Contents
Strategic Report
1.
2.
3.
4.
5.
6.
7.
8.
9.
Directors, Officers And Professional Advisers
Results at a Glance/Key Performance Indices
Group Financial Highlights
Corporate Profile & Strategy
Notice of Annual General Meeting
Chairman’s Statement
Group Managing Director/Chief Executive Officer’s Review
Board of Directors (in pictures)
Directors’ Report
Governance & Sustainability
10.
11.
12.
13.
14.
Corporate Governance Report
Statement of Directors’ Responsibilities
Report to the Directors on the outcome of the Board Evaluation
Sustainability Report
Report of the Statutory Audit Committee
Financials
15.
16.
17.
18.
19.
20.
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
Other National Disclosures
21.
22.
23.
24.
25.
Value Added Statement
Five Year Financial Summary
Share Capital History
Zenith Youth Parade, Style by Zenith, The Aba SME Fair and Zenith Tech Fair
Forms
4
5
6
9
18
20
26
30
38
48
60
61
62
68
70
78
79
80
83
86
220
222
226
227
231
2
Strategic Report
01 Zenith Bank Plc Annual Report December 31, 2019
Directors, Officers And Professional Advisers
DIRECTORS
Jim Ovia, CON.
Prof. Chukuka Enwemeka
Mr. Jeffrey Efeyini
Prof. Oyewusi Ibidapo-Obe
Mr. Gabriel Ukpeh
Engr. Mustafa Bello
Dr. Al-Mujtaba Abubakar***
Mr. Ebenezer Onyeagwu*
Dr. Adaora Umeoji
Mr. Ahmed Umar Shuaib
Dr. Temitope Fasoranti
Mr. Dennis Olisa
Mr. Henry Oroh***
Mr. Peter Amangbo**
Chairman
Non-Executive Director
Non-Executive Director
Non-Executive Director/ Independent
Non-Executive Director/ Independent
Non-Executive Director/ Independent
Non-Executive Director/ Independent
Group Managing Director/CEO
Deputy Managing Director
Executive Director
Executive Director
Executive Director
Executive Director
Group Managing Director/CEO (retired)
* Appointed Group Managing Director effective 1 June 2019
** Retired from the Board effective 31 May 2019
*** Appointed to the Board effective 1 August 2019
COMPANY SECRETARY
Michael Osilama Otu
REGISTERED OFFICE
AUDITOR
Zenith Bank Plc
Zenith Heights
Plot 87, Ajose Adeogun Street,
Victoria Island, Lagos
KPMG Professional Services
KPMG Tower
Bishop Aboyade Cole Street,
Victoria Island, Lagos
REGISTRAR AND TRANSFER OFFICE
Veritas Registrars Limited (formerly Zenith Registrars Limited)
Plot 89 A, Ajose Adeogun Street,
Victoria Island,
Lagos
4
Results at a Glance/ Key Performance Indices
Financial Highlights
In millions of Naira
31-Dec-19
31-Dec-18
% 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
415,563
267,031
475,119
(231,825)
243,294
208,843
6.65
440,052
295,594
457,185
(225,500)
231,685
193,424
6.15
2,462,359
2,016,520
4,262,289
3,690,295
6,346,879
5,955,710
941,886
815,751
23.8%
3.4%
8.2%
3.0%
1.1%
23.8%
3.4%
8.9%
3.1%
0.9%
48.8%
49.3%
57.3%
57.8%
22%
4.30%
72.0%
44.2%
25%
4.98%
-6%
-10%
4%
3%
5%
8%
8%
22%
15%
7%
15%
0%
0%
-8%
-3%
22%
-1%
-20%
31%
-12%
-14%
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5
Zenith Bank Plc Annual Report December 31, 2019
Group Financial Highlights
(cid:24)(cid:9)(cid:16)(cid:13)(cid:21)(cid:12)(cid:1)(cid:7)(cid:6)(cid:16)(cid:14)(cid:1)(cid:18)(cid:15)(cid:8)(cid:1)(cid:25)(cid:1)(cid:1)(cid:4)(cid:2)(cid:3)(cid:5)(cid:1)(cid:11)(cid:19)(cid:17)(cid:22)(cid:18)(cid:1)(cid:10)(cid:13)(cid:16)(cid:6)(cid:16)(cid:8)(cid:13)(cid:6)(cid:15)(cid:1)(cid:12)(cid:13)(cid:11)(cid:12)(cid:15)(cid:13)(cid:11)(cid:12)(cid:21)(cid:20)(cid:1) (cid:10)(cid:23)(cid:9)(cid:1)(cid:4)(cid:2)(cid:3)(cid:5)(cid:1)
Total deposits grew by 15% (N572bn) reflecting public
confidence in the Zenith brand. The funding mix was
also rebalanced towards cheaper retail deposits.
Total assets grew by 7% (N391bn) to close at
N6.3trn enhancing our balance sheet.
5% growth in PBT is attributable to the growth in non-
interest income and effective management of
operational and funding costs as well.
Profit after tax increased by 8% (N15.4bn) driven by
improved profit before tax as well as an efficient tax
management strategy.
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(cid:24)(cid:9)(cid:16)(cid:13)(cid:21)(cid:12)(cid:1)(cid:7)(cid:6)(cid:16)(cid:14)(cid:1)(cid:18)(cid:15)(cid:8)(cid:1)(cid:25)(cid:1)(cid:1)(cid:4)(cid:2)(cid:3)(cid:5)(cid:1)(cid:11)(cid:19)(cid:17)(cid:22)(cid:18)(cid:1)(cid:10)(cid:13)(cid:16)(cid:6)(cid:16)(cid:8)(cid:13)(cid:6)(cid:15)(cid:1)(cid:12)(cid:13)(cid:11)(cid:12)(cid:15)(cid:13)(cid:11)(cid:12)(cid:21)(cid:20)(cid:1) (cid:10)(cid:23)(cid:9)(cid:1)(cid:4)(cid:2)(cid:3)(cid:5)(cid:1)
Shareholders’ funds grew year-on-year by
15.5% to close at N942bn providing adequate
buffer for business expansion.
Consistent and growing dividend payout in the last 7
years. The payout remained unchanged year-on-year.
With this proposed dividend we are recording a dividend
yield of 15% (2018: 12%).
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Return on Average Equity (RoAE) remained flat year-on-year while Return on Average Asset (RoAA)
grew marginally reflecting a strong commitment to delivering impressive retutrns to investors.
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Increase in interest expense by 2.8% is as a result of the significant growth in the Group’s deposit base
(especially savings and dormicilliary deposits).
2019
Current
account
Borrowed
funds and
lease
2018
Time
deposits
Savings
account
Time
deposits
Current
account
Savings
account
Borrowed
funds and
lease
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cid:1)(cid:1)(cid:1)(cid:1)(cid:1)(cid:1)(cid:1)(cid:1)(cid:1)(cid:1)(cid:1)(cid:1)(cid:1)(cid:1)(cid:1)(cid:1)(cid:1)(cid:1)(cid:18)(cid:24)(cid:23)(cid:1)(cid:1)(cid:1)(cid:1)(cid:1)(cid:1)(cid:1)(cid:1)(cid:1)(cid:1)(cid:1)(cid:1)(cid:1)(cid:1)(cid:1)(cid:1)(cid:1)(cid:1)(cid:1)(cid:1)(cid:1)(cid:1)(cid:1)(cid:1)(cid:1)(cid:20)(cid:13)(cid:26)(cid:17)(cid:19)(cid:1)(cid:1)(cid:1)(cid:1)(cid:1)(cid:1)(cid:1)(cid:1)(cid:1)(cid:1)(cid:1)(cid:1)(cid:1)(cid:1)(cid:1)(cid:1)(cid:1)(cid:1)(cid:1)(cid:1)(cid:1)(cid:1)(cid:1)(cid:1)(cid:1)(cid:20)(cid:13)(cid:23)(cid:26)(cid:19)(cid:1)(cid:18)(cid:13)(cid:25)(cid:26)(cid:18)(cid:19)(cid:17)(cid:18)(cid:26)(cid:19)(cid:17)(cid:18)(cid:25)(cid:3)(cid:16)(cid:15)(cid:10)(cid:12)(cid:8)(cid:9)(cid:15)(cid:17)(cid:12)(cid:6)(cid:14)(cid:1)(cid:17)(cid:16)(cid:1)(cid:5)(cid:9)(cid:15)(cid:12)(cid:17)(cid:11)(cid:1)(cid:2)(cid:6)(cid:15)(cid:13)(cid:1)(cid:4)(cid:14)(cid:7)(cid:1)(cid:1)(cid:1)(cid:1)(cid:1)(cid:1)(cid:1)(cid:1)Consistent growth across the subsidiaries contributing 18% (2018: 17%) to the Group’s profit before tax Group Financial Highlights8 Corporate Profile & Strategy
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 technology (ICT).
Within twenty-nine years, Zenith has demonstrated its resilience
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 608 business locations (see
page 16 for more details) in Nigeria and the rest of the world.
However, in line with advances in technology, the bank has also
invested heavily on 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:
I n n o v a t i o n
G o o d fi n a n c i a l p e r f o r m a n c e
•
•
S t a b l e a n d d e d i c a t e d m a n a g e m e n t t e a m
H i g h l y s k i l l e d p e r s o n n e l
L e a d e r s h i p i n t h e u s e o f I n f o r m a t i o n a n d C o m m u n i c a t i o n Te c h n o l o g y
S t r a t e g i c d i s t r i b u t i o n c h a n n e l s
•
•
•
•
G o o d a s s e t q u a l i t y
•
t
r
o
p
e
R
c
g
e
t
a
r
t
S
i
9
Zenith Bank Plc Annual Report December 31, 2019
Corporate Profile & Strategy
OUR
VISION
institution
“To build the Zenith brand into a reputable international
innovation, superior
financial
customer service and performance while creating premium
value for all stakeholders”.
recognized
for
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”
OUR
VALUE
.
.
.
.
Integrity
Professionalism
Excellence
Ethics
.
·
·
Commitment
Transparency
Service
10
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
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. It 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)
d)
e)
f )
Transport and Aviation,
Conglomerates
Breweries & Beverages
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).
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Business Focus
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
businesses,
its pension/custodian services and nominees
business only.
a) Core Business Segments
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
Zenith Bank Plc Annual Report December 31, 2019
Corporate Profile & Strategy
loans and advances
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.
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 and electronic and
digital channels. It offers various banking services to primarily
individuals.
Personal banking which 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. Recently the Bank has also deployed agency banking
services across the states of the federation which is meant to
service mostly financial inclusion customers who might not be
able to visit a bank branch because of distance. These agents
provide access to basic financial services such as account
opening, cash-in, cash-out, bills payments and electronic
transfers.
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
12
(tertiary
customers), Aspire Savings Accounts
institution
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.
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
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
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
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 2019,
total funds under its custody amounted to approximately N4.103
trillion. Zenith Pensions has 106 funds under its custody which
are shared among nine 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
•
•
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 sustain 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
•
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Zenith Bank Plc Annual Report December 31, 2019
Corporate Profile & Strategy
•
•
•
•
•
•
•
•
•
•
•
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.
•
•
14
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
international business
and reputation to drive our
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
in Nigeria and other
currently have trade partners
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.
MARKET AND BUSINESS STRATEGY
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.
Despite the increase in regulations over the last 6 months with
profound impact on our earnings capacity, 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
retail banking
business by consolidating on
transformation exercise which has significantly grown its
retail banking revenue, deposit liabilities and risk assets
and continue to obtain a significant share of the retail
its
•
•
•
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;
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Core Banking Transformation
The 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. Datastore has recently gone live. This document
management system enables the Bank to digitize its records
using the system’s robust scanning,
indexing & retrieval
capabilities) and replaced the legacy system ADA.
The next solution scheduled for go-live is Essence, the new core
banking solution, to replace Phoenix and other in-house 3rd
party applications.
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 and agency
banking means more customers are able to carry out banking
transactions without visiting its branches, thereby reducing
operating 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
15
Zenith Bank Plc Annual Report December 31, 2019
Corporate Profile & Strategy
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 2019, the geographical spread of the Group’s
business locations is as follows:
Geographical Locations
Branches
Federal Republic of Nigeria
Republic of Ghana
United Kingdom
Sierra Leone
The Gambia
384
27
2
7
6
China Representative Office
1
Total
Grand Total
427
178
Cash
Centers
Non-Banking
Operations
155
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3
-
-
-
12
-
-
-
-
-
3
608
As shown above, the Group also has 178 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 as well as agents for its financial inclusion
customers.
ATM network
The Group has a total of 2,009 ATM machines with 1,935 in
Nigeria, 60 in Ghana, 12 in Sierra Leone and 2 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, Visa
and Verve, 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, agency 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 and also online shopping.
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
16
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;
*966*60# – this allows you to perform other self-service.
These include retrieve card PIN, Block Cards, manage card
less withdrawal, select preferred USSD account to debit,
perform transaction above N100k via USSD subject to
signing an indemnity, activate agent banking activities i.e
cash in and cash out and perform USSD on POS.
•
•
•
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
in the generation of
involved
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.
EaZymoney is a virtual account (also called an Eazymoney
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
different channels.
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.
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Zenith Bank Plc Annual Report December 31, 2019
Notice of Annual General Meeting
NOTICE IS HEREBY GIVEN that the Twenty Ninth Annual General Meeting of Zenith Bank Pie will hold at the Shehu Musa Yar’Adua Centre,
1, Memorial Drive (Opposite Sheraton Hotels & Towers), Abuja, FCT at 9.00 a.m. on Monday the 16th day of March, 2020 to transact the
following business:-
ORDINARY BUSINESS
1.
To present and consider the Bank’s Audited Accounts for the financial year ended 31st December, 2019, the Reports of the
Directors, Auditors and Audit Committee thereon.
2.
To declare a final dividend.
3.
4.
Dr. AI-MujtabaAbubakar - Independent Non-Executive Director
To approve the appointments of the following:
(i)
(ii) Mr. Henry Oroh - Executive Director.
The Appointment of both Directors has been approved by the Central Bank of Nigeria. The profiles of the aforementioned
Directors are available in the Annual Report and also on the Bank’s website at www.zenithbank.com
To re-elect the following Directors who retire by rotation and have offered themselves for re-election:
(i)
(ii)
(iii) Dr. Temitope Fasoranti
Prof. Oyewusi lbidapo-Obe
Umar Shuaib
5.
To authorize the Directors to fix the remuneration of the Auditors.
6.
To elect members of the Audit Committee.
SPECIAL BUSINESS
To consider and if thought fit, to pass the following as ordinary resolution:
7.
8.
That the remuneration of the Directors of the Bank for the year ending December 31, 2020 be and is hereby fixed at N20 million
only.
