-
-
-
-
11,059
1,431
(4,500)
6,064
(420,210)
200,672
(22)
16,418
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
62,863
13,032
63,301
14,078
94,906
(54,981)
76,739
(473,275)
(139,667)
(132,704)
(118,930)
454,294
22,566
25,641
(46,029)
(228,577)
474,628
900
(216,637)
(28,522)
(2,235)
(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)
62,424
(20,642)
24,495
(473,275)
(142,435)
(1,375)
(119,078)
191,562
(22,132)
25,641
(46,029)
(457,543)
420,210
4,500
(200,672)
(20,431)
(1,814)
(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)
Net cash flows used in operations
(443)
(1,660)
(255,750)
(104,917)
32 Zenith Bank Plc Annual Report - December 31, 2017
ZENITH BANK PLC
Consolidated and Separate Statement of Cash Flows
for the Year Ended December 31, 2017
Group
Bank
2017
2016
2017
2016
Cash flows from investing activities
Purchase of property and equipment
Proceeds from sale of property and equipment
Purchase of intangible assets
Proceeds from sale of equity securities
Purchase of equity securities
25
44(vii)
26
44(viii)
(41,883)
241
(6,694)
-
(1,000)
(27,421)
603
(2,417)
681
-
(38,180)
206
(6,288)
-
(1,000)
(22,737)
360
(2,066)
-
-
Net cash used in investing activities
(49,336)
(28,554)
(45,262)
(24,443)
Cash flows from financing activities
Proceeds from debt securities
Borrowed funds
Inflow from long term borrowing
Repayment of long term borrowing
Net inflow from On-lending facilities
Repayment of debt securities issued
Finance lease payments
Dividends paid to shareholders
152,239
-
152,239
-
30
30
29
31
39
102,373
(8,983)
32,377
21,164
(370)
(63,422)
82,017
(77,773)
63,776
390
-
(56,514)
193,088
(66,911)
32,377
21,164
(370)
(63,422)
104,043
(79,352)
63,776
390
-
(56,514)
Net cash generated from financing activities
235,378
11,896
268,165
32,343
Net decrease/(increase) in cash and cash equivalents
185,599
(18,318)
(32,847)
(97,017)
Analysis of changes in cash and cash equivalents :
Cash and cash equivalent at the beginning of the year
Increase/(decrease) in cash and cash equivalents
Effect of exchange rate movement on cash balances
727,399
185,599
3,344
709,714
(18,318)
36,003
566,358
(32,847)
-
663,375
(97,017)
-
Cash and cash equivalents at the end of the year
40
916,342
727,399
533,511
566,358
The accompanying notes are an integral part of these consolidated and separate financial statements.
33 Zenith Bank Plc Annual Report - December 31, 2017
ZENITH BANK PLC
Notes to the Consolidated and Separate Financial Statements
for the Year Ended December 31, 2017
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 June 16, 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 six subsidiary companies namely, Zenith Bank (Ghana) Limited, Zenith Pensions Custodian Limited, Zenith
Bank (UK) Limited, Zenith Bank (Sierra Leone) Limited, Zenith Bank (Gambia) Limited and Zenith Nominee. 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 December 31, 2017 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
December 31, 2017 were approved for issue by the Board of Directors on January 22, 2018.
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 January 1, 2017.
(i) Recognition of Deferred Tax Assets for Unrealised Losses (Amendments to IAS 12)
The amendments provide guidance on the existence of deductible differences, which depend solely on a comparison of the
carrying amount of the asset and its tax base at the end of the reporting period, and is not affected by possible future
changes in the carrying amount or expected recovery of the asset. The amendment also provide additional guidance on the
methods used to calculate future taxable profit to establish whether the deferred tax asset can be recognised. Guidance is
provided where an entity may assume that it will recover an asset for more than its carrying amount, provided that there is
sufficient evidence that it is probable that the entity will achieve this. Guidance is provided for deductible temporary
differences related to unrealized losses are not assessed separately for recognition. These are assessed on combined
basis, unless a tax law restricts the use of losses to deduction against income of a specific type. The adoption of these
amendments did not have any material impact on the Group’s financial statements.
ii. Disclosure Initiative (Amendments to IAS 7).
The amendments provide for disclosures that enable users of financial statements to evaluate changes in liabilities arising
from financing activities, including both changes arising from cash flow and non-cash changes. This includes providing a
reconciliation between the opening and closing balances arising from the financing activities.
(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.
34 Zenith Bank Plc Annual Report - December 31, 2017
ZENITH BANK PLC
Notes to the Consolidated and Separate Financial Statements
for the Year Ended December 31, 2017
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, 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 with the exception of the following:
Assets and liabilities held at fair value are measured at fair value;
Assets and liabilities held at amortised cost are measured at amortised cost;
Loans and Receivables are measured at amortised cost;
Derivative financial instruments which are measured at fair value; and
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
(i) Adoption of IFRS 9 Financial Instruments
In July 2014, the IASB issued IFRS 9 Financial Instruments (IFRS 9), which addresses impairment, classification,
measurement and hedge accounting. IFRS 9 is effective for the Group for the financial year beginning 1 January 2018.
Guidance relating to the adoption of IFRS 9 has been provided by the Central Bank of Nigeria (CBN) in its Guidance Note
to Banks and Discount Houses on the Implementation of IFRS 9 Financial Instruments in Nigeria (CBN Guideline). The
CBN Guideline was considered in our determination of the allowance for credit losses. Based on 31 December 2017 data
and current implementation status, the Group estimate that the adoption of IFRS 9 will lead to a decrease in shareholders’
equity of approximately N42.16 billion (Bank N34.79 billion) before tax driven by the impairment requirements of IFRS 9.
The above assessment is preliminary because not all transition work has been finalized. The actual impact of adoption of
IFRS 9 on 1 January 2018 may change because:
- IFRS 9 will require the Group to revise its accounting processes and internal controls and these changes are not yet
complete;
- although parallel runs were carried out in the last quarter of 2017, the new systems and associated controls in place have
not been operational for a more extended period;
- the Group is refining and finalizing its models for expected credit loss (ECL) calculations; and
- the new accounting policies, assumptions, judgements and estimation techniques employed are subject to change until
the Group finalizes its first financial statements that include the date of initial application.
Classification and Measurement of Financial Assets and Liabilities
35 Zenith Bank Plc Annual Report - December 31, 2017
ZENITH BANK PLC
Notes to the Consolidated and Separate Financial Statements
for the Year Ended December 31, 2017
The new standard requires that we classify debt instruments based on our business model for managing the assets and the
contractual cash flow characteristics of those assets. The business model test determines the classification based on the
business purpose for holding the asset. Debt instruments will be measured at fair value through profit and loss unless
certain conditions are met that permit measurement at fair value through other comprehensive income (FVOCI) or
amortized cost. Debt instruments that have contractual cash flows representing only payments of principal and interest will
be eligible for classification as FVOCI or amortized cost. Gains and losses recorded in other comprehensive income for
debt instruments will be recognized in profit or loss only on disposal.
Equity instruments would be measured at fair value through profit or loss unless we elect to measure them at FVOCI.
Future unrealized gains and losses on fair value through profit or loss equity instruments will be recorded in income.
Currently, the unrealized gains and losses are recognized in other comprehensive income for available-for-sale equity
instruments. For equity instruments we elect to record at FVOCI, gains and losses would never be recognized in income.
The classification and measurement requirements of financial assets and liabilities of IFRS 9 issued in 2014 are the same
as IFRS 9 issued in 2009. The Group early adopted IFRS 9 issued in 2009 which already incorporated these classification
and measurement requirements in the financial year beginning on 1 January 2009. Therefore, the Group does not expect to
have any changes to its classification and measurement of financial instruments upon adoption of IFRS 9 issued in 2014.
Impairment of Financial Assets, Loan Commitments and Financial Guarantee Contracts
IFRS 9 introduces a new expected credit loss (ECL) impairment framework for all financial assets and certain off-balance
sheet loan commitments and guarantees. The new ECL framework will result in an allowance for expected credit losses
being recorded on financial assets regardless of whether there has been an actual loss event. This differs from the current
approach where the allowance recorded on performing loans is designed to capture only losses that have been incurred,
whether or not they have been specifically identified.
The new impairment model applies to the following financial instruments that are not measured at fair value through profit or
loss:
- financial assets that are debt instruments;
- lease receivables; and
- loan commitments and financial guarantee contracts issued
Under IFRS 9, no impairment loss is recognized on equity investments.
IFRS 9 Impairment model uses a three stage approach based on the extent of credit deterioration since origination:
Stage 1 – 12-month ECL applies to all financial assets that have not experienced a significant increase in credit risk (SIR)
since origination and are not credit impaired. The ECL will be computed using a 12-month PD that represents the
probability of default occurring over the next 12 months. For those assets with a remaining maturity of less than 12 months,
a PD is used that corresponds to remaining maturity. This Stage 1 approach is different from the current approach which
estimates a collective allowance to recognize losses that have been incurred but not reported on performing loans.
Stage 2 – When a financial asset experiences a SIR subsequent to origination but is not credit impaired, it is considered to
be in Stage 2. This requires the computation of ECL based on lifetime PD that represents the probability of default occurring
over the remaining estimated life of the financial asset. Provisions are higher in this stage because of an increase in risk
and the impact of a longer time horizon being considered compared to 12 months in Stage 1.
Stage 3 – Financial assets that have an objective evidence of impairment will be included in this stage. Similar to Stage 2,
the allowance for credit losses will continue to capture the lifetime expected credit losses.
The impairment requirements of IFRS 9 are complex and require management judgments, estimates and assumptions,
particularly in the areas of assessing whether the credit risk of an instrument has increased significantly since initial
recognition and incorporating forward-looking information into the measurement of ECLs.
Definition of default
Under IFRS 9, the Group will consider a financial asset to be in default when:
- the borrower is unlikely to pay its credit obligations to the Group in full, without recourse by the Group to actions such as
realizing collaterals (if any is held); or
36 Zenith Bank Plc Annual Report - December 31, 2017
ZENITH BANK PLC
Notes to the Consolidated and Separate Financial Statements
for the Year Ended December 31, 2017
- the borrower is more than 90 days past due on any material credit obligation to the Group. Overdrafts are considered past
dues once the customer has breached an advised limit or been advised of a limit that is smaller than the current amount
outstanding.
This definition is largely consistent with the definition that is used for regulatory purposes.
Significant increase in credit risk
Under IFRS 9, when determining whether the credit risk (i.e., risk of default) on a financial instrument has increased
significantly since initial recognition, the Group will consider reasonable and supportable information that is relevant and
available without undue cost or effort, including both quantitative and qualitative information and analysis based on the
Group’s historical experience, expert credit assessment and forward-looking information.
The Group will primarily identify whether a significant increase in credit risk has occurred for an exposure by comparing:
- the remaining lifetime probability of default (PD) as at the reporting date; with
- the remaining lifetime PD for this point in time that was estimated on initial recognition of the exposure.
Forward-looking information
IFRS 9 requires an unbiased and probability weighted estimate of credit losses by evaluating a range of possible outcomes
that incorporates forecasts of future economic conditions.
Macroeconomic factors and FLI are required to be incorporated into the measurement of ECL as well as the determination
of whether there has been a significant increase in credit risk since origination. Measurement of ECLs at each reporting
period should reflect reasonable and supportable information at the reporting date about past events, current conditions
and forecasts of future economic conditions.
Hedge Accounting
IFRS 9 introduces a new hedge accounting model that expands the scope of hedged items and risks eligible for hedge
accounting and aligns hedge accounting more closely with risk management. The new model no longer specifies
quantitative measures for effectiveness testing and does not permit hedge de-designation. The Group does not apply
hedge accounting and therefore does not expect any changes to the financial statements in respect of the new
requirements on hedge accounting.
Disclosures
IFRS 9 will require extensive new disclosures, in particular about credit risk and ECLs.
Transition impact
The Bank will record an adjustment to its opening 1 January 2018 retained earnings to reflect the application of the new
requirements at the adoption date and will not restate comparative periods. The Group estimates the IFRS 9 transition
amount will reduce shareholders’ equity of approximately N42.16 billion (Bank N34.79 billion) before tax and Tier 1 capital
ratio by approximately 200 basis points as at 1 January 2018. The estimated impact relates primarily to the implementation
of the ECL requirements. The Bank continues to revise, refine and validate the impairment models and related process
controls.
Impacts on Governance and Controls
The bank has applied its existing governance framework to ensure that appropriate controls and validations are in place
over key processes and judgments to determine the ECL. As part of the implementation, we are in the process of refining
existing internal controls and implementing new controls where required in areas that are impacted by IFRS 9, including
controls over the development and probability weighting of macroeconomic scenarios, credit risk data and systems, and the
determination of a significant increase in credit risk.
Impacts on Capital Planning
IFRS 9 will impact our reported capital as a result of the adjustment recorded in shareholders’ equity on adoption of the
standard; this impact is not expected to be significant. During 2017, the Basel Committee on Banking Supervision (BCBS)
released its standard on Regulatory treatment of accounting provisions – interim approach and transitional arrangements.
The BCBS clarified it will retain its current treatment of provisions under both Standardized Approach and Advanced
Internal Ratings Based frameworks at this time. Further, the BCBS allows local jurisdictions the option to choose whether to
apply a transitional arrangement for the impact of IFRS 9 on regulatory capital. The Bank’s regulator, CBN, has not
established a transitional arrangement for regulatory capital purposes.
37 Zenith Bank Plc Annual Report - December 31, 2017
ZENITH BANK PLC
Notes to the Consolidated and Separate Financial Statements
for the Year Ended December 31, 2017
(ii) IFRS 15: Revenue from contracts with customers
On May 28, 2014, the IASB issued IFRS 15 Revenue from Contracts with Customers, which replaces the previous revenue
standard IAS 18 Revenue, and the related Interpretations on revenue recognition. The standard is a control-based model
as compared to the existing revenue standard which is primarily focused on risks and rewards and provides a single
principle based framework to be applied to all contracts with customers that are in scope of the standard. Under the new
standard revenue is recognized when a customer obtains control of a good or service. Transfer of control occurs when the
customer has the ability to direct the use of and obtain the benefits of the good or service. The standard introduces a new
five step model to recognize revenue as performance obligations in a contract are satisfied. The standard scopes out
contracts that are considered to be lease contracts, insurance contracts and financial instruments, and as such will impact
the businesses that earn fee and commission revenue.
On April 12, 2016, the IASB issued amendments to IFRS 15 Revenue from Contracts with Customers. The amendments
provide additional clarification on the identification of a performance obligation in a contract, determining the principal and
agent in an agreement, and determining whether licensing revenues should be recognized at a point in time or over a
specific period. The amendments also provide additional practical expedients that can be used on transition to the standard.
The Group will adopt the standard and its amendments in the financial year beginning on 1 January, 2018 and plans to use
the modified retrospective approach. Under this approach, the Group will recognize the cumulative effect of initially applying
the standard as an adjustment to the opening balances of retained earnings as of 1 January, 2018, without restating
comparative periods. Additional disclosures will be required in order to explain any significant changes between reported
results and results had the previous revenue standard been applied.
The standard does not apply to revenue associated with financial instruments, and therefore, will not impact the majority of
the Group’s revenue, including interest income, trading revenue and securities gains which are covered under IFRS 9
Financial Instruments. The implementation of the standard is being led by the Financial control and strategic Planning
department in coordination with the business segments. The areas of focus for the Group’s assessment of impact are fees
and commissions. The Group has been working to identify and review the customer contracts within the scope of the new
standard. While the assessment is not complete, the timing of the Group’s revenue recognition of fees and commissions
within the scope of this standard is not expected to materially change. The Group is also evaluating the additional
disclosures that may be relevant and required.
(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 annual period commencing January 1, 2019.
(iv) IFRIC 22: Foreign currency transactions and advance consideration
The amendments clarifies the transaction date to be used in determining the exchange rate for translation of foreign
currency transactions involving an advance payment or receipt.
The amendments clarifies that the transaction date is the date on which the Group initially recognises the prepayment or
deferred income arising from the advance consideration.
For transactions involving multiple payments or receipts, each payment or receipt gives rise to a separate transaction date.
The interpretation applies when the Group:
•
pays or receives consideration in a foreign currency; and
•
related item.
recognises a non-monetary asset or liability – eg. non-refundable advance consideration – before recognising the
38 Zenith Bank Plc Annual Report - December 31, 2017
ZENITH BANK PLC
Notes to the Consolidated and Separate Financial Statements
for the Year Ended December 31, 2017
The Group will adopt the amendments for the year ending 31 December 2018.
(v) IFRIC 23: Uncertainty over income tax treatments
These amendments provide clarity on the accounting for income tax treatments that have yet to be accepted by the tax
authorities.
The amendments clarifies that the key test for determining the amounts to be recognised in the financial statements is
whether it is probable that the tax authority will accept the chosen tax treatment; this could result in an increase in the tax
liability or a recognition of an asset depending on the current practice of the Group.
The Group will adopt the amendments 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 Non Controlling Interests (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.
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 are 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.
39 Zenith Bank Plc Annual Report - December 31, 2017
ZENITH BANK PLC
Notes to the Consolidated and Separate Financial Statements
for the Year Ended December 31, 2017
2.3 Basis of Consolidation (continued)
(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)
(ii)
assets and liabilities for statement of financial position presented are translated at the closing rate at the reporting
date;
income and expenses for each statement of profit or loss and other comprehensive income are translated at average
exchange rates (unless this average is not a reasonable approximation of the cumulative effect of the rates prevailing
on the transaction dates, in which case income and expenses are translated at the rate on the dates of the
transactions); and
(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 fair value reserve in equity.
40 Zenith Bank Plc Annual Report - December 31, 2017
ZENITH BANK PLC
Notes to the Consolidated and Separate Financial Statements
for the Year Ended December 31, 2017
2.4 Translation of foreign currencies (continued)
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.
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.
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's financial assets are subsequently measured at amortised cost if they meet 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
'SPPI' 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 (SPPI) 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:
41 Zenith Bank Plc Annual Report - December 31, 2017
ZENITH BANK PLC
Notes to the Consolidated and Separate Financial Statements
for the Year Ended December 31, 2017
2.6 Financial instruments (continued)
'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 Group has not elected to classify as at FVOCI;
A financial asset where the Group 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:
The financial liability is held for trading and is therefore required to be measured at FVTPL, or
The Group 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.
42 Zenith Bank Plc Annual Report - December 31, 2017
ZENITH BANK PLC
Notes to the Consolidated and Separate Financial Statements
for the Year Ended December 31, 2017
2.6 Financial instruments (continued)
(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 asset that qualifies 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 sometimes 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. Examples of transfers of
assets with retention of all or substantially all risks and rewards include, 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 - December 31, 2017
ZENITH BANK PLC
Notes to the Consolidated and Separate Financial Statements
for the Year Ended December 31, 2017
2.6 Financial instruments (continued)
(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 and which 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. Assets pledged as collateral are
initially recognised at fair value, and are subsequently measured at amortised cost or fair value as appropriate. These
transactions are performed in accordance with the usual terms of securities lending and borrowing.
44 Zenith Bank Plc Annual Report - December 31, 2017
ZENITH BANK PLC
Notes to the Consolidated and Separate Financial Statements
for the Year Ended December 31, 2017
2.6 Financial instruments (continued)
(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 as the one sold) 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. The Group
designates the derivative as an instrument held for trading or non-hedging purposes (a "trading" or "non-hedging"
instrument).
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.
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
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 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 exists are not
included in a collective assessment of impairment.
45 Zenith Bank Plc Annual Report - December 31, 2017
ZENITH BANK PLC
Notes to the Consolidated and Separate Financial Statements
for the Year Ended December 31, 2017
Impairment of financial assets (continued)
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 of 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 assesses 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.
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 among 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 when 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.
46 Zenith Bank Plc Annual Report - December 31, 2017
ZENITH BANK PLC
Notes to the Consolidated and Separate Financial Statements
for the Year Ended December 31, 2017
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).
47 Zenith Bank Plc Annual Report - December 31, 2017
ZENITH BANK PLC
Notes to the Consolidated and Separate Financial Statements
for the Year Ended December 31, 2017
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.
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
Aircraft
Depreciation is included in profit or loss.
Indefinite
4 years
5 years
5 years
3 years
50 years
Over the remaining lease period
10 years
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.
48 Zenith Bank Plc Annual Report - December 31, 2017
ZENITH BANK PLC
Notes to the Consolidated and Separate Financial Statements
for the Year Ended December 31, 2017
2.13 Intangible assets
Computer software
Software that is 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 expenses as they are 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/sell the software
product are available;
(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.
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 future economic benefits are expected from their use or
disposal.
2.14 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.
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.
49 Zenith Bank Plc Annual Report - December 31, 2017
ZENITH BANK PLC
Notes to the Consolidated and Separate Financial Statements
for the Year Ended December 31, 2017
2.15 Leases
(a) A Group company is the lessee
Leases, under which 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.
