(cid:49)(cid:38)(cid:48)(cid:49)(cid:45)(cid:38)(cid:1)(cid:53)(cid:38)(cid:36)(cid:41)(cid:47)(cid:48)(cid:45)(cid:48)(cid:40)(cid:58)(cid:52)(cid:38)(cid:51)(cid:55)(cid:42)(cid:36)(cid:38)(cid:21)(cid:19)(cid:20)(cid:27)(cid:40)(cid:83)(cid:80)(cid:86)(cid:81)(cid:1)(cid:34)(cid:79)(cid:79)(cid:86)(cid:66)(cid:77)(cid:1)(cid:51)(cid:70)(cid:81)(cid:80)(cid:83)(cid:85)(cid:1)(cid:7)(cid:1)(cid:39)(cid:74)(cid:79)(cid:66)(cid:79)(cid:68)(cid:74)(cid:66)(cid:77)(cid:1)(cid:52)(cid:85)(cid:66)(cid:85)(cid:70)(cid:78)(cid:70)(cid:79)(cid:85)(cid:84) 01STRATEGIC REPORT
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Corporate Information
Results at a Glance/Key Performance Indices
Group Financial Highlights
Corporate Profile & Strategy
Notice of Annual General Meeting
Chairman’s Statement
Chief Executive Officer’s Review
Board of Directors (in pictures)
Directors’ Report
02GOVERNANCE & SUSTAINABILITY
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Corporate Governance Report
Report to the Directors on the outcome of the Board Evaluation
Sustainability Report
Statement of Directors’ Responsibilities
Report of the Statutory Audit Committee
03FINANCIALS
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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 Statement of Changes in Equity
Consolidated and Separate Statements of Cash Flows
Notes to the Consolidated and Separate Financial Statements
04
OTHER NATIONAL DISCLOSURES
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Value Added Statement
Five Year Financial Summary
Share Capital History
Style by Zenith
Forms
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Contents
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Strategic Report01 Chairman
Group Managing Director/CEO
Non-Executive Director/ Independent
Non-Executive Director
Non-Executive Director
Non-Executive Director/ Independent
Non-Executive Director/ Independent
Non-Executive Director/ Independent
Deputy Managing Director
Deputy Managing Director
Executive Director
Executive Director
Executive Director
Zenith Bank Plc Annual Report December 31, 2018
Zenith Bank Plc Annual Report December 31, 2018
Corporate Information
Directors, Officers And Professional Advisers
DIRECTORS
Mr. Jim Ovia, CON.
Mr. Peter Amangbo
Alhaji Baba Tela*
Prof. Chukuka Enwemeka
Mr. Jeffrey Efeyini
Prof. Oyewusi lbidapo-Obe
Mr. Gabriel Ukpeh
Engr. Mustafa Bello
Ms. Adaora Umeoji
Mr. Ebenezer Onyeagwu
Mr. Ahmed Umar Shuaib
Dr. Temitope Fasoranti
Mr. Dennis Olisa
*Retired from the Board effective October 2, 2018
COMPANY SECRETARY
Michael Osilama Otu
REGISTERED OFFICE
Zenith Bank Plc
Zenith Heights
Plot 87, Ajose Adeogun Street,
Victoria Island, Lagos
AUDITOR
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
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Results at a Glance/
Key Performance Indices
Financial Highlights
In millions of Naira
31-Dec-18
31-Dec-17
% Change
Income statement Highlights
Interest and similar income
Net Interest income
Operating income
Operating expenses
Profit before tax
Profit after tax
Earnings Per share (N)
Balance sheet Highlights
Gross loans and advances
Customers' deposits
Total assets
Shareholders' fund
Key ratios
Return on average equity (ROAE)
Return on average assets (ROAA)
Net interest margin (NIM)
Cost of funds
Cost of risk
Cost-to-income
Liquidity ratio
Loan to deposit ratio
Capital adequacy ratio (CAR)
Non-performing loans
440,052
295,594
457,185
(225,500)
231,685
193,424
6.15
2,016,520
3,690,295
5,955,710
815,751
23.8%
3.3%
8.90%
3.1%
0.9%
49.3%
72.0%
44.2%
25.0%
4.98%
474,628
257,991
422,730
(223,411)
199,319
173,791
5.53
2,252,172
3,437,915
5,595,253
812,116
22.9%
3.4%
8.94%
5.2%
4.3%
52.8%
69.7%
54.5%
27.0%
4. 70%
-7%
15%
8%
1%
16%
11%
11%
-10%
7%
6%
0.5%
4%
-3%
0%
-40%
-79%
-7%
3%
-19%
-7%
6%
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Total deposits grew by 7% (N252bn) reflecting public also rebalanced towards cheaper retail deposits. 16% growth in PBT is largely attributable to the effective management of the three levers of cost; cost of funds, cost of risk, and cost-to-income ratio. Total assets grew by 6% to close at N6trn enhancing Profit afterer tax increased by 11% (N19.6bn) driven by improved profit before tax as well as an efficient tax management strategy. confidence in the Zenith brand. The funding mix was our balance sheet.Group Financial HighlightsZenith Bank Plc Annual Report December 31, 201866Strategic ReportZenith Bank Plc Annual Report December 31, 2018 Shareholders’ funds grew year-on-year by 0.5% to close at N816bn providing adequate buffer for business expansion. Consistent and growing dividend payout in the last 7 years. The payout increased by 4% year-on-year. With this proposed dividend we are recording a dividend yield of 12% (2017: 11%). Return on Average Equity (RoAE) grew by 4% year-on-year while Return on Average Asset (RoAA) remained flat at 3.4% reflecting a strong commitment to delivering impressive retutrns to investors. Decrease in interest expense by 33% is as a result of efficient rebalaning of the Group’s deposit mix in favour of low cost deposits. 2018 2017 77Strategic Report 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Financial HighlightsZenith Bank Plc Annual Report December 31, 201888Strategic ReportZenith Bank Plc Annual Report December 31, 2018 Corporate Profile
& Strategy
its resilience
O ver the past years, Zenith Group (“Zenith”) has
redefined customer service standards and created
diverse service delivery channels through strategic
deployment of its people, information and communication
(ICT). Within twenty-eight years, Zenith has
technology
demonstrated
irrespective of the business/
economic cycle and witnessed growth in virtually all areas. Its
growth is driven principally by strategic business focus and
a conservative business model. The Group has a stable and
experienced management team that is well positioned for strong
execution leading to significant market share opportunities.
Today, Zenith is undoubtedly, one of Nigeria’s strongest banking
brands and one of the country’s largest banks by market
capitalization, profitability and total assets. Our branding has
been anchored on continued investment in people, technology
and excellent customer service. The combined intellectual
capital and dedication of the staff, Management and Board have
shaped Zenith into the world-class institution that it is today.
From inception Zenith clearly set out to distinguish itself in the
banking industry through its service quality, drive for a unique
customer experience and the calibre of its customer base. Over the
years the Zenith brand has become synonymous with leadership
in the use of Information and Communication Technology (ICT)
in banking and general innovation in the Nigerian banking
industry. The Group serves its customers through a variety of
business location spread across Africa, Europe, Middle East and
Asia. These comprise of a total of 596 business locations (see
page 17 for more details) in Nigeria and the rest of the world.
However, in line with advances in technology, the bank has also
invested heavily in electronic and digital channels including
ATMs, POS terminals, internet and mobile banking applications
and as a result there has been an exponential upsurge in the
volume of transactions consummated over digital channels with
a corresponding decrease in transactions completed at physical
outlets and branches.
Zenith Bank has remained a Tier 1 bank and is adequately
capitalised to meet and even surpass all our customers’ needs and
expectations. The bank has efficiently deployed its competitive
edge of excellent customer services, size, brand name, branch
network and customer reach, stable management as well as
motivated workforce, strong capital and liquidity base in order
to effectively compete in the Nigerian banking landscape. Today,
Zenith is easily associated with the following attributes in the
Nigerian banking industry:
•
•
•
•
•
•
•
Innovation
Good financial performance
Stable and dedicated management team
Highly skilled personnel
Leadership in the use of Information and Communication Technology
Strategic distribution channels
Good asset quality
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Our Vision“To build the Zenith brand into a reputable international financial institution recognized for innovation, superior customer service and performance while creating premium value for all stakeholders”.Our Mission“Establish a presence in all major economic and financial centres in Nigeria, Africa and indeed all over the world; creating premium value for all stakeholders”Core Values. Integrity. Professionalism. Excellence. Ethics. Commitment· Transparency· ServiceMISSIONVISIONCorporate Profile & StrategyZenith Bank Plc Annual Report December 31, 20181010Strategic ReportZenith Bank Plc Annual Report December 31, 2018 The Bank opted to and operates a commercial banking model
and as a result Zenith now focuses and channels its resources
only on its core business segments, international subsidiary
its pension/custodian services and nominees
businesses,
business only.
Core Business Segments
a)
The Bank’s core business segments provide a broad range of
banking products and services to a diverse range of customers
which include corporates, financial institutions, investment
funds, governments and individuals. These business activities are
conducted through the following business units:
Institutional and Investment Banking
•
Corporate Banking
•
Commercial/SMEs
•
Retail Banking
•
Public Sector Banking
•
Institutional and Investment Banking
The Institutional and Investment Banking Unit (the “IIBU”)
manages the Group’s business relationship with other banks,
financial institutions, multilateral agencies, securities houses,
insurance companies, asset management companies and other
non-bank finance companies, private equity and venture funds.
The IIBU also assists individuals, corporations and governments
in raising capital by underwriting and/or acting as the client’s
agent in the issuance of securities as well as assisting companies
in mergers and acquisitions processes.
The unit through its Treasury sub unit provides ancillary services
such as market-marking, derivatives trading, fixed income
instruments, foreign exchange, commodities and equity
securities and manages the group’s correspondent banking
relationships. The Treasury sub-group works closely with
Business Focus
branches and various business focus Groups as well as corporate
customers and pension funds to deliver currency and fixed
income solutions tailored specifically for their requirements.
The Treasury sub-group focuses on creating wealth while
mitigating interest rate and foreign exchange risks for the Zenith
Group and its customers.- Treasury offers the Group’s customers
a broad array of money market and foreign exchange services
that enable them to carry out their business operations locally
and internationally. The Treasury sub-group’s activities are carried
out through four units: the Liability and Deposit Management
Unit, Bonds Trading Unit, Foreign Currency Trading Unit and the
Correspondent Banking Unit.
Corporate Banking
The Group’s Corporate Banking business unit offers a wide
variety of services to multinationals, large local conglomerates
and corporate clients. The unit is focused on providing superior
banking services and customized banking products to the top
tier of the market. It is primarily focused on attracting, building
and sustaining strong enduring relationships with its target
market through the provision of innovative solutions together
with excellent customer services to meet clients’ banking needs.
It also looks at promoting the businesses of these corporate
clients through the provision of services to the various
stakeholders within the value chain of these corporate clients.
This is aimed at building long-term relationships and partnership
with our clients.
Within Corporate Banking, industry specific desks or sub-units
exist to facilitate the efficient and effective management of the
relationships with the unit’s corporate customers. These sub-
units include;
a)
b)
c)
Transport and Aviation,
Conglomerates
Breweries & Beverages
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Zenith Bank Plc Annual Report December 31, 2018
Zenith Bank Plc Annual Report December 31, 2018
Corporate Profile
& Strategy
d)
e)
f )
Oil and Gas
Power, Infrastructure and Construction.
Telecommunications and Fintechs
Commercial/SMEs
The Commercial/SME unit focuses on all small and medium
enterprises (SMEs), commercial businesses which comprises
of personal current, and savings accounts customers and all
unincorporated entities (such as societies, clubs, churches,
mosques etc).
It offers
in the form of overdrafts,
import finance lines, term loans and leases to the customers
especially those involved in the sales and distribution of fast
moving consumer good items and key distributors to major
manufacturing companies. Credit facilities offered by the unit are
priced higher than those extended to corporate or institutional
banking customers, in order to compensate for the relatively
higher risk.
loans and advances
The Group offers a wide range of generic banking services and
products to meet the needs of the customers in this sub-sector.
These include various lending and deposit products such as
working capital lines (overdraft, invoice discounting, invoice/
contract financing, stock financing, etc), lease finance lines, Bonds
and Guarantee lines, current account, domiciliary accounts and
fixed deposit accounts . Ancillary services rendered to this sub-
sector include; local drafts issuance, local inter/intra bank funds
transfers payroll services, bill payments, safe custody, duty/tax
payments and remittances and so on. The Group aims to build a
value chain synergy between this sub-sector and the corporate
banking clients thereby promoting businesses across the various
business units.
Retail Banking
Generally, the Group’s Retail Banking businesses are conducted
through its extensive branch network, electronic and digital
It offers various banking services to primarily
channels.
individuals.
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Personal banking is structured to develop and promote the retail
business generally and provide banking services to individuals
through traditional branches, as well as electronic banking
channels.
Attracting, winning and retaining this segment of customers is
through the development of customer value propositions (CVPs)
unique to each customer sub-segment and the delivery of these
CVPs are principally through the branches, electronic and digital
channels.
The personal banking products and services range from standard
to specialized savings, current, domiciliary and investment
accounts modified to suit individuals of different strata of life.
Examples of such specialized products are the Zenith Children
Accounts (ZECA), Individual Current and Savings Accounts,
Easysave Classic and Premium Accounts (financial inclusion
institution
customers), Aspire Savings Accounts
students) and Platinum and Gold Current Accounts (high net
worth individuals) etc. The sub-group also offers credit products
including personal loans, advances, mortgages, asset finance,
and credit cards. E-business products offered include internet
banking and mobile banking services (mobile app) and *966#
EazyBanking, Zenith Scan to Pay, EazyMoney etc. Numerous
channels such as ATMs, cards, POS terminals, internet and mobile
banking is to effectively service this segment of the market.
(tertiary
institutional counterparties to support
its funding needs.
Through effective treasury management, Zenith UK trades
in fixed income instruments which include government and
institutional bonds and certificates of deposit. Zenith UK also has
a wealth management unit which is dedicated to offering long-
term investment advisory and wealth management solutions to
its customers.
Zenith Bank West African Subsidiaries
Public Sector Banking
The Public Sector Group (PSG) provides services to meet the
banking needs of all tiers of government (federal, state and
local governments), ministries, departments and agencies, The
focus of the PSG business is all institutions operating under the
auspices of Government, including those within the executive,
legislative and judiciary branches, and at the Federal, State and/
or Local Government levels. Some of the products and services
offered to the public sector include revenue collection schemes,
cash management, deposit and investment, electronic payroll
systems, offshore remittances and foreign exchange and project
finance.
b) Overseas Subsidiaries
The Group’s overseas subsidiaries carry out banking operations,
providing traditional banking products and services tailored
to meet the needs of those customers who are either located
in countries where the subsidiaries are based or who have
a business presence in such locations. Each of the Group’s
overseas subsidiaries act as intermediary between the financially
surplus and deficit units in their locations, offering a wide range
of products and services to attract deposits and extend loans
and advances. The Group’s overseas subsidiaries include the
following:
Zenith Bank UK Limited
Zenith Bank UK Limited (“Zenith UK”) leverages on trade and
investment flows between Nigeria and Europe to intermediary
banking services which include post shipment finance, back
to back letters of credit, standby letters of credit and contract
guarantees. Zenith UK also provides facilities for working capital
and capital expenditure directly to Nigerian borrowers through
participation in syndicated loans. The subsidiary acts as the
contact point for correspondent banking relationships with
Nigerian and other West African banks by providing facilities for
letter of credit confirmation and treasury products.
The operational mandate of Zenith UK also enables it to source
deposits from institutions such as parastatals, corporate and
Zenith Bank (Ghana) Limited, Zenith Bank (Sierra Leone) Limited
and Zenith Bank (The Gambia) Limited make up our West African
subsidiaries. They provide comprehensive trade services to major
global corporations and medium sized enterprises operating in
the region. With the support of the parent company and Zenith
UK which operate an account with Citigroup, the West African
subsidiaries have both a global reach and local market knowledge
which allows them to provide high quality importing and
exporting intermediary services to their respective customers.
Solutions are customized to each subsidiary’s customers’ needs,
integrating letters of credit and other trade finance alternatives
or products for an end-to-end trade proposition.
The West African subsidiaries source deposits from retail,
corporate and institutional customers to support their respective
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Zenith Bank Plc Annual Report December 31, 2018
Zenith Bank Plc Annual Report December 31, 2018
Corporate Profile
& Strategy
funding needs. Each subsidiary also lends to customers in
different sectors of their respective economies, through term
loans, short term overdrafts, trade finance facilities and bonds
and guarantees. Investment in fixed income instruments such as
treasury bills, government and corporate bonds also form part
of the banking activities carried out by each of the West African
subsidiaries.
Pension and Custodial Services
c.
The Group’s Pension Custodian services business is conducted
through Zenith Pension Custodians Limited (“Zenith Pensions”)
which offers pension management and custodian services to
pension funds administrators (PFAs). As at 31 December 2018,
total funds under its custody amounted to approximately N3,531
billion. Zenith Pensions has 102 funds under its custody which
are shared among seven open pension fund administrators,
three closed pension fund administrators and two annuities.
The main service offerings provided by Zenith Pensions include;
collecting pension contributions, paying beneficiaries from their
respective retirement saving accounts, safe keeping of assets,
managing real estate assets of the funds under its custody and
the settlement of transactions in financial investments such as
equities, bonds and treasury bills. Zenith Pensions also provides
administrative and record keeping services to the funds under its
custody on a day-to-day basis.
Zenith Nominees Limited
d.
Zenith Nominees Limited provides nominees,
trustees,
administrators and executorship services for non-pension assets.
It started operations in 2018.
Zenith Nominee seeks to be associated with the following
attributes:
•
•
•
•
•
Innovation
Good financial performance
Stable and dedicated management team
Highly skilled personnel
Leadership in the use of Information and Communication
Technology
Strategic Distribution Channels
Good asset quality
•
•
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Strategic Objectives
The strategic objective of Zenith Bank remains the continuous
improvement of its capacity to meet the customers’ changing
and increasing banking needs as well as sustaining high quality
growth in a volatile business environment through:
•
Continuous investment in branch network expansion and
thus bringing quality banking services to our existing and
potential customer base
Continuous investment and deployment of state of the art
technology and ICT platform
Continue to seek, employ and retain the best personnel
available
Continuous investment in training and re-training of our
personnel
Maintain and reinforce our core customer service delivery
charter
Sustain strong profitability and ensure adequate Return
on Equity (ROE)
Remain conservative but innovative
Sustain strong balance sheet size with adequate liquidity
and capital base
Sustain our brand and premium customer services
Cautious and synergistic global expansion
Remain customer service focused
Continuous emphasis on use of technology as a
competitive tool
Maintain
governance practices
risk management and corporate
strong
•
•
•
•
•
•
•
•
•
•
•
•
Locally, branches will continue to be located at commercial
business districts in all the state of the federation, taking into
consideration the existence of the following:
•
Commercial activities, enough to ensure that the branch
breaks even within a year.
Synergistic loop based on business line (i.e. ensuring that
the branches are located in areas having similar business
lines to facilitate needed synergy).
Convenience to our customers.
•
Our international outlook will focus on consolidating our
•
presence in our selected African and European markets while
we continue to evaluate opportunities in other markets as well.
The key strategies that will be used to drive our vision and
mission are as follows:
1.
2.
3.
4.
5.
6.
7.
8.
9.
10.
11.
12.
13.
risk management and corporate
Continue to deliver superior and tailor-made service
experience to all our customers at all times
Continue to develop deeper and broader relationship
with all clients and strive to understand their individual
and industry peculiarities with a view to developing
specific solutions for each segment of our customer base
Continue to expand our operations by adding new
distribution channels especially in the digital space
Consolidate our leadership as a banking service provider
in Nigeria by continuing to build on long standing
relationships, capabilities and the strength of our brand
and reputation to drive our
international business
network expansion
Continually enhance our processing and systems
platforms to deliver new capabilities and
improve
operational efficiencies and achieve economies of scale.
Maintain strong
governance culture
Ensure proper pricing of our products and services
Increase our market share of retail banking customers
and deploy our E-business tools and enhanced customer
service
Develop compelling customer value proposition (CVP)
for our various customer segments that ensures we can
optimise our average revenue per customer.
Continuous investment in technology as a driving tool for
customer services
Increasing corporate finance activities to boost fee
income
Leveraging on our existing branch network to drive our
product delivery and deposit liability growth
Leveraging on our understanding of specific trade and
correspondent banking requirements to drive business
relationships with banks and financial institutions in the
West African sub-region to encourage them to use our
foreign subsidiaries for businesses they are currently
transacting with other banks
14. Our foreign subsidiaries will target companies that
currently have trade partners
in Nigeria and other
locations where we have presence across the globe and
process their trade transactions through the Zenith Bank
network. This approach is aimed at encouraging cross
border marketing and the routing of a portion of their
international trade transactions through the Group. The
idea is to demonstrate to the local companies that their
relationship with Zenith Bank in their country and dealing
with Zenith Bank in another country will be mutually
beneficial.
“Our Strategic Plan is part of a process of our development,
and attempts to engender a commitment to continuous
improvement, by focusing and harnessing the energies
of everyone in the group. We believe that the concepts
of strategic readiness, life-long learning and community
engagement encourage and support quality in all aspects
of the Bank’s performance.”
The lending businesses in all our subsidiaries will focus
primarily on international and export trade transactions.
It will
international trade bills
for companies and also providing short-term credits
to financial institutions that use the bank as their
correspondent bank.
involve discounting
15.
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MARKET AND BUSINESS STRATEGYAs a result of the Group’s decision to comply with CBN Banking Activities Regulation by divesting from its subsidiaries which carry out non-banking activities, the Group’s principal strategy is aimed at promoting the growth and profitability of its banking activities. In the next five years, the Group will look to continue to pursue organic growth. In the longer term period it intends to improve (through creation and enhancement of new markets and products and services) and consolidate (through superior customer services) local and international awareness of its brand. Its growth and marketing plans will seek to optimize its strengths, maximize available opportunities and minimize identified threats while taking steps to mitigate the effects of observed weaknesses.The strategic objectives of the Group in the next five years include:• to be amongst and remain one of the top tier banks in Africa in terms of profitability, balance sheet size, risk assets quality, financial stability and operational efficiency;• Re-channelling its efforts in deploying more electronic banking products, following the divestment from non-core banking operations. • The Group will look to strengthen its retail banking business by doing a retail banking transformation exercise which will significantly grow its retail banking revenue, deposit liabilities and risk assets and obtain a significant share of the retail banking industry in Nigeria.• improving its capacity to meet its customers’ changing and increasing banking needs as well as sustain high quality growth despite the volatile business environment;Core Banking TransformationThe Bank has begun implementation of a core banking system to replace existing core banking systems (Ethix/Phoenix) with MISYS suite of banking software and affiliated solutions which started in 2016. The bank has successfully gone live on a number of MISYS banking solutions including – Trade Innovation, TradeX, Zenith Trade Portal, Kondor, MPM and LoanIQ which are used to drive our trade services, treasury products/deals and loan processing related customer transactions. These implemented solutions have been seen to improve efficiency and streamline operations.Upcoming solutions include Datastore (a document management system that enables the Bank digitize its records using the system’s robust scanning, indexing & retrieval capabilities) which will replace the legacy system ADA. In addition to the Datastore, Essence is the new core banking solution to replace Phoenix and other in-house 3rd party applications. The Essence implementation has gained significant traction with the just concluded System Integration Testing (SIT) which to be followed shortly with the User Acceptance Testing (UAT).Corporate Profile & StrategyZenith Bank Plc Annual Report December 31, 20181616Strategic ReportZenith Bank Plc Annual Report December 31, 2018 Enhancing the Group’s internal operating systems
to reduce costs
The Group expects to continue its drive to deploy the latest
innovations in banking technology in order to maintain its
position at the forefront of the changing banking landscape in
Nigeria. In addition, the Group will aim to enhance its systems
and internal procedures, in order to be able to improve its
levels of customer service by delivering improved operational
capabilities and efficiencies, whilst at the same time achieving
economies of scale.
The Group’s increased deployment of digital channels means
more customers are able to carry out banking transactions
its branches, thereby reducing operating
without visiting
costs. From an internal operating perspective, the Group has
automated most of the operational activities, such as cheque
confirmation and clearing processes, account opening processes,
credit administration process and internal audit processes. These
automated processes have started yielding results in the form of
reduced turnaround times in all operational activities as well as a
reduction in operating costs.
In addition to the above, other strategies that have been have
been adopted to streamline our cost include: arranging with
training agencies based abroad to train our staff locally where a
large number of staff have to be trained thereby reducing cost
of travelling, and retrofitting some of our equipment including
lighting and replacing regular equipment with energy-efficient
ones to save on power and energy costs.
Business Locations
As at 31 December 2018, the geographical spread of the Group’s
business locations is as follows:
Geographical
Locations
Branches
Cash Centers
Non-Banking
Operations
374
27
2
6
6
1
1
Federal
Republic of
Nigeria
Republic of
Ghana
United
Kingdom
Sierra Leone
The Gambia
South Africa
Representative
Office
China
Representative
Office
Total
Grand Total
155
3
10
-
-
-
11
-
-
-
-
-
-
-
3
596
417
176
As shown above, the Group also has 176 off-site locations,
strategically located in various commercial centres around
Nigeria and the African countries in addition to its network
of branches. These off-site locations comprise small business
offices such as kiosks/cash offices and are located in the airports,
university campuses, large shopping malls or the premises of
core customers of the Group. These off-site locations only offer
deposit taking services and the Bank expects their number
to decrease over the coming years as the restrictions on the
use of cash are put in place throughout Nigeria as part of the
CBN’s cashless policy implementation. However, we expect an
increase in e-centres where various electronic transactions can
be consummated.
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Zenith Bank Plc Annual Report December 31, 2018
Zenith Bank Plc Annual Report December 31, 2018
Corporate Profile
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ATM network
The Group has a total of 1,891 ATM machines with 1,817 in
Nigeria, 59 in Ghana, 9 in Sierra Leone and 6 in The Gambia. The
ATM machines are mounted in branches and strategic locations
such as airports, university campuses, large shopping malls and
premises of large manufacturing firms employing large numbers
of workers. Due
to collaboration and shared services
arrangements which the Bank has with other banks, ATM cards
issued by the Bank are accepted by the ATM machines of other
institutions. The Bank also collaborates with other card issuing
agencies to offer internationally recognised cards, such as
MasterCard and Visa, in different currencies to their customers.
Distribution Channels
Other distribution channels which the Group uses include
electronic and digital channels which offers products and
services, including electronic fund transfers at points of sale
(POS), telephone banking, internet banking, visa telebanking,
mobile banking and the Group’s call centres. Furthermore,
in addition to being able to use its branches, ATMs and the
network of third party ATMs available throughout Nigeria under
arrangements between the Bank and third party vendors, the
Group’s customers are currently entitled to use the Bank’s card
products to pay for goods and services at trade service outlets
throughout Nigeria.
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The Group has invested significantly in software which enables
electronic product platforms to interface with core banking
applications, hardware to enable data storage and to improve
processing speed and in training of its IT staff. The Group has
also developed electronic delivery systems in order to implement
multiple delivery channels to its customers, including its ATM
networks, on mobile devices and over the internet. The Group’s
range of internet and mobile banking products and services
offer customers services such as collections and remittances of
bills (including utility bills), real time internet banking, purchase
of mobile phone airtime, funds transfers, cheque requisitions
and confirmations, balance enquiries, transfer of/receipt of funds
between Visa Credit Cards and Prepaid Cards, and statement
services. Specific electronic products offered by the Group
include:
•
Zenith Scan to Pay – this is a quick response (QR) code
solution which involves customers scanning merchants QR
displayed in their stores or on their websites using a smart
device;
*966*911# – this is a distress code to be dialled by Zenith
customers to automatically block their accounts where
customers’ smart phones has been stolen or privacy details
have been compromised;
•
• USSD on POS – This allows customers to make payments at merchant stores using *966eazybanking even without their payment cards (debit, credit, prepaid);• Corporate i-Bank - a secure online solution that allows corporate customers to carry-out banking transactions on the internet;• Zenith Payroll (Branch i-Bank) - automates the [end-to-end] payroll process of the Group’s customers which eliminates the manual processes involved in the generation of monthly payroll while also remitting funds electronically to staff accounts. The platform provides, database backup, payroll reports, customization option, secure payment authorization and salary payments;• Xpath (Customised Branch Collections) - allows customers to collect or receive remittance from their key distributors and customers through any branch of the Group. The platform also enables customers to capture specific information relating to their account. Other features of the product include the provision of electronic receipts, PIN Vending and direct integration; • Internet Banking - a real-time solution that provides customers with access to their account 24 hours a day, 7 days a week via the internet;• EaZymoney - Zenith Bank’s mobile money platform is a wallet payment solution that allows customers make withdrawals(cash-out), make deposits(cash-in), transfer funds, pay bills (DSTV, Electricity etc. ) make purchases and top up airtime using their mobile phones. It is a virtual account/wallet created for the subscriber. With this solution, the subscriber’s mobile number will be the account number. Payment for goods and services, cash withdrawals and deposits can be done from this mobile number through an AGENT or a Bank branch.• Global Pay - a convenient, flexible and secure platform for receiving payments through the internet. This platform accepts multi-currency transactions and also provides online transaction monitoring capabilities; and• Electronic Multicard – this product enables merchants to receive payments from customers when they use a bank card issued either by the Group or another institution recognised by Group on this platform. The platform provides additional benefits to customers as it enables merchant to accept payment after banking hours, provides online transaction monitoring, can be customised to capture specific data and provides an alternative mode of payment.• Visa Telebanking – this innovative offering on the bank’s website allows customers to transfer/receive funds between Visa Credit and Prepaid Cards. It provides real time option for funds transfer between different parties and allows you to your Visa Card account online.• *966 EazyBanking - is a convenient, fast, secure, and affordable way to access your bank account 24 hours a day, 7 days a week through your mobile phone without internet data and is available to all individual account holders with any phone that runs on the GSM platform and runs with debit cards. • Zmart - is a free online retail system where the bank’s customers can list their products online in a customizable online mall for buyers. It is suitable for the bank’s customers involved in business with high end retail content who can take advantage of this platform to sell their wares online.1919Strategic Report Zenith Bank Plc Annual Report December 31, 2018
Zenith Bank Plc Annual Report December 31, 2018
Notice of Annual
General Meeting
NOTICE IS HEREBY GIVEN that the Twenty Eight Annual General Meeting of Zenith Bank Plc will hold at the Civic Centre, Ozumba
Mbadiwe Street, Victoria Island, Lagos at 9.00 a.m. on Monday the 18th day of March, 2019 to transact the following business:-
ORDINARY BUSINESS
1.
To present and consider the Bank’s Audited Accounts for the financial year ended 31st December, 2018, the Reports of the
Directors, Auditors and Audit Committee thereon.
2.
To declare a final dividend.
3.
To re-elect the following Directors retiring by rotation:
(i) Prof. Chukuka Enwemeka
(ii) Mr. Dennis Olisa
(iii) Engr. Mustafa Bello
4.
To authorize the Directors to fix the remuneration of the Auditors.
5.
To elect members of the Audit Committee.
SPECIAL BUSINESS
6.
To consider and if thought fit, to pass the following as ordinary resolution:
That the remuneration of the Directors of the Bank for the year ending December 31, 2019 be and is hereby fixed at N20 million
only.
Dated this 19th day of February, 2019.
NOTES:
1.
PROXY:
A member of the company entitled to attend and vote at the general meeting is entitled to appoint a proxy in his stead. All
instruments of proxy should be completed, stamped and deposited at the office of the Company’s Registrars, Veritas Registrars
Limited, 89A, Ajose Adeogun Street, Victoria Island, Lagos State not later than 48 hours before the time of holding the meeting. A
proxy need not be a member of the company.
2.
Closure of Register of Members
The Register of Members and Transfer Books of the Company will be closed from March 11, 2019 to March 15, 2019 (both dates
inclusive), to enable the Registrar prepare for the payment of dividend.
3. Dividend Warrants
If approved, dividend warrants for the sum of N2.50K for every share of 50K (bringing the total dividend for the financial year
ended December 31, 2018 to N2.80K) will be paid via e-mandate on the 18th of March, 2019, to shareholders whose names are
registered in the Register of Members at the close of business on 8th day of March 2019. Shareholders are advised to forward
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particulars or their account details to the Registrar to enable direct credit of their dividend on same day. Note however, that
holders of the Company’s Global Depository Receipts listed on the London Stock Exchange will receive their dividend payments
after the local payment date.
Audit Committee
In accordance with Section 359(5) of the Companies and Allied Matters Act, 1990, any shareholder may nominate another
shareholder for appointment to the Audit Committee. Such nomination should be in writing and should be forwarded to reach
the Company Secretary at least 21 days before the Annual General Meeting.
Rights of Shareholders/Securities’ Holders to ask Questions
Shareholders/Securities’ Holders have a right to ask questions not only at the Meeting, but also in writing prior to the Meeting, and
such questions must be submitted to the Company on or before the 15th day of March, 2019.
4.
5.
6. Unclaimed Dividend Warrants and Share Certificates
Shareholders are hereby informed that a number of share certificates and dividend warrants have been returned to the Registrars
as “unclaimed”. A list of all unclaimed dividend will be circulated with the Annual Report and Financial Statements. Any member
affected by this notice is advised to write to or call at the office of the Bank’s Registrars, Veritas Registrars Limited, Plot 89A, Ajose
Adeogun Street, Victoria Island, Lagos during normal working hours.
7.
E-Dividend
Notice is hereby given to all shareholders to open bank accounts for the purpose of dividend payment in line with the Securities
and Exchange Commission (SEC) directives. Detachable application forms for e-dividend and e-bonus are attached to the Annual
Report to enable all shareholders furnish the particulars of their bank accounts/CCS details to the Registrars as soon as possible.
8.
Profile of Directors
The profile of all Directors are available for viewing on the bank’s website, www.zenithbank.com
By Order of the Board
MICHAEL OSILAMA OTU, ESQ.
Company Secretary/General Counsel
Plot 87, Ajose Adeogun Street
Victoria Island, Lagos
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Jim Ovia, CON
Chairman’s
Statement
My Fellow Shareholders, Distinguished Guests, Ladies and
Gentlemen;
I am delighted to welcome you to the 28th Annual General
Meeting of our great Bank and to present to you the Annual
Report and Financial Statements for the financial year ended
December 31, 2018. Without any doubt, your unwavering
support and loyalty to the Bank over the years, as evidenced by
your large turnout here today, is appreciated.
Clearly, 2018 was marked by significant global and domestic
economic developments with far-reaching implications for our
business. The resilience of our Bank, however, enabled us to
weather the socio-economic headwinds.
It is, therefore, pertinent to review the economic and financial
environment in which our Bank operated during the period
under review.
MACRO-ECONOMIC REVIEW
T he bank remains
a clear leader
in the digital space
with several firsts in
the deployment of
innovative products,
solutions and an
assortment of
alternative channels
that ensure convenience,
speed and safety of
transactions for all.
Zenith Bank Plc Annual Report December 31, 2018
Zenith Bank Plc Annual Report December 31, 2018
Chairman’s
Statement
The positive growth trajectory of the Nigerian economy which
began in 2017 after exiting recession was maintained in 2018.
Measured by real Gross Domestic Product (GDP), the Nigerian
economy grew by 1.93 per cent in 2018, up from 0.82 per cent
recorded in 2017, according to the National Bureau of Statistics
(NBS). The growth performance of the economy was impacted by
the dynamics of crude oil price in the international commodities
market and domestic oil production.
Oil price remained at appreciable levels through a significant
part of the year driven by the extension of the Declaration of
Cooperation to cap production by the Organisation of Petroleum
Exporting Countries (OPEC) and non-OPEC oil producers as well
concerns about scarcity. The trend was reversed in the last quarter
as fears of a glut combined with weak global economic growth
to drive down prices. The net effect of these developments was a
significant improvement in government revenue and accretion
to the nation’s foreign reserves.
During the year, the goal of the monetary and fiscal authorities,
to a large extent, was the attainment and sustenance of
macroeconomic stability. Thus, the fiscal and monetary efforts
resulted in the stability of interest and exchange rates. Inflationary
pressures returned towards the end of the year after spiralling
downwards from January to July. The Consumer Price Index
(CPI), which measures inflation rate, was at 11.44 per cent (year-
on-year) in December 2018, 0.16 per cent points higher than the
rate recorded the previous month (11.28 per cent), making it
the fifth consecutive rise in headline year-on-year inflation since
July 2018. Similarly, the national currency (the Naira), remained
relatively stable at the inter-bank foreign exchange market
throughout the year. The Investors’ and Exporters’ FX Window
continued to bring some stability to the market and ensured
increased availability of foreign exchange as it acted as a key
driver of foreign portfolio investment inflow into the country.
As a result, the quarterly average exchange rate in the interbank
market stood at N306.70/$1 as at Q4 2018. Also, the quarterly
average foreign exchange rate stood at N364.27/$1 for Q4 2018
in the I & E Window.
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Increased foreign reserves played a significant role in the
stability of the value of the Naira against the US Dollar and
other international currencies during the year under review. The
sustained rise in the price of oil in the international market from
the beginning of the year to early October contributed to the
marked increase in the foreign reserves. OPEC production cap
from which Nigeria was exempted and global concern about
oil scarcity pushed up oil prices such that the OPEC Reference
Basket (ORB) averaged $79.39 in October, the highest monthly
average since October 2014, thereby increasing the nation’s
receipts from oil export.
Though the ORB nosedived in the last quarter and closed the year
at $51.55, total oil receipts coupled with the various measures
adopted by the Central Bank of Nigeria (CBN) in managing
Zenith Bank Plc as a forward
looking brand and a contending
force in the Nigerian financial
services industry has remained
one of the biggest Corporate Social
Responsibility contributors. Our
sustainability and CSR initiatives
are hinged on the belief that today’s
business performance is not all
about the financial numbers, but the
achievement of a balanced scorecard
as demonstrated by an organization’s
contribution to inclusive economic
growth through improvements in the
condition of the host communities
and the larger environment.
foreign exchange, saw the nation’s gross external reserves, which
stood at US$40.69 billion as at January 2018, close the year at
US$43.12 billion.
The increase in external reserves in 2018 did little to stave off
a continued rise in the nation’s public debt stock during the
period. Nigeria’s total public debt stock (external and domestic
debt) which was US$70.99 billion (N21.725 trillion) as at end-
December 2017, rose to US$73.21 billion (about N22.428
trillion) as at September 2018, according to data from the Debt
Management Office (DMO) of the Federation.
The sum distributed by the Federation Account Allocation
Committee (FAAC) witnessed a marked increase in 2018. The
sum of N655.18 billion was shared by the federal, state and
local governments in January 2018 while N812.76 billion was
distributed in December 2018. A total of N8.52 trillion was
allocated to the three tiers of government in 2018 compared to
N6.42 trillion in 2017.
A bearish trend persisted in the Nigerian stock market in the
year under review. The All-Share Index (ASI) of the Nigerian Stock
Exchange (NSE), which opened trading for the year at 38,264.79,
lost 6,834.29 points or 17.86 per cent to close trading on
December 31, 2018, at 31,430.50. Similarly, market capitalisation
shed N1.9 trillion or 16.21 per cent to close trading in the same
period at N11.72 trillion as at December 31, 2018, against N13.61
trillion posted on December 29, 2017. The bearish performance
of the capital market was attributable to the weak economic
outlook, improving yields in advanced economies notably the
United States, and general investor apathy usually associated
with pre-election years.
FINANCIAL RESULTS
Owing to a number of global and domestic factors, 2018 was
a very challenging year for operators in the Nigerian banking
industry. True to our track record, however, we were able to
fully exploit the opportunities within the environment to record
a performance that attests to our durability and resilience as
a brand. Clearly, the results are, once again, a reflection of the
exceptional financial health of the Bank and the Group. For
the Bank, total deposits was N2.82trillion for the year ended
December 31, 2018, representing a 2.9 per cent increase over
the previous year’s figure of N2.74trillion. Profit-Before-Tax rose
by 13.6 per cent, from N169billion in 2017 to N192billion in 2018.
Profit-After-Tax similarly rose by 7.8 per cent, from N153billion
in 2017 to N165billion in 2018. During the same period, total
assets of the Bank grew by 2.7 per cent from N4.83trillion to
N4.96trillion; while shareholders’ fund declined by 3.3 per cent,
from N698billion to N675billion. Gross earnings similarly declined
by 20.2 per cent from N674billion in year 2017 to N538billion in
2018.
As a Group, the performance indices were no less remarkable. The
Group Profit-Before-Tax grew by 16.6 per cent, from N199billion
in year 2017 to N232billion in 2018. Profit-After-Tax thus grew
by 10.9 per cent during the period, from N174billion in 2017 to
N193billion in 2018. The Group total assets similarly rose by 6.4
per cent, from N5.60trillion in 2017 to N5.96trillion in 2018, while
customers’ deposits grew by 7.3 per cent during the same period,
from N3.44trillion to N3.69trillion. Group shareholders’ fund grew
by 0.5 per cent, from N812billion in 2017 to N816billion in 2018;
gross earnings dropped by 15.4 per cent, from N745billion in
2017 to N630billion in 2018.
DIVIDEND
Zenith Bank remains committed to delivering superior returns to
our much-valued shareholders by ensuring that a good chunk of
our profit is set aside for you. In clear demonstration of this, we
had declared and paid an interim dividend of 30kobo per share
in the course of the 2018 financial year. We hereby propose a
final dividend of 250kobo per share. If approved, this will bring
the total dividend for the year ended December 31, 2018 to
280kobo per share as against 270kobo per share that was paid
in the previous year.
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Zenith Bank Plc Annual Report December 31, 2018
Zenith Bank Plc Annual Report December 31, 2018
Chairman’s
Statement
THE BOARD OF DIRECTORS
During the year under review, Alhaji Baba Tela (an Independent
Non-Executive Director) retired from the Board with effect from
October 2, 2018. This follows the expiration of his tenure of
office, having served the Group for almost twelve (12) years. On
behalf of the Board, Management and all shareholders of our
great institution, I wish him success in his future endeavours.
INVESTMENT IN TECHNOLOGY
The Bank remains a clear leader in the digital space with several
firsts in the deployment of innovative products, solutions and
an assortment of alternative channels that ensure convenience,
speed and safety of transactions. In order to continue to cater to
the varied appetites of our customers in a constantly changing
world and stay ahead of the competition, therefore, we have
invested massively in new technologies and innovative solutions
in the last financial year. This is geared towards ensuring that
we continue to provide best-in-class quality service that create
value for all our stakeholders.
CORPORATE SOCIAL RESPONSIBILITY
Zenith Bank made significant progress in its adoption and
integration of sustainable banking principles into our business
operations, especially the credit administration process. At Zenith
Bank, sustainability goes beyond a regulatory requirement. It
is the springboard to the future we desire. Hence the Bank is
committed to reconsidering its business processes, products
and services to ensure compliance with globally acceptable
economic, environmental and social norms.
Our Corporate Social Responsibility (CSR) and community
investments initiatives are targeted to align with the global
objectives to end extreme poverty and hunger, protect the
planet and create sustainable wealth for all, in line with the United
Nations’ Sustainable Development Goals (SDGs). Healthcare
improvement, education and skills development, sports
development, youth and women economic empowerment, as
well as public infrastructure development formed the bedrock
of our CSR endeavours.
Zenith Bank Plc as a forward looking bank has remained one
of the biggest Corporate Social Responsibility contributors.
Our sustainability and CSR initiatives are hinged on the belief
that today’s business performance is not all about the financial
numbers, but the achievement of a balanced scorecard as
demonstrated by an organization’s contribution to inclusive
economic growth through improvements in the condition of
the host communities and the larger environment.