That Mr. Jeffrey Efeyini and Prof. Oyewusi lbidapo-Obe, who have both attained the age of 70 years be elected a Non Executive
Director and an Independent Non Executive Director of the Bank respectively.
Dated this 21 st day of February. 2020.
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 on 10th of March 2020, to enable the Registrar prepare
for the payment of dividend.
18
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, 2019 to N2.80K) will be paid via e-mandate on the 16th of March, 2020, to shareholders whose names are
registered in the Register of Members at the close of business on 9th day of March 2020. Shareholders are advised to forward
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.
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4.
5.
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 theAnnual 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 13th day of March, 2020.
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,
AjoseAdeogun 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
19
Chairman’s Statement
Indeed, your unflinching support
and loyalty to the Bank over the
years have enabled it to rise to the
pinnacle of the nation’s financial
services industry.
JIM OVIA, CON
My Fellow Shareholders, Distinguished Guests, Ladies and Gen-
tlemen,
I am very much pleased to welcome you to the 29th Annual
General Meeting of our Bank and to present to you the Annu-
al Report and Financial Statements for the financial year ended
December 31, 2019.
Indeed, your unflinching support and loyalty to the Bank over
the years have enabled it to rise to the pinnacle of the nation’s
financial services industry. Your commitment to the Bank’s prog-
ress is reflected in your continued engagement, including your
presence here today.
May I use this opportunity to congratulate everyone for the
success we have achieved in the last thirty years since this in-
stitution was birthed, as we look forward to many more years of
astounding performance.
The year 2019 was marked by significant global and domestic
economic developments which impacted our business in sev-
eral ways. However, we were able to adapt our strategies to
leverage available opportunities while creating value for all our
stakeholders.
It is against this background that I will review the economic and
financial environment within which our Bank operated in the
outgone financial year.
MACROECONOMIC REVIEW
The Nigerian economy recorded a positive but fragile perfor-
mance in the year 2019, as the post-recession recovery of the
economy continued. According to the National Bureau of Statis-
tics (NBS), aggregate output, measured by Gross Domestic Prod-
uct (GDP), grew by 2.27 per cent in 2019, compared to 1.91 per
cent recorded in 2018. On a quarterly basis, GDP grew by 2.10
per cent, 2.12 per cent 2.28 per cent and 2.55 per cent in Q1, Q2,
Q3 and Q4, 2019, respectively. The performance of the domestic
economy was driven by relatively high crude oil prices in the in-
ternational commodities market, as well as improved oil produc-
tion averaging 2 million barrels per day (mbpd) all through 2019.
Also, the recovery in services and industry sectors, particularly
mining and quarrying, and manufacturing was a boon to GDP
growth.
The year 2019 was somewhat a balanced one for the oil market,
as the early rise in crude oil prices in the first half of the year
evened out during the rest of the year, although prices rose
relative to the preceding year. The rally in crude oil prices was
supported by the commitment of the Organization of Petroleum
Exporting Countries (OPEC) and participating non-OPEC coun-
tries to restore global oil market stability. However, the U.S-China
trade war fueled a global economic slowdown which triggered
bearish sentiment in global oil demand.
Nonetheless, crude oil prices closed out 2019 on a bullish note,
buoyed by renewed economic optimism on the back of reduced
trade tensions between the U.S. and China, as well as planned
production cut by OPEC and its allies. Thus, the OPEC Reference
20
Basket (ORB) averaged $58.74/b in the first month of 2019 and
settled at $66.48/b as of December 2019, gaining more than 13
per cent. Brent, which averaged $60.24/b in January 2019, stood
at $65.17/b on average as at December 2019, rising by more
than 8 per cent. This had a substantial impact on government
revenue and the nation’s external reserves.
Specifically, external reserves, which opened the year at about
$43billion, rose to about $45billion in June 2019, before closing
the year at about $39billion. The considerable decrease in the
second half was mainly due to lower crude oil prices, reduced
foreign portfolio investment inflows, and increased external
debt service payments.
Monetary and fiscal authorities significantly pursued strategies
to maintain macroeconomic stability during the year under
review. These strategies reflected in efforts to create a balance
between spurring growth through credit allocation to the real
sector and reining in inflation. Headline inflation, measured by
the Consumer Price Index (CPI), moderated in 2019, relative to
the preceding year. According to the National Bureau of Statis-
tics (NBS), the inflation rate stood at 11.37 per cent in January
2019 but dropped to a three- and half-year low of 11.02 per cent
in August. However, hopes of the headline inflation receding to-
wards the target range of 6.0-9.0 per cent set by the CBN evap-
orated as the index significantly ticked up to 11.98 per cent in
December on the back of seasonal year-end upward movement
in prices.
In 2019, the Naira exchange rate against major currencies was
relatively stable at the inter-bank foreign exchange market but
recorded marginal appreciation at the Bureau De Change (BDC)
and Investors’ & Exporters’ (I&E) segments of the market. The Nai-
ra averaged NGN306.92/$1, NGN 359.53/$1 and NGN361.79/$1
at the interbank, BDC and I&E markets, respectively in the year
under review. The exchange rate was supported by sustained in-
tervention in the foreign exchange market by the CBN, as well as
improved foreign exchange inflow into the I&E window, which
continued to attract foreign portfolio investment inflow into the
economy.
Nigeria witnessed significant accretion in the country’s stock
of foreign exchange reserves in the first half of 2019. However,
gross external reserves dipped significantly in the second half of
the year, reversing the steady increase recorded in the first half.
The Federation Account Allocation Committee (FAAC) disbursed
a total of N8.19trillion among the three tiers of government as al-
locations between January and December 2019. This represents
a decline of 3.87 per cent compared to the N8.52trillion distrib-
uted in 2018, an indication that government revenues shrunk in
the year under review.
In 2019, the Nigerian Stock Exchange (NSE) witnessed a bearish
trend. The All-Share Index (ASI) opened at 31,430.50 index points
but closed the year at 26,842.07, representing a depreciation of
14.60 per cent. The decline in the ASI is largely attributed to bear-
ish investor sentiments over the year, driven mostly by tepid eco-
nomic growth. While market capitalisation was at N11.721 trillion
at the start of the year, it recorded a 9.55 per cent appreciation
as it increased to N12.985 trillion at the close of the year. The
increase in market capitalisation was attributed to new listings in
the year, especially MTN Nigeria and Airtel which contributed a
combined market capitalisation of N3.196 trillion.
FINANCIAL RESULTS
As noted earlier, the year 2019 was a very challenging year for
operators in the Nigerian banking industry because of several
supervening factors in the global and domestic environment.
Notwithstanding the challenges, we were able to leverage the
inherent opportunities within the business environment and re-
cord a performance which further attests to our resilience as a
brand. The result is a manifestation of the remarkable financial
health of the Bank and the Group.
As a pioneer in the deployment of digital technology in
the Nigerian banking industry, Zenith Bank remains com-
mitted to pushing the boundaries and setting the pace in
financial technology.
21
Zenith Bank Plc Annual Report December 31, 2019
Chairman’s Statement
For the Bank, gross earnings grew by 5 per cent from N538bil-
lion in 2018 to N565billion in 2019. Profit-Before-Tax (PBT) rose
by 4.1 per cent, from N192billion in 2018 to N200billion in 2019,
while Profit-After-Tax (PAT) rose by 7.6 per cent, from N165billion
in 2018 to N178billion in 2019. Total deposits were N3.49trillion
as at the year ended December 31, 2019, representing a 23.6
per cent increase over the previous year’s figure of N2.82trillion.
During the same period, total assets of the Bank grew by 9.7 per
cent from N4.96trillion to N5.44trillion, while shareholders’ fund
rose by 15.4 per cent, from N675billion to N779billion.
As a Group, the performance indices were no less outstand-
ing. The Group gross earnings also grew by 5 per cent in 2019.
The Group PBT grew by 5 per cent, from N232billion in 2018 to
N243billion in 2019. Also, PAT rose by 8 per cent during the peri-
od, from N193billion in 2018 to N208.8billion in 2019. The Group
total assets grew by 7 per cent, from N5.96trillion in 2018 to
N6.35trillion in 2019, while customers’ deposits increased by 15
per cent during the same period, from N3.69trillion to N4.26tril-
lion. The Group shareholders’ fund grew by 15 per cent, from
N816billion in 2018 to N942billion in 2019, while gross earnings
rose by 5 per cent, from N630billion in 2018 to N662billion in
2019.
Our major focus in 2019 was
to support the government’s
effort at improving wellbeing
and the life expectancy of Ni-
gerians through support for
quality healthcare delivery in
host communities.
DIVIDEND
Zenith Bank is committed to consistently deliver superior returns
to our highly esteemed shareholders by ensuring that a good
chunk of our profit is set aside for you. In a clear demonstration
of this, we had declared and paid you an interim dividend of
30kobo per share in the course of the 2019 financial year. We
hereby propose a final dividend of N2.50kobo per share. If ap-
proved, this will bring the total dividend for the year ended De-
cember 31, 2019, to N2.80kobo per share.
THE BOARD OF DIRECTORS
During the year under review, the following changes occurred
on the Board of the Bank. Mr. Peter Amangbo’s tenure as Group
Managing Director/Chief Executive Officer expired on May 31,
2019, and he accordingly retired from the Board as he has served
the Group as a Director for over thirteen years. On behalf of the
Board, Management and all shareholders, I wish him success
in his future endeavours. Mr. Ebenezer Onyeagwu became the
Group Managing Director/Chief Executive Officer effective June
1, 2019, following the retirement of Mr. Peter Amangbo as the
Group Managing Director/Chief Executive Officer and in line
with the succession plan of the Bank. Dr. Al-Mujataba Abukakar
was appointed to the Board as an Independent Non-Executive
Director with effect from August 1, 2019. Mr. Henry Oroh was
appointed to the Board as an Executive Director with effect from
August 1, 2019.
INVESTMENT IN TECHNOLOGY
As a pioneer in the deployment of digital technology in the
Nigerian banking industry, Zenith Bank remains committed to
pushing the boundaries and setting the pace in financial tech-
nology. As a result, we invested immensely in new technologies
and digital solutions in the year under review. This is in conso-
nance with our pledge to create value for our highly esteemed
customers through our wide range of innovative products and
services.
CORPORATE SOCIAL RESPONSIBILITY
Zenith Bank is committed to building a more balanced, fairer
and inclusive economy. As such, we have continued to inter-
nalise sustainability principles in our business operations and
investment decisions, in line with global best practices. During
the financial year under review, we made considerable prog-
ress in this regard, bearing in mind our role in accelerating the
achievement of the United Nations Sustainable Development
Goals (SDGs).
22
Thus, in 2019, Zenith Bank endorsed the Principles for Respon-
sible Banking alongside 129 other banks globally. By signing up
to this framework led by the United Nations Environment Fi-
nance Initiative (UNEP FI), we committed to strategically aligning
our business with the goals of the Paris Agreement on Climate
Change and the SDGs. This means that we will seek to create
value for our shareholders, customers, clients, investors, commu-
nities and the environment through our practices, operations
and investments.
Through our Corporate Social Responsibility (CSR) initiatives,
we have embodied the overarching objective of the 17 SDGs,
which provide a framework for addressing the major challenges
confronting our society. Our social investments are targeted at
health, education, women and youth empowerment, sports de-
velopment and public infrastructure enhancement.
Our major focus in 2019 was to support the government’s ef-
fort at improving wellbeing and the life expectancy of Nigerians
through support for quality healthcare delivery in host com-
munities. Underscoring our achievements in this regard, Zenith
Bank won the award for “Best Company in Promotion of Good
Health and Wellbeing” in Africa at the 2019 Sustainability, Enter-
prise and Responsibility Awards (SERAs).
In addition to partnering with State Governments on security ini-
tiatives to improve the safety of lives and property, Zenith Bank
executed projects that significantly delivered economic benefits
to our host communities in the areas of education and skills de-
velopment, sustainable livelihood and poverty alleviation, infra-
structure development, environmental sustainability, youth em-
powerment and the welfare of the physically challenged. Details
of our social investments for the financial year is contained in the
annual report.
MACROECONOMIC OUTLOOK
Nigeria’s economic growth outlook for 2020 is brighter but re-
mains fragile. The economy is expected to sustain the modest
growth recorded in 2019, even as recovery in the oil and non-oil
sectors (manufacturing and services) continues to gather mo-
mentum. Growth is expected to be supported by monetary and
fiscal policy measures, including fiscal stimulus from the 2020
Federal Government budget.
Through our Corporate So-
cial Responsibility (CSR) ini-
tiatives, we have embodied
the overarching objective of
the 17 SDGs, which provide a
framework for addressing the
major challenges confronting
our society
The budget has an aggregate expenditure estimate [inclusive
of General Operating Expenses (GOEs) and project tied loans]
of N10.59trillion, representing a 5.1 per cent increase compared
to N10.07trillion (inclusive of GOEs and project tied loans) bud-
geted for 2019 fiscal year. A breakdown of the budget estimate
shows that N2.78 trillion (26.2 per cent) was budgeted for capital
expenditure; N4.84trillion (45.6 per cent) for recurrent expendi-
ture; N2.45trillion (23.1 per cent) for debt servicing; and N560.
47billion (5.1 per cent) for statutory transfers.
Also, N272.9billion and N350billion were earmarked for sinking
fund and special interventions, respectively. Aggregate budget
revenue for 2020 is projected at N8.42trillion, 10.94 per cent
higher than the N7.59trillion estimated for 2019. The budget is
predicated on crude oil production of 2.18 million barrels per
day; crude oil price of $57 per barrel and an average exchange
rate of N305/dollar.
On the monetary policy side, CBN policy initiatives such as inter-
ventions in selected employment and growth-enhancing sec-
tors, measures to boost credit flow to the private sector through
the Loan-to-Deposit Ratio (LDR), Global Standing Instruction
(GSI) initiatives, etc. are expected to provide momentum for
growth. However, the downside to this prospect remains fears of
23
Zenith Bank Plc Annual Report December 31, 2019
Chairman’s Statement
declining oil prices in the global oil market, on the back of con-
cerns about the economic impact of the coronavirus outbreak
on crude oil demand, as the country remains heavily dependent
on oil exports. Also, high level of unemployment, persistent
inflationary pressures, and rising debt burden could weigh on
the country’s growth prospect. Consequently, the International
Monetary Fund (IMF) forecast the domestic economy to grow at
2 per cent in 2020, a downward review from the 2.5 per cent it
had projected earlier in January.
Just like the domestic economy, the global economic outlook for
2020 is fragile. Growth is expected to remain subdued as the out-
break of the coronavirus in China raises concerns about global
growth prospects. However, the expansionary monetary policy
stance of central banks around the world, which helped offset
some of the pains of trade wars and falling investment in 2019,
improving trade relations between the major economies of the
world are good indications of optimism about global growth
prospects in 2020.