2.16 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.
50 Zenith Bank Plc Annual Report - December 31, 2017
ZENITH BANK PLC
Notes to the Consolidated and Separate Financial Statements
for the Year Ended December 31, 2017
2.17 Employee benefits
(a) Post-employment benefits
The Group operates 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.
2.18 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.
51 Zenith Bank Plc Annual Report - December 31, 2017
ZENITH BANK PLC
Notes to the Consolidated and Separate Financial Statements
for the Year Ended December 31, 2017
2.18 Share capital and reserves (continued)
(e) SMIEIS reserve
The SMIEIS reserve is maintained to comply with the Central Bank of Nigeria (CBN) requirement that all licensed banks set
aside a portion of the profit after tax in a fund to be used to finance equity investments in qualifying small and medium scale
enterprises. Under the terms of the guideline (amended by CBN letter dated 11 July 2006), the contributions will be 10% of
profit after tax and shall continue after the first 5 years but banks’ contributions shall thereafter reduce to 5% of profit after
tax. The small and medium scale industries equity investment scheme reserves are nondistributable. Transfer to this
reserve is no longer mandatory.
(f) Statutory reserve for credit risk
The Nigerian banking regulator requires the Bank to create a reserve for the difference between 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) Fair value 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.
2.19 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.
52 Zenith Bank Plc Annual Report - December 31, 2017
ZENITH BANK PLC
Notes to the Consolidated and Separate Financial Statements
for the Year Ended December 31, 2017
2.20 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.
2.21 Net Trading gains
Net trading gain comprises gains less losses relating to trading assets and liabilities and includes all fair value changes,
interest, dividends and foreign exchange differences.
2.22 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 basis 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.
2.23 Current and deferred income tax
(a) Current tax
Minimum tax.
In accordance with the Companies Income Tax Act, Cap C21, LFN 2004, the Bank is assessed for tax under the minimum
tax regulation when the total profits of the Bank from all sources have produced tax or tax payable which is less than the
minimum tax specified by the law.
When assessed for minimum tax, the rates applicable for calculating the minimum tax is the highest of the following:
(i)
(ii)
0.5% of Gross Profit
0.5% of Net Assets
(iii)
0.25% of Paid-up Share Capital
(iv)
0.25% of Turnover of up to N500, 000
If however the turnover is higher than N500, 000, the minimum tax payable will be the highest of the above plus 0.125% of
the excess of the turnover above N500,000.
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.
53 Zenith Bank Plc Annual Report - December 31, 2017
ZENITH BANK PLC
Notes to the Consolidated and Separate Financial Statements
for the Year Ended December 31, 2017
2.23 Current and deferred income tax (continued)
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)
(iii)
the initial recognition of goodwill;
the initial recognition of assets and liabilities in a transaction that is not a business combination, which affects neither
accounting nor taxable profits or losses; and
investments in subsidiaries where the Group controls the timing of the reversal of temporary differences to the extent
that it is probable that these differences 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.
2.24 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.
2.25 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 are based on the Group’s internal reporting to management.
54 Zenith Bank Plc Annual Report - December 31, 2017
ZENITH BANK PLC
Notes to the Consolidated and Separate Financial Statements
for the Year Ended December 31, 2017
2.26 Fiduciary activities
The Group acts as trustees and in other fiduciary capacities through its subsidiary, Zenith Pensions Custodian Limited, that
results 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.
2.27 Deposit for Investment in AGSMEIS
The Agri-Business/Small and Medium Enterprises Investment Scheme is an initiative of Banker's committee of Nigeria. The
contributed funds is meant for supporting the Federal Government's effort at promoting agricultural businesses as well as
Small and Medium Enterprises. In line with this initiative, the Bank will contribute 5% of Profit After Tax yearly to the fund.
55 Zenith Bank Plc Annual Report - December 31, 2017
ZENITH BANK PLC
Notes to the Consolidated and Separate Financial Statements
for the Year Ended December 31, 2017
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 strengthened the risk management culture across the Group.
3.1.1 Risk Management Philosophy/Strategy
The Group considers sound risk management practice to be the foundation of a long lasting financial institution.
(a)
The Group adopt a holistic and integrated 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 the Group would assume in pursuit of its business objectives at
any point in time. The Group uses this risk appetite definition in aligning its overall corporate strategy, its capital allocation
and risks.
The Group sets tolerance limits for identified key risk indicators (“KRIs”), which served as proxies for the risk appetite for
each risk area and business/support unit. Tolerance levels for KRIs are jointly define, agreed upon by the business/support
units and 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 committee provides oversight on the systems of internal control, financial reporting and
compliance. The Board credit committee 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 committee and Management Risk committee) that help it
develop and implement various risk strategies. The Global Credit committee 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.
56 Zenith Bank Plc Annual Report - December 31, 2017
ZENITH BANK PLC
Notes to the Consolidated and Separate Financial Statements
for the Year Ended December 31, 2017
3.
Risk management (continued)
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, 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 coordinated manner within the organisation;
(e)
The Group’s risk management function is independent of the business divisions; and
(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 continuously 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, are an integral 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 LauNdering Prohibition
Act 2011 and Anti-Terrorism Act 2011 as amended; and
(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 to tackle 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;
57 Zenith Bank Plc Annual Report - December 31, 2017
ZENITH BANK PLC
Notes to the Consolidated and Separate Financial Statements
for the Year Ended December 31, 2017
3.
Risk management (continued)
(c) Risk identification, measurement, monitoring and control procedures;
(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; and
(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; and
(d)
The risk inherent in the activity and sector.
Risk management structures and processes are continuously reviewed to ensure their adequacy and appropriateness for
the Group’s risk and opportunities profile as well as 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 majority of its revenue. The recent
volatility and decline of the crude oil prices have therefore significantly affected the country's revenue and capacity.
These developments have impacted negatively on the country's economic indicators as follows::
(a) Reduced government earnings
(b)
Low foreign exchange reserve position currently at about US$30.29bn as at June 30, 2017.
(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 the 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 about reduced capacity utilization in local industries and therefore possibility of increase in Non-
Performing Loans during the period as customers may not be able to produce enough or they may do so at higher costs
which may affect sales and cash flows required to meet repayment arrangements. According to the Central Bank of
Nigeria's prudential guidelines, a loan is non-performing when the principal and/or interest remains 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 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.
58 Zenith Bank Plc Annual Report - December 31, 2017
ZENITH BANK PLC
Notes to the Consolidated and Separate Financial Statements
for the Year Ended December 31, 2017
3.
Risk management (continued)
(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.
(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.
59 Zenith Bank Plc Annual Report - December 31, 2017
ZENITH BANK PLC
Notes to the Consolidated and Separate Financial Statements
for the Year Ended December 31, 2017
3.
Risk management (continued)
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; and
(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 their credit data to develop models that will
improve the determination of economic and financial threats resulting from 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: These are:
(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; and
(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.
60 Zenith Bank Plc Annual Report - December 31, 2017
ZENITH BANK PLC
Notes to the Consolidated and Separate Financial Statements
for the Year Ended December 31, 2017
3.
Risk management (continued)
(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 Rating
Description of the grade
AAA
AA
A
BBB
BB
B
CCC
CC
C
D
Unrated
Investment Risk (Extremely Low Risk)
Investment Risk (Extremely Low Risk)
Investment Risk (Very 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
AAA
AA
BBB
BB
B
CCC
CC
C
D
Unrated
The credit rating system seeks to achieve the foundation level of the internal rating-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; and
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.
61 Zenith Bank Plc Annual Report - December 31, 2017
ZENITH BANK PLC
Notes to the Consolidated and Separate Financial Statements
for the Year Ended December 31, 2017
3.
Risk management (continued)
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 they are presented along with all documents and information defined for
the proper assessment and decision of Credit to the Global Credit Committee for consideration. All Credits presented for
approval are required to be in conformity with the documented and communicated Risk Acceptance Criteria(RAC).
As part of credit appraisal process, the Group will have to review the following:
(a) Credit assessment of the borrower’s industry, and macro-economic factors;
(b)
The purpose of credit and source of repayment;
(c)
The track record / repayment history of borrower;
(d) Assess/evaluate the repayment capacity of the borrower;
(e)
The proposed terms and conditions and covenants;
(f)
Adequacy and enforceability of collaterals; and
(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 assessment 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) Regular portfolio examination in line with key performance indicators and periodic stress testing;
(e) Continuous assessment of concentrations and mitigation strategies;
(f)
Continuous validation and modification of early warning system 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 which enables 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;
and
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, which focus 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 continuously upgrades and fine-tunes above in line with the developments in the financial services
industry environment and technology.
62 Zenith Bank Plc Annual Report - December 31, 2017
ZENITH BANK PLC
Notes to the Consolidated and Separate Financial Statements
for the Year Ended December 31, 2017
3.
Risk management (continued)
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 counterparties from borrowing more than
they are capable of repaying.
The Group focuses on its concentration and intrinsic risks and further manages 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' fund)
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 demand.
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 through quarterly review activities.
Credit risk is monitored on an ongoing basis with formal weekly, monthly and quarterly reporting to keep senior
management aware 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 continuously enhanced in order to improve the facility monitoring activity and
assure good quality Risk Assets Portfolio across the Group.
A specialised and focused loan recovery and workout team handles the management and collection of problematic 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.
63 Zenith Bank Plc Annual Report - December 31, 2017
ZENITH BANK PLC
Notes to the Consolidated and Separate Financial Statements
for the Year Ended December 31, 2017
Risk management (continued)
3.
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;
(f)
Letter of lien; and
(g) Cash collateral.
Collateral securities are usually valued and inspected prior to disbursement and on a regular basis thereafter until full
repayment of the exposure. We conduct a regular 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 periodic confirmation of collateral values
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 are 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 December 31, 2017 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
89,553
25,276
1,234,199
903,144
2,252,172
(82,904)
(68,906)
Value of
collateral
53,966
12,194
1,057,198
-
1,123,358
-
-
Total
exposure
88,648
25,217
1,222,121
781,083
2,117,069
(68,443)
(68,162)
2,100,362
1,123,358
1,980,464
Value of
collateral
52,424
12,194
889,929
-
954,547
-
-
954,547
64 Zenith Bank Plc Annual Report - December 31, 2017
ZENITH BANK PLC
Notes to the Consolidated and Separate Financial Statements
for the Year Ended December 31, 2017
3.
Risk management (continued)
Details of collateral pledged by customers against carrying amount of loans and advances as at December 31, 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
(ii) Balance Sheet Netting Arrangements
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)
Value of
collateral
31,131
31,367
778,503
-
841,001
-
-
2,138,132
841,001
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.
(iii) Guarantees and Standby Letters of Credit
Guarantees and Standby Letters of Credit are perceived to have comparable 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 guarantors, 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 December 31, 2017 and December 31, 2016 respectively, are 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 are represented by the maximum amount the Group would have to
pay if the guarantees are called on (refer to note 38 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 December 31, 2017 and December 31, 2016 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 December 31, 2017 and December 31, 2016 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
December 31, 2017
Nigeria
Rest of Africa
Outside Africa
Group Bank
Due from
banks
Treasury
bills
Investment
securities
18,287 799,992
- 136,825
-
477,516
117,814
12,451
200,686
Other
financial
assets
42,752
11,521
31,369
Due from
banks
Treasury
bills
Investment
securities
8,733 799,992
-
-
-
264,598
117,814
-
-
Other
financial
assets
42,752
-
-
495,803 936,817
330,951
85,642
273,331 799,992
117,814
42,752
65 Zenith Bank Plc Annual Report - December 31, 2017
ZENITH BANK PLC
Notes to the Consolidated and Separate Financial Statements
for the Year Ended December 31, 2017
3.
Risk management (continued)
In millions of Naira
December 31, 2016
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
118,622
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
199,179
28,031
354,405 463,787
118,622
27,583
Gross loans and advances to customers and the Non-performing loan portion per geographical region as at December 31, 2017
*Carrying amounts presented in the table below is determined as gross loans less impairment allowances.
In millions
of Naira
Gross
loans
111,626
71,886
73,635
2,171
South South
South West 1,751,942 85,776
460
South East
3,062
North
Central
North West
North East
Rest of
Africa
Outside
Africa
24,940
83,100
77,547
36
233
4,471
57,496
9,656
Group
Bank
Loans and advances to customers
Loans and advances to customers
NPL Collective
impair.
allow
2,890
58,699
2,518
3,192
Specific
impair.
allow
-
68,443
-
-
Carrying
amount
Gross
loans
108,736
1,624,800
69,368
70,443
111,626
2,171
1,751,883 85,776
460
3,062
71,886
73,635
NPL Collective
impair.
allow
2,890
58,699
2,518
3,193
Specific
impair.
allow
-
68,443
-
-
Carrying
amount
108,736
1,624,741
69,368
70,442
331
532
744
-
-
3,201
24,609
82,568
73,602
24,939
83,100
-
36
233
-
-
11,260
46,236
-
-
331
531
-
-
-
-
-
-
24,608
82,569
-
-
2,252,172 105,865
68,906
82,904
2,100,362
2,117,069 91,738
68,162
68,443
1,980,464
Gross loans and advances and non-performing portion per geographical region as at December 31, 2016
Group
Bank
Loans and advances to customers
Loans and advances to customers
Gross
loans
NPL Collective
impair
allowance
1,761
Specific
impair
allowance
928
Carrying
amount
Gross
loans
161,033
163,722
NPL Collective
impair
allowance
1,761
1,771
Specific
impair
allowance
928
Carrying
amount
161,033
1,771
163,722
66,252
71,015
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
31,080
452
3,716
16,679
-
-
1,728,403
65,800
67,299
1,776,162 52,300
533
2,153
66,252
71,015
31,080
452
3,716
16,679
-
-
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
66 Zenith Bank Plc Annual Report - December 31, 2017
ZENITH BANK PLC
Notes to the Consolidated and Separate Financial Statements
for the Year Ended December 31, 2017
Risk management (continued)
3.
(b) Industry sectors
Gross loans and advances to customers and the non-performing loan portion per industry sector as at December 31, 2017
*Carrying amounts presented in the table below are determined as gross loans less impairment allowances.
In millions of
Naira
Agriculture
Oil and gas
Consumer Credit
Manufacturing
Real estate and
construction
Finance and
insurance
Government
Power
Transportation
Communication
Education
General Commerce
Group
Bank
Loans and advances to customers
Loans and advances to customers
Gross
loans
63,223
660,243
11,728
633,739
113,137
NPL Collective
impair
allow.
1,474
23,194
583
11,352
5,203
956
39,618
59
6,459
7,375
Specific
impair
allow,
-
22,807
692
-
752
Carrying
amount
Gross
loans
NPL Collective
61,749
614,242
10,453
622,387
107,182
63,223
609,133
11,728
601,355
101,897
956
29,954
59
6,459
3,228
impair
allow.
1,474
23,109
583
11,185
4,741
Specific
impair
allow,
-
11,538
692
-
752
Carrying
amount
61,749
574,486
10,453
590,170
96,404
8,045
1,913
2,286
-
5,759
6,673
1,907
2,272
-
4,401
311,904
83,470
53,037
95,093
9,953
208,600
321
12
16,862
2,270
175
29,845
2,591
5,677
315
111
268
15,852
-
-
13,650
35,117
691
9,195
309,313
77,793
39,072
59,865
8,994
183,553
311,367
83,470
41,561
92,960
6,992
186,710
252
-
16,862
2,235
143
29,683
2,591
5,677
315
111
268
15,836
-
-
13,650
34,980
-
6,832
308,776
77,793
27,596
57,869
6,724
164,043
2,252,172
105,865
68,906
82,904
2,100,362
2,117,069
91,738
68,162
68,443 1,980,464
Gross loans and advances to customers and the non-performing loan portion per industry sector as at December 31, 2016
In millions of Naira
Group
Bank
Loans and advances to customers
Loans and advances to customers
NPL Collective
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
23,486
307,049
108,272
55,859
116,082
9,347
348,256
1,636
10,821
552
4,824
3,636
3,804
854
30,676
1,052
134
161
13,224
impair.
allow.
586
15,294
444
3,829
2,919
Specific
impair.
allow.
941
6,543
-
2,804
646
348
363
4,766
220
839
524
8,416
1,984
357
12,306
1,415
26
21
5,853
Carrying
amount
Gross
loans
NPL Collective
impair.
allow.
Specific
impair.
allow.
Carrying
amount
68,502
633,125
5,637
516,537
134,651
21,154
306,329
91,200
54,224
115,217
8,802
333,987
66,669
602,263
5,621
497,763
130,820
22,941
305,651
89,500
43,853
101,768
6,979
319,396
1,619
4,606
552
4,052
2,670
3,804
286
30,676
15
23
161
9,113
566
15,208
444
3,752
2,707
341
363
4,765
55
738
524
8,022
928
482
-
337
-
1,984
-
12,306
-
-
-
1,570
65,175
586,573
5,177
493,674
128,113
20,616
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
The group's credit risk exposure from "other financial assets" is categorized under the "finance and insurance", and
government sector.
67 Zenith Bank Plc Annual Report - December 31, 2017
ZENITH BANK PLC
Notes to the Consolidated and Separate Financial Statements
for the Year Ended December 31, 2017
3.
Risk management (continued)
3.2.9 Credit quality
In millions of Naira
At December 31, 2017
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, 2016
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
2,061,901
495,803
Financial
guarantee
Due from
banks
Bank
Loans and
advances to
customers
1,943,102
273,331
Financial
guarantee
-
-
-
84,406
84,793
21,072
581,463
-
-
-
-
-
-
82,229
70,667
21,071
542,619
-
-
-
495,803
2,252,172
581,463
273,331
2,117,069
542,619
-
-
(82,904)
(68,906)
-
-
-
-
(68,443)
(68,162)
-
-
495,803
2,100,362
581,463
273,331
1,980,464
542,619
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
*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 269.91 billion which
are neither past due nor impaired have been renegotiated (December 31, 2016: NGN 249.09 billion).
68 Zenith Bank Plc Annual Report - December 31, 2017
ZENITH BANK PLC
Notes to the Consolidated and Separate Financial Statements
for the Year Ended December 31, 2017
3.
Risk management (continued)
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 December 31, 2017
AAA
AA to A
BBB to BB
Below B
Unrated
At December 31, 2016
AAA
AA to A
BBB to BB
Below B
Unrated
Group
Bank
Due from
banks
495,803
-
-
-
-
Loans and
advances to
customers
241,701
1,451,324
217,831
42,228
108,817
495,803
2,061,901
Other
financial
assets
-
-
-
-
55,099
55,099
Due from
banks
273,331
-
-
-
-
Loans and
advances to
customers
241,701
1,442,382
216,739
42,186
94
273,331
1,943,102
Other
financial
assets
-
-
-
-
39,291
39,291
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
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 are also be assessed by reference to the internal rating system adopted by the
Group.
At December 31,
2017
AAA
AA to A
BBB to BB
Below B
Unrated
At December 31,
2016
AAA
AA to A
AA to A
Below B
Unrated
Group
Assets
pledged as
collateral
Derivative
assets
Treasury
bills
Bank
Assets
pledged as
collateral
Derivative
assets
Treasury
bills
Cash and
balances
with central
bank
907,265
-
-
-
-
799,992
-
-
-
-
-
57,219
-
-
-
468,010
-
-
-
-
Cash and
balances
with central
bank
957,663
-
-
-
-
936,817
-
-
-
-
-
57,219
-
-
-
57,219
468,010
-
-
-
-
468,010
957,663
936,817
907,265
799,992
57,219
468,010
Group Bank
Cash and
balances
with central
bank
669,058
-
-
-
-
Treasury
bills
Derivative
assets
Assets
pledged as
collateral
557,359
-
-
-
-
-
82,860
-
-
-
328,343
-
-
-
-
Cash and
balances
with central
bank
627,385
-
-
-
-
Treasury
bills
Derivative
assets
Assets
pledged as
collateral
463,787
-
-
-
-
-
82,860
-
-
-
325,575
-
-
-
-
669,058
557,359
82,860
328,343
627,385
463,787
82,860
325,575
69 Zenith Bank Plc Annual Report - December 31, 2017
ZENITH BANK PLC
Notes to the Consolidated and Separate Financial Statements
for the Year Ended December 31, 2017
Risk management (continued)
3.