Through our strategic CSR focus, we have been able to deliver
projects that have long-term social and economic benefits for
our host communities. In the course of the year, Zenith Bank
made donations towards the wellbeing of many individuals and
healthcare organizations. In our quest to support government’s
efforts at improving the standard of education and human capital
development, we supported capacity building workshops
and the setting up of ultramodern ICT centres in several
educational institutions across the country, among others. We
also encouraged youth development through our support for
sports at the grassroots and professional levels. In addition to
making donations to various State Governments’ Security Trust
Fund to improve security and safety of lives and properties, the
Bank sponsored various summits, conferences, and seminars
organized by governmental and non-governmental agencies
targeted at creating platforms to improve policymaking that
will sustain economic growth across the local, state and federal
levels.
A detailed breakdown of our Corporate Social Responsibility
initiatives for the year is contained in Note 13 under the Directors’
Report.
MACROECONOMIC OUTLOOK
It is with a great deal of pleasure that I share our perceptions
and approach to business in 2019. It is a known fact that Zenith
Bank has maintained its culture of outstanding performance
and industry leadership even in a very challenging operating
environment. We are constantly monitoring developments in
the local and global economic environment, and appropriately
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applying pragmatic and dynamic approaches to the banking
business. Our strategic focus on the pursuit of shared prosperity
has positioned us to seek and leverage new opportunities in the
market. We recognise the demands and obligations that exist
in the environment where we operate. This has continued to
inform our commitment to sustainability principles and global
best practices, anchored on good corporate governance and
citizenship, and first-class risk management. It is a thread that
runs through the fabric of our operations.
In 2018, the federal government sought to frame the budget
to build on the Economic Recovery and Growth Plan (ERGP),
the medium-term strategy for 2017-2020, designed to advance
macroeconomic stability and economic diversification. The
proposed 2019 budget seeks to maintain the growth momentum
in the ERGP. The aggregate expenditure proposed for 2019 is
N8.83 trillion, comprising capital expenditure of N2.03 trillion
(inclusive of capital in Statutory Transfers), recurrent expenditure
of N4.04 trillion, debt service of N2.14 trillion, statutory transfers
of N492 billion, and sinking fund of N120billion. The 2019
federal government budget is predicated on projected crude oil
production of 2.3 million barrels per day (mpd); crude oil price of
US$60 per barrel; and an average exchange rate of N305/dollar.
The fiscal deficit is projected at N1.86 trillion or 1.3 per cent of
GDP to be financed partly by new borrowings estimated at
N1.65 trillion.
The federal government expects the economy, measured
by Gross Domestic Product (GDP), to grow at 3.01 per cent in
2019, up from 1.93 per cent in 2018. The International Monetary
Fund (IMF) and the World Bank, however, expect the Nigerian
economy to expand by 2 per cent and 2.2 per cent respectively.
The subdued growth outlook for the Nigerian economy in 2019
is based on expectations of a decline in oil revenue due to falling
oil prices and crude oil production cap of 1.68 (mpd) mandated
by OPEC and non-OPEC oil producers.
The domestic and global economic environment remain
susceptible to several vagaries. Subdued growth is expected in
the Nigerian economy similar to 2018, albeit the growth prospect
for 2019 is brighter. The beacon of optimism in the outlook for
2019 is the gradual improvement in the performance of the
non-oil sectors and their contribution to GDP which is expected
to continue in the short to medium term. The major downsides
to Nigeria’s growth outlook for 2019 are significant fall in global
crude oil price, and disruption to optimal oil production. The
downsides to global growth outlook are weak commodities
prices and international trade tension. In view of these, we shall
continue to be pragmatic in our projections while continually
creating value for all our stakeholders.
APPRECIATION
In conclusion, 2018 has been an interesting, challenging but
successful year for Zenith Bank. Indeed, the collective efforts
of all our staff, Management and Board made it possible for us
to sustain our superior performance in the year. I am, therefore,
very thankful to our customers for their unflinching loyalty; our
staff and Management, whose passion and commitment have
sustained our very good performances over the years; and our
Board, whose vision and exemplary leadership ensure that our
Bank does not falter in the pursuit of its mission and objectives.
Ladies and gentlemen, I welcome you to the 2019 financial year,
with unwavering assurance of continued improved performance
by our Bank.
Thank you.
Jim Ovia. CON
Chairman
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Peter Amangbo I n the year under review, we harnessed the enormous potential of our human capital, digital solutions, excellent service culture, and cost control strategies to grow our business and enhance efficiency, which culminated in a stellar performance.GMD/CEO’s ReviewIn 2018, the Nigerian economy continued its recovery from recession albeit slowly, while trade tensions exacerbated in the global economy with attendant economic headwinds on the operating environment. However, a considerable increase in the price of oil in the international commodities market, relative stability in domestic oil production output, and exemption of Nigeria from production cuts by member countries of the Organisation of Petroleum Exporting Countries (OPEC) and non-OPEC members helped ease pressure on the Nigerian foreign exchange market. As a pragmatic institution, we were primed to take advantage of the opportunities availed by the changing dynamics in the domestic and global economy to create value for our stakeholders, while mitigating the negative impacts of macroeconomic headwinds. Zenith Bank Plc Annual Report December 31, 2018
Zenith Bank Plc Annual Report December 31, 2018
GMD/CEO’s
Review
In the year under review, we harnessed the enormous potential
of our human capital, digital solutions, excellent service culture,
and cost control strategies to grow our business and enhance
efficiency, which culminated in a stellar performance.
Since its inception, the Zenith brand has been synonymous with
innovation and the deployment of cutting-edge technology to
cater to the expectations of our customers. Our array of products,
services and alternative channels that ensure convenience,
speed and security of transactions, and our readiness to deploy
state-of-the-art technology has assured that we maintain our
leadership in the digital space.
Riding on the success of the inaugural “Style by Zenith” – our
flagship lifestyle, beauty, fashion, and entertainment fair, we shall
continue to intensify efforts towards making further in-roads
into the retail segment of the market with new and innovative
products that support small and medium-sized enterprises.
Our drive towards entrenching sustainable principles in our
business operations gained further momentum in the year
under review. Our corporate social responsibility initiatives and
investments are hinged on the firm belief that our performance
is not all about profit – we believe that our social investments,
contributions to inclusive economic growth and development,
as well as improvements in the condition of the physical
environment all constitute our balanced scorecard in line with
the Sustainable Development Goals.
As a financial institution, we continue to place a high premium
on developing a robust risk management framework which has
helped in promoting the soundness of the bank, protecting its
assets, and ensuring its growth. We are committed to entrenching
a robust enterprise risk management, global best practices in
corporate governance and sustainability in the coming years.
In the year under review, Zenith Bank was recognised as the “Best
Bank in Corporate Governance” (World Finance), “Bank of the Year”
for the second consecutive year (BusinessDay Awards), and “Best
Institution in Sustainability Reporting in Africa” for the second
consecutive year (SERAS Awards). These awards and recognition
amongst several others attest to our market leadership.
The operating domestic
and global macroeconomic
environment in 2019 will be challenging for myriad reasons
including weak recovery of commodity prices and continuing
trade tensions. However, we are optimistic and primed to
harness potential opportunities for astounding performance.
We shall continue to be guided by our core strategy of adapting
to market dynamics and the evolving needs of our customers as
we seek to continually delight and surpass their expectations.
As a customer-centric organisation, our people are the most
valuable asset that is vital to our long-term sustainable success,
competitive advantage, and brand differentiation strategy.
The skills, experience and commitment of our employees are
critical for stakeholders’ engagement and delivery of exceptional
services to our customers. Consequently, our focus in the years
ahead is to continually create an environment for our people to
thrive, while creating value for all stakeholders.
W e shall continue to
intensify efforts
towards making
further in-roads into the retail
segment of the market with
new and innovative products
that support small and
medium-sized enterprises.
Thankyou.
Peter Amangbo
Group Managing Director/CEO
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Board of Directors
Zenith Bank Plc Annual Report December 31, 20183232Strategic ReportZenith Bank Plc Annual Report December 31, 2018Board of DirectorsChairmanJim Ovia, CONPeter AmangboGroup Managing Director/CEOAdaora UmeojiDeputy Managing DirectorEbenezer OnyeagwuDeputy Managing Director (cid:35)(cid:48)(cid:34)(cid:51)(cid:37)(cid:1)(cid:48)(cid:39)(cid:1)(cid:37)(cid:42)(cid:51)(cid:38)(cid:36)(cid:53)(cid:48)(cid:51)(cid:52)3333Strategic ReportGabriel UkpehNon-Executive DirectorJeffrey EfeyiniNon-Executive DirectorDennis OlisaExecutive DirectorUmar Shuaib AhmedExecutive DirectorDr. Temitope FasorantiExecutive DirectorProf. Oyewusi Ibidapo-ObeNon-Executive DirectorEngr. Mustafa BelloNon-Executive DirectorProf. Chukuka S. EnwemekaNon-Executive Director Zenith Bank Plc Annual Report December 31, 2018
Directors’ Report for the Year
Ended December 31, 2018
The directors present their report on the affairs of ZENITH BANK PLC, together with the financial statements and independent auditor’s
report for the year ended 31 December, 2018.
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
opened five new branches and no branch was closed.
As at 31 December, 2018 the Group had 417 branches, 256 cash centers; 1,891 ATM terminals; 34,006 POS terminals and 5,732,820 cards
issued to its customers.
3. Operating results
Gross earnings of the Group decreased by 15.4% and profit before tax increased by 16.2% . This is largely due to the reduction of 25%
in expenses. Highlights of the Group’s operating results for the year under review are as follows:
Gross earnings
Profit before tax
Minimum 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 %
*See Note 43
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N’ Million
630,344
231,685
(4,052)
(34,209)
193,424
(277)
193,147
32,456
160,691
193,147
6.15
4.98
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N’ Million
Restated*
745,189
199,319
(4,350)
(21,178)
173,791
(319)
173,472
22,950
150,522
173,472
5.53
4.70
4. Dividends
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 N2.50 per share which in addition to the N0.30 per share paid as interim dividend
amounts to N2.80 per share (2017: Interim of N0.25 per share and final of N2.45 per share) from the retained earnings account as at
December 31, 2018. 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 N22.3
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, 2018.
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, 2018
December 31, 2017
Director
Designation
Direct
Indirect
Direct
Indirect
Mr. Jim Ovia, CON. *
Chairman/ Non-Executive Director
3,546,199,395
1,513,137,010
2,946,199,395 1,593,494,151
Prof. Chukuka Enwemeka
Non-Executive Director
Mr. Jeffrey Efeyini
Non Executive Director
Prof. Oyewusi lbidapo-Obe
Non Executive Director/ Independent
Mr. Gabriel Ukpeh
Non Executive Director/ Independent
Engr. Mustafa Bello
Non Executive Director/ Independent
127,137
541,690
421,426
32,660
-
-
-
-
-
-
127,137
541,690
321,426
32,660
-
-
-
-
-
-
Mr. Peter Amangbo *
Group Managing Director
15,000,000
21,000,000
5,000,000
2,300,000
Ms. Adaora Umeoji *
Deputy Managing Director
53,873,169
1,710,123
31,620,141
1,710,123
Mr. Ebenezer Onyeagwu
Deputy Managing Director
Mr. Ahmed Umar Shuaib
Executive Director
Dr. Temitope Fasoranti
Executive Director
Mr. Dennis Olisa
Executive Director
36,000,000
7,077,343
5,075,000
7,122,316
-
-
-
-
7,000,000
1,077,343
1,875,000
4,122,316
-
-
-
-
* The indirect holdings relate to the holdings of the Directors in the underlisted companies: .
•
Jim Ovia: (Institutional investors Ltd, Lurot Burca Ltd, Jovis Nigeria Ltd, Veritas Registrars Ltd, Zenith General Insurance Ltd, Zenith
Securities Ltd)
• Peter Amangbo: (Apeaches Ventures Limited, Pocenc Limited)
• Adaora Umeoji: (Palaise Vendome Limited)
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Zenith Bank Plc Annual Report December 31, 2018
Directors’ Report for the Year
Ended December 31, 2018
6. Directors’ Remuneration
The Bank ensures that remuneration paid to its Directors complies with the provisions of the codes of corporate governance issued by
its regulators.
In compliance with Section 34(5) of the Code of Corporate Governance for Public Companies as issued by Securities and Exchange
Commission, the Bank makes disclosure of the remuneration paid to its directors as follows:
Type of package Fixed Description
Basic Salary
Other allowances
- Part of gross salary package for Executive Directors only. Reflects the banking
industry competitive salary package and the extent to which the Bank’s objectives
have been met for the financial year.
- Part of gross salary package for Executive Directors only. Reflects the banking
industry competitive salary package and the extent to which the Bank’s objectives
have been met for the financial year.
Paid at periodic
intervals during the
financial year
Timing
Paid monthly during
the financial year.
Productivity bonus
-Paid to executive directors only and tied to performance of the line report. It is
also a function of the extent to which the Bank’s objectives have been met for the
financial year.
Paid annually in arrears.
Director fees
- Paid annually on the day of the Annual General Meeting (‘AGM’) to Non-Executive
Paid annually on the
Directors only.
day of the AGM.
Sitting allowances
- Allowances paid to Non-Executive Directors only, for attending Board and Board
Paid after each
Committee Meetings
Meeting.
7. Changes on the Board
In the course of the financial year ended December 31, 2018, Alhaji Baba Tela (an Independent Non-executive Director) retired from the
Board with effect from October 2, 2018. This follows the expiration of his tenure of office.
8. Directors’ interests in contracts
For the purpose of section 277(1) and (3) of Companies and Allied Matters Act of Nigeria, (GAMA), 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.
9. 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.
10. 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.
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11. Shareholding analysis
The shareholding pattern of the Bank as at 31 December, 2018 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
Percentage of
Shareholders
Number of
holdings
Percentage
Holdings (%)
537,935
80,329
20,032
791
141
116
26
23
4
6
84.1308 %
1,596,747,902
12.5631 %
1,638,639,586
3.1329 %
3,108,802,557
0.1237 %
1,682,858,529
0.0221 %
966,504,587
0.0181 %
2,567,943,284
0.0041 %
1,791,562,895
0.0036 %
4, 138,595,598
0.0006 %
2,279,638,965
0.0009 %
11,625,199,884
639,403
100 %
31,396,493,787
5.09 %
5.22 %
9.90 %
5.36 %
3.08 %
8.18 %
5.71 %
13.18 %
7.26 %
37.02 %
100 %
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
Percentage of
Shareholders
Number of
holdings
Percentage
Holdings (%)
539,481
81,858
20,122
736
118
89
21
22
2
6
83.9718 %
1,621,763, 173
12.7414 %
1,698,673,987
3.1320 %
3,211,097,112
0.1146%
1,649,481,195
0.0184 %
879,516,903
0.0139 %
2,210,108,463
0.0033 %
1,435,220,409
0.0034 %
4,880,206,479
0.0003 %
2,421,682,932
0.0009 %
11,388,743,134
642,455
100 %
31,396,493,787
5.17 %
5.41 %
10.23 %
5.25 %
2.80 %
7.04 %
4.57 %
15.54 %
7.71 %
36.27 %
100 %
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Directors’ Report for the Year
Ended December 31, 2018
12. Substantial interest in shares
According to the register of members as at 31 December, 2018, the following shareholders held more than 5% 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 - MAIN
Number of Shares Held
Number of Shares Held
3,546,199,395
2,075,323,002
1,820,956,539
1,774,705,532
11.29 %
6.61 %
5.80 %
5.65 %
According to the register of members as at 31 December 2017, the following shareholders held more than 5% 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
Number of Shares Held
2,946,199,395
3,242,344,702
2,438,670,039
1,809,897,790
9.38 %
10.33 %
7.77 %
5.76 %
13. Donations and charitable gifts
The Bank made contributions to charitable and non-political organisations amounting to N3,065 million during the year ended 31
December 2018 (31 December 2017: N2,611 million).
The beneficiaries are as follows:
Various States' Governments Security Trust Funds
Various Sports Organisations i.e. NFF, NBBF etc.
Seed contribution to private health sector alliance
Financial Inclusion Project (Central Bank of Nigeria)
Medical assistance to the underpriviledged
Educational support to Nigerian schools
ICT centres for educational institutions
Economic Summit
Delta State Principal Cup Second Edition
CFA Society of Nigeria
Louisville Girls High School
Centre for Value in Leadership Youth Empowerment
St. Saviours School lkoyi
Nigeria Academy of Neurological Surgeons
Musical Society of Nigeria
Other donations individually below N10 million
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N’ Million
1,571
363
305
200
158
131
85
61
43
30
30
25
20
10
14
19
3,065
Educational support to Nigerian schools
Sport organisations
States 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
14. 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.
15. Disclosure of customer complaints in financial statements for the period ended 31 December, 2018
Description
Number
Amount claimed
Amount refunded
31-Dec-18
31-Dec-17
31-Dec-18
N
31-Dec-17
N
31-Dec-18
N
31-Dec-17
N
Pending complaints brought forward
Received Complaints
Resolved Complaints
Unresolved Complaints escalated to
CBN for intervention I carried forward
86
224
122
188
154
220
288
9,783,412,201
1,571,817,766
11,026,857,556
10 045,190,151
N/A
N/A
N/A
N/A
3,776,775,251
1,833,595,716
800,131,355
346,672,659
86
17,033,494,506 9,783,412,201
-
-
*Other refunds made to customers during the year amounted to N9,372,176
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Zenith Bank Plc Annual Report December 31, 2018
Directors’ Report for the Year
Ended December 31, 2018
Human
Resources
16.
Employment of disabled persons
(i)
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.
Health, safety and welfare at work
(ii)
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.
Employee training and development
(iii)
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.
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(iv) Gender analysis of staff The average number of employees of the Bank during the year by gender and level is as follows; a. Analysis of total employees Gender NumberGender PercentageMaleFemaleTotalMaleFemaleEmployees3,236 3,017 6,253 52 %48 %3,236 3,017 6,253 52 %48 %(b) Analysis of Board and top management staffGender NumberGender PercentageMaleFemaleTotalMaleFemaleBoard members(Executive and Non-executive directors)11 1 12 92 % 8% Top management staff (AGM-GM)43 21 64 67 % 33 % 54 22 76 71 % 29 % (c) Further analysis of board and top management staffGender NumberGender PercentageMaleFemaleTotalMaleFemaleAssistant general managers25143964%36 %Deputy general managers1021283%17%General managers851362%38%Board members (Non-executive directors)6-6100%-%Executive directors (excluding MD and DMDs)3-3100%-%Deputy managing director11250%50%Managing director/CEO1-1100%-%54227671%29%17. AuditorsThe auditors, Messrs KPMG Professional Services, having satisfied the relevant corporate govemance rules on their tenure in office, have indicated their willingness to continue in office as auditors to the Bank, In accordance with section 357 (2) of the Companies and Allied Mailers Act of Nigeria, therefore, the auditors will be reappointed at the next annual general meeting of the Bank without any resolution being passed.By order of the BoardMichael Osilama Otu (Esq.) Company SecretaryJanuary 18 ,2019FRC/2013/MULTI/000000010844141Strategic Report (cid:42)(cid:85)(cid:169)(cid:84)(cid:1)(cid:52)(cid:85)(cid:74)(cid:77)(cid:77)(cid:1)(cid:35)(cid:66)(cid:79)(cid:76)(cid:74)(cid:79)(cid:72)(cid:15)(cid:15)(cid:15)(cid:1)(cid:48)(cid:79)(cid:77)(cid:90)(cid:1)(cid:38)(cid:66)(cid:91)(cid:74)(cid:70)(cid:83)(cid:37)(cid:74)(cid:66)(cid:77)(cid:1)(cid:1)(cid:85)(cid:80)(cid:1)(cid:72)(cid:70)(cid:85)(cid:1)(cid:84)(cid:85)(cid:66)(cid:83)(cid:85)(cid:70)(cid:69)(cid:11)(cid:26)(cid:23)(cid:23)(cid:11)(cid:17)(cid:4) 02Governance & Sustainability Zenith Bank Plc Annual Report December 31, 2018
Corporate Governance Report for
the Year Ended December 31, 2018
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 period under review, the Directors and other key
personnel of the Bank complied with the following Codes of
Corporate Governance, which it subscribes to:
a.
The Central Bank of Nigeria (CBN) issued Code of Corporate
Governance for Banks and Discount Houses in Nigeria
2014.
The Securities and Exchange Commission (SEC) issued
Code of Corporate Governance for public companies.
b.
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 shareholder holding more than 20% of the
Bank’s total 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.
fully abreast of
responsibilities and
Directors are
knowledgeable in the business and are therefore able to exercise
good judgment on issues relating to the bank’s business. They
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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.
The Board has a Charter which regulates its operations. The
Charter has been forwarded to the Central Bank of Nigeria in line
with the CBN Code of Corporate Governance.
5. Board structure
The Board is made up of a Non-Executive Chairman, five (5) Non-
Executive Directors and Six (6) Executive Directors including
the GMD/CEO. Three (3) of the Non-Executive Directors are
independent directors, appointed in compliance with the Central
Bank of Nigeria (CBN) circular on Appointment of Independent
Directors by Banks.
The Group Managing Director/Chief Executive is responsible
for the day to day running of the bank and oversees the group
structure, assisted by the Executive Committee (EXCO). EXCO
comprises the Executive Directors, 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.
b.
c.
reviewing and approving the Bank’s strategic plans for
implementation by management;
review and approving the Bank’s financial Statements;
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;
implementing the Bank’s succession planning;
approving acquisitions and divestitures of business
operations, strategic investments and alliances and
major business development initiatives;
approving delegation of authority for any unbudgeted
expenditure;
e.
f.
g.
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
its own effectiveness
responsibilities, including monitoring the effectiveness
of individual directors.
fulfilling
in
The membership of the Board during the period is as follows:
Board of Directors
NAME
Mr. Jim Ovia, CON
Alhaji Baba Tela*
Prof. Chukuka S. Enwemeka
Mr Jeffrey Efeyini
Prof. Oyewusi Ibidapo-Obe
Mr. Gabriel Ukpeh
Engr. Mustafa Bello
Mr. Peter Amangbo
Ms. Adaora Umeoji
Mr. Ebenezer Onyeagwu
Mr. Umar Shuaib Ahmed
Dr. Temitope Fasoranti
Mr. Dennis Olisa
POSITION
Chairman
Independent/Non-Executive
Director
Non-Executive Director
Non-Executive Director
Independent/Non-Executive
Director
Independent/Non-Executive
Director
Independent/Non-Executive
Director
Group Managing Director/
CEO
Deputy Managing Director
Deputy Managing Director
Executive Director
Executive Director
Executive Director
* Retired from the Board effective October 2, 2018.
least every quarter but may hold
The Board meets at
extraordinary sessions to address urgent matters requiring the
attention of the Board
main responsibility is to lead and manage the Board to ensure
that it operates effectively and fully discharges its legal and
regulatory responsibilities. The Chairman is responsible for
ensuring that Directors receive accurate, timely and clear
information to enable the Board take informed decisions
and provide advice to promote the success of the Bank. The
Chairman also facilitates the contribution of Directors and
promotes effective relationships and open communications
between Executive and Non-Executive Directors, both inside
and outside the Boardroom.
The Board has delegated the responsibility for the day-to-
day management of the Bank to the Managing Director/Chief
Executive Officer, who is supported by Executive Management.
The Managing Director executes the powers delegated to him in
accordance with guidelines approved by the Board of Directors.
Executive Management is accountable to the Board for the
development and implementation of strategies and policies. The
Board regularly reviews group performance, matters of strategic
concern and any other matter it regards as material.
8. Director Nomination Process
The Board Nomination and Remuneration Committee
is
charged with the responsibility of leading the process for Board
appointments and for identifying and nominating suitable
candidates for the approval of the Board.
With respect to new appointments, the Board Governance,
nomination and rumeneration committee identifies, reviews
and recommends candidates for potential appointment as
Directors. In identifying suitable candidates, the Committee
considers candidates on merit against objective criteria and with
due regard for the benefits of diversity on the Board, including
gender as well as the balance and mix of appropriate skills and
experience.
7. Roles of Chairman and Chief Executive
The roles of the Chairman and Chief Executive are separate and
no one individual combines the two positions. The Chairman’s
Shareholding in the Bank is not the only considered criterion for
the nomination or appointment of a Director. The appointment
of Directors is subject to the approval of the shareholders and
the Central Bank of Nigeria.
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Zenith Bank Plc Annual Report December 31, 2018
Corporate Governance Report for
the Year Ended December 31, 2018
9. Induction and continuous training
Upon appointment to the Board and to Board Committees, all
Directors receive an induction tailored to meet their individual
requirements.
The induction, which is arranged by the Company Secretary,
may include meetings with senior management staff and key
external advisors, to assist Directors in acquiring a detailed
understanding of the Bank’s operations, its strategic plan, its
business environment, the key issues the Bank faces, and to
introduce Directors to their fiduciary duties and responsibilities.
The Bank attaches great importance to training its Directors
and for this purpose, continuously offers training and education
from onshore and offshore institutions to its Directors, in order
to enhance their performance on the Board and the various
committees to which they belong.
10. Non-Executive Directors’ remuneration
The Bank’s policy on remuneration of Non-Executive Directors
is guided by the provisions of the CBN Code which stipulates
that Non-Executive Directors’ remuneration should be limited
to sitting allowances, Directors’ fees and reimbursable travel and
hotel expenses.
11. 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.
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The Committees of the Board meet quarterly but may hold
extraordinary sessions as the business of the Bank demands.
The following are the current standing Committees of the Board:
11.1 Board credit committee
The Committee is currently made up of eight (8) members
comprising four (4) non-Executive Directors and four (4)
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
Alhaji Baba Tela*
Prof. Chukuka Enwemeka
Mr. Gabriel Ukpeh
Mr. Peter Amangbo
Mr. Ebenezer Onyeagwu
Ms. Adaora Umeoji
Dr. Temitope Fasoranti
* Retired from the Board with effect from 02 October 2018
Terms of reference
•
To conduct a quarterly review of all collateral security 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
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;
To perform such other duties and responsibilities as the
Board of Directors may assign from time to time.
11.2 Staff Welfare, 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 year is as follows:
Alhaji Baba Tela* – Chairman
Prof. Chukuka Enwemeka
Prof. Oyewusi Ibidapo-Obe**
Mr. Peter Amangbo
Ms. Adaora Umeoji
Mr. Ahmed Umar Shuaib
* Retired from the Board with effect from 02 October 2018
** Appointed as acting Chairman from 18 January 2019
Terms of reference
•
Approval of large scale procurements by the bank and
other items of major expenditure by the bank;
Recommendation of the bank’s Capital Expenditure
(CAPEX) and major Operating Expenditure (OPEX) limits for
•
•
•
•
•
•
•
•
•
•
consideration by the Board;
Consideration of management requests for branch set up
and other business locations;
Consideration of management request for establishment
of offshore subsidiaries and other offshore business offices;
Consideration of the dividend policy of the Group and the
declaration of dividends or other forms of distribution 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 GMD/CEO;
Review and recommendations on recruitment, promotion,
and disciplinary actions for senior management and 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 and staff,
based on the recommendation of the Executives;
Oversight of broad-based employee compensation policies
and programs;
11.3 Board risk management committee:
The Board Risk Management Committee has oversight
responsibility for the overall risk assessment of various areas of
the Bank’s operations and compliance.
The Chief Risk Officer and the Chief Inspector have access
to this Committee and make quarterly presentations for the
consideration of the Committee. Chaired by Prof. Chukuka
(a non executive Director), the Committee’s
Enwemeka
membership comprises the following:
Prof. Chukuka S. Enwemeka - Chairman
Mr. Jeffrey Efeyini
Mr. Gabriel Ukpeh
Mr. Peter Amangbo
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Zenith Bank Plc Annual Report December 31, 2018
Corporate Governance Report for
the Year Ended December 31, 2018
Mr. Ebenezer Onyeagwu
Mr. Dennis Olisa
Terms of reference
•
implement
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;
risk management practices,
Design and
specifically provide ongoing guidance and support for the
refinement of the overall risk management framework and
ensuring that best practices are incorporated;
Ensure that management understands and accepts its
responsibility for identifying, assessing and managing risk;
Ensure and monitor risk management practices, specifically
determine which enterprise risks are most significant
and approve resource allocation for risk monitoring and
improvement activities, assign risk owners and approve
action plans;
Periodically review and monitor risk mitigation process and
periodically review and report to the Board of Directors:
(a)
the magnitude of all material business risks;
(b) the processes, procedures and controls in place to
(c)
manage material risks; and
the overall effectiveness of the risk management
process;
Facilitate the development of a comprehensive risk
management framework for the Bank and develop the
risk management policies and processes and enforce its
compliance;
To perform such other duties and responsibilities as the
Board of Directors may assign from time to time.
•
•
•
•
•
•
11.4 Board audit and compliance committee:
The Committee is chaired by an Independent Non Executive
Director - Mr. Gabriel Ukpeh, who is a Fellow of the Institute
of the Chartered Accountants of Nigeria (ICAN) and who is
knowledgeable in financial matters. The Chief Inspector and
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Chief Compliance Officer have access to this Committee and
make quarterly presentations for the consideration of the
Committee.
The committee membership comprises the following:
Mr. Gabriel Ukpeh - Chairman
Alhaji Baba Tela*
Mr. Jeffrey Efeyini
Engr. Mustafa Bello
* Retired from the Board with effect from 02 October 2018
Committee’s terms of reference
The Board Audit and compliance Committee have the following
responsibilities as delegated by the Board of Directors::
•
Ascertain whether the accounting and reporting policies
of the Bank are in accordance with legal requirements and
acceptable ethical practices;
Review the scope and planning of audit requirements;
Review the findings on management matters (Management
Letter) in conjunction with the external auditors and
Management’s responses thereon;
Keep under review the effectiveness of the Bank’s system of
accounting and internal control;
•
•
•
•
•
• Make recommendations to the Board with regard to the
appointment, removal and remuneration of the external
auditors of the Bank;
Authorize the internal auditor to carry out investigations
into any activities of the Bank which may be of interest or
concern to the Committee;
Assist in the oversight of compliance with legal and other
regulatory requirements, assessment of qualifications and
independence of the external auditors and performance
of the Bank’s internal audit function as well as that of the
external auditors;
Ensure that the internal audit function is firmly established
and that there are other reliable means of obtaining
sufficient assurance of regular review or appraisal of the
system of internal control in the Bank;
Oversee management’s processes for the identification
of significant fraud risks across the Bank and ensure that
•
•
•
•
adequate prevention, detection and reporting mechanisms
are in place;
On a quarterly basis, obtain and review reports by the
internal auditor on the strength and quality of internal
controls, including any issues or recommendations for
improvement, raised during the most recent control review
of the Bank;
Discuss and review the Bank’s unaudited quarterly, audited
half year and annual financial statements with management
and external auditors to include disclosures, management
control reports, independent reports and external auditors’
reports before submission to the Board, in advance of
publication;
•
•
•
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• 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 and ensure that the internal audit
function is adequately resourced to carry out the plan;
.To review periodically the Internal Audit progress against
Plan for the period and review outstanding Agreed Actions
and follow up;
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.
To perform such other duties and responsibilities as the
Board of Directors may assign from time to time.
11.5 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
* Retired from the Board with effect from 02 October 2018
•
Committee’s terms of reference
To determine a
reasonable and competitive
fair
•
compensation practices for Executive Directors of the bank
which are consistent with the bank’s objectives;
Determining the amount and structure of compensation
and benefits for Executive Directors;
Ensuring the existence of an appropriate remuneration
policy and philosophy for Executive Directors;
Review and recommendation for Board ratification, all
terminal compensation arrangements for Directors;
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Zenith Bank Plc Annual Report December 31, 2018
Corporate Governance Report for
the Year Ended December 31, 2018
•
•
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•
•
•
•
•
•
•
•
Recommendation of appropriate compensation for Non-
Executive Directors for Board and Annual General Meeting
consideration;
Review and approval of any recommended compensation
actions for the Company’s Executive Committee members,
including base salary, annual incentive bonus, long-term
incentive awards, severance benefits, and perquisites;
Review and continuous assessment of the size and
composition of the Board and Board Committees, and
recommend the appropriate Board structure, size, age, skills,
competencies, composition, knowledge, experience and
background in line with needs of the Group and diversity
required to fully discharge the Board’s duties;
Recommendation of membership criteria for the Group
Board, Board Committees and subsidiary companies Boards.
Identification at the request of the Board of specific
individuals for nomination to the Group and subsidiary
companies Boards and to make recommendations on the
appointment and election of New Directors (including the
Group MD) to the Board, in line with the Group’s approved
Director Selection criteria;
Review of the effectiveness of the process for the selection
and removal of Directors and to make recommendations
where appropriate;
Ensuring that there is an approved training policy for
Directors, and monitor compliance with the policy;
Review and make recommendations on the Group’s
succession plan for Directors and other senior management
staff for the consideration of the Board;
Regular monitoring of compliance with Group’s code of
ethics and business conduct for Directors and staff;
Review the Group’s organization structure and make
recommendations to the Board for approval;
Review the 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
the Board’s structure, composition,
all aspects of
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.
11.6 Statutory 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 / Director’s Representatives
Alhaji Baba Tela*
Mr. Jeffrey Efeyini
Mr. Gabriel Ukpeh
* Retired from the Board with effect from 02 October 2018
Committee’s terms of reference
•
To meet with the independent Auditors, Chief Financial
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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 financial statements,
including any related notes, the bank’s specific disclosures
and discussion under “Managements Control Report” and
the independent auditors’ 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;
such other matters in connection with overseeing the
financial reporting process and the maintenance of internal
controls as the committee shall deem appropriate.
To prepare the Committee’s report for inclusion in the
Bank’s annual report;
To report to the entire Board at such times as the Committee
shall determine.
•
•
•
•
•
•
11.7 Executive committee (EXCO)
The EXCO comprises 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.
11.8 Other committees
IIn 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
(f ) Sustainability Steering Committee
the
comprises
(a) Management committee (MANCO)
senior
The Management Committee
management of the Bank and has been established to identify,
analyze, 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.
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Zenith Bank Plc Annual Report December 31, 2018
Corporate Governance Report for
the Year Ended December 31, 2018
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
the Board. The Committee also makes
established by
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.
is responsible
(d) Risk management committee (RMC)
This Committee
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
is
responsible for amongst others, development of corporate
(IT) Steering Committee
Information Technology
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:
1
2
3
4
5
6
7
8
9
10
11
12
The Group Managing Director/Chief Executive Officer;
One (1) Deputy Managing Director
Two (2) Executive Directors;
Chief Financial Officer;
Chief Inspector;
Chief Risk Officer;
Chief Information Officer/Head of Infotech;
Head of Infotech - Software;
Head of Infotech - Enginering;
Head of Card Services;
Group Head of IT Audit;
Head of e-Business;
The committee meets monthly or as the need arises.
(f ) Sustainability Steering Committee (SSC)
This Committee is responsible for regular analysis and review
of sustainable banking policies and practices within the bank
to ensure compliance with globally acceptable economic,
environmental and social norms.
The Bank recognized that every institution is as strong as the
strength of its relationship and that the ability to nurture existing
relationships and develop new ones will invariably play a
significant role in the financial stability of the organization.
Therefore, the bank believes that an organization must forge a
closer relationship with its stakeholders, including customers,
employees, local communities, suppliers, among others, to
ensure triple bottom line profit.
The Committee present quarterly reports 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 representatives from various marketing and
operations departments and groups within the bank as well as
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the CSR and Research Group.
12. 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.
13. 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.
14. 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:
remuneration,
•
into account
level
Fixed
taking
of responsibility, and ensuring this remuneration
is
competitive with remuneration paid for equivalent posts in
banks of equivalent status both within and outside Nigeria.
Variable annual remuneration linked to the Zenith Bank
financial results. The amount of this remuneration is subject
to achieving specific quantifiable targets, aligned directly
with shareholders’ interest.
the
•
15. Monitoring Compliance With Corporate Governance
Chief Compliance Officer
The Chief Compliance Officer monitors compliance with money
laundering requirements and the implementation of the Code
of Corporate Governance of the Bank. The Chief Compliance
Officer and the Company Secretary forward regular returns to
the Central Bank of Nigeria on all whistle-blowing reports and
also on corporate governance compliance.
Whistle Blowing Procedures
The Bank has a whistle-blowing procedure that ensures
anonymity for whistle-blowers. The Bank has a direct link on the
bank’s website, provided for the purpose of whistle-blowing.
link on
Internally, the Bank has a direct
intranet for
dissemination of information, to enable members of staff
report all identified breaches of the Bank’s Code of Corporate
Governance. All reports are investigated and necessary sanctions
applied for breaches.
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Zenith Bank Plc Annual Report December 31, 2018
Corporate Governance Report for
the Year Ended December 31, 2018
During the year the Bank filed quarterly returns in line with the
provision on whistle blowing.
Codes of Conduct
The Bank has an internal Code of Professional Conduct for
Employees, which all members of staff subscribe to upon
assumption of duties. The Bank also has a Code of Conduct for
Directors.
16. Foreign Subsidiaries Governance Structure
The Bank as at 31 December, 2018 has four (4) foreign subsidiaries,
two (2) local subsidiaries and two (2) representative offices. Their
activities are governed by the foreign subsidiaries governance
structure put in place by the Group Head Office to ensure
efficient and effective operations. The framework establishes the
scope, method of performance management, periodic reviews
and feedback mechanism for operating within the local laws in
their jurisdiction.
The activities of the subsidiaries are closely monitored by Zenith
Bank Plc using the following strategies:
Liaison and Oversight Function
The Foreign Subsidiaries Department is charged with the
responsibility of overseeing the growth and implementation of
the Bank’s global expansion strategy into new territories/regions.
The Department serves as an interface between the bank and its
offshore subsidiaries. It also provides guidance on how to
optimize synergy within the Group. Reports from the Group is
presented to the Board at its quarterly meetings.
Representation on the Subsidiary Board
Zenith Bank Plc exercise control over the subsidiaries by
maintaining adequate representation on the Board of each
subsidiary. The representatives are chosen on the basis of
professional competencies, business experience and integrity as
well as knowledge of the Bank’s business.
The subsidiaries Board of Directors are responsible for reviewing
and approving the strategic plans and financial objectives as
well as monitoring the corporate performance against these
objectives.
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Local Board and Board Committees
To ensure that the activities of the subsidiaries reflect the
same values, ethics, controls and processes, Zenith Bank Plc is
represented by at least two (2) non-executive directors in the
local board and board committee of each foreign subsidiary.
These directors provide effective oversight function over each
subsidiary and ensure that there is consistency with the strategic
direction of the Bank. They also act as link with the parent board
at the Group Head Office in Nigeria.
Subsidiary Board Committees
The Subsidiary Board meets at least every quarter and exercises
oversight function on the business of each location through the
following committee structure
•
Board Credit Committee which
is charged with the
responsibility of considering the approval of new loans
and renewal of existing ones above the threshold set for
the Management Credit Committee. It also determines the
credit policy or changes therein.
Board Risk Management Committee which has oversight
responsibility for the overall risk management of various
areas of the Bank’s operations and compliance. This
includes advising the Board on risk-related matters arising
from its business.
Board Audit and Compliance Committee is responsible
for the review of accounting and reporting policies to
ensure compliance with regulatory and financial reporting
requirements. The Board, through the committee exercises
oversight on the Compliance and AML/CFT activities
of the Bank. Overall, it monitors the effectiveness of the
Bank’s system of internal control to safeguard its assets for
shareholders.
Board Governance, Nomination and Remuneration
Committee (BGNRC) saddled with the responsibility of
determining a fair, reasonable and competitive structure
for senior management of the Bank as well as administering
the Governance structure for the Bank.
Board Staff Welfare, Finance & General Purpose Committee
has the responsibility of approving large scale procurements
by the Bank, as well as matters relating to staff welfare,
discipline, staff remuneration and promotion.
•
•
•
•
Management of Subsidiaries
Zenith Bank Plc appoints one of its senior management staff to
act as the Managing Director of each subsidiary. Other key staff
are seconded to assist the managing director in the supervision
of critical departments of the Bank.
The objective of this management structure is to ensure that the
core values and principles of the Zenith Bank brand are instilled
seamlessly across its offshore subsidiaries. It also offers the Group
an opportunity to adopt a uniform culture of best practices in
the area of corporate governance, technology, controls and
customer service excellence.
Monthly and Quarterly Reports
The subsidiaries furnish Zenith Bank Plc with monthly and
quarterly reports on their business and operational activities.
These reports cover the subsidiaries’ financial performance,
risk assessment, regulatory and compliance matters amongst
others. The reports are analyzed and presented to Executive
Management and the Group Board of Directors for decision
making and fulfilment of its oversight function.
Group Performance & Strategy Review/Budget Session
The Managing Directors and senior management team of the
respective Subsidiaries of the Bank attend the annual Group’s
Performance & Strategy Review/Budget Session during which
their performances are analyzed and recommendations made
towards achieving continuous improvement in financial, social
and environmental performance. The annual budgets of the
subsidiaries are discussed at this session. This session also serves
as a forum for sharing business ideas, tapping into identified
synergy within the Group and disseminating information on
relevant best practices that could enhance our sustained growth
in the banking landscape.
Annual Internal Control Audit
The Internal Control & Audit Department of Zenith Bank Plc
carries out an annual audit of each of the offshore subsidiaries in
line with the Group’s Annual Audit Programme. This audit
exercise covers all operational areas of the subsidiaries and the
outcome is discussed with Executive Management at the home
office for timely intervention on identified lapses. It is important
to note that this exercise is distinct from the daily operations
audit carried out by the respective internal audit unit within the
subsidiaries.
Annual Loan Review/Audit
This audit is carried out by the Loan Review & Monitoring Unit of
Zenith Bank Plc. The core areas of concentration during this audit
exercise include asset quality assessment, loan performance,
review of security pledged, loan conformity with credit policy,
documentation check and review of central liability report
among others.
Group Compliance Function
Zenith Bank Plc is committed to complying with regulatory
requirements in all locations where it operates. To this end, The
Bank’s Compliance Group monitors ongoing developments in
the regulatory environment of each location where it operates
and ensuring compliance with same. This includes conducting
periodic compliance checks on each subsidiary annually to
ascertain compliance with local banking laws and regulations.
Report of External Auditors
In line with global best practices and regulatory guidelines, the
bank undertakes review of Management letters from external
Auditors on periodic audit of the subsidiary companies. This
is to ensure that all exceptions are complied with and for
implementation of the Auditors’ recommendations.
17. 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.
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Zenith Bank Plc Annual Report December 31, 2018
Corporate Governance Report for
the Year Ended December 31, 2018
18. 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.
Director
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. Ahmed Umar Shuaib
Dr. Temitope Fasoranti
Mr. Dennis Olisa
Mr. Peter Amangbo
6
6
5*
6
6
6
6
5
6
6
6
6
6
6
4
N/A
4
4
4
N/A
4
N/A
4
1**
3***
N/A
4
4
N/A
4
N/A
4
4
N/A
N/A
N/A
4
N/A
N/A
4
4
N/A
4
4
4
4
4
N/A
N/A
N/A
N/A
N/A
N/A
N/A
4
N/A
N/A
4
4
N/A
4
N/A
N/A
4
N/A
N/A
3****
4
4
N/A
4
4
N/A
N/A
4
3
N/A
N/A
N/A
N/A
N/A
N/A
Note:
* Retired from the Board with effect from October 2, 2018 and approved by the Board on November 15, 2018
** Mr. Ahmed Umar Shuaib stepped down as a member of the Committee on January 22, 2018 following Board Committee’s
reconstitution.
*** Dr. Temitope Fasoranti was appointed as a member of the committee at the board meeting of January 22, 2018 following Board
committees’ reconstitution.