APPRECIATION
Without doubt, 2019 was a challenging but successful year for us
as a Bank. Indeed, the superior profitability recorded in the year
would not have been possible without the collective efforts of all
our stakeholders. I would, therefore, like to thank all our custom-
ers for their unwavering loyalty; our staff and Management for
their commitment; and our Board for the sound guidance which
has translated into sustained profitability.
Ladies and gentlemen, the 2020 financial year holds good pros-
pects, and I have the firm belief that our Bank will continue to
record outstanding performance.
Thank you.
Jim Ovia, CON
Chairman
24
GMD/CEO’s Review
As an institution, we adapted our
strategies given
these develop-
ments, based on the markets or sec-
tors where we operate while ensur-
ing that we were able to create value
for our customers.
EBENEZER ONYEAGWU
It gives me great pleasure to welcome you, our highly esteemed
shareholders, for the first time as Group Managing Director/Chief
Executive Officer, following my appointment in June 2019.
In 2019, the global economy recorded its weakest growth since
the global financial crisis about a decade ago due to tepid
growth in advanced economies, a decline in global trade, and
shrinking capital spending. Growth was mainly subdued by the
heightened US-China trade tension, BREXIT-related uncertainties
and geopolitical tensions which dampened global economic
activities, particularly business spending and manufacturing. On
the domestic front, the economy continued to recover from the
2016 economic recession, expanding by 2.55 per cent (year-on-
year) in the last quarter of 2019, the highest quarterly post-re-
cession growth performance. Overall, the Nigerian economy
recorded annual real growth rate of 2.27 per cent in 2019, com-
pared to 1.91 per cent in 2018.
The performance of the domestic economy was driven by im-
proved oil production and relatively high oil prices in the interna-
tional commodities market for most part of the year. Also, the re-
covery in services and industry sectors contributed to the Gross
Domestic Product (GDP) growth. As an institution, we adapted
our strategies given these developments, based on the markets
or sectors where we operate while ensuring that we were able
to create value for our customers. Amidst the challenges in the
operating environment, we can look back and take great pride
in the outstanding value-addition we have all achieved together.
In a bid to improve lending by Deposit Money Banks (DMBs) to
the real sector of the Nigerian economy, the Central Bank of Ni-
geria (CBN) introduced a measure requiring banks to maintain
minimum Loan-to-Deposit Ratio (LDR) which currently stands
at 65 per cent. The initiative required adjustment, but we were
determined (and are still poised) to leverage it to provide op-
portunities for the growth of sectors like Small and Medium
Enterprises (SMEs) and mortgage in tandem with the vision of
the apex bank. The LDR policy thus provided further impetus for
strategic loan growth, especially in consumer lending and the
retail segment of the market.
In the course of the year, we launched a Tech Fair and an SME
Fair to accelerate our inroad into the retail banking space. These
initiatives complement “Style by Zenith”, our flagship lifestyle,
beauty, fashion, and entertainment fair that has continued to
reinforce our retail and digital journey. Also, we have continued
to boost our array of unique products, innovative solutions and
digital channels to ensure convenience, speed and security of
transactions. Infrastructure financing remains a huge opportuni-
ty with the requisite policy framework.
Technology continues to be a defining tool in our effort to create
value for all our stakeholders. We are, however, also cognizant of
the disruptive impact of new and emerging technologies in the
financial service space, especially as the fourth industrial revolu-
tion era continues to unfold. I wish to assure you that we have all
that is necessary to adapt to changes, acquire new capabilities
26
ty to thank all our staff, Management and Board (both past and
present), our shareholders and all other stakeholders for your
contributions towards making Zenith Bank a model of institu-
tional stability and leadership.
Going into this decade, our commitment is to keep the bank on
the path of growth as we have done over the last three decades.
We will be unwavering in our adoption of sound policies, robust
risk management practices, building stronger and dynamic dig-
ital capabilities to support our business processes and product
innovation, while delivering enduring value to all our stakehold-
ers.
Thank you.
Ebenezer Onyeagwu
Group Managing Director / CEO
and upskill our talents to deliver new levels of service excellence
and convenience to all our esteemed customers.
Our journey towards becoming a financial institution aligned
with global sustainable best practices received a massive boost
in 2019. On September 22nd, we launched the Principles for Re-
sponsible Banking together with 129 banks and the United Na-
tions. By signing up to this framework led by the United Nations
Environment Finance Initiative (UNEP FI), we committed to stra-
tegically aligning our business with the goals of the Paris Agree-
ment on Climate Change and the Sustainable Development
Goals (SDGs). This means that we will seek to create value for our
shareholders, customers, clients, investors, communities and the
environment through our practices, operations and investments.
We consider that the Principles for Responsible Banking aligns
with the United Nations Global Compact (UNGC) Principles and
Nigerian Sustainable Banking Principles (NSBP), two sustainable
business frameworks which Zenith Bank has adopted.
As a testament to our market leadership, robust and best-in-class
service, and unflinching commitment to global best practices,
we received several awards and recognitions in 2019 including
“Best Commercial Bank in Nigeria” (World Finance), “Most Val-
uable Banking Brand in Nigeria” (The Banker Magazine), “Best
Digital Bank in Nigeria” (Agusto & Co.), “Bank of the Year” for the
third consecutive year (BusinessDay Awards), and the “Most In-
novative Bank of the Year” (Tribune Awards). In recognition of our
support to the health sector, Zenith Bank was adjudged the “Best
Company in Promotion of Good Health and Wellbeing” in Africa
at the 2019 Sustainability, Enterprise and Responsibility Awards
(SERAS).
The outlook for the domestic economy in 2020 is expected to
be brighter as government policies and programmes to spur
growth gain traction. The economy is expected to sustain the
modest growth, as the recovery in the oil and non-oil sectors
(manufacturing and services) continues to gather momentum.
Growth will further be supported by monetary and fiscal pol-
icy measures, including fiscal stimulus from the 2020 Federal
Government budget and CBN interventions in selected employ-
ment and growth-enhancing sectors as well as efforts to boost
credit to the private sector through the LDR policy. While global
macroeconomic headwinds are beginning to recede, especially
with the trade deal between the US and China, and diminishing
BREXIT-related uncertainties, the outbreak of Coronavirus has
somewhat posed a major threat in the global landscape. The
challenges of the domestic and global economy notwithstand-
ing, I am confident that financial year 2020 holds enormous po-
tential.
The year 2020 represents a major landmark for us as an institu-
tion, as it marks our 30th anniversary. May I use this opportuni-
27
Board of Directors
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JIM OVIA, CON
Jim Ovia is the founder and pioneer Group Managing Director
/ CEO of Zenith Bank Plc, Nigeria’s largest and Africa’s 9th largest
bank by Shareholders’ Funds. He was at the helm of affairs, from
inception, for 20 years until his resignation in July, 2010. He was
reappointed the Chairman of the bank in 2014.
Jim Ovia was a member of the National Economic Management
Team of Nigeria and he is a member of the Honorary Internation-
al Investors’ Council.
Jim Ovia is a philanthropist and the founder and proprietor of
James Hope College, Agbor, Delta State. His foundation, which
focuses on providing scholarship to the less-privileged, has a
number of beneficiaries that are now qualified medical doctors,
engineers, etc.
He is also the Founder of several enterprises and philanthropic
institutions including the Youth Empowerment & ICT Founda-
tion, which focuses on improving the socio-economic welfare
of Nigerian youths by empowering them to embrace Informa-
tion and Communication Technology. The initiative holds annual
Youth Empowerment seminars.
In recognition of his achievements particularly in support of the
Nigerian economy, Jim Ovia was conferred with the national
award of Commander of the Order of the Niger (CON) in No-
vember, 2011.
Jim Ovia holds a Master’s degree in Business Administration
(MBA) from the University of Louisiana, Louisiana, USA obtained
in 1979 and a B.Sc degree in Business Administration from
Southern University, Louisiana, USA (1977). He is an alumnus of
Harvard Business School (OPM).
Jim Ovia is a writer and motivational speaker. He has been inter-
viewed by a number of global networks including CNN, CNBC,
Bloomberg and Arise TV.
30
Chairman
EBENEZER ONYEAGWU
Mr. Ebenezer Onyeagwu is a vastly experienced Chartered
Accountant, a knowledgeable and astute financial expert,
trained in reputable institutions of learning in Nigeria, the
United Kingdom and the United States of America.
Mr. Onyeagwu is a graduate in accounting from Auchi
Polytechnic, widely recognized as an institution that has
produced some of Nigeria’s most renowned Chartered Ac-
countants. He obtained the Higher National Diploma in
Accounting from that institution in 1987. He qualified as a
Chartered Accountant (ACA) of the Institute of Chartered
Accountants of Nigeria (ICAN) in 1989, almost immediately
after graduation. He subsequently became a Fellow (FCA) of
the Institute of Chartered Accountants of Nigeria (ICAN), in
2003.
He has over 29 years of experience in the banking industry in
Nigeria, out of which he spent 17 in Zenith Bank Plc. Before
joining Zenith Bank Plc, he worked at Citizens International
Bank Limited between 1991 and 2002. He was one of the
most outstanding branch managers in the bank, winning
multiple awards and recognitions for his brilliant, excellent
and highly professional performance on the job.
He joined Zenith Bank Plc in 2002 as a Senior Manager, in the
Internal Control and Audit Group of the bank. His profession-
alism, competence, integrity and commitment to the ob-
jectives of the bank saw him rise swiftly between 2003 and
2005, first, as Assistant General Manager, then Deputy Gener-
al Manager, and eventually, General Manager of the bank. In
these capacities, he handled strategies for new business and
branch development, management of risk assets portfolios,
treasury functions, strategic top level corporate, multination-
als and public institutional relationships, among others.
He was appointed Executive Director of the bank in 2013,
and put in charge of Lagos and South-South Zones as well as
strategic groups/business units of the bank, including Finan-
cial Control & Strategic Planning, Treasury and Correspond-
ent Groups, Human Resources Group, Oil and Gas Group,
and Credit Risk Management Group, etc.
Mr. Onyeagwu was named Deputy Managing Director of the
bank in 2016. In that capacity, he deputized for the Group Man-
aging Director and Chief Executive Officer of the bank. He also
had direct oversight of the bank’s Financial Control and Stra-
tegic Planning, Risk Management, Retail Banking, Institutional
and Corporate banking business portfolios, IT Group, Credit Ad-
ministration, Treasury and Foreign Exchange Trading.
Mr. Onyeagwu is an alumnus of the prestigious University of
Oxford, England, from where he obtained a Postgraduate Di-
ploma in Financial Strategy, and a certificate in Macroeconom-
ics. He also undertook extensive executive level education in
Wharton Business School of the University of Pennsylvania,
Columbia Business School of Columbia University, the Harvard
Business School of Harvard University, in the United States.
At Wharton Business School, Mr. Onyeagwu undertook the CEO
academy and leadership training programmes. His strategic
skills were further nurtured and honed at Columbia Business
School strategy training programme. At the Harvard Business
School, he acquired capabilities in negotiations and critical de-
cision-making.
In the last six years, Mr. Onyeagwu has been on the board of
Zenith Bank Ghana, Zenith Pensions Custodian Limited, Ze-
nith Nominees Limited and African Finance Corporation (AFC).
In AFC, he serves on the Board Risk & Investment Committee
(BRIC), and Board Audit & Compliance Committee (BAAC). At
Zenith Bank Ghana, he chairs the Board Credit and Governance
Committees.
He is very well noted for his tenacity, entrepreneurial spirit, high
sense of innovation and creativity and very inspirational leader-
ship skills. Within the market, he is highly respected for his con-
sistent and impeccable character, brilliance, deep knowledge
and insight of the market, as well as for his strong professional
and ethical principles, which have continued to endear him to
all stakeholders. Mr. Onyeagwu is married and has children.
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Group Managing Director/CEO
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DR. ADAORA UMEOJI
With over 20 years cognate banking and broad executive man-
agement experience, Dr. Adaora Umeoji rose through the ranks
to her current position.
advancement of the banking industry and national economic
growth and development. She has delivered several motivation-
al speeches at strategic sessions aimed at mentoring youths and
managers, especially banking professionals.
She holds a Bachelor’s degree from University of Jos, an MBA
from University of Calabar and a Doctorate degree in Business
Administration from Apollos University, Great Falls, Montana,
USA. Her dissertation was on inspirational leadership and her
findings have been recognized as a major contribution in lead-
ership and people management.
She was trained in strategic thinking and management at Whar-
ton Business School, Pennsylvania, USA and also holds a Certifi-
cate in Management from Harvard Business School, Boston, USA.
She is a member of notable professional bodies including the
Chartered Institute of Bankers of Nigeria, Institute of Credit Ad-
ministration, Nigerian Institute of Management, Institute of Cer-
tified Public Accountants of Nigeria and Institute of Chartered
Mediators and Conciliators.
Beyond banking, Dr. Adaora Umeoji supports research and learn-
ing on inspirational leadership, mentorship, talent development,
collaboration, change and adaptability, strategic thinking, inno-
vation and creativity, amongst others.
Dr. Adaora Umeoji promotes the Pink Breath Cancer Care Foun-
dation which supports several healthcare programs within the
six geopolitical zones of Nigeria.
Dr. Adaora Umeoji has won numerous awards for excellence and
creativity in management. Her contribution towards improv-
ing humanity has been recognized by the Nigerian Red Cross,
Catholic Women organization of Nigeria and the Institute of
Chartered Mediators and Conciliators among other non-govern-
mental organizations both within and outside the country.
Dr. Adaora Umeoji has presented lead papers at major academic
conferences and symposia. Recently, she was a keynote speaker
at the Zenith Global Economic Forum held in New York City, USA
where she delivered a thought-provoking lecture on Financing
Growth Drivers in the Nigerian Economy.
As a result of her passion in promoting professionalism in the
banking industry and improving the well-being of the less priv-
ileged, Dr Adaora Umeoji founded the Catholic Bankers Associ-
ation of Nigeria (CBAN), a platform she uses to promote ethical
banking and service to humanity.
Dr. Adaora Umeoji has at different times participated in high-lev-
el Bankers’ meetings with impactful contributions towards the
32
Deputy Managing Director
PROF. CHUKUKA ENWEMEKA
He is a Professor, Provost and Senior Vice President for Academic Affairs
at San Diego State University, California, United States of America. Prior
to this appointment, he was the Professor and Dean, College of Health
Sciences, University of Wisconsin, Milwaukee, United States of Ameri-
ca. He was also Professor and Dean, School of Health Professions, New
York Institute of Technology, Old Westbury, New York, United States
of America and Professor/Chairman, University of Kansas (Medical
Center), Kansas City, United States of America as well as Associate Pro-
fessor of Orthopaedics and Rehabilitation, University of Miami, School
of Medicine, Miami, Florida, United States of America.