The table below shows the credit quality of investment securities
At December 31, 2017
Group
Investment securities
Bank
Investment securities
AAA
AA to A
BBB to BB
Below B
Unrated
Total
Federal
Governmen
t Bonds
State
Governmen
t Bonds
Corporate
bonds
Federal
Governmen
t Bonds
State
Governmen
t Bonds
Corporate
bonds
250,315
32,266
-
-
-
282,581
-
31,725
-
-
-
31,725
2,544
14,101
-
-
-
16,645
330,951
37,502
32,266
-
-
-
69,768
-
31,401
-
-
-
31,401
2,544
14,101
-
-
-
16,645
117,814
At December 31, 2016
Group
Investment securities
Bank
Investment securities
AAA
AA to A
BBB to BB
Below B
Unrated
Total
Federal
Governmen
t Bonds
State
Governmen
t Bonds
Corporate
bonds
Federal
Governmen
t Bonds
State
Governmen
t Bonds
Corporate
bonds
138,013
9,702
-
-
-
147,715
-
31,996
-
-
-
31,996
-
3,115
-
-
-
3,115
182,826
57,457
9,702
-
-
-
67,159
-
31,696
-
-
-
31,696
-
3,115
-
-
-
3,115
101,970
70 Zenith Bank Plc Annual Report - December 31, 2017
ZENITH BANK PLC
Notes to the Consolidated and Separate Financial Statements
for the Year Ended December 31, 2017
3.
Risk management (continued)
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
Below B
Unrated
In millions of Naira
(d) Credit portfolio individually impaired
Group
Bank
Loans and advances
31-Dec-16
39,519
2,563
12,298
31-Dec-17
8,870
24,615
50,921
Loans and advances
31-Dec-16
38,259
1,250
8,549
31-Dec-17
6,706
24,604
50,919
84,406
54,380
82,229
48,058
-
58,174
25,952
280
84,406
38,292
16,088
-
-
54,380
-
58,174
23,775
280
82,229
37,921
10,137
-
-
48,058
Group
Bank
Loans and advances
Other financial
assets
Loans and advances
Other financial
assets
31-Dec-17
31-Dec-16
31-Dec-17 31-Dec-16
31-Dec-17
31-Dec-16
31-Dec-17 31-Dec-16
Gross amount
BB
Grade:
Below BB
Specific
provision
80,322
4,471
22,397
36,307
(82,904)
(32,896)
1,889
25,808
Restructuring policy
-
-
-
-
-
-
-
-
70,667
-
16,354
31,057
(68,443)
(17,607)
2,224
29,804
-
-
-
-
-
-
-
-
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 these provided by the Group 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 are 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; and
(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.
71 Zenith Bank Plc Annual Report - December 31, 2017
ZENITH BANK PLC
Notes to the Consolidated and Separate Financial Statements
for the Year Ended December 31, 2017
3.
Risk management (continued)
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 continuously 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 enhances its Market Risk Management Framework on a continuous
basis. 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; and
(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
activities 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, which stems the tides of frontloading
of FX and reduces 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.
72 Zenith Bank Plc Annual Report - December 31, 2017
ZENITH BANK PLC
Notes to the Consolidated and Separate Financial Statements
for the Year Ended December 31, 2017
Risk management (continued)
3.
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
bank
Treasury bills
Assets pledged as collateral
Due from other banks
Derivative assets
Loans and advances
Investment securities
Other financial assets
Liabilities
Customer deposits
Derivative liabilities
Other financial liabilities
On-lending facilities
Borrowings
Debt securities issued
Bank
Assets
Cash and balances with central
bank
Treasury bills
Assets pledged as collateral
Due from other banks
Derivative assets
Loans and advances
Investment securities
Other financial assets
Liabilities
Customer deposits
Derivative liabilities
Other financial liabilities
On-lending facilities
Borrowings
Debt securities issued
Note Carrying
amount
At December 31, 2017
Trading
Non-trading
At December 31, 2016
Trading
Non-trading
Carrying
amount
15
16
17
18
19
20
21
24
27
32
28
29
30
31
15
16
17
18
19
20
21
24
27
32
28
29
30
31
957,663
936,817
468,010
495,803
57,219
2,100,363
330,951
100,808
3,437,915
20,805
212,304
383,034
362,639
332,931
-
547,656
136,438
-
57,219
-
32,266
-
957,663
389,161
331,572
495,803
-
2,100,363
298,685
100,808
669,058
557,359
328,343
459,457
82,860
2,289,365
199,478
22,777
-
74,381
113,544
-
82,860
-
9,702
-
669,058
482,978
214,799
459,457
-
2,289,365
189,776
22,777
-
20,805
-
-
-
-
3,437,915
-
212,304
383,034
362,639
332,931
2,983,621
66,834
190,458
350,657
263,106
153,464
-
66,834
-
-
-
-
2,983,621
-
190,458
350,657
263,106
153,464
At December 31, 2017
Trading
Non-trading
Carrying
amount
At December 31, 2016
Trading
Non-trading
Carrying
amount
907,265
799,992
468,010
273,331
57,219
1,980,465
117,814
42,752
2,744,525
20,805
212,304
383,034
418,979
332,931
-
547,656
136,438
-
57,219
-
32,266
-
907,265
252,336
331,572
273,331
-
1,980,465
85,548
42,752
627,385
463,787
325,575
354,405
82,860
2,138,132
118,622
22,335
-
74,381
-
-
82,860
-
9,702
-
627,385
389,406
325,575
354,405
-
2,138,132
108,920
22,335
-
20,805
-
-
-
-
2,744,525
-
212,304
383,034
418,979
332,931
2,552,963
66,834
233,532
350,657
292,802
153,464
-
66,834
-
-
-
-
2,552,963
-
233,532
350,657
292,802
153,464
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.
73 Zenith Bank Plc Annual Report - December 31, 2017
ZENITH BANK PLC
Notes to the Consolidated and Separate Financial Statements
for the Year Ended December 31, 2017
3.
Risk management (continued)
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 Group's 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 forwards and swaps). 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 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 denominated in
foreign currencies.
Group
The table below summarizes the Group’s exposure to foreign currency exchange rate risk at December 31, 2017 and
December 31, 2016. 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 December 31, 2017
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
517,794
799,992
468,010
9,574
57,219
1,357,236
116,112
77,328
385,147
74,511
-
424,742
-
719,066
213,587
-
5,802
23,279
-
19,850
-
873
-
-
3,365
-
-
36,120
-
2,027
1,252
-
45,554
39,035
-
5,517
-
21,161
-
-
957,663
936,817
468,010
495,803
57,219
2,100,362
330,951
77,328
3,403,265
1,817,053
49,804
42,764
111,267
5,424,153
2,045,413
20,805
225,019
383,034
-
-
1,193,820
-
-
-
356,496
332,931
2,674,271
1,883,247
37,972
-
-
-
-
-
37,972
11,832
33,100
-
-
-
-
-
33,100
9,664
127,610
-
-
-
-
-
3,437,915
20,805
225,019
383,034
356,496
332,931
127,610
4,756,200
(16,343)
667,953
Net on-balance sheet position
728,994
(66,194)
74 Zenith Bank Plc Annual Report - December 31, 2017
ZENITH BANK PLC
Notes to the Consolidated and Separate Financial Statements
for the Year Ended December 31, 2017
3.
Risk management (continued)
In millions of Naira
At December 31, 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
40,877
11,131
10,971
-
669,058
463,787
325,575
17,538
-
1,298,192
117,055
25,557
34,959
-
392,618
82,860
969,109
43,984
-
-
-
2,855
-
878
-
-
-
-
14,499
-
8,177
-
-
58,613
2,768
31,947
-
84,453
38,439
2,474
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
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-17
31-Dec-16
5,394
7,233
US Dollar effect of 30% up or (down) movement on profit before tax and statement of
financial position size (in millions of Naira)
10,788
14,467
75 Zenith Bank Plc Annual Report - December 31, 2017
ZENITH BANK PLC
Notes to the Consolidated and Separate Financial Statements
for the Year Ended December 31, 2017
3.
Risk management (continued)
Bank
The table below summarizes the Bank’s exposure to foreign currency exchange rate risk at December 31, 2017 and
December 31, 2016. Included in the table are the Bank’s financial instruments at carrying amounts, categorised by
currency.
Net on-balance sheet position
714,245
(192,408)
In millions of Naira
At December 31, 2017
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
In millions of Naira
At December 31, 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
Financial liabilities
On-lending facilities
Borrowings
Debt securities issued
Naira
Dollar
GBP
Euro
Others
Total
517,794
799,992
468,010
9,455
57,219
1,357,236
116,112
56,052
382,200
-
-
239,299
-
614,988
1,702
-
5,438
-
-
2,389
-
70
-
-
1,833
-
-
22,069
-
8,160
-
-
-
-
-
118
-
10
-
-
907,265
799,992
468,010
273,331
57,219
1,980,464
117,814
56,052
3,381,870
1,238,190
7,897
32,062
128
4,660,147
2,045,413
20,805
218,373
383,034
-
-
678,688
-
-
-
418,979
332,931
2,667,625
1,430,598
7,457
-
-
-
-
-
7,457
440
12,967
-
-
-
-
-
12,967
19,095
-
-
-
-
-
-
-
2,744,525
20,805
218,373
383,034
418,979
332,931
4,118,647
128
541,500
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
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.
76 Zenith Bank Plc Annual Report - December 31, 2017
ZENITH BANK PLC
Notes to the Consolidated and Separate Financial Statements
for the Year Ended December 31, 2017
3.
Risk management (continued)
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.
In millions of Naira
US Dollar effect of 15% up or (down) movement on profit before tax and balance sheet
size
31-Dec-17
31-Dec-16
27,320
10,122
US Dollar effect of 30% up or (down) movement on profit before tax and statement of
financial position size (in millions of Naira)
54,639
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 Group has a significant portion of its liabilities in non-rate sensitive liabilities. This helps it in minimizing 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 December 31, 2017
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
24
27
32
28
29
30
31
957,663
936,817
468,010
495,803
57,219
2,252,172
330,951
82,576
7,500
517,106
-
495,803
57,219
2,252,172
316,665
-
950,163
419,711
468,010
-
0
-
14,286
82,576
5,581,211
3,646,465
1,934,746
3,437,915
20,805
216,104
383,034
356,496
332,931
2,900,212
20,805
-
383,034
368,877
332,931
537,703
(0)
216,104
0
(12,381)
-
4,747,285
4,005,859
741,426
833,926
(359,394)
77 Zenith Bank Plc Annual Report - December 31, 2017
ZENITH BANK PLC
Notes to the Consolidated and Separate Financial Statements
for the Year Ended December 31, 2017
3.
Risk management (continued)
At December 31, 2017
Assets
Cash and balances with central
banks
Treasury bills
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
44,655
493,571
5,685
671,538
1 - 3 months 3 - 6 months
6 - 12
months
Over 1 year
Total rate
sensitive
-
-
-
-
7,500
131,555
160
6,887
39,753
108,013
688
13,192
42,023
232,883
171
16,045
69,461
-
1,213
15,410
1,429,397
517,106
495,803
57,219
2,252,172
500
-
-
4,712
311,453
316,665
1,223,449
178,355
163,916
323,272
1,757,473
3,646,465
1,013,580
3,906
63,413
-
-
1,080,899
169,835
3,851
68,302
-
-
241,988
16,271
1,716
2,360
-
-
20,347
1,231
11,332
159
2,794
-
1,699,295
-
248,800
366,083
332,931
2,900,212
20,805
383,034
368,877
332,931
15,516
2,647,109
4,005,858
Total interest repricing gap
142,550
(63,633)
143,569
307,756
(889,636)
(359,394)
78 Zenith Bank Plc Annual Report - December 31, 2017
ZENITH BANK PLC
Notes to the Consolidated and Separate Financial Statements
for the Year Ended December 31, 2017
3.
Risk management (continued)
At December 31, 2016
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
24
27
32
29
30
28
31
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
34,550
Up to 1
month
7,500
35,444
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
557,359
328,343
459,457
82,860
2,360,809
11
26
68,183
735
113,871
182,826
1,490,558
172,057
338,371
413,911
1,564,257
3,979,154
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
1,398,197
-
244,025
63,819
152,626
2,502,387
66,834
350,657
263,106
153,465
129,421
86,076
1,858,667
3,336,449
Total interest repricing gap
447,999
(47,669)
208,950
327,835
(294,410)
642,705
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-17
31-Dec-16
16,572
5,114
79 Zenith Bank Plc Annual Report - December 31, 2017
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, 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
ZENITH BANK PLC
Notes to the Consolidated and Separate Financial Statements
for the Year Ended December 31, 2017
3.
Risk management (continued)
Bank
The table below summarizes the Bank's interest rate gap position:
In millions of Naira
At December 31, 2017
Assets
Cash and balances with central banks
Treasury and other eligible 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)
Other financial assets
Note Carrying
amount
Rate
sensitive
Non-rate
sensitive
15
16
17
18
19
20
21
19
27
32
28
29
30
31
907,265
799,993
468,009
273,331
57,219
2,117,069
117,814
42,752
7,500
517,106
136,438
97,160
57,219
2,117,069
32,266
-
899,765
282,887
331,571
176,171
-
-
85,548
42,752
4,783,452
2,964,758
1,818,694
2,744,525
20,805
212,304
383,034
418,979
332,931
2,229,625
20,805
-
383,034
418,979
332,931
514,900
(0)
212,304
-
(0)
-
4,112,578
3,385,374
727,204
670,874
(420,616)
1,091,490
Up to 1
month
7,500
22,050
32,709
97,160
5,144
640,232
1 - 3 months 3 - 6 months
6 - 12
months
Over 1 year
Total rate
sensitive
-
-
-
-
7,500
44,399
8,149
-
7,427
38,575
227,187
45,802
-
13,192
40,710
223,470
49,778
-
16,045
64,542
-
-
-
15,411
1,333,010
517,106
136,438
97,160
57,219
2,117,069
-
-
-
-
32,266
32,266
804,795
98,550
326,891
353,835
1,380,687
2,964,758
850,077
3,389
34
119
-
853,619
117,790
4,368
28
98,755
-
220,941
2,706
1,716
821
107,568
-
112,811
849
11,332
1,285
115,128
-
1,258,203
-
380,866
97,408
332,931
2,229,625
20,805
383,034
418,979
332,931
128,594
2,069,408
3,385,374
Total interest repricing gap
(48,824)
(122,391)
214,080
225,241
(688,721)
(420,616)
80 Zenith Bank Plc Annual Report - December 31, 2017
Liabilities
Customer deposits
Derivative liabilities
Other financial liabilities
On-lending facilities
Borrowings
Debt securities issued
Total interest repricing gap
In millions of Naira
At December 31, 2017
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
ZENITH BANK PLC
Notes to the Consolidated and Separate Financial Statements
for the Year Ended December 31, 2017
3.
Risk management (continued)
In millions of Naira
At December 31, 2016
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
Liabilities
Customer deposits
Financial liabilities
Derivative liabilities
On-lending facilities
Borrowings
Debt securities issued
Note Carrying
amount
Rate
sensitive
Non rate
sensitive
15
16
17
18
19
20
21
24
27
13
28
32
29
30
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
233,532
66,834
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)
At December 31, 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
Total interest repricing gap
Up to 1
month
1 - 3 months 3 - 6 months
6 - 12
months
Over 1 year
Total rate
sensitive
7,500
30,869
9,988
354,329
2,503
-
81,706
22,003
-
3,792
-
101,096
75,101
76
47,364
-
250,116
41,481
-
29,201
-
-
177,002
-
-
7,500
463,787
325,575
354,405
82,860
933,926
54,134
14,480
44,844
1,145,840
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
The management of interest risk against interest rate gap limits is supplemented by the monitoring of 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-17
31-Dec-16
20,887
246
81 Zenith Bank Plc Annual Report - December 31, 2017
ZENITH BANK PLC
Notes to the Consolidated and Separate Financial Statements
for the Year Ended December 31, 2017
3.
Risk management (continued)
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 as a result of 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 N14.10 billion (cost N6.4
billion) as at December 31, 2017. 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 in section 3.5 (b).
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 its inability 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 is 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 deposit 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.
82 Zenith Bank Plc Annual Report - December 31, 2017
ZENITH BANK PLC
Notes to the Consolidated and Separate Financial Statements
for the Year Ended December 31, 2017
3.
Risk management (continued)
3.4.2 Stress testing and contingency funding
Stress testing
The Group 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 practice and
global best practice, the Group:
(a). Conducts on a regular basis appropriate stress tests so as to;
(i)
(ii)
Identify sources of potential liquidity strain; and
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; and
(iii)
Profitability.
The Board and the Asset and Liability Committee (ALCO) regularly review the stresses and scenarios tested to ensure that
their nature and severity remain appropriate and relevant to the Bank. These reviews take into the account the following;
(a) Changes in market condition;
(b) Changes in the nature, scale or complexity of the Bank's business model and activities; and
(c)
The Group's practical experience in periods of stress.
The Group considers the potential impact of idiosyncratic Institution-Specific, market-wide and combined alternative
scenarios while carrying out the test to ensure that all areas are appropriately covered. In addition, the Group also
considers the impact of severe stress scenarios.
Contingency Funding Plan
The Group maintains a contingency funding plan which sets out strategies for addressing liquidity. The Plan:
(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 Group's 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 Group will manage both internal communications and those with its external stakeholders; and
(i)
establishes mechanisms to ensure that the Board and Senior Management receive management.
As part of the contingency funding plan process, the Group maintains committed credit lines that can be drawn in case of
liquidity crises. These lines are renewed as at when due.
83 Zenith Bank Plc Annual Report - December 31, 2017
ZENITH BANK PLC
Notes to the Consolidated and Separate Financial Statements
for the Year Ended December 31, 2017
3.
Risk management (continued)
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 to 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 December 31, 2017
Average for the period
Maximum for the period
Minimum for the period
(b) Liquidity reserve
Group
Bank
31-Dec-17
31-Dec-16
31-Dec-17
31-Dec-16
69.66%
59.59%
51.88%
44.03%
52.15%
60.28% .
52.06%
54.94%
82.42%
70.76%
55.49%
63.27%
38.94%
53.09%
46.96%
44.03%
The table sets out the component of the Group's liquidity reserve.
Group
31-Dec-17
31-Dec-16
In millions of naira
Carrying
value
Fair value
Carrying
value
Fair value
Cash and balances with Central Banks
310,549
310,549
140,874
140,874
Treasury Bills
419,711
314,046
482,978
475,552
Balances with other banks
201,982
201,982
155,859
155,859
Investment securities
316,850
174,227
182,826
177,806
Assets pledged as collaterals
Total
Bank
468,010
326,055
328,343
310,778
1,717,102
1,326,859
1,290,880
1,260,869
Cash and balances with Central Banks
260,180
260,180
99,378
99,378
Treasury Bills
282,886
214,046
389,406
375,552
Balances with other banks
8,733
8,733
17,537
17,537
Investment securities
103,713
84,227
101,970
95,557
Assets pledged as collaterals
468,010
326,055
325,575
310,778
Total
1,123,522
893,241
933,866
898,802
84 Zenith Bank Plc Annual Report - December 31, 2017
ZENITH BANK PLC
Notes to the Consolidated and Separate Financial Statements
for the Year Ended December 31, 2017
Risk management (continued)
3.
(c) Financial assets available to support funding
The table below sets out the availability 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 December 31, 2017
At December 31, 2016
Note Encumbered Unencumbered
15
Total
Encumbered Unencumbered
Total
16
17
18
20
21
24
647,114
-
468,010
-
-
-
79,677
310,549
936,817
-
495,803
2,100,362
330,951
5,964
957,663
936,817
468,010
495,803
2,100,362
330,951
85,641
528,184
-
328,343
-
-
-
-
140,875
557,359
-
459,457
2,289,365
199,478
22,777
669,058
557,359
328,343
459,457
2,289,365
199,478
22,777
'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 December 31, 2017
At December 31, 2016
Note Encumbered Unencumbered
15
Total
Encumbered Unencumbered
Total
16
17
18
20
21
24
647,114
-
468,010
-
-
-
36,788
260,181
799,992
-
273,331
1,980,464
117,814
5,964
907,295
799,992
468,010
273,331
1,980,464
117,814
42,752
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
(d) Financial assets pledged as collateral
The total financial assets recognized in the statement of financial position that have been pledged as collateral for liabilities
as at December 31, 2017 and December 31, 2016 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 processes are 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.
85 Zenith Bank Plc Annual Report - December 31, 2017
ZENITH BANK PLC
Notes to the Consolidated and Separate Financial Statements
for the Year Ended December 31, 2017
Risk management (continued)
3.
Group
At December 31, 2017
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
16
Assets pledged as collateral
17
18
Due from other banks
Loans and advances to customers 20
21
Investment securities
15
306,822
44,655
45,246
487,668
671,539
500
-
-
647,112
-
953,934
957,663
131,555 108,013
82,995
688
42,023
-
63,239
160
39,753
-
642,255
75,549
171
-
200,982
1,213
936,817
468,010
495,803
69,461 1,423,541 2,246,316 2,246,316
330,951
926,479
468,011
489,900
330,767
325,555
4,712
19
27
28
29
30
31
32
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
Derivative liabilities
Trading:
Inflow
Outflow
Risk management:
Inflow
Inflow
1,556,430
234,707 233,719 1,439,260 1,951,291 5,415,407 5,435,560
-
5,685
11,669
-
6,887
13,926
-
13,192
-
-
16,045
-
-
15,409
-
-
57,219
25,595
57,219
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
17,354
20,813
13,192
16,045
15,409
82,814
57,219
3,227,703
-
63,413
-
-
169,835
-
68,302
-
-
16,271
-
2,360
-
-
1,219
230,857
159
2,794
2,618
84 3,415,112 3,415,112
230,857
383,034
368,877
332,931
230,857
383,034
368,877
332,931
-
248,800
366,083
330,313
3,291,116
238,137
18,631
237,647
945,280 4,730,811 4,730,811
3,906
-
3,851
-
1,716
35,156
11,332
-
-
-
-
-
-
-
-
-
-
-
-
-
3,906
3,851
36,872
11,332
20,805
35,156
20,805
-
-
-
-
-
-
-
-
55,961
20,805
-
-
-
-
-
-
86 Zenith Bank Plc Annual Report - December 31, 2017
ZENITH BANK PLC
Notes to the Consolidated and Separate Financial Statements
for the Year Ended December 31, 2017
3.