**** Mr Dennis Olisa was appointed as a member of the committee at the board meeting of January 22, 2018 following Board
committees’ reconstitution
N/A - Not Applicable (Not a Committee member)
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Dates for Board and Board Committee meetings held in the year ended 31 December 2018
Board meetings
22-Jan-18
13-Apr-18
02-May-18
24-Jul-18
17-Oct-18
15-Nov-18
Board credit committee meeting
22-Jan-18
12-Apr-18
Finance and general purpose committee
22-Jan-18
12-Apr-18
Board risk management committee meeting
22-Jan-18
12-Apr-18
Board audit and compliance committee meeting
22-Jan-18
12-Apr-18
Board governance, nomination and remuneration
22-Jan-18
12-Apr-18
committee
Audit committee meeting
22-Jan-18
12-Apr-18
-
-
-
-
-
-
23 July, 2018
16-Oct-18
23 July, 2018
16-Oct-18
23 July, 2018
16-Oct-18
23 July, 2018
16-Oct-18
23 July, 2018
16-Oct-18
23 July, 2018
30-Oct-18
19. Audit Committee
The table below shows the frequency of meetings of the audit committee and members’ attendance at these meetings during
the period under review.
Date of meetings held during the period:
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)
* Retired from the Board with effect from October 2, 2018
SR - Shareholders representative
20. Analysis of Fraud and Forgeries Returns
4
4
4
4
3
4
Nature of Fraud
ATM/Electronic fraud
Staff Perpetrate
Impersonation
Stolen/Forged Instrument
Internet Banking
Others
Total
December 31, 2018
December 31, 2017
No.
44
32
32
146
20
43
317
%
Loss
-
67
22
11
-
-
Actual Loss to
the Bank (N)
Jan-Dec 2018
-
316,910,400
4,250,103
107,534,526
413,841
-
No.
39
19
166
34
1
20
%
Loss
-
34
37
25
-
4
100
429,098,870
279
100
Actual Loss to
the Bank (N)
Jan - Dec 2017
-
11,689,602
12,789,868
8,644,515
-
1,624,830
34,748,815
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Zenith Bank Plc Annual Report December 31, 2018
20 February 2019
The Chairman
Zenith Bank Plc.
Plot 84, Ajose Adeogun Street
Victoria Island
Lagos Nigeria
20 February 2019
The Chairman
Zenith Bank Plc.
Plot 84, Ajose Adeogun Street
Victoria Island
Lagos Nigeria
Report to the Directors of Zenith Bank Plc. on the Outcome of the 2018 Board Performance
Assessment
PricewaterhouseCoopers Chartered Accountants (“PwC”) was engaged to carry out an evaluation of the Board of
Directors of Zenith Bank Plc. (“the Bank”) as required by Section 2.8.1 of the Central Bank of Nigeria (CBN) Code of
Corporate Governance for Banks and Discount Houses in Nigeria (“the CBN Code”). The evaluation covered the
Board’s structure and composition, responsibilities, processes and procedures, relationships and performance of the
Board Committees for year ended 31 December 2018.
Report to the Directors of Zenith Bank Plc. on the Outcome of the 2018 Board Performance
Assessment
PricewaterhouseCoopers Chartered Accountants (“PwC”) was engaged to carry out an evaluation of the Board of
Directors of Zenith Bank Plc. (“the Bank”) as required by Section 2.8.1 of the Central Bank of Nigeria (CBN) Code of
Corporate Governance for Banks and Discount Houses in Nigeria (“the CBN Code”). The evaluation covered the
Board’s structure and composition, responsibilities, processes and procedures, relationships and performance of the
Board Committees for year ended 31 December 2018.
The Board is responsible for the preparation and presentation of the information relevant to its performance. Our
responsibility was to reach a conclusion on the Board’s performance based on work carried out within the scope of our
engagement as contained in our Letter of Engagement. In carrying out the evaluation, we relied on representations
made by members of the Board and Management and on the documents provided for our review.
The Board has complied significantly with the provisions of the CBN Code. Areas of compliance include the wealth of
experience and diversity of skill on the Board, clear delegation of responsibility to Management and effective
monitoring of the Bank’s performance against its strategic objectives. Furthermore, the Board exercises strong
oversight of the Bank’s risk management practices and compliance systems.
The Board is responsible for the preparation and presentation of the information relevant to its performance. Our
responsibility was to reach a conclusion on the Board’s performance based on work carried out within the scope of our
engagement as contained in our Letter of Engagement. In carrying out the evaluation, we relied on representations
made by members of the Board and Management and on the documents provided for our review.
We have also identified some areas of improvement. The Board should ensure that the External Auditors report on the
Bank’s risk management practices. Furthermore, the Board should expedite the appointment of an additional Non-
Executive Director, to increase the ratio of Non-Executive Directors to Executive Directors.
The Board has complied significantly with the provisions of the CBN Code. Areas of compliance include the wealth of
experience and diversity of skill on the Board, clear delegation of responsibility to Management and effective
monitoring of the Bank’s performance against its strategic objectives. Furthermore, the Board exercises strong
oversight of the Bank’s risk management practices and compliance systems.
We also facilitated a Self and Peer Assessment of each Director’s performance in the year under review. This
assessment covered the Director’s time commitment to the business of the Bank, commitment to continuous learning
and development and a self-and-peer assessment. Each Individual Director’s Assessment Report was prepared and
will be made available to them respectively, while a consolidated report of the performance of all Directors will be
submitted to the Chairman.
We have also identified some areas of improvement. The Board should ensure that the External Auditors report on the
Bank’s risk management practices. Furthermore, the Board should expedite the appointment of an additional Non-
Executive Director, to increase the ratio of Non-Executive Directors to Executive Directors.
We also facilitated a Self and Peer Assessment of each Director’s performance in the year under review. This
assessment covered the Director’s time commitment to the business of the Bank, commitment to continuous learning
and development and a self-and-peer assessment. Each Individual Director’s Assessment Report was prepared and
will be made available to them respectively, while a consolidated report of the performance of all Directors will be
submitted to the Chairman.
Yours faithfully
For: PricewaterhouseCoopers Chartered Accountants
Femi Osinubi
FRC/2017/ICAN/0000001665
Yours faithfully
For: PricewaterhouseCoopers Chartered Accountants
PricewaterhouseCoopers Chartered Accountants
Landmark Towers, 5B Water Corporation Road, Victoria Island, Lagos, Nigeria
T: +234 1 271 1700, www.pwc.com/ng TIN: 01556757-0001
Femi Osinubi
FRC/2017/ICAN/0000001665
Partners:
S Abu, O Adeola, W Adetokunbo-Ajayi, UN Akpata, O Alakhume, C Azobu, E Erhie, D McGraw, U Muogilim, P Obianwa, T Ogundipe, C Ojechi, O Oladipo,
P Omontuemhen, O Osinubi, T Oyedele, AB Rahji, O Ubah
PricewaterhouseCoopers Chartered Accountants
Landmark Towers, 5B Water Corporation Road, Victoria Island, Lagos, Nigeria
T: +234 1 271 1700, www.pwc.com/ng TIN: 01556757-0001
Partners:
S Abu, O Adeola, W Adetokunbo-Ajayi, UN Akpata, O Alakhume, C Azobu, E Erhie, D McGraw, U Muogilim, P Obianwa, T Ogundipe, C Ojechi, O Oladipo,
P Omontuemhen, O Osinubi, T Oyedele, AB Rahji, O Ubah
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Z
enith Bank is a reputable brand that creates superior value for
its esteemed stakeholders. The bank remains outstanding in the
quest for excellence and commitment to high-quality service,
innovation and sustainable banking. In line with global best
practices, Zenith Bank has embraced sustainable business prin-
ciples and standards and has fully integrated environmental and
social risks considerations into its credit and investment deci-
sions. All credit proposals are now screened for environmental
and social risks before they are presented to our Global Credit
Committee for consideration. The bank is poised to promoting sustainable banking
practices and green finance initiatives in communities where we operate.
Sustainable Wealth Creation
In our business investments and lending activities, we are conscious of the need to
accelerate economic growth and development, create wealth and generate employ-
ment opportunities for the over 20 million Nigerian youths that are actively seeking
employment. The wealth we create is increasingly our most significant competitive
edge.
Our strategy is to support the
government’s efforts at diversify-
ing the economy through ongo-
ing funding and investments in
the real sector of the economy
such as agriculture, power,
manufacturing, solid minerals, in-
dustries and construction. The
bank also prioritizes economic
areas with the highest potential
to enhance the condition and
wellbeing of the broader
economy and bring develop-
ment closer to the people.
In the same vein, the Bank is com-
mitted to promoting green in-
vestments with priority attention
to projects that promote the
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Zenith Bank Plc Annual Report December 31, 2018
wellbeing of the larger society and the physical en-
vironment. We have continued to invest responsi-
bly in the best interest and per capita wealth of our
stakeholders. We understand that we can only be as
prosperous as our customers, investors and the
larger economy. We remain focused on product in-
novation, fair pricing, value addition and responsible
competition and marketing.
Environmental Sustainability and
Carbon Footprint Management
Zenith Bank’s Environmental and Social Manage-
ment System (ESMS) provides a clear framework for
the management of E&S risks of the bank concern-
ing its borrowers and investees. We take measures
to avoid, mitigate and minimise the risks identified
in our E&S risk due diligence. The ESMS of the Bank
is based on the Equator Principles, the International
Finance Corporation (IFC) Performance Standards,
among other global sustainability principles.
Zenith Bank has completed the automation of E&S
Risk Exposure Assessment Workflow, in a move to
implement our Environmental and Social Manage-
ment System. Our goal is to ensure sustainable fi-
nancing of every project we invest in and adopt re-
sponsible practices in line with the Sustainable De-
velopment Goals and principles of responsible bank-
ing of the United Nations Environment Programme
Finance Initiative (UNEP-FI).
Indeed, our target is to broaden our E&S risk cover-
age to all major projects, irrespective of the sector,
by 2020; and to all projects, major and minor, by
2025. In 2018, about 90 per cent of all our transac-
tions valued at over N3.4 trillion were screened and
accessed for E&S risk. This was a remarkable improve-
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ment over 2017 figures where 26 per cent of all trans-
actions valued at N1.4 trillion were screened and as-
sessed for E&S risk. We hope to cover up to 100 per
cent of our credit transactions by 2019 and to im-
prove significantly in our E&S monitoring of existing
credit customers and projects.
Zenith Bank is consistently working towards power-
ing all our operations from alternative (renewable)
sources, such as solar energy. As at end of the year
2018, we have grown the number of our build-
ings powered by solar energy to nearly 413 of-
fices. Specifically, about 632 ATMs are currently
powered by solar energy, with 142 installed in
2018. We have also put in place, policies to re-
duce consumption of paper and water in our
daily operations. This includes recycling of pa-
per and automation of some banking processes.
In line with our carbon footprint emission re-
duction strategy, Zenith Bank is committed to
significantly reducing its environmental foot-
prints. Again, the bank contracted V4 Advisors
to measure its carbon footprint/emissions
within the period under review, in line with
regulatory and global expectations. To achieve
success in this regard, we continually organised
carbon footprint training for relevant Key Per-
formance Indicator (KPI) owners in the different de-
partments in the bank.
Social Investments and Community
Development
The year 2018 witnessed slow economic growth,
challenging business environment and rising unem-
ployment rate, which are reflections of the socioeco-
nomic difficulties experienced by households in our
host communities. Because we are mindful of the
vulnerabilities that these communities and house-
eration (NBBF), a real female empower-
ment initiative that has produced national
and international basketball stars. Simi-
larly, our sponsorship of the Nigerian Foot-
ball Federation (NFF) underscores our pas-
sion for the development of grassroots
sports and the empowerment of future Ni-
gerian football stars. With a total of about
N406 million, sports received a large chunk
of our social investment in 2018 in line with
the high priority we place on this critical
sector.
Health: Our health initiatives in the year
under review were mostly focused on ma-
ternal healthcare and medical assistance
to the underprivileged. In 2018, we sus-
tained our support for the Private Sector
Health Alliance of Nigeria with a seed con-
tribution of N305m. The goal of this initia-
tive is to positively influence private and
public policies towards addressing women
and children’s health and wellbeing issues,
including maternal and neonatal mortal-
ity. Other health initiatives in 2018 include
N158 million investment in medical inter-
ventions for low-income individuals faced
with various life-threatening medical con-
ditions, all geared towards complement-
ing government’s efforts at improving life
expectancy in the country.
Education: In line with our resolute com-
mitment to the development of the Nige-
rian educational sector, we expended
about N266million towards this initiative
Our health
initiatives in the
year under
review were
mostly focused
on maternal
healthcare and
medical
assistance to the
underprivileged.
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holds face, we remained committed to
enhancing our social investments. In
the year under review, Zenith Bank’s
total Corporate Social Responsibility in-
vestment was the biggest, reaching a
record high of N3.1 billion at the end of
the year.
Healthcare improvement; education
and skills development; sports devel-
opment; youth, women and economic
empowerment; and public infrastruc-
ture development remained the focus
of our CSR endeavours during the year.
Security: Our most significant social in-
vestment in 2018 was on promoting the
security of lives and property of local
communities. Our need-gap analysis re-
vealed that security remains the cardi-
nal need of our communities. We are
committed to collaborating with the lo-
cal communities, the federal, state and
local governments, and other relevant
agencies to preserve public peace, and
ensure a crime-free environment. In the
year under review and as part of our
corporate social responsibility, we in-
vested N1.57 billion in this initiative
which covers the contributions to sev-
eral State Security Funds across the fed-
eration.
Sports: In 2018, our sports develop-
ment initiatives included title sponsor-
ship of the Delta State Principal’s Cup;
the Nigerian Football Federation (NFF);
and our flagship Zenith National
Women’s Basketball League in partner-
ship with the Nigerian Basketball Fed-
Zenith Bank Plc Annual Report December 31, 2018
In line with our resolute commitment
to the development of the Nigerian
educational sector, we expended
about N266million towards this
initiative in the 2018 financial year.
in the 2018 financial year. Our educational empow-
erment initiatives in the year under review include a
flagship vocational training centre in Maiduguri; an
ICT Centre in the University of Nigeria, Nsukka; do-
nation of ICT facilities to Ambrose Ali University,
Ekpoma; support for the North-East Children’s Fund;
educational support for Louisville Girls High School,
Ijebu-Itele, Ogun State; the Zenith Academic Excel-
lence Award for Best Graduating Students in some
Federal Universities and the Zenith Scholarship Fund
for the Nigerian Computer Society, among others.
Because we understand the critical importance of
education in our developmental agenda as a coun-
try, we will continue to invest in this all-important
sector towards improving people’s skills to enhance
their standard of living.
Workplace
Zenith Bank has approved the constitution of Health,
Safety and Environment Management Committee to
ensure a safe and secure workplace for its employ-
ees, vendors, contractors and other stakeholders. We
have also developed the Health, Safety and Environ-
ment Management Plan, in line with the provisions
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of ISO45001. In 2018, we trained 441 employ-
ees in Basic Emergency Response & First Aid.
Also, 63 participants were trained in Occupa-
tional, Health & Safety.
The Bank has continued to enforce a mandatory
5 pm closing time for all staff bank-wide. This is
a significant work/life balance initiative that
saves a substantial amount for the bank in terms
of energy costs, while also reducing our overall
carbon footprint.
Human Rights
Zenith Bank prohibits discrimination in all its
ramifications. Our organisation maintains an
equal pay for equal work policy where employ-
ees receive the same remuneration across the
same level, irrespective of gender in all our busi-
ness locations. Ours is an inclusive work envi-
ronment, and we are committed to SDG 5 of
gender equality where people are valued
equally and can rise in the corporate ladder
based on merit and competence.
Zenith Bank has a robust Human Rights Policy
which lay down guidelines on how our employ-
ees are expected to relate among themselves
and with all other stakeholders within our busi-
ness operations. Besides, our employees, con-
tractors, agents, consultants and other business
partners are encouraged to conform to the
United Nations Universal Declaration of Human
pliers etc.) to ensure their E&S compliance and avert
potential reputational risks. ICT facilities and equip-
ments constituted a substantial part of our procure-
ments.
We empower local communities and businesses by
ensuring that our procurement policy deliberately
promotes the patronage of local ICT vendors. Our
relations with IT vendors are guided by laid down
service level agreements and compliance with our
Code of Conduct, while our Tender Committee over-
sees the process of selection of vendors. Zenith
Bank’s procurement practices have positively im-
pacted the economy, creating jobs, income and eco-
nomic empowerment for households.
Financial Inclusion
Zenith Bank has continued to support financial in-
clusion and literacy in the country. In 2018, the bank
invested N200 million to support the Financial In-
clusion Project of the Central Bank of Nigeria. The
Rights (UDHR).
The Bank has developed a human right assessment
course, “Introduction to Human Rights Framework
and the Rights of the child” to train staff across all
levels on the basics of human rights. This course has
been deployed on our Learning Management Por-
tal and made mandatory for staff, from entry level
to executive management level. During the year un-
der review, the bank assessed about 795 credit trans-
actions for human rights-related risks such as child
labour, discrimination by gender, ethnicity, and reli-
gion, among others.
Women Empowerment
Zenith Bank operates a gender-inclusive workplace
culture. In our business operations, we seek to pro-
vide products and services designed specifically for
women. The female gender make-up of our total
workforce remained 48 per cent relative to 52 per
cent of male employees. Our male/female ratio for
management level staff for 2018 was 74:26. In
the year under review, we spent over N346 bil-
lion in capacity building for our female employ-
ees, and about 1,976 employees took our Online
Women’s Right training.
Zenith Bank has supported female participation
in sports with its title sponsorship of the Zenith
National Women Basketball League. Many
alumni of the league currently have successful
careers in national and international basketball
teams around the world.
Sustainable Supply Chain
Management
Our procurement policies prioritise excellent
product quality, service delivery and after-sales
support. As part of efforts to comply with the
principles of responsible consumption and pro-
duction as enshrined in SDG 12, we have inte-
grated environmental and social conditions into
our Code of Conduct for Suppliers, Vendors and
Contractors, among others. This promotes socio-
environmental friendly business practices, and
also to ensure high-quality products and ser-
vices, value for money and responsible sourc-
ing of raw materials in our supply chain.
In 2018, we administered our “Code of Conduct”
on all major vendors, suppliers and contractors
of the bank and periodically screen all third party
business partners (investees, contractors, sup-
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Zenith Bank Plc Annual Report December 31, 2018
Capacity building and
awareness creation
remained one of the key
people-oriented
strategies we adopted in
the year under review.
bank has developed winning strategies for nurtur-
ing financial inclusion in the country. Our financial
literacy strategy is aimed at empowering the finan-
cially excluded groups with necessary information
and adequate knowledge of the various types of fi-
nancial products and services that are available to
them.
In the year under review, 538,910 previously
unbanked individuals received financial services or
products for the first time from Zenith Bank. We were
able to achieve this through our several retail prod-
ucts, such as the Zenith Children’s Account (ZECA),
Zenith Integrated Student Account (ZISA), Aspire Ac-
count, easy save Accounts (Classic & Premium),
EazyMoney, Mobile Phone enabled, Agent Banking,
and Zenith Mobile Banking. Zenith Bank’s mobile
app, agency banking initiative and short messaging
codes (*966#) have continued to drive the financial
inclusion of the unbanked population in Nigeria.
In the year under review, the Bank organised
programmes to mark the Financial Literacy and
World Savings Day in March and October, respec-
tively. This covered six (6) schools in each of the six
(6) geopolitical zones of the country. Within this pe-
riod, we also increased the number of branches that
can be easily accessed by physically challenged per-
sons, from 25 to 30.
Training and Capacity Building
Capacity building and awareness creation remained
one of the key people-oriented strategies of the
bank. In 2018, we continued to carry out E&S risk
management training for all our employees using
classrooms and online platforms. As part of our
sustainability acculturation strategy, we made sig-
nificant progress with the integration of Environmen-
tal and Social Risk Management sessions into our
quarterly Anti-Money Laundering and Operational
Risks trainings bank-wide, as well as the quarterly
Business Summit of the decision makers of the Bank
and Zenith orientation program during on boarding
of new employees. We also publish “Sustainability
Titbits”, Sustainability Lifestyle Tips” and
“Sustainability Headlines” daily using official staff
emails, while our intranet portal is continuously used
to create E&S awareness.
Reporting
In 2018, Zenith Bank endorsed the draft principles
of responsible banking under the auspices of the
United Nations Environment Programme Finance
Initiative (UNEP-FI). The bank also signed on for the
Board Session of the United Nations Global Compact
(UNGC) aimed at setting a three-year strategic plan
and direction for the Local Network. Zenith Bank is a
member of the United Nations Global Compact; the
United Nations Environment Programme’s Finance
Initiative, (UNEP-FI); and is signatory to the Central
Bank of Nigeria’s Nigerian Sustainable Banking Prin-
ciples (NSBP). Consequently, we remain fully com-
mitted to sustainability reporting.
Our third standalone Sustainability Report titled
“Sustaining the Strong Momentum” uniquely feature
the bank’s significant footprints in line with the Sus-
tainable Development Goals (SDGs) of the United
Nations. The report followed the adoption of the new
GRI standard and earned the bank the Award of the
Best Company in Sustainability Reporting in Africa
at the 2018 SERAS CSR Awards. Additionally, Zenith
Bank sends biannual progress reports to the CBN as
well as annual reports to the IFC, UNGC, PROPARCO,
among others.
Conclusion
Zenith Bank has in place a strong governance struc-
ture that supports its sustainable lending, wealth
creation and community empowerment strategies.
We understand that our brand thrives on the sus-
tainable value we create for our stakeholders. As
such, we shall continue to be strategic and proac-
tive in pursuing our sustainability targets in line with
globally acceptable environmental and social prac-
tices.
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Statement of Directors’ Responsibilities in Relation to the
Financial Statements for the Year Ended December 31,2018
The Directors accept responsibility for the preparation of the annual consolidated and seperate financial statements that give a true
and fair view in accordance with International Financial Reporting Standards (IFRS) and in the manner required by the Companies and
Allied Matters Act Cap C20, Laws of the Federation of Nigeria 2004, Financial Reporting Council of Nigeria Act, 2011, the Banks and
Other Financial Institutions Act Cap B3, Laws of the Federation of Nigeria 2004 relevant Central Bank of Nigeria (CBN) Guidelines and
circulars.
The Directors further accept responsibility for maintaining adequate accounting records as required by the Companies and Allied
Matters Act Cap C20, Laws of the Federation of Nigeria, 2004 and for such internal control as the directors determines necessary to
enable the preparation of financial statements that are free from material misstatements whether due to fraud or error.
The Directors have made assessment of the Bank and Group’s ability to continue as a going concern and have no reason to believe that
the Bank and the Group will not remain a going concern in the year ahead.
SIGNED ON BEHALF OF THE
BOARD OF DIRECTORS BY:
__________________________
Mr. Jim Ovia, CON.
Chairman
FRC/2013/CIBN/00000002406
January 18, 2019
_______________________
Mr. Peter Amangbo
Managing Director
FRC/2013/ICAN/00000001310
January 18, 2019
___________________________
Mr. Ebenezer Onyeagwu
Deputy Managing Director
FRC/2013/ICAN/00000003788
January 18, 2019
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Zenith Bank Plc Annual Report December 31, 2018
Report of the Audit Committee for the
Year Ended December 31,2018
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03Financials Zenith Bank Plc Annual Report December 31, 2018
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Zenith Bank Plc Annual Report December 31, 2018
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Zenith Bank Plc Annual Report December 31, 2018
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Zenith Bank Plc Annual Report December 31, 2018
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75Financials Zenith Bank Plc Annual Report December 31, 2018
Consolidated and Separate Statements of Profit or Loss and other
Comprehensive Income for the Year Ended 31 December, 2018
In millions of Naira
Gross earnings
Interest and similar income
Interest and similar expense
Net interest income
Impairment loss on financial and non-financial instruments
Net interest income after impairment loss on
financial and non-financial instruments
Net income on fees and commission
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:
Items that will never be reclassified to profit or loss:
Group
Bank
Note(s)
31-Dec-18
31-Dec-17
Restated*
31-Dec-18
31-Dec-17
Restated*
6
7
8
9
11
10
25
26
36
12
13a
13a
630,344
745,189
440,052
474,628
538,004
367,816
673,636
420,210
(144,458)
(216,637)
(124,156)
(200,672)
295,594
257,991
243,660
219,538
(18,372)
(98,227)
(15,313)
(95,244)
277,222
159,764
228,347
124,294
81,814
82,548
80,202
157,974
17,947
22,444
64,124
80,202
17,479
65,561
157,974
22,606
(16,648)
(12,428)
(14,625)
(11,059)
(2,399)
(1,631)
(2,187)
(1,431)
(68,556)
(64,459)
(56,657)
(55,672)
(137,897)
(144,893)
(124,576)
(132,852)
231,685
199,319
192,107
169,421
(4,052)
(4,350)
(4,052)
(4,350)
(34,209)
(21,178)
(22,575)
(12,068)
193,424
173,791
165,480
153,003
Fair value movements on equity instruments at FVOCI
21(b)
1,459
(2,551)
1,459
(2,551)
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
4,828
6,287
5,233
2,682
-
-
1,459
(2,551)
Total comprehensive income for the year
199,711
176,473
166,939
150,452
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 (Naira)
193,147
173,472
165,480
153,003
277
319
-
-
199,437
176,139
166,939
150,452
274
334
-
-
14
6.15
5.53
5.27
4.87
The accompanying notes are an integral part of these consolidated and separate financial statements.
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Consolidated and Separate Statements of
Financial Position as at 31 December, 2018
In millions of Naira
Note(s) 31-Dec-18
31-Dec-17
01-Jan-17
31-Dec-18 31-Dec-17
01-Jan-17
Group
Bank
Restated*
Restated*
Restated*
Restated*
Assets
Cash and balances with central banks
Treasury bills
Assets pledged as collateral
Due from other banks
Derivative assets
Loans and advances
Investment securities
Investment in subsidiaries
Deferred tax asset
Other assets
Property and equipment
Intangible assets
Total assets
Liabilities
Customers' deposits
Derivative liabilities
Current income tax payable
Deferred tax liabilities
Other liabilities
On-lending facilities
Borrowings
Debt securities issued
Total liabilitles
Capital and reserves
Share capital
Share premium
Retained earnings
Other reserves
Attributable to equity holders of the parent
Non-controlling interest
Total shareholders' equity
Total liabilities and equity
15
16
17
18
19
20
21
22
23
24
25
26
27
32
13
23
28
29
30
31
33
34
34
34
34
954,416
957,663
669,058
902,073
907,265
627,385
1,000,560
936,817
557,359
592,935
674,274
88,826
468,010
328,343
495,803
459,457
57,219
82,860
817,043
592,935
393,466
88,826
799,992
463,787
468,010
325,575
273,331
354,405
57,219
82,860
1,823,111
2,100,362
2,289,365
1,736,066
1,980,464
2,138,132
565,312
330,951
199,478
156,673
117,814
118,622
-
9,513
80,948
149,137
16,678
-
-
9,561
6,440
92,494
37,536
34,003
9,197
75,910
34,003
9,197
56,052
133,384
105,284
133,854
118,223
12,989
4,645
15,399
12,088
33,003
6,041
35,410
94,613
3,903
5,955,710
5,595,253 4,739,825
4,955,445
4,833,658
4,283,736
3,690,295
3,437,915
2,983,621
2,821,066
2,744,525
2,552,963
16,995
9,154
67
20,805
66,834
8,915
18
8,953
45
16,995
5,954
-
20,805
6,069
-
66,834
6,927
-
231,716
243,023
214,080
223,463
229,332
249,136
393,295
437,260
361,177
383,034
350,657
356,496
263,106
332,931
153,464
393,295
458,463
361,177
383,034
350,657
418,979
292,802
332,931
153,464
5,139,959
4,783,137 4,040,760
4,280,413
4,135,675
3,672,783
15,698
255,047
322,237
221,231
814,213
1,538
15,698
15,698
255,047
255,047
356,837
261,608
183,217
165,729
810,799
698,082
1317
983
15,698
255,047
238,635
165,652
675,032
-
15,698
255,047
287,867
139,371
697,983
-
15,698
255,047
213,107
127,101
610,953
-
815,751
812,116
699,065
675,032
697,983
610,953
5,955,710
5,595,253
4,739,825
4,955,445
4,833,658
4,283,736
The accompanying notes are an integral part of these consolidated and separate financial statements.
The financial statements were approved by the Board of Directors for issue on 18 January, 2019 and signed on its behalf by:
Jim Ovia, CON (Chairman)
FRC/2013/CIBN/00000002406
Peter Amangbo (Group Managing Director and Chief Executive)
FRC/2013/lCAN/00000001310
Ebenezer Onyeagwu (Deputy Managing Director)
FRC/2013/ICAN/00000003788
Mukhtar Adam, PhD (Chief Financial Officer)
FRC/2013/MUL Tl/00000003196
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Zenith Bank Plc Annual Report December 31, 2018
Consolidated and Separate Statements of
Changes in Equity as at 31 December, 2018
Group
In millions of Naira
Attributable to equity holders of the Parent
Share
capital
Share
premium
Foreign currency
translation reserve
Fair value
reserve
Statutory
SMIEIS
reserve
reserve
Credit risk
reserve
Retained
earnings
Total Non- cotrolling
Interest
Total
equity
At 1 January, 2017
15,698
255,047
28,465
10,950
112,114
3,729
10,471
267,008
703,482
983
704,465
Correction of errors (see note 43)
-
-
-
-
Restated 1 January, 2017
15,698
255,047
-
28,465
10,950
112,114
3,729
10,471
261,608
698,082
Restated Profit for the period (see note 43)
Foreign currency translation differences
Fair value movements on equity instruments
Total comprehensive income for the period
Transfer between reserves
Transactions with owners of the Parent
Dividends
-
-
-
-
-
-
-
-
-
-
-
5,218
-
-
-
(2,551)
5,218
(2,551)
-
-
At 31 December, 2017 (restated)
15,698
255,047
33,683
8,399
135,064
3,729
2,342
356,837
810,799
1,317
812,116
At January 1, 2018
15,698
255,047
33,683
8,399
135,064
3,729
2,342
356,837
810,799
Adjustment on initial application of IFRS 9,
(see note 34c(ii))
Restated balance at 1 January, 2018
15,698
255,047
33,683
8,399
135,064
3,729
2,342
Profit for the period
Foreign currency translation differences
Fair value movements on equity instruments
Total comprehensive income for the period
Transfer between reserves
Transactions with owners of the Parent
Dividends
Cost of transfer from income to stated capital
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
4,831
-
4,831
-
-
-
-
-
1,459
1,459
-
-
-
32,456
(732)
At 31 December, 2018
15,698
255,047
38,514
9,858
167,520
3,729
1,610
322,237
814,213
1,538
815,751
22,950
(8,129)
(14,821)
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
(5,400)
(5,400)
173,472
173,472
-
-
5,218
(2,551)
983
319
15
(5,400)
699,065
173,791
5,233
(2,551)
173,472
176,139
334
176,473
(63,422)
(63,422)
(63,422)
-
-
-
-
-
-
-
-
-
1,317
812,116
(53)
(108,169)
1,264
277
(3)
274
199,711
703,947
193,424
4,828
1,459
(86,340)
(1,567)
(108,116)
(108,116)
248,721
702,683
193,147
193,147
-
-
4,831
1,459
193,147
199,437
(31,724)
-
(86,340)
(86,340)
(1,567)
(1,567)
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Group
In millions of Naira
Attributable to equity holders of the Parent
Share
Share
Foreign currency
Fair value
capital
premium
translation reserve
reserve
Statutory
reserve
SMIEIS
reserve
Credit risk
reserve
Retained
earnings
Total Non- cotrolling
Interest
Total
equity
-
-
-
-
267,008
703,482
(5,400)
(5,400)
261,608
698,082
173,472
173,472
-
-
5,218
(2,551)
173,472
176,139
At 1 January, 2017
15,698
255,047
28,465
10,950
Restated 1 January, 2017
15,698
255,047
28,465
10,950
112,114
3,729
-
-
112,114
3,729
10,471
-
10,471
5,218
(2,551)
5,218
(2,551)
-
-
-
-
22,950
-
-
-
-
-
Correction of errors (see note 43)
Restated Profit for the period (see note 43)
Foreign currency translation differences
Fair value movements on equity instruments
Total comprehensive income for the period
Transfer between reserves
Transactions with owners of the Parent
Dividends
Adjustment on initial application of IFRS 9,
(see note 34c(ii))
Profit for the period
Foreign currency translation differences
Fair value movements on equity instruments
Total comprehensive income for the period
Transfer between reserves
Transactions with owners of the Parent
Dividends
Cost of transfer from income to stated capital
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
At 31 December, 2017 (restated)
15,698
255,047
33,683
8,399
135,064
3,729
2,342
356,837
810,799
1,317
812,116
(63,422)
(63,422)
(63,422)
At January 1, 2018
15,698
255,047
33,683
8,399
135,064
3,729
2,342
356,837
810,799
Restated balance at 1 January, 2018
15,698
255,047
33,683
8,399
135,064
3,729
2,342
4,831
4,831
1,459
1,459
-
-
-
-
32,456
-
-
-
-
-
-
-
-
-
-
-
-
-
(732)
-
-
(108,116)
(108,116)
248,721
702,683
193,147
193,147
-
-
4,831
1,459
193,147
199,437
(31,724)
-
(86,340)
(86,340)
(1,567)
(1,567)
1,317
812,116
(53)
(108,169)
1,264
277
(3)
-
274
-
-
-
703,947
193,424
4,828
1,459
199,711
-
(86,340)
(1,567)
At 31 December, 2018
15,698
255,047
38,514
9,858
167,520
3,729
1,610
322,237
814,213
1,538
815,751
983
704,465
-
983
319
15
-
(5,400)
699,065
173,791
5,233
(2,551)
334
176,473
-
-
(8,129)
(14,821)
-
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Zenith Bank Plc Annual Report December 31, 2018
Consolidated and Separate Statements of
Changes in Equity as at 31 December, 2018
Bank
In millions of Naira
Share
capital
Share
premium
Fair
value
reserve
Statutory
reserve
SMIEIS
reserve
Credit
risk
reserve
Retained
earnings
Total
equity
Balance at 1 January, 2017
15,698
255,047
10,950
104,293
3,729
8,129
218,507
616,353
Correction of errors (see note 43)
-
-
-
-
-
-
(5,400)
(5,400)
Restated 1 January, 2017
15,698
255,047
10,950
104,293
3,729
8,129
213,107
610,953
Restated profit for the period (see noe 43)
Fair value movements on equity lnsturnents
Total comprehensive income for the period
Transfer between reserves
Dividend
At 31 December, 2017 (restated)
At 01 January 2018
Adjustment on initial applicationof IFRS 9,
(see note 34c(ii))
-
-
-
-
-
-
-
-
-
-
15,698
15,698
-
255,047
255,047
-
-
(2,551)
(2,551)
-
-
8,399
8,399
-
-
-
-
22,950
-
127,243
127,243
-
-
-
-
-
-
3,729
3,729
-
Restated balance at 1 January 2018
15,698
255,047
8,399
127,243
3,729
Profit for the year period
Fair value movements on equity instruments
Total comprehensive income for the period
Transfer between reserves
Dividends
-
-
-
-
-
-
-
-
-
-
-
1,459
1,459
-
-
-
-
-
24,822
-
-
-
-
-
-
Balance at 31 December, 2018
15,698
255,047
9,858
152,065
3,729
-
-
-
153,003
153,003
-
{2,551)
153,003
150,452
(8,129)
(14,821)
-
-
-
-
-
-
-
-
-
-
-
-
(63,422)
(63,422)
287,867
697,983
287,867
697,983
(103,550)
(103,550)
184,317
594,433
165,480
165,480
1,459
165,480
166,939
(24,822)
-
(86,340)
(86,340)
238,635
675,032
The accompanying notes are an inteqral part of these consolidated and separate financial statements.
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Consolidated and Separate Statement of
Cash Flows for the Year Ended 31 December, 2018
In millions of Naira
Cash flows from operating activities
Profit after tax for the period
Adjustments for:
Impairment loss/(reversal)
Loans and Advances
Treasury bills, investment securities, assets pledged and due from Banks
Off balance sheet
On other assets
Fair value changes in trading bond
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 expense
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
Group
Bank
Note(s)
2018
2017
2018
2017
193,424
173,791
165,480
153,003
8
8
8
8
45(i)
25
26
10
31
6
7
10
13
45(iv)
45(x)
45(ii)
45(iii)
45(xi)
45(i)
45(xiii)
45(v)
45(vi)
45(xii)
45(xiv)
13,303
98,204
(807)
5,337
539
1,990
16,648
2,399
(1,795)
27,778
-
-
23
-
12,428
1,631
(900)
6,064
9,396
(1,051)
6,441
527
1,990
14,625
2,187
(5,395)
27,778
95,244
-
-
-
-
11,059
1,431
(4,500)
6,064
(440,052)
(474,628)
(367,816)
(420,210)
144,458
216,637
124,156
200,672
(259)
38,261
(57)
25,528
(241)
26,627
(22)
16,418
1,224
58,721
4,704
59,159
161,690
94,906
3,050
(54,981)
(187,329)
76,739
-
-
135,770
(28,366)
(33,619)
-
37,343
(473,275)
37,343
(124,925)
(139,667)
(124,925)
(203,264)
(132,704)
(5,755)
62,424
(20,642)
24,495
-
(473,275)
(142,435)
(1,375)
(58,357)
(118,930)
(58,386)
(119,078)
252,380
454,294
(16,298)
(31,607)
26,709
25,641
76,541
(10,860)
(31,607)
191,562
(17,990)
25,641
(3,810)
(46,029)
(3,810)
(46,029)
(169,903)
(228,576)
(42,970)
(457,543)
45 (viii)
434,846
474,628
365,125
420,210
10
45 (ix)
13(c)
45(vi)
1,795
900
5,395
4,500
(134,201)
(195,473)
(116,234)
(179,508)
(37,925)
(28,522)
(26,742)
(260)
(2,235)
(260)
(20,431)
(1,814)
Net cash flows (used in)/generated from operations
94,352
20,722
184,314
(234,586)
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Zenith Bank Plc Annual Report December 31, 2018
Consolidated and Separate Statement of Cash Flows
for the Year Ended 31 December, 2018
In millions of Naira
Cash flows from investing activities
Purchase of property and equipment
Proceeds from sale of property and equipment
Purchase of intangible assets
Note(s)
2018
Group
2017
2018
Bank
2017
25
(35,712)
(41,883)
(30,501)
(38,180)
45(vii)
26
3,490
(3,928)
241
(6,694)
(1,000)
406
(3,260)
(34,200)
206
(6,288)
(1,000)
Purchase of equity securities
21
(34,200)
Net cash (used in)/generated from investing activities
(70,350)
(49,336)
(67,555)
(45,262)
Cash flows from financing activities
Proceeds from debt securities
Borrowed funds
Proceeds of long term borrowing
Repayment of long term borrowing
Net inflow from On-lending facilities
Finance lease payments
Dividends paid to shareholders
31
30
30
29
45(vi)
39
-
-
152,239
-
-
-
152,239
-
370,606
102,373
391,810
193,088
(289,842)
10,261
(2,760)
(8,983)
32,377
(370)
(352,326)
(66,911)
10,261
(2,760)
32,377
(370)
(86,340)
(63,422)
(86,340)
(63,422)
Net cash generated from / (used in) financing activities
1,925
214,214
(39,355)
247,001
Net (decrease)/increase in cash and cash equivalents
25,927
185,600
77,404
(32,847)
Analysis of changes in cash and cash equivalents :
Cash and cash equivalent at the beginning of the year
916,342
727,399
533,511
566,358
(decrease)/increase in cash and cash equivalents
25,927
185,600
77,404
(32,847)
Effect of exchange rate movement on cash balances
4,769
3,343
-
-
Cash and cash equivalents at the end of the period
40
947,038
916,342
610,915
533,511
The accompanying notes are an integral part of these consolidated and separate financial statements
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Notes Zenith Bank Plc Annual Report December 31, 2018
Notes to the Consolidated and Separate Financial
Statements for the Year Ended December 31, 2018
1General
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 31
December, 2018 comprise the Bank and its subsidiaries (together
referred to as “the Group” and individually as “Group entities”)
and the Group’s interest in associates. The separate financial
statements comprise the Bank. The consolidated and separate
financial statements for the year ended 31 December, 2018 were
approved for issue by the Board of Directors on 18 January, 2019.
The Group does not have any unconsolidated structured entity.
(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, 2018.
The effect of initially applying these standards is mainly attributed
to the following,
1) An increase in impairment losses recognised on financial
instruments (see note 3.2.18)
2) Additional disclosures related to IFRS 9 (see note
2.8,3.2.9 - 3.2.18)
3) Additional disclosures related to IFRS 15 (see note 9)
i) IFRS 9 Financial Instruments.
The Group has adopted IFRS 9 Financial Instruments as issued by
the IASB in July 2014 with a date of transition of 1 January 2018,
which resulted in changes in accounting policies and adjustments
to the amounts previously recognised in the financial statements.
The Group had previously adopted IFRS 9 as issued by the IASB
in 2010 which covered the classification and measurement of
financial assets and financial liabilities. The major change in the
current adoption relates to the impairment of financial assets.
As permitted by the transitional provisions of IFRS 9, the Group
elected not to restate comparative figures. Adjustments to the
carrying amounts of financial assets and financial liabilities at the
date of the transition were recognised in the opening retained
earnings and other reserves of the current period.
The adoption of IFRS 9 also significantly amends other standards
dealing with financial instruments such as IFRS 7 Financial
Instrument Disclosures.
Consequently for notes disclosure, the consequential amendments
to IFRS 7 disclosures have also only been applied in the current
period as shown in note 3.2.9. The comparative period disclosures
repeat those disclosure made in the prior year.
ii) IFRS 15 Revenue from contracts with customers
The standard contains a single model that applies to contracts
with customers and two approaches to recognising revenue:
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at a point in time or over time. The model features a contract-
based five-step analysis of transactions to determine whether
how much and when revenue is recognised. The Group has
adopted the following new standards and amendments
including any consequential amendments to other standards
with initial date of application of January 1, 2018. The adoption
of IFRS 15 did not impact the timing or amount of fee and
commission income from contracts with customers and the
related assets and liabilities recognised by the Group. Accordingly
the impact on the comparative information is limited to new
disclosure requirements.
Transition
IFRS 15 on 1 January 2018
The Group
retrospectively in accordance with IAS 8 without any practical
expedients.
initially applied
iii) 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.
•
2Significant
accounting policies
(b) Significant accounting policies
Except as noted in Note 2(a), the Group has consistently applied
the following accounting policies to all periods presented in
these consolidated and separate financial statements, unless
otherwise stated.
2.1 Basis of preparation
(a). Statement of compliance
The financial statements are prepared in accordance with
International Financial Reporting Standards (IFRS) as issued by
the International Accounting Standard Board (IASB) and in the
manner required by the Companies and Allied Matters Act of
Nigeria, the Financial Reporting Council of Nigeria Act, 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 with the exception of the following:
•
•
Assets and liabilities measured at amortised cost;
Derivative financial instruments which are measured at fair
value; and
Non-derivative financial
fair
value through profit or loss, or fair value through OCI are
measured at fair value.
instruments, carried at
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
recognises
–
–
non-refundable
recognising
liability
or
consideration
item
advance
the
eg.
before
non-monetary
related
asset
a
(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.
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Zenith Bank Plc Annual Report December 31, 2018
Notes to the Consolidated and Separate Financial
Statements for the Year Ended December 31, 2018
2.2 New standards, interpretations and amendments to
existing standards that are not yet effective
2.3 Basis of Consolidation
(a) Subsidiaries
(i) 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
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.
For the lessor, IFRS 16 substantially carries forward the lessor
lessor
accounting requirements
continues to classify its leases or finance leases, and to account
for these two types of leasers differently.
IAS 17. Accordingly, a
in
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.
(ii) 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.
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, invesments in subsidiaries
are measured at cost.
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(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 a 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.
in reserves are recognised
The Group’s share of its associates’ post-acquisition profits
or losses is recognised in profit or loss, and its share of
postacquisition movements
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
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.
in 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.
Significant accounting policies
(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.
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Zenith Bank Plc Annual Report December 31, 2018
Notes to the Consolidated and Separate Financial
Statements for the Year Ended December 31, 2018
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.
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 nonrestricted
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).