He graduated and obtained his first degree in 1978 from the University
of Ibadan, Ibadan, Oyo State, Nigeria. He obtained his Master’s degree
in 1983 from the University of Southern California, Los Angeles, United
States of America and thereafter proceeded to the New York Univer-
sity, New York, United States of America where he bagged his Ph.D. in
1985.
Professor Enwemeka is a distinguished scholar who has authored sev-
eral books and has provided administrative oversight and academic
leadership for various degree programs and in various prestigious Uni-
versities.
He is an experienced and well-rounded international banker, interna-
tional trade expert and financial services professional with a powerful
entrepreneurial streak, combined with risk aversion and with an eye to
the “bottom line”.
He is an energetic lateral thinker with several years experience in Man-
agement Consulting, Board and Corporate Governance.
Mr. Efeyini is a fellow of the Chartered Institute of Bankers, United King-
dom. He holds a Master’s degree from the London School of Econom-
ics and Political Science as well as an MBA from the University of Lagos,
Nigeria.
JEFFREY EFEYINI
He recently retired as the Managing Director of Melvale Group, United
Kingdom (a diversified international trade finance and foreign direct
investment consulting organization).
From2003 to 2009, he was an Independent Director with Union Bank
UK Plc, London. He was also a Director and later Chairman of Britain
Nigeria Business Council, London.
He started his professional banking career with Barclays Bank Interna-
tional, United Kingdom, later Union Bank of Nigeria and rose to the
position of the pioneer Chief Executive/General Manager, Union Bank
of Nigeria Plc, London.
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PROF. OYEWUSI IBIDAPO-OBE
Mr. Ukpeh is an internationally acclaimed consultant in business strategy,
risk management, process re-engineering and financial services, who was,
until recently, a Senior Partner and Risk Quality Leader for Africa at Pricewa-
terhouseCoopers (PwC).
He is a fellow of the Institute of Chartered Accountants of Nigeria with over
thirty five (35) years experience in Financial Audit and Reporting, as well as
a member of the Institute of Taxation of Nigeria.
A graduate of accounting, he holds Graduate Diploma in Business Admin-
istration from the University of Warwick, Coventry, United Kingdom. He
obtained a Master of Science (M.Sc) Degree in Contemporary Accounting
from the Leeds Metropolitan University, UK in 2009.
He worked with PwC, an International Business auditing and consulting
firm for over thirty five (35) years, and as a Partner for over 20 years led,
directed, planned and managed the audit, accounting, and consulting
assignments for numerous financial institutions, multinationals and local
companies, including most major banks in Nigeria.
Professor Oyewusi Ibidapo-Obe, a Distinguished Professor of Systems Engi-
neering and former Vice Chancellor (2000-2007) of the University of Lagos
and former Vice Chancellor of the new Federal University Ndufu Alike Ikwo
Ebonyi State Nigeria (2011-2016); was the President of the Nigerian Acade-
my of Science from 2009-2013.
He attended the University of Lagos from 1968-1971. He was awarded a
Bachelor of Science [B.Sc. (Hon)] degree in Mathematics in the 1st Class
Division by the University of Lagos, Nigeria in 1971; a Master of Mathemat-
ics (M. Maths) degree in Applied Mathematics with a minor in Computer
Science in 1973 and a Doctor of Philosophy (PhD) in Civil Engineering with
specialisation in Applied Mechanics/Systems in 1976 both from the Uni-
versity of Waterloo, Ontario, Canada. He attended the Round Table at Ox-
ford University in 2003 and also the 2007 MIT Research and Development
Conference and Innovations for Economic Development Course as well as
Harvard University of Kennedy School of Government in 2013.
Professor Ibidapo-Obe was also a Commonwealth Scholar (Canada) (1972-
1976); an NSERC/CIDA (Natural Sciences and Engineering Research Coun-
cil/Canadian International Development Agency (1977-1980) and a Senior
Fulbright Research Scholar (1980-1981).
He serves as an honorary International Scholar-in-Residence at the Penn-
sylvania State University and a Visiting Research Professor at Texas Southern
University (2007 – present) both in the United States. He has similar recog-
nitions with Otto von Guericke University Magdeburg, Germany.
Professor Ibidapo-Obe was invested in 2004 with the prestigious Fellow-
ships of the Academy of Science and Academy of Engineering Nigerian
Computer Society and Mathematical Association of Nigeria. He was elect-
ed Fellow of the African Academy of Science (AAS) as well as The World
Academy of Science (TWAS) in 2012. He was the Vice President of NASAC
(Network of African Science Academies) (2011-2013).
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Non-Executive DirectorNon-Executive Director
ENGR. MUSTAFA BELLO
Engr. Mustafa Bello graduated with B.Engr. (Civil Engineering), from the
Ahmadu Bello University (ABU), Zaria in 1978 with Second Class Upper
Division and won the Shell prize for best project and thesis for Faculty
of Engineering in 1978.
He served in the Directorate of Quartering and Engineering Service
(Nigerian Army) between 1978 / 1979 and later joined the Niger State
Housing Corporation between 1980 and 1983 as a Senior Civil Engi-
neer.
He served as a cabinet Minister of the Federal Republic of Nigeria as
the Federal Minister of Commerce between 1999 and 2002. He was
subsequently appointed Executive Secretary/Chief Executive Officer
of the Nigerian Investments Promotion Commission (NIPC) between
November 2003 and February 2014.
He is currently the Chairman of Invest-in-Northern Nigeria Limited, a
special purpose vehicle for the economic and social transformation of
the Northern Nigerian Economy.
He has been involved in several projects in Nigeria including CAC on-
line project in 2002, developed WTO consistent Trade Policy for the
Federal Republic of Nigeria etc.
He has attended several conferences, missions and meetings and rep-
resented the Federal Government of Nigeria.
Dr. Al-Mujtaba Abubakar is currently the Managing Director of Apt
Pensions Funds Managers Limited.
He is a graduate of the Leeds Polytechnic, UK. He is a renowned Char-
tered Accountant and a Fellow of the Institute of Chartered Account-
ants of Nigeria.
Dr. Abubakar has extensive and tremendous experience in the finan-
cial services industry, audit and consulting. He worked with the firm
of Akintola Williams Deloitte between January 2000 and November
2008, and rose to become the Partner and Board Member of West Af-
rica sub-region. Prior to this, he had served on the Board of several
financial institutions in Nigeria.
DR. AL-MUJTABA ABUBAKAR
He has attended several management and leadership training pro-
grammes and conferences both within and outside the country.
He brings to the Board of the bank tremendous track record in Risk
Management, Credit & Marketing, Auditing and very outstanding
leadership skills.
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DR. TOPE FASORANTI
Until his appointment as an Executive Director, Umar Shuaib Ahmed
was a General Manager and Zonal Head supervising 7 branches and 3
Strategic Business Units in Abuja and also coordinate 3 zones compris-
ing over 20 branches in the North-West and North East.
Umar graduated in 1990 with B.Sc (Hons) Accounting from Ahmadu
Bello University, Zaria and later obtained an MSc. (Banking & Finance)
from Bayero University Kano in 1998. He started his banking career 23
years ago in 1993 at Citibank (Nigeria International Bank).
He joined Zenith in 2006 as an Assistant General Manager. Through
his career, Umar has held several management positions before this
appointment.
He is a Fellow of Nigerian Institute of Loan and Risk Management,
Honorary Senior Member, Chartered Institute of Bankers and Member,
Nigerian Institute of Management.
He has attended Strategic Business courses at London Business School
and Harvard Business School, USA.
He is married with children.
Dr. Temitope Fasoranti, has spent over 26 years in the Nigerian Banking
Industry. He obtained a Bachelor’s degree in Economics (1988), a Mas-
ter’s degree in Economics (1991) and a PhD in Economics all from the
Obafemi Awolowo University (OAU) Ile-Ife.
He worked in FBN Merchant Bankers from 1991 – 1997 and joined Ze-
nith Bank in 1997. Prior to his appointment as Executive Director he
was a General Manager/Group Zonal Head overseeing several branch-
es in Lagos which includes Ikeja Zone, Apapa Zone, Ilupeju Zone and
was Group Head of Oil & Gas, Conglomerate Group, Agriculture Desk
etc.
He has attended several local and international courses and programs
including Changing The Game: Negotiation and Competitive Decision
Making (Harvard Business School), Creating and Leading High Perfor-
mance Teams (The Wharton School, Pennsylvania, USA), and Develop-
ing Strategy for Value Creation (London Business School).
He is a member of the Nigerian Institute of Management (NIM), an
honorary member of the Chartered Institute of Bankers of Nigeria
(CIBN), The Institute of Credit Administration and a sitting board mem-
ber of Financial Institutions Training Centre (FITC).
His experience covers Treasury, Corporate Finance, Corporate Banking,
Retail Banking, Risk Management, Branch Management and Zonal
Management.
He is married with children.
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Executive DirectorExecutive Director
DENNIS OLISA
HENRY OROH
Mr. Olisa is a Chartered Accountant and holds an MBA.
He is a Fellow of the Institute of Chartered Accounts of Nigeria (FCA),
Fellow of the Chartered Institute of Bankers of Nigeria (FCIB) and an
Associate, Chartered Institute of Taxation (ACIT).
He has attended several international courses including INSEAD Busi-
ness School, Fontainebleau, France; Havard Business School, Boston,
Massachusetts, USA; Booth School of Business, University of Chicago,
USA; London School of Economics (LSE) UK, and Oxford Princeton Pro-
gramme, Oxford, United Kingdom.
Mr. Olisa has spent over twenty seven (27) years in the Nigerian Bank-
ing Industry. He joined the services of the bank in 1998. His experi-
ence covers Treasury, Banking Operations, Credit Risk Management,
Telecommunication, Oil and Gas, Internal Control as well as Branch
Management and Zonal Management.
Prior to his appointment, he was a General Manager and Chief Inspec-
tor of the bank, overseeing the Internal Audit and Inspection of the
Group.
Henry Oroh holds a Bachelor’s Degree in Accounting from the Univer-
sity of Benin, Edo State and an MBA from the Lagos State University as
well as an LLB Degree from the University of London. He is a Fellow of
the Institute of Chartered Accountants of Nigeria (ICAN) and an honor-
ary member of the Chartered Institute of Bankers (CIBN), Nigeria.
He has over two decades of banking experience. He began his bank-
ing career in 1992 at Citibank where he served for seven (7) years in
Operations, Treasury and Marketing.
He joined Zenith Bank in February 1999 and has worked in various
Groups and Departments within the Zenith Group Office. His exper-
tise spans Operations, Information Technology, Treasury, Marketing,
including the Manufacturing, Food and Beverages, Pharmaceuticals,
Oil and Gas, Public Sector, Consumer, as well as Corporate Banking and
Business Development.
In April 2012, he was seconded to Zenith Bank Ghana Limited as an Ex-
ecutive Director and became the Managing Director/ Chief Executive
in February 2016, where he successfully spearheaded the phenomenal
growth of the Zenith Brand both within the Ghana market and the
West African sub-region.
Henry has attended several Leadership Programmes and Executive
Management Courses at the Harvard Business School, Columbia Busi-
ness School, New York, University of Chicago, University of Pennsylva-
nia, HEC Paris, JP Morgan Chase, UK and the Lagos Business School.
He comes to the Board of Zenith Bank Plc with strong competencies in
Credit & Marketing, Operations, Information Technology, Treasury and
impressive Leadership skills.
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Executive DirectorExecutive Director
Zenith Bank Plc Annual Report December 31, 2019
Directors’ Report for the Year Ended December 31, 2019
The directors present their report on the affairs of ZENITH BANK PLC (“the Bank”), together with the financial statements and
independent auditor’s report for the year ended December 31, 2019.
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 thirteen new branches and no branch was closed.
As at December 31, 2019 the Group had 430 branches, 178 cash centers; 2,093 ATM terminals; 50,427 POS terminals and 7,745,176 cards
issued to its customers. (December 31, 2018: 417 branches, 256 cash centers, 1,891 ATM terminals, 34,006 POS terminals and 5,732,820
cards issued).
3. Operating results
Gross earnings of the Group increased by 5.1% and profit before tax increased by 5.0%. 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
31-Dec-19
31-Dec-18
N’ Million
N’ Million
662,251
243,294
-
(34,451)
208,843
(150)
630,344
231,685
(4,052)
(34,209)
193,424
(277)
Profit attributable to the equity holders of the parent
208,693
193,147
Appropriations
Transfer to statutory reserve
Transfer to retained earnings and other reserves
Basic and Diluted earnings per share (kobo)
Non-performing loan ratio %
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29,875
178,818
32,456
160,691
208,693
193,147
6.65
4.30
6.15
4.98
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 (2018: Interim dividend of N0.30 per share and final of N2.50 per share) from the retained earnings account
as at December 31, 2019. This will be presented for ratification by the shareholders at the next Annual General Meeting.
Payment of dividends is subject to withholding tax at a rate of 10% in the hands 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, 2019
December 31, 2018
Director
Designation
Direct
Indirect
Direct
Indirect
Mr. Jim Ovia, CON
Chairman/ Non-Executive Director
3,546,199,395
1,513,137,010
3,546,199,395
1,513,137,010
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
Dr. Al-Mujtaba Abubakar****
Non Executive Director/ Independent
127,137
541,690
421,426
32,660
-
-
Mr. Ebenezer Onyeagwu**
Group Managing Director
45,500,000
-
-
-
-
-
-
-
127,137
541,690
421,426
32,660
-
-
36,000,000
-
-
-
-
-
-
-
Mr. Peter Amangbo *
Group Managing Director (retired)
19,600,000
21,000,000
15,000,000
21,000,000
Dr. Adaora Umeoji
Deputy Managing Director
68,873,169
1,710,123
53,873,169
1,710,123
Mr. Ahmed Umar Shuaib
Executive Director
Dr. Temitope Fasoranti
Executive Director
Mr. Dennis Olisa
Mr. Henry Oroh ***
Executive Director
Executive Director
7,577,343
5,075,000
7,122,316
7,827,027
-
-
-
-
7,077,343
5,075,000
7,122,316
5,018,579
-
-
-
-
*
**
***
Retired from the Board effective 31 May 2019.
Appointed as Group Managing Director effective 1 June 2019
Appointed as Executive Director effective 1 August 2019
**** Appointed as Independent Non-Executive Director effective 1 August 2019
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, 2019
Directors’ Report for the Year Ended December 31, 2019
6. Directors’ Remuneration
The Bank ensures that remuneration paid to its Directors complies with the provisions of the Code 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
- 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.