Risk management (continued)
At December 31, 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)
15
Assets
Non-derivative assets
Cash and balances with central
banks
16
Treasury bills
17
Assets pledged as collateral
Due from other banks
18
Loans and advances to customers 20
21
Investment securities
24
Other financial assets
140,874
38,385
19,959
440,108
975,732
2,888
4,466
-
-
528,184
-
669,058
669,058
93,888 139,939
81,943
22,543
16,808
7,379
14,729
54,642
78,868
3,148
-
-
586,755
-
314,543
740,766
541,077
75,244
15,154
481,483
2,034
45,090 1,270,634 2,360,827
291,181
198,533
22,777
-
7,744
18,311
557,359
328,343
459,457
2,289,365
199,478
22,777
1,622,412
181,600 332,287 1,004,270 2,012,278 5,152,847
4,525,837
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
19
-
-
-
-
-
-
82,860
46,546
-
46,120 178,821
-
-
109,806
-
36,399
-
417,692
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
46,546
46,120 178,821
109,806
36,399
417,692
82,860
27
28
29
30
31
38
32
2,857,864
117,857
32,293
30,934
-
28,213
104,904
-
64,710
45,981
-
75,565
20,332
-
629
63,034
4,770
79,004
1,283
67,984
9,000
59,458
4,770
106,236
160 2,984,543
256,835
350,657
292,853
176,474
560,704
70,994
244,025
93,446
166,934
271,686
2,983,621
190,458
350,657
263,106
153,464
560,704
3,067,161
291,160 167,769
248,731
847,245 4,622,066
4,502,010
-
-
-
-
-
-
66,834
45,531
-
41,042 183,080
-
-
23,306
-
24,267
-
317,226
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
45,531
41,042 183,080
23,306
24,267
317,226
66,834
87 Zenith Bank Plc Annual Report - December 31, 2017
ZENITH BANK PLC
Notes to the Consolidated and Separate Financial Statements
for the Year Ended December 31, 2017
3.
Risk management (continued)
Bank
At December 31, 2017
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
Assets
Non-derivative assets
Cash and balances with central
banks
16
Treasury bills
17
Assets pledged as collateral
Due from other banks
18
Loans and advances to customers20
21
Investment securities
24
Other financial assets
260,180
29,046
57,915
273,331
640,232
2,396
36,139
-
-
647,085
-
907,265
907,265
93,640 317,228
89,462
64,662
-
-
40,710
38,575
4,038
5,398
-
-
427,562
96,869
-
-
621,959
-
867,476
930,867
273,331
64,543 1,333,010 2,117,069
234,461
212,755
42,752
6,613
9,874
-
799,992
468,010
273,331
2,117,069
117,814
34,003
19
27
28
29
30
31
32
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
Derivative liabilities
Trading:
Inflow
Outflow
Risk management:
Inflow
Outflow
1,299,239
202,275 451,438 1,245,933
62,195,901,333,010 5,373,221
4,717,484
-
5,685
11,669
-
6,887
13,926
-
13,192
-
-
16,045
-
-
15,409
-
-
57,219
25,595
57,219
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
17,354
20,813
13,192
16,045
15,409
82,814
57,219
2,623,192
-
63,413
2,769
-
117,790
-
68,302
2,706
-
2,360
111,047 113,937
-
-
837
11,930
159
129,155
2,618
0 2,744,525
11,930
-
383,034
248,800
438,777
81,869
332,931
330,313
2,744,525
11,930
383,034
418,979
332,931
2,689,374
297,139 119,003
144,699
660,982 3,911,197
3,891,399
-
3,906
-
-
3,851
-
-
1,716
35,156
-
11,332
-
-
-
-
-
-
-
-
-
-
-
-
-
3,906
3,851
36,872
11,332
-
-
-
-
-
-
-
-
20,805
35,156
20,805
-
-
-
-
-
-
-
-
55,961
20,805
88 Zenith Bank Plc Annual Report - December 31, 2017
ZENITH BANK PLC
Notes to the Consolidated and Separate Financial Statements
for the Year Ended December 31, 2017
3.
Risk management (continued)
At December 31, 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)
15
Assets
Non-derivative assets
Cash and balances with central
banks
16
Treasury bills
17
Assets pledged as collateral
Due from other banks
18
Loans and advances to customers 20
21
Investment securities
24
Other financial assets
19
27
28
29
30
31
38
32
Derivative assets
Trading:
Inflow
Outflow
Risk management:
Inflow
Outflow
Liabilities
Non-derivative liabilities
Customer's deposits
Financial liabilities
On-lending facilities
Borrowings
Debt securities issued
Financial guarantees contracts
Derivative liabilities
Trading:
Inflow
Outflow
Risk management:
Outflow
Inflow
99,379
-
- 528,006
-
627,385
627,385
31,012
19,959
313,030
933,926
2,877
6,435
490,416
-
84,030 108,119 267,255
740,766
541,077
75,244
81,943
22,543
15,154
16,808
7,379
354,405
2,034
44,843 1,145,841 2,193,224
14,480
54,134
210,325
172,276
24,524
3,122
22,335
15,900
-
-
7,526
-
463,787
325,575
354,405
2,193,224
118,622
22,335
1,406,618
171,208 245,874 938,028 1,877,128 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
-
25,854
75,973
-
64,710
45,981
-
75,565
14,195
262
- 110,512
9,000
59,458
4,770
79,004 106,236
629
63,034
4,770
- 2,552,964
283,355
350,657
292,853
176,474
558,345
55,092
244,025
93,446
166,934
271,686
2,552,963
233,532
350,657
292,802
153,464
513,832
2,669,366
262,229 161,632 290,238
831,183 4,214,648
4,097,250
-
45,531
-
-
-
-
-
-
41,042 183,080
-
-
-
23,306
-
-
24,267
-
-
317,226
-
66,834
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
45,531
41,042 183,080
23,306
24,267
317,226
66,834
89 Zenith Bank Plc Annual Report - December 31, 2017
ZENITH BANK PLC
Notes to the Consolidated and Separate Financial Statements
for the Year Ended December 31, 2017
Risk management (continued)
3.
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
Undiscounted cash flows, which include estimated interest
payments.
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
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 do not reflect 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 that are eligible
for use as collateral with central banks (these amounts are referred to as the ‘Group’s liquidity reserves’).
90 Zenith Bank Plc Annual Report - December 31, 2017
ZENITH BANK PLC
Notes to the Consolidated and Separate Financial Statements
for the Year Ended December 31, 2017
3.
Risk management (continued)
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 and fair value hierarchy
Group
The table below sets out the Group's classification of each class of its financial assets and liabilities.
Note Carrying
At December 31, 2017
Fair value
Fair value
hierarchy
Carrying
value
At December 31, 2016
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
547,656
32,266
547,656
32,266
57,219
57,219
14,101
14,101
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
24
957,663
679,915
389,161
468,010
495,803
2,252,172
314,046
326,055
495,803
1,546,337
284,584
77,328
174,227
28,388
Liabilities
Carried at FVTPL
Derivative liabilities
Carried at FVTPL
Customer's deposits
Other financial liabilities
On-lending facilities
Borrowings
Debt securities issued
32
27
28
29
30
31
20,805
20,805
3,437,915
216,104
383,034
356,496
332,931
2,935,105
158,160
339,995
335,504
251,961
1
1
2
3
-
1
1
2
3
1
-
2
-
-
3
3
2
74,381
9,702
74,381
9,702
82,860
82,860
16,652
16,652
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
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
91 Zenith Bank Plc Annual Report - December 31, 2017
ZENITH BANK PLC
Notes to the Consolidated and Separate Financial Statements
for the Year Ended December 31, 2017
Risk management (continued)
3.
Bank
The table below sets out the Bank's classification of each class of its financial assets and liabilities.
Note Carrying
At December 31, 2017
Fair value
Fair value
hierarchy
Carrying
value
At December 31, 2016
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
547,656
32,266
547,656
32,266
57,219
57,219
14,101
14,101
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
24
907,265
907,265
282,886
468,010
273,331
2,117,069
246,210
407,334
273,331
1,449,107
71,447
42,752
72,748
40,546
Liabilities
Carried at FVTPL
Derivative liabilities
Carried at amortized cost:
Customer's deposits
Other financial liabilities
On-lending facilities
Borrowings
Debt securities issued
32
27
28
29
30
31
20,805
20,805
2,744,525
212,304
383,034
418,979
332,931
2,481,971
168,830
339,995
335,504
251,961
1
1
2
3
-
1
1
-
3
1
-
2
-
-
3
3
2
74,381
9,702
74,381
9,702
82,860
82,860
16,652
16,652
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
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
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.
92 Zenith Bank Plc Annual Report - December 31, 2017
ZENITH BANK PLC
Notes to the Consolidated and Separate Financial Statements
for the Year Ended December 31, 2017
Risk management (continued)
3.
Financial instruments measured at fair value
At December 31, 2017
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
Disposal recognised through profit or loss
Loss recognised through other comprehensive income
At December 31, 2017
At December 31, 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
Gains/(losses) recognised through profit or loss
Gains/(losses) recognised through other comprehensive income
At December 31, 2016
16
21
19
32
21
16
21
19
32
21
Level 1
Level 2
Level 3
547,656
32,266
-
-
-
579,922
-
-
57,219
20,805
-
78,024
-
-
-
-
14,101
14,101
16,652
-
(2,551)
14,101
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
93 Zenith Bank Plc Annual Report - December 31, 2017
ZENITH BANK PLC
Notes to the Consolidated and Separate Financial Statements
for the Year Ended December 31, 2017
3.
Risk management (continued)
Level 3 fair value measurements
(a) Unobservable inputs used in measuring fair value
The table below sets out information about significant unobservable inputs used at December 31, 2017 and December 31,
2016 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, 2017
Valuation
technique
Range of estimates
(average) for
unobservable
inputs
Fair value
measurement
sensitivity to
unobservable
inputs
Unquoted equity
investment
N14.03 billion
Equity DCF
model.
-Discount rate.
-Estimate cash flow.
Risk premium of
11.50 -12.50%
(12.09%) above risk-
free interest rate
(2.38%) (31 Dec.
2016:11.50-12.50%
(12.09%) above risk
free rate (2.49%))
5-year Compound
Annual Growth Rate
(CAGR) of cash flow
of 16-17% (16.96%)
(December 2016: 16-
17% (14.4%))
A significant increase
in the risk premium
above the risk rate
would result in a
lower fair value.
A significant increase
in the CAGR of cash
flow would result in a
higher fair value
Risk premium is determined by adding country risk premium to the product of market premium and equity beta.
(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
At December 31, 2017
At December 31, 2016
Favourable
changes
Un-
favourable
changes
Favourable
changes
Un-
favourable
changes
0.92
(0.40)
0.90
(0.83)
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
December 31, 2017 included a risk premium 12.09% above the risk-free interest rate of 2.38% (with reasonably possible
alternative assumptions of 12.0% and 12.30%) (December 31, 2016: 11.50% - 12.50% (12.09%) respectively above risk
free rate of 2.49%).
The fair value of the 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 December
31, 2017: N647 billion, December 31, 2016: N528 billion) with Central banks of the various jurisdictions in which the Group
operates. The fair value of these balances is their carrying amounts.
94 Zenith Bank Plc Annual Report - December 31, 2017
ZENITH BANK PLC
Notes to the Consolidated and Separate Financial Statements
for the Year Ended December 31, 2017
Risk management (continued)
3.
(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 estimated 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
Other financial assets/financial liabilities represent monetary assets, which usually have a short recycle period and as such,
whose fair values 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 determining 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 determining fair values. Availability of observable markets prices and inputs varies depending
on the products and markets and is prone to changes based on specific events and general conditions in the financial
markets.
3.6 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.
95 Zenith Bank Plc Annual Report - December 31, 2017
ZENITH BANK PLC
Notes to the Consolidated and Separate Financial Statements
for the Year Ended December 31, 2017
3.
Risk management (continued)
The Group's Capital Adequacy is reviewed regularly to meet regulatory requirements and standard of international best
practices. The Group adopts and implements 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 requirements 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, which are not incorporated in Nigeria, are directly regulated and supervised by their local
banking regulators and are required to meet the capital requirement directive of the local regulatory jurisdiction. Parental
support and guidance are given at the Group level at which the risk level in relation to capital level and adequacy is closely
monitored. The Group meet all capital requests from these regulatory jurisdictions and determines 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 can 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.
The table below shows the computation of the Group's capital adequacy ratio for the year ended December 31, 2017 as
well as the 31 December, 2016 comparatives. During those two periods, 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.
96 Zenith Bank Plc Annual Report - December 31, 2017
ZENITH BANK PLC
Notes to the Consolidated and Separate Financial Statements
for the Year Ended December 31, 2017
3.
Risk management (continued)
In millions of Naira
Tier 1 capital
Share capital
Share premium
Statutory reserves
SMEIES reserve
Retained earnings
Group
Bank
December 31,
2017
December 31,
2016
Basel II Basel II
15,698
255,047
112,114
3,729
267,008
15,698
255,047
135,686
3,729
365,757
December 31,
2017
December 31,
2016
Basel II Basel II
15,698
255,047
104,293
3,729
218,507
15,698
255,047
127,865
3,729
296,787
Total qualifying Tier 1 capital
775,917
653,596
699,126
597,274
Deferred tax assets
Intangible assets
Investment in capital of financial subsidiaries
(9,561)
(12,989)
-
(6,440)
(4,645)
-
(9,197)
(12,088)
(25,604)
(6,041)
(3,903)
(22,053)
Adjusted Total qualifying Tier 1 capital
753,367
642,511
652,237
565,277
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
42,082
42,082
-
42,082
795,449
39,415
39,415
-
39,415
681,926
(8,399)
(8,399)
10,950
10,950
8,399
(10,950)
-
-
652,237
565,277
2,306,892
84,690
595,934
2,406,800
17,684
554,772
2,066,961
62,956
540,331
2,109,275
5,875
509,493
Total risk-weighted assets
2,987,516
2,979,256
2,670,248
2,624,643
Risk-weighted Capital Adequacy Ratio (CAR)
%27
%23
%24
%22
97 Zenith Bank Plc Annual Report - December 31, 2017
ZENITH BANK PLC
Notes to the Consolidated and Separate Financial Statements
for the Year Ended December 31, 2017
3.
Risk management (continued)
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 and
strategic risks. 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 components by aligning the people, technology and processes with best
risk management practices towards enhancing stake holders' 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; and
(c)
To enable the group identify and analyse events (both internal and external) that impact on its business.
The Operational Risk unit constantly conducts reviews to identify and assess the operational risk inherent in all material
products, activities, processes and systems. It also ensures that all business units within the Bank monitor their operational
risks using set standards and indicators. Significant issues and exceptions are reported to Risk Management and are also
identified 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 terrorrist 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 organisation's 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, creating awareness of legislation among employees, identifying
significant legal risks as well as assessing the potential impact of these.
Legal risks management in the Group is also being enhanced by appropriate product risk review and management of
contractual obligations via well documented Service Level Agreements and other contractual documents.
98 Zenith Bank Plc Annual Report - December 31, 2017
ZENITH BANK PLC
Notes to the Consolidated and Separate Financial Statements
for the Year Ended December 31, 2017
3.
Risk management (continued)
3.10 Reputational risk
Reputational risk is defined as the risk of indirect losses arising from a decline in the bank’s reputation among one or
multiple bank stakeholders. The risk can expose the Group to litigation, financial loss or damage to its reputation. The
Group's reputation risk management philosophy 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 oversee 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; and
(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: Conducting qualitative assessment of reputational risk based on the potential events that have been
identified as reputational risk;
(c) Monitoring: Undertaking frequent monitoring of the reputational risk drivers;
(d) Mitigation and Control: Establishing preventive measures and controls for management of reputational risk and
tracking mitigation actions;
(e)
Independent review: Subjecting the reputational risk measures and mitigation techniques to regular independent
review by internal auditors and/or external auditors; and
(f)
Reporting: Generating regular, action-oriented reports for management review.
3.11 Taxation risk
Taxation risk refers to the risk that new taxation laws will adversely affect the Group and/or the loss as a result 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 to which it is potentially exposed by monitoring new regulatory rules and applicable
laws, and identifying significant regulatory risks. The Group strives to maintain appropriate procedures, processes and
policies that enable it to comply with applicable regulation.
The Group maintains zero tolerance posture for any regulatory breach 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
consequently established Corporate Social Responsibility (CSR) vision and mission.
As global awareness on sustainable development became prevalent, the Group commenced a project to increase its 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.
99 Zenith Bank Plc Annual Report - December 31, 2017
ZENITH BANK PLC
Notes to the Consolidated and Separate Financial Statements
for the Year Ended December 31, 2017
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 3.3.5(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.
100 Zenith Bank Plc Annual Report - December 31, 2017
ZENITH BANK PLC
Notes to the Consolidated and Separate Financial Statements
for the Year Ended December 31, 2017
4.4 Prudential Adjustments
Provisions under prudential guidelines are determined using the time-based provisioning specified by the revised Prudential
Guidelines issued by the Central Bank of Nigeria. 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) Expenses for loan losses recognised in the profit and loss account should be determined based on the relevant IFRS.
However, the allowance for loan losses determined under the IFRS should be compared with the loan loss provisions
determined under the Prudential Guidelines. The differences between both provisions should be treated as follows:
(i)
Where Prudential Provisions is greater than IFRS provisions, the resulting difference should be transferred from the
general reserve account to a non-distributable regulatory credit risk reserve.
(ii) Where Prudential Provisions is less than IFRS provisions, the IFRS determined provision is charged to the statement
of comprehensive income. The cumulative balance in the regulatory risk reserve is thereafter transferred to the
general reserve account.
(b) The non-distributable reserve is classified under Tier 1 as part of the core capital for the purpose of determining
capital adequacy..
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 no credit risk reserves as at
December 31, 2017.
Provision for loan losses per prudential guidelines
In millions of Naira
Loans and advances
Other financial assets
(a)
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
(b)
(c)=(a)-(b)
(Reversal from)/transfer to retained earnings at year end
Bank
Note 31-Dec-17
109,405
6,560
115,965
31-Dec-16
62,680
7,101
69,781
20
20
22
24
68,443
68,162
136,605
1,312
5,248
143,165
(27,200)
(8,129)
17,607
37,485
55,092
1,312
5,248
61,652
8,129
-
101 Zenith Bank Plc Annual Report - December 31, 2017
ZENITH BANK PLC
Notes to the Consolidated and Separate Financial Statements
for the Year Ended December 31, 2017
5.
Segment analysis
The Group's strategic divisions offer different products and services, and are managed seperately based on the Group's
management and internal reporting structure. The Group's Executive Management (Chief Operating Decision Maker)
reviews internal management reports from each of the strategic divisions 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, Pension Custodial services and Nominee - 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.
(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 in Europe (the United Kingdom) respectively.
102 Zenith Bank Plc Annual Report - December 31, 2017
ZENITH BANK PLC
Notes to the Consolidated and Separate Financial Statements
for the Year Ended December 31, 2017
In millions of Naira
December 31, 2017
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
December 31, 2017
Capital expenditure**
Identifiable assets
Identifiable liabilities
Outside Nigeria
Africa
Europe
Eliminations Consolidated
Total
reportable
segments
53,822
-
53,822
(17,776)
(557)
(14,906)
20,583
(5,602)
14,981
14,056
148
14,204
(1,394)
(2,403)
(5,706)
4,701
(1,035)
3,666
748,789
3,206
751,995
(219,842)
(98,227)
(226,064)
207,862
(25,528)
182,334
(3,600)
(3,206)
(6,806)
3,205
-
(800)
(4,401)
-
(4,401)
745,189
-
745,189
(216,637)
(98,227)
(226,864)
203,461
(25,528)
177,933
Outside Nigeria Banking
Africa
Europe
Eliminations Consolidated
Total
reportable
segments
Nigeria
Corporate
retail and
pensions
custodian
services
680,911
3,058
683,969
(200,672)
(95,267)
(205,452)
182,578
(18,891)
163,687
Nigeria
Corporate
retail and
pensions
custodian
services
44,025
4,854,394
4,129,169
4,429
375,106
313,380
182
48,636
-
48,636
554,087
5,783,587
(188,334)
5,595,253
486,382
4,928,931
(155,336)
4,773,595
* 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.