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(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 and are
not designated as at FVTPL:
•
•
‘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 amortised cost by the Group
if they meet both of the following criteria and are not
designated as at FVTPL:
•
•
‘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.
Significant accounting policies
All other financial assets (equity investments) are measured
at fair value.
A 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 irrevocably
elected to classify as at FVOCI and present subsequent
changes in fair value in OCI;
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
liability at FVTPL
financial
fair value option).
to measure
the
(using
elects
the
(iii) Financial guarantees contracts and loan commitments
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.
Loan commitments’ are firm commitments to provide credit
under pre-specified terms and conditions. Financial guarantees
issued or commitments to provide a loan at a below-market
interest rate are initially measured at fair value. Subsequently,
they are measured as follows:
– from 1 January 2018: at the higher of the loss allowance
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Zenith Bank Plc Annual Report December 31, 2018
Notes to the Consolidated and Separate Financial
Statements for the Year Ended December 31, 2018
initially
determined in accordance with IFRS 9 (see note 3.2.18) and the
amount
less, when appropriate, the
cumulative amount of income recognised in accordance with
the principles of IFRS 15; and
recognised
– before 1 January 2018: at the higher of the amount representing
the initial fair value amortised over the life of the guarantee or the
commitment and the present value of any expected payment
to settle the liability when a payment under the contract has
become probable.
The Group has issued no loan commitments that are measured
at FVTPL.
For other loan commitments:
– from 1 January 2018: the Group recognises a loss allowance
– before 1 January 2018: the Group recognised a provision in
accordance with IAS 37 if the contract was considered to be
onerous.
Liabilities arising
commitments are included within provisions.
from financial guarantees and
loan
The Group conducts business
involving commitments to
customers. The majority of these facilities are set-off by
corresponding obligations of third parties. Contingent liabilities
and commitments comprise usance lines and letters of credit.
Usance and letters of credit are agreements to lend to a customer
in the future subject to certain conditions. An acceptance is an
undertaking by a bank to pay a bill of exchange drawn on a
customer.
Letters of credit are given as security to support the performance
of a customer to third parties. As the Group will only be required
to meet these obligations in the event of the Customer’s default,
the cash requirements of these instruments are expected to be
considerably below their nominal amounts.
Contingent liabilities and commitments are initially recognized
at fair value which is also generally equal to the fees received
and amortized over the life of the commitment. The carrying
amount of contingent liabilities are subsequently measured at
the higher of the present value of any expected payment when
a payment under the contingent liability has become probable
and the unamortised fee.
(d) Derecognition
(i) Financial assets
The Group derecognises a financial asset when the contractual
rights to the cash flows from the financial asset expire (see also
(e)), or it transfers the rights to receive the contractual cash flows
in a transaction in which substantially all of the risks and rewards
of ownership of the financial asset are transferred or in which the
Group neither transfers nor retains substantially all of the risks
and rewards of ownership and it does not retain control of the
financial asset.
On derecognition of a financial asset, the difference between the
carrying amount of the asset (or the carrying amount allocated
to the portion of the asset derecognised) and the sum of (i) the
consideration received (including any new asset obtained less
any new liability assumed) and (ii) any cumulative gain or loss
that had been recognised in OCI is recognised in profit or loss.
Any cumulative gain/loss recognised in OCI in respect of equity
investment securities designated as at FVOCI is not recognised
in profit or loss on derecognition of such securities. Any interest
in transferred financial assets that qualify for derecognition that
is created or retained by the Group is recognised as a separate
asset or liability.
The Group sometimes enters into transactions whereby it
transfers assets recognised on its 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. In such cases,
the transferred assets are not derecognised. Examples of such
transactions are securities lending and sale-andrepurchase
transactions.
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Significant accounting policies
When assets are sold to a third party with a concurrent total
rate of return swap on the transferred assets, the transaction is
accounted for as a secured financing transaction similar to sale-
and-repurchase transactions, because the Group retains all or
substantially all of the risks and rewards of ownership of such
assets.
In transactions in which the Group neither retains nor transfers
substantially all of 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.
In certain transactions, the Group retains the obligation to
service the transferred financial asset for a fee. The transferred
asset is derecognised if it meets the derecognition criteria.
An asset or liability is recognised for the servicing contract if
the servicing fee is more than adequate (asset) or is less than
adequate (liability) for performing the servicing.
(ii) Financial liabilities
The Group derecognises a financial liability when its contractual
obligations are discharged or cancelled, or expire.
(e) Modifications of financial assets and financial liabilities
Financial assets
If the terms of a financial asset are modified, then the Group
evaluates whether the cash flows of the modified asset are
substantially different.
If the cash flows are substantially different, then the contractual
rights to cash flows from the original financial asset are deemed
to have expired. In this case, the original financial asset is
derecognized (see (d)) and a new financial asset is recognised at
fair value plus any eligible transaction costs. Any fees received as
part of the modification are accounted for as follows: - fees that
are considered in determining the fair value of the new asset and
fees that represent reimbursement of eligible transaction costs
are included in the initial measurement of the asset; and - other
fees are included in profit or loss as part of the gain or loss on
derecognition.
If cash flows are modified when the borrower is in financial
difficulties, then the objective of the modification is usually
to maximize recovery of the original contractual terms rather
than to originate a new asset with substantially different terms.
If the Group plans to modify a financial asset in a way that
would result in forgiveness of cash flows, then it first considers
whether a portion of the asset should be written off before the
modification takes place (see below for write off policy). This
approach impacts the result of the quantitative evaluation and
means that the derecognition criteria are not usually met in such
cases.
If the modification of a financial asset measured at amortised
cost or FVOCI does not result in derecognition of the financial
asset, then the Group first recalculates the gross carrying amount
of the financial asset using the original effective interest rate of the
asset and recognises the resulting adjustment as a modification
gain or loss in profit or loss. For floating-rate financial assets, the
original effective interest rate used to calculate the modification
gain or loss is adjusted to reflect current market terms at the
time of the modification. Any costs or fees incurred and fees
received as part of the modification adjust the gross carrying
amount of the modified financial asset and are amortised over
the remaining term of the modified financial asset.
If such a modification is carried out because of financial
difficulties of the borrower (see (2.8)), then the gain or loss is
presented together with impairment losses. In other cases, it
is presented as interest income calculated using the effective
interest rate method.
Financial liabilities
The Group derecognises a financial liability when its terms
are modified and the cash flows of the modified liability are
substantially different. In this case, a new financial liability
based on the modified terms is recognised at fair value. The
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Zenith Bank Plc Annual Report December 31, 2018
Notes to the Consolidated and Separate Financial
Statements for the Year Ended December 31, 2018
difference between the carrying amount of the financial
liability derecognised and consideration paid is recognised in
profit or loss. Consideration paid includes non-financial assets
transferred, if any, and the assumption of liabilities, including the
new modified financial liability.
If the modification of a financial liability is not accounted for
as derecognition, then the amortised cost of the liability is
recalculated by discounting the modified cash flows at the
original effective interest rate and the resulting gain or loss is
recognised in profit or loss. For floating-rate financial liabilities,
the original effective
interest rate used to calculate the
modification gain or loss is adjusted to reflect current market
terms at the time of the modification. Any costs and fees incurred
are recognised as an adjustment to the carrying amount of the
liability and amortised over the remaining term of the modified
financial liability by re-computing the effective interest rate on
the instrument.
(f) Offsetting
Financial assets and financial liabilities are offset and the net
amount presented in the statement of financial position when,
and only when, the Group currently has a legally enforceable
right to set off the amounts and it intends either to settle them
on a net basis or to realise the asset and settle the liability
simultaneously.
Income and expenses are presented on a net basis only when
permitted under IFRS, or for gains and losses arising from a
group of similar transactions such as in the Group’s trading
activity.
(g) Amortised cost measurement
The amortised cost of a financial asset or liability is the amount
at which the financial asset or liability is measured at initial
recognition, minus principal repayments, plus or minus the
cumulative amortisation using the effective interest rate method
of any difference between the initial amount recognised and the
maturity amount, minus any reduction for impairment.
(h) Fair value measurement
‘Fair value’ is the price that would be received to sell an asset
or paid to transfer a liability in an orderly transaction between
market participants at the measurement date in the principal
or, in its absence, the most advantageous market to which the
Group has access at that date. The fair value of a liability reflects
its non-performance risk.
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.
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Significant accounting policies
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.
liabilities are
Non-hedging derivative assets and
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.
Nonhedging derivative assets and liabilities are not reclassified
subsequent to their initial recognition.
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.
(i) 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.
(j) Assets under repurchase agreement
Assets under repurchase agreement are transactions in which the
Group sells a security and simultaneously agrees to repurchase
it (or an asset that is substantially the same 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
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Zenith Bank Plc Annual Report December 31, 2018
Notes to the Consolidated and Separate Financial
Statements for the Year Ended December 31, 2018
2.8 Impairment
Policy applicable before 1 January 2018
2.8.1 Objective evidence of impairment
At each reporting date, the Group assessed whether there was
objective evidence that financial assets not carried at FVTPL
were impaired. A financial asset or a group of financial assets was
‘impaired’ when objective evidence demonstrated that a loss
event had occurred after the initial recognition of the asset(s)
and that the loss event had an impact on the future cash flows
of the asset(s) that could be estimated reliably.
–
Objective evidence that financial assets were impaired included:
Delinquency in contractual payments of principal or
–
interest;
Cash flow difficulties experienced by the borrower (for
example, equity ratio, net income percentage of sales);
Breach of loan covenants or conditions;
Initiation of bankruptcy proceedings;
Deterioration of the borrower’s competitive position;
Deterioration in the value of collateral; and
Downgrading below investment grade level.
–
–
–
–
–
2.8.2 Individual or collective assessment
The Group first assessed whether objective evidence of
impairment existed individually for financial assets that are
individually or collectively for
individually significant, and
financial assets that are not individually significant. If the Group
determined that no objective evidence of impairment exists
for an individually assessed financial asset, whether significant
or not, it included the asset in a group of financial assets with
similar credit risk characteristics and collectively assessed them
for impairment. Assets that were individually assessed for
impairment and for which an impairment loss existed were not
included in a collective assessment of impairment.
2.8.3 Measurement of impairment
The amount of impairment loss for financial assets carried at
amortised cost was measured as the difference between the
asset’s carrying amount and the present value of estimated
future cash flows (excluding future credit losses that had not
been incurred) discounted at the financial asset’s original
effective interest rate. The carrying amount of the asset was
reduced through the use of an allowance account and the
amount of the loss was recognised in profit or loss. If a financial
instrument had variable interest rates, the discount rate for
measuring any impairment loss was 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 reflected the cash
flows that may have resulted from foreclosure less costs of
obtaining and selling the collateral, whether or not foreclosure
was probable.
For the purposes of a collective evaluation of impairment,
financial assets were grouped on the basis of similar credit risk
characteristics (i.e. on the basis of the Group’s grading process
that considered asset type, industry, geographical location,
collateral type, past-due status and other relevant factors). Those
characteristics were 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 were
collectively evaluated for impairment were 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 was
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 was based and to remove
the effects of conditions in the historical period that did not
currently exist.
Estimates of changes in future cash flows for groups of assets
were reflected and directionally consistent with changes in
related observable data from period to period (for example,
changes in unemployment rates, property prices, payment
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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 were
reviewed regularly by the Group to reduce any differences
between loss estimates and actual loss experience.
•
•
When a loan was uncollectible, it was written off against the
related provision for loan impairment. Such loans were written
off after all the necessary procedures including regulatory
apprasial where necessary had been completed and the amount
of the loss had been determined.
Amount reported as other financial assets were tested for
impairment on an individual basis at the reporting date. In testing
for impairment, the Group assessed whether there was objective
evidence that a loss event had occurred. If it was established that
a loss event had occurred and the loss event had an impact on
the recoverable amount of the asset, an impairment charge was
taken against the asset carrying amount.
2.8.4 Reversal of impairment
If, in a subsequent period, the amount of the impairment loss
decreased and the decrease could 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 was reversed by adjusting the
allowance account. The amount of the reversal was recognised
in profit or loss under impairment charge for credit losses.
2.8.5 Policy applicable from 1 January 2018
The Group recognises loss allowances for ECL on the following
financial instruments that are not measured at FVTPL:
•
•
•
•
Financial assets that are debt instruments;
Lease receivables;
Financial guarantee contracts issued; and
Loan commitments issued.
No impairment loss is recognised on equity investments.
The Group measures loss allowances at an amount equal
Significant accounting policies
to lifetime ECL, except for the following, for which they are
measured as 12-month ECL:
Debt investment securities that are determined to have
low credit risk at the reporting date; and
Other financial instruments on which credit risk has not
increased significantly since their initial recognition
12-month ECL are the portion of ECL that result from
default events on a financial instrument that are possible
within the 12 months after the reporting date.
2.8.6 Measurement of ECL
ECL are a probability-weighted estimate of credit losses. They are
measured as follows:
•
Financial assets that are not credit-impaired at the
reporting date: as the present value of all cash shortfalls
(i.e. the difference between the cash flows due to the
entity in accordance with the contract and the cash flows
that the Group expects to receive);
Financial assets that are credit-impaired at the reporting
date: as the difference between the gross carrying
amount and the present value of estimated future cash
flows;
Undrawn loan commitments: as the present value of the
difference between the contractual cash lows that are
due to the Group if the commitment is drawn down and
the cash flows that the Group expects to receive; and
Financial guarantee contracts: the expected payments
to reimburse the holder less any amount that the Group
expects to recover.
•
•
•
2.8.7 Credit-impaired financial assets
At each reporting date, the Group assesses whether financial
assets carried at amortised cost are credit-impaired. A financial
asset is ‘credit-impaired’ when one or more events that have a
detrimental impact on the estimated future cash flows of the
financial asset have occurred.
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Zenith Bank Plc Annual Report December 31, 2018
Notes to the Consolidated and Separate Financial
Statements for the Year Ended December 31, 2018
2.8.8 Presentation of allowance for ECL in the statement of
financial position
Loss allowances for ECL are presented in the statement of
financial position as follows:
•
Financial assets measured at amortised cost: as a
deduction from the gross carrying amount of the assets;
Loan commitments and financial guarantee contracts:
generally, as a provision;
Where a financial instrument includes both a drawn and
an undrawn component, and the Group cannot identify
the ECL on the loan commitment component separately
from those on the drawn component: the Group presents
a combined loss allowance for both components. The
combined amount is presented as a deduction from the
gross carrying amount of the drawn component. Any
excess of the loss allowance over the gross amount of the
drawn component is presented as a provision and;
Debt instruments measured at FVOCI, no loss allowance is
recognised in the statement of financial position because
the carrying amount of the asset is their fair value.
However, the loss allowance is disclosed and recognised
in the fair value reserve.
•
•
•
2.9 Reclassification of financial instruments
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
in accordance with the new model. The
financial assets
reclassification is applied prospectively from the reclassification
date. Accordingly, any previously recognised gains, losses or
interest are not reinstated. Changes in the business model for
managing financial assets are expected to be very infrequent.
Evidence that a financial asset is credit-impaired includes the
following observable data:
•
•
•
Significant financial difficulty of the borrower or issuer;
A breach of contract such as a default or past due event;
The restructuring of a loan or advance by the Group on
terms that the Group would not consider otherwise;
It is becoming probable that the borrower will enter
bankruptcy or other financial reorganisation; or
The disappearance of an active market for a security
because of financial difficulties.
•
•
A loan that has been renegotiated due to a deterioration in the
borrower’s condition is usually considered to be credit impaired
unless there is evidence that the risk of not receiving contractual
cash flows has reduced significantly and there are no other
indicators of impairment. In addition, a retail loan that is overdue
for 90 days or more is considered impaired.
In making an assessment of whether an investment in sovereign
debt is credit-impaired, the Group considers the following
factors.
•
The market’s assessment of creditworthiness as reflected
in the bond yields.
The rating agencies’ assessments of creditworthiness.
The country’s ability to access the capital markets for
new debt issuance.
The probability of debt being restructured, resulting in
holders suffering losses through voluntary or mandatory
debt forgiveness.
The international support mechanisms in place to
provide the necessary support as ‘lender of last resort’ to
that country, as well as the intention, reflected in public
statements, of governments and agencies to use those
mechanisms. This includes an assessment of the depth
of those mechanisms and, irrespective of the political
intent, whether there is the capacity to fulfil the required
criteria.
•
•
•
•
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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.
If the terms of a financial asset is restructured due to financial
difficulties of the borrower, then an assessment is made of
whether the financial asset should be derecognized:
•
•
If the expected restructuring will not result in derecognition
of the existing asset, then the expected cash flows arising
from the modified financial asset is included in calculating
the cash shortfalls from the existing asset.
If the expected restructuring will result in derecognition of
the existing asset, then the expected fair value of the new
asset is treated as the final cash flow from the existing
financial asset at the time of derecognition. This amount is
included in calculating the cash shortfalls from the existing
financial asset that is discounted from the expected date
of derecognition to the reporting date using the original
effective interest rate of the existing financial asset.
2.11 Collateral
The Group obtains collateral where appropriate, from customers
to manage their credit risk exposure to the customers. The
collateral normally takes the form of a lien over the customer’s
assets and gives the Group a claim on these assets for customers
in the event that the customer defaults. The Group may also use
other credit instruments, such as derivative contracts in order to
reduce their credit risk.
Collateral received in the form of securities is not recorded on
the statement of financial position. Collateral received in the
form of cash is recorded on the statement of financial position
with a corresponding liability see note 3.2.7(a)(i).
2.12 Property and equipment
Property and equipment are stated at historical cost less
accumulated depreciation and accumulated impairment losses.
Historical cost includes expenditure that is directly attributable
to the acquisition of the items. Where significant parts of an tem
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.
(Not depreciated)
4 years
5 years
5 years
3 years
50 years
Over the remaining lease period
10 years
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Notes to the Consolidated and Separate Financial
Statements for the Year Ended December 31, 2018
Work in progress consists of items of property and equipment
that are not yet available for use. Work in progress is carried at cost
less any required impairment. Depreciation starts when assets are
available for use. An impairment loss is recognised if the asset’s
recoverable amount is less than cost. The asset is reviewed for
impairment when events or changes in circumstances indicate
that the carrying amount may not be recoverable. Once the
items are available for use, they are transferred to relevant classes
of property and equipment as appropriate.
Property and equipment are derecognized on disposal, or when
no future economic benefits are expected from their use or
disposal.
Gains and losses on disposal are determined by comparing
proceeds with carrying amount. These are included in profit or
loss.
Depreciation methods, useful lives and residual values are
reassessed at each reporting date and adjusted if appropriate.
Borrowing Costs
Borrowing costs that are directly attributable to the acquisition
or construction of a qualifying asset is capitalized as part of the
cost of the asset. Other costs relating to borrowings which the
group undertakes in the normal course of business are expensed
in the period which they are incurred.
2.13 Intangible assets
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)
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;
(v) 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
residual values
are reviewed at each financial period-end and adjusted if
appropriate.
lives and
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.
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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.
Significant accounting policies
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
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Notes to the Consolidated and Separate Financial
Statements for the Year Ended December 31, 2018
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.
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 5% and 13% 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.
2.17 Employee benefits
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.
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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 carried
at FVOCI.
(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
Policy before 1 January 2018
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.
(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.
(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
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Notes to the Consolidated and Separate Financial
Statements for the Year Ended December 31, 2018
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 marginyielding 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.
Policy from 1January 2018
Effective interest rate
Interest income and expense are recognised in profit or loss
using the effective interest method. The ‘effective interest rate’ is
the rate that exactly discounts estimated future cash payments
or receipts through the expected life of the financial instrument
to:
–
–
the gross carrying amount of the financial asset; or
the amortised cost of the financial liability.
When calculating the effective
interest rate for financial
instruments other than purchased or originated credit-impaired
assets, the Group estimates future cash flows considering all
contractual terms of the financial instrument, but not ECL.
For purchased or originated credit impaired financial assets, a
creditadjusted effective interest rate is calculated using estimated
future cash flows including ECL.
The calculation of the effective interest rate includes transaction
costs and fees and points paid or received that are an integral part
of the effective interest rate. Transaction costs include incremental
costs that are directly attributable to the acquisition or issue of a
financial asset or financial liability.
Amortised cost and gross carrying amount
The ‘amortised cost’ of a financial asset or financial liability is
the amount at which the financial asset or financial liability is
measured on initial recognition minus the principal repayments,
plus or minus the cumulative amortisation using the effective
interest method of any difference between that initial amount
and the maturity amount and, for financial assets, adjusted for any
expected credit loss allowance (or impairment allowance before 1
January 2018).
The ‘gross carrying amount of a financial asset’ is the amortised
cost of a financial asset before adjusting for any expected credit
loss allowance.
Calculation of interest income and expense
The effective interest rate of a financial asset or financial liability is
calculated on initial recognition of a financial asset or a financial
liability. In calculating interest income and expense, the effective
interest rate is applied to the gross carrying amount of the asset
(when the asset is not credit impaired) or to the amortised cost
of the liability. The effective interest rate is revised as a result of
periodic re-estimation of cash flows of floating rate instruments to
reflect movements in market rates of interest.
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However, for financial assets that have become credit-impaired
subsequent to initial recognition, interest income is calculated by
applying the effective interest rate to the amortised cost of the
financial asset. If the asset is no longer creditimpaired, then the
calculation of interest income reverts to the gross basis.
initial
For financial assets that were credit-impaired on
recognition, interest income is calculated by applying the
creditadjusted effective interest rate to the amortised cost of
the asset. The calculation of interest income does not revert to a
gross basis, even if the credit risk of the asset improves.
For information on when financial assets are credit-impaired, see
Note 2.8.7.
Presentation
Interest income calculated using the effective interest method
presented in the statement of profit or loss and OCI includes only
interest on financial assets and financial liabilities measured at
amortised cost.
Interest expense presented in the statement of profit or loss and
OCI includes only interest on financial liabilities measured
at amortised cost.
Interest income and expense on all trading assets and liabilities
are considered to be incidental to the Group’s trading operations
and are presented together with all other changes in the fair
value of trading assets and liabilities in net trading income (see
Note 2.21).
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 financial liability
are included in the effective interest rate (see Note 2.19).
Other fee and commission income – including account servicing
fees, fees on electronic products, sales commission, placement
fees and syndication fees – is recognised as the related services
are performed. If a loan commitment is not expected to result
in the draw-down of a loan, then the related loan commitment
fee is recognised on a straight-line basis over the commitment
period.
A contract with a customer that results in a recognised financial
instrument in the Group’s financial statements may be partially
in the scope of IFRS 9 and partially in the scope of IFRS 15. If this
is the case, then the Group first applies IFRS 9 to separate and
measure the part of the contract that is in the scope of IFRS 9 and
then applies IFRS 15 to the residual.
Other fee and commission expenses relate mainly to transaction
and service fees, which are expensed as the services are received.
Dividend income is recognised when the right to receive income
is established. Usually, this is the exdividend date for quoted
equity securities. Dividends are presented in net trading gains,
or other income based on the underlying classification of the
equity investment.
Dividends on equity instruments designated as at FVOCI that
clearly represent a recovery of part of the cost of the investment
are presented in OCI.
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
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Notes to the Consolidated and Separate Financial
Statements for the Year Ended December 31, 2018
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)
(iii) 0.25% of Paid-up Share Capital
(iv) 0.25% of Turnover of up to N500,000
0.5% of Gross Profit
0.5% of Net Assets
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.
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.
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
recognised in profit or loss because they relate to incomearising
from transactions that were originally recognised in profit or loss.
(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.
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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.
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.
2.26 Fiduciary activities
The Group acts as trustees and in other fiduciary capacities
through its subsidiaries, Zenith Pensions Custodian Limited and
Zenith Nominees 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.
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.
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
in order to make decisions about
[Management/Board]
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3Risk
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.
Risk management is a shared responsibility. Therefore the
Group aims to build a shared perspective on risks that is
grounded in consensus.
There is clear segregation of duties between market-
facing business units and risk management functions.
Risk Management is governed by well-defined policies
which are clearly communicated across the Group.
Risk related issues are taken into consideration in all
business decisions.
b.
c.
d.
e.
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.
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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.
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.
b.
c.
d.
e.
f.
The key features of the Group’s risk management policy are:
a.
The Board of Directors provides overall risk management
direction and oversight;
The Group’s risk appetite is approved by the Board of
Directors;
Risk management is embedded in the Group as an intrinsic
process and is a core competence of all its employees;
The Group manages
its credit, market, operational
and liquidity risks in a coordinated manner within the
organisation;
The Group’s risk management function is independent of
the business divisions; and
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:
Review and analysis of all relevant laws and regulations,
b.
Risk management
c.
d.
which are adopted into policy statements to ensure
business is conducted professionally;
Review of the Bank’s Anti-Money Laundering Policy in
accordance with changes in the Money Laundering
Prohibition Act 2011 and Anti-Terrorism Act 2011 as
amended; and
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;
Establish lines of authority and responsibility for managing
individual risk elements in line with the Board’s overall
direction;
Risk identification, measurement, monitoring and control
procedures;
Establish effective internal controls that cover each risk
management process;
Ensure that the Group’s risk management processes are
properly documented;
Create adequate awareness to make risk management a
part of the corporate culture of the Group;
b.
c.
d.
e.
f.
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g.
h.
Ensure that risk remains within the boundaries established
by the Board; and
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.
b.
The strategic importance of the activity and sector;
The contribution of the activity/sector to the total assets
of the Bank;
The net income of the sector; and
The risk inherent in the activity and sector.
c.
d.
currency liquidity has improved following the introduction of
administrative measures by the Central Bank since early 2017.
The measures include a trading window for portfolio investors
at market determined rates and the introduction of the Nigerian
Autonomous Foreign Exchange Rate Fixing, which allowed
commercial banks to quote forex rates that are close to parallel
market rates. The naira remained stable for most of 2018 and is
expected to wane slightly as the economy moves towards 2019
elections.
reforms
to diversify
Tailwinds
A recovery in oil prices and production will help drive growth
and provide fiscal space as the government pursues important
the economy. Faithful
structural
implementation of the Economic Recovery and Growth Plan
(2017–20) holds the promise of weaning the country off its
dependence on oil. The plan focuses on six priority sectors:
agriculture; manufacturing; solid minerals, including iron, gold,
and coal; services, including information and communication
technology, financial services, tourism, and creative industries;
construction and real estate; and oil and gas. The government
has produced specific programs for each sector and defined
broader growth policy enablers to drive the plan.
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
Fiscal policy remained expansionary in 2018. Although total
spending as a percentage of GDP declined from 13% in 2014 to
10.3% in 2017, revenues declined more sharply, from 11.4% to
5.6%. At 14%, unemployment remained high in 2018, the same as
in 2017, and is expected to decline only slightly in 2019, to 13.5%,
as recovery eases production constraints in manufacturing and
agriculture.
Monetary policy continued to be contractionary in 2018 and
is expected to remain so in 2019; the policy rate has been
kept at 14% since July 2016 to support the naira and control
inflation. Inflation has remained in the double digits. Foreign
Headwinds
including foreign
Nigeria still faces significant challenges,
exchange shortages, disruptions in fuel supply, power shortages,
and insecurity in some parts of the country. Revenue mobilization
efforts are insufficient; at 5%, value added tax rates are. Among
the lowest in the world, and revenue administration is inefficient.
Poverty is unacceptably high; nearly 80% of Nigeria’s 190 million
people live on less than $2 a day.
The Bank has 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;
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credit performance obligations (restructuring repayments to
match cash-flows, where necessary);
impact of global economy
Some of the key risk management strategies in the period would
include the following:
(a) Continue to monitor
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.
(i)
(j)
(h) Create additional foreign exchange funding sources from
the receipt of foreign exchange deposits from customers
especially export proceeds.
Pursue and support export strategies to assure expanded
foreign exchange inflow.
Increased collections of payments (Deploy more friendly
collection tools)
Improve customer service delivery through trainings,
systems, communication, and compensation medium.
Stabilize the Bank’s technology/platforms - This is to
increase and aid customers’ confidence, loyalty and Bank’s
reputation.
(k)
(l)
(m) Cautiously grow risk assets while maintaining adequate
level of capital.
3.2 Credit Risk
Credit risk is the risk of a financial loss if an obligor does not fully
honour its contractual commitments to the Group. Obligors
may be borrowers, issuers, counterparties or guarantors. Credit
risk is the most significant risk facing the Bank in the normal
course of business. The Bank is exposed to credit risk not only
through its direct lending activities and transactions but also
Risk management
through commitments to extend credit, letters of guarantee,
letters of credit, securities purchased under reverse repurchase
institutions, brokerage
agreements, deposits with financial
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;
Exposures to any industry or customer will be determined
by the regulatory guidelines, clearly defined internal
policies, debt service capability and balance sheet
management guidelines;
Credit is not extended to customers where the source of
repayment is unknown or speculative, and also where the
destination of funds is unknown. There must be clear and
verifiable purpose for the use of the funds;
Credit is not given to a customer where the ability of
the customer to meet obligations is based on the most
optimistic forecast of events. Risk considerations will always
have priority over business and profit considerations
The primary source of repayment for all credits must be from
an identifiable cash flow from the counterparty’s normal
business operations or other financial arrangements. The
realization of security remains a fall back option;
A pricing model that reflects variations in the risk profile of
various credits to ensure that higher risks are compensated
by higher returns is adopted;
All insiders’ related credits are limited to regulatory and
strict internal limits and are disclosed as required; and
The consequences for non-compliance with the credit
policy and credit indiscipline are communicated to all staff
and are implemented.
b.
c.
d.
e.
f.
g.
h.
3.2.1 Credit Metrics and Measurement Tools
Zenith Bank and its subsidiaries have devoted resources and
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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;
Credit rating of obligor;
The likelihood of failure to pay over the period stipulated in
the contract;
The size of the facility in case default occurs; and
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.
b.
c.
d.
e.
3.2.2 Credit Rating Tools
The principal objective of the credit risk rating system is to
produce a reliable assessment of the credit risk to which the
Group is exposed. As such, all loans and indirect credits such as
guarantees and bonds as well as treasury investments undergo
a formal credit analysis process that would ensure the proper
appraisal of the facility.
(a) Loans and advances and amounts due from banks
Each individual borrower is rated based on an internally
developed rating model that evaluates risk based on financial,
qualitative and industry-specific inputs. The associated loss
estimate norms for each grade have been developed based on
the experience of the Bank and its various subsidiaries.
In order to allow for a meaningful distribution of exposures
across grades with no excessive concentrations on the Group’s
borrower-rating and its facility-rating scale, the Group maintains
the under listed rating grade, which is applicable to both new
and existing customers.
Zenith Group Rating
Description of the grade
Equivalent of external rating (Standard & Poor’s)
AAA
AA
A
BBB
BB
B
CCC
CC
C
D
Investment Risk (Extremely Low Risk)
Investment Risk (Very Low Risk)
Investment Risk (Low Risk)
Upper Standard Grade (Acceptable Risk)
Lower Standard Grade (Moderately High Risk)
Non Investment Grade (High Risk)
Non Investment Grade (Very High Risk)
Non Investment Grade (Extremely High Risk)
Non Investment Grade (High Likelihood of Default)
Non Investment Grade (Lost)
AAA
AA
A
BBB
BB
B
CCC
CC
C
D
Unrated
Individually insignificant (unrated)
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.
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(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) External ratings of such instruments/institutions by rating
agencies like Fitch, Standard & Poor’s, Agusto & Co;
(ii) Internal and external research and market intelligence
reports; and
(iii) 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.
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;
Risk management
b.
c.
d.
e.
f.
g.
The purpose of credit and source of repayment;
The track record / repayment history of borrower;
Assess/evaluate the repayment capacity of the borrower;
The proposed terms and conditions and covenants;
Adequacy and enforceability of collaterals; and
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
risk
monitoring and control activities enable the Group to deal
with the emerging risks and challenges with a high level of
confidence and determination.
framework, solid structure and
infrastructure,
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
c.
d.
e.
f.
g.
h.
i.
j.
criteria;
Rigorous financial, credit and overall risk analysis for each
customer/transaction;
Regular portfolio examination in line with key performance
indicators and periodic stress testing;
Continuous assessment of concentrations and mitigation
strategies;
Continuous validation and modification of early warning
system to ensure proper functioning for risk identification;
Systematic and objective credit risk rating methodologies
that are based on quantitative, qualitative and expert
judgment;
Systematic credit
limits management which enables
the Bank to monitor its credit exposure on daily basis at
country, borrower, industry, credit risk rating and credit
facility type levels;
Solid documentation and collateral management process
with proper coverage and top-up triggers and follow-ups;
and
Annual and interim individual credit reviews to ensure
detection of weakness signs or warning signals and
considering proper remedies.
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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.
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
Approval limit (% of Shareholders’
Fund)
Board Credit
Committee
N1 billion and above (Not exceeding 20%
of total shareholders’ fund)
Management Global
Credit Committee
Below N1 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 counter-party 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.
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(i) Collateral Security
A key mitigation step employed by the Group in its credit risk
management process includes the use of collateral securities
to secure its loans and advances as alternative sources of
repayment during adverse conditions. All major credit facilities
to our customers are to be secured and the security instruments
and documentations must be perfected and all conditions
precedent must be met before drawdown or disbursement is
allowed. Collateral analysis includes a good description of the
collateral, its value, how the value was arrived at, and when
the valuation was made. It is usually necessary to review the
potential adverse changes in the value of collateral security for
the foreseeable future.
Collateral securities that are pledged must be in negotiable
form and usually fall under the following categories:
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;
Collateral consisting of inventory, accounts receivable,
machinery equipment, patents,
farm
products, general intangibles, etc. These require a security
trademarks,
b.
Risk management
agreement (usually a floating debenture) which has to be
registered and, must be enforceable under Nigerian law;
Stocks and shares of publicly quoted companies;
c.
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;
Letter of lien; and
Cash collateral.
f.
g.
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, 2018 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
Impairment allowance
Net carrying amount
Total exposure
Value of collateral
Total exposure
Value of collateral
62,080
7,762
1,031,525
915,153
2,016,520
(193,409)
1,823,111
34,925
5,411
942,486
74,554
1,057,376
-
1,057,376
61,010
7,762
1,021,103
831,189
1,921,064
(184,998)
1,736,066
33,697
5,411
932,157
-
971,265
-
971,265
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Zenith Bank Plc Annual Report December 31, 2018
Notes to the Consolidated and Separate Financial
Statements for the Year Ended December 31, 2018
Group
31 December, 2018
Disclosure by Collateral
Property/Real estate
Equities
Cash
Grand total: Fair value of collateral
Grand total: Gross loans
Grand total: Impairment
Grand total: Net amount
Grand total: Amount of undercollaterization
Term loan Overdrafts
On lending Finance lease
Total
17,574
343
611,013
628,930
16,022
5,067
53,661
74,750
1,419,276
208,021
156,366
1,262,910
633,980
31,999
176,022
101,272
101
-
267,407
267,508
385,922
4,903
381,019
113,511
-
-
77
77
33,697
5,410
932,158
971,265
3,301
2,016,520
141
193,409
3,160
1,823,111
3,083
851,846
31 December, 2018
Term loan Overdrafts
On lending Finance lease
Total
Against 12 months ECL loans and advances
Property/Real estate
Equities
Cash and debentures
Fair value of collateral
Gross loans
Impairment
Net amount
Amount of undercollaterization
11,490
-
332,884
344,374
916,359
11,123
905,236
560,862
5,748
904
45,544
52,196
158,264
2,623
155,641
103,445
-
-
257,600
257,600
373,659
2,092
371,567
113,967
-
-
55
55
17,238
904
636,083
654,225
3,168
1,451,450
127
15,965
3,041
1,435,485
2,986
781,260
31 December, 2018
Term loan Overdrafts On lending
Finance lease
Total
Against lifetime ECL not credit-impaired loans and advances
Property/Real estate
Equities
Cash
Fair value of collateral
Gross loans
Impairment
Net amount
Amount of undercollaterization
2,294
343
212,397
215,034
350,833
32,384
318,449
103,415
3,750
13
3,284
7,047
21,214
1,857
19,357
12,310
-
-
9,457
9,457
11,131
1,793
9,338
(119)
-
-
18
18
6,044
356
225,156
231,556
122
383,300
6
116
98
36,040
347,260
115,704
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31 December, 2018
Term loan Overdrafts On lending
Finance lease
Total
Against lifetime ECL credit-impaired loans and advances
Risk management
Property/Real estate
Equities
Cash
Fair value of collateral
Gross loans
Impairment
Net amount
3,789
-
65,731
69,520
152,084
112,859
39,225
6,525
4,150
4,833
15,508
28,543
27,519
1,024
Amount of undercollaterization
(30,295)
(14,484)
101
-
350
451
1,132
1,018
114
(337)
-
-
4
4
10,415
4,150
70,918
85,483
11
181,770
8
3
141,404
40,366
(1)
(45,117)
Bank
31 December, 2018
Disclosure by Collateral
Property/Real estate
Equities
Cash
Grand total: Fair value of collateral
Grand total: Gross loans
Grand total: Impairment
Grand total: Net amount
Term loan Overdrafts
On lending
Finance lease
Total
17,574
343
611,013
628,930
16,022
5,067
53,661
74,750
1,353,101
178,740
154,678
25,276
1,198,423
153,464
101
-
267,407
267,508
385,922
4,903
381,019
113,511
-
-
77
77
3,301
141
3,160
3,083
33,697
5,410
932,158
971,265
1,921,064
184,998
1,736,066
764,801
Grand total: Amount of undercollaterization
569,493
78,714
31 December, 2018
Term loan Overdrafts
On lending Finance lease
Total
Against 12 months ECL loans and advances
Property/Real estate
Equities
Cash
Fair value of collateral
Gross loans
Impairment
Net amount
Amount of undercollaterization
11,490
-
332,884
344,374
879,355
11,080
868,275
523,901
5,748
904
45,544
52,196
130,993
793
130,200
78,004
-
-
257,600
257,600
373,658
2,092
371,566
113,966
-
-
55
55
17,238
904
636,083
654,225
3,168
1,387,174
127
14,092
3,041
1,373,082
2,986
718,857
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Zenith Bank Plc Annual Report December 31, 2018
Notes to the Consolidated and Separate Financial
Statements for the Year Ended December 31, 2018
31 December, 2018
Term loan Overdrafts On lending
Finance lease
Total
Against lifetime ECL not credit-impaired loans and advances
Property/Real estate
2,294
3,750
Equities
Cash
Fair value of collateral
Gross loans
Impairment
Net amount
Amount of undercollaterization
343
212,397
215,034
321,662
30,739
290,923
75,889
13
3,284
7,047
19,204
1,694
17,510
10,463
-
-
9,457
9,457
11,131
1,793
9,338
(119)
-
-
18
18
6,044
356
225,156
231,556
122
352,119
6
116
98
34,232
317,887
86,331
31 December, 2018
Term loan Overdrafts On lending
Finance lease
Total
Against lifetime ECL credit-impaired loans and advances
Property/Real estate
Equities
Cash
Fair value of collateral
Gross loans
Impairment
Net amount
Amount of undercollaterization
3,789
-
65,731
69,520
152,084
112,859
39,225
(30,295)
6,525
4,150
4,833
15,508
28,543
22,789
5,754
(9,754)
101
-
350
451
1,133
1,018
115
(336)
-
-
4
4
10,415
4,150
70,918
85,483
11
181,771
8
3
136,674
45,097
(1)
(40,386)
Details of collateral pledged by customers against carrying amount of loans and advances as at 31 December, 2017 are as follows:
In millions of Naira
31 December, 2017
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
Group
Bank
Total exposure Value of collateral
89,553
25,276
1,234,199
903,144
53,966
12,194
1,057,198
88,648
Total exposure Value of collateral
52,424
12,194
889,929
1,222,121
25,217
-
781,083
-
2,252,172
1,123,358
2,117,069
954,547
(82,904)
(68,906)
-
-
(68,443)
(68,162)
-
-
Net carrying amount
2,100,362
1,123,358
1,980,464
954,547
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Risk management
The Group’s policy is to pursue timely realisation of the
collateral in an orderly manner. The Group does not
generally use the non-cash collateral for its own operations.
(ii) Balance Sheet Netting Arrangements
Risk reduction by way of current account set-off
is recognised for exposures to highly rated and
creditworthy customers. Customers are required to
enter into formal agreements giving Zenith Bank Plc
the right to set-off gross credit and debit balances in
their nominated accounts to determine the Groups
net exposure. Cross-border set-offs are not permitted.
(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 31 December,
2018 and 31 December, 2017 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 31 December, 2018 and 31 December, 2017 respectively
for loans and advances to customers and amounts due from banks,
is set out below:
(a) Geographical sectors
The following table breaks down the Group’s main credit exposure at
their carrying amounts, as categorised by geographical region at 31
December, 2018 and 31 December, 2017 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.
Group
Bank
Nigeria
Rest of Africa
Outside Africa
In millions of Naira
31 December, 2018
Cash and balances with central bank
Treasury bills
Assets pledged as collateral
Due from other banks
Investment securities
Derivative instruments
Other financial assets
Total
Financial Guarantees
Usance
Letters of credit
Performance bond and guarantees
Total
Nigeria
902,107
818,314
592,935
13,214
164,349
88,826
59,754
Rest of
Africa
52,299
182,246
-
-
67,754
-
1,343
Outside
Africa
10
-
-
661,060
333,209
-
273
902,073
817,043
592,935
-
156,673
88,826
58,406
2,639,499
303,642
994,552
2,615,956
147,189
356,939
327,123
831,251
-
-
-
-
-
-
-
-
147,189
321,754
306,412
775,355
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
393,466
-
-
-
393,466
-
-
-
-
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Zenith Bank Plc Annual Report December 31, 2018
Notes to the Consolidated and Separate Financial
Statements for the Year Ended December 31, 2018
Group
Bank
Nigeria
Rest of Africa
Outside Africa
In millions of Naira
31 December, 2017
Cash and balances with central bank
Treasury bills
Assets pledged as collateral
Due from other banks
Investment securities
Derivative instruments
Other financial assets
Nigeria
907,265
799,992
468,010
18,287
117,814
57,219
Rest of
Africa
41,966
136,825
-
-
Outside
Africa
8,432
-
-
477,516
12,451
200,686
-
42,752
11,521
31,369
907,265
799,992
468,010
8,733
117,814
57,219
42,752
Total
2,411,339
202,763
718,003
2,401,785
Financial Guarantees
Usance
Letters of credit
Performance bond and guarantees
141,283
287,645
445,913
-
94,272
47,014
Total
874,841
141,286
-
-
-
-
141,283
287,645
445,913
874,841
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
264,598
-
-
-
264,598
-
-
-
-
Gross loans and advances to customers and the Non-performing loan portion per geographical region as at 31 December, 2018
*Carrying amounts presented in the table below is determined as gross loans less impairment allowances.
The non-performing loans (NPL) is presented in accordance with Central Bank of Nigeria (CBN) prudential guidelines.
In millions of Naira
Group
Bank
South South
South West
South East
North Central
North West
North East
Rest of Africa
Outside Africa
Loans and advances to customers
Loans and advances to customers
Gross
loans
NPL Impairment
Allowance
Carrying
amount
Gross
loans
NPL
Impairment
Allowance
Carrying
amount
113,319
1,071
3,330
109,989
113,319
1,071
3,330
109,989
1,553,639
87,650
177,322
1,376,317
1,553,037
87,650
177,294
1,375,743
60,715
54,483
39,122
100,388
66,224
28,630
1,263
2,158
359
129
7,873
-
1,466
2,161
495
252
6,929
1,454
59,249
52,322
38,627
60,715
54,483
39,122
100,136
100,388
59,295
27,176
-
-
1,263
2,158
359
129
-
-
1,466
2,161
495
252
-
-
59,249
52,322
38,627
100,136
-
-
2,016,520 100,503
193,409
1,823,111
1,921,064
92,630
184,998
1,736,066
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Risk management
Gross loans and advances and non-performing portion per geographical region as at 31 December 2017
In millions of
Naira
Group
Bank
Loans and advances to customers
Loans and advances to customers
Gross
loans
NPL Collective
impair.
allow
Specific
impair.
allow
Carrying
amount
Gross
loans
NPL Collective
impair.
allow
Specific
impair.
allow
Carrying
amount
South South
111,626
2,171
2,890
-
108,736
111,626
2,171
2,890
-
108,736
South West
1,751,942
85,776
58,699
68,443
1,624,800
1,751,883
85,776
58,699
68,443
1,624,741
South East
North Central
North West
North East
Rest of Africa
Outside Africa
71,886
73,635
24,940
83,100
77,547
57,496
460
3,062
36
233
4,471
9,656
2,518
3,192
331
532
744
-
-
-
-
-
3,201
11,260
69,368
70,443
24,609
82,568
73,602
46,236
71,886
460
73,635
3,062
24,939
83,100
-
-
36
233
-
-
2,518
3,193
331
531
-
-
-
-
-
-
-
-
69,368
70,442
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
(b) Industry sectors
Gross loans and advances to customers and the non-performing loan portion per industry sector as at 31 December, 2018
*Carrying amounts presented in the table below are determined as gross loans less impairment allowances.