Timing
Paid monthly during
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.
-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.
- Paid annually on the day of the Annual General Meeting (‘AGM’) to Non-
Executive Directors only.
Paid annually on the day of the
AGM.
- Allowances paid to Non-Executive Directors only, for attending Board and Board
Committee Meetings.
Paid after each Meeting.
Basic Salary
Other allowances
Productivity bonus
Director fees
Sitting allowances
7. Changes on the Board
Mr Peter Amangbo (Group Managing Director) retired from the Board effective 31, May 2019 and Mr Ebenezer Onyeagwu was
appointed as the new Group Managing Director, effective 1 June 2019. Also, Dr. Al-Mujtaba Bello and Mr. Henry Oroh were appointed
as Non-Executive Director and Executive Director respectively effective 1, August 2019.
8. Directors’ interests in contracts
For the purpose of section 277(1) and (3) of Companies and Allied Matters Act of Nigeria, (CAMA), all contracts with related parties
during the year were conducted at arm’s length. Information relating to related parties transactions are contained in Note 37 to the
financial statements.
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, 2019 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 - 1,000,000,000
Above 1,000,000,000
No. of Shareholders Percentage of Shareholders
Number of holdings
Percentage Holdings (%)
538,495
79,624
21,321
1,012
165
159
54
5
640,835
84.0302 %
12.4250 %
3.3271 %
0.1579 %
0.0257 %
0.0248 %
0.0084 %
0.0009 %
100 %
1,600,809,615
1,637,944,446
3,466,126,816
2,182,848,956
1,160,270,614
3,456,450,729
9,080,638,007
8,811,404,604
31,396,493,787
5.10 %
5.22 %
11.04 %
6.95 %
3.70 %
11:01 %
28.92 %
28.06 %
100 %
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
639,403
84.1309 %
12.5631 %
3.1329 %
0.1237 %
0.0221 %
0.0181 %
0.0041 %
0.0036 %
0.0006 %
0.0009 %
100 %
1,596,747,902
1,638,639,586
3,108,802,557
1,682,858,529
966,504,587
2,567,943,284
1,791,562,895
4,138,595,598
2,279,638,965
11,625,199,884
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 %
12. Substantial interest in shares
According to the register of members as at 31 December, 2019, the following shareholders held more than 5% of the issued share
capital of the Bank.
Jim Ovia, CON
Number of Shares Held
Number of Shares Held
3,546,199,395
11.29 %
According to the register of members at December 31, 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 %
We wish to declare that the Bank has diverse shareholding structures and that no other individual(s) holds above 5% of the Bank’s
issued and fully paid shares except as disclosed above.
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Zenith Bank Plc Annual Report December 31, 2019
Directors’ Report for the Year Ended December 31, 2019
13. Donations and charitable gifts
The Bank made contributions to charitable and non-political organisations amounting to N2,729 million during the year ended 31
December 2019 (31 December 2018: N3,065 million).
31-Dec-19
N’ Million
573
362
314
245
204
165
153
145
120
100
73
66
55
50
45
35
20
4
2,729
The beneficiaries are as follows:
Various State Government Security Trust Funds
Global Citizen Award
Various Conference and Seminars .
Medical assistance to the underpriviledged
Musical Society Of Nigeria
Various Sports Organisations i.e. NFF, NBBF etc
Sponsorship/Catholic Archdiocese Abuja
Educational Support to Nigerian Schools
Financial Inclusion Project and Other Contribution (CBN)
O'Five Charity Initiative
Sponsorship/Delta State Principal Cup
Road and drainage rehabilitation
Africa Business: Health Forum
Sponsorship/Greater Lagos 2020
ICT Centres for Educational Institutions
Unilag Alumni Association at 50
CFA Society of Nigeria
Other donations individually below N10 million
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The Bank made contributions to charitable and non-political organisations amounting to N3,065 million during the year 31
December 2018.
The beneficiaries are as follows:
Various State Government Security Trust Funds
Various Sports Organisations i.e, NFF, NBBF etc
Seed contribution 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 Enpowerment
St. Saviours School Ikoyi
Nigeria Academy of Neurological Surgeons
Musical Society of Nigeria
Other donations individually below N10 million
31-Dec-18
N’ Million
1,571
363
305
200
158
131
85
61
43
30
30
25
20
10
14
19
3,065
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 year ended December 31, 2019
Description
Number
Amount claimed
Amount refunded
31-Dec-
19
31-Dec-
18
31-Dec-19
N
31-Dec-18
N
31-Dec-19
N
31-Dec-18
N
Pending complaints brought forward
Received Complaints
Resolved Complaints
Unresolved Complaints escalated to
188
769
408
549
86
224
122
17,033,494,506
9,783,412,201
27,009,119
167,782,649,956
11,026,857,556
222,775,473
N/A
N/A
4,051,113,818
3,776,775,251
421,465,468
800,131,355
188
180,765,030,644 17,033,494,506
12,982,196
-
CBN for intervention/carried forward
Other refunds made to customers during the year amounted to N897,526.70 (US$2,461) ( December 31, 2018: N9,372,176, US$26,121.62).
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Zenith Bank Plc Annual Report December 31, 2019
16. Human resources
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 occasional 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.
44
Gender analysis of staff
(iv)
The average number of employees of the Bank during the year by gender and level is as follows;
a.
Analysis of total employees
Employees
(b) Analysis of Board and top management staff
Board members
(Executive and Non-executive directors)
Top management staff (AGM-GM)
(c) Further analysis of board and top management staff
Assistant general managers
Deputy general managers
General managers
Board members (Non-executive directors)
Executive Directors (excluding MD and DMDs)
Deputy Managing Director
Managing Director/CEO
Male
3,099
3,099
Gender
Number
Female
2,883
2,883
Gender
Number
Gender
Percentage
Total
5,982
5,982
Male
52 %
52 %
Female
48 %
48 %
Gender
Percentage
Male
Female
Total
Male
Female
12
39
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1
20
21
13
59
72
92 %
66 %
71 %
8%
34 %
29 %
Gender
Number
Gender
Percentage
Male
Female
Total
Male
Female
28
15
7
4
7
4
-
1
3
2
-
-
1
-
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10
6
7
4
1
1
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21
72
65%
70%
67%
100%
100%
-%
100%
71%
35 %
30%
33%
-%
-%
100%
-%
29%
17. Auditors
The tenure of the Bank’s auditor, Messrs KPMG Professional Services, will be 10 years by 31 December 2019. In accordance with section
5.2.12 of the Central Bank of Nigeria (CBN) Code of Corporate Governance for Banks and Discount houses in Nigeria, Messrs KPMG
Professional Services will not be eligible for reappointment as the Bank’s auditor in the next annual general meeting.
By order of the Board
Michael Osilama Otu (Esq.)
Company Secretary
January 28, 2020
FRC/2013/MULTI/00000001084
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Governance & Sustainability
(cid:53)(cid:51)(cid:34)(cid:47)(cid:52)(cid:49)(cid:34)(cid:51)(cid:38)(cid:47)(cid:36)(cid:58)(cid:52)(cid:53)(cid:34)(cid:47)(cid:37)(cid:34)(cid:51)(cid:37)(cid:52)(cid:36)(cid:48)(cid:46)(cid:49)(cid:45)(cid:42)(cid:34)(cid:47)(cid:36)(cid:38)(cid:51)(cid:38)(cid:50)(cid:54)(cid:42)(cid:51)(cid:38)(cid:46)(cid:38)(cid:47)(cid:53)(cid:52)(cid:51)(cid:54)(cid:45)(cid:38)(cid:52)(cid:1)(cid:14)(cid:1)(cid:45)(cid:34)(cid:56)(cid:51)(cid:38)(cid:40)(cid:54)(cid:45)(cid:34)(cid:53)(cid:42)(cid:48)(cid:47)(cid:52)(cid:52)(cid:54)(cid:52)(cid:53)(cid:34)(cid:42)(cid:47)(cid:34)(cid:35)(cid:42)(cid:45)(cid:42)(cid:53)(cid:58)02 Zenith Bank Plc Annual Report December 31, 2019
Corporate Governance Report for the Year Ended 31 December, 2019
1. Introduction
The Bank and the Group subscribes to the highest level of
Corporate Governance and best practice in the conduct of
its business. The Group’s governance practices are constantly
reviewed to ensure we keep pace with global standards.
2 The Directors and other key personnel
During the year under review, the Directors and other key
personnel of the Bank complied with the following Codes of
Corporate Governance, which the Bank subscribes to:
a.
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.
The National Code of Corporate Governance for Public
Companies which became effective in January 2019.
b.
c.
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 12% of the
bank’s total shares.
b.
c.
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, six (6) Non-
Executive Directors and six (6) Executive Directors including
the GMD/CEO. Four (4) of the Non-Executive Directors are
Independent Directors, appointed in compliance with the
Central Bank of Nigeria (CBN) circular on Appointment of
Independent Directors by Banks.
The Group Managing Director/Chief Executive is responsible
for the day to day running of the bank and oversees the group
structure, assisted by the Executive Committee (EXCO). EXCO
comprises the Executive Directors, Deputy Managing Director
as well as the Group Managing Director/Chief Executive as its
Chairman.
6. Responsibilities of the Board
The Board is responsible for the following amongst others:
a.
reviewing and approving the Bank’s strategic plans for
implementation by management;
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;
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
at all times.
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 their
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
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 year of review.
The Board has a Charter which regulates its operations. The
48
d. monitoring corporate performance against the strategic
e.
f.
g.
h.
i.
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;
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;
its
in
assessing
responsibilities, including monitoring the effectiveness of
individual directors.
its own effectiveness
fulfilling
The membership of the Board during the year is as follows:
POSITION
Chairman
Board of Directors
NAME
Jim Ovia, CON
Prof. Chukuka S. Enwemeka Non-Executive Director
Non-Executive Director
Mr Jeffrey Efeyini
Independent/Non-Executive Director
Prof. Oyewusi Ibidapo-Obe
Independent/Non-Executive Director
Mr. Gabriel Ukpeh
Independent/Non-Executive Director
Engr. Mustafa Bello
Independent/Non-Executive Director
Dr. Al-Mujtaba Abubakar***
Group Managing Director/CEO
Mr. Ebenezer Onyeagwu*
Deputy Managing Director
Dr. Adaora Umeoji
Executive Director
Mr. Umar Shuaib Ahmed
Executive Director
Dr. Temitope Fasoranti
Executive Director
Mr. Dennis Olisa
Executive Director
Mr. Henry Oroh***
Group Managing Director/CEO (retired)
Mr. Peter Amangbo **
Appointed as GMD/CEO with effect from June 1, 2019
Retired from the Board with effect from May 31, 2019
*
**
*** Appointed to the Board effective August 1, 2019
The Board meets at least once every quarter but may hold
extra-ordinary sessions to address urgent matters requiring the
attention of the Board.
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
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 remuneration 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.
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.
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. Board Committees
The Board carries out its oversight functions using its various
Board Committees. This makes for efficiency and allows for a
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Zenith Bank Plc Annual Report December 31, 2019
Corporate Governance Report for the Year Ended 31 December, 2019
deeper attention to specific matters for the Board.
Membership of the Committees of the Board is intended to
make the best use of the skills and experience of non-executive
directors in particular.
The Board has established the various Committees with well
defined terms of reference and Charters defining their scope of
responsibilities in such a way as to avoid overlap or duplication
of functions.
The Committees of the Board meet quarterly but may hold
extraordinary sessions as the business of the Bank demands.
The following are the current standing Committees of the Board:
10.1 Board credit committee
The Committee is currently made up of seven (7) members
comprising four (4) non-Executive Directors and three (3)
Executive Directors of the Bank. The Board Credit Committee is
chaired by a non-Executive Director who is well versed in credit
matters.
The Committee considers loan applications above the level of
Management Credit Committee. It also determines the credit
policy of the Bank or changes therein.
-
Chairman
The membership of the Committee during the year is as follows:
Mr. Gabriel Ukpeh
Mr. Jeffrey Efeyini
Prof. Chukuka Enwemeka
Dr. Al-Mujtaba Abubakar **
Mr. Peter Amangbo*
Mr. Ebenezer Onyeagwu
Dr. Adaora Umeoji
Dr. Temitope Fasoranti
•
•
•
•
•
•
•
•
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.
10.2 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.
– Chairman
The membership of the Committee during the year is as follows:
Prof. Oyewusi Ibidapo-Obe
Mr. Jeffrey Efeyini
Mr Gabriel Ukpeh
Mr. Henry Oroh*
Dr. Adaora Umeoji
Mr. Ebenezer Onyeagwu
Retired from the Board with effect from 31 May 2019
*
** Appointed to the Board effective August 1, 2019
*
Appointed to the Board effective August 1, 2019
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;
•
50
Terms of reference
•
Approval of large scale procurements by the bank and
other items of major expenditure by the bank;
Recommendation of the bank’s Capital Expenditure
(CAPEX) and major Operating Expenditure (OPEX) limits for
consideration by the Board;
Consideration of management requests for branch set up
•
•
•
•
•
•
•
•
•
•
and other business locations;
Consideration of management request for establishment
of offshore subsidiaries and other offshore business offices;
Consideration of the dividend policy of the Group and the
declaration of dividends or other forms of distributions and
recommendation to the Board;
Consideration of capital expenditures, divestments,
acquisitions, joint ventures and other investments, and
other major capital transactions;
Consideration of senior management promotions as
recommended by the GMD/CEO;
Review and recommendations on recruitment, promotion,
and disciplinary actions for senior management staff;
To discharge the Board’s responsibility relating to oversight
of the management of the health and welfare plans that
cover the company’s employees;
Review and recommendation to the Board, salary revisions
and service conditions for senior management staff, based
on the recommendation of the Executives;
Oversight of broad-based employee compensation policies
and programs;
10.3 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 Engr. Mustapha
Bello (an Independent Non-Executive Director), the Committee’s
membership comprises the following:
Engr. Mustapha Bello - Chairman
Mr. Jeffrey Efeyini
Prof. Chukuka S. Enwemeka
Dr. Al-Mujtaba Abubakar**
Mr. Peter Amangbo*
Mr. Ahmed Umar Shuaib
Mr. Dennis Olisa
*
** Appointed to the Board effective August 1, 2019
Retired from the Board with effect from 31 May 2019
implement
for the risk-wide management of the Bank’s material risks
and to report the results of the Committee’s activities to the
Board of Directors;
Design and
risk management practices,
specifically provide ongoing guidance and support for the
refinement of the overall risk management framework and
ensuring that best practices are incorporated;
Ensure that management understands and accepts its
responsibility for identifying, assessing and managing risk;
Ensure and monitor risk management practices, specifically
determine which enterprise risks are most significant
and approve resource allocation for risk monitoring and
improvement activities, assign risk owners and approve
action plans;
Periodically review and monitor risk mitigation process
and periodically review and report to the Board of
Directors: (a)
the magnitude of all material business risks;
(b) the processes, procedures and controls in place to
manage material risks; and (c) 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.