103 Zenith Bank Plc Annual Report - December 31, 2017
ZENITH BANK PLC
Notes to the Consolidated and Separate Financial Statements
for the Year Ended December 31, 2017
In millions of Naira
December 31, 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
December 31, 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.
104 Zenith Bank Plc Annual Report - December 31, 2017
ZENITH BANK PLC
Notes to the Consolidated and Separate Financial Statements
for the Year Ended December 31, 2017
Group
Bank
31-Dec-17
31-Dec-16
31-Dec-17
31-Dec-16
6.
Interest and similar income
Loans and advances to customers
Placement with banks and discount houses
Treasury bills
Government and other bonds
314,683
6,733
109,740
43,472
474,628
273,351
2,289
60,187
48,730
384,557
295,932
552
84,973
38,753
420,210
252,834
1,089
44,347
45,286
343,556
Total interest income, calculated using the effective interest rate method reported above that relates to financial assets not
carried at fair value through profit or loss are N474,628 million (December 31, 2016: N384,557 million) and N420,210
million (December 31, 2016: N343,556 million) for Group and Bank respectively.
Included in interest income on loans and advances are amounts totalling N18.02 billion (December 31, 2016: N2.66 billion)
and N11.80 billion (December 31, 2016: N2.17 billion) 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 and lease
10,029
17,099
108,735
80,774
216,637
4,125
12,516
94,369
33,368
9,403
16,927
95,329
79,013
3,808
12,379
83,989
31,734
144,378
200,672
131,910
Total interest expense are calculated using the effective interest rate method reported above and 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 24)
Investment in Associates (see note 22(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 commission
Asset based management fees
Auction fees income
Corporate finance fees
Foreign withdrawal charges
Commissions on agency and collection services
31,305
65,905
925
69
23
-
98,227
20,834
1,740
27,710
4,617
12,280
2,708
7,943
1,894
2,048
3,509
4,860
90,143
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
30,748
63,502
925
69
-
-
95,244
17,718
-
27,710
4,275
11,387
1,277
-
1,894
1,674
3,509
3,402
72,846
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
105 Zenith Bank Plc Annual Report - December 31, 2017
ZENITH BANK PLC
Notes to the Consolidated and Separate Financial Statements
for the Year Ended December 31, 2017
Group
Bank
31-Dec-17
31-Dec-16
31-Dec-17
31-Dec-16
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. Other operating income
Dividend income from equity investments
Gain on disposal of property and equipment (see note
44(vii))
Provision for claims
Income on cash handling
Foreign currency revaluation gain
900
57
8,404
557
12,526
22,444
349
236
-
426
25,587
26,598
4,500
22
8,404
423
9,257
22,606
3,949
172
-
426
22,688
27,235
Dividend income from equity investments represent dividend received from 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 currency-denominated assets and
liabilities held in the non-trading books.
11. Trading gains
Derivatives income
Treasury bill trading income
Bond trading income/(loss)
12. Operating expenses
Directors' emoluments (see note 37 (b))
Auditors' remuneration
Deposit insurance premium
Professional fees
Training and development
Information technology
Operating lease
Advertisement
Outsourcing services
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 levy
Telephone and postages
Corporate promotions
Customer service related expenses
68,711
88,895
368
157,974
20,077
8,649
(328)
28,398
68,711
88,895
368
157,974
20,077
8,649
(328)
28,398
1,479
693
11,683
3,442
4,070
12,686
3,771
8,819
9,583
2,984
19,367
6,310
2,871
7,289
2,457
4,975
368
7,595
-
2,624
21,419
2,414
8,056
3,391
1,057
626
10,393
3,323
3,215
5,856
3,288
4,991
9,582
1,542
14,021
1,907
1,904
2,998
1,627
3,322
33
3,818
16
2,564
18,752
1,530
2,450
5,266
551
510
11,683
2,997
3,811
12,109
2,331
8,577
9,583
2,765
16,371
6,180
2,567
6,670
1,903
4,615
368
7,285
-
2,611
21,419
2,106
7,920
1,063
148,346
104,081
135,995
404
486
10,393
2,957
3,012
5,425
2,077
4,801
9,582
1,412
10,911
1,799
1,707
2,513
1,227
3,060
33
3,661
16
2,557
18,752
1,277
2,323
3,733
94,118
106 Zenith Bank Plc Annual Report - December 31, 2017
ZENITH BANK PLC
Notes to the Consolidated and Separate Financial Statements
for the Year Ended December 31, 2017
Group
Bank
31-Dec-17
31-Dec-16
31-Dec-17
31-Dec-16
13. Taxation
(a) Major components of the tax expense
Minimum tax expense
4,350
-
4,350
-
Income tax expense
Corporate tax
Information technology tax
Excess dividend tax (see note (i) below)
Prior year over 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
8,878
1,804
11,546
1,959
112
-
24,299
(3,121)
21,178
25,528
12,726
1,448
12,909
(189)
1,009
-
27,903
(807)
27,096
27,096
-
1,719
11,546
1,959
-
-
15,224
(3,156)
12,068
16,418
6,530
1,385
12,909
(189)
917
-
21,552
(910)
20,642
20,642
(i) Income tax liability of 2017 financial year of the Bank was assessed based on the minimum tax rule because of a
significant non-taxable income that resulted in a taxable loss for the Bank.
(ii) During the year, the Bank was liable to excess dividend tax of N19.03 billion, representing 30% of N63.42 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 2017 financial year, income tax payable based on taxable profit was N6.6 billion. However, total
Companies Income tax paid based on dividend for 2016 financial year was N19.03 billion and the Bank had tax credits
amounting to N0.871 billion. The difference between income tax payable assessed on dividend and income tax payable
assessed on taxable profit amounted to N11.55 billion which was charged as tax expense in 2017 financial year.
107 Zenith Bank Plc Annual Report - December 31, 2017
ZENITH BANK PLC
Notes to the Consolidated and Separate Financial Statements
for the Year Ended December 31, 2017
Group
Bank
31-Dec-17
31-Dec-16
31-Dec-17
31-Dec-16
13. Taxation (continued)
(b) Reconciliation of effective tax rate
Profit before income tax
203,461
156,748
173,563
139,927
Tax calculated at the weighted average Group rate of
30% (2016: 30%)
61,038
47,024
52,069
41,978
Tax effect of adjustments on taxable income
Effect of tax rates in foreign jurisdictions
Non-deductable expenses
Tax exempt income
Balancing charge
Tax loss effect
Minimum tax
Information technology levy
Excess dividend tax paid
Tertiary education tax
Unrecognised deductible temporary differences
Changes in estimate relating to prior year
Tax expense
3
12,904
(85,699)
45
1,928
4,350
1,804
11,546
113
15,537
1,959
25,528
-
12,940
(48,112)
65
2
-
1,448
12,909
1,009
-
(189)
27,096
-
11,675
(84,408)
45
1,927
4,350
1,718
11,546
-
15,537
1,959
16,418
-
11,500
(47,923)
65
-
-
1,385
12,909
917
-
(189)
20,642
(c) 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
Total tax expense
31-Dec-17
31-Dec-16
31-Dec-17
31-Dec-16
8,953
(28,522)
(165)
4,350
24,299
8,915
29,878
3,579
(22,444)
(85)
-
27,903
8,953
27,096
6,927
(20,431)
-
4,350
15,223
6,069
20,768
2,534
(17,159)
-
-
21,552
6,927
20,642
108 Zenith Bank Plc Annual Report - December 31, 2017
ZENITH BANK PLC
Notes to the Consolidated and Separate Financial Statements
for the Year Ended December 31, 2017
Group
Bank
31-Dec-17
31-Dec-16
31-Dec-17
31-Dec-16
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)
177,614
129,434
157,145
119,285
Number of shares in issue at end of the year (millions)
Weighted average number of ordinary shares in issue
(millions)
31,396
31,396
31,396
31,396
31,396
31,396
31,396
31,396
Basic and diluted earnings per share (Kobo)
566
k
412
k
501
k
380
k
Basic and diluted earnings per share are the same, as the Bank has no potentially dilutive ordinary shares.
109 Zenith Bank Plc Annual Report - December 31, 2017
ZENITH BANK PLC
Notes to the Consolidated and Separate Financial Statements
for the Year Ended December 31, 2017
Group
Bank
31-Dec-17
31-Dec-16
31-Dec-17
31-Dec-16
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
150,883
159,666
566,425
80,689
957,663
957,663
-
957,663
36,953
103,921
447,495
80,689
669,058
669,058
-
669,058
136,711
123,469
566,396
80,689
907,265
907,265
-
907,265
24,342
75,036
447,318
80,689
627,385
627,385
-
627,385
(a) Mandatory reserve deposits with central banks represents a percentage of customers' deposits (stipulated 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
547,656
389,161
936,817
74,381
482,978
557,359
547,656
252,336
799,992
74,381
389,406
463,787
936,817
936,817
557,359
557,359
799,992
799,992
463,787
463,787
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 42).
109,990
127,068
-
112,575
110 Zenith Bank Plc Annual Report - December 31, 2017
ZENITH BANK PLC
Notes to the Consolidated and Separate Financial Statements
for the Year Ended December 31, 2017
17. Assets pledged as collateral
Treasury bills pledged as collateral
Bonds pledged as collateral
Treasury bills under repurchase agreement
Bonds under repurchase agreement
Group
Bank
31-Dec-17
31-Dec-16
31-Dec-17
31-Dec-16
-
125,059
267,028
75,923
468,010
2,768
76,428
113,544
135,603
328,343
-
125,059
267,028
75,923
468,010
-
76,428
113,544
135,603
325,575
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 as at December 31, 2017 are with the following counterparties (see note
30):
Counterparties
JP Morgan
ABSA
Standard Bank
First Abu Dhabi
Carrying value
of assets
Carrying value
of liabilities
Carrying value
of assets
Carrying value
of liabilities
48,079
82,311
228,931
32,765
392,086
33,198
50,310
125,716
16,824
226,048
48,079
82,311
228,931
32,765
392,086
33,198
50,310
125,716
16,824
226,048
Assets exchanged under repurchase agreement (December 31, 2016) are with the following counterparties (see note 30):
Counterparties
JP Morgan
ABSA
Standard Bank
Citi Bank Global Market
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
Classified as:
Current
Carrying value
of assets
Carrying value
of liabilities
Carrying value
of assets
Carrying value
of liabilities
54,748
81,452
102,751
10,196
249,147
22,908
45,985
71,541
15,362
155,796
54,748
81,452
102,751
10,196
249,147
22,908
45,985
71,541
15,362
155,796
267,028
200,982
468,010
328,343
-
328,343
267,028
200,982
468,010
325,575
-
325,575
18,287
273,721
203,795
495,803
12,344
291,254
155,859
459,457
-
264,598
8,733
273,331
-
336,868
17,537
354,405
495,803
459,457
273,331
354,405
Included in balances with banks outside Nigeria is the amount of N69.31 billion and N67.23 billion for the Group and Bank
respectively (December 31, 2016: N104.63 billion and N104.53 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 28).
111 Zenith Bank Plc Annual Report - December 31, 2017
ZENITH BANK PLC
Notes to the Consolidated and Separate Financial Statements
for the Year Ended December 31, 2017
Group
Bank
31-Dec-17
31-Dec-16
31-Dec-17
31-Dec-16
19. Derivative assets
Instrument types:
Forward contracts
Fair value of assets
Futures contracts
Fair value of assets
Total
42,285
18,093
42,285
18,093
-
14,934
57,219
-
64,767
82,860
-
14,934
57,219
-
64,767
82,860
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 Group generated net gains of N68.7 billion (December 31,
2016 net gains of N20.08 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 N57.2 billion and N20.8 billion
respectively (December 31, 2016 N82.9 and N66.8 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
514,009
1,355,300
379,195
3,668
591,219
1,417,860
345,940
5,790
480,392
1,253,817
379,195
3,665
551,798
1,289,864
345,940
5,622
2,252,172
(151,810)
2,360,809
(71,444)
2,117,069
(136,605)
2,193,224
(55,092)
(82,904)
(68,906)
(32,896)
(38,548)
(68,443)
(68,162)
(17,607)
(37,485)
2,100,362
2,289,365
1,980,464
2,138,132
514,009
(47,952)
(27,094)
(20,858)
591,219
(30,567)
(14,737)
(15,830)
480,392
(44,007)
(23,893)
(20,114)
551,798
(22,245)
(7,478)
(14,767)
466,057
560,652
436,385
529,553
1,355,300
(101,767)
1,417,860
(39,472)
1,253,817
(90,507)
1,289,864
(31,443)
(55,810)
(45,957)
(18,159)
(21,313)
(44,550)
(45,957)
(10,129)
(21,314)
1,253,533
1,378,388
1,163,310
1,258,421
112 Zenith Bank Plc Annual Report - December 31, 2017
ZENITH BANK PLC
Notes to the Consolidated and Separate Financial Statements
for the Year Ended December 31, 2017
Group
Bank
31-Dec-17
31-Dec-16
31-Dec-17
31-Dec-16
On-lending facilities
Gross on-lending facilities
Less: 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
379,195
(1,955)
377,240
345,940
(1,337)
344,603
379,195
(1,955)
377,240
345,940
(1,337)
344,603
3,668
(136)
3,532
5,790
(67)
5,723
3,665
(136)
3,529
5,622
(67)
5,555
822,775
1,423,397
1,090,193
1,270,616
784,059
1,333,010
1,047,384
1,145,840
2,246,172
2,360,809
2,117,069
2,193,224
113 Zenith Bank Plc Annual Report - December 31, 2017
Notes to the Consolidated and Separate Financial Statements
for the Year Ended December 31, 2017
In millions of Naira
Reconciliation of impairment allowance on loans and advances to customers:
Group
Balance at January 1, 2017
Specific impairment
Collective impairment
Additional impairment for the year (see note 8)
Specific impairment
Collective impairment
Foreign currency translation and other adjustments
Write-offs (specific)
Write-offs (collective)
Balance at December 31, 2017
Specific impairment
Collective impairment
Balance at January 1, 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 December 31, 2016
Specific impairment
Collective impairment
Overdrafts
Term loans
On-lending
facilities
Advances under
finance lease
Total
30,568
14,738
15,830
31,305
19,848
11,457
(4,935)
(3,694)
(5,292)
47,952
27,094
20,858
18,880
10,088
8,792
13,786
6,482
7,304
3,784
(5,882)
30,568
14,738
15,830
39,472
18,158
21,314
65,905
39,665
26,240
828
(2,841)
(1,597)
101,767
55,810
45,957
21,310
12,302
9,008
19,099
9,024
10,075
2,323
(3,260)
39,472
18,158
21,314
1,337
-
1,337
925
-
925
-
-
(307)
1,955
-
1,955
2,673
-
2,673
(1,336)
-
(1,336)
-
-
1,337
-
1,337
67
-
67
69
-
69
-
-
-
136
-
136
80
-
80
(13)
-
(13)
-
-
67
-
67
71,444
32,896
38,548
98,204
59,513
38,691
(4,107)
(6,535)
(7,196)
151,810
82,904
68,906
42,943
22,390
20,553
31,536
15,506
16,030
6,107
(9,142)
71,444
32,896
38,548
* 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 account.
114 Zenith Bank Plc Annual Report - December 31, 2017
Notes to the Consolidated and Separate Financial Statements
for the Year Ended December 31, 2017
In millions of Naira
Reconciliation of impairment allowance on loans and advances to customers:
Bank
Balance at January 1, 2017
Specific impairment
Collective impairment
Additional impairment for the year (see note 8)
Specific impairment
Collective impairment
Write-offs (Specific)
Write-offs (Collective)
Balance at December 31, 2017
Specific impairment
Collective impairment
Balance at January 1, 2016
Specific impairment
Collective impairment
Additional impairment for the year
Specific impairment
Collective impairment
Write-offs (Collective)
Balance at December 31, 2016
Specific impairment
Collective impairment
Overdrafts
Term loans
On-lending
facilities
Advances under
finance lease
Total
22,245
7,478
14,767
30,748
20,109
10,639
(3,694)
(5,292)
44,007
23,893
20,114
13,312
5,474
7,838
12,811
5,762
7,049
(3,878)
22,245
7,478
14,767
31,443
10,129
21,314
63,502
37,262
26,240
(2,841)
(1,597)
90,507
44,550
45,957
19,651
10,642
9,009
14,465
5,843
8,622
(2,673)
31,443
10,129
21,314
1,337
-
1,337
925
-
925
-
(307)
1,955
-
1,955
2,673
-
2,673
(1,336)
-
(1,336)
-
1,337
-
1,337
67
-
67
69
-
69
-
-
136
-
136
80
-
80
(13)
-
(13)
-
67
-
67
55,092
17,607
37,485
95,244
57,371
37,873
(6,535)
(7,196)
136,605
68,443
68,162
35,716
16,116
19,600
25,927
11,605
14,322
(6,551)
55,092
17,607
37,485
* 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 account.
115 Zenith Bank Plc Annual Report - December 31, 2017
Notes to the Consolidated and Separate Financial Statements
for the Year Ended December 31, 2017
Group
Bank
31-Dec-17
31-Dec-16
31-Dec-17
31-Dec-16
Advances under finance lease
Gross investment
Less: Unearned income
Net Investment
The net investment may be analysed as follows:
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:
Non-current
3,698
(30)
3,668
3,668
3,668
3,698
(30)
3,668
(136)
3,532
5,896
(106)
5,790
5,790
5,790
5,843
(53)
5,790
(67)
5,723
3,688
(23)
3,665
3,665
3,665
3,688
(23)
3,665
(136)
3,529
5,728
(106)
5,622
5,622
5,622
5,675
(53)
5,622
(67)
5,555
89,553
25,276
1,234,199
903,144
98,000
52,333
1,180,353
1,030,123
88,648
25,217
1,222,121
781,083
95,990
52,332
1,157,333
887,569
2,252,172
2,360,809
2,117,069
2,193,224
284,584
173,124
71,447
92,268
32,266
9,702
32,266
9,702
14,101
330,951
16,652
199,478
14,101
117,814
16,652
118,622
330,951
330,951
199,478
199,478
117,814
117,814
118,622
118,622
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.
116 Zenith Bank Plc Annual Report - December 31, 2017
ZENITH BANK PLC
Notes to the Consolidated and Separate Financial Statements
for the Year Ended December 31, 2017
In millions of Naira
(b) Movement in investment securities
The movement in investment securities for the group may be summarised as follows:
Group
At January 1, 2017
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
9,702
-
22,196
-
368
-
-
-
Debt
securities at
fair value
through profit
or loss
Debt
securities at
amortised
cost
Equity
securities at
fair value
through other
comprehensive
income
16,652
-
-
-
-
Total
199,478
952
194,104
(75,541)
368
173,124
952
171,908
(75,541)
-
-
(2,551)
(2,551)
26,684
(12,543)
-
-
26,684
(12,543)
At December 31, 2017
32,266
284,584
14,101
330,951
At January 1, 2016
Exchange differences
Additions
Disposals
Gains from changes in fair value recognised in profit or
loss (Note11)
Gains from changes in fair value recognised in other
comprehensive income
Interest accrued
Coupon interest received
6,707
-
9,702
(6,379)
(328)
195,737
(953)
75,794
(112,739)
10,697
-
-
(681)
213,141
(953)
85,496
(119,799)
-
-
(328)
-
-
-
-
29,567
(14,282)
6,636
-
-
6,636
29,567
(14,282)
At December 31, 2016
9,702
173,124
16,652
199,478
The movement in investment securities for the Bank may be summarised as follows:
117 Zenith Bank Plc Annual Report - December 31, 2017
ZENITH BANK PLC
Notes to the Consolidated and Separate Financial Statements
for the Year Ended December 31, 2017
In millions of Naira
Bank
Debt
securities at
fair value
through profit
or loss
Debt
securities at
amortised
cost
At January 1, 2017
Additions
Disposals
Gains from changes in fair value recognised in profit
or loss (Note 11)
Gains from changes in fair value recognised in other
comprehensive income
Interest accrued
Coupon interest received
At December 31, 2017
At January 1, 2016
Additions
Disposals (sale and redemption)
Gains from changes in fair value recognised in profit or
loss (Note 11)
Gains from changes in fair value recognised in other
comprehensive income
Interest accrued
Coupon interest received
At December 31, 2016
9,702
22,196
-
368
-
-
-
32,266
6,707
9,702
(6,379)
(328)
-
-
-
9,702
Equity
securities at
fair value
through other
comprehensive
income
16,652
-
-
-
Total
118,622
95,138
(95,432)
368
92,268
72,942
(95,432)
-
-
(2,551)
(2,551)
11,211
(9,542)
71,447
134,002
52,351
(101,739)
-
-
11,211
(9,542)
14,101
117,814
10,015
1
-
150,724
62,054
(108,118)
-
-
(328)
-
21,597
(13,943)
92,268
6,636
-
-
6,636
21,597
(13,943)
16,652
118,622
118 Zenith Bank Plc Annual Report - December 31, 2017
ZENITH BANK PLC
Notes to the Consolidated and Separate Financial Statements
for the Year Ended December 31, 2017
In millions of Naira
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
Zenith Nominee Limited
All investments in subsidiaries are non-current.