The non-performing loans (NPL) is presented in accordance with Central Bank of Nigeria (CBN) prudential guidelines.
In millions of Naira
Group
Bank
Loans and advances to customers
Loans and advances to customers
Gross loans
NPL
Impairment
allowance
Carrying
amount
Gross loans
NPL
Impairment
allowance
Carrying
amount
56,422
1,180
1,338
55,085
56,422
1,180
1,338
55,085
510,139
38,427
60,795
449,344
500,237
38,340
60,154
440,083
Agriculture
Oil and gas
Consumer Credit
Manufacturing
30,761
893
579,856
31,207
Real estate and construction
113,281
13,119
Finance and insurance
7,118
2,739
Government
Power
Transportation
Communication
Education
310,265
88,852
27,579
170
60
185
56,234
2,381
5,021
171
1,204
49,006
16,104
2,916
1,956
14,845
1,897
29,892
208
29,557
530,850
97,177
4,201
308,309
74,007
25,682
26,342
4,813
30,125
893
548,097
23,770
113,281
13,118
6,307
2,641
309,721
81,610
19,402
158
8
185
52,427
2,338
5,021
171
1,177
43,732
16,104
2,875
1,945
14,201
1,361
29,846
208
28,948
504,366
97,177
3,432
307,776
67,409
18,042
22,581
4,813
General Commerce
230,992
9,971
13,246
217,746
198,412
9,826
12,057
186,355
2,016,520
100,503
193,409
1,823,111
1,921,064
92,630
184,998
1,736,066
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Zenith Bank Plc Annual Report December 31, 2018
Notes to the Consolidated and Separate Financial
Statements for the Year Ended December 31, 2018
Gross loans and advances to customers and the non-performing loan portion per industry sector as at 31 December 2017
In millions of Naira
Group
Bank
Loans and advances to customers
Loans and advances to customers
Gross
loans
NPL
Collective
impair.
allow
Specific
impair.
allow
Carrying
amount
Gross
loans
NPL
Collective
impair.
allow
Specific
impair.
allow
Carrying
amount
63,223
956
1,474
-
61,749
63,223
956
1,474
-
61,749
660,243
39,618
23,194
22,807
614,242
609,133
29,954
23,109
11,538
574,486
Agriculture
Oil and gas
Consumer Credit
Manufacturing
Real estate and
construction
11,728
633,739
113,137
59
6,459
7,375
Finance and insurance
8,045
1,913
Government
Power
311,904
83,470
321
12
Transportation
53,037
16,862
Communication
Education
95,093
9,953
2,270
175
583
11,352
5,203
2,286
2,591
5,677
315
111
268
692
10,453
-
622,387
752
107,182
11,728
601,355
101,897
59
6,459
3,228
-
-
-
13,650
35,117
691
5,759
6,673
1,907
309,313
311,367
77,793
39,072
59,865
8,994
252
-
83,470
41,561
16,862
92,960
6,992
2,235
143
583
11,185
4,741
2,272
2,591
5,677
315
111
268
692
10,453
-
590,170
752
96,404
-
-
-
13,650
34,980
-
4,401
308,776
77,793
27,596
57,869
6,724
General Commerce
208,600
29,845
15,852
9,195
183,553
186,710
29,683
15,836
6,832
164,043
2,252,172
105,865
68,906
82,904
2,100,362
2,117,069
91,738
68,162
68,444
1,980,464
3.2.9 Credit quality
All other financial assets are neither past due nor impaired. Loans and advances to customers of NGN295 billion which are neither past
due nor impaired have been renegotiated (31 December 2017: N270 billion).
Group
31 December, 2018
Credit rating - 12 month ECL: All financial assets excluding loans and advances
In millions of
naira
AAA
BBB to BB
Cash and
balances with
central bank
Treasury
bills
Assets
pledged as
collateral
Due from
other banks
Investment
securities
Derivative
instruments
Other
financial
assets
954,416
1,000,632
593,061
676,243
-
-
-
-
518,124
49,760
88,826
62,080
-
-
Gross amount
954,416
1,000,632
593,061
676,243
567,884
88,826
62,080
ECL - impairment
Carrying amount
-
(72)
(126)
(1,969)
(2,572)
-
(710)
954,416
1,000,560
592,935
674,274
565,312
88,826
61,370
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In millions of Naira
Loans and Advances
Risk management
12 months ECL
Lifetime ECL not credit impaired
Lifetime ECL credit impaired
Gross loans and advances
Less allowances for impairment
12 - months ECL
Lifetime ECL not credit impaired
Lifetime ECL credit impaired
Total allowances for impairment
Net loans and advances
Term loans
Overdraft
916,359
350,833
152,084
158,264
21,214
28,543
Others
376,827
11,253
1,143
Total
1,451,450
383,300
181,770
1,419,276
208,021
389,223
2,016,520
11,123
32,383
112,859
156,365
2,623
1,857
27,519
31,999
2,220
1,800
1,025
5,045
15,966
36,040
141,403
193,409
1,262,911
176,022
384,178
1,823,111
Bank
31 December, 2018
Credit rating - 12 month ECL: All financial assets excluding loans and advances
In millions of
naira
Cash and
balances with
central bank
Treasury
bills
Assets
pledged as
collateral
Due from
other banks
Investment
securities
Derivative
instruments
Other
financial
assets
AAA
BBB to BB
902,073
817,115
593,061
394,397
-
-
-
-
107,478
49,760
88,826
59,104
-
-
Gross amount
902,073
817,115
593,061
394,397
157,238
88,826
59,104
ECL - impairment
Carrying amount
-
(72)
(126)
(931)
(565)
-
(698)
902,073
817,043
592,935
393,466
156,673
88,826
58,406
In millions of Naira
12 months ECL
Lifetime ECL not credit impaired
Lifetime ECL credit impaired
Gross loans and advances
Less allowances for impairment
12 - months ECL
Lifetime ECL not credit impaired
Lifetime ECL credit impaired
Total allowances for impairment
Net loans and advances
Loans and Advances
879,355
321,662
152,084
130,993
19,204
28,543
1,353,101
178,740
11,080
30,739
112,859
154,678
793
1,694
22,789
25,276
376,826
11,254
1,143
389,223
2,220
1,800
1,024
5,044
1,387,174
352,120
181,770
1,921,064
14,093
34,233
136,672
184,998
1,198,423
153,464
384,179
1,736,066
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Zenith Bank Plc Annual Report December 31, 2018
Notes to the Consolidated and Separate Financial
Statements for the Year Ended December 31, 2018
Credit portfolio neither past due nor impaired
The credit quality of the portfolio of loans and advances, amounts due from banks and other financial assets that were neither past
due nor impaired can be assessed by reference to the internal rating system adopted by the Group.
At 31 December, 2018
Group
Bank
Loans and advances to
customers
Loans and advances to
customers
AAA
AA to A
BBB to BB
Below B
Unrated
B-
At 31 December,
2017
In millions of Naira
AAA
AA to A
BBB to BB
Below B
Unrated
787,799
340,500
620,051
172,714
63,728
31,728
787,799
340,500
620,051
172,714
-
-
2,016,520
1,921,064
Group
Bank
Due from
Banks
Loans and advances
to customers
Other financial
assets
Due from
Banks
Loans and advances
to customers
Other financial
assets
495,803
-
-
-
-
241,701
1,451,324
217,831
42,228
108,817
495,803
2,061,901
-
-
-
-
55,099
55,099
273,331
-
-
-
-
241,701
1,442,382
216,739
42,186
94
273,331
1,943,102
-
-
-
-
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 31 December,
2017
In millions of
Naira
AAA
AA to A
BBB to BB
Below B
Unrated
Group
Bank
Cash and
balances
with central
bank
Treasury
bills
Derivative
assets
Assets
pledged as
collateral
Cash and
balances
with central
bank
Treasury
bills
Derivative
assets
Assets
pledged as
collateral
957,663
936,817
-
468,010
907,265
799,992
-
468,010
-
-
-
-
-
-
-
-
57,219
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
57,219
-
-
-
-
-
-
957,663
936,817
57,219
468,010
907,265
799,992
57,219
468,010
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Risk management
At 31 December,
2017
In millions of Naira
AAA
AA to A
BBB to BB
Below B
Unrated
Total
Group
Investment securities
Bank
Investment securities
Federal
Government
Bonds
State
Government
Bonds
Corporate
bonds
Federal
Government
Bonds
State
Government
Bonds
Corporate
bonds
250,315
32,266
-
-
-
-
31,725
-
-
-
282,581
31,725
2,544
14,101
-
-
-
16,645
330,951
37,502
32,266
-
-
-
-
31,401
-
-
-
69,768
31,401
2,544
14,101
-
-
-
16,645
117,814
3.2.10 Amounts Arising from ECL
For inputs, assumptions and techniques used for estimating impairment see accounting policy in note 2.8
3.2.11 Amounts Arising from ECL
Corporate exposures
Retail exposures
All exposures
– Information obtained during periodic review of customer files –
–
Internally collected data on
– Payment record – this includes
e.g. audited financial statements, management accounts, budgets
customer behaviour – e.g. utilisation
overdue status as well as a range of
and projections.
of credit card facilities
Examples of areas of particular focus are: gross profit margins,
– Affordability metrics
financial leverage ratios, debt service coverage, compliance with
– External data from credit reference
covenants, quality of management, senior management changes
agencies,
including
industry-
– Data from credit reference agencies, press articles, changes in
standard credit scores
external credit ratings
– Quoted bond and credit default swap (CDS) prices for the
borrower where available
– Actual and expected significant changes
in the political,
regulatory and technological environment of the borrower or in its
business activities
variables about payment ratios
– Utilisation of the granted limit
– Requests for and granting of
forbearance
– Existing and forecast changes in
business, financial and economic
conditions
The Group allocates each exposure to a credit risk grade based
on a variety of data that is determined to be predictive of the
risk of default and applying experienced credit judgement.
Credit risk grades are defined using qualitative and quantitative
factors that are indicative of risk of default. These factors vary
depending on the nature of the exposure and the type of
borrower.
Credit risk grades are defined and calibrated such that the risk
of default occurring increases exponentially as the credit risk
deteriorates so, for example, the difference in risk of default
between credit risk grades 1 and 2 is smaller than the difference
between credit risk grades 2 and 3.
Each exposure is allocated to a credit risk grade at initial
recognition based on available information about the borrower.
Exposures are subject to ongoing monitoring, which may result
in an exposure being moved to a different credit risk grade.
3.2.12 Internal portfolio segmentation
Credit risk grades are a primary input into the determination
of the term structure of PD for exposures. The Group collects
performance and default information about its credit risk
exposures analysed by jurisdiction or region and by type of
product and borrower as well as by credit risk grading. For
some portfolios, information purchased from external credit
reference agencies is also used.
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Zenith Bank Plc Annual Report December 31, 2018
Notes to the Consolidated and Separate Financial
Statements for the Year Ended December 31, 2018
The Group employs statistical models to analyse the data
collected and generate estimates of the remaining lifetime PD
of exposures and how these are expected to change as a result
of the passage of time.
This analysis includes the identification and calibration of
relationships between changes in default rates and changes in
key macro-economic factors as well as in-depth analysis of the
impact of certain other factors (e.g. forbearance experience) on
the risk of default. For most exposures, key macro-economic
indicators include: GDP growth, benchmark interest rates and
unemployment. For exposures to specific industries and/or
regions, the analysis may extend to relevant commodity and/
or real estate prices.
Based on advice from the Group Market Risk Committee and
economic experts and consideration of a variety of external
actual and forecast information, the Group formulates a
‘base case’ view of the future direction of relevant economic
variables as well as a representative range of other possible
forecast scenarios (see discussion below on incorporation
of forward-looking information). The Group then uses these
forecasts to adjust its estimates of PDs.
In determining the ECL for other assets, the Group applies the
simplified model to estimate ECLs, adopting a provision matrix
to determine the lifetime ECLs. The provision matrix estimates
ECLs on the basis of historical default rates, adjusted for current
and future economic conditions (expected changes in default
rates) without undue cost and effort.
3.2.13 Significant increase in credit risk
Significant increase in credit risk
The criteria for determining whether credit risk has increased
significantly vary by portfolio and include quantitative changes
in PDs and qualitative factors, including a backstop based on
delinquency.
Using its expert credit judgement and, where possible,
relevant historical experience, the Group may determine that
an exposure has undergone a significant increase in credit risk
based on particular qualitative indicators that it considers are
indicative of such and whose effect may not otherwise be fully
reflected in its quantitative analysis on a timely basis.
As a backstop, the Group considers that a significant increase in
credit risk occurs no later than when an asset is more than 30
days past due. Days past due are determined by counting the
number of days since the earliest elapsed due date in respect
of which full payment has not been received. Due dates are
determined without considering any grace period that might
be available to the borrower.
If there is evidence that there is no longer a significant increase in
credit risk relative to initial recognition, then the loss allowance
on an instrument returns to being measured as 12-month ECL.
Some qualitative indicators of an increase in credit risk, such as
delinquency or forbearance, may be indicative of an increased
risk of default that persists after the indicator itself has ceased to
exist. In these cases, the Group determines a probation period
during which the financial asset is required to demonstrate
good behaviour to provide evidence that its credit risk has
declined sufficiently. When contractual terms of a loan have
been modified, evidence that the criteria for recognising
lifetime ECL are no longer met includes a history of up-to-date
payment performance against the modified contractual terms.
Generally, facilities with loss allowances being measured as
Life-time ECL not credit impaired (Stage 2) are monitored for
a probationary period of 90 days to confirm if the credit risk
has decreased sufficiently before they can be migrated from
Lifetime ECL not credit impaired (Stage 2) to 12-month ECL
(Stage 1) while credit-impaired facilities (Stage 3) are monitored
for a probationary period of 180 days before migration from
Stage 3 to 12-month ECL (Stage 1). The decrease in risk of
default is reflected in the obligor’s Risk Rating which is a critical
input for Staging.
The credit risk of a particular exposure is deemed to have
increased significantly since initial recognition if, based on the
Group’s quantitative modelling, the remaining lifetime PD is
determined to have increased by more than a predetermined
percentage/range.
The Group monitors the effectiveness of the criteria used to
identify significant increases in credit risk by regular reviews to
confirm that:
the criteria are capable of identifying significant increases
in credit risk before an exposure is in default;
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the criteria do not align with the point in time when an
asset becomes 30 days past due; and
there is no unwarranted volatility in loss allowance from
transfers between 12-month PD (stage 1) and lifetime PD
(stage 2).
3.2.14 Modified financial assets
The contractual terms of a loan may be modified for a
number of reasons, including changing market conditions,
customer retention and other factors not related to a current
or potential credit deterioration of the customer. An existing
loan whose terms have been modified may be derecognised
and the renegotiated loan recognised as a new loan at fair
value in accordance with the accounting policy set out in the
accounting policy.
When the terms of a financial asset are modified and
in derecognition, the
the modification does not result
determination of whether the asset’s credit risk has increased
significantly reflects comparison of:
its remaining lifetime PD at the reporting date based on
the modified terms; with
the remaining lifetime PD estimated based on data at
initial recognition and the original contractual terms.
The Group renegotiates loans to customers in financial
difficulties (referred to as ‘forbearance activities) to maximise
collection opportunities and minimise the risk of default.
Under the Group’s forbearance policy, loan forbearance is
granted on a selective basis if the debtor is currently in default
on its debt or if there is a high risk of default, there is evidence
that the debtor made all reasonable efforts to pay under the
original contractual terms and the debtor is expected to be
able to meet the revised terms.
The revised terms usually include extending the maturity,
changing the timing of interest payments and amending the
terms of loan covenants. Both retail and corporate loans are
subject to the forbearance policy. The Group Audit Committee
regularly reviews reports on forbearance activities.
For financial assets modified as part of the Group’s forbearance
policy, the estimate of PD reflects whether the modification
has improved or restored the Group’s ability to collect interest
and principal and the Group’s previous experience of similar
Risk management
forbearance action. As part of this process,the Group evaluates
the borrower’s payment performance against the modified
contractual terms and considers various behavioural indicators.
Generally, forbearance is a qualitative indicator of a significant
increase in credit risk and an expectation of forbearance may
constitute evidence that an exposure is credit-impaired/in
default. A customer needs to demonstrate consistently good
payment behaviour over a period of time before the exposure
is no longer considered to be credit-impaired/in default or
the PD is considered to have decreased such that the loss
allowance reverts to being measured at an amount equal to
12- month ECL.
3.2.15 Definition of default
The Group considers 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 realising security (if any is held); or
the borrower is past due more than 90 days on any material
credit obligation to the Group. Overdrafts are considered
as being past due once the customer has breached an
advised limit or been advised of a limit smaller than the
current amount outstanding. In assessing whether a
borrower is in default, the Group considers indicators that
are:
qualitative - e.g. breaches of covenant;
quantitative - e.g. overdue status and non-payment on
another obligation of the same issuer to the Group; and
based on data developed internally and obtained from
external sources.
Inputs into the assessment of whether a financial instrument
is in default and their significance may vary over time to reflect
changes in circumstances.
The definition of default largely aligns with that applied by the
Group for regulatory purposes (see note 3.2.8), except where
there is regulatory waiver on specifically identified loans and
advances.
3.2.16 Incorporation of forward-looking information
The Group incorporates forward-looking information into
both its assessment of whether the credit risk of an instrument
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Zenith Bank Plc Annual Report December 31, 2018
Notes to the Consolidated and Separate Financial
Statements for the Year Ended December 31, 2018
has increased significantly since its initial recognition and its
measurement of ECL. Based on advice from the Group Market
Risk Committee and economic experts and consideration
of a variety of external actual and forecast information, the
Group formulates a ‘base case’ view of the future direction of
relevant economic variables as well as a representative range
of other possible forecast scenarios. This process involves
developing two or more additional economic scenarios
and considering the relative probabilities of each outcome.
External information includes economic data and forecasts
published by governmental bodies and monetary authorities
in the countries where the Group operates, supranational
organisations such as the OECD and the International Monetary
Fund, and selected private-sector and academic forecasters.
The base case represents a most-likely outcome and is aligned
with information used by the Group for other purposes such
as strategic planning and budgeting. The other scenarios
represent more optimistic and more pessimistic outcomes.
Periodically, the Group carries out stress testing of more
extreme shocks to calibrate its determination of these other
representative scenarios.
The Group has identified and documented key drivers of credit
risk and credit losses for each portfolio of financial instruments
and, using an analysis of historical data, has estimated
relationships between macro-economic variables and credit
risk and credit losses.
The key drivers for credit risk for non-retail portfolios are: GDP
growth and foreign exchange rate. For exposures to specific
industries and/or regions, the key drivers also include relevant
commodity and/or real estate prices. The key drivers for credit
risk for retail portfolios are: GDP and foreign exchange rate.
The economic scenarios used as at 31 December 2018
included the following key indicators for Nigeria for the years
ending 31 December 2019 to 2020.
2019
2020
Foreign exchange
Base 365
rate
Upside 360
Base 365
Upside 360
Downside 375
Downside 400
GDP growth
Base 2.3%
Upside 2.5%
Base 3.0%
Upside 3.5%
Downside 2.0%
Downside 2.2%
Predicted relationships between the key indicators and
default and loss rates on various portfolios of financial assets
have been developed based on analysing historical data over
the past 5 years.
3.2.17 Measurement of ECL
The key inputs into the measurement of ECL are the term
structure of the following variables:
probability of default (PD);
loss given default (LGD)
exposure at default (EAD)
ECL for exposures in stage 1 (12-months ECL) is calculated by
multiplying the 12-months PD by LGD and EAD. Lifetime ECL
is calculated by multiplying the lifetime PD by LGD and EAD.
internally
These parameters are generally derived from
developed statistical models and other historical data and
they are adjusted to reflect forward-looking information as
described above.
PD is an estimate of the likelihood of default over a given
time horizon, which are calculated based on statistical rating
models, and assessed using rating tools tailored to the various
categories of counterparties and exposures. These statistical
models are based on internally compiled data comprising
both quantitative and qualitative factors. Where it is available,
market data may also be used to derive the PD for large
corporate counterparties. If a counterparty or exposure
migrates between rating classes, then this will lead to a
change in the estimate of the associated PD. PDs are estimated
considering the contractual maturities of exposures and
estimated prepayment rates. The methodology of estimating
PD is discussed in note 3.2.12.
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Risk management
management, but only when the Group becomes aware of
an increase in credit risk at the facility level. This longer period
is estimated taking into account the credit risk management
actions that the Group expects to take and that serve to
mitigate ECL. These include a reduction in limits, cancellation
of the facility and/or turning the outstanding balance into a
loan with fixed repayment terms.
Where modelling of a parameter is carried out on a collective
basis, the financial instruments are grouped on the basis of
shared risk characteristics that include:
instrument type
credit risk gradings
collateral type
Past due information
date of initial recognition
remaining term to maturity
industry
geographic location of the borrower
The groupings are subject to regular review to ensure that
exposures within a particular group remain appropriately
homogeneous.
3.2.18 Loss allowance
The following tables show reconciliations from the opening to
the closing balance of the loss allowance by class of financial
instrument. Comparative amounts
represent
allowance account for credit losses and reflect measurement
basis under IAS 39.
for 2017
LGD is the magnitude of the likely loss if there is a default.
The Group estimates LGD parameters based on the history
of recovery rates of claims against defaulted counterparties.
The LGD models consider the structure, collateral, seniority
of the claim, counterparty industry and recovery costs of any
collateral that is integral to the financial asset. LGD estimates
are recalibrated for different economic scenarios and, for
lending, to reflect possible changes in the economies. They
are calculated on a discounted cash flow basis using the
effective interest rate as the discount.
EAD represents the expected exposure in the event of a
default. The Group derives the EAD from the current exposure
to the counterparty and potential changes to the current
amount allowed under the contract including amortisation.
The EAD of a financial asset is its gross carrying amount at the
time of default. For lending commitments, the EAD includes
the amount drawn,as well as potential future amounts that
may be drawn under the contract, which are estimated based
on historical observations and forward-looking forecasts. For
financial guarantees, the EAD represents the amount of the
guaranteed exposure when the financial guarantee becomes
payable. For some financial assets, EAD is determined by
modelling the range of possible exposure outcomes at various
points in time using scenario and statistical techniques.
As described above, and subject to using a maximum of a
12-month PD for financial assets for which credit risk has not
significantly increased, the Group measures ECL considering
the risk of default over the maximum contractual period
(including any borrower’s extension options) over which it is
exposed to credit risk, even if, for risk management purposes,
the Group considers a
longer period. The maximum
contractual period extends to the date at which the Group
has the right to require repayment of an advance or terminate
a loan commitment or guarantee.
However, for overdrafts and revolving facilities that include
both a loan and an undrawn commitment component, the
Group measures ECL over a period longer than the maximum
contractual period
if the Group’s contractual ability to
demand repayment and cancel the undrawn commitment
does not limit the Group’s exposure to credit losses to the
contractual notice period.These facilities do not have a fixed
term or repayment structure and are managed on a collective
basis. The Group can cancel them with immediate effect but
this contractual right is not enforced in the normal day-to-day
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Zenith Bank Plc Annual Report December 31, 2018
Notes to the Consolidated and Separate Financial
Statements for the Year Ended December 31, 2018
Group
In millions of Naira
Treasury bills at amortised cost
Balance at 1 January
Net remeasurement of loss allowances
(see note 8)
Transfers from assets pledged as
collateral
Foreign exchange and other movements
Closing balance
Gross amount
31 December, 2018
31 December, 2017
12-month
ECL
Lifetime ECL
not credit
impaired
Lifetime
ECL credit
impaired
Total
Specific Collective
Total
1,305
(1,243)
-
10
72
-
-
-
-
-
-
-
-
-
-
1,305
(1,243)
-
10
72
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
490,319
490,319
In millions of Naira
Off balance sheet exposure
Balance at 1 January
Net remeasurement of loss
allowances (see note 8)
Write-offs
Closing balance
Gross amount
31 December, 2018
31 December, 2017
12-month
ECL
Lifetime ECL
not credit
impaired
Lifetime
ECL credit
impaired
Total
Specific Collective
Total
2,526
5,337
148
8,011
831,251
-
-
2,526
5,337
148
8,011
831,251
-
-
-
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Risk management
In millions of Naira
12-month
ECL
Lifetime ECL
not credit
impaired
Lifetime
ECL credit
impaired
Total
Specific Collective
Total
31 December, 2018
31 December, 2017
Assets pledged as collateral at ammortised cost
Balance at 1 January
Net remeasurement of loss
allowances (see note 8) Write-offs
Closing balance
Gross amount
1,202
(1,076)
-
126
593,061
-
-
-
-
-
-
-
-
-
-
1,202
(1,076)
-
126
593,061
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
In millions of Naira
12-month
ECL
Lifetime ECL
not credit
impaired
Lifetime
ECL credit
impaired
Total
Specific Collective
Total
31 December, 2018
31 December, 2017
Loans and advances to customers at amortised cost
Balance at 1 January
- Transfer to 12-month ECL
- Transfer to lifetime ECL not credit-
impaired
64,620
382
(22,215)
35,586
(248)
22,913
- Transfer to lifetime ECL credit-impaired
(42,298)
Net remeasurement of loss allowances
14,074
(46,836)
22,890
89,134
(27,128)
(see note 8)
152,967
253,174
32,896
38,548
71,444
(134)
(698)
-
-
-
-
-
-
-
-
-
-
-
-
9,836
59,513
38,691
98,204
New financial assets originated or
1,550
1,540
377
3,467
-
-
-
purchased
Write-offs and recoveries
Foreign exchange and other
movements
Closing balance
Gross amount
-
(148)
-
195
(73,962)
(73,962)
(6,535)
(7,196)
(13,731)
847
894
(2,970)
(1,137)
(4,107)
15,965
36,040
141,403
193,409
82,904
68,906
151,810
1,451,450
383,300
181,770 2,016,520
84,793
2,167,379 2,252,172
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Zenith Bank Plc Annual Report December 31, 2018
Notes to the Consolidated and Separate Financial
Statements for the Year Ended December 31, 2018
In millions of Naira
12-month
ECL
Lifetime ECL
not credit
impaired
Lifetime
ECL credit
impaired
Total
Specific Collective
Total
31 December, 2018
31 December, 2017
Investment securities at amortised cost
Balance at 1 January
Net remeasurement of loss allowances
(see note 8)
Write-offs and recoveries
Closing balance
Gross amount
1,773
(430)
1,229
2,572
513,154
-
-
-
-
-
-
-
-
-
-
1,773
221
578
2,572
513,154
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
31 December, 2018
31 December, 2017
12-month
ECL
Lifetime ECL
not credit
impaired
Lifetime
ECL credit
impaired
Total
Specific Collective
Total
-
-
-
-
-
-
-
-
-
-
-
-
4,831
395
(4,516)
5
715
62,468
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
In millions of Naira
Other financial assets
Balance at 1 January
Net remeasurement of loss allowances (see
note 8)
4,831
395
Financial assets that have been derecognised
(4,516)
Write-offs
Foreign exchange and other Foreign
-
exchange and other movements
Closing balance
Gross amount
710
62,468
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Risk management
In millions of Naira
Due from other banks
Balance at 1 January
Net remeasurement of loss allowances (see
note 8)
Financial assets that have been derecognised
Write-offs
Foreign exchange and other movements
Closing balance
Gross amount
31 December, 2018
31 December, 2017
12-month
ECL
Lifetime ECL
not credit
impaired
Lifetime
ECL credit
impaired
Total
Specific Collective
Total
-
1,938
-
31
1,969
458,305
-
-
-
-
-
-
-
-
-
-
-
-
1,938
-
31
1,969
458,305
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
In millions of Naira
Impact of IFRS9 Opening Entries on Impairment Allowances
Addition under IFRS 9 as at 1 January 2018
Under IAS 39 as at 31 December 2017
12-month
ECL
Lifetime ECL
not credit
impaired
Lifetime
ECL credit
impaired
Total
Specific
allowance for
impairment
Collective
allowance for
impairment
Total
Loans and advances
25,903
14,242
61,218
101,363
82,904
68,906
151,810
Off-balance sheet exposures
Assets pledged as collateral
Investment Securities
Treasury bills
2,526
1,202
1,773
1,305
-
-
-
-
-
-
-
-
2,526
1,202
1,773
1,305
-
-
-
-
-
-
-
-
-
-
-
-
Balance as at 1 January 2018
32,709
14,242
61,218 108,169
82,904
68,906
151,810
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Zenith Bank Plc Annual Report December 31, 2018
Notes to the Consolidated and Separate Financial
Statements for the Year Ended December 31, 2018
Bank
In millions of Naira
31 December, 2018
31 December, 2017
12-month
ECL
Lifetime ECL
not credit
impaired
Lifetime
ECL credit
impaired
Total
Specific
allowance for
impairment
Collective
allowance for
impairment
Total
Treasury bills at ammortised cost
Balance at 1 January
Net remeasurement of loss
allowances (see note 8)
Transfers from assets pledged as
collateral
Closing balance
Gross amount
1,186
(1,114)
72
306,802
-
-
-
-
-
-
-
-
1,186
(1,114)
72
306,802
-
-
-
-
-
-
-
-
-
-
-
252,336
In millions of Naira
Off balance sheet exposure
Balance at 1 January
Net remeasurement of loss
allowances (see note 8)
Closing balance
Gross amount
31 December, 2018
31 December, 2017
12-month
ECL
Lifetime ECL
not credit
impaired
Lifetime
ECL credit
impaired
Total
Specific
allowance for
impairment
Collective
allowance for
impairment
Total
1,571
6,441
8,011
775,355
-
-
-
-
-
-
-
-
1,571
6,441
8,011
775,355
-
-
-
-
-
-
-
-
-
-
-
874,841
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Risk management
In millions of Naira
12-month
ECL
Lifetime ECL
not credit
impaired
Lifetime
ECL credit
impaired
Total
Specific
allowance for
impairment
Collective
allowance for
impairment
Total
31 December, 2018
31 December, 2017
Assets pledged as collateral at ammortised cost
Balance at 1 January
Net remeasurement of loss
allowances (see note 8)
Closing balance
Gross amount
1,202
(1,076)
126
593,061
-
-
-
-
-
-
-
-
1,202
(1,076)
126
593,061
-
-
-
-
-
-
-
-
-
-
-
331,571
In millions of Naira
12-month
ECL
Lifetime ECL
not credit
impaired
Lifetime
ECL credit
impaired
Total
Specific
allowance for
impairment
Collective
allowance for
impairment
Total
31 December, 2018
31 December, 2017
Loans and advances to customers at amortised cost
Balance at 1 January
- Transfer to 12-month ECL
- Transfer to lifetime ECL
not credit-impaired
60,761
382
(22,215)
33,245
(248)
22,913
- Transfer to lifetime ECL
(42,298)
(46,836)
89,134
credit-impaired
141,832
235,838
17,607
37,485
55,092
(134)
(698)
-
-
-
-
-
-
-
-
-
-
-
-
Net remeasurement of loss
15,912
23,619
(33,602)
5,929
57,371
37,873
95,244
allowances (see note 8)
New financial assets originated
1,550
1,540
377
3,467
-
-
-
or purchased Write-offs
Write-offs
Closing balance
-
-
(60,236)
(60,236)
14,092
34,233
136,673
184,998
(6,535)
68,443
(7,196)
(13,731)
68,162
136,605
Gross amount
1,387,174
352,119
181,770 1,921,064
70,667
2,046,402 2,117,069
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Zenith Bank Plc Annual Report December 31, 2018
Notes to the Consolidated and Separate Financial
Statements for the Year Ended December 31, 2018
In millions of Naira
Other financial assets
Balance at 1 January
Net remeasurement of loss allowances (see
note 8)
Write-offs
Closing balance
Gross amount
In millions of Naira
31 December, 2018
31 December, 2017
12-month
ECL
Lifetime ECL
not credit
impaired
Lifetime
ECL credit
impaired
Total
Specific Collective
Total
4,832
383
(4,517)
698
59,104
-
-
-
-
-
-
-
-
-
-
4,832
383
(4,517)
698
59,104
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
31 December, 2018
31 December, 2017
12-month
ECL
Lifetime
ECL not
credit
impaired
Lifetime
ECL
credit
impaired
Total
Specific Collective
Total
Due from other Banks
Balance at 1 January
Net remeasurement of loss allowances (see
note 8)
Financial assets that have been derecognised
Write-offs
Foreign exchange and other movements
Closing balance
Gross amount
-
931
-
-
-
931
394,397
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
931
-
-
-
931
394,397
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
In millions of Naira
12-month
ECL
Lifetime
ECL not
credit
impaired
Lifetime
ECL
credit
impaired
Total
Specific Collective
Total
31 December, 2018
31 December, 2017
Investment securities at amortised cost
Balance at 1 January
Net remeasurement of loss allowances (see
note 8)
Financial assets that have been derecognised
Closing balance
Gross amount
358
207
-
565
102,508
-
-
-
-
-
-
-
-
-
-
358
207
-
565
102,508
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
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Risk management
Summary of loss allowance by class of financial instruments also showing ECL coverage ratio.
Group
Financial Statement Items
In millions of Naira
On-balance sheet items
Gross Carrying Amount
ECL Provision
ECL Coverage Ratio
Stage 1 Stage 2
Stage 3
Total Stage 1
Stage 2 Stage 3
Total Stage 1 Stage 2 Stage 3
Total
%
%
%
%
Assets pledged as
593,061
-
-
593,061
126
-
-
126
0.02
-
-
0.02
collateral
Treasury bills
490,319
490,319
72
72
Loans and advances to
1,451,450
383,300
181,770
2,016,520
15,965
36,040
141,403
193,408
0.01
1.10
9.40
77.79
0.01
9,59
2,572
0.50
-
-
0.50
customers at amortised
cost
Debt investment
513,154
securities at amortised
cost
Debt investment
securities at FVOCI
49,760
Other financial assets
62,468
measured at amortised
cost
-
-
-
-
513,154
2,572
49,760
62,468
710
-
-
-
-
710
1.14
Due from other Banks
676,243
676,243
1,969
1,969
Subtotal
3,160,212
383,300
181,770
3,725,282
19,445
36,040
141,403
196,888
0.29
2.77
-
9.40
77.79
Off-balance sheet items
Loans and other credit related commitments
Letters of credit
Usance
Financial guarantee and
similar contracts
356,939
147,189
356,939
147,189
5,312
1,940
5,312
1,940
1.49
1.32
1.14
0.29
5.29
1.49
1.32
Performance bonds and
327,123
327,123
759
759
0.23
.
0.23
guarantees
Subtotal
Total
831,251
831,251
8,011
8,011
3,991,463 383,300
181,770 4,556,533
27,456
36,040 141,403 204,899
3.04
5.81
9.40
77.79
3.04
4.50
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Zenith Bank Plc Annual Report December 31, 2018
Notes to the Consolidated and Separate Financial
Statements for the Year Ended December 31, 2018
Summary of loss allowance by class of financial instruments also showing ECL coverage ratio.
Bank
Financial Statement Items
In millions of Naira
On-balance sheet items
Gross Carrying Amount
ECL Provision
ECL Coverage Ratio
Stage 1 Stage 2
Stage 3
Total Stage 1
Stage 2 Stage 3
Total Stage 1 Stage 2 Stage 3
Total
%
%
%
%
Assets pledged as
593,061
-
-
593,061
126
-
-
126
0.02
-
-
0.02
collateral
Treasury bills
306,802
306,802
72
72
Loans and advances to
1,387,174
352,119
181,770
1,921,064
14,092
34,233
136,673
184,998
0.02
1.02
9.72
75.19
customers at amortised
cost
Debt investment
102,508
securities at amortised
cost
Debt investment
securities at FVOCI
49,760
Other financial assets
59,104
measured at amortised
cost
Other non- financial
18,064
assets
-
-
-
-
-
-
-
-
102,508
565
49,760
-
59,104
698
18,064
560
-
-
-
-
-
-
-
-
565
0.55
-
-
698
1.18
560
3.10
-
-
-
-
-
-
-
-
Due from other Banks
394,397
394,397
931
931
Subtotal
2,498,409
352,119
181,770
3,032,299
15,553
34,233
136,673
186,459
Off-balance sheet items
Loans and other credit related commitments
Letters of credit
Usance
Performance bonds and
guarantees
Subtotal
Total
321,754
147,189
306,412
775,355
-
-
-
-
-
-
-
-
321,754
147,189
306,412
5,311
1,941
759
775,355
8,011
-
-
-
-
-
-
-
-
5,311
1,941
759
8,011
3,273,764 352,119
181,770 3,807,654
23,564
34,233 136,673 194,470
0.24
2.79
1.65
1.32
0.24
3.21
6.00
9.72
75.19
-
-
-
-
-
-
-
-
9.72
75.19
0.02
9.63
0.55
-
1.18
3.10
0.24
6.15
1.65
1.32
0.25
1.03
5.11
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3.2.19 Restructuring policy
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.
lost. This determination
3.2.20 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
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.
Loans and debt securities are written off (either partially or
in full) when there is no realistic prospect of recovery. This
is generally the case when the Group determines that the
borrower does not have assets or sources of income that
Risk management
could generate sufficient cash flows to repay the amounts
subject to the write-off. However, financial assets that are
written off could still be subject to enforcement activities in
order to comply with the Group’s procedures for recovery of
amounts due.
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
identify,
manage and control market risk exposure within acceptable
parameters, while optimizing the return on risks taken.
is to continuously
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
categorised into:
risks exposures are broadly
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Zenith Bank Plc Annual Report December 31, 2018
Notes to the Consolidated and Separate Financial
Statements for the Year Ended December 31, 2018
(i) Trading Market Risks - These are risks that arise
primarily through trading activities and market
making activities. These activities include position-
taking
income
in foreign exchange and fixed
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 Naira exchange rate continues to be an important
influence on consumer prices and output recovery. Stability
in the naira exchange rate has been sustained for most part
of the year through appropriate policies and reforms of
the exchange rate market; There has also been some form
of convergence in the various markets. The NIFEX rate has
moved within touching distance of the I&E market as well
as the Parallel market, with these markets trading closely
within a +/- N5 band.
The Nigerian Foreign Exchange Reserves
recorded
significant growth during the year with favourable crude
oil prices and uninterrupted crude production as well as
increased autonomous inflows through the Investors’ and
Exporters’ foreign exchange (I&E) window. The supply of FX
to the parallel market has remained impressive.
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
At December 31, 2018
At December 31, 2017
Note
Carrying
Amount
Trading
Non-
trading
Carrying
Amount
Trading
Non-
trading
15
16
17
18
19
21
24
27
32
28
29
30
31
954,416
954,416
957,663
957,663
1,000,560
510,313
490,247
936,817
547,656
389,161
592,935
184,812
408,123
468,010
136,438
331,572
674,274
674,274
495,803
495,803
88,826
88,826
57,219
57,219
1,823,111
1,823,111
2,100,363
2,100,363
565,312
4,970
560,342
330,951
32,266
298,685
61,370
61,370
100,808
100,808
3,690,295
-
3,690,295
3,437,915
-
3,437,915
16,995
16,995
20,805
20,805
190,408
393,295
437,260
361,177
-
-
-
-
190,408
212,304
393,295
383,034
437,260
356,496
361,177
332,931
-
-
-
-
212,304
383,034
356,496
332,931
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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
Risk management
At December 31, 2018
At December 31, 2017
Note
Carrying
Amount
Trading
Non-
trading
Carrying
Amount
Trading
Non-
trading
15
16
17
18
19
21
24
27
32
28
29
30
31
902,073
902,073
907,265
907,265
817,043
510,313
306,730
799,992
547,656
252,336
592,935
184,812
408,123
468,010
136,438
331,572
393,466
393,466
273,331
273,331
88,826
88,826
57,219
57,219
1,736,066
1,736,066
1,980,465
1,980,465
156,673
4,970
151,703
117,814
32,266
58,406
58,406
42,752
85,548
45,752
2,821,066
-
2,821,066
2,744,525
-
2,744,525
16,995
16,995
20,805
20,805
212,006
393,295
458,463
361,177
-
-
-
-
212,006
212,304
393,295
383,034
458,463
418,979
361,177
332,931
-
-
-
-
212,304
383,034
418,979
332,931
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.
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.
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Zenith Bank Plc Annual Report December 31, 2018
Notes to the Consolidated and Separate Financial
Statements for the Year Ended December 31, 2018
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 31 December, 2018 and 31
December, 2017. Included in the table are the Group’s financial instruments at carrying amounts, categorised by currency.
In millions of Naira
At December 31, 2018
Assets
Naira
Dollar
GBP
Euro
Others
Total
Cash and balances with central bank
436,185
469,608
6,049
4,838
37,736
954,416
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
930,701
592,935
1,957
-
-
-
-
-
67,902
1,000,560
0
592,935
54,201
497,803
34,100
52,825
35,346
674,274
88,826
-
-
-
-
88,826
926,163
830,868
1,006
16,217
48,857
1,823,111
176,771
320,897
-
1,283
66,360
565,312
7,006
10,892
25,618
-
17,854
61,370
3,212,788
2,132,025
66,773
75,163
274,055
5,760,804
2,100,306
1,203,619
63,148
43,868
279,354
3,690,295
16,995
59,284
121,994
393,295
0
0
437,260
361,177
-
-
-
-
-
-
-
16,995
3,390
5,740
190,407
-
-
-
-
-
-
393,295
437,260
361,177
2,569,880 2,124,050
63,148
47,258
285,094
5,089,429
Net on-balance sheet position
642,908
7,975
3,625
27,905
(11,039)
671,374
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In millions of Naira
At December 31, 2017
Assets
Cash and balances with central bank
Treasury bills
Assets pledged as collateral
Due from other banks
Derivative assets
Loans and advances to customers (gross)
Investment securities
Other financial assets
Liabilities
Customer deposits
Derivative liabilities
Other financial liabilities
On-lending facilities
Borrowings
Debt securities issued
Risk management
Naira
Dollar
GBP
Euro
Others
Total
517.794
385,147
799,992
74,511
468,010
-
5,802
23,279
-
3,365
-
-
45.554
39,035
957.663
936,817
-
468,010
9,574
424,742
19,850
36,120
5,517
495,803
57,219
-
1,357,236
719,066
116,112
213,587
77,328
-
-
873
-
-
-
2,027
1,252
-
-
57,219
21,161
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
1,193,820
37,972
33,100
127,610
3,437,915
20,805
225,019
383,034
-
-
-
-
-
356,496
332,931
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
20,805
225,019
383,034
356,496
332,931
2,674,271 1,883,247
37,972
33,100
127,610
4,756,200
Net on-balance sheet position
728,994
(66,194)
11,832
9,664
(16,343)
667,953
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-18
31-Dec-17
5,891
5,394
US Dollar effect of 30% up or (down) movement on profit before tax and statement of financial position
size (in millions of Naira)
11,782
10,788
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Zenith Bank Plc Annual Report December 31, 2018
Notes to the Consolidated and Separate Financial
Statements for the Year Ended December 31, 2018
Bank
The table below summarizes the Bank’s exposure to foreign currency exchange rate risk at 31 December, 2018 and 31
December, 2017. Included in the table are the Bank’s financial instruments at carrying amounts, categorised by currency.