•
•
•
•
•
•
10.4 Board audit and compliance committee:
The Committee is chaired by a Non-Executive Director - Mr.
Jeffrey Efeyini, who is well experienced and knowledgeable in
financial matters. The Chief Inspector and Chief Compliance
Officer have access to this Committee and make quarterly
presentations for the consideration of the Committee.
Committee’s membership comprises the following:
Mr. Jeffrey Efeyini - Chairman
Mr. Gabriel Ukpeh
Engr. Mustafa Bello
Prof. Oyewusi Ibidapo-Obe
Dr. Al-Mujtaba Abubakar*
*
Appointed to the Board effective August 1, 2019
Terms of reference
•
The primary responsibility of the Committee is to ensure
that sound policies, procedures and practices are in place
Committee’s terms of reference
The Board Audit and Compliance Committee have the following
responsibilities as delegated by the Board of Directors:
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•
•
•
•
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;
•
•
•
•
• 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
year 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 year 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.
10.5 Board governance, nominations and remuneration
committee:
The Committee is made up of four (4) Non-Executive Directors
and one of the Non-Executive Directors chairs the Committee.
The membership of the committee is as follows:
Prof. Chukuka Enwemeka - (Chairman)
Prof. Oyewusi Ibidapo Obe
Engr. Mustafa Bello
Mr. Gabriel Ukpeh
52
Committee’s terms of reference
•
fair
reasonable and competitive
To determine a
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;
Recommendation of appropriate compensation for Non-
Executive Directors for Board and Annual General Meeting
consideration;
Review and approval of any recommended compensation
actions for the Company’s Executive Committee members,
including base salary, annual incentive bonus, long-term
incentive awards, severance benefits, and perquisites;
Review and continuous assessment of the size and
composition of the Board and Board Committees, and
recommend the appropriate Board structure, size, age, skills,
competencies, composition, knowledge, experience and
background in line with needs of the Group and diversity
required to fully discharge the Board’s duties;
Recommendation of membership criteria for the Group
Board, Board Committees and subsidiary companies Boards.
Identification at the request of the Board of specific
individuals for nomination to the Group and subsidiary
companies Boards and to make recommendations on the
appointment and election of New Directors (including the
Group MD) to the Board, in line with the Group’s approved
Director Selection criteria;
Review of the effectiveness of the process for the selection
and removal of Directors and to make recommendations
where appropriate;
Ensuring that there is an approved training policy for
Directors, and monitor compliance with the policy;
Review and make recommendations on the Group’s
succession plan for Directors and other senior management
staff for the consideration of the Board;
Regular monitoring of compliance with Group’s code of
ethics and business conduct for Directors and staff;
Review the Group’s organization structure and make
recommendations to the Board for approval;
Review and agreement at the beginning of the year, of
the key performance indicators for the Group MD and
Executive Directors;
•
•
•
•
•
•
•
•
•
•
•
•
•
•
•
Ensure annual review or appraisal of the performance
of the Board is conducted. This review/appraisal covers
all aspects of
the Board’s structure, composition,
responsibilities, individual competencies, Board operations,
Board’s role in strategy setting, oversight over corporate
culture, monitoring role and evaluation of management
performance and stewardship towards shareholders.
10.6 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
Mr. Jeffrey Efeyini
Mr. Gabriel Ukpeh
Engr. Mustafa Bello*
* Appointed to the Committee effective 18 January 2019.
Committee’s terms of reference
•
To meet with the independent auditors, chief financial
officer, internal auditor and any other Bank executive both
individually and/or together, as the Committee deems
appropriate at such times as the Committee shall determine
to discuss and review:
the bank’s quarterly and audited financial statements,
including any related notes, the bank’s specific disclosures
•
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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.
•
•
•
•
•
10.7 Executive committee (EXCO)
The EXCO comprises the Group Managing Director, Deputy
Managing Director 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.
10.8 Other committees
In addition to the afore-mentioned committees, the Bank has in
place, other standing management committees. They include:
(a) Management Committee (MANCO);
(b)
Assets and Liabilities Committee (ALCO);
(c) Management Global Credit Committee (MGCC);
(d)
(e)
(f )
Risk Management Committee (RMC)
Information Technology (IT) Steering Committee
Sustainability Steering Committee
54
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.
The Committee meets weekly and as frequently as the need
arises.
(c) Management global credit committee (MGCC)
The Management Global Credit Committee is responsible
for ensuring that the Bank complies with the credit policy
guide as established by the Board. The Committee also makes
contributions to the Board Credit Committee. The Committee
can approve credit facilities to individual obligors not exceeding
in aggregate a sum as pre-determined by the Board from time to
time. The Committee is responsible for reviewing and approving
extensions of credit, including one-obligor commitments that
exceed an amount as may be determined by the Board. The
Committee reviews the entire credit portfolio of the Bank and
conducts periodic assessment of the quality of risk assets in the
Bank. It also ensures that adequate monitoring of performance
is carried out. The secretary of the committee is the Head of the
Credit Administration Department.
The Committee meets weekly or fortnightly depending on the
number of credit applications to be considered. The members of
the Committee include the Group Managing Director, the
Executive Directors and all divisional and group heads.
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.
Information Technology
(e) Information technology (IT) steering committee
is
The
responsible for amongst others, development of corporate
information technology (IT) strategies and plans that ensure cost
effective application and management of resources throughout
the organization.
(IT) Steering Committee
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;
Two (2) Executive Directors;
Chief Financial Officer;
Chief Inspector;
Chief Risk Officer;
Chief Compliance 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, recognizing 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
the CSR and Research Group.
11. 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.
12. 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 information about the
Bank. The Bank also regularly briefs the regulatory authorities,
and file statutory returns which are usually accessible to the
shareholders.
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Zenith Bank Plc Annual Report December 31, 2019
Corporate Governance Report for the Year Ended 31 December, 2019
13. 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.
During the year under review, all Directors attended the
CFT/AML training programme to keep them abreast of
recent trends in CFT and Money Laundering.
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
•
14. 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.
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.
link on
its
56
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.
15. Foreign Subsidiaries Governance Structure
The Bank as at December 31, 2019 has four (4) foreign
subsidiaries, two (2) local subsidiaries and one (1) representative
office. 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.
Local Board and Board Committees
To ensure that the activities of the subsidiaries reflects 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 a 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 exercise
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 covers the subsidiaries’ financial performance, risk
assessment, regulatory and compliance matters amongst others.
The
to Executive
Management and the Group Board of Directors for decision
making and fulfilment of its oversight function.
reports are analyzed and presented
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 budget 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.
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Zenith Bank Plc Annual Report December 31, 2019
Corporate Governance Report for the Year Ended 31 December, 2019
Group Compliance Function
Zenith Bank Plc is committed to complying with regulatory requirements in all locations where it operate. 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 include 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 undertake 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.
16. 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.
17. Schedule of board and board committees meeting held during the year
The table below shows the frequency of meetings of the Board of directors, board committees and members’ attendance at these
meetings during the year under review.
Directors
Board
Board
credit
committee
Finance and
general purpose
committee
Board governance,
nomination and
remuneration
committee
Board risk
management
committee
Board audit and
compliance
committee
Attendance/no of meetings
Jim Ovia, CON
Mr. Jeffrey Efeyini
Prof. Chukuka S. Enwemeka
Prof. Oyewusi Ibidaop-Obe
Mr. Gabriel Ukpeh
Engr. Mustafa Bello
Dr. AI-Mujtaba Abubakar***
Dr. Adaora Umeoji
Mr. Ebenezer Onyeagwu*
Mr. Ahmed Umar Shuaib
Dr. Temitope Fasoranti
Mr. Dennis Olisa
Mr. Henry Oroh****
Mr. Peter Amangbo**
7
7
7
7
7
7
7
2
7
7
7
7
7
2
3
4
N/A
4
4
N/A
4
N/A
N/A
4
N/A
4
N/A
N/A
2
4
N/A
N/A
2 (**)
4
N/A
2 (*)
N/A
2 (*)
2 (**)
N/A
N/A
N/A
2 (**)
4
N/A
4
4
4
2 (**)
2 (*)
N/A
N/A
N/A
N/A
N/A
N/A
N/A
N/A
4
N/A
4
4
N/A
4
N/A
N/A
N/A
4
2 (*)
N/A
4
N/A
2
4
N/A
4
N/A
2 (*)
4
4
N/A
N/A
N/A
N/A
N/A
N/A
N/A
N/A
Note:
* Appointed as Group Managing Director (GMD)/Chief Executive Officer (CEO) effective 1 June 2019.
** Retired from the Board as GMD/CEO with effect from 31 May 2019.
*** Appointed as an Independent Non-Executive Director with effect from August 1, 2019.
**** Appointed as Executive Director with effect from August 1, 2019.
(*) Joined the Committee on April 16, 2019 based on Reconstitution of Board Committees.
58
(**) Left the Committee on April 16, 2019 based on Reconstitution of Board Committees.
N/A - Not Applicable (Not a Committee member)
Dates for Board and Board Committee meetings held in the year ended December 31, 2019
Board meetings
18-Jan-19
18-Mar-19
16-Apr-19
23-Jul-19
01-Aug-19
22-Oct-19
23-Dec-19
Board credit
committee
meeting
Finance and
general
purpose
committee
Board risk
and
audit
committee
meeting
Board audit
and
compliances
committee
meeting
Board
governance,
nominations and
remuneration
committee
Audit
committee
meeting of the
bank
17-Jan-19
17-Jan-19
17-Jan-19
17-Jan-19
17-Jan-19
17-Jan-19
15-Apr-19
15-Apr-19
15-Apr-19
15-Apr-19
22-Jul-19
22-Jul-19
22-Jul-19
22-Jul-19
15-Apr-19
22-Jul-19
15-Apr-19
22-Jul-19
21-Oct-19
21-Oct-19
21-Oct-19
21-Oct-19
21-Oct-19
21-Oct-19
18. Audit Committee
The table below shows the frequency of meetings of the audit committee and members’ attendance at these meetings during
the year under review.
Number of meetings held during the year:
Members
Mrs. Adebimpe Balogun (SR)
Prof. (Prince) L. F. O Obika (SR)
Mr. Michael Olusoji Ajayi (SR)
Engr. Mustafa Bello (NED)
Mr. Jeffrey Efeyini (NED)
Mr. Gabriel Ukpeh (NED)
SR - Shareholders representative
NED- Non-Executive Director
19. Analysis of Fraud and Forgeries Returns
Number of Meetings attended
4
4
4
4
4
4
Nature of Fraud
ATM/Electronic fraud
Staff Perpetrated (see (i))
Impersonation
Stolen/Forqed Instrument
Internet Bankinq
Others
Total
December 31, 2019
December 31, 2018
No. %Loss
Actual Loss to the Bank (N)
Jan-Dec 2019
No. %Loss Actual Loss to the Bank (N)
Jan - Dec 2018
78
32
16
92
119
12
349
0.06
82.44
0.23
11.58
3.46
2.24
100
672,450
999,767,153
2,827,000
140,448,145
41,947,690
27,114,000
44
32
32
146
20
43
-
67
22
11
-
-
-
316,910,400
4,250,103
107,534,526
413,841
-
1,212,776,438
317
100
429,098,870
(i)
(ii)
Out of the staff perpetrated fraud during the year, losses of N975million has been recorded in prior years
Other losses incurred by the Bank from fraud and forgeries during the year amounted to N40.88 million (US$112,101.06)
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Zenith Bank Plc Annual Report December 31, 2019
Statement of Directors’ Responsibilities in Relation to the Financial
Statements for the Year Ended December 31, 2019
The Directors accept responsibility for the preparation of the 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 28, 2020
60
_________________________
Mr. Ebenezer Onyeagwu
Group Managing Director / CEO
FRC/2013/ICAN/00000003788
January 28, 2020
06 February 2020
The Chairman,
Zenith Bank Plc.
Plot 84, Ajose Adeogun Street,
Victoria Island, Lagos
Nigeria.
Dear Sir,
(cid:53)(cid:72)(cid:83)(cid:82)(cid:85)(cid:87)(cid:3)(cid:87)(cid:82)(cid:3)(cid:87)(cid:75)(cid:72)(cid:3)(cid:39)(cid:76)(cid:85)(cid:72)(cid:70)(cid:87)(cid:82)(cid:85)(cid:86)(cid:3)(cid:82)(cid:73)(cid:3)(cid:61)(cid:72)(cid:81)(cid:76)(cid:87)(cid:75)(cid:3)(cid:37)(cid:68)(cid:81)(cid:78)(cid:3)(cid:51)(cid:79)(cid:70)(cid:17)(cid:3)(cid:82)(cid:81)(cid:3)(cid:87)(cid:75)(cid:72)(cid:3)(cid:50)(cid:88)(cid:87)(cid:70)(cid:82)(cid:80)(cid:72)(cid:3)(cid:82)(cid:73)(cid:3)(cid:87)(cid:75)(cid:72)(cid:3)(cid:37)(cid:82)(cid:68)(cid:85)(cid:71)(cid:3)(cid:40)(cid:89)(cid:68)(cid:79)(cid:88)(cid:68)(cid:87)(cid:76)(cid:82)(cid:81)(cid:3)(cid:73)(cid:82)(cid:85)(cid:3)
(cid:87)(cid:75)(cid:72)(cid:3)(cid:60)(cid:72)(cid:68)(cid:85)(cid:3)(cid:40)(cid:81)(cid:71)(cid:72)(cid:71)(cid:3)(cid:22)(cid:20)(cid:3)(cid:39)(cid:72)(cid:70)(cid:72)(cid:80)(cid:69)(cid:72)(cid:85)(cid:3)(cid:21)(cid:19)(cid:20)(cid:28)(cid:3)
PricewaterhouseCoopers (“PwC”) was engaged to carry out an evaluation of the Board of Directors of
Zenith Bank Plc. (“Zenith Bank”) or (“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” or “the Code”). The evaluation covered the Board’s structure, composition, responsibilities,
processes, relationships and performance of the Board Committees for the period ended 31 December
2019.
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 dated 27
November 2019. 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 achieved significant compliance with the provisions of the CBN Code. Areas of strength
include: the diversity of skill and wealth of experience on the Board, effective oversight over the Bank’s
risk management practices, corporate social responsibility, financial performance, as well as
succession planning and implementation.