31-Dec-17
Ownership
interest %
31-Dec-17
Carrying amount
31-Dec-16
98.0700
100.0000
99.9900
99.9600
99.0000
99.0000
6,444
21,482
2,059
1,038
1,980
1,000
34,003
6,444
21,482
2,059
1,038
1,980
-
33,003
119 Zenith Bank Plc Annual Report - December 31, 2017
ZENITH BANK PLC
Notes to the Consolidated and Separate Financial Statements
for the Year Ended December 31, 2017
In millions of Naira
22.
Investment in subsidiaries (continued)
(b) Condensed results of consolidated entities
December 31, 2017
Zenith Group Elimination
entries
Zenith Bank
Plc
Zenith Bank
Ghana
Zenith Bank
UK
Zenith Bank
SierraLeone
Zenith Bank
Gambia
Zenith
Pension
Custodian
Zenith
Nominee
Limited
Condensed statement of profit or loss
Operating income
Operating expenses
Inpairment charge for financial assets
Profit before tax
Taxation
Profit for the year
Condensed statement of financial position
Assets
Cash and balances with central banks
Treasury bills
Assets pledged as collateral
Due from other banks
Derivative asset held for risk management
Loans and advances
Investment securities
Investment in subsidiaries
Deferred tax asset
Other assets
Property and equipment
Intangible assets
745,189
(443,501)
(98,227)
203,461
(25,528)
177,933
(6,806)
2,412
-
(4,394)
-
(4,394)
673,636
(404,829)
(95,244)
173,563
(16,418)
157,145
49,008
(29,910)
(555)
18,543
(5,334)
13,209
14,204
(7,100)
(2,403)
4,701
(1,035)
3,666
957,663
936,817
468,010
495,803
57,219
2,100,362
330,951
-
9,561
92,494
133,384
12,989
-
-
-
(145,193)
-
-
-
(34,003)
-
(10,140)
-
-
907,265
799,992
468,010
273,331
57,219
1,980,464
117,814
34,003
9,197
56,052
118,223
12,088
5,595,253
(189,336)
4,833,658
45,525
118,890
-
91,263
-
72,319
1,721
-
51
935
13,563
171
344,438
14
-
-
252,607
-
46,237
210,360
-
61
44,086
393
329
554,087
2,908
(1,772)
-
1,136
-
1,136
1,866
10,624
-
4,054
-
335
-
-
252
252
463
41
17,887
1,906
(1,001)
(2)
903
(268)
635
1,959
7,311
-
1,198
-
948
731
-
-
144
395
97
12,783
10,333
(1,301)
(23)
9,009
(2,473)
6,536
34
-
-
18,543
-
59
325
-
-
1,165
347
263
20,736
-
-
-
-
-
-
1,000
-
-
-
-
-
-
-
-
-
-
-
1,000
120 Zenith Bank Plc Annual Report - December 31, 2017
ZENITH BANK PLC
Notes to the Consolidated and Separate Financial Statements
for the Year Ended December 31, 2017
In millions of Naira
22.
Investment in subsidiaries (continued)
December 31, 2017
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
Increase / decrease in cash and cash
equivalents
Zenith Group Elimination
entries
Zenith Bank
Plc
Zenith Bank
Ghana
Zenith Bank
UK
Zenith Bank
SierraLeone
Zenith Bank
Gambia
Zenith
Pension
Custodian
Zenith
Nominee
Limited
3,437,915
20,805
8,915
18
233,481
383,034
356,496
332,931
821,658
(238)
-
-
-
(92,615)
-
(62,483)
-
(34,001)
2,744,525
20,805
6,069
-
219,790
383,034
418,979
332,931
707,525
5,595,253
(189,337)
4,833,658
279,431
-
113
-
9,984
-
-
-
54,910
344,438
391,809
-
-
-
94,573
-
-
-
67,705
554,087
(443)
235,378
(49,336)
283,817
(19,579)
(22,560)
(255,750)
268,165
(45,262)
185,599
241,678
(32,847)
(6,729)
(9,028)
19,358
3,601
(22,817)
-
(2,575)
(25,392)
727,399
3,344
68,695
3,344
566,358
-
35,791
-
57,996
-
916,342
313,717
533,511
39,392
32,604
14,600
-
-
-
27
-
-
-
3,260
17,887
(263)
-
(89)
(352)
(352)
-
(704)
7,788
-
199
5
1,233
-
-
-
3,557
12,782
(1,195)
(180)
(46)
(1,421)
(1,421)
-
(2,842)
185,599
241,678
(32,847)
3,601
(25,392)
(352)
(1,421)
-
-
2,534
13
489
-
-
-
17,702
20,738
2,494
(4,000)
1,838
332
332
-
664
332
-
-
-
-
-
-
-
-
1,000
1,000
-
-
-
-
-
-
-
-
121 Zenith Bank Plc Annual Report - December 31, 2017
ZENITH BANK PLC
Notes to the Consolidated and Separate Financial Statements
for the Year Ended December 31, 2017
In millions of Naira
22.
Investment in subsidiaries (continued)
December 31, 2016
Condensed statement of profit or loss
Operating income
Operating expenses
Impairment charge for financial assets
Profit before tax
Taxation
Profit for the period
December 31, 2016
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
Limited
Zenith Bank
UK Limited
Zenith Bank
SierraLeone
Limited
Zenith Bank
Gambia
Limited
Zenith
Pension
Custodian
Limited
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
2,412
(1,534)
(106)
772
-
772
1,735
(824)
(1)
910
(280)
630
7,122
(1,378)
(6)
5,738
(1,905)
3,833
Zenith Group Elimination
entries
Zenith Bank
Plc
Zenith Bank
Ghana
Zenith Bank
UK
Zenith Bank
SierraLeone
Zenith Bank
Gambia
669,058
557,359
328,343
459,457
82,860
2,289,365
199,478
-
6,440
37,536
105,284
4,645
-
-
-
(158,506)
-
-
(731)
(33,003)
-
(56,913)
-
-
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
36,355
74,262
2,768
42,816
-
81,102
97
-
302
647
9,215
179
4,739,825
(249,153)
4,283,736
247,743
10
-
-
196,942
-
67,971
80,459
-
51
56,897
371
169
402,870
3,359
11,159
-
7,237
-
831
-
-
46
156
392
39
23,219
1,881
8,151
-
1,002
-
1,318
731
-
-
156
373
108
13,720
Zenith
Pension
Custodian
68
-
-
15,561
-
11
300
-
-
1,183
320
247
17,690
122 Zenith Bank Plc Annual Report - December 31, 2017
ZENITH BANK PLC
Notes to the Consolidated and Separate Financial Statements
for the Year Ended December 31, 2017
In millions of Naira
22.
Investment in subsidiaries (continued)
December 31, 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
Zenith Group Elimination
entries
Zenith Bank
Plc
Zenith Bank
Ghana
Limited
Zenith Bank
UK Limited
Zenith Bank
SierraLeone
Limited
Zenith Bank
Gambia
Limited
2,983,621
66,834
8,953
45
208,680
350,657
263,106
153,464
704,465
(348)
-
-
-
(182,716)
-
(29,696)
-
(32,601)
2,552,963
66,834
6,927
-
243,736
350,657
292,802
153,464
616,353
194,892
-
(111)
-
11,935
-
-
-
41,027
4,739,825
(245,361)
4,283,736
247,743
210,151
-
-
-
133,947
-
-
-
58,771
402,869
20,348
-
(7)
-
144
-
-
-
2,728
23,213
8,668
-
264
34
999
-
-
-
3,023
12,988
Zenith
Pension
Custodian
Limited
-
-
1,880
11
635
-
-
-
15,164
17,690
Condensed cash flow
Net cash from operating activities
Net cash from financing activities
Net cash from investing activities
Decrease/Increase in cash and cash equivalents
(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)
(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
709,714
36,003
727,399
(80,132)
36,003
57,802
663,375
-
566,358
Decrease/Increase in cash and cash equivalents
(18,318)
101,931
(97,017)
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
123 Zenith Bank Plc Annual Report - December 31, 2017
ZENITH BANK PLC
Notes to the Consolidated and Separate Financial Statements
for the Year Ended December 31, 2017
In millions of Naira
22.
Investment in subsidiaries (continued)
Apart from Zenith Bank Pensions Custodian Limited and Zenith Nominees Limited, which are 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 March 1,
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 December 7,
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 February 17, 2006 and commenced operations on March 30, 2007.
Zenith Bank (Sierra Leone) Limited provides corporate and retail banking services. It was incorporated in Sierra Leone on
September 17, 2007 and granted an operating license by the Bank of Sierra Leone on September 10, 2008. It commenced
banking operations on September 15, 2008. The test for impairment on this subsidiary indicated that it is not impaired.
Zenith Bank (Gambia) Limited provides corporate and retail banking services. It was incorporated in The Gambia on
October 24, 2008 and granted an operating licence by the Central Bank of Gambia on December 30, 2009. It commenced
banking operations on January 18, 2010.
Zenith Nominees Limited provides nominees, trustees, administrators and executorship services.
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.
Investment in associates:
The Group's investments under the Small and Medium Enterprises Equity Investment Scheme ("SMEEIS") is in compliance
with the Policy Guidelines for 2001 Fiscal Year (Monetary Policy Circular No. 35). The Group generally holds 20 percent or
more of the voting power of the investee and is therefore presumed to have significant influence over the investee. In
instances where the Group holds less than 20 percent of the voting power of the investee, the Group concluded that it has
significant influence due to the Group's representation on the Board of the relevant investee, with such Board generally
limited to a small number of Board members.
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.
Gross investment
Share of profit b/f
Diminution in investment
Balance at end of the year
Group
Bank
31-Dec-17
31-Dec-16
31-Dec-17
31-Dec-16
1,312
440
(1,752)
-
1,312
440
(1,752)
-
1,312
-
(1,312)
-
1,312
-
(1,312)
-
124 Zenith Bank Plc Annual Report - December 31, 2017
ZENITH BANK PLC
Notes to the Consolidated and Separate Financial Statements
for the Year Ended December 31, 2017
In millions of Naira
23. Deferred tax asset
Group
December 31, 2017
Assets
Movements in temporary differences during the period
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 period
Property and equipment
Allowances for loan losses
December 31, 2016
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
01-Jan-17 Recognised in
profit or loss
(4,951)
(2)
12,514
(6,414)
1,926
48
(7,036)
-
2,168
11,246
-
62
6,440
3,121
31-Dec-17
(11,987)
(2)
14,682
4,832
1,926
110
9,561
01-Jan-17 Recognised in
profit or loss
(35)
8
37
8
45
(27)
31-Dec-17
2
16
18
01-Jan-16 Recognised in
profit or loss
(2,374)
(2)
4,890
(1,737)
(116)
172
(4,662)
2
6,356
3,905
116
(110)
5,607
833
31 Dec, 2016
(7,036)
-
11,246
2,168
-
62
6,440
1 January Recognised in
profit or loss
26
-
11
8
19
26
31 Dec, 2016
37
8
45
125 Zenith Bank Plc Annual Report - December 31, 2017
ZENITH BANK PLC
Notes to the Consolidated and Separate Financial Statements
for the Year Ended December 31, 2017
In millions of Naira
23. Deferred tax asset (continued)
Bank
December 31, 2017
Assets
Movements in temporary differences during the period
Property and equipment
Allowances for loan losses
Unutilized capital allowances
Tax loss carried forward
December 31, 2016
Movements in temporary differences during the year:
Property and equipment
Other assets
Allowances for loan losses
Unutilised capital allowance
01-Jan-17 Recognised in
profit or loss
(4,951)
(6,334)
12,515
1,926
(7,373)
11,246
2,168
-
6,041
3,156
31-Dec-17
(12,324)
4,912
14,683
1,926
9,197
1 January Recognised in
profit or loss
(2,706)
(13)
5,366
(1,737)
(4,667)
13
5,880
3,905
5,131
910
31 Dec., 2016
(7,373)
-
11,246
2,168
6,041
During the period, the Bank realised deferred tax credit of N18.7 Billion, which principally arose from allowable loss, un-
utilized capital allowance and collective impairment on loans. Based on projected future taxable profits, expected growth of
unutilised capital allowance and collective loan impairment balances, the Bank has determined that only N3.2 Billion of the
computed deferred tax credit can be recovered in the foreseeable future. Therefore, the deferred tax credit recognized in
these financial statements has been restricted to N3.2 Billion, resulting in total deferred tax asset of N9.2 Billion as at 31
December 2017. The Bank will continue to assess the recoverability of its deferred tax assets, and to ensure that only
amount considered recoverable are recognised in the books and presented in the statement of financial position.
All deferred tax are non current.
24. Other assets
Non financial assets
Prepayments
Other financial assets
Electronic card related receivables
Intercompany receivables
Deposit for investment in AGSMEIS
Receivables
Deposits for shares
Gross other financial assets
Less: Specific impairment
Net other financial assets
Group
Bank
31-Dec-17
31-Dec-16
31-Dec-17
31-Dec-16
15,166
14,759
13,300
13,075
37,397
-
5,964
39,215
-
82,576
(5,248)
77,328
10,533
-
-
17,498
-
28,031
(5,254)
22,777
35,462
1,075
5,964
4,849
650
48,000
(5,248)
42,752
8,207
929
-
17,797
650
27,583
(5,248)
22,335
Total other assets
92,494
37,536
56,052
35,410
Deposit for investment in AGSMEIS represents funds deposited with the CBN for future equity investments in agricultural,
small and medium enterprises in line with the CBN directives (See note 34(e)).
126 Zenith Bank Plc Annual Report - December 31, 2017
ZENITH BANK PLC
Notes to the Consolidated and Separate Financial Statements
for the Year Ended December 31, 2017
Group
Bank
31-Dec-17
31-Dec-16
31-Dec-17
31-Dec-16
24. Other assets (continued)
Classified as:
Current
Non-current
Movement in specific impairment:
At start of the year
Charge for the year (see note 8)
Amounts written off
At end of the year
92,494
-
92,494
37,536
-
37,536
56,052
-
56,052
35,410
-
35,410
5,254
23
(29)
5,248
4,970
284
-
5,254
5,248
-
-
5,248
4,970
278
-
5,248
127 Zenith Bank Plc Annual Report - December 31, 2017
ZENITH BANK PLC
Notes to the Consolidated and Separate Financial Statements
for the Year Ended December 31, 2017
In millions of Naira
25. Property and equipment
Group
Cost
At the start of the year
Additions
Reclassification/transfer from WIP
Reclassifications
Disposals
Write off against cost (See note (i) below)
Foreign exchange movements
At the end of the year
Accumulated Depreciation
At the start of the year
Charge for the year
Reclassifications
Disposals
Write off against cost (See Note (i) below)
Foreign exchange movements
At the end of the year
Net book amount
At December 31, 2017
At December 31, 2016
Leasehold
land
Buildings
Leasehold
improvements
Furniture and
fittings and
equipment
Computer
equipment
Aircraft
Motor Vehicles
Work in
progress
Total
25,015
1,250
4,208
2
(49)
(1,949)
(1)
28,476
35,030
5,605
5,659
(56)
(63)
-
703
46,878
16,084
1,988
65
(43)
(7)
-
(78)
18,009
52,398
16,013
225
128
(432)
-
133
68,465
26,667
1,901
64
(31)
(114)
-
349
28,836
-
12,600
-
-
-
-
-
12,600
18,473
1,036
35
-
(958)
-
133
18,719
27,039
1,490
(13,584)
-
(7)
-
238
15,176
200,706
41,883
(3,328)
-
(1,630)
(1,949)
1,477
237,159
Leasehold
land
Buildings
Leasehold
improvements
Furniture and
fittings and
equipment
Computer
equipment
Aircraft
Motor Vehicle
Work in
progress
Total
1,949
-
-
-
(1,949)
-
-
28,476
23,066
4,723
808
(2)
(13)
-
(6)
5,510
41,368
30,307
13,604
888
(10)
(7)
-
20
14,495
3,514
2,480
38,602
6,247
31
(408)
-
(323)
44,149
24,316
13,796
23,943
2,085
(19)
(114)
-
(376)
25,519
3,317
2,724
-
210
-
-
-
-
210
12,390
-
12,601
2,190
-
(904)
-
5
13,892
4,827
5,872
-
-
-
-
-
-
-
15,176
27,039
95,422
12,428
-
(1,446)
(1,949)
(680)
103,775
133,384
105,284
There were no impairment losses on any class of property and equipment during the year (December 31, 2016 :Nil)
There were no capitalised borrowing costs related to the acquisition of property and equipment during the year (December 31, 2016:Nil).
128 Zenith Bank Plc Annual Report - December 31, 2017
ZENITH BANK PLC
Notes to the Consolidated and Separate Financial Statements
for the Year Ended December 31, 2017
In millions of Naira
25. Property and equipment (continued)
All property and equipment are non-current. The reclassification balance of N3,329 million represents reclassification of software from WIP to intangible assets (31 December, 2016:
N459 million).
During the year, the Group acquired an aircraft under a finance lease arrangement. The lease agreement provides the Group first refusal rights to purchase the aircraft after expiration of
the lease. At December 31, 2017 the net carrying amount of the leased aircraft was N12.39 billion (December 31, 2016: Nil)
129 Zenith Bank Plc Annual Report - December 31, 2017
ZENITH BANK PLC
Notes to the Consolidated and Separate Financial Statements
for the Year Ended December 31, 2017
In millions of Naira
25. Property and equipment (continued)
Bank
Cost
At the start of the year
Additions
Reclassification/transfer from WIP
Reclassifications
Disposals
Write off against cost (See Note (i) below)
At the end of the year
Accumulated depreciation
Leasehold land
Buildings
Leasehold
improvements
Furniture
fittings and
equipment
Computer
Equipment
Aircraft
Motor Vehicle
Work in
progress (WIP)
Total
25,014
1,250
4,208
2
(49)
(1,949)
28,476
34,671
3,757
506
(56)
(63)
-
38,815
13,862
1,903
65
(43)
(7)
-
15,780
50,280
15,363
225
128
(432)
-
65,564
25,248
911
64
(31)
(114)
-
26,078
-
12,600
-
-
-
-
12,600
16,933
906
35
-
(958)
-
16,916
18,963
1,490
(8,431)
-
(7)
-
12,015
184,971
38,180
(3,328)
-
(1,630)
(1,949)
216,244
Leasehold land
Buildings
Leasehold
improvements
Furniture
fittings and
equipment
Computer
equipment
Aircraft
Motor vehicle
Work in
progress (WIP)
Total
At the start of the year
Charge for the year
Reclassifications
Disposals
Write off against cost (See Note (i) below)
At the end of the year
Net book amount
At December 31, 2017
At December 31, 2016
1,949
-
-
-
(1,949)
-
28,476
23,065
4,689
717
(3)
(13)
-
5,390
33,425
29,982
12,258
870
(10)
(7)
-
13,111
2,669
1,604
37,099
5,758
31
(408)
-
42,480
23,084
13,181
22,747
1,385
(19)
(114)
-
23,999
2,079
2,501
-
210
-
-
-
210
12,390
-
11,616
2,119
-
(904)
-
12,831
4,085
5,317
-
-
-
-
-
-
90,358
11,059
(1)
(1,446)
(1,949)
98,021
12,015
18,963
118,223
94,613
(i) During the year, the Group reviewed the estimated useful life of its leasehold land as unlimited on the basis that it is reasonably certain that the lessors (state governments), will
renew the lease upon expiration and that the substance of the lease is that the Group has ownership of the land, not a right to use the land for a predefined period. Consequently, the
Group has discontinued depreciation of the leasehold land.
There were no impairment losses on any class of property and equipment during the year (December 31, 2016 :Nil)
130 Zenith Bank Plc Annual Report - December 31, 2017
ZENITH BANK PLC
Notes to the Consolidated and Separate Financial Statements
for the Year Ended December 31, 2017
In millions of Naira
25. Property and equipment (continued)
There were no capitalised borrowing costs related to the acquisition of property and equipment during the year (December 31, 2016:Nil).
All property and equipment are non-current. None of the Bank's assets were financed from borowings, consequently no borrowing cost has been capitalized as part of asset cost.
The reclassification balance of N3,328 million represents reclassification of software from WIP to intangible assets (December 31, 2016: N459 million).
During the year, the Group acquired an aircraft under a finance lease arrangement. The lease agreement provides the Group first refusal rights to purchase the aircraft after expiration of
the lease. At December 31, 2017 the net carrying amount of the leased aircraft was N12.39 billion (December 31, 2016: Nil)
131 Zenith Bank Plc Annual Report - December 31, 2017
ZENITH BANK PLC
Notes to the Consolidated and Separate Financial Statements
for the Year Ended December 31, 2017
Group
Bank
31-Dec-17
31-Dec-16
31-Dec-17
31-Dec-16
26.