In millions of Naira
At December 31, 2018
Assets
Naira
Dollar
GBP
Euro
Others
Total
Cash and balances with central banks
435,137
459,300
5,389
2,247
Treasury bills
Assets pledged as collaterals
Due from other banks
Derivative assets
Loans and advances to customers
Investment securities
Other financial assets
Liabilities
Customer deposits
Derivative liabilities
Other financial liabilities
On-lending facilities
Borrowings
Debt securities issued
815,086
592,935
1,957
-
-
-
-
-
0
-
-
902,073
817,043
592,935
29,211
339,070
4,760
16,818
3,607
393,466
88,826
-
932,004
788,477
154,806
54,047
1,867
3,940
-
147
-
418
-
15,416
-
-
-
22
-
-
88,826
1,736,066
156,673
58,406
3,102,052 1,594,611
10,714
34,481
3,629
4,745,488
2,084,773
703,545
10,634
20,518
1,596
2,821,066
16,995
-
105,202
91,400
393,295
-
849
(0)
457,614
361,177
-
-
-
-
-
-
16,995
13,390
2,014
212,006
-
-
-
-
-
-
393,295
458,463
361,177
2,601,114 1,613,736
10,634
33,908
3,610
4,263,002
Net on-balance sheet position
500,938
(19,125)
80
573
19
482,485
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In millions of Naira
At December 31, 2017
Assets
Risk management
Naira
Dollar
GBP
Euro
Others
Total
Cash and balances with central bank
517,794
382,200
5,438
1,833
Treasury bills
Assets pledged as collateral
Due from other banks
Derivative assets
Loans and advances to customers
Investment securities
Other financial assets
Liabilities
Customer deposits
Derivative liabilities
Other financial liabilities
On-lending facilities
Borrowings
Debt securities issued
799,992
468,010
-
-
-
-
-
-
9,455
239,299
2,389
22,069
57,219
-
1,357,236
614,988
116,112
1,702
56,052
-
-
70
-
0
-
8,160
-
-
-
-
-
118
-
10
-
-
907,265
799,992
468,010
273,331
57,219
1,980,464
117,814
56,052
3,381,870 1,238,189
7,897
32,062
128
4,660,147
2,045,413
678,688
7,457
12,967
20,805
218,373
383,034
-
-
-
-
-
418,979
332,931
-
-
-
-
-
-
-
-
-
-
2,667,625 1,430,598
7,457
12,967
-
-
-
-
-
-
-
2,744,525
20,805
218,373
383,034
418,979
332,931
4,118,647
Net on-balance sheet position
714,245
(192,409)
440
19,095
128
541,500
The Bank’s exposure to foreign currency risk is largely concentrated in US Dollar. Movement in exchange rate between the US Dollar,
and the Nigerian Naira affects reported earnings through revaluation gain or loss and statement of financial position size through
increase or decrease in the revalued amounts of assets and liabilities denominated in US Dollars. The Group's closing and average Dollar
rate as at 31 December, 2018 was 358.79 and 348.16 respectively.
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.
US Dollar effect of 15% up or (down) movement on profit before tax and balance sheet size
US Dollar effect of 30% up or (down) movement on profit before tax and statement of
financial position size (in millions of Naira)
31-Dec-18
31-Dec-17
9,881
19,762
27,320
54,639
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Zenith Bank Plc Annual Report December 31, 2018
Notes to the Consolidated and Separate Financial
Statements for the Year Ended December 31, 2018
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 market realities.
Group
The table below summarizes the Group's interest rate gap position:
In millions of Naira
At December 31, 2018
Assets
Cash and balances with central banks
Treasury and other eligible bills (Amortized cost)
Assets pledged as collateral
Due from other banks
Derivative assets
Loans and advances to customers (Gross)
Investment securities (Amortized cost and Fair value through OCI)
Other financial assets
Liabilities
Customer deposits
Derivative liabilities
Other financial liabilities
On-lending facilities
Borrowings
Debt securities issued
Note
Carrying Amount Rate sensitive Non rate sensitive
15
16
17
18
19
21
24
27
32
28
29
30
31
954,416
1,000,560
592,935
674,274
88,826
2,016,520
565,312
61,370
7,500
1,000,560
592,935
674,274
88,826
2,016,520
515,552
-
946,916
-
-
-
-
-
49,760
61,370
5,954,213
4,896,167
1,058,046
3,690,295
3,221,790
16,995
190,408
392,935
437,620
361,177
16,995
392,935
437,620
361,177
468,505
-
190,408
-
-
-
5,089,430
4,430,517
658,913
Total interest repricing gap
864,783
465,650
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At December 31, 2018
In millions of Naira
Assets
Risk management
Up to 1
month
1 - 3
months
3 - 6
months
6 - 12
months
Over 1
year
Total rate
sensitive
Cash and balances with central bank
7,500
-
-
-
Treasury bills
Assets pledged as collateral
Due from other banks
Derivative assets
Loans and advances to customers (Gross)
-
-
7,500
1,000,560
211,269
243,457
194,041
351,793
3,000
123,929
27,475
187,419
251,112
592,935
660,078
4,944
137,132
241
27,920
80,020
-
9,641
4,314
674,274
14,097
41,865
-
88,826
87,026
314,277
1,398,064
2,016,520
Investment securities (Amortized cost and fair value through OCI)
-
659
75,012
105,389
334,492
515,552
1,023,923
476,226
397,651 1,010,384 1,987,982
4,896,167
Liabilities
Customer deposits
Derivative liabilities
On-lending facilities
Borrowings
Debt securities issued
1,062,367
116,163
6,907
44,655
-
-
6,682
3,277
-
-
7,130
3,268
47,712
-
180,588
886
2,035,244
3,221,790
139
9,516
6,343
1,251
-
16,996
287,776
392,935
431,277
437,620
179,338
361,177
1,113,929
126,122
238,698
18,135 2,933,634
4,430,517
Total interest repricing gap
(90,006)
350,104
158,953
992,249
(945,652)
465,648
At December 31, 2018
Note
Carrying Amount Rate sensitive Non rate sensitive
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
On-lending facilities
Borrowings
Financial liabilities
Debt securities issued
Total interest repricing gap
15
16
17
18
19
-
21
24
27
32
29
30
28
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
-
-
-
14,286
82,576
5,581,211
3,646,465
1,934,746
3,437,915
2,900,212
20,805
216,104
383,034
356,496
332,931
20,805
-
383,034
368,877
332,931
4,747,285
4,005,859
833,926
(359,394)
537,703
-
216,104
-
(12,381)
-
741,426
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Zenith Bank Plc Annual Report December 31, 2018
Notes to the Consolidated and Separate Financial
Statements for the Year Ended December 31, 2018
At December 31, 2017
In millions of Naira
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
1 - 3
months
3 - 6
months
6 - 12
months
Over 1
year
Total rate
sensitive
7,500
-
-
-
44,655
131,555
108,013
232,883
-
-
7,500
517,106
493,571
160
688
171
1,213
495,803
5,685
6,887
13,192
16,045
15,410
57,219
671,538
500
1,223,449
39,753
-
178,355
42,023
-
163,916
69,461
1,429,397
2,252,172
4,712
311,453
316,665
323,272 1,757,473
3,646,465
1,013,580
169,835
16,271
1,231
1,699,295
2,900,212
3,906
3,851
63,413
68,302
-
-
-
-
1,716
2,360
-
-
11,332
20,805
159
248,800
383,034
2,794
366,083
368,877
-
332,931
332,931
1,080,899
241,988
20,347
15,516 2,647,109
4,005,859
Total interest repricing gap
142,550
(63,633)
143,569
307,756
(889,636)
(359,394)
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-18
31-Dec-17
44,891
16,572
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Bank
The table below summarizes the Bank's interest rate gap position:
Risk management
At December 31, 2018
In millions of Naira
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
Liabilities
Customer deposits
Derivative liabilities
Other financial liabilities
On-lending facilities
Borrowings
Debt securities issued
Total interest repricing gap
At December 31, 2018
In millions of Naira
Assets
Cash and balances with central bank
Treasury bills
Assets pledged as collateral
Due from other banks
Derivative assets
Loans and advances to customers (Gross)
Note
Carrying Amount Rate sensitive Non rate sensitive
15
16
17
18
19
-
21
19
27
32
28
29
30
31
902,073
817,043
592,935
393,466
88,826
1,921,064
156,673
58,406
7,500
817,043
592,935
393,466
88,826
1,921,064
106,913
-
894,573
-
-
-
-
-
49,760
58,406
4,930,486
3,927,747
1,002,739
2,821,066
2,352,561
16,995
212,006
393,295
458,463
361,177
16,995
-
393,295
458,463
361,177
4,263,002
3,582,491
667,484
345,256
468,505
-
212,006
-
-
-
680,511
322,228
Up to 1
month
1 - 3
months
3 - 6
months
6 - 12
months
Over 1
year
Total rate
sensitive
7,500
-
-
-
182,137
195,199
155,676
284,030
-
-
3,000
123,929
27,475
187,419
251,112
387,596
4,944
127,791
241
27,920
79,607
-
915
4,713
14,097
41,865
-
83,120
296,620
1,333,926
1,921,064
Investment securities (Amortized cost and fair value through OCI)
-
659
11,032
48,150
47,072
106,913
712,968
427,556
291,400
858,999 1,636,824
3,927,747
Liabilities
Customer deposits
Derivative liabilities
On-lending facilities
Borrowings
Debt securities issued
831,197
74,685
6,907
44,655
6,682
3,277
2,354
3,268
216
1,444,109
2,352,561
140
-
47,712
10,368
287,283
-
-
-
-
-
180,588
5,490
1,251
452,973
179,338
7,500
817,043
592,935
393,466
88,826
16,997
393,295
458,463
361,177
Total interest repricing gap
(169,791)
342,912
57,478
841,534
(726,879)
345,254
882,759
84,644
233,922
17,465 2,363,703
3,582,493
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Zenith Bank Plc Annual Report December 31, 2018
Notes to the Consolidated and Separate Financial
Statements for the Year Ended December 31, 2018
At December 31, 2017
In millions of Naira
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
Financial liabilities
Derivative liabilities
On-lending facilities
Borrowings
Debt securities issued
Note
Carrying Amount Rate sensitive Non rate sensitive
15
16
17
18
19
-
21
24
27
13
28
32
29
30
907,265
799,993
468,009
273,331
57,219
7,500
517,106
136,438
97,160
57,219
2,117,069
2,117,069
117,814
42,752
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
2,229,625
20,805
212,304
383,034
418,979
332,931
20,805
-
383,034
418,979
332,931
514,900
-
212,304
-
-
-
4,112,578
3,385,374
727,204
Total interest repricing gap
670,874
(420,616)
1,091,490
At December 31, 2017
In millions of Naira
Assets
Cash and balances with central bank
Treasury bills
Assets pledged as collateral
Due from other banks
Derivative assets
Up to 1
month
1 - 3
months
3 - 6
months
6 - 12
months
Over 1
year
Total rate
sensitive
7,500
22,050
32,709
97,160
5,144
-
-
-
44,399
227,187
223,470
8,149
45,802
49,778
-
7,427
-
16,045
15,411
-
-
-
-
7,500
517,106
136,438
97,160
57,219
-
13,192
40,710
-
Loans and advances to customers (Gross)
640,232
38,575
Investment securities (Amortized cost and fair value through OCI)
-
-
64,542
1,333,010
2,117,069
-
32,266
32,266
Liabilities
Customer deposits
Derivative liabilities
On-lending facilities
Borrowings
Debt securities issued
804,795
98,550
326,891
353,835 1,380,687
2,964,758
850,077
117,790
3,389
4,368
28
2,706
1,716
821
11,332
-
1,285
380,866
849
1,258,203
2,229,625
34
119
-
98,755
107,568
115,128
97,408
-
-
-
332,931
20,805
383,034
418,979
332,931
Total interest repricing gap
(48,824)
(122,391)
214,080
225,241
(688,721)
(420,616)
853,619
220,941
112,811
128,594 2,069,408
3,385,374
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Risk management
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.
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 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.
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
In millions of Naira
31-Dec-18
31-Dec-17
and regulatory requirements;
Effect of 300 basis points
movement on profit before tax
48,184
20,887
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 9.13% equity holding in African Finance
Corporation (AFC) valued at N49.76 billion (cost N40 billion) as at
31 December, 2018. 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.
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
indicators of stress
identify early
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.
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)
Identify sources of potential liquidity strain; and
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Notes to the Consolidated and Separate Financial
Statements for the Year Ended December 31, 2018
(ii) 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
i.
h. outlines how the Group will manage both
internal
communications and those with its external stakeholders;
and
establishes mechanisms to ensure that the Board and
Senior Management receive management.
future liquidity stresses on:
(i) Cash flows;
(ii) 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
The Group's practical experience in periods of stress.
c.
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
c.
d.
e.
f.
g.
management responsibility;
is formally documented;
includes clear invocation and escalation procedures;
is regularly tested and the result shared with the ALCO and
Board;
outlines
managing a huge funding run;
is sufficiently robust to withstand simultaneous disruptions
in a range of payment and settlement;
that Group's operational arrangements
for
At year end
Average for the period
Maximum for the period
Minimum for the period
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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.
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.
GROUP
BANK
31-Dec-18
31-Dec-17
31-Dec-18
31-Dec-17
80.91%
69.66%
82.59%
52.15% .
88.87%
82.42%
74.63%
38.94%
75.35%
74.33%
82.10%
67.04%
51.88%
52.06%
55.49%
46.96%
(b) Liquidity reserve
The table sets out the component of the Group's liquidity reserve.
Risk management
Group
In millions of Naira
Cash and balances with central banks
Treasury bills
Balances with other banks
Investment securities
Assets pledged as collaterals
Total
Bank
In millions of Naira
Cash and balances with central banks
Treasury bills
Balances with other banks
Investment securities
Assets pledged as collaterals
Total
31-Dec-18
31-Dec-17
Carrying value
Fair value
Carrying value
Fair value
954,416
954,416
1,000,560
1,000,729
675,309
565,312
592,935
675,312
555,379
377,444
310,549
419,711
201,982
316,850
468,010
310,549
314,046
201,982
174,227
326,055
3,788,532
3,563,280
1,717,102
1,326,859
31-Dec-18
31-Dec-17
Carrying value
Fair value
Carrying value
Fair value
902,073
817,043
393,466
156,673
592,935
902,073
817,181
393,466
153,920
377,444
260,180
282,886
8,733
103,713
468,010
260,180
214,046
8,733
84,227
326,055
2,862,190
2,644,084
1,123,522
893,241
(c)Financial assets available to support funding
The table below sets out the availability of the Group's financial assets to support future funding
Group
31-Dec-18
31-Dec-17
In millions of Naira
Cash and balances with central
banks
Treasury bills
Assets pledged as collateral
Due from other banks
Loans and advances
Investment securities
Financial assets
Note
Encum-
bered
Unenc-
umbered
Total
Encum-
bered
Unenc-
umbered
Total
15
705,471
248,945
954,416
647,114
310,549
957,663
16
17
18
-
21
24
-
1,000,560
1,000,560
-
936,817
592,935
-
592,935
468,010
-
-
-
-
67,274
67,274
2,016,520
2,016,520
565,312
565,312
-
-
-
495,803
2,100,362
330,951
13,822
44,584
58,406
79,677
5,964
936,817
468,010
495,803
2,100,362
330,951
85,641
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Zenith Bank Plc Annual Report December 31, 2018
Notes to the Consolidated and Separate Financial
Statements for the Year Ended December 31, 2018
Bank
31-Dec-18
31-Dec-17
Note
Encum-
bered
Unenc-
umbered
Total
Encum-
bered
Unenc-
umbered
In millions of Naira
Cash and balances with central banks
Treasury bills
Assets pledged as collateral
Due from other banks
Loans and advances
Investment securities
Financial assets
705,471
196,602
902,073
647,114
-
817,043
817,043
-
592,935
-
592,935
468,010
-
-
-
393,466
393,466
1,921,064
1,921,064
156,673
156,673
-
-
-
15
16
17
18
-
21
24
13,822
44,584
58,406
36,788
5,964
42,752
Total
907,295
799,992
468,010
273,331
260,181
799,992
-
273,331
1,980,464
1,980,464
117,814
117,814
(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 31
December, 2018 and 31 December, 2017 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.
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Group
At December 31, 2018
In millions of naira
Assets
Non-derivative assets
Cash and balances with central banks
Treasury bills
Assets pledged as collateral
Due from other banks
Loans and advances to customers
Investment securities
Other financial assets
Derivative assets
Trading:
Inflow
Outflow
Risk management:
Liabilities
Non-derivative liabilities
Customer deposits
Financial liabilities
On-lending facilities
Borrowings
Debt securities issued
Derivative assets
Trading:
Inflow
Outflow
Risk management
Note
Up to 1
month
1 - 3
months
3 - 6
months
6 - 12
months
Over 1
year
Carrying
amount
Gross
nominal
inflow/
(outflow)
15
16
17
18
21
24
19
27
28
29
30
31
32
248,945
-
-
705,471
211,269
243,457
194,041
351,793
-
-
954,416
954,416
- 1,000,560
1,000,560
3,000
123,929
27,475
187,419
251,112
660,078
241
-
9,641
4,314
592,935
674,274
592,935
674,274
344,904
80,020
87,026
314,277
1,190,292
2,016,520
2,016,520
-
-
659
75,012
100,420
389,221
565,312
565,312
27,920
-
5,631
27,818
61,370
61,370
1,468,196
476,226
383,554 1,674,653 1,862,757
5,865,386
5,865,386
-
-
-
-
4,944
27,920
14,097
41,865
-
-
-
-
-
30,454
-
-
4,944
27,920
44,551
41,865
3,566,115
116,163
886
7,130
3,268
43,648
44,655
46,391
6,682
3,277
23,559
113,251
47,712
9,516
287,416
77,907
37,394
216,662
72,376
-
191,616
6,615
212,471
-
-
-
-
-
-
-
88,826
88,826
-
-
-
30,454
60,908
119,280
149,734
- 3,690,295
3,690,295
190,408
392,575
450,730
410,702
190,408
393,295
458,463
361,177
3,700,809
204,028
287,120
257,238
685,514
5,134,710
5,093,637
-
-
-
6,907
6,682
3,268
-
-
-
6,907
6,682
3,268
-
139
-
139
-
-
-
-
-
16,996
35,156
16,995
16,996
-
52,152
33,991
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Zenith Bank Plc Annual Report December 31, 2018
Notes to the Consolidated and Separate Financial
Statements for the Year Ended December 31, 2018
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
Assets pledged as collateral
Due from other banks
Loans and advances to customers
Investment securities
Derivative assets
Trading:
Inflow
Outflow
Liabilities
Non-derivative liabilities
Customer deposits
Financial liabilities
On-lending facilities
Borrowings
Debt securities issued
Derivative assets
Trading:
Inflow
Outflow
15
16
17
18
20
21
19
27
28
29
30
31
306,822
-
-
647,112
44,655
131,555
108,013
642,255
-
-
45,246
63,239
82,995
75,549
200,982
487,668
160
688
171
1,213
953,934
926,478
468,011
489,900
957,663
936,817
468,010
495,803
671,539
39,753
42,023
69,461
1,423,541
2,246,317
2,246,316
500
4,712
325,555
330,767
330,951
1,556,430
234,707
233,719 1,439,260 1,951,291
5,415,407
5,435,560
-
-
-
-
-
-
57,219
5,685
6,887
13,192
16,045
15,409
11,669
13,926
-
-
-
57,219
25,595
-
-
17,354
20,813
13,192
16,045
15,409
82,814
57,219
3,227,703
169,835
16,271
1,219
-
-
-
230,857
84
-
63,413
68,302
2,360
159
248,800
-
-
-
-
-
-
2,794
2,618
366,083
330,313
3,415,112
3,415,112
230,857
383,034
368,877
332,931
230,857
383,034
368,877
332,931
3,291,116
238,137
18,631
237,647
945,280
4,730,811
4,730,811
-
-
-
-
3,906
3,851
1,716
11,332
-
-
35,156
-
3,906
3,851
36,872
11,332
-
-
-
-
-
20,805
20,805
35,156
-
-
55,961
20,805
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Bank
At December 31, 2018
In millions of Naira
Assets
Non-derivative assets
Cash and balances with central banks
Treasury bills
Assets pledged as collateral
Due from other banks
Loans and advances to customers
Investment securities
Other financial assets
Derivative assets
Trading:
Inflow
Outflow
Liabilities
Non-derivative liabilities
Customer deposits
Financial liabilities
On-lending facilities
Borrowings
Debt securities issued
Derivative assets
Trading:
Inflow
Outflow
Risk management
Note
Up to 1
month
1 - 3
months
3 - 6
months
6 - 12
months
Over 1
year
Carrying
amount
Gross
nominal
inflow/
(outflow)
15
16
17
18
20
21
24
19
27
28
29
30
31
196,602
-
-
705,471
182,137
195,199
155,676
284,031
-
-
902,073
902,073
817,043
817,043
3,000
123,929
27,475
187,419
251,112
592,935
592,935
387,596
241
-
916
4,713
393,466
393,466
312,789
79,607
83,120
296,620
1,148,928
1,921,064
1,921,064
-
659
11,032
48,150
96,832
156,673
156,673
6,283
-
-
15,712
36,411
58,406
58,406
1,088,407
399,635
277,303 1,538,319 1,537,996
4,841,660
4,841,660
-
-
-
-
4,944
27,920
14,097
41,865
-
-
-
-
4,944
27,920
14,097
41,865
-
-
-
-
-
88,826
88,826
-
-
-
88,826
88,826
2,743,812
74,685
2,354
3,268
216
-
2,821,066
2,821,066
101,254
84,998
212,006
212,006
47,712
10,368
287,283
393,295
393,295
6,682
3,277
88,443
37,394
216,662
74,248
463,138
393,295
-
191,616
6,615
212,471
410,702
361,177
15,804
44,655
46,391
2,850,662
173,087
282,344
335,115
659,000
4,300,207
4,180,839
-
-
-
6,907
6,682
3,268
-
-
-
6,907
6,682
3,268
-
139
-
139
-
-
-
16,995
16,996
35,156
52,152
16,995
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Zenith Bank Plc Annual Report December 31, 2018
Notes to the Consolidated and Separate Financial
Statements for the Year Ended December 31, 2018
Bank
At December 31, 2017
Note
In millions of Naira
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 bank
Treasury bills
Assets pledged as collateral
Due from other banks
Loans and advances to customers
Investment securities
Other financial assets
Derivative assets
Trading:
Inflow
Outflow
Liabilities
Non-derivative assets
Customer deposits
Derivative liabilities
On-lending facilities
Borrowings
Debt securities issued
Derivative liabilities
Trading:
Inflow
Outflow
Risk management:
Outflow
Inflow
15
16
17
18
20
21
24
19
27
28
29
30
31
32
260,180
29,046
57,915
273,331
-
-
647,085
93,640
317,228
427,562
-
-
907,265
907,265
867,476
799,992
64,662
89,462
96,869
621,959
930,867
468,010
-
-
-
-
273,331
273,331
640,232
38,575
40,710
64,543
1,333,010
2,117,069
2,117,069
2,396
5,398
4,038
9,874
212,755
234,461
117,814
36,139
-
-
-
6,613
42,752
34,003
1,299,239
202,275
451,438
1,245,933 2,174,337
5,373,221
4,717,484
-
-
-
-
-
-
57,219
5,685
6,887
13,192
16,045
15,409
11,669
13,926
-
-
-
57,219
25,595
-
-
17,354
20,813
13,192
16,045
15,409
82,814
57,219
2,623,192
117,790
2,706
837
-
-
-
11,930
-
-
2,744,525
2,744,525
11,930
11,930
63,413
68,302
2,360
159
248,800
383,034
383,034
2,769
111,047
113,937
129,155
81,869
438,777
418,979
-
-
-
2,618
330,313
332,931
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
20,805
35,156
-
-
-
-
-
-
-
-
55,961
20,805
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Risk management
Type of financial instrument
Basis on which amounts compiled
Non-derivative financial liabilities and financial
assets
Issued financial guarantee contracts
Undiscounted cash flows, which include estimated interest payments.
Earliest possible contractual maturity. For issued financial guarantee contracts, the maximum
amount of the guarantee is allocated to the earliest period in which the guarantee could be
called.
Derivative financial liabilities and financial assets
held for risk management purposes
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.
Trading derivative liabilities and assets forming
part of
trading
the Group’s proprietary
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
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’).
Residual contractual maturities of off-balance sheet exposures.
Group
At December 31, 2018
In millions of Naira
Financial guarantees
Usance
Letters of Credit
Performance bonds and Guarantees
Total
Bank
At December 31, 2018
In millions of Naira
Financial guarantees
Usance
Letters of Credit
Performance bonds and Guarantees
Total
Carrying
amount
Less than 3
months
3 -6
months
6 - 12
months
1 to 5 Years More than 5
years
147,189
356,939
327,123
100,638
44,422
203,327
142,873
71,251
45,981
2,129
10,714
48,998
831,251
375,216
233,276
61,841
-
25
100,028
100,053
-
-
60,865
60,865
Carrying
amount
Less than 3
months
3 -6
months
6 - 12
months
1 to 5 Years More than 5
years
147,189
321,754
306,412
775,355
100,638
44,422
180,202
133,813
2,129
7,731
68,040
40,855
42,763
348,880
219,090
52,623
-
8
100,028
100,036
-
-
54,726
54,726
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Notes to the Consolidated and Separate Financial
Statements for the Year Ended December 31, 2018
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.
Level 1: Quoted prices (unadjusted) in active markets for identical assets or liabilities.
a.
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).
Level 3: Inputs for the asset or liability that are not based on observable market data (unobservable inputs).
c.
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
In millions of Naira
Assets Carried at FVTPL:
Treasury bills
Investment securities (FGN bonds)
Derivative assets
Asset pledged as collateral
Carried at FVOCI :
At 31 December, 2018
At 31 December, 2017
Note Carrying
Value
Fair value Fair value
hierarchy
Carrying
Value
Fair
value
Fair value
hierarchy
Value
510,313
510,313
1&2
547,656
547,656
16
21
19
4,970
4,970
88,826
88,826
208,382
208,382
Investment securities (unquoted)
21
49,760
49,760
Carried at amortized cost:
Cash and balances with central banks
Treasury bills
Assets pledged as collateral
Due from other banks
Loans and advances to customers
Investment securities
Other financial assets
Liabilities Carried at FVTPL
Derivative liabilities
Carried at FVTPL
Customer deposits
Other financial liabilities
On-lending facilities
Borrowings
Debt securities issued
15
16
17
18
20
21
24
954,416
490,247
954,416
490,424
592,935
585,826
674,274
675,312
1,823,111
1,728,567
510,582
496,543
61,370
61,370
32
16,995
16,995
27
28
29
30
31
3,690,295
3,690,295
177,810
190,408
393,295
393,295
437,260
437,260
361,177
361,177
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1
2
-
3
-
1
1
2
3
1
-
2
-
-
3
3
2
32,266
32,266
57,219
57,219
-
-
14,101
14,101
957,663
679,915
389,161
314,046
468,010
326,055
495,803
495,803
2,252,172
1,546,337
284,584
174,227
77,328
28,388
20,805
20,805
3,437,915
2,935,105
225,646
158,160
383,034
339,995
356,496
335,504
332,931
251,961
1
1
2
-
3
-
1
1
2
3
1
-
2
-
-
3
3
2
Risk management
Bank
The table below sets out the Bank's classification of each class of its financial assets and liabilities.
In millions of Naira
Note
At 31 December, 2018
At 31 December, 2017
Carrying
Value
Fair value Fair value
hierarchy
Carrying
Value
Fair
value
Fair value
hierarchy
Assets Carried at FVTPL:
Treasury bills
Investment securities (FGN bonds)
Derivative assets
Asset pledged as collateral
Carried at FVOCI :
Investment securities (unquoted)
Carried at amortized cost:
Cash and balances with central
banks
Treasury bills
Assets pledged as collateral
Due from other banks
Loans and advances to customers
Investment securities
Other financial assets
Liabilities Carried at FVTPL
Derivative liabilities
Carried at FVTPL
Customer deposits
Other financial liabilities
On-lending facilities
Borrowings
Debt securities issued
16
21
19
21
15
16
17
18
20
21
24
32
27
28
29
30
31
510,313
510,313
1&2
547,656
547,656
4,970
4,970
88,826
88,826
208,382
208,382
49,760
49,760
902,073
902,073
306,730
306,868
592,935
585,826
393,466
393,466
1,736,066
1,638,254
102,508
99,190
58,406
58,406
16,995
16,995
2,821,066
2,821,066
212,006
212,006
393,295
393,295
458,463
458,463
361,177
361,177
1
2
-
3
-
1
1
-
3
1
-
2
-
-
3
3
2
32,266
32,266
57,219
57,219
-
-
14,101
14,101
907,265
907,265
282,886
246,210
468,010
407,334
273,331
273,331
2,117,069
1,449,107
71,447
72,748
42,752
40,546
20,805
20,805
2,744,525
2,481,971
221,846
168,830
383,034
339,995
418,979
335,504
332,931
251,961
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.
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Zenith Bank Plc Annual Report December 31, 2018
Notes to the Consolidated and Separate Financial
Statements for the Year Ended December 31, 2018
Financial instruments measured at fair value
At 31 December, 2018
In millions of Naira
Financial assets
Treasury bills (FVTPL) (unpledged)
Treasury bills pledged under repurchase agreement (FVTPL)
FGN bonds FVTPL (unpledged)
Bonds pledged under repurchase agreement (FVTPL)
Derivative assets
Derivative liabilities
Investment securities (Unquoted)
Reconciliation of Level 3 items
At 1 January
Addition
Gain recognised through other comprehensive income
At 31 December, 2018
At 31 December, 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
Gains/(losses) recognised through other comprehensive income
At 31 December, 2017
At 31 December, 2018
Note
Level1
Level2
Level3
16
16
21
21
19
32
21
362,639
179,259
4,970
23,570
-
-
-
147,674
553
-
-
88,826
16,995
-
-
-
-
-
-
-
49,760
570,438
254,048
49,760
14,101
34,200
1,459
49,760
At 31 December, 2018
Note
Level1
Level2
Level3
16
21
19
32
21
547,656
32,266
-
-
-
-
-
57,219
20,805
-
-
-
-
-
14,101
579,922
78,024
14,101
16,652
(2,551)
14,101
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Risk management
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 31 December, 2018 and 31 December, 2017 in
measuring financial instruments categorized as level 3 in the fair value hierarchy
Fair values
at 31
December,
2018
N49.76 billion
Type of
financial
instrument
Unquoted
equity
investment
Valuation
technique
Significant
unobservable
input
Range of estimates
(average) for
unobservable
inputs
Equity DCF
model.
-Discount rate.
-Estimate cash
flow.
Risk premium of 11.50
-12.50% above risk-free
interest rate
(3.01%) (31 Dec. 2017:14.08-
15.08% (14.58%) above risk
free rate (2.38%)) 5-year
Compound Annual Growth
Rate (CAGR) of cash flow of
8-9% (15.20%) (December
2017: 16- 17% (16.96%))
Fair value
measurement
sensitivity to
unobservable
inputs
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
At 31 December, 2018
At 31 December, 2017
Favourable
changes
Unfavourable
changes
Favourable
changes
Unfavourable
changes
Unquoted investment securities
2,140.00
(870.00)
0.92
(0.40)
The favourable and unfavourable effects of using reasonably possible alternative assumptions for valuation of unquoted equity
securities have been calculated by recalibrating the model values using unobservable inputs based on upper and lower quartile
respectively of the Group’s range of possible estimates. Key inputs and assumptions used in the model at 31 December, 2018
included a risk premium 13.44% above the risk-free interest rate of 3.01% (with reasonably possible alternative assumptions of
12.44% and 13.44%) (31 December, 2017: 12.00% - 12.30% (12.09%) respectively above risk free rate of 2.38%).
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).
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Zenith Bank Plc Annual Report December 31, 2018
Notes to the Consolidated and Separate Financial
Statements for the Year Ended December 31, 2018
(c) Fair valuation methods and assumptions
(i) Cash and balances with central banks
Cash and balances with Central banks represent cash held
(including mandatory cash reserve requirements of 31
December, 2018: N705 billion, 31 December, 2017: N647
billion) with Central banks of the various jurisdictions in which
the Group operates. The fair value of these balances is their
carrying amounts.
(ii) Due from other banks
Due from other banks represents balances with local and
correspondence banks, inter-bank placements and items in
the course of collection. The fair value of the current account
balances, floating placements and overnight deposits are their
carrying amounts.
(iii) Treasury bills and investment securities
Treasury bills represent short term instruments issued by
the Central banks of the jurisdiction where the Group has
operations. The fair value of treasury bills and bonds at fair value
through profit or loss are determined with reference to quoted
prices (unadjusted) in active markets for identical assets. The
estimated fair value of treasury bills and bonds at amortized
cost represents the discounted amount of estimated future
cash flows expected to be received. Expected cash flows are
discounted at current market rates to determine fair value.
The fair values of quoted equity securities are determined
by reference to quoted prices (unadjusted) in active markets
for identical instruments. The fair value of the unquoted
equity holding in AFC is determined on the basis of the
discounted cashflow methodology which takes into account
the discounted stream of 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
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regulatory minimum prescribed in all its operating jurisdictions.
The adoption of IFR9 with effect from January 2018 impacted
the capital adequacy ratio (CAR) due the resultant additional
impairment charge. However, the impact did not reduce the
CAR below both our Internal Guidance and Regulatory Limit.
This impact is however moderated with the introduction
of a relieve-based Transitional Arrangements for treatment
of expected Credit Loss by the Central Bank. This is meant to
spread the IFR9 Impact over a four (4) year period ending 31
December 2020.
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.
b.
c.
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
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
its expansion strategies and
Risk management
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.
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.
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 31 December 2018 as well
as the 31 December, 2017 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.
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Zenith Bank Plc Annual Report December 31, 2018
Notes to the Consolidated and Separate Financial
Statements for the Year Ended December 31, 2018
Adjusted
impact of
IFRS 9
transition
on
31-Dec-18
Group
Adjusted
Day-one
impact of
IFRS 9
transition
on
01-Jan-18
31-Dec-
17
31-Dec-
18
31-Dec-
17
Bank
Adjusted
impact of
IFRS 9
transition
on
31-Dec-18
Adjusted
Day-one
impact of
IFRS 9
transition
on
01-Jan-18
Basel II
15,698
Basel II
15,698
Basel II
15,698
Basel II
15,698
Basel II
15,698
Basel II
15,698
Base II
15,698
255,047
255,047
255,047
255,047
255,047
255,047
255,047
143,320
135,686
135,686
127,865
127,865
127,8655
127,865
3,729
3,729
3,729
3,729
346,215
257,642
365,757
263,781
828,910
(9,513)
754,295
775,917
666,120
(9,561)
(9,561)
(9,197)
3,729
263,781
62,129
728,249
(9,197)
3,729
3,729
193,237
296,787
82,840
-
678,416
699,126
(9,197)
(9,197)
(16,678)
(12,989)
(12,989)
(15,399)
(15,399)
(12,088)
(12,088)
802,719
731,745
753,367
641,524
703,653
657,131
677,841
In millions of Naira
31-Dec-
18
Tier 1 capital
Share capital
Share premium
Statutory reserves
SMEIES reserve
Retained earnings
Basel II
15,698
255,047
143,320
3,729
346,215
764,009
(9,513)
(16,678)
737,818
Total qualifying Tier 1 capital
Deferred tax assets
Intangible assets
Adjusted Total qualifying Tier
1 capital
Tier 2 capital
Other comprehensive income
(OCI)
IFRS 9 Transitional Adjustment
-
64,901
886,493
-
-
48,354
48,354
42,082
42,082
(9,858)
(9,858)
(8,399))
(8,399)
Total qualifying Tier 2 capital
48,354
48,354
42,082
42,082
(9,858)
(9,858)
(8,399)
(8,399)
Net Tier 2 Capital
48,354
48,354
42,082
42,082
-
-
-
-
Total regulatory capital
786,172
851,073 77773,827 795,449
641,524
703,653
657,131 677,841
Risk-weighted assets
Credit risk
Market risk
Operational risk
2,050,298
2,050,298
2,306,892 2,306,892
1,755,076
1,755,076
2,066,961 2,066,961
88,914
945,361
88,914
84,690
84,690
53,562
53,562
62,956
62,956
945,361
595,934
595,934
881,691
881,691
540,331
540,331
Total risk-weighted assets
3,084,573
3,084,573
2,987,516 2,987,516
2,690,329
2,690,329
2,670,248 2,670,248
Risk-weighted Capital
Adequacy Ratio (CAR)
25%
28 %
26 %
27%
24%
26%
25%
25%
The adjusted day-1 capital adequacy computed reflect reliefs given by the CBN for Banks to account for the IFRS 9
adjustment to capital as follows:
Percentage of IFRS 9
adjustment
Year 1 60%
Year 2 40%
Year 3 20%
Year 4 -%
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Risk management
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.
The Bank uses the following tools and methodologies in the
implementation of its Operational Risk Management.
Risk and Control Self-Assessment (RCSA)
This is the process whereby risks that are inherent in Business
Units strategies, objectives and activities are identified and the
effectiveness of the controls over those risks evaluated and
monitored bank wide. The Risk and Control Self-Assessment
It
process address
incorporates the process for evaluating and managing all
aspects of risk that is inherent in how and where the business
is done.
risks and controls comprehensively.
Key Risk Indicators (KRI) - Key Risk Indicator is measures which
indicate the risk profile of the bank and any change thereof.
KRIs act as early warning indicators and are used to monitor
and predict potential operational loss events. KRIs are used in
conjunction with system of thresholds. When the threshold
or tolerance level for any KRI is breached, it triggers review,
escalation or management action. Risk indicators help keep the
operational risk management dynamic and risk profile current.
Loss Incident Reporting – Loss incidents are reported by all
business units using the Loss incident reporting template. The
discipline of collecting loss data is not only needed to understand
the dimensions of risk the Bank faces but also used to motivate
staff to consider and more actively control key elements of risk.
The Bank-wide data collection promotes a dialogue within the
Bank about determining the major operational risk exposures
and reinforces more qualitative efforts to manage operational
risk within each of the business lines.
Operational Risk Capital Computation – The Bank, based on
Central Bank of Nigeria guideline, adopted basic indicator
approach (BIA) in the calculation of its Operational Risk Capital
adequacy. The estimated operational Risk Capital Charge is
reported to the Board and management for capital planning
and decision making.
Business Continuity Management (BCM)
In line with ISO 22301 Standards, the Bank has a robust
documented Business Continuity Plan. The primary objective
of this plan is to protect the bank in the event of an undesired
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Zenith Bank Plc Annual Report December 31, 2018
Notes to the Consolidated and Separate Financial
Statements for the Year Ended December 31, 2018
event in the form of fire outbreak, flood, theft or robbery,
thunderstorm, unexpected breakdown of systems, networks,
equipment, etc or any other form of disaster. This plan ensures
that the bank recover from disasters resulting in the partial or
total loss of IT infrastructure and applications to normal business
operations, in a timely, effective and efficient manner. The
business continuity test is conducted at least once in a year The
process is driven at a committee level but ably championed by
the Risk Management Group.
Operational Risk Reporting
Periodic Operational Risk report highlighting key Operational
risk
identified are rendered to the Board, Management
and other relevant stakeholders for awareness and prompt
implementation of mitigation plans.
timely Operational Risk
For
Identification, Assessment,
treatment and Monitoring, the Bank has acquired SAP-GRC
solution and implementation has reached an advance stage,
this will ensure prompt data collation/analysis, escalation and
reporting of key Operational Risk events
There was no significant financial loss resulting from operational
risk incidence during the period across the group. However
major security concerns in the country still border around the
Boko haram and herdsmen insurgencies. Steps are being taken
to ensure stability in those conflict inflicted areas.
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.
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.
b.
c.
Board and senior management oversee the proper set-
up and effective functioning of the reputational risk
management framework;
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
Corporate Communications is responsible for managing
both the internal and external communications that
may impact the reputation of the Bank.
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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;
Assessment: Conducting qualitative assessment of
reputational risk based on the potential events that
have been identified as reputational risk;
Monitoring: Undertaking frequent monitoring of the
reputational risk drivers;
Mitigation and Control: Establishing preventive
measures and controls for management of reputational
risk and tracking mitigation actions;
Independent
reputational
review: Subjecting
risk measures and mitigation techniques to regular
independent review by internal auditors and/or external
auditors; and
Reporting: Generating regular, action-oriented reports
for management review.
the
b.
c.
d.
e.
f.
4Critical accounting
estimate and judgements
The Group makes estimates and assumptions that affect
the reported amounts of assets and liabilities within the next
judgements are continually
financial year. Estimates and
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
4.1
Policy before 1 January 2018
(a) Determination of default prior to the measurement of
expected credit loss
The Group considers an objective evidence of default for the
purpose of determining its stage classification of impairment.
It considers all default event terms no matter if it is obligatory
or facultative to constitute objective evidence of impairment in
accordance to IFRS 9.
Taxation risk
3.11
Taxation risk refers to the risk that new taxation laws will
adversely affect the Group and/or the loss as a result of
noncompliance with tax laws.
All financial assets with objective evidence of impairment
will be further referred to as defaulted (or in default status).
Exposure is considered defaulted, if the obligatory payments on
the exposure have been passed due for at least 90 days.
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.
An exposure is considered to be individually significant if the
total amount exceeds a significance threshold expressed
in percentage as of reporting date. Significance thresholds
are established and reviewed at regular intervals. Significant
threshold can be determined separately for each risk portfolio
or for groups of porfolios. However exposures considered by
the Group as having specific risk, are deemed as individually
significant exposures and have to be assessed individually.
An exposure is comprised of the following components as at
the reporting date:
i)
ii)
iii)
iv)
Overdue principal receivable
Undue principal receivable
Overdue contract interest receivable
Undue accrued interest
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Zenith Bank Plc Annual Report December 31, 2018
Notes to the Consolidated and Separate Financial
Statements for the Year Ended December 31, 2018
v)
vi)
vii)
Other outstanding exposure
Unconditional and conditional off-balance sheet
exposure, in particular available limit
Unamortized discount or premium.
4.1
Policy from 1 January 2018
loss
Measurement of the expected credit
(b)
allowance for financial assets.
The measurement of the expected credit loss allowance for
financial assets measured at amortised cost and FVOCI is an
area that requires the use of complex models and significant
assumptions about future economic conditions and credit
behaviour (e.g. the likelihood of customers defaulting and the
resulting losses). Explanation of the inputs, assumptions and
estimation techniques used in measuring ECL is further detailed
in note 3.2.9 to 3.2.18.
A number of significant judgements are also required in
applying the accounting requirements for measuring ECL, such
as:
•
•
•
•
•
•
Determining criteria for significant increase in credit risk;
Determining the credit risk grades;
Generating the term structure of the probability of default;
Determining whether credit risk has increased significantly;
Incorporation of forward-looking information;
Establishing groups of similar financial assets for the
purposes of measuring ECL.
Detailed information about the judgements and estimates
made by the Group in the above areas is set out in note 3.2.10
to 3.2.18.
Determining fair values
4.2
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
instruments where the
includes all
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.
Income taxes
4.3
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.
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Critical accounting estimate and judgements
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 expected credit loss (ECL) model required
under IFRS 9. As a result of the differences in the methodology/
provision, there will be variances in the impairments allowances
required under the two methodologies.
(i)
(ii)
is greater than
Where Prudential Provisions
IFRS
provisions, the resulting difference should be transferred
from the general reserve account to a non-distributable
regulatory credit risk reserve.
Where Prudential Provisions is less than IFRS provisions,
the
is charged to the
statement of comprehensive income. The cumulative
balance in the regulatory risk reserve is thereafter
transferred to the general reserve account.