Areas of improvement and other findings were highlighted in the course of our review. Details of these
are contained in the full report to the Board.
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 & peer assessment. Each individual
director’s assessment report was prepared and made available to them respectively, while a
consolidated report of the performance of all directors was submitted to the Board Chairman.
Yours faithfully,
for: PricewaterhouseCoopers Chartered Accountants
Femi Osinubi
Director
FRC/2017/ICAN/00000016659
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 Adekoya, O Adeola, T Adeleke, W Adetokunbo-Ajayi, UN Akpata, O Alakhume, C Azobu, E Erhie, K Erikume, U Muogilim, P Obianwa, T Ogundipe,
C Ojechi, O Oladipo, P Omontuemhen, O Osinubi, T Oyedele, AB Rahji, O Ubah
61
O
ver the years, Zenith Bank has con-
sistently created superior value for
its esteemed stakeholders. As a
reputable and responsible brand,
the bank has entrenched sustain-
able principles and standards into
its business operations and invest-
ment decisions, in line with global
best practices. We have fully integrated environmental and so-
cial (E&S) risks considerations into our credit process; all credit
proposals are screened for E&S risks before presentation at the
Global Credit Committee (GCC). Zenith Bank remains committed
to promoting sustainable banking practices and green finance,
as well as improving the quality of lives in communities where
we operate, through social investments.
Sustainable Wealth Creation
As a leading financial institution, we are conscious of our role in
spurring economic growth and development, create wealth and
employment generation for the more than 20 million Nigerian
youths that are actively seeking employment. This conscious-
ness influences our business investments and lending activities,
and continually propel us to explore innovative ways to sustain
our wealth creation efforts.
identifies and channels funds to sectors and industries with
considerable potential to spur economic growth and the overall
well-being of the people.
The bank also prioritises green investments, supporting and
funding projects that promote the well being of the larger soci-
ety and the physical environment. We are conscious of our envi-
ronmental footprint and remain focused on investing responsi-
bly in the best interest and per capita wealth of our stakeholders.
Social Investments and Community Development
Despite the relatively slow economic growth and challenging
business environment, Zenith Bank remained committed to en-
hancing the socio-economic welfare and prosperity of the com-
munities of which we are a part through our social investments.
In the year under review, Zenith Bank’s total Corporate Social Re-
sponsibility (CSR) investment was NGN2.73 billion, representing
1.31 per cent of Profit After Tax (PAT).
The focus areas of the bank’s CSR endeavours during the year
mirror the Sustainable Development Goals (SDGs) of the Unit-
ed Nations and include security, healthcare, education and skills
development, sports development, youth & women empower-
ment, and public infrastructure development.
Our strategy is to support the government’s initiatives at diver-
sifying the economy through ongoing funding and investments
in the real sector of the economy such as agriculture, power,
manufacturing, solid minerals, construction, etc. The bank also
Security: Promoting the safety of lives and properties was our
most significant social investment in 2019. Similar to the pre-
vious year, the bank’s need-gap analysis revealed that security
remains a fundamental need of our communities. Thus, in 2019,
62
“Best Company in Promotion of Good Health and Well-Being” at
the 2019 Sustainability Enterprise Responsibility Awards (SERAs).
Education: In line with our firm commitment to the develop-
ment of the Nigerian education sector, we expended about
NGN210 million towards educational initiatives in the outgone
financial year. Some of our educational initiatives in the year un-
der review include construction of a multi-purpose hall at Mar-
yland Comprehensive Secondary School; upgrade of facilities at
St. Francis Catholic Secondary School, Idimu; donation of laptops
to Gateway Polytechnic, Ogun state; construction of a new hos-
tel at St Finbarr’s College, Akoka; sponsorship of CFA Institute
Research Challenge, and the Zenith Academic Excellence Award
for Best Graduating Students in some Federal Universities.
Environmental Sustainability and Carbon Footprint
Management
Zenith Bank considers environmental and social (E&S) risk man-
agement critical to the bank’s sustainability strategy. Our Envi-
ronmental and Social Management System (ESMS) provides a
clear framework for the management of E&S risks of the bank
concerning its borrowers and investees. We take measures to
avoid, mitigate and minimise the risks identified in our E&S risk
due diligence. Zenith Bank’s ESMS benchmark the Equator Prin-
ciples, the International Finance Corporation (IFC) Performance
Standards, among other global sustainability principles.
63
we invested NGN573 million in our various partnerships with the
local communities, the federal, state and local governments, and
other relevant agencies to preserve the public peace, and ensure
a crime-free environment. The sum also includes contributions
to several State Security Funds across the federation.
Sports: In 2019, the bank’s investments in sports development
included title sponsorship of the Delta State Principal’s Cup;
the Nigerian Football Federation (NFF); and our flagship Zenith
National Women’s Basketball League in partnership with the
Nigerian Basketball Federation (NBBF), a female empowerment
initiative that has produced national and international basket-
ball stars. Similarly, our sponsorship of the Nigerian Football
Federation (NFF) underscores our passion for the development
of grassroots sports and the empowerment of future Nigerian
football stars. Our total investments in sports in the year under
review was about NGN238 million.
Health: Our health initiatives in the outgone year focused main-
ly on providing maternal healthcare and medical assistance to
the underprivileged. In 2019, we invested about NGN345 million
investment in medical interventions for low-income individuals
faced with various life-threatening medical conditions, as well
as support for various health initiatives complementing gov-
ernment’s efforts at improving life expectancy in the country.
Some of the initiatives include the Private Sector Health Alliance
of Nigeria, the O’Five Charity Initiative, provision of medical sup-
plies to Iga-Idunganran Primary Healthcare Centre, etc. Our in-
vestment in this focus area earned Zenith Bank an award as the
The automation of our E&S Risk Exposure As-
sessment process was a major milestone in
our resolve to ensure sustainable financing
of every project we invest in and the adop-
tion of responsible practices in line with the
Sustainable Development Goals and prin-
ciples of responsible banking of the United
Nations Environment Programme Finance
Initiative (UNEP-FI). Our target remains to
broaden our E&S risk coverage to all major
projects, irrespective of the sector, by 2020;
and to all projects, major and minor, by 2025.
In the outgone financial year, about 90 per
cent of all our transactions valued at over
NGN3.7 trillion were screened and assessed
for E&S risk. We hope to cover up to 100 per
cent of our credit transactions by 2020 and
to improve significantly in our E&S monitor-
ing of existing credit customers, and pro-
jects.
In line with Zenith Bank’s carbon footprint
emission reduction strategy, we are working
towards powering all our operations from al-
ternative (renewable) sources, such as solar
energy. As at the end of the year 2019, about
1,012 Automated Teller Machines (ATMs) are
currently powered by solar energy. We have
also put in place, automation of some bank-
ing processes to reduce consumption of
paper in our daily operations. We also con-
tracted V4 Advisors to measure our carbon
footprint/emissions within the period under
review, to manage and reduce our impact,
in line with regulatory and global expecta-
tions.
Workplace
As a strong component of making Zenith
Bank a great place to work, building a safe
and healthy work environment is a core pri-
ority. We have constituted a Health, Safety
and Environment (HSE) Management Com-
mittee to ensure a safe and secure work-
place for our employees, vendors, contrac-
tors and other stakeholders. We have also
developed an HSE Management Plan, in line
with the provisions of ISO45001. In 2019,
1,019 employees were trained in Basic Emer-
gency Response & First Aid up from 441 in
2018. Similarly, 99 participants were trained
64
Our
re-
target
mains to broad-
en our E&S risk
coverage to all
major projects,
of
irrespective
the
sector, by
2020; and to all
projects, major
and minor, by
2025.
in Occupational Health & Safety in 2019,
up from 63 in 2018. Also, 139 employees
were trained on fire and safety in the out-
gone year.
To help our employee maintain a healthy
work/life balance, we have continued to
enforce a mandatory 5.00 pm closing
time for all staff bank-wide. This initiative
saves a significant amount for the bank in
terms of energy costs, while also reducing
our overall carbon footprint.
Human Rights
Zenith Bank is committed to respecting
human rights, principally as they apply
to our employees, suppliers/contractors
and other stakeholders. The bank has a
robust Human Rights Policy, which lay
down guidelines on how our employees
are expected to relate among themselves
and with all other stakeholders within
our business operations. We prohibit dis-
crimination, bullying and harassment on
any grounds. We strive to build an inclu-
sive work environment where people are
valued and respected and given equal
opportunities to fulfil their potential, in
line with Sustainable Development Goal
(SDG) 5 of gender equality.
As a sign of our support for equal opportunities, the bank has devel-
oped a human right assessment training programme, “Introduction to
Human Rights Framework and the Rights of the child” to acquaint staff
across all levels on the basics of human rights. This course has been
deployed on our Learning Management Portal and made mandatory
for staff, from entry-level to executive management level.
Women Empowerment
Women empowerment is an area where Zenith Bank is making visi-
ble progress, although we recognise the need to improve. We operate
a gender-inclusive workplace culture and also provide products and
services designed specifically for women. In 2019, the female gender
makeup of our total workforce was 48 per cent. Our male/female ra-
tio for management-level staff for 2019 was 75:25. In the year under
review, we spent over NGN307 million in capacity building for our fe-
male employees, and 2,832 employees were trained on the e-Learning
course – “Choosing to Lead as a Woman”.
Our Z-Woman Business Package is designed to address the unique
needs of women-owned businesses. The package comes with loans
of up to NGN10 million at a single-digit interest rate, free digital skills
training, and free exhibition stands at Zenith Bank events and many
other benefits which will help them grow their businesses and in-
crease sales. Through our sponsorship of the Zenith National Women
Basketball League, the bank continues to support female participation
in sports. Many alumni of the league currently have successful careers
in national and international basketball teams around the world.
Sustainable Supply Chain Management
As part of efforts to comply with the principles of responsible con-
sumption and production as enshrined in Sustainable Development
Goal (SDG) 12, we have integrated environmental and social condi-
Accordingly, we maintain an equal remuneration for
equal work policy where employees receive the same
remuneration across the same level, irrespective of
gender in all our business locations. Besides, our em-
ployees, contractors, agents, consultants and other
business partners are encouraged to treat each other,
their employees and others with dignity and respect, in
conformity to the United Nations Universal Declaration
of Human Rights (UDHR).
65
tions into our Code of Conduct for Sup-
pliers, Vendors and Contractors, among
others. The aim is to promote socio-envi-
ronmental friendly business practices, and
also to ensure high-quality products and
services, value for money and responsible
sourcing of raw materials in our supply
chain. Consequently, in 2019, we admin-
istered “Code of Conduct” on all major
vendors, suppliers and contractors of the
bank and periodically screen all third party
business partners (investees, contractors,
suppliers etc.) to ensure their compliance
and avert potential reputational risks.
Because
Information Communication
Technology (ICT) facilities and equipment
constituted a substantial part of our pro-
curement, we strive to empower local
communities and businesses by ensuring
that our procurement policy deliberate-
ly promotes the patronage of local ICT
vendors. Our relations with IT vendors are
guided by laid down service level agree-
ments and compliance with our Code of
Conduct, while our Tender Committee
oversees the process of selection of ven-
dors. Zenith Bank’s procurement practices
have positively impacted the economy,
creating jobs, income and economic em-
powerment for households.
Financial Inclusion
Zenith Bank has continued to support fi-
nancial inclusion and literacy in the coun-
try. In 2019, the bank committed NGN120
million to support the Financial Inclusion
initiative of the Central Bank of Nigeria
(CBN). The bank has developed engaging
initiatives for nurturing financial inclusion
in the country. Our financial literacy initia-
tives are geared towards empowering the
financially excluded groups by providing
them with essential information and ade-
quate knowledge of the various types of
financial products and services that are ac-
cessible to them.
In the year under review, 737,628 previ-
ously unbanked individuals received finan-
cial services or products for the first time
66
from Zenith Bank, a 36.87 per cent growth from 538,910 in 2018. We were able to
achieve this through our several retail products, such as the Zenith Children’s Ac-
count (ZECA), Zenith Integrated Student Account (ZISA), Aspire Account, EazySave
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. Also, Zenith Bank collaborated with the Central
Bank of Nigeria (CBN) organised programmes to mark the Financial Literacy and
World Savings Day in March 2019 and October 2019, respectively, covering six (6)
schools in each of the six (6) geopolitical zones of the country.
Training and Capacity Building
Capacity building and awareness creation remained one of the
key people-oriented strategies of the bank. In 2019, we contin-
ued to carry out E&S risk management training for all our em-
ployees using classrooms and online platforms. As part of our
sustainability acculturation strategy, we made significant pro-
gress with the integration of Environmental and Social Risk Man-
agement sessions into our quarterly Anti-Money Laundering
and Operational Risks training bank-wide, as well as the quarterly
Business Summit of the management-level staff of the Bank
and Zenith orientation programmes during onboarding of
new employees. We also publish “Sustainability Titbits”, Sus-
tainability Lifestyle Tips” and “Sustainability Headlines” daily
using official staff emails, while our intranet portal is contin-
uously used to create E&S awareness.
Reporting
In 2019, the bank attended the launch and official signing
event of the UNEP-FI Principles for Responsible Banking,
held on September 22 and 23, 2019, at the UN Headquar-
ters on the sidelines of the UN General Assembly meeting.
This follows Zenith Bank’s endorsement of the landmark
draft principles of responsible banking of UNEP-FI in De-
cember 2018. The bank also signed on for the Board Ses-
sion 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 Na-
tions Global Compact; the United Nations Environment
Programme’s Finance Initiative, (UNEP-FI); and is a signatory
to the Central Bank of Nigeria’s Nigerian Sustainable Bank-
ing Principles (NSBP). Consequently, we remain fully com-
mitted to sustainability reporting.
In August 2019, Zenith Bank published its fourth stan-
dalone 2018 Sustainability Report titled ‘Building a Sustain-
able Future’, to demonstrate our economic, environmental
and social progress in the financial year 2018. The report
followed the adoption of the new Global Reporting Initia-
tive (GRI) standard. Additionally, Zenith Bank sends biannu-
al progress reports to the CBN as well as annual reports to
the IFC, UNGC, PROPARCO, and AfDB, among others.
Conclusion
Zenith Bank has in place a robust governance structure
that supports its sustainable lending, wealth creation and
community empowerment strategies. We understand that
our brand thrives on the sustainable value we create for our
stakeholders. As such, we are positioning our self to be a
leader in the adoption of UNEP-FI Principles for Responsi-
ble Banking and align our business strategy accordingly.
We shall continue to be strategic and proactive in pursuing
our sustainability targets in line with globally acceptable
standards.
67
Zenith Bank Plc Annual Report December 31, 2019
Report of the Audit Committee for the
Year Ended December 31, 2019
In compliance with Section 359(6) Companies and Allied Matters Act of Nigeria (1990), Cap C20 LFN 2004, we have
reviewed the consolidated and separate financial statements of Zenith Bank Plc for the year ended December 31, 2019
and hereby state as follows:
1.
The scope and planning of the audit were adequate in our opinion;
2.
The accounting and reporting policies of the Group and Bank conformed with the statutory requirements and
agreed ethical practices;
3.
The Internal Control and Internal Audit functions were operating effectively; and
4.
5.
The External Auditor’s findings as stated in the management letter are being dealt with satisfactorily by the
management.
Related party balances and transactions have been disclosed in Note 37 to the financial statements in accordance
with requirements of the International Financial Reporting Standards (IFRS) and directives issued by the Central
Bank of Nigeria (CBN) as contained in the Prudential Guidelines for Deposit Money Banks in Nigeria and Circular
on Disclosure of insider related credits in financial statements BSD/1/2004.
Dated January 27, 2020
Mrs. Adebimpe Balogun
Chairman, Audit Committee
FRC/2017/CITN/00000017467
MEMBERS OF THE COMMITTEE
Shareholders Representative
1.
2.
3.
Mrs Adebimpe Balogun - Chairman
Mr. Michael Olusoji Ajayi
Prof. (Prince) L.F.O Obika
Directiors’ Representative
Non-Executive Director
1.
2.
3.
Mr. Jeffrey Efeyini
Mr. Gabriel Ukpeh
Engr. Mustafa Bello*
* Appointed on the committee effective 18 January 2019
68
Financials
03 Zenith Bank Plc Annual Report December 31, 2019
KPMG Professional Services
KPMG Tower
Bishop Aboyade Cole Street
Victoria Island
PMB 40014, Falomo
Lagos
Telephon e
234 (1) 271 8955
234 (1) 271 8599
Internet
home .kpmg/ng
INDEPENDENT AUDITOR'S REPORT
To the Shareholders of Zenith Bank P(cid:79)(cid:70)
Report on the Audit of the Consolidated and Separate Financial Statements
Opinion
We have audited the consolidated and separate financial statements of Zenith
Bank (cid:3)P(cid:79)(cid:70) ("the Bank") and its subsidiaries (together,(cid:3)"the Group"),(cid:3)which (cid:3)
comprise the consolidated and separate statements of financial position as at 31
December, 2019, and the consolidated and separate statements of profit or loss
and other comprehensive income, consolidated and separate statements of
changes in equity and consolidated and separate statements of cash flows for the
year then ended, and notes, comprising significant accounting policies and other
explanatory information, as set out on pages (cid:26)(cid:27) to (cid:21)1(cid:25).
In our opinion, the accompanying consolidated and separate financial statements
give a true and fair view of the consolidated and separate financial position of the
Group and Bank as at 31 December, 2019, and of their consolidated and separate
financial performance and their consolidated and separate cash flows for the year
then ended in accordance with International Financial Reporting Standards (IFRSs)
and in the manner required by the Companies and Allied Matters Act, Cap C.20,
Laws of the Federation of Nigeria, 2004 and the Financial Reporting Council of
Nigeria Act, 2011, the Banks and other Financial Institutions Act, Cap B3, Laws of
the Federation of Nigeria, 2004 and relevant Central Bank of Nigeria (CBN)
Guide!ines and Circulars .
Basis for Opinion
We conducted our audit in accordance with International Standards on Auditing
(ISAs). Our responsibilities under those standards are further described in the
Auditor's Responsibilities for the Audit of the consolidated and separate Financial
Statements section of our report. We are independent of the Group and Bank in
accordance with the International Ethics Standards Board for Accountants' Code
of Ethics for Professional Accountants (IESBA Code) together with the ethical
requirements that are relevant to our audit of the consolidated and separate
financial statements in Nigeria and we have fulfilled our other ethical
KPM G Profession al Ser vices, a Partnership establ ished under
Nigeria laws, is a mem ber of KPMG Inter nati onal Cooperative
("KPMG International"). a swiss entity. All rights reserved.
Registered in Nigeria No BN 986925
(cid:9)(cid:12)(cid:16)(cid:18)(cid:15)(cid:13)(cid:1)(cid:16)(cid:17)(cid:3)(cid:1)
Adebisi 0 . l amikanra Adegoke A. Oyelami
Adekunle A. Etebute
Adetola (cid:9)(cid:2)(cid:1)Adeyemi
Adewale K. Ajayi
Ayodele H. Othihiwa Chibuzor N. Anyanechi
Ajibo la 0. Olomola
Ayobami L. Salami
Chineme B. Nwigbo
Ayodele A. Soyinka
Ehile A. Aibangb ee
Elijah 0. Oladunmoye Goodluck C. Obi
Joseph 0 . Tegbe
Nneka C. Eluma
lbitomi M. Adepoju
Kabir 0 . Okunlola
Law rence C. Amadi
Oguntayo (cid:6)(cid:2)(cid:1)Ogungbenro Olabimpe S. Afo1abi
ljeoma T Em ezie-Ezigbo
Moham med M. Adama
Oladimeji (cid:6)(cid:2)(cid:1)Salaudeen
Olanike (cid:7)(cid:2)(cid:1)James
Oluwafemi 0 . Awotoye Ofuwatoyin A. Gbagi
Olumide 0. Olayinka
Olusegun A. Sowande Olutoyi n (cid:7)(cid:2)(cid:1)Ogunlowo
Temitope A. Onitiri
Tolutope A. Odukale
Victo r U. Onyenkpa
70
responsibilities in accordance with these requirements and the IESBA Code. We
believe that the audit evidence we have obtained is sufficient and appropriate to
provide a basis for our opinion.
Key Audit Matters
Key audit matters are those matters that, in our professional judgment, were of
most significance in our audit of the consolidated and separate financial
statements of the current period. These matters were addressed in the context of
our audit of the financial statements as a whole, and in forming our opinion
thereon, and we do not provide a separate opinion on these matters.
Impairment of Loans and Advances
The impairment of loans and advances disbursed to customers is considered to
be of most significance in the audit due to the level of subjectivity inherent in
estimating the key assumptions that impact the recoverability of loan and
advances, including the application of industry knowledge and the prevailing
economic conditions in determining the level of impairment allowance required.
The determination of impairment allowance using the Expected Credit Loss (ECL)
model requires the application of certain financial indices which are estimated
from historical financial data obtained within and outside the Group, as inputs, into
the complex financial model.
Impairment allowance on loans that have shown a significant increase in credit
risk, is based on the Group's estimate of losses expected to result from default
events over the life of the loans. Impairment allowance on loans that have not
shown a significant increase in credit risk is recognized based on an estimate of
the losses expected to result from default events within the next 12 months. This
estimate is also an output of models, with the key assumptions being the
possibility of a loan becoming past due and subsequently defaulting, and the rate
of recovery on the loans that are past due and in default. The Group also
incorporates forward looking information into the measurement of ECL.
The judgment involved in classifying loans into expected credit loss stages, the
level of subjectivity inherent in estimating the key assumptions on the
recoverability of loan balances, the inputs estimated, the complexity of the
estimation process and the significant judgment involved in applying these
estimates to determine the level of impairment allowance required, make the
impairment allowance of loans and advances a matter of significance to the audit.
71
Zenith Bank Plc Annual Report December 31, 2019
Procedures
Our procedures include the following:
• We evaluated the design and implementation of the key controls over the
impairment determination process such as the board credit committee review
of loans and advances, management review of relevant data used in the
calculation of expected credit losses including forward looking macroeconomic
data to be included in the impairment model and evaluation of ECL impairment
computation .
• We tested the appropriateness of the Group's determination of significant
increase in credit risk and the resultant classification of loans into the various
stages by examining the loans on a sample basis. We evaluated the level of
past due obligations and qualitative factors such as publicly available
information about the obligors to determine whether the Group should
estimate the expected credit loss over a period of 12 months or over the life of
the loans and advances.
• Assisted by our financial risk management specialists, we checked the key
data and assumptions for the data input into the ECL model used by the
Group. Our procedures in this regard included the following:
(i) We challenged the reasonableness of the Bank's ECL methodology by
considering whether it reflects unbiased and probability-weighted
amounts that are determined by evaluating a range of possible
outcomes, the time value of money, reasonable and supportable
information at the reporting date about past events, current conditions
and forecasts of future economic conditions;
(ii)
For forward looking assumptions comprising foreign exchange rate and
inflation rate used by the Group's management in its ECL calculations,
we corroborated the Group's assumptions using publicly available
information from external sources;
(iii) We evaluated the appropriateness of the basis of determining Exposure
at Default, including the contractual cash flows, outstanding loan balance,
loan repayment type, loan tenor and effective interest rate;
(iv)
For Probability of Default (PD) used in the ECL calculations, we checked
the historical movement in the balances of facilities between default and
non-default categories for each sector;
(v) We checked the calculation of the Loss Given Default (LGD) used by the
Group in the ECL calculations, including the appropriateness of the use of
collat eral, by recomputing the LGD;
72
(vi) We re-performed the calculations of impairment allowance for loans and
advances using the Group's impairment model and validated key inputs.
For loans and advances which have shown a significant increase in credit
risk, the recalculation was based on the amount which may not be
recovered throughout the life of the loans while for loans and advances
that have not shown significant increase in credit risk, the recalculation
was based on the losses expected to result from default events within a
year.
The Group's accounting policy on impairment and related disclosures on credit
risk are shown in notes 2.7, 3.2 and 20 respectively.
Valuation of derivatives
The Bank's derivative instruments comprise foreign currency swaps and foreign
exchange forward contracts, which are used to manage foreign exchange risk.
These derivative instruments usually involve the use of future pricing param eters.
The estimation of pricing details as at the reporting date, in order to determine the
fair value of these derivative instruments, require the use of valuation approaches
or models to derive forward exchange rates and determine the appropriate
discount rates to be applied on future cash flows.
Due to the significance of these derivatives and the related estimation
uncertainty, the valuation of the Bank's derivatives is considered a matter of
significance to the audit.
Procedures
Our procedures included the following, amongst others :
• We evaluated the design and implementation of key controls over the inputs
used in determining the Bank's valuation of derivative contracts by checking
that there was review over the accuracy of inputs such as the foreign
exchange rates and the forward price by the Bank.
• We used our KPMG valuation specialists to:
(i)
(ii)
inspect on a sample basis, the derivative contracts to obtain an
understanding of the respective transactions;
challenge the Bank's assumptions with respect to the fair value of the
derivative assets and liabilities by comparing observable inputs into the
Bank's valuation model such as quoted Nigerian Autonomous Foreign
Exchange Fixing (NAFEX) rates to externally available market data.
73
Zenith Bank Plc Annual Report December 31, 2019
(iii)
(iv)
assess whether the valuation model used by the Bank is appropriate and
complies with the requirements of the relevant accounting standards.
recompute the fair value of the entire population of the instruments using
validated inputs.
The Bank's accounting policy on derivative instruments and relevant financial risk
disclosures are shown in note 2.6, 3.0, 19 and 32 respectively.
Other Information
The Directors are responsible for the other information.
The other information which comprises the Corporate Information, Result at a
Glance/Key Performance Indices, Financial Highlights, Corporate Profile and
Strategy, Notice of the Annual General Meeting, Chairman's Statement, Chief
Executive Officer's R eview, Board of Directors (in pictures), Directors' report,
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, Other National Disclosures, Share
Capital History, Style by Zenith and Forms, but does not include the consolidated
and separate financial statements and our auditor's report thereon.
Our opinion on the consolidated and separate financial statements does not cover
the other information and we do not express any form of assurance conclusion
thereon .
In connection with our audit of the consolidated and separate financial
statements, our responsibility is to read the other information and in doing so,
consider whether the other information is materially inconsistent with the
consolidated and separate financial statements or our knowledge obtained in the
audit or otherwise appears to be materially misstated. If, based on the work we
have performed, we conclude that there is a material misstatement of this other
inform ati on, we are required to report that fact. We have nothing to report in this
regard .
Responsibilities of the Directors for the Consolidated and separate Financial
Statements
The Directors are responsible for the preparation of consolidated and separate
financial statements that give a true and fair view in accordance with IFRSs and in
the manner required by the Companies and Allied Matters Act, Cap C.20, Laws of
the Federation of Nigeria, 2004 and the Financial Reporting Council of Nigeria Act,
2011, the Banks and other Financial Institutions Act, Cap 83, Laws of the
Federation of Nigeria, 2004 and relevant Central Bank of Nigeria (CBN) Guidelines
74
and Circulars, and for such internal control as the directors determine is necessary
to enable the preparation of financial statements that are free from material
misstatement, whether due to fraud or error.
In preparing the consolidated and separate financial statements, the directors are
responsible for assessing the Group and Bank's ability to continue as a going
concern, disclosing, as applicable, matters related to going concern and using the
going concern basis of accounting unless the directors either intend to liquidate
the Group and Bank or to cease operations, or have no realistic alternative but to
do so.
Auditor's Responsibilities for the Audit of the Consolidated and separate Financial
Statements
Our objectives are to obtain reasonable assurance about whether the consolidated
and separate financial statements as a whole are free from material
misstatement, whether due to fraud or error, and to issue an auditor's report that
includes our opinion. Reasonable assurance is a high level of assurance, but is not
a guarantee that an audit conducted in accordance with ISAs will always detect a
material misstatement when it exists. Misstatements can arise from fraud or error
and are considered material if, individually or in the aggregate, they could
reasonably be expected to influence the economic decisions of users taken on the
basis of these financial statements.
As part of an audit in accordance with ISAs, we exercise professional judgment
and maintain professional skepticism throughout the audit. We also:
•
Identify and assess the risks of material misstatement of the consolidated and
separate financial statements, whether due to fraud or error, design and
perform audit procedures responsive to those risks, and obtain audit evidence
that is sufficient and appropriate to provide a basis for our opinion. The risk of
not detecting a material misstatement resulting from fraud is higher than for
one resulting from error, as fraud may involve collusion, forgery, intentional
omissions, misrepresentations, or the override of internal control.
• Obtain an understanding of internal control relevant to the audit in order to
design audit procedures that are appropriate in the circumstances, but not for
the purpose of expressing an opinion on the effectiveness of the Group and
Bank's internal control.
• Evaluate the appropriateness of accounting policies used and the
reasonableness of accounting estimates and related disclosures made by the
directors.
75
Zenith Bank Plc Annual Report December 31, 2019
• Conclude on the appropriateness of directors' use of the going concern basis(cid:3)
of accounting and, based on the audit evidence obtained, whether a material(cid:3)
uncertainty exists related to events or conditions that may cast significant(cid:