Intangible assets
Computer software
Cost
At start of the year
Exchange difference
WIP (Reclassification)
Disposal
WIP (Additions)
Additions
At end of the year
Accumulated amortization
At start of the year
Exchange difference
Disposal
Charge for the year
At the end of the year
Carrying amount at end of the year
11,998
79
3,328
-
6,228
466
22,099
8,761
410
460
(50)
2,417
-
9,761
-
3,328
-
6,228
60
11,998
19,377
7,236
-
459
-
2,066
-
9,761
7,353
126
-
1,631
9,110
12,989
5,521
442
(45)
1,435
7,353
4,645
5,858
-
-
1,431
7,289
12,088
4,483
-
-
1,375
5,858
3,903
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 N3.3 billion represents reclassification from WIP to intangible assets (31 December, 2016:
N0.46 billion). Amortization is not charged on WIP (reclassification and additions).
27. Customers' deposits
Demand
Savings
Term
Domiciliary
Classified as:
Current
1,812,843
383,045
572,461
669,566
1,463,144
358,951
555,547
605,979
1,337,839
339,488
460,484
606,714
1,215,533
285,250
502,418
549,762
3,437,915
2,983,621
2,744,525
2,552,963
3,437,915
2,983,621
2,744,525
2,552,963
3,437,915
2,983,621
2,744,525
2,552,963
132 Zenith Bank Plc Annual Report - December 31, 2017
ZENITH BANK PLC
Notes to the Consolidated and Separate Financial Statements
for the Year Ended December 31, 2017
Group
Bank
31-Dec-17
31-Dec-16
31-Dec-17
31-Dec-16
28. 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
Sales and other collections
Unclaimed dividend
Finance lease obligation
Electronic card related payables
Customer's foreign transactions payables
Total other financial liabilities
Non financial liabilities
Provision for claims (see note (a) below)
Tax collections
Other payables
Total other non financial liabilities
Total other liabilities
Classified as:
Current
69,308
25,296
17,670
47,719
654
29,174
3,521
12,049
1,687
9,026
216,104
-
3,604
13,773
17,377
233,481
104,631
35,962
13,724
9,720
906
11,594
2,932
-
1,580
6,914
187,963
8,404
2,495
9,818
20,717
208,680
69,163
25,198
16,904
47,719
654
29,174
3,521
12,049
1,505
6,417
212,304
-
3,416
4,070
7,486
219,790
104,530
35,898
12,952
57,077
906
11,594
2,932
-
1,458
3,827
231,174
8,404
2,358
1,800
12,562
243,736
233,481
208,680
219,790
243,736
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 (See Note 10)
At end of the year
(b) Finance lease obligation
8,404
-
(8,404)
-
9,766
-
(1,362)
8,404
8,404
-
(8,404)
-
9,766
-
(1,362)
8,404
The lease obligation relates to an Aircraft held under a finance lease arrangement. The net carrying amount of the assets,
included within property and equipment is N12,390,000.00
The future minimum lease payments extend over a number of years. This is analysed as follows:
Not more than one year
Over one year but less than five years
Less future finance charges
At end of the year
The present value of finance lease liabilities is as follows:
Not more than one year
Over one year but less than five years
At end of the year
2,760
23,927
(14,638)
12,049
848
11,201
12,049
-
-
-
-
-
-
-
2,760
23,927
(14,638)
12,049
848
11,201
12,049
-
-
-
-
-
-
-
133 Zenith Bank Plc Annual Report - December 31, 2017
ZENITH BANK PLC
Notes to the Consolidated and Separate Financial Statements
for the Year Ended December 31, 2017
Group
Bank
31-Dec-17
31-Dec-16
31-Dec-17
31-Dec-16
29. 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)
Real Sector Support Facility (vii)
Classified as:
Current
Non-current
57,515
40,908
57,515
40,908
49,375
7,661
4,011
142,999
92,812
28,661
383,034
-
383,034
383,034
53,919
9,476
1,665
147,170
97,519
-
350,657
-
350,657
350,657
49,375
7,661
4,011
142,999
92,812
28,661
383,034
-
383,034
383,034
53,919
9,476
1,665
147,170
97,519
-
350,657
-
350,657
350,657
(b) Movement in on-lending facilities
At beginning of the period
Addition during the period
Repayment during the period
At end of the year
350,657
34,839
(2,462)
383,034
286,881
70,934
(7,158)
350,657
350,657
34,839
(2,462)
383,034
286,881
70,934
(7,158)
350,657
(i) The fund received under the Central Bank of Nigeria (CBN) Commercial Agriculture Credit Scheme represents 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 and will expire in 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 N50.41 billion (December 31, 2016: N61.66 billion). The
maximum tenor for term loans 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 is 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.
(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's focus on the sectors. The facility is secured by Irrevocable Standing Payment
Order (ISPO). The maximum tenor for term loans under the programme is 15 years while the tenor for working capital is one
year, with option to renew the facility 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 established to
support the channelling of 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 obligated to on-lend to SMEs at 9% per annum. The maximum tenor is 5
years while the tenor for working capital is 1 year.
134 Zenith Bank Plc Annual Report - December 31, 2017
ZENITH BANK PLC
Notes to the Consolidated and Separate Financial Statements
for the Year Ended December 31, 2017
Group
Bank
31-Dec-17
31-Dec-16
31-Dec-17
31-Dec-16
(v) The Salary Bailout Scheme was approved by the Federal Government to assist State Governments in the settlement of
outstanding salaries owed their workers. Funds are disbursed to Banks nominated by beneficiary States at 2% for on-
lending to the beneficiary states at 9%. The loans have a tenor of 20 years. Repayments are 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 N10 billion to each State with a tenor of 10-years priced at 9% per
annum interest rate to the beneficiaries. Repayments are deducted at source, by the Accountant General of the Federation,
as a first line charge against each beneficiary state’s monthly statutory allocation.
(vii) The Real Sector Support Facility (RSSF): The Central Bank of Nigeria, as part of the efforts to unlock the potential of
the real sector to engender output growth, productivity and job creation has established a N300 billion Real Sector Support
Facility (RSSF). The Facility will be large enterprises for startups and expansion financing needs of N500 million up to a
maximum of N10.0 billion. The activities targeted by the Facility are manufacturing, agricultural value chain and selected
service sub-sectors. The fund from the CBN at 2%, and then disburses the funds to the manufacturers at 9% interest rate.
30. Borrowings
Long term borrowing comprise:
Due to ADB (i)
Due to KEXIM (ii)
Due to EIB (iii)
Due to PROPARCO (iv)
Due to AFC (v)
Due to ABSA Bank (vi)
Due to J P Morgan Chase Bank (vii)
Due to Standard Bank London (viii)
Due to First Rand Bank (x)
Due to Standard Bank South Africa (ix)
Due to IFC (x)
Due to First Abu Dhabi Bank (xi)
Due to Citi Global Markets
Due to British Arab Bank (xii)
Due to Zenith Bank (UK) (xiii)
Due to Zenith Bank Ghana (xiv)
37,115
5,861
4,628
14,253
17,307
50,310
33,198
58,993
-
66,723
28,116
33,313
-
6,679
-
-
38,924
4,066
6,370
17,205
-
45,985
22,908
71,541
5,114
-
31,016
-
15,362
4,615
-
-
37,115
5,861
4,628
14,253
17,307
50,310
33,198
58,993
-
66,723
28,116
33,313
-
6,679
8,313
54,170
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
356,496
263,106
418,979
292,802
The Group has not defaulted in the payment of principal or interest neither has the Group been in breach of any covenant
relating to the liabilities during the period (December 31, 2016: 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
(i) Due to ADB
-
356,496
356,496
199,287
63,819
263,106
-
418,979
418,979
199,287
93,515
292,802
263,106
102,373
(8,983)
356,496
258,862
82,017
(77,773)
263,106
292,802
193,088
(66,911)
418,979
268,111
104,043
(79,352)
292,802
The amount due to African Development Bank (ADB) of N37.12billion (US $112.08million) represents the outstanding
balance from a dollar term loan facility to the tune of US $125 million granted by ADB on September 2014. The facility is
repayable over 7 years. Interest is payable half-yearly at the rate of 6 months LIBOR + 3.6% per annum. The outstanding
balance of N37.12billion (US $112.08million) will mature in February 2021.
135 Zenith Bank Plc Annual Report - December 31, 2017
ZENITH BANK PLC
Notes to the Consolidated and Separate Financial Statements
for the Year Ended December 31, 2017
Group
Bank
31-Dec-17
31-Dec-16
31-Dec-17
31-Dec-16
(ii) Due to KEXIM
The amount of N5.86billion (US $17.70million) represents the outstanding balance from eight short term loan facilities of US
$4.8 million, US $3million, US $3.6million, US $3.2million, US $3 million, US $5.08million, US $6 million and US $3.12
million granted by The Export-Import Bank of Korea (KEXIM) in November, October, March, April, May, June, August and
September 2017. Interest is payable monthly at 3 month LIBOR+ 1.8% (for US $4.8million), 3 month LIBOR+1.74% (for US
$3million, US $6 million and US $3.12 million), 3 months LIBOR+ 1.7% ( for US $3.6million, US $3 million, US $ 5.08
million) and 3 months LIBOR +1.73% ( for US $3.2million).
The outstanding balances are N1.46billion (US $4.4million), N827.90million (US $2.5million), N119.22million (US
$0.36million), N211.94million (US $0.64million), N298.04million (US $0.9million), N844.46 million (US $2.55 million), N1.32
billion (US $4 million) and N774.91million (US $2.34 million) respectively. Final repayments on these facilities are due in
November, October, January, February, March, April, August and September 2018 respectively.
(iii) Due to European Investment Bank
The amount due to European Investment Bank (EIB) of N4.63 billion ($13.98 million) represents the outstanding balance
from the a 6-year dollar facility of US $27.32 million, 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 outstanding balance of
N4.63 billion ($13.98 million) from the facility will mature in July 2019.
(iv) Due to Proparco
The amount due to Propaco of N14.25billion (US $43.04million) represents the outstanding balance of two tranches of the
credit facilities to the tune of US $25m and US $50m granted by Promotion et Participation pour la Coopération
économique (PROPARCO) in February and December 2013 respectively. The facilities are priced at 6 months Libor+3.76%
and 6 months 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. The outstanding balances for each facilities are N3.51 billion (US $10.59 million) and
N10.74 (US $32.45) respectively.
(v) Due to AFC
The amount of N17.31 billion ($52.26 million) represents the outstanding balances on the dollar short-term facilities of US$
50 million granted by AFC in April 2017. The facility is priced at 6.4% with a maturity date of April 2018. Interest is payable
upon maturity for the facility.
(vi) Due to ABSA
The amount of N50.31billion (US $151.92million) represents the amount payable by the Bank on two dollar repurchase
facilities of US$75 million each granted by ABSA in September 2017 and November 2017. Interest is payable on maturity at
the rate of 3months Libor plus 4.25% on the first facility and 3 months' LIBOR plus 4.0% on the second facility. The first
facility will mature in March 2018 and the other facility will mature in May 2018.
(vii) Due to JP Morgan
The amount due to JP Morgan Chase Bank of N14.94 billion (US $75.06 million) represents the outstanding balance of two
tranches of dollar facilities in the sums of US $50 million and US $25 million . Both tranches are being rolled over on a
monthly basis. The interest is payable at a rate of LIBOR +2.7 and + 2.5% per annum. The interest is payable at a rate of
LIBOR +2.7 and + 2.5% per annum. The outstanding balance of US $50.03 million and US $25.03 million from the both
facility will mature in 1 month time.
(viii) Due to Standard Bank London
The amount of N58.99 billion (US $178.14 million) represents the amount payable by the Bank from eight short term
facilities of US $29.7 million, US $15 million, US $8.09 million, US $5.85 million, US $75 million, US $21.5 million, US $5
million and US $15.75 million granted by Standard Bank London in December 2017 (US $29.7 million, $8.09 million and US
$15.75 million), November 2017 (US $15 million) June 2017 (US $5.85 million), August 2017 (US $75 million) and
September 2017 (US $21.5 million and US $5 million) respectively.
136 Zenith Bank Plc Annual Report - December 31, 2017
ZENITH BANK PLC
Notes to the Consolidated and Separate Financial Statements
for the Year Ended December 31, 2017
Group
Bank
31-Dec-17
31-Dec-16
31-Dec-17
31-Dec-16
Interest is payable upon maturity at 5.19% (US $29.70 million, US $8.09 million and US $15.75 million), 5.13% (US $15
million), 5.62% (US $5.85 million), 3 month LIBOR plus 4% (US $75 million), 5.25% (US $21.05 million) and 5.24% (US $5
million). The facilities will mature in May 2018 (US $29.7 million, $15 million, $8.09 million and US $15.75 million), March
2018 (US $5.85 million), August 2018 (US $75 million) and February 2018 (US $21.5 million and US $5 million)
respectively.
(ix) Due to Standard Bank South Africa
The amount of N66.72 billion ($201.48 million) represents the outstanding balance on three dollar short-term facilities of
US$ 75 million, US $50 million and US $ 75 million granted by Standard Bank of South Africa in April and September (for
the last two facilities) 2017 respectively. The first facility is priced at 3 months LIBOR plus 5%, the second facility at 3
months LIBOR plus 4% and the third facility at 12 months LIBOR plus 5% with a maturity date of April, September and
March 2018 respectively. Interest is payable quarterly on all the facilities.
(x) Due to IFC
The amount of N28.12 million (US $84.9million) represents the amount payable by the Bank from a term loan facility of US
$100million granted by International Finance Corporation (IFC) in June 2015. Interest is payable semi annually at 6 months
LIBOR plus 4.5% per annum and the facility will mature in September 2022. The facility has an outstanding principal
balance of N27.60 billion (US $83.33million).
(xi) Due to First Abu Dhabi Bank
The amount of N33.31 billion ($100.60 million) represents the outstanding balance on two dollar short-term facilities of US$
50 million each granted by FAB in August and September 2017 respectively. The first facility is priced at 4.71% and the
second facility is priced at 3 months LIBOR plus 3.75% with a maturity date of August and September 2018 respectively.
Interest is payable upon maturity for the first facility and quarterly on the second facility.
(xii) Due to British Arab Commercial Bank
The amount of N6.68billion ($20.17 million) represents the outstanding balance on a dollar short term facility of $20 million
obtained from British Arab Bank in November 2017. It is priced at 5.59% with interest payable at maturity date of May 2018.
(xiii) Due to Zenith Bank UK
The amount N8.31 billion ( US $25.1 million) represents a short dollar Term Loan from Zenith Bank UK granted in
September 2017. It is priced at 6.0% with interest payable quarterly and principal payable at maturity date of September,
2018. This amount has been eliminated on consolidation.
(xiv) Due to Zenith Bank Ghana
The amount N54.17 billion ($163.58 million) represents the outstanding balance on nine short-term dollar facilities of US
$40 million, US $20 million, US $10 million, US $ 10 million, US $9.71 million, US $11.08 million, US $8.49 million, US $10
million and US $40 million availed to the Bank by Zenith Bank Ghana in August 2017 ($40 million, $20 million, $10million,
$10 million), May 2017 ($9.71 million and $8.49 million), March 2017 ($11.08 million), and June 2017 ($10 million and $40
million). The first four facilities are due to mature in August 2018 ($40 million, $20 million, $10 million and $10 million) while
the others have maturities of March 2018, May 2018, June 2018 and December 2021 respectively. The facilities are priced
at 7% for (US $40 million, US $20 million, US $10 million, US $ 10 million), 7.5% for the $9.71 million, $8.49 million and $10
million facility, 8.5% for the $11.08million and 6 months' LIBOR + 5.75% for the last facility (US $40 million). This amount
has been eliminated on consolidation.
137 Zenith Bank Plc Annual Report - December 31, 2017
ZENITH BANK PLC
Notes to the Consolidated and Separate Financial Statements
for the Year Ended December 31, 2017
31. Debt securities issued
Due to Euro bond holders
Group
Bank
31-Dec-17
31-Dec-16
31-Dec-17
31-Dec-16
332,931
332,931
153,464
153,464
332,931
332,931
153,464
153,464
The amount of N332.93 billion ($1 billion) represents the outstanding balance due on the two tranches of US $500 million
Eurobond notes issued by Zenith Bank Plc in April 2014 and May 2017 with a maturity date of April 2019 and May 2022
respectively. Interest is priced at 6.25% for the first tranche and 7.375% for the second tranche; both payable semi-annually
with a 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
year (December 31, 2016: Nil).
Movement in debt securities issued
At start of the year
Revaluation loss for the year
Additional issue
Contractual repayment
Accrued interest during the year
At end of the year
Classified as:
Current
Non-current
32. Derivative liabilities
Instrument types:
Forward contracts
Fair value of liabilities
Futures contracts
Fair value of liabilities
Classified as:
Current
Non-current
153,464
6,064
152,239
21,164
-
332,931
99,818
53,256
-
(9,539)
9,929
153,464
153,464
6,064
152,239
21,164
-
332,931
99,818
53,256
-
(9,539)
9,929
153,464
-
332,931
332,931
-
153,464
153,464
-
332,931
332,931
-
153,464
153,464
6,124
-
14,681
20,805
9,887
-
56,947
66,834
6,124
-
14,681
20,805
9,887
-
56,947
66,834
20,805
-
20,805
66,834
-
66,834
20,805
-
20,805
66,834
-
66,834
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 reference being made to similar transactions in the wholesale dealer
market.
During the year, various forward contracts entered into by the Bank generated net gains of N68.70 billion (December 31,
2016 net gain of N20.08 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 N57.2 and N20.8 billion respectively
(December 31, 2016 N82.9 and N66.8 billion respectively).
138 Zenith Bank Plc Annual Report - December 31, 2017
ZENITH BANK PLC
Notes to the Consolidated and Separate Financial Statements
for the Year Ended December 31, 2017
Group
Bank
31-Dec-17
31-Dec-16
31-Dec-17
31-Dec-16
33. Share capital
Authorised
40,000,000,000 ordinary shares of 50k each
(31 Dec 2016: 40,000,000,000 )
Issued and fully paid
31,396,493,786 ordinary shares of 50k each
(31 Dec 2016: 31,396,493,786)
Issued
Ordinary
Share premium
20,000
20,000
20,000
20,000
15,698
15,698
15,698
15,698
15,698
255,047
270,745
15,698
255,047
270,745
15,698
255,047
270,745
15,698
255,047
270,745
There was no movement in the share capital account during the year. The holders of ordinary shares are entitled to receive
dividends, which are declared from time to time, also each shareholder is entitled to a vote at the meetings of the Bank. All
ordinary shares rank equally with regards to the Group's residual assets.
34. 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 represent undistributed profits, net of statutory appropriations attributable to the
ordinary shareholders.
(d) Statutory reserve: This reserve represents the cumulative appropriation from general reserves/earnings in line with
Nigerian banking regulations that require the Bank to make an annual appropriation in reference to specific rules. Section
16(1) of the Bank and Other Financial Institutions Act of 1991 (amended), stipulates that an appropriation of 30% of profit
after tax be 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. In the current period, a total of N23,572 million representing 15% of Zenith
Bank's profit after tax was appropriated.
(e) SMIEIS/AGSMIES reserves: This reserve represents the aggregate amount of appropriations from profit after tax to
finance equity investments in compliance with the directives issued by the Central Bank of Nigeria (CBN) through its
circulars dated July 11, 2006 (amended) and April 7, 2017 respectively.
The SMIEIS reserve was maintained in compliance with the Central Bank of Nigeria's 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 issued in July 2006, the contributions were 10% of profit after tax and
were expected to continue after the first 5 years after which banks’ contributions were to reduce to 5% of profit after tax.
In April 2017, the Central Bank of Nigeria issued guidelines to govern the operations of the Agriculture/Small and Medium
Enterprises Scheme (AGSMIES), which was established to support the Federal Government's efforts at promoting
agricultural businesses and Small and Medium Enterprises (SMEs) as vehicles for achieving sustainable economic
development and employment generation.
While transfer to this reserve under the earlier directive is no longer mandatory, all Nigerian banks are now required to set
aside an amount equal to 5% of their annual Profits After Tax (PAT) towards the funding of equity investments, which
qualify under the AGSMIE Scheme.
During the year under review, the Bank was debited a total of N5.96 Billion by CBN so no amount was appropriated from
retained earnings.
139 Zenith Bank Plc Annual Report - December 31, 2017
ZENITH BANK PLC
Notes to the Consolidated and Separate Financial Statements
for the Year Ended December 31, 2017
Group
Bank
31-Dec-17
31-Dec-16
31-Dec-17
31-Dec-16
The small and medium scale industries equity investment scheme reserves are non-distributable.