IFRS determined provision
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:
(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 31 December 2018.
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Zenith Bank Plc Annual Report December 31, 2018
Notes to the Consolidated and Separate Financial
Statements for the Year Ended December 31, 2018
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
12-months ECL credit
Life-time ECL Not impaired
Life- time ECL credit impaired
(b)
Investment securities
12-Months ECL
(c)
Off balance sheet exposures
12-Month ECL
(d)
Other financial assets
Specific allowance for impairment on associated companies
Specific allowance for impairment on other assets
22
24
12 months ECLLifetime ECL
Other non-financial assets
(e)
(f )=(b )+( c)+(d)+( e)
(G)=(a)-(f )
(Reversal from)/transfer to retained earnings at year end
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Note
31-Dec-18
31-Dec-17
Bank
122,0877
833
122,920
1109,405
6,560
115,965
-
-
14,092
34,233
136,673
184,998
-
763
763
-
8,011
8,011
-
-
1,628
560
2,188
195,960
(73,040)
-
68,443
68,162
-
-
-
136,605
-
-
-
-
-
-
1,312
5,248
-
-
143,165
279,770
(163,805)
(8,129)
5Segment analysisThe 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, Public, Retail Banking, Pension Custodial services and Nominee - NigeriaThis 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 EuropeThese 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.Segment profit before tax, as included in internal management reports reviewed by the Group's Executive Management, is used to measure performance because management believes that this information is the most relevant in evaluating the results of the respective segments relative to other entities that operate within the same industries. Inter-segment pricing is determined on arm's length basis.No single external cutomer accounts for 10% or more of the Group's revenue. The measurement policies the Group uses for segment reporting are the same as those used in its financial statements. There have been no changes from prior periods in the measurement methods used to determine reported segment profit or loss.SEGMENT ANALYSIS171Financials Zenith Bank Plc Annual Report December 31, 2018
Notes to the Consolidated and Separate Financial
Statements for the Year Ended December 31, 2018
Information regarding each reportable segment is included in the tables below. The tables also show the reconciliation of the
amounts in the statement of profit or loss and statement of financial position for the reportable segments to the amounts in the
Groups statement of profit or loss and statement of financial position.
In millions of Naira
31 December, 2018
Revenue:
Nigeria Outside Nigeria
Corporate
retail and
pensions
custodian
services
Africa
Europe
Total
reportable
segments
Eliminations
Consolidated
Derived from external customers
542,490
68,492
19,362
Derived from other business segments
5,834
55
134
630,344
6,023
Total revenue*
548,324
68,547
19,496
636,367
Interest expense
(124,156)
(20,849)
(1,876)
(146,881)
Impairment loss on financial assets
(15,313)
(4,241)
1,182
(18,372)
Admin and operating expenses
(207,770)
(21,389)
(6,270)
(235,429)
-
(6,023)
(6,023)
2,423
-
(400)
(4,000)
-
630,344
-
630,344
(144,458)
(18,372)
(235,829)
231,685
(38,261)
Profit before tax
Tax expense
Profit after tax
201,085
22,068
12,532
(28,585)
(7,313)
(2,363)
235,685
(38,261)
172,500
14,755
10,169
197,424
(4,000)
193,424
In millions of Naira
Nigeria
Outside Nigeria
31 December, 2018
Corporate
retail and
pensions
custodian
services
Africa
Europe
Total
reportable
segments
Eliminations
Consolidated
Capital expenditure**
Identifiable assets
Identifiable liabilities
33,761
126
389
34,276
4,979,886
454,391
681,443
4,282,935
381,524
601,502
6,115,720
5,265,961
-
(160,010)
(126,002)
34,276
5,955,710
5,139,959
* 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.
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Segment analysis
In millions of Naira
Nigeria
Outside Nigeria
31 December, 2017
Revenue:
Corporate
retail and
pensions
custodian
services***
Africa
Europe
Total
reportable
segments
Eliminations
Consolidated
Derived from external customers
680,911
53,822
14,056
Derived from other business segments
3,058
-
148
Total revenue*
683,969
53,822
14,204
748,789
3,206
751,995
Interest expense
(200,672)
(17,776)
(1,394)
(219,842)
Impairment loss on financial assets
(95,267)
(557)
(2,403)
(98,227)
Admin and operating expenses (see note 43b)
(209,594)
(14,906)
(5,706)
(230,206)
(3,600)
(3,206)
(6,806)
3,205
-
(800)
(4,401)
-
745,189
-
745,189
(216,637)
(98,227)
(231,006)
199,319
(25,528)
Profit before tax
Tax expense
Profit after tax
178,436
20,583
4,701
(18,891)
(5,602)
(1,035)
203,720
(25,528)
159,545
14,981
3,666
178,192
(4,401)
173,791
In millions of Naira
Nigeria
Outside Nigeria
31 December, 2017
Corporate
retail and
pensions
custodian
services
Africa
Europe
Total
reportable
segments
Eliminations
Consolidated
Capital expenditure**
Identifiable assets
Identifiable liabilities
44,025
4,429
182
48,636
4,854,394
375,106
554,087
4,138,711
313,380
486,382
5,783,587
4,938,473
-
(188,334)
(155,336)
48,636
5,595,253
4,783,137
* 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.
*** see note 43b
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Zenith Bank Plc Annual Report December 31, 2018
Notes to the Consolidated and Separate Financial
Statements for the Year Ended December 31, 2018
In millions of Naira
Group
Bank
31 December, 2018
31 December, 2017
31 December,
2018
31 December, 2017
6. Interest and similar income
Loans and advances to customers
Placement with banks and discount houses
Treasury bills
Government and other bonds
273,179
13,886
100,537
52,450
314,683
6,733
109,740
43,472
258,440
6,608
64,002
38,766
295,932
552
84,973
38,753
440,052
474,628
367,816
420,210
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 N440,052 million (31 December, 2017: N474,628 million) and N367,816 million (31 December, 2017:
N420,210 million) for Group and Bank respectively. Included in this amount is interest income on lease N671 million (31 December,
2017: N1,025 million)
7. Interest and similar expense
Current
Savings accounts
Time deposits
Borrowed funds and lease
10,952
18,698
42,299
72,509
144,458
10,029
17,099
108,735
80,774
216,637
10,258
18,532
30,172
65,194
9,403
16,927
95,329
79,013
124,156
200,672
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/(write back) on financial and non-financial instruments
Impairment charge on financial instruments
Total impairment charge on loans and advances( see note 3.2.18)
Investment securities (see note 3.2.18)
Treasury Bills Impairment Charge (see note 3.2.18)
Other financial assets (see note 3.2.18)
Due from other Banks (see note 3.2.18)
Assets pledged as collateral (see note 3.2.18)
Total impairment charge on financial instruments
Impairment charge on non-financial instruments
Off balance sheet impairment (see note 3.2.18)
Other non financial assets (see note 3.2.18)
13,303
(430)
(1,237)
395
1,938
(1,078)
12,891
5,337
144
98,204
-
-
23
-
-
98,227
-
-
9,396
207
(1,111)
383
931
(1,078)
8,728
6,441
144
95,244
-
-
-
-
-
95,244
-
-
18,372
98,227
15,313
95,244
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In millions of Naira
Group
Bank
31-Dec-18
31-Dec-17
31-Dec-18
31-Dec-17
9. Net income on Fee and commission
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
Total fee and Commission income
Fees and commission expense (see note 44)
19,309
2,160
18,008
8,058
20,422
3,232
7,708
3,239
892
4,518
4,597
92,143
(10,329)
81,814
20,834
1,740
27,710
4,617
14,145
2,708
7,943
1,894
2,048
3,509
2,995
90,143
(7,595)
82,548
15,231
-
18,008
7,596
19,307
1,161
-
3,239
449
4,518
2,998
72,507
(8,383)
17,718
-
27,710
4,275
13,250
1,277
-
1,894
1,674
3,509
1,539
72,846
(7,285)
64,124
65,561
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 through profit or loss.
10. Other operating income
Dividend income from equity investments (see note a below)
Gain on disposal of property and equipment (see note 45(vii))
Provision for claims
Income on cash handling
Foreign currency revaluation gain (See note b below)
1,795
259
-
601
15,292
17,947
900
57
8,404
557
12,526
22,444
5,395
241
-
428
11,415
4,500
22
8,404
423
9,257
17,479
22,606
(a) Dividend income from equity investments represent dividend received from Subsidiaries and other equity instruments held for
strategic purposes and for which the Group has elected to present the fair value and loss in Other Comprehensive Income.
(b) 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 (loss) / income
Treasury bills trading income
Bonds trading income
(16,783)
94,478
2,507
68,711
88,895
368
(16,783)
94,478
2,507
68,711
88,895
368
80,202
157,974
80,202
157,974
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Zenith Bank Plc Annual Report December 31, 2018
Notes to the Consolidated and Separate Financial
Statements for the Year Ended December 31, 2018
In millions of Naira
12. Operating expenses
Directors' emoluments (see note 36 (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
Fines & Penalties (see note 41)
Donations
AMCON levy (see note 43)
Telephone and postages
Corporate promotions
Others
* see notes 43, 44
13. Taxation
Group
31-Dec-18
31-Dec-17
Restated*
Bank
31-Dec-18
31-Dec-17
Restated*
1,418
822
11,500
4,149
3,246
10,137
3,411
9,612
8,672
4,022
20,908
4,393
3,015
4,197
2,200
3,327
429
10
3,101
28,542
1,400
7,599
1,787
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
-
2,624
25,561
2,414
8,056
3,391
735
535
11,500
3,557
3,040
9,418
2,133
9,204
8,672
3,527
17,168
4,260
2,521
3,495
1,617
2,888
429
10
3,065
28,542
1,059
7,143
58
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
-
2,611
25,561
2,106
7,920
1,063
137,897
144,893
124,576
132,852
(a) Major components of the tax expense
Minimum tax expense (see note i below)
4,052
4,350
4,052
4,350
Income tax expense
Corporate tax
Information technology tax
Dividend tax (see note (ii) below)
Prior year (over)/under provision
Tertiary Education tax
Current income tax
Deferred tax expense:
Origination/(reversal) of temporary differences
Income tax expense
Total tax expense
11,031
2,056
20,673
275
77
34,112
-
97
34,209
38,261
8,878
1,804
13,505
-
112
24,299
-
(3,121)
21,178
25,528
-
1,902
20,673
-
-
22,575
-
-
22,575
26,627
-
1,719
13,505
-
-
15,224
-
(3,156)
12,068
16,418
(i) Income tax liability as at 31 December, 2018 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.
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In millions of Naira
Group
Bank
31-Dec-18
31-Dec-17
Restated*
31-Dec-18
31-Dec-17
Restated*
(ii) Included is N18.04 billion which represent dividend tax for 2018 financial year, the Bank was liable to dividend tax of N25.43
billion, representing 30% of N84.77 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. However, total companies’ Income tax payable based on minimum tax was
N4.35 billion and the Bank had tax paid in prior year and tax credits amounting to N3.04 billion. Therefore, the difference between
income tax payable assessed on dividend and income tax payable assessed on minimum tax amounted to N18.04 billion which
was charged as tax expense during the period.
(b) Reconciliation of effective tax rate
Profit before income tax
231,685
199,319
192,107
169,421
Tax calculated at the weighted average Group rate of 30% (2017: 30%)
69,506
59,796
57,632
50,826
Tax effect of adjustments on taxable income
Effect of tax rates in foreign jurisdictions
Non-deductable expenses
Tax exempt income
Minimum tax
Information technology levy
Dividend tax paid
Tertiary education tax
(1,377)
9,158
3
14,192
-
-
8,212
12,963
(84,852)
(85,699)
(83,488)
(84,408)
4,052
2,056
4,350
1,804
4,052
1,902
4,350
1,718
20,673
13,505
20,673
13,505
1,126
113
-
-
Unrecognised deductible temporary differences
17,644
17,464
17,644
17,464
Changes in estimate relating to prior year
275
-
-
-
Tax expense
38,261
25,528
26,627
16,418
In millions of Naira
31-Dec-18
31-Dec-17
31-Dec-18
31-Dec-17
(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
8,915
8,953
6,069
(37,925)
(28,522)
(26,742)
-
4,052
34,112
9,154
(165)
4,350
24,299
8,915
-
4,052
22,575
5,954
6,927
(20,431)
-
4,350
15,223
6,069
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Zenith Bank Plc Annual Report December 31, 2018
Notes to the Consolidated and Separate Financial
Statements for the Year Ended December 31, 2018
In millions of Naira
Group
Bank
31-Dec-18
31-Dec-17
Restated*
31-Dec-18
31-Dec-17
Restated*
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)
193,147
173,472
165,480
153,003
Number of shares in issue at end of the year (millions)
Weighted average number of ordinary shares in issue (millions)
Basic and diluted earnings per share (Koba)
31,396
31,396
6.15
31,396
31,396
5.53
31,396
31,396
5.27
31,396
31,396
4.87
Basic and diluted earnings per share are the same, as the Bank has no potentially dilutive ordinary shares.
Cash and balances with central banks
15.
Cash and balances with central banks consist of:
Cash
Operating accounts and deposits with Central Banks
Mandatory reserve deposits with central bank (cash reserve) (see note (a))
Special Cash Reserve Requirement (see note (b))
Current
Non current
Tax expense
148,266
100,679
624,782
80,689
150,883
159,666
566,425
80,689
133,466
63,136
624,782
80,689
136,711
123,469
566,396
80,689
954,416
957,663
902,073
907,265
954,416
957,663
902,073
907,265
-
-
-
-
954,416
957,663
902,073
907,265
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)
Treasury bill imparment allowance (see note 3.2.16)
Classified as:
Current
510,313
490,319
(72)
547,656
389,161
-
510,313
306,802
(72)
547,656
252,336
-
1,000,560
936,817
817,043
799,992
1,000,560
936,817
1,000,560
936,817
817,043
817,043
799,992
799,992
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In millions of Naira
Group
Bank
31-Dec-18
31-Dec-17
31-Dec-18
31-Dec-17
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 40).
23,819
109,990
20,847
17. Assets pledged as collateral
Treasury bills pledged as collateral
Bonds pledged as collateral
Treasury bills under repurchase agreement
Bonds under repurchase agreement
Assets Pledged Impairment Allowance
5,100
94,046
373,336
120,579
(126)
-
75,923
267,028
125,059
-
5,100
94,046
373,336
120,579
(126)
-
-
75,923
267,028
125,059
-
592,935
468,010
592,935
468,010
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) N28.18 billion (31 December, 2017: N4.55billion), Federal Inland Revenue Services N8.04 billion (31 December,
2017: N8.03billion), V-Pay N44.70 million (31 December, 2017: N44.59million), Interswitch Limited N2.15 billion (31 December, 2017:
N2.14billion), the Bank of Industry (Nigeria) N44.03 billion (31 December, 2017: N50.41billion), E- Tranzact N44 million (31 December,
2017: N44.59million), CBN Real Sector Support Fund (RSSF) N13.95 billion (31 December, 2017: N10.70billion) and System Specs/RMITA
N2.69 billion (31 December, 2017: Nil).
Assets exchanged under repurchase agreement as at 31 December, 2018 are with the following counterparties (note 30):
Counterparties
JP Morgan (see note 30)
ASSA (see note 30)
Standard Bank (see note 30)
First Abu Dhabi (see note 30) Societe
Generale Bank (see note 30) Standard
Bank London (see note 30)
Carrying value of
asset
Carrying value
of liability
Carrying value
of asset
Carrying value
of liability
154,577
70,781
91,164
118,834
45,580
12,979
108,416
63,175
49,023
81,217
27,209
36,926
154,577
70,781
91,164
118,834
45,580
12,979
108,416
63,175
49,023
81,217
27,209
36,926
493,915
365,966
493,915
365,966
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Zenith Bank Plc Annual Report December 31, 2018
Notes to the Consolidated and Separate Financial
Statements for the Year Ended December 31, 2018
In millions of Naira
Group
Bank
31-Dec-18
31-Dec-17
31-Dec-18
31-Dec-17
Assets exchanged under repurchase agreement as at 31 December, 2017 are with the following counterparties (note 30):
Counterparties
JP Morgan
ABSA
Standard Bank
First Abu Dhabi
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
Placement impairment allowance
Classified as:
Current
Carrying value of
asset
Carrying value
of liability
Carrying value
of asset
Carrying value
of liability
48,079
82,311
228,931
32,765
392,086
436,491
156,444
592,935
33,198
50,310
125,716
16,824
226,048
267,028
200,982
468,010
18,287
273,721
203,795
-
48,079
82,311
228,931
32,765
392,086
436,491
156,444
592,935
-
196,384
198,013
(931)
33,198
50,310
125,716
16,824
226,048
267,028
200,982
468,010
-
264,598
8,733
495,803
393,466
273,331
674,274
495,803
393,466
273,331
13,214
204,724
458,305
(1,969)
674,274
Included in balances with banks outside Nigeria is the amount of N41.18 billion and N41.05 billion for the Group and Bank respectively
(31 December, 2017: N69.31 billion and N67.23 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).
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In millions of Naira
Group
Bank
31-Dec-18
31-Dec-17
31-Dec-18
31-Dec-17
19. Derivative assets
Instrument types:
Forward contracts
Fair value of assets
Futures contracts
Fair value of assets
Total
87,467
42,285
87,467
42,285
1,359
14,934
1,359
14,934
88,826
57,219
88,826
57,219
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 derivative contracts entered into by the Group generated net loss of N(16.8) billion (31 December 2017 net
gains of N68.7 billion), which were recognized in the statement of profit or loss and other comprehensive income.
All derivative assets are current.
20. Loans and advances
Overdrafts
Term loans
On-lending facilities
Advances under finance lease
208,021
514,009
178,740
480,392
1,419,276
1,355,300
1,353,101
1,253,817
385,922
379,195
385,922
379,195
3,301
3,668
3,301
3,665
Gross loans and advances to customers
2,016,520
2,252,172
1,921,064
2,117,069
Less: Allowance for impairment (see note 3.2.18)
(193,409)
(151,810)
(184,998)
(136,605)
1,823,111
2,100,362
1,736,066
1,980,464
Gross Loans classified as:
Current
Non-current
608,556
822,775
566,279
784,059
1,407,964
1,429,397
1,354,785
1,333,010
2,016,520
2,252,172
1,921,064
2,117,069
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Zenith Bank Plc Annual Report December 31, 2018
Notes to the Consolidated and Separate Financial
Statements for the Year Ended December 31, 2018
Reconciliation of impairment allowance on loans and advances to customers:
Overdrafts
Term
loans
On-lending
facilities
Aclvances under
finance lease
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 as at December 31, 2017
Specific impairment
Collective impairment
30,568
14,738
15,830
31,305
19,848
11,457
(4,935)
(3,694)
(5,292)
39,472
18,158
21,314
65,905
39,665
26,240
828
(2,841)
(1,597)
47,952
101,767
27,094
20,858
55,810
45,957
1,337
-
1,3371
925
-
925
-
-
(307)
1,955
-
1,955
* 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.
Movement in impairment allowance as at 31 December, 2018 is presented in Note 3.2.18.
Reconciliation of impairment allowance on loans and advances to customers:
Bank
Balance as at January 1, 2017
Specific impairment
Collective impairment
Additional impairment for the year
Specific impairment
Collective impairment
Write-offs (Specific)
Write-offs (Collective)
Balance as at December 31, 2017
Specific impairment
Collective impairment
Overdrafts
Term
loans
On-lending
facilities
Aclvances under
finance lease
22,245
7,478
14,767
30,748
20,109
10,639
(3,694)
(5,292)
31,443
10,129
21,314
63,502
37,262
26,240
(2,841)
(1,597)
44,007
90,507
23,893
20,114
44,550
45,957
1,337
-
1,3371
925
-
925
-
(307)
1,955
-
1,955
* 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.
Movement in impairment allowance as at 31 December, 2018 is presented in Note 3.2.18.
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136
151,810
-
136
82,904
68,906
Total
71,444
32,896
38,548
98,204
59,513
38,691
(4,107)
(6,535)
(7,196)
Total
55,092
17,607
37,485
95,244
57,371
37,873
(6,535)
(7,196)
67
-
67
69
-
69
-
-
-
67
-
67
69
-
69
-
-
136
136,605
-
136
68,443
68,162
In millions of Naira
Group
Bank
31-Dec-18
31-Dec-17
31-Dec-18
31-Dec-17
21. Investment securities
(a) Analysis of investments
Debt securities
Debt securities (measured at amortised cost)(see note iii)
Impairment allowance (see note 3.2.18)
Net debt securities measured at amortised cost
513,154
284,584
(2,572)
-
510,582
284,584
Debt securities (measured at fair value through profit or loss) (see note ii)
4,970
32,266
102,508
(565)
101,943
4,970
71,447
-
71,447
32,266
Net debt securities
Equity securities
515,552
316,850
106,913
103,713
At fair value through other comprehensive income (see note i below)
49,760
14,101
49,760
14,101
565,312
330,951
156,673
117,814
Classified as:
Current
Non-current
132,124
185,218
433,188
145,733
28,342
128,331
20,839
96,975
565,312
330,951
156,673
117,814
(i)
(ii)
(iii)
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.
The Group's debt securities measured at FVTPL comprise FGN bonds (2018: N2.99 billion; 2017: N32.27 billion) and
Eurobonds (2018; N1.98 billion, 2017; Nil)
The Group's debt securities measured at amortised cost can be analysed as follows:
Classified as:
FGN bonds
State bonds
Corporate bonds
484,899
250,639
24,663
31,401
3,592
2,544
74,253
24,663
3,592
37,502
31,401
2,544
513,154
284,584
102,508
71,447
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Zenith Bank Plc Annual Report December 31, 2018
Notes to the Consolidated and Separate Financial
Statements for the Year Ended December 31, 2018
(b) Movement in investment securities
The movement in gross investment securities for the Group may be summarised as follows:
Group
In millions of Naira
At January 1, 2018
Additions
Disposals
Gains from changes in fair value recognised in profit or loss (see note 11)
Gains from changes in fair value recognised in other comprehensive income
Interest accrued
Impairment
At 31 December, 2018
At January 1, 2017
Exchange differences
Additions
Disposals
Gains from changes in fair value recognised in profit or loss (see note 11)
Gains from changes in fair value recognised in other comprehensive income
Interest accrued
Coupon interest received
At 31 December, 2017
Debt
securities at
fair value
through
profit orloss
Debt
securities at
amortised
cost
Equity
securities at
fair value
through other
comprehensive
income
Total
32,266
1,978
(27,408)
(1,990)
-
124
-
284,584
230,573
(10,086)
-
-
8,083
(2,572)
14,101
330,951
34,200
266,751
-
-
(37,494)
(1,990)
1,459
-
-
1,459
8,207
(2,572)
4,970
510,582
49,760 565,312
9,702
173,124
16,652
199,478
-
22,196
-
368
-
-
-
952
171,908
(75,541)
-
-
26,684
(12,543)
-
-
-
-
952
194,104
(75,541)
368
(2,551)
(2,551)
-
-
26,684
(12,543)
32,266
284,584
14,101 330,951
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The movement in investment securities for the Bank may be summarised as follows:
Bank
In millions of Naira
At January 1, 2018
Additions
Disposals
Gains from changes in fair value recognised in profit or loss (see note 11)
Gains from changes in fair value recognised in other comprehensive income
Interest accrued
Impairment
At 31 December, 2018
At January 1, 2017
Additions
Disposals (sale and redemption)
Gains from changes in fair value recognised in profit or loss (see note 11)
Gains from changes in fair value recognised in other comprehensive income
Interest accrued
Coupon interest received
At 31 December, 2017
Debt
securities at
fair value
through
profit orloss
Debt
securities at
amortised
cost
Equity
securities at
fair value
through other
comprehensive
income
Total
32,266
1,978
(27,408)
(1,990)
-
124
-
71,447
27,475
(1,252)
-
-
4,838
(565)
14,101
117,814
34,200
63,653
-
-
(28,660)
(1,990)
1,459
-
-
1,459
4,962
(565)
4,970
101,943
49,760
156,673
9,702
22,196
-
368
-
-
-
32,266
92,268
72,942
(95,432)
-
-
11,211
(9,542)
71,447
16,652
118,622
-
-
-
95,138
(95,432)
368
(2,551)
(2,551)
-
-
11,211
(9,542)
14,101
117,814
The movement in investment securities for the Bank may be summarised as follows:
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-18
31-Dec-18
31-Dec-17
Ownership interest%
Carrying amount
98.0700
100.0000
99.9900
99.9600
99.0000
99.0000
6,444
21,482
2,059
1,038
1,980
1,000
6,444
21,482
2,059
1,038
1,980
1,000
34,003
34,003
i
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185
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2
2
Zenith Bank Plc Annual Report December 31, 2018
Notes to the Consolidated and Separate Financial
Statements for the Year Ended December 31, 2018
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.
and granted an operating licence by the Central Bank of Gambia on
December 30, 2009. It commenced banking operations on January 18,
2010.
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 wholesale and investment banking
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.
Zenith Bank (Gambia) Limited provides corporate and retail banking
services. It was incorporated in The Gambia on October 24, 2008
Zenith Nominees Limited provides nominees, trustees, administrators
and executorship services for non-pension assets.
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-18
31-Dec-17
31-Dec-18
31-Dec-17
103
440
(543)
-
1,312
440
(1,752)
-
103
-
(103)
-
1,312
-
(1,312)
-
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F
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190
23. Deferred tax asset
Group
31 December, 2018
Movements in temporary differences during the year
In millions of Naira
Asset
Property and equipment
Other assets
Unutilized capital allowances
Impairment allowance on not-credit impaired financial
instruments
Tax loss carry forward
Foreign exchange differences
Movements in temporary differences during the period
In millions of Naira
Liabilities
Property and equipment
Impairment allowance on not-credit impaired financial
instruments
31 December, 2017
Movements in temporary differences during the year
In millions of Naira
Asset
Property and equipment
Other assets
Impairment allowance on not-credit impaired financial
instruments
Unutilized capital allowances
Tax loss carry forward
Foreign exchange differences
Movements in temporary differences during the year
In millions of Naira
Liabilities
Property and equipment
Impairment allowance on not-credit impaired financial
instruments
01-Jan-18
Recognised in
profit or loss
31-Dec-18
(11,987)
(2)
14,682
4,832
1,926
110
9,561
(46)
-
-
-
-
(2)
(48)
(12,033)
(2)
14,682
4,832
1,926
108
9,513
01-Jan-18
Recognised in
profit or loss
31-Dec-18
2
16
18
49
-
49
51
16
67
01-Jan-17
Recognised in
profit or loss
31-Dec 17
(7,036)
-
11,246
2,168
-
62
6,440
(4,951)
(2)
(6,414)
12,514
1,926
48
3,121
(11,987)
(2)
4,832
14,682
1,926
110
9,561
01-Jan-17
Recognised in
profit or loss
31-Dec-17
37
8
45
(35)
8
(27)
2
16
18
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F
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191
Zenith Bank Plc Annual Report December 31, 2018
Notes to the Consolidated and Separate Financial
Statements for the Year Ended December 31, 2018
In millions of Naira
Group
Bank
31-Dec-18
31-Dec-17
31-Dec-18
31-Dec-17
23. Deferred tax asset (continued)
Bank
31 December, 2018
Movements in temporary differences during the year
In millions of Naira
Asset
Property and equipment
Impairment allowance on not-credit impaired financial instruments
Unutilized capital allowances
Tax loss carried forward
31 December, 2017
Movements in temporary differences during the year
In millions of Naira
Asset
Property and equipment
Impairment allowance on not-credit impaired financial instruments
Unutilized capital allowances
Tax loss carried forward
01-Jan-18
Recognised in profit or loss
31-Dec-18
(12,324)
4,912
14,683
1,926
9,197
-
-
-
-
-
(12,324)
4,912
14,683
1,926
9,197
01-Jan-18
Recognised in profit or loss
31-Dec-18
(7,373)
11,246
2,168
6,041
(4,951)
(6,334)
12,515
1,926
3,156
(12,324)
4,912
14,683
1,926
9,197
The Bank's deferred tax asset which principally arise from allowable loss, un-utilized capital allowance and impairment allowance
on not credit-impaired financial instruments is N44.2 Billion as at 31 December, 2018. (31 December, 2017: N18.7 billion) Based
on projected future taxable profits, expected growth of unutilised capital allowance and impairment allowance on not-credit
impaired financial instruments, the Bank has restricted the deferred tax asset recognised as at 31 December, 2018 to N9.2 billion.
Thus the Bank has not recognised deferred tax asset of N35.1 billion in these financial statements. The unrecognised deferred tax
asset are attributable to:
Property and equipment
Capital allowance
Unrelieved losses
Impairment allowance on financial instruments not-credit impaired
Balance at end of the year
Group
31-Dec-18
Bank
31-Dec-18
(2,066)
6,801
17,645
12,665
35,045
(2,066)
6,801
17,645
12,665
35,045
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.
s
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192
In millions of Naira
Group
Bank
31-Dec-18 31-Dec-17
31-Dec-18
31-Dec-17
24. Other assets
Non financial assets
Prepayments
Other non-financial assets
Gross other non-financial assets
less impairment
Net other non-financial assets
Other financial assets
Electronic card related receivables
lntercompany receivables
Deposit for investment in AGSMEIS
Receivables
Deposits for shares
Gross other financial assets
Less: Impairment (see note 3.2.18)
Net other financial assets
Total
Classified as:
Current
Non-current
19,398
740
20,138
(560)
19,578
15,166
5,237
20,403
(416)
19,987
47,256
36,931
-
13,822
1,002
-
62,080
(710)
61,370
80,948
-
5,964
34,444
-
77,339
(4,832)
72,507
92,494
17,322
742
18,064
(560)
17,504
43,395
637
13,822
530
720
59,104
(698)
58,406
75,910
13,300
5,237
18,537
(416)
18,121
34,813
1,075
5,964
261
650
42,763
(4,832)
37,931
56,052
80,948
92,494
75,910
56,052
-
-
-
-
80,948
92,494
75,910
56,052
See note 3.2.18 for movement in impairment allowance for other financial asset as at 31 December, 2018.
Movement in impairment allowance for non financial assets
At start of the year
Charge for the year (see note 8)
At end of the year
416
144
560
416
-
416
416
144
560
416
-
416
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S
Zenith Bank Plc Annual Report December 31, 2018
Notes to the Consolidated and Separate Financial
Statements for the Year Ended December 31, 2018
In millions of Naira
26. Intangible assets
Computer software
Cost
At start of the year
Exchange difference
Reclassification from PPE
WIP (Additions)
Additions
At end of the year
Accumulated amortization
At start of the year
Exchange difference
Reclassification from PPE
Disposal
Charge for the year
At the end of the year
Carrying amount at end of the year
Group
Bank
31-Dec-18
31-Dec-17
31-Dec-18
31-Dec-17
22,099
11,998
19,377
720
81
2,158
3,928
79
3,328
6,228
466
28,905
22,099
-
81
2,158
3,260
24,876
9,761
-
3,328
6,228
60
19,377
9,110
717
1
-
2,399
12,227
16,678
7,353
126
-
-
1,631
9,110
12,989
7,289
5,858
-
1
-
2,187
9,477
15,399
-
-
-
1,431
7,289
12,088
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 N81 million (2017: N3,328 billion) represents reclassification from property and equipment.
27. Customers' deposits
Demand
Savings
Term
Domiciliary
Classified as:
Current
1,934,766
1,812,843
1,286,187
1,337,839
492,206
462,433
800,890
383,045
572,461
669,566
435,291
368,816
730,772
339,488
460,484
606,714
3,690,295
3,437,915
2,821,066
2,744,525
3,690,295
3,437,915
2,821,066
2,744,525
3,690,295
3,437,915
2,821,066
2,744,525
i
s
l
a
c
n
a
n
F
i
196
In millions of Naira
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 (see
note (b) below)
Sales and other collections
Unclaimed dividend
Finance lease obligation (see note (c) below)
AMCON payable (see note 43)
Electronic card related payables
Customer's foreign transactions payables
Off Balance Sheet ECL allowance (see note (a) below)
Group
31-Dec-
18
31-Dec-17
Restated*
Bank
31-Dec-18
31-Dec-17
Restated*
41,179
31,511
13,195
22,164
509
36,345
5,832
11,568
9,542
4,266
6,286
8,011
69,308
25,296
17,670
47,719
654
29,174
3,521
12,049
9,542
1,687
9,026
-
41,046
31,346
12,317
50,563
508
36,345
5,832
11,568
9,542
3,903
1,025
8,011
69,163
25,198
16,904
47,719
654
29,174
3,521
12,049
9,542
1,505
6,417
Total other financial liabilities
190,408
225,646
212,006
221,846
Non financial liabilities
Tax collections
Other payables
Total other non financial liabilities
1,824
39,484
41,308
3,604
13,773
17,377
1,578
9,879
11,457
3,416
4,070
7,486
Total other liabilities
231,716
243,023
223,463
229,332
Classified as:
Current
Non-current
(a) ECL allowance for off balance sheet exposure
In millions of Naira
Bonds and guarantee contracts
Undrawn portion of loan commitments
Letters of credit
213,429
18,287
231,716
221,922
21,101
243,023
205,176
18,287
223,463
208,232
21,101
229,333
2018
759
1,941
5,311
8,011
2017
-
-
-
-
(b) The amounts above for financial guarantee contracts represents the deferred income initially recognised less cumulative
amortisation
i
s
l
a
c
n
a
n
F
i
197
Zenith Bank Plc Annual Report December 31, 2018
Notes to the Consolidated and Separate Financial
Statements for the Year Ended December 31, 2018
In millions of Naira
31-Dec-18
31-Dec-17
31-Dec-18
31-Dec-17
Group
Bank
28. Other liabilities (continued)
(c) Finance lease obligation
The lease obligation relates to an Aircraft held under a finance lease arrangement by the Group. The net carrying amount of the air-
craft, included within property and equipment is N11.13 billion as at 31 December, 2018. (31 December, 2017: the aircraft, included
N12.39 billion)
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
More than five years
Less future finance charge
At end of the year
The present value of finance lease liabilities is
as follows:
Not more than one year
Between one and five years
More than five years
At the end of the year
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 Indus-
try(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)
Non-Oil Export Stimulation Facility (viii)
Classified as:
Current
Non-current
2,760
11,043
10,123
(12,358)
11,568
915
3,656
6,997
2,760
11,043
12,884
(14,638)
12,049
490
3,375
8,184
2,760
11,043
10,123
(12,358)
11,568
915
3,656
6,997
2,760
11,043
12,884
(14,638)
12,049
490
3,375
8,184
11,568
12,049
11,568
12,049
51,735
44,678
16,416
4,223
139,835
88,226
34,276
13,906
57,515
49,375
7,661
4,011
142,999
92,812
28,661
-
51,735
44,678
16,416
4,223
139,835
88,226
34,276
13,906
57,515
49,375
7,661
4,011
142,999
92,812
28,661
-
393,295
383,034
393,295
383,034
-
393,295
393,295
-
383,034
383,034
-
393,295
393,295
-
383,034
383,034
i
s
l
a
c
n
a
n
F
i
198
In millions of Naira
31-Dec-18
31-Dec-17
31-Dec-18
31-Dec-17
Group
Bank
(b) Movement in on-lending facilities
At beginning of the year
Addition during the year
Repayment during the year
At end of the year
383.034
57,194
(46,933)
350.657
34,839
(2,462)
383,034
57,194
(46,933)
350,657
34,839
(2,462)
393,295
383,034
393,295
383,034
(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. This facility is not secured.
(ii) The Central Bank of Nigeria (CBN) / Bank of Industry (B0I) - SME / Manufacturing Intervention Fund represents an intervention
credit granted to the Bank for the purpose of refinancing I 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 N50.63 billion (31 December 2018). 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. This facility is not secured.
(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. This facility is not secured.
(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 onlending 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. This facility is not secured.
(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. This facility is not secured.
(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 is disbursed to large enterprises and startups with 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
funds are received from the CBN at 3%, and disbursed at 9% to the beneficiary.
(Viii) Non-oil Export Stimulation Facility (NESF): This Facility was established by the Central Bank of Nigeria to diversify the economy
away from the oil sector, after the fall in crude prices. The Central Bank invested N500billion debenture, issued by Nigerian Export-
Import Bank (NEXIM). The facility disbursed per customer shall not exceed 70% of total cost of project, or subject to a maximum
of N5billion. Funds disbursed to the Bank from CBN are at a cost of 2% which are then disbursed to qualifying customers at the
rate of 9% per annum.
i
s
l
a
c
n
a
n
F
i
199
Zenith Bank Plc Annual Report December 31, 2018
Notes to the Consolidated and Separate Financial
Statements for the Year Ended December 31, 2018
Figures in Millions of Naira
31-Dec-18
31-Dec-17
31-Dec-18
31-Dec-17
Group
Bank
30. Borrowings
Long term borrowing comprise:
Due to ADB (i)
Due to KEXIM (ii)
Due to EIB (iii)
Due to PROPARCO (iv)
Societe Generale Bank (v)
Due to AFC
Due to ABSA Bank (vi)
Due to J P Morgan Chase Bank (vii)
Due to Standard Bank London (viii)
Due to Standard Bank South Africa (ix)
Due to IFC (x)
Due to First Abu Dhabi Bank (xi)
Due to British Arab Bank
Due to Zenith Bank (UK) (xii)
Due to Zenith Bank Ghana (xiii)
29,005
4,726
2,528
10,758
27,209
-
63,175
108,417
36,926
49,023
24,276
81,217
-
-
-
37,115
5,861
4,628
14,253
-
17,307
50,310
33,198
58,993
66,723
28,116
33,313
6,679
-
-
29,005
4,726
2,528
10,758
27,209
-
63,175
108,416
36,926
49,023
24,276
81,217
-
10,437
10,767
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
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 year (31 December, 2017: nil). The assets exchanged under repurchase agreements with counterparties are
disclosed in note 17.
437,260
356,496
458,463
418,979
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
345,921
91,339
437,260
356,496
370,606
(289,842)
437,260
-
356,496
356,496
263,106
102,373
(8,983)
356,496
356,357
102,106
458,463
418,979
391,810
(352,326)
458,463
-
418,979
418,979
292,802
193,088
(66,911)
418,979
(i) Due to ADB
The amount due to African Development Bank (ADB) of N29.01 billion (US $80.84 million) 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 N29.01 billion (US $80.51 million)
will mature in February 2021.
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(ii) Due to KEXIM
The amount of N4.73 billion (US $13.17 million) represents the
outstanding balance from seven short term loan facilities of US
$5.1million, US $4.98million, US $2.28million, US $6.72 million,
US $5.58million, US $2.51 million and US $2.52 million granted
by The Export-Import Bank of Korea (KEXIM) in February 2018,
March 2018, April 2018, May 2018, June 2018, August 2018 and
September 2018 respectively. Interest is payable monthly at 3
month LIBOR+1.74% for all running obligations.
The outstanding balances are N305.16 million (US $0.85 million),
N446.97 million (US $1.25 million), N272.85 million (US $0.76
million), N1.01 billion (US $2.80 million), N1.00 billion (US $2.79
million), N601.49 million (US $1.67 million) and N679.10 million
(US $1.89 million) respectively. Final repayments on these
facilities are due in November 2018, February 2019, March 2019,
April 2019, May 2019, June 2019, August 2019 and September
2019 respectively.
(iii) Due to European Investment Bank
The amount due to European Investment Bank (EIB) of N2.53
billion ($7.04 million) represents the outstanding balance from
the 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 N2.53 billion ($7.04
million) from the facility will mature in July 2019.
(iv) Due to Proparco
The amount due to Propaco of N10.76 billion (US $29.98 million)
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
N2.27 billion (US $6.32 million) and N8.49 (US $23.66 million)
respectively.
US$75 million granted by Societe Generale Bank in September
2018. Interest is payable on maturity at a Fixed rate of 5.00% and
will mature in September 2019.
(vi) Due to ABSA
The amount of N63.18 billion (US $176.08 million) represents
the amount payable by the Bank on dollar repurchase facilities
of US$100 million and US$75 million granted by ABSA in
September 2018 and November 2018 respectively. Interest
is payable on maturity at a fixed rate of 4.95% and 5.20% per
annum respectively. The facilities will mature in September 2019
and November 2019.
(vii) Due to JP Morgan
The amount of N108.42 billion (US $302.17 million) represents
the outstanding balance on three short-term dollar facilities,
each of US $100 million granted to the Bank in June, July and
August 2018 by JP Morgan. Interest is payable upon maturity at
the rate of 4.97%, 4.95% and 5.1% per annum and the facility
will mature in March 2019, January 2019 and August 2019
respectively.
(viii) Due to Standard Bank London
The amount of N36.93 billion (US $102.92 million) represents
the amount payable by the Bank from seven short term facilities
of US $24.88 million, US $15 million, US $3.74 million, US $5.73
million, US $19.19 million, US $21.5 million and US $10.85 million
granted by Standard Bank London in May 2018 (US $24.88
million, US $3.74 million, US $5.73 million and US $19.19 million),
August 2018 (US $21.5 million) and September 2018 (US $10.85
million) and November 2018 (US $15 million).
Interest is payable at maturity at 4.81% (US $24.88 million),
5.35% (US $15 million), 4.80% (US $3.74 million), 4.78% (US $5.73
million), 4.78% (US $19.19 million), 4.92% (US $21.5 million) and
4.91% (US $10.85 million). The facilities will mature in May 2019
(US $24.88 million), October 2019 (US $15 million), April 2019
(US $3.74 million), January 2019 (US $5.73 million and US $19.19
million), August 2019 (US $21.5 million and US $10.85 million).
(v) Societe Generale Bank
The amount of N27.21 billion (US $75.83 million) represents the
amount payable by the Bank on a dollar repurchase facility of
(ix) Due to Standard Bank South Africa
The amount of N49.02 billion ($136.63 million) represents the
outstanding balance on two dollar short-term facilities of US $60
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Zenith Bank Plc Annual Report December 31, 2018
Notes to the Consolidated and Separate Financial
Statements for the Year Ended December 31, 2018
million and US $75 million granted by Standard Bank of South
Africa in April 2018 and July 2018 respectively. The first facility
is priced at 3 months LIBOR plus 5% and the second facility at
3 months LIBOR plus 2.78%. The first facility is due to mature
in April 2019, while the second facility has a maturity date in
October 2020.
(x) Due to IFC
The amount of N24.28 billion (US $67.66 million) represents
the amount payable by the Bank from a term loan facility of US
$100million, with a 1.5 year moratorium, 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.
(xi) Due to First Abu Dhabi Bank
The amount of N81.22 billion ($226.36 million) represents the
outstanding balance on three dollar short-term facilities of US
$75 million, US $100 and US $50 million granted by First Abu
Dhabi Bank in March 2018, August 2018 and September 2018
respectively. The first facility is priced at 3-month LIBOR plus 2.5%
spread payable quarterly and would mature in February 2018,
the second facility is priced at 4.95% payable at maturity and
would mature in August 2019 while the third facility is priced at
4.95% payable quarterly and would mature in September 2019.
(xii) Due to Zenith Bank UK
The amount of N10.44 billion (US $29.08 million) represents a
short dollar Term Loan facility of US $29 million from Zenith Bank
UK granted in September 2018. It is priced at 5.0% with interest
payable quarterly and principal payable at maturity date of
March 2019. This amount has been eliminated on consolidation.
(xiii) Due to Zenith Bank Ghana
The amount N10.77 billion ($30.01 million) represents the
outstanding balance on a short-term dollar facility of US $30
million availed to the Bank by Zenith Bank Ghana in December
2018. The facility priced at 7.5% per annum and is due to
mature in December 2021. This amount has been eliminated on
consolidation.
31. Debt securities issued
in Millions of Naira
Due to Euro bond holders
Group
Bank
31-Dec-18
31-Dec-17
31-Dec-18
31-Dec-17
361,177
361,177
332,931
332,931
361,177
361,177
332,931
332,931
The amount of N361 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, 2017: Nil).
Movement in debt securities issued
At start of the period/year
Revaluation loss for the year
Additional issue
Contractual repayment
Accrued interest during the year
At end of the year
332,931
27,778
(24,443)
24,911
361,177
153,464
6,064
152,239
21,164
332,931
332,931
27,778
(24,443)
24,911
361,177
153,464
6,064
152,239
21,164
332,931
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in Millions of Naira
31-Dec-18
31-Dec-17
31-Dec-18
31-Dec-17
Group
Bank
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
180,720
180,457
361,177
332,931
332,931
180,720
180,457
361,177
332,931
332,931
16,236
6,124
16,236
6,124
759
16,995
16,995
-
16,995
14,681
20,805
20,805
-
20,805
759
16,995
16,995
-
16,995
14,681
20,805
20,805
-
20,805
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 loss of N16.78 billion (31 December 2017
net gain of N68.70 billion) which were recognized in the statement of profit or loss and other comprehensive income. These
net loss/gains related to the fair values of the forward contracts, producing derivative assets and liabilities of N88.8 and N17.0
billion respectively (31 December, 2017 N57.2 and N20.8 billion respectively).
33. Share capital
Authorised
40,000,000,000 ordinary shares of 50k each (31 Dec 2017: 40,000,000,000 )
20,000
20,000
20,000
20,000
Issued and fully paid
31,396,493,786 ordinary shares of 50k each (31 Dec 2017: 31,396,493,786)
15,698
15,698
15,698
15,698
Issued
Ordinary
Share premium
15,698
15,698
15,698
15,698
255,047
255,047
255,047
255,047
270,745
270,745
270,745
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.
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Zenith Bank Plc Annual Report December 31, 2018
Notes to the Consolidated and Separate Financial
Statements for the Year Ended December 31, 2018
34. Share premium, retained earnings and other reserves
(a) There was no movement in the Share premium account during the current and prior year.
in Millions of Naira
Share premium
Group
Bank
31-Dec-18
31-Dec-17
31-Dec-18
31-Dec-17
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.
represent
(c) Retained earnings: Retained earnings
undistributed profits, net of statutory appropriations attributable
to the ordinary shareholders.
(i) Classification and Measurement of Financial Assets and
Liabilities
IFRS 9 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. 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 adoption of IFRS 9 issued in 2014
did not cause any change to the classification and measurement
of the Group's financial instrument.
(ii) Impact of IFRS 9 (issued in 2014) on Retained Earnings
The following table analyses the impact, net of tax, of transition
to IFRS 9 on retained earnings. The impact relates to retained
earnings. There is no impact on other components of equity.
Group
in Millions of Naira
Retained earnings
Closing balance under lAS 39 (31 Decem-
ber 2017)*
Recognition of expected credit losses
under IFRS 9:
Impact of
adopting IFRS 9
2018
356,837
-
Loans and advances (and other assets)
(101,363)
Investment Securities
Asset pledged as collateral
Treasury bills
Off balance sheet exposure
Less portion from NCI
Opening balance under IFRS 9 (1 Janu-
ary 2018)
(1,773)
(1,202)
(1,305)
(2,526)
53
248,721
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Bank
in Millions of Naira
Retained earnings
Closing balance under lAS 39 (31 December
2017)'
Recognition of expected credit losses under
IFRS 9:
Loans and advances
Investment Securities
Asset pledged as collateral
Treasury bills
Off balance sheet exposure
Opening balance under IFRS 9 (1 January
2018)
* See note 43
Impact of
adopting
IFRS 9
2018
287,867
-
(99,233)
(358)
(1,202)
(1,186)
(1,571)
184,317
(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 year, a total of N24.82 billion (31 December, 2017:
N22.95 billion) 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.
The small and medium scale industries equity investment
scheme reserves are non-distributable.
(f) Fair value reserve: Comprises fair value movements on
equity instruments that are carried at fair value through other
comprehensive income.
(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 IFRS 9. As at 31 December, 2018, there
was a reversal of N8.1 billion from the credit risk reserve to
general reserve (31 December, 2017: 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 5% and 13% 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 N4.05 billion and N3.15 billion
respectively (31 December, 2017: N1.52 billion and N1.19
billion).
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Zenith Bank Plc Annual Report December 31, 2018
Notes to the Consolidated and Separate Financial
Statements for the Year Ended December 31, 2018
In millions of Naira
31-Dec-18
31-Dec-17
31-Dec-18
31-Dec-17
Group
Bank
36. Personnel expenses
Compensation for the staff are as follows:
Other staff costs
Pension contribution
6,547
4,052
68,556
7,107
3,955
64,459
5,536
3,150
56,657
6,340
3,151
55,672
(a) The average number of persons employed during the year by category:
Executive directors
Management
Non-management
Number
Number
Number
Number
14
443
7,137
7,594
11
428
6,635
7,074
6
387
5,860
6,253
5
380
5,496
5,881
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
Number
Number
Number
1,566
107
706
1,015
1,421
841
1,938
7,594
869
27
779
1,716
1,223
796
1,664
7,074
1,114
-
626
849
1,225
833
1,606
6,253
472
-
759
1,556
1,009
670
1,415
5,881
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Group
Bank
31-Dec-18
31-Dec-17
31-Dec-18
31-Dec-17
In millions of Naira
(b) Directors' emoluments
The remuneration paid to directors are as follows:
Executive compensation
Fees and sitting allowances
Fees and other emoluments disclosed above include amounts paid to:
The Chairman
The highest paid director
1,048
370
1,418
773
706
1,419
550
185
735
28
125
305
246
551
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
39
33
13
10
Number
Number
Number
Number
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 31
December, 2018 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%
99.99%
99.00%
99.99 %
6,444
21,482
2,059
1,038
1,980
1,000
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Zenith Bank Plc Annual Report December 31, 2018
Notes to the Consolidated and Separate Financial
Statements for the Year Ended December 31, 2018
31 December, 2018
Transactions and balances with subsidiaries
In millions of Naira
Receivable from
Payable to
Income received
from
Expense to
Zenith Bank (UK) Limited
Zenith Bank (Ghana) Limited
Zenith Bank (Sierra leone) Limited
Zenith Bank (Gambia) Limited
Zenith Pensions Custodian Limited
31 December, 2017
38,836
14,169
2,876
97
200
74,828
491
88
59
2
-
2
52
1
134
-
-
-
3,600
2,288
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
Significant restrictions
-
880
103
92
-
8,313
54,170
-
-
239
-
-
-
-
-
29
-
-
-
3,058
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 N1,138 billion and N986 billion
respectively (31 December, 2017: N748.54 billion and N713.66 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.
In millions of Naira
31-Dec-18
31-Dec-17
31-Dec-18
31-Dec-17
Group
Bank
Key management compensation
Key management compensation
Retirement benefit cost
Fees and sitting allowances
1,222
20
262
1,504
773
30
676
1,479
724
7
77
808
305
3
243
551
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Loans and advances
At start of the year
Granted during the year
Repayment during the year
At end of of the year
Interest earned
31-Dec-18
31-Dec-17
31-Dec-18
31-Dec-17
199
1,016
(35)
1,180
41
292
-
(93)
199
15
225
824
(27)
1,022
41
264
-
(39)
225
15
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 specific impairment has been recognised in respect of loans granted to
key management (December 31, 2017: Nil) as they are performing. Mortgage loans amounting to N1,180 million (December 31,
2017: N699 million) are secured by the underlying assets. All other loans are unsecured.
31 December, 2018
Name of company
Relationship/Name
Loans Deposits
Interest
received
Interest
paid
Cyberspace Network
Common significant shareholder/Jim Ovia
Quantum Fund Management
Common significant shareholder/Jim Ovia
Zenith General Insurance Company Ltd
Common directorship/Jim Ovia
Directors deposits
Sirius Lumina Ltd
-
Director / Prof. Sam Enwemeka
-
-
-
-
3
3
226
32
968
1,660
-
2,886
-
-
8
6
-
14
-
-
-
-
-
31 December, 2017
Name of company
Relationship/
Name
Loans
Deposits
Interest
received
Interest
paid
Cyberspace Network
Common directorship/Jim Ovia
Quantum Fund Management
Common directorship/Jim Ovia
Zenith General Insurance Company Ltd
Common directorship/Jim Ovia
Zenith Trustees Limited
Director and relations
Common directorship/Jim Ovia
-
-
-
-
-
-
692
64
1,051
1
301
2,109
3 -
-
-
-
4
7
-
9
1
1
11
Interest charged on loans to related parties and interest and other fees paid to related parties are similar to what would be
charged in an arms' length transaction. Loans granted to related parties are secured over real estate and other assets of the
respective borrowers. No impairment has been recognised in respect of loans granted to related parties (31 December, 2017: Nil).
During the year, Zenith Bank Plc paid N1.86 billion as insurance premium to Zenith General Insurance Limited (31 December,
2017: N2.12 billion). These expenses were reported as operating expenses.
The amount of N3,425 billion (31 December, 2017: N2,962 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. Aside from the Guarantee on the asset held by our subsidiary Zenith Pension Custodian Limited,
the Group does not have any contingent liabilities in respect of related parties.
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Zenith Bank Plc Annual Report December 31, 2018
Notes to the Consolidated and Separate Financial
Statements for the Year Ended December 31, 2018
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, 2018 (Note 28c) was11.57 billion ( 31 December, 2017 – 12.05 billion)
The Bank paid N12,192 million (31 December, 2017 N13,213 million) to Cyberspace Network for various Information
technology services rendered during the year.
38. Contingent liabilities and commitments
(a) Legal proceedings
The Group is presently involved in 195 litigation suits in the ordinary course of business. The total amount claimed in the cases
against the Group is estimated at N28 billion (31 December, 2017: N48.63 billion). The actions are being contested and the
Directors are of the opinion that none of the aforementioned cases is likely to have a material adverse effect on the Group and
are not aware of any other pending or threatened claims and litigations.
(b) Capital commitments
At the reporting date, the Group had capital commitments amounting to N6.24 billion (31 December, 2017: N5.72 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:
Group
Bank
31-Dec-18
31-Dec-17
31-Dec-18
31-Dec-17
Performance bonds and guarantees (see note i below)
Usance (see note ii below)
Letters of credit (see note ii below)
327,123
147,189
356,939
492,927
141,283
381,917
831,251
1,016,127
Pension Funds (See Note iii below)
3,425,398
2,961,650
306,412
147,189
321,754
775,355
3,425,398
445,913
141,283
287,645
874,841
2,961,650
(i) The transaction related performance bonds and guarantees are, generally, short-term commitments to third parties which are
not directly dependent on the customer's creditworthiness. As at 31 December, 2018, performance bonds and guarantees worth
N59.4 billion (31 December, 2017: N86.3 billion) are secured by cash while others are otherwise secured.
(ii) 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.
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(iii) The amount of N3,425 billion (31 December, 2017: N2,962 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
Group
Bank
31-Dec-18
31-Dec-17
31-Dec-18
31-Dec-17
Dividend proposed
Number of shares in issue and ranking for dividend
Proposed dividend per share (Naira)
Interim dividend paid (Naira)
Final dividend per share proposed
Dividend paid during the year
Interim dividend paid during the year
Total dividend paid during the year
87,910
31,396
2.80
0.30
2.50
76,921
9,419
86,340
84,771
31,396
2.70
0.25
2.45
55,572
7,850
63,422
87,910
31,396
2.80
0.30
2.50
76,921
9,419
86,340
84,771
31,396
2.7
0.25
2.45
55,572
7,850
63,422
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 an interim dividend of N0.30 and a final dividend of N2.50 per share (31 December,
2017: interim; N0.25, final; N2.45) from the retained earnings account as at 31 December, 2018. This is subject to approval by
shareholders at the next Annual General Meeting.
The number of shares in issue and ranking for dividend represents the outstanding number of shares as at 31 December, 2018
and 31 December, 2017 respectively.
Dividends are paid to shareholders net of withholding tax at the rate of 10% in compliance with extant tax laws.
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.
In millions of Naira
31-Dec-18
31-Dec-17
31-Dec-18
31-Dec-17
Group
Bank
Cash and cash balances with central bank (less
mandatory reserve deposits)
Treasury bills (maturing within 3 months) (see
note 16)
Due from other banks
248,945
310,549
196,602
260,180
23,819
109,990
20,847
-
674,274
947,038
495,803
916,342
393,466
610,915
273,331
533,511
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Zenith Bank Plc Annual Report December 31, 2018
Notes to the Consolidated and Separate Financial
Statements for the Year Ended December 31, 2018
41. Compliance with banking regulations
During the year, the Bank incurred the following penalties due to contraventions of the regulations of the Banks and Other
Financial Institutions Act, 1991.
S/N
Descripton
Amount Paid in Naira
1
2
3
Penalty imposed for the application of excess charges on status enquiry.
Penalty for opening of branch in Dubai by Zenith Bank Plc without CBN approval and
for failing to discharge penalty.
Penalty for dismissed/terminated staff and additional penalty for failure to discharge
within the stipulated timeframe.
2,000,000
4,000,000
4,000,000
10,000,000
42. Events after the reporting period
No significant event that requires disclosure occured between the reporting date and the date when the financial statements
were issued.
43. Prior period restatement
The Central Bank of Nigeria (CBN), pursuant to Section 9(c) of the AMCON(Amended) Act 2015, informed the Bank of its shortfall
in contributions to the Banking Sector Resolution Cost Sinking Fund for the years 2016 and 2017. The shortfalls arose as a result of
the erroneous application of the resolution Trust Deed’s definition of ”Total Assets”. The definition of "Total Assets" was amended
in 2015 to include off balance sheet items. However, the contribution made by the Bank did not include the off balance sheet
items.
The actual payments for the shortfalls will be spread over a five year period commencing in 2019 as specified by the CBN. The
full shortfall of N9.5 billion (N5.4billion- 2016 and N4.1billion- 2017), which is material to the Group has been adjusted for in these
financial statements.
Consolidated statement of profit or loss and OCI
31 December, 2017
In millions of Naira
Operating expenses
Other expenses
Profit after tax
Total comprehensive income
*See note 44
As
previously
reported
(148,346)
326,279
177,933
180,615
Group
Bank
Adjustments
As restated
Adjustments
As restated
As
previously
reported
(4,142)
(152,488)*
(135,995)
(4,142)
(140,137)*
-
326,279
293,140
-
293,140
(4,142)
173,791
157,145
(4,142)
153,003
(4,142)
176,473
154,594
(4,142)
150,452
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Consolidated statement of profit or loss and OCI
1 January, 2017
In millions of Naira
Total asset
Other liabilities
Others
Total liabilities
Retained earnings
Others
As
previously
reported
4,739,825
208,680
3,826,680
Group
Bank
Adjustments As restated
Adjustments As restated
As
previously
reported
-
4,739,825
4,283,736
-
4,283,736
5,400
214,080
243,736
5,400
249,136
-
3,826,680
3,423,647
-
3,423,647
4,035,360
5,400
4,040,760
3,667,383
5,400
3,672,783
267,008
437,457
(5,400)
261,608
218,507
(5,400)
213,107
-
437,457
397,846
-
397,846
Total shareholders' equity
704,465
(5,400)
699,065
616,353
(5,400)
610,953
31 December, 2017
In millions of Naira
Total asset
Other liabilities
Others
Total liabilities
Retained earnings
Others
Group
Bank
As
previously
reported
5,595,253
Adjustments
As restated
Adjustments As restated
As
previously
reported
-
5,595,253
4,283,736
-
4,283,736
233,481
9,542
243,023
219,790
9,542
229,332
4,540,114
4,773,595
365,757
455,901
-
4,540,114
3,906,343
-
3,906,343
9,542
(9,542)
4,783,137
4,126,133
9,542
4,135,675
356,215
296,787
(9,542)
287,245
-
455,901
410,738
-
410,738
Total shareholders' equity
821,658
(9,542)
812,116
707,525
(9,542)
697,983
44. Comparatives
During the year expenses on electronic products was reclassified to fee and commission expense in order to present al
revenue and expenses relating to fees and commission. Prior year comparatives for the year ended 31 December 2017
have also been adjusted to reflect this principle as presented in the notes below.
Restated operating expenses In millions of Naira
Group
31-Dec-17
Bank
31-Dec-17
Amount previously reported (see note 9)
Expenses on electronic products
Amount as restated
Restated Net income on fees and commission In millions of Naira
Amount previously reported
Less: Fee and commission expense
Amount as restated
152,488
(7,595)
144,893
90,143
(7,595)
82,548
140,137
(7,285)
132,852
72,846
(7,285)
65,561
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Zenith Bank Plc Annual Report December 31, 2018
Notes to the Consolidated and Separate Financial
Statements for the Year Ended December 31, 2018
Group
2018
2017
Bank
2018
2017
In millions of Naira
45. Statement of cash flow workings
(i) Debt securities (see note 21)
31 December, 2018
Debt securities at
fair value through
profit or loss
32,266
(1,990)
1,978
(27,408)
124
-
4,970
(25,306)
Debt securities at
amortised cost
284,584
-
230,573
(10,086)
8,083
-
513,154
228,570
Debt securities at fair
value through profit
or loss
32,266
(1,990)
1,978
(27,408)
124
-
4,970
(25,306)
Debt securities at
amortised cost
71,447
27,475
(1,252)
4,838
-
102,508
31,061
-
(203,264)
-
(5,755)
Debt securities at
fair value through
profit or loss
9,702
368
-
22,196
-
-
-
32,266
22,196
Debt securities at
amortised cost
173,124
-
952
171,908
(75,541)
26,684
(12,543)
284,584
110,508
Debt securities at
fair value through
profit or loss
9,702
368
-
22,196
-
-
-
32,266
22,196
Debt securities
atamortised cost
92,268
-
-
72,942
(95,432)
11,211
(9,542)
71,447
(20,821)
-
(132,704)
-
(1,375)
At 1 January 2018
Gains from changes in fair
value recognised in profit
or loss (see note 21)
Additions
Disposals (sale, transfers
and redemption)
Interest accrued
Coupon received
Movement for cash flow
statement
Recognised in cash flow
statement
31 December, 2017
At 1 January 2017
Gains/(losses) from changes
in fair
value recognised in other
comprehensive income (see
note 11)
Exchange differences
Additions
Disposals (sale and
redemption)
Gains from changes in fair
value recognised in profit
or loss (see note 10)
Movement for cash flow
statement
Recognised in cashflow
statement
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In millions of Naira
2018
2017
2018
2017
Group
Bank
(ii) Treasury bills (Amortised cost) (see note 16)
31 December, 2018
Treasury bills (Amortised cost)
Treasury bills (with 3 months maturity)
Changes
Recognised in Cashflow statement
31 December, 2017
31-Dec-18
31-Dec-17
31-Dec-18
31-Dec-17
490,319
(23,819)
466,500
(187,329)
389,161
(109,990)
279,171
306,802
(20,847)
285,955
(33,619)
252,336
-
252,336
31-Dec-17
31-Dec-16
31-Dec-17
31-Dec-16
Treasury bills (Amortised cost)
Treasury bills (with 3 months maturity)
Changes
Recognised in Cashflow statement
389,161
(109,990)
279,171
76,739
482,978
(127,068)
355,910
252,336
-
252,336
24,495
389,406
(112,575)
276,831
(iii) Treasury bills (FVTPL) (see note 16)
31 December, 2018
Treasury bills (FVTPL)
Recognised in Cashflow
31 December, 2017
Treasury bills (FVTPL)
Recognised in Cashflow
(iv) Loans and advances (see note 20)
31 December, 2018
31-Dec-18
31-Dec-17
31-Dec-18
31-Dec-17
510,313
37,343
547,656
510,313
37,343
547,656
31-Dec-17
31-Dec-16
31-Dec-17
31-Dec-16
547,656
(473,275)
74,381
547,656
74,381
(473,275)
Gross loans and advances
2,016,520
2,252,172
1,921,064
2,117,069
31-Dec-18
31-Dec-17
31-Dec-18
31-Dec-17
Changes
Write off
235,652
(73,962)
161,690
-
-
-
196,005
(60,235)
135,770
-
-
-
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Zenith Bank Plc Annual Report December 31, 2018
Notes to the Consolidated and Separate Financial
Statements for the Year Ended December 31, 2018
In millions of Naira
2018
2017
2018
2017
Group
Bank
In millions of Naira
31 December, 2017
Gross loans and advances
2,252,172
2,360,809
2,117,069
2,193,224
31-Dec-17
31-Dec-16
31-Dec-17
31-Dec-16
Changes
Write-back (specific)
Write-back (collective)
(v) Customer deposits
31 December, 2018
As per financial statement
Changes
Interest payables
31 December, 2017
108,637
(6,535)
(7,196)
94,906
-
-
-
-
76,155
(6,535)
(7,196)
62,424
-
-
-
-
31-Dec-18
31-Dec-17
31-Dec-18
31-Dec-17
3,690,295
252,380
-
3,437,915
2,821,066
2,744,525
454,294
1,112
76,541
-
191,562
1,112
252,380
454,294
76,541
191,562
As per financial statement
3,437,915
2,983,621
2,744,525
2,552,963
Changes
454,294
454,294
-
-
191,562
191,562
-
-
31-Dec-17
31-Dec-16
31-Dec-17
31-Dec-16
vi) Other liabilities (see note 29)
31 December, 2018
As per statement of financial position
Changes
Finance lease repayments
off balance sheet ECL allowance
VAT paid
31-Dec-18
31-Dec-17
31-Dec-18
31-Dec-17
231,716
11,307
(2,760)
8,011
(260)
243,023
(24,801)
-
-
(2,235)
223,463
5,869
(2,760)
8,011
(260)
229,332
23,946
-
-
(1,814)
22,132
Net cash movement
(16,298)
(27,036)
(10,860)
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In millions of Naira
In millions of Naira
31 December, 2017
As per statement of financial position
Changes
VAT paid
Net cash movement
Group
Bank
2018
2017
2018
2017
31-Dec-17
31-Dec-16
31-Dec-17
31-Dec-16
243,023
(28,944)
2,235
26,709
214,080
229,332
249,136
-
-
-
19,804
(1,814)
(17,990)
-
-
-
(vii) Profit on disposal of property and equipment
31-Dec-18
31-Dec-17
31-Dec-18
31-Dec-17
Cost (see note 25)
Accummulated depreciation (see note 25)
Net book value
Sales proceed
Profit on Disposal (see note 10)
4,157
(926)
3,231
3,490
259
1,630
(1,446)
184
241
57
2,262
(2,097)
165
406
241
1,630
(1,446)
184
206
22
(viii) Interest received
Interest income as per financial statement
Interest receivables
Recognised in cash flow
statement
(ix) Interest paid
Interest income as per financial statement
Interest payables
Recognised in cash flow statement
(x) Other assets
Other assets (see note 24)
Changes
Write off of asset
Recognised in cash flow statement
31-Dec-18
440,052
(5,206)
434,846
31-Dec-17
474,628
-
474,628
31-Dec-18
367,816
31-Dec-17
420,210
(2,691)
365,125
-
420,210
31-Dec-18
144,458
(10,257)
134,201
31-Dec-17
216,637
(21,164)
195,473
31-Dec-18
124,156
31-Dec-17
200,672
(7,922)
116,234
(21,164)
179,508
31-Dec-18
31-Dec-17
31-Dec-18
31-Dec-17
79,678
7,568
(4,518)
3,050
87,246
74,652
50,804
-
-
-
(23,848)
(4,518)
(28,366)
-
-
-
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Zenith Bank Plc Annual Report December 31, 2018
Notes to the Consolidated and Separate Financial
Statements for the Year Ended December 31, 2018
In millions of Naira
2018
2017
2018
2017
Group
Bank
Other assets
Changes
Recognised in cash flow statement
(xi) Asset pledged as collateral
Asset pledged as collateral
Recognised in cashflow
(xii) Derivative Asset
Forward contract
Future contract
Recognised in cashflow
31-Dec-17
31-Dec-16
31-Dec-17
31-Dec-16
92,494
(54,981)
(54,981)
37,513
-
-
56,052
(20,642)
(20,642)
35,410
-
-
31-Dec-18
31-Dec-17
31-Dec-18
31-Dec-17
592,935
-
(124,925)
468,010
468,010
592,935
592,935
-
(124,925)
468,010
468,010
-
31-Dec-18
31-Dec-17
31-Dec-18
31-Dec-17
87,467
1,359
88,826
(31,607)
42,285
14,934
57,219
25,641
87,467
1,359
88,826
42,285
14,934
57,219
(31,607)
25,641
(xiii) Restricted balances (Cash Reserve)
Mandatory reserve deposit with central bank
Special Cash Reserve
Recognised in cashflow
31-Dec-18
31-Dec-17
31-Dec-18
31-Dec-17
624,78
80,689
705,471
(58,357)
566,425
80,689
647,114
624,782
80,689
705,471
566,396
80,689
647,085
(118,930)
(58,386)
(119,078)
(xiv) Derivative liabilities
Group
Group
Bank
Bank
Forward Contract
Futures Contract
Recognised in cashflow
31-Dec-18
31-Dec-17
31-Dec-18
31-Dec-17
16,236
759
16,995
(3,810)
6,124
14,681
20,805
(46,029)
16,236
759
16,995
(3,810)
6,124
14,681
20,805
(46,029)
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Other National Disclosures04 Zenith Bank Plc Annual Report December 31, 2018
Value Added
Statement
In millions of Naira
Group
Gross income
Interest expense
- Local
- Foreign
Impairment loss on financial and non-financial instruments
Bought-in materials and services
- Local
- Foreign
Value added
Distribution
Employees
Salaries and benefits
Government
Income tax
Retained in the Group
31-Dec-
18
31-Dec-
18
%
31-Dec-
17
Restated*
31-Dec-
17
%
630,344
745,189
(49,224)
(95,234)
485,886
(18,903)
466,983
(65,388)
(72,509)
(194,873)
(21,764)
528,552
(98,227)
430,325
(149,894)
(2,594)
329,086
100
277,837
100
68,556
21
64,459
23
38,261
12
25,528
9
Replacement of property and equipment/ intangible assets
To pay proposed dividend
Profit for the year (including statutory, small scale industry, and non-controling
interest)
Total Value Added
19,047
84,771
118,451
6
26
35
14,059
84,771
89,020
5
31
32
329,086
100
277,837
100
Value added represents the additional wealth which the Group has been able to create by its own and employees efforts.
* See note 43
s
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u
s
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a
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In millions of Naira
Bank
Gross income
Interest expense
- Local
- Foreign
Impairment loss on financial and non-financial instruments
Bought-in materials and services
- Local
- Foreign
Value added
Distribution
Employees
Salaries and benefits
Government
Income tax
Retained in the Bank
31-Dec-
18
31-Dec-
18
%
31-Dec-
17
Restated*
31-Dec-
17
%
538,004
673,636
(51,647)
(72,509)
413,848
(15,313)
398,535
(121,999)
(2,577)
(198,078)
{2,594)
472,964
(95,244)
377,720
(137,560)
(2,577)
273,959
100
237,583
100
56,657
21
55,672
23
26,627
10
16,418
7
Replacement of property and equipment/ intangible assets
To pay proposed dividend
Profit for the year (including statutory, small scale industry, and non-controling
interest)
Total Value Added
16,812
84,771
80,709
6
33
30
12,490
84,771
72,374
5
35
30
265,576
100
241,725
100
Value added represents the additional wealth which the Bank has been able to create by its own and employees efforts.
* See note 43
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Zenith Bank Plc Annual Report December 31, 2018
Five Year Financial
Summary
In millions of Naira
31-Dec-18 31-Dec-17
31-Dec-16 31-Dec-15 31-Dec-14
Restated*
Restated*
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
Investment securities
Investments in associates
Deferred tax
Other assets
Property and equipment
Intangible assets
Total assets
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
Non-controlling interest
Total shareholders' equity
* See note 43
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954,416
1,000,560
957,663
936,817
669,058
557,359
761,561
377,928
752,580
295,397
592,935
468,010
328,343
265,051
151,746
674,274
88,826
495,803
57,219
459,457
272,194
82,860
8,481
506,568
17,408
1,823,111
2,100,362
2,289,365
1,989,313
1,729,507
565,312
330,951
199,478
213,141
200,079
-
9,513
80,948
149,137
16,678
-
9,561
92,494
133,384
12,989
-
6,440
37,536
105,284
4,645
530
5,607
22,774
87,022
3,240
302
6,449
21,455
71,571
2,202
5,955,710
5,595,253
4,739,825
4,006,842
3,755,264
3,690,295
3,437,915
2,983,621
2,557,884
2,537,311
16,995
9,154
67
231,716
393,295
437,260
361,177
20,805
8,915
18
243,023
383,034
356,496
332,931
66,834
8,953
45
214,080
350,657
263,106
153,464
384
3,579
19
205,062
286,881
258,862
99,818
6,073
10,042
289,858
68,344
198,066
92,932
5,139,959
815,751
4,783,137
812,116
4,040,760
699,065
3,412,489
594,353
3,202,626
552,638
15,698
255,047
322,237
221,231
814,213
1,538
15,698
255,047
356,837
183,217
810,799
1,317
15,698
255,047
261,608
165,729
698,082
983
15,698
255,047
200,115
122,900
593,760
593
15,698
255,047
183,396
97,945
552,086
552
815,751
812,116
699,065
594,353
552,638
In millions of Naira
31-Dec-18 31-Dec-17
31-Dec-16 31-Dec-15 31-Dec-14
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
Borrowings
Restated*
Restated*
630,344
745,189
507,997
432,535
403,343
-
-
-
228
138
(144,458)
(216,637)
(144,378)
(123,597)
(106,919)
(235,829)
(231,006)
(179,921)
(167,877)
(163,702)
(18,372)
(98,227)
(32,350)
(15,673)
(13,064)
231,685
199,319
151,348
125,616
119,796
(38,261)
(25,528)
(27,096)
(19,953)
193,424
173,791
124,252
105,663
4,828
1,459
5,233
(2,551)
30,338
6,636
637
(1,752)
-
-
-
-
-
-
-
-
-
-
-
-
6,287
2,682
36,974
(1,115)
(20,341)
99,455
3,282
2,549
(2,771)
760
3,820
Total comprehensive income
199,711
176,473
161,226
104,548
103,275
Earning per share:
Basic and diluted
* See note 43
615 K
553 K
395 K
336 K
316 K
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Zenith Bank Plc Annual Report December 31, 2018
Five Year Financial
Summary
In millions of Naira
31-Dec-18 31-Dec-17
31-Dec-16 31-Dec-15 31-Dec-14
Restated*
Restated*
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
Total assets
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
Total shareholders' equity
* See note 43
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902,073
817,043
907,265
799,992
627.385
463,787
735.946
330,900
728.291
253,414
592,935
468,010
325,575
264,320
151,746
393,466
88,826
273.331
57,219
354,405
266,894
82,860
8,481
470,139
16,896
1,736,066
1,980,464
2,138,132
1,849,225
1,580,250
156,673
34,003
-
9,197
75,910
-
133,854
15,399
117,814
34,003
-
9,197
56,052
-
118,223
12,088
118,622
150,724
33,003
33,003
-
6,041
35,410
-
94,613
3,903
90
5,131
21,673
-
81,187
2,753
92,832
33,003
90
6,333
19,393
-
69,531
1,901
4,955,445
4,833,658
4,283,736
3,750,327
3,423,819
2,821.066
2,744.525
2,552,963
2.333,017
2,265,262
16,995
5,954
-
223,463
393,295
458,463
361,177
20,805
6,069
-
229,332
383,034
418,979
332,931
66,834
6,927
-
249,136
350,657
292,802
153,464
384
2,534
-
212,636
286,881
268,111
99,818
6,073
7,709
-
272,726
68,344
198,066
92,932
4,280,413
675,032
4,135,675
697,983
3,672,783
610,953
3,203,381
546,946
2,911,112
512,707
15,698
255,047
238,635
165,652
675,032
15,698
255,047
287,867
139,371
697,983
15,698
255,047
213,107
127,101
610,953
15,698
255,047
160,408
115,793
546,946
15,698
255,047
150,342
91,620
512,707
675,032
697,983
610,953
546,946
512,707
In millions of Naira
31-Dec-18 31-Dec-17
31-Dec-16 31-Dec-15 31-Dec-14
Statement Of Profit Or Loss And Other Comprehensive Income
Gross earnings
Interest expense
Operating and direct expenses
Impairment charge for financial assets
Profit before tax
Income tax
Profit after tax
Other comprehensive income
Fair value movements on equity instruments
Tax effect of equity instruments at fair value
Total comprehensive income
Earning per share:
Basic and diluted
* See note 43
Restated*
Restated*
538,004
673,636
454,808
396,653
372,015
(124,156)
(200,672)
(131,910)
(114,936)
(98,439)
(206,428)
(208,299)
(162,076)
(155,406)
(152,335)
(15,313)
(95,244)
(26,295)
(11,091)
(12,392)
192,107
169,421
134,527
115,220
108,849
(26,627)
(16,418)
(20,642)
(16,436)
165,480
153,003
113,885
98,784
-
-
-
-
1,459
(2,551)
6,636
(1,752)
-
1,459
166,939
-
(2,551)
150,452
-
6,636
120,521
-
(1,752)
97,032
(15,370)
93,479
-
2,549
-
2,549
96,028
527 K
487 K
362 K
315 K
295 K
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Zenith Bank Plc Annual Report December 31, 2018
Share Capital
History
Financial year
Nominal value of
Number of shares
Nominal value per
shares (=N=)
(units)
shares (=N=)
3 0 - J u n - 9 1
3 0 - J u n - 9 2
3 0 - J u n - 9 3
3 0 - J u n - 9 4
2 4 , 8 3 9 , 0 0 0 . 0 0
24,839,000.00
5 4 , 4 0 7 , 0 0 0 . 0 0
54,407,000.00
5 7 , 8 9 7 , 3 5 2 . 0 0
57,897,352.00
9 0 , 0 6 2 , 0 0 0 . 0 0
90,062,000.00
3 0 - J u n - 9 5
1 7 8 , 7 4 4 , 0 0 0 . 0 0
178,744,000.00
3 0 - J u n - 9 6
2 4 2 , 8 3 0 , 0 0 0 . 0 0
242,830,000.00
3 0 - J u n - 9 7
2 4 4 , 0 5 4 , 0 0 0 . 0 0
244,054,000.00
3 0 - J u n - 9 8
5 1 2 , 5 1 3 , 0 0 0 . 0 0
512,513,000.00
3 0 - J u n - 9 9
5 1 2 , 5 1 3 , 0 0 0 . 0 0
512,513,000.00
3 0 - J u n - 0 0
5 1 3 , 3 2 9 , 0 0 0 . 0 0
513,329,000.00
3 0 - J u n - 0 1
1 , 0 2 6 , 6 5 8 , 0 0 0 . 0 0
1,026,658,000.00
3 0 - J u n - 0 2
1 , 0 2 6 , 6 5 8 , 0 0 0 . 0 0
1,026,658,000.00
3 0 - J u n - 0 3
1 , 5 4 8 , 5 5 5 , 0 0 0 . 0 0
1,548,555,000.00
3 0 - J u n - 0 4
1 , 5 4 8 , 5 5 5 , 0 0 0 . 0 0
3,097,110,000.00
3 0 - J u n - 0 5
3 , 0 0 0 , 0 0 0 , 0 0 0 . 0 0
6,000,000,000.00
3 0 - J u n - 0 6
4 , 5 8 6 , 7 4 4 , 4 5 0 . 0 0
9,173,488,900.00
3 0 - J u n - 0 7
4 , 6 3 2 , 7 6 2 , 1 5 0 . 0 0
9,265,524,300.00
3 0 - S e p - 0 8
8 , 3 7 2 , 3 9 8 , 3 4 3 . 0 0
16,744,796,686.00
3 1 - D e c - 0 9
1 2 , 5 5 8 , 5 9 7 , 5 1 4 . 5 0
25,117,195,029.00
3 1 - D e c - 1 0
1 5 , 6 9 8 , 2 4 6 , 8 9 3 . 0 0
31,396,493,786.00
3 1 - D e c - 1 1
1 5 , 6 9 8 , 2 4 6 , 8 9 3 . 0 0
31,396,493,786.00
3 1 - D e c - 1 2
1 5 , 6 9 8 , 2 4 6 , 8 9 3 . 0 0
31,396,493,786.00
3 1 - D e c - 1 3
1 5 , 6 9 8 , 2 4 6 , 8 9 3 . 0 0
31,396,493,786.00
3 1 - D e c - 1 4
1 5 , 6 9 8 , 2 4 6 , 8 9 3 . 0 0
31,396,493,786.00
3 1 - D e c - 1 5
1 5 , 6 9 8 , 2 4 6 , 8 9 3 . 0 0
31,396,493,786.00
3 1 - D e c - 1 6
1 5 , 6 9 8 , 2 4 6 , 8 9 3 . 0 0
31,396,493,786.00
3 1 - D e c - 1 7
1 5 , 6 9 8 , 2 4 6 , 8 9 3 . 0 0
31,396,493,786.00
3 1 - D e c - 1 8
1 5 , 6 9 8 , 2 4 6 , 8 9 3 . 0 0
31,396,493,786.00
1
1
1
1
1
1
1
1
1
1
1
1
1
0 . 5
0 . 5
0 . 5
0 . 5
0 . 5
0 . 5
0 . 5
0 . 5
0 . 5
0 . 5
0 . 5
0 . 5
0 . 5
0 . 5
0 . 5
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Style by Zenith
Style by Zenith
A BLEND OF
LIFESTYLE AND
ENTERTAINMENT
MASTERPIECE
T he “Style by Zenith” Fair was truly
an exciting and captivating event. Dubbed
‘Nigeria’s Biggest Lifestyle Fair’, for a first edition,
it truly surpassed expectations.
celebrities,
influencers,
The two-day fair, which held on Saturday,
December 29 and Sunday, December 30 at the
Open Ground after Four Points by Sheraton,
Oniru and attracted a rich mix of attendees
fashion
including
enthusiasts, shopaholics and families, was a
potpourri of lifestyle activities featuring runway
modelling by leading Nigerian and international
top designers,
models
modelling masterclasses, exhibition of lifestyle,
beauty, health & fitness products, games arcade
for children as well as a 2-day musical concert.
Attendance to the fair was free and products,
which were sold out, came at massive
discounts, to enable consumers and customers
network with the exhibitors for future business
transactions.
accessorized by
from
learn
The modelling masterclasses provided fashion
entrepreneurs and enthusiasts the opportunity
international and Nigerian
to
fashion icons like Oraine Berrett, Mercy Ajisafe,
Bonang Matheba, Jane Michael Ekanem, Tarmar
Awobutu, Akin Ogunranti and Wunmi Ogunbiyi,
amongst others.
The evening concerts, which were hosted by
Ilrymz alongside Eku Edewor and Mercy Ajisafe,
featured A-list Nigerian artistes and a special
guest performance by American RnB singer,
Bobby Valentino.
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Zenith Bank Plc Annual Report December 31, 2018
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(cid:53)(cid:73)(cid:70)(cid:90)(cid:1)(cid:73)(cid:66)(cid:87)(cid:70)(cid:1)(cid:66)(cid:1)(cid:71)(cid:86)(cid:85)(cid:86)(cid:83)(cid:70)(cid:13)(cid:1)(cid:73)(cid:80)(cid:88)(cid:1)(cid:1)(cid:74)(cid:84)(cid:1)(cid:74)(cid:85)(cid:32)(cid:84)(cid:70)(cid:68)(cid:86)(cid:83)(cid:70)(cid:48)(cid:81)(cid:70)(cid:79)(cid:1)(cid:66)(cid:1)(cid:59)(cid:38)(cid:36)(cid:34)(cid:1)(cid:66)(cid:68)(cid:68)(cid:80)(cid:86)(cid:79)(cid:85)(cid:1)(cid:71)(cid:80)(cid:83)(cid:1)(cid:90)(cid:80)(cid:86)(cid:83)(cid:1)(cid:68)(cid:73)(cid:74)(cid:77)(cid:69) V
RERITAS EGISTRARSRC 510155
Veritas Registrars Limited (formerly Zenith Registrars Limited)
Plot 89A, Ajose Adeogun Street, P. O. Box 75315, Victoria Island, Lagos
Telephone: (01) 27089304, 2784167-8; Fax:(01)2704085
enquiry@veritasregistrars.com
www.veritasregistrars.com
e-BONUS (DIRECT CREDIT TO CSCS ACCOUNT)
Account No:
I/We have
units of Zenith Bank Plc shares.
I/We hereby request and authorise you to credit my/our CSCS account (statement
attached) with BONUS accruing on my/our holdings.
I/We indemnify the Directors of Zenith Bank Plc against all claims and demands (and any
case expense thereof which may be made in consequence of your complying with this
instruction:
SURNAME
OTHER NAMES
Shareholder’s Name:
Shareholder’s Address:
Mobile Tel:
Date:
I hereby affirm that the information given above are true of me
Shareholder’s Signature
1. Please attach copies of CSCS statement
2. CSCS transaction listing
3. Name of Stockbrokers
FOR REGISTRAR’S USE ONLY
DATE
Action taken:
Credited
Officer’s Name & Sign:
Not Credited
Pending
Affix
Passport
Photograph
(to be stamped by the Bank)
Please tick as
applicable
CONSOL.
BREWERIES
DANGOTE
SUGAR
FORTE
OIL
GUINNESS
NIGERIA
MAY &
BAKER
ZENITH
BANK
V
RERITAS EGISTRARSRC 510155
(formerly Zenith Registrars)
Plot 89A, Ajose Adeogun Street, P. O. Box 75315, Victoria Island, Lagos
Telephone: (01) 27089304, 2784167-8; Fax:(01)2704085
enquiry@veritasregistrars.com
www.veritasregistrars.com
e-DIVIDEND MANDATE FORM
I/We hereby request that from now, all dividends due to me/us from my/our shareholding in all
companies indicated be credited to my/our bank account named below.
Surname/Company’s Name
Date: DD/MM/YYYY
Other Names (for Individual Shareholder)
Present Postal Address
City
E-mail Address
State
Mobile (GSM) Phone Number
Clearing House Number
Bank Name
Bank Address
Bank Account Number
Bank Sort Code
Shareholder’s Signature or Thumbprint
Shareholder’s Signature or Thumbprint
Company Seal/Incorporation No. (Corporate Shareholder)
Authorized Signature and Stamp of Bankers
Authorized Signature and Stamp of Bankers
For Bank’s use only
Date account was established
(cid:61)(cid:40)(cid:49)(cid:44)(cid:55)(cid:43)(cid:3)(cid:37)(cid:36)(cid:49)(cid:46)(cid:3)(cid:51)(cid:47)(cid:38)
(cid:51)(cid:53)(cid:50)(cid:59)(cid:60)(cid:3)(cid:38)(cid:36)(cid:53)(cid:39)
(cid:36)(cid:49)(cid:49)(cid:56)(cid:36)(cid:47)(cid:3)(cid:42)(cid:40)(cid:49)(cid:40)(cid:53)(cid:36)(cid:47)(cid:3)(cid:48)(cid:40)(cid:40)(cid:55)(cid:44)(cid:49)(cid:42)(cid:3)(cid:55)(cid:50)(cid:3)(cid:37)(cid:40)(cid:3)(cid:43)(cid:40)(cid:47)(cid:39)(cid:3)(cid:36)(cid:55)(cid:3)(cid:28)(cid:17)(cid:19)(cid:19)(cid:3)(cid:36)(cid:17)(cid:48)(cid:17)(cid:3)
(cid:50)(cid:49)(cid:3)(cid:55)(cid:43)(cid:40)(cid:3)(cid:20)(cid:27)(cid:55)(cid:43)(cid:3)(cid:39)(cid:36)(cid:60)(cid:3)(cid:50)(cid:41)(cid:3)(cid:48)(cid:36)(cid:53)(cid:38)(cid:43)(cid:15)(cid:3)(cid:21)(cid:19)(cid:20)(cid:28)(cid:3)(cid:36)(cid:55)(cid:3)(cid:38)(cid:44)(cid:57)(cid:44)(cid:38)(cid:3)(cid:38)(cid:40)(cid:49)(cid:55)(cid:53)(cid:40)(cid:15)(cid:3)
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