(f) Fair reserve: Comprises fair value movements on equity instruments where the provision required per the prudential
guidelines is higher.
(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: This reserve represents the cummulative difference between the loan loss provision
determined per the Prudential Guidelines and the allowance/reserve for loan losses as determined in line with the principles
of IAS 39. As at 31 December 2017, there was a reversal of N8.1 billion from the credit risk reserve to general reserve (31
December 2016: transfer of N8.1 billion). This reserve is not available for distribution to shareholders.
35. 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 N1.52 billion and N1.19 billion respectively (December 31, 2016: N3.52 billion
and N2.97 billion).
36. Personnel expenses
Compensation for the staff are as follows:
Salaries and wages
Other staff costs
Pension contribution
31-Dec-17
31-Dec-16
31-Dec-17
31-Dec-16
53,397
7,107
3,955
64,459
50,820
4,982
3,524
59,326
46,181
6,340
3,151
55,672
44,649
4,901
2,969
52,519
(a) The average number of persons employed during the year by category:
Executive directors
Management
Non-management
Number Number Number
Number
11
428
6,635
7,074
11
442
6,667
7,120
5
380
5,496
5,881
5
403
5,562
5,970
The table below shows the number of employees, whose earnings during the year, fell within the ranges shown below:
N300,001 - N2,000,000
N2,000,001 - N2,800,000
N2,800,001 - N4,000,000
N4,000,001 - N6,000,000
N6,000,001 - N8,000,000
N8,000,001 - N9,000,000
N9,000,001 - and above
Number
869
27
779
1,716
1,223
796
1,664
Number
811
58
787
1,798
1,225
798
1,643
Number
472
-
759
1,556
1,009
670
1,415
Number
472
-
759
1,645
1,009
670
1,415
7,074
7,120
5,881
5,970
140 Zenith Bank Plc Annual Report - December 31, 2017
ZENITH BANK PLC
Notes to the Consolidated and Separate Financial Statements
for the Year Ended December 31, 2017
Group
Bank
31-Dec-17
31-Dec-16
31-Dec-17
31-Dec-16
36. Personnel expenses (continued)
(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
773
676
30
1,479
52
88
403
625
29
1,057
52
88
305
243
3
551
34
88
169
230
5
404
34
88
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
33
Number
33
Number
10
Number
11
37. 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
December 31, 2017 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
Zenith Nominee Limited
Effective
holding
%
Nominal share
capital held
98.07
100.00
99.99
99.96
99.00
100.00
%
%
%
%
%
%
6,444
21,482
2,059
1,038
1,980
1,000
141 Zenith Bank Plc Annual Report - December 31, 2017
ZENITH BANK PLC
Notes to the Consolidated and Separate Financial Statements
for the Year Ended December 31, 2017
In millions of Naira
December 31, 2017
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
December 31, 2016
-
880
103
92
-
8,313
54,170
-
-
239
-
-
-
-
-
29
-
-
-
3,058
Transactions and balances with subsidiaries
In millions of naira
Receivable
from
Payable to
Income
received from
Income
received from
Zenith Bank (UK) Limited
Zenith Bank (Ghana) Limited
Zenith Bank (Sierra leone) Limited
Zenith Bank (Gambia) Limited
Zenith Pensions Custodian Limited
Significant restrictions
82,738
661
23
721
-
22,906
-
-
-
348
2,959
-
-
-
3,960
-
-
-
-
2,036
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, 3.6 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
N748.54 billion and N713.66 billion respectively (December 31, 2016: N704.42 billion and N583.79 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
Executive compensation
Retirement benefit cost
Fees and sitting allowances
Loans and advances
At start of the year
Repayment during the year
At end of of the year
Interest earned
31-Dec-17
31-Dec-16
31-Dec-17
31-Dec-16
773
30
676
1,479
403
625
29
1,057
305
3
243
551
169
230
5
404
31-Dec-17
31-Dec-16
31-Dec-17
31-Dec-16
292
(93)
199
15
559
(267)
292
29
264
(39)
225
15
522
(258)
264
26
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 (December 31, 2016: Nil) as they are performing. Mortgage loans amounting to N699 million (December
31, 2016: N715 million) are secured by the underlying assets. All other loans are unsecured.
142 Zenith Bank Plc Annual Report - December 31, 2017
ZENITH BANK PLC
Notes to the Consolidated and Separate Financial Statements
for the Year Ended December 31, 2017
In millions of Naira
Loans
Deposits
Interest
received
Interest paid
December 31, 2017
Name of company
Cyberspace Network
Quantum Fund Management *
Zenith General Insurance company Ltd
Zenith Trustees Ltd
Directors and relations
Relationship/
Name
Common
directorship
/Jim Ovia
Common
directorship
/Jim Ovia
Common
directorship/Ji
m Ovia
Common
directorship
-
-
-
-
-
-
-
692
64
1,051
1
301
2,109
31 December, 2016
Name of company
Quantum Fund Management
Zenith General Insurance Company
Limited
Zenith Trustees Limited
Director and relations
Relationship Loans
Deposits
Interest
received
Common
directorship /
Jim Ovia
Common
directorship/Ji
m Ovia
Common
directorship/Ji
m Ovia
-
-
-
-
-
303
704
5
440
1,452
3
-
-
-
4
7
-
-
-
-
-
-
-
9
1
1
11
Interest paid
2
2
4
2
10
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 (December 31,
2016: Nil).
During the year, Zenith Bank Plc paid N2,115 million as insurance premium to Zenith General Insurance Limited (December
31, 2016: N1,822 million). These expenses were reported as operating expenses.
The amount of N2,961.65 billion (December 31, 2016: N2,362.35 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.
The Bank entered into a finance lease contract in October 2017 with Oviation Limited. Oviation limited has two common
Directors with Zenith Bank. The finance lease agreement has Zenith Bank as lessee for a Gulfstream jet over a tenor of 10
years with annual lease payments of 2.76 billion Naira. The lease transaction was conducted at arm’s length and the lease
obligation as at year end 31 December 2017(Note 28b) was 12.05 billion ( 31 December 2016 – Nil)
The Bank paid N13,213 million (December 31, N6,799 million) to Cyberspace Network for various transactions during the
year.
38. Contingent liabilities and commitments
(a) Legal proceedings
The Group is presently involved in 138 litigation suits in the ordinary course of business. The total amount claimed in the
cases against the Group is estimated at N48.63 billion (December 31, 2016: N17.18 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.
143 Zenith Bank Plc Annual Report - December 31, 2017
ZENITH BANK PLC
Notes to the Consolidated and Separate Financial Statements
for the Year Ended December 31, 2017
Group
Bank
31-Dec-17
31-Dec-16
31-Dec-17
31-Dec-16
38. Contingent liabilities and commitments (continued)
(b) Capital commitments
At the balance sheet date, the Group had capital commitments amounting to N5.72 billion (December 31, 2016: N6.50
billion) in respect of authorized and contracted capital projects.
(c) Confirmed credits and other obligations on behalf of customers
In the normal course of business the Group is a party to financial instruments with off-balance sheet risk. These instruments
are issued to meet the credit and other financial requirements of customers. The contractual amounts of the off-balance
sheet financial instruments are:
Performance bonds and guarantees
Usance
Letters of credit
Pension Funds (See Note (below))
Group
Bank
31-Dec-17
31-Dec-16
31-Dec-17
31-Dec-16
492,927
141,283
381,917
2,961,650
560,704
98,761
311,681
2,362,349
445,913
141,283
287,645
2,961,650
513,832
98,761
215,839
2,362,349
3,977,777
3,333,495
3,836,491
3,190,781
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 December 31, 2017, performance bonds and
guarantees worth N86.3 billion (December 31, 2016: N560.7 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 N2,961.65 billion (December 31, 2016: N2,362.35 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. 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-17
31-Dec-16 31-Dec-17
31-Dec-16
84,771
31,396
270
k
k25
245
k
55,572
7,850
63,422
63,422
31,396
202
k
k25
177
k
48,664
7,850
56,514
84,771
31,396
270
k
k25
k
245
55,572
7,850
63,422
63,422
31,396
202
k25
177
48,664
7,850
56,514
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 270 kobo per share (December 31, 2016: 202k)
from the retained earnings account as at December 31, 2017. 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 December 31,
2017 and December 31, 2016 respectively.
Dividends are paid to shareholders net of withholding tax at the rate of 10% in compliance with extant tax laws.
144 Zenith Bank Plc Annual Report - December 31, 2017
ZENITH BANK PLC
Notes to the Consolidated and Separate Financial Statements
for the Year Ended December 31, 2017
In millions of Naira
40. Cash and cash equivalents
For the purposes of the statement of cash flow, cash and cash equivalents include cash and non-restricted balances with
central banks, treasury bills maturing within three months, operating account balances with other banks, amounts due from
other banks.
Cash and cash balances with central bank (less
mandatory reserve deposits)
Treasury bills (maturing within 3 months)
Due from other banks
41. Compliance with banking regulations
31-Dec-17
31-Dec-16
31-Dec-17
31-Dec-16
310,549
140,874
260,180
99,378
109,990
495,803
916,342
127,068
459,457
727,399
-
273,331
533,511
112,575
354,405
566,358
During the year, there was no contraventions of the regulation of the Banks and Other Financial Institutions Act, 1991 by the
Bank.
42. 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.
43. Comparatives
During the year, outsourcing service cost reporting to personnel expense were reclassified to operating expense,
Prior year comparatives for year ended December 31, 2016 have also been adjusted to reflect this principle,as presented in
the notes below:
In millions of Naira
Group
Bank
31-Dec-17
31-Dec-16
31-Dec-17
31-Dec-16
(i) Personnel expense
Amount previously reported
Reclassified to operating expense
Amount as restated
(ii) Operating expense
Amount previously reported
Reclassified to operating expense
Amount as restated
-
-
-
-
-
-
69,042
(9,716)
59,326
94,365
9,716
104,081
-
-
-
-
-
-
62,235
(9,716)
52,519
84,402
9,716
94,118
145 Zenith Bank Plc Annual Report - December 31, 2017
ZENITH BANK PLC
Notes to the Consolidated and Separate Financial Statements
for the Year Ended December 31, 2017
Group
Bank
2017
2016
2017
2016
44. Statement of cash flow workings
(i) Debt securities (see note 21)
December 31, 2017
At 1 January
Gains from changes in fair value recognised in profit
or loss (note 10)
Exchange differences
Additions
Disposals (sale and redemption)
Interest accrued
Coupon received
Movement for cash flow statement
Recognised in Cashflow statement
December 31, 2016
At 1 January
Gains/(losses) 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
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
9,702
173,124
9,702
92,268
368
-
22,196
-
-
-
32,266
22,196
-
952
171,908
(75,541)
26,684
(12,543)
284,584
110,508
368
-
22,196
-
-
-
32,266
22,196
-
-
72,942
(95,432)
11,211
(9,542)
71,447
(20,821)
-
(132,704)
-
(1,375)
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)
Recognised in Cashflow statement
-
18,337
-
38,410
(ii) Treasury bills (Amortised cost) (see note 16)
December 31, 2017
Treasury bills (Amortised cost)
Treasury bills (with 3 months maturity)
Changes
Recognised in Cashflow
31-Dec-17 31-Dec-16
482,978
(127,068)
355,910
389,161
(109,990)
279,171
31-Dec-17 31-Dec-16
389,406
(112,575)
276,831
252,336
-
252,336
76,739
24,495
146 Zenith Bank Plc Annual Report - December 31, 2017
ZENITH BANK PLC
Notes to the Consolidated and Separate Financial Statements
for the Year Ended December 31, 2017
December 31, 2016
Treasury bills (Amortized cost)
Treasury bills (with 3 months maturity)
Changes
Recognised in Cashflow
(iii) Treasury bills (FVTPL) (see note 16)
December 31, 2017
Treasury bills (FVTPL)
Recognised in Cashflow
December 31, 2016
Treasury bills (FVTPL)
Recognised in Cashflow
(iv) Loans and advances (see note 20)
December 31, 2017
Gross loans and advances
Changes
Write-back (specific)
Write-back (collective)
December 31, 2016
Gross loans and advances
Changes
Write-back
Interest receivables
Group
Bank
2017
2016
2017
2016
31-Dec-16 31-Dec-15
324,230
(79,513)
244,717
482,978
(127,068)
355,910
31-Dec-16 31-Dec-15
277,202
(63,979)
213,223
389,406
(112,575)
276,831
(111,193)
(63,608)
31-Dec-17 31-Dec-16
74,381
547,656
31-Dec-17 31-Dec-16
74,381
547,656
(473,275)
(473,275)
31-Dec-16 31-Dec-15
53,698
74,381
31-Dec-16 31-Dec-15
53,698
74,381
(20,683)
(20,683)
31-Dec-17 31-Dec-16
2,360,809
2,252,172
-
108,637
31-Dec-17 31-Dec-16
2,193,224
2,117,069
-
76,155
(6,535)
(7,196)
94,906
-
-
-
(6,535)
(7,196)
62,424
-
-
-
31-Dec-16
31-Dec-15 31-Dec-16
31-Dec-15
2,360,809
(328,553)
2,032,256
-
2,193,224
(308,283)
1,884,941
-
(9,142)
39,147
(298,548)
-
-
-
(6,551)
31,027
(283,807)
-
-
-
147 Zenith Bank Plc Annual Report - December 31, 2017
ZENITH BANK PLC
Notes to the Consolidated and Separate Financial Statements
for the Year Ended December 31, 2017
Group
Bank
2017
2016
2017
2016
(v)Customer deposits
December 31, 2017
As per financial statement
Changes
December 31, 2016
As per financial statement
Changes
Interest payables
(vi) Other liabilities (see note 29)
December 31, 2017
As per statement of financial position
Changes
Vat payable
Net cash movement
December 31, 2016
As per statement of financial position
Changes
Vat paid
Net cash movement
31-Dec-17
31-Dec-16 31-Dec-17
31-Dec-16
3,437,915
454,294
454,294
2,983,621
-
2,744,525
191,562
2,552,963
-
-
191,562
-
31-Dec-16
31-Dec-15
2,983,621
425,737
(5,239)
420,498
2,557,884
-
-
31-Dec-16 31-Dec-15
2,552,963
219,946
(4,620)
2,333,017
-
-
-
215,326
-
31-Dec-17
31-Dec-16 31-Dec-17
31-Dec-16
233,481
(24,801)
2,235
22,566
208,680
-
-
-
219,790
23,946
(1,814)
(22,132)
243,736
-
-
-
31-Dec-16
31-Dec-15 31-Dec-16
31-Dec-15
208,680
(3,618)
(429)
4,047
205,062
-
-
-
243,736
(31,100)
(212)
31,312
212,636
-
-
-
(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 10)
31-Dec-17
31-Dec-16
31-Dec-17
31-Dec-16
1,630
(1,446)
184
241
57
2,278
(1,911)
367
603
236
1,630
(1,446)
184
206
22
1,795
(1,607)
188
360
172
148 Zenith Bank Plc Annual Report - December 31, 2017
ZENITH BANK PLC
Notes to the Consolidated and Separate Financial Statements
for the Year Ended December 31, 2017
Group
Bank
2017
2016
2017
2016
(viii) Proceed from sale of equity securities
Cost of equity securities disposed (see note 21b)
Recognised in cash flow
Group
31-Dec-17
-
Group
31-Dec-16
681
Bank
31-Dec-17
-
Bank
31-Dec-16
-
-
681
-
-
(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-17
474,628
-
Group
31-Dec-16
384,557
(39,147)
Bank
31-Dec-17
420,210
-
Bank
31-Dec-16
343,556
(31,027)
474,628
345,410
420,210
312,529
Group
31-Dec-17
216,637
-
Group
31-Dec-16
144,378
(5,239)
Bank
31-Dec-17
200,672
-
Bank
31-Dec-16
131,910
(4,620)
216,637
139,139
200,672
127,290
Group
31-Dec-17
92,494
(54,958)
(23)
(54,981)
Group
31-Dec-16
37,536
(14,762)
(284)
(15,046)
Group
31-Dec-16
37,536
-
-
Bank
31-Dec-17
56,052
(20,642)
-
Bank
31-Dec-16
35,410
-
-
-
(20,642)
-
Group
31-Dec-15
22,774
-
-
Bank
31-Dec-16
35,410
(13,737)
(278)
Bank
31-Dec-15
21,673
-
-
-
(14,015)
-
149 Zenith Bank Plc Annual Report - December 31, 2017
Other National Disclosures
ZENITH BANK PLC
Value Added Statement
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
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)
31-Dec-17
31-Dec-17 31-Dec-16 31-Dec-16
%
%
745,189
507,997
(194,873)
(21,764)
528,552
(98,227)
430,325
(145,752)
(2,594)
(127,237)
(17,141)
363,619
(32,350)
331,269
(91,771)
(2,594)
281,979
100
236,904
100
64,459
25,528
14,059
84,771
93,162
23
9
5
30
33
69,042
27,096
11,114
63,421
66,231
29
11
5
27
28
Total Value Added
281,979
100
236,904
100
Value added represents the additional wealth which the group has been able to create by its own and employees efforts.
151 Zenith Bank Plc Annual Report - December 31, 2017
ZENITH BANK PLC
Value Added Statement
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)
Total Value Added
31-Dec-17
31-Dec-17
%
31-Dec-16
31-Dec-16
%
673,636
454,808
(198,078)
(2,594)
472,964
(95,244)
377,720
(133,418)
(2,577)
(129,316)
(2,594)
322,898
(26,736)
296,162
(81,825)
(2,577)
241,725
100
211,760
100
55,672
16,418
12,490
84,771
72,374
241,725
23
7
5
35
30
100
52,520
20,642
10,039
63,421
65,138
25
10
5
29
30
211,760
100
Value added represents the additional wealth which the bank has been able to create by its own and employees efforts.
152
Zenith Bank Plc Annual Report - December 31, 2017
ZENITH BANK PLC
Five Year Financial Summary
31-Dec-17
31-Dec-16
31-Dec-15
31-Dec-14
31-Dec-13
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
Other assets
Property and equipment
Intangible assets
957,663
936,817
468,010
495,803
57,219
2,100,362
-
330,951
-
9,561
92,494
133,384
12,989
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
Total assets
5,595,253
4,739,825
4,006,842
3,755,264
3,143,133
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
3,437,915
20,805
8,915
18
233,481
383,034
356,496
-
332,931
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
-
4,773,595
4,035,360
3,412,489
3,202,626
2,633,882
821,658
704,465
594,353
552,638
509,251
15,698
255,047
365,757
183,839
820,341
1,317
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
Total shareholders' equity
821,658
704,465
594,353
552,638
509,251
153 Zenith Bank Plc Annual Report - December 31, 2017
ZENITH BANK PLC
Five Year Financial Summary
31-Dec-17
31-Dec-16
31-Dec-15
31-Dec-14
31-Dec-13
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
Earning per share:
Basic and diluted
745,189
-
(216,637)
(226,864)
(98,227)
203,461
(25,528)
177,933
5,233
(2,551)
-
-
-
2,682
180,615
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
566
K
412
K
336
K
316
K
301
K
154
Zenith Bank Plc Annual Report - December 31, 2017
ZENITH BANK PLC
Five Year Financial Summary
31-Dec-17
31-Dec-16
31-Dec-15
31-Dec-14
31-Dec-13
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
Other assets
Assets classified as held for sale
Property and equipment
Intangible assets
907,265
799,992
468,010
273,331
57,219
1,980,464
117,814
34,003
-
9,197
56,052
-
118,223
12,088
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
Total assets
4,833,658
4,283,736
3,750,327
3,423,819
2,878,693
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
2,744,525
20,805
6,069
-
219,790
383,034
418,979
332,931
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
-
4,126,133
3,667,383
3,203,381
2,911,112
2,406,071
707,525
616,353
546,946
512,707
472,622
15,698
255,047
296,787
139,993
707,525
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
Total shareholders' equity
707,525
616,353
546,946
512,707
472,622
155
Zenith Bank Plc Annual Report - December 31, 2017
ZENITH BANK PLC
Five Year Financial Summary
31-Dec-17
31-Dec-16
31-Dec-15
31-Dec-14
31-Dec-13
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
673,636
(200,672)
(204,157)
(95,244)
173,563
(16,418)
157,145
(2,551)
-
(2,551)
454,808
(131,910)
(156,676)
(26,295)
139,927
(20,642)
119,285
6,636
-
6,636
Total comprehensive income
154,594
125,921
396,653
(114,936)
(155,406)
(11,091)
115,220
(16,436)
98,784
(1,752)
-
(1,752)
97,032
372,015
(98,439)
(152,335)
(12,392)
108,849
(15,370)
93,479
2,549
-
2,549
96,028
311,275
(68,471)
(138,789)
(9,907)
94,108
(10,694)
83,414
549
890
1,439
84,853
Earning per share:
Basic and diluted
501
K
380
K
315
K
295
K
266
K
156
Zenith Bank Plc Annual Report - December 31, 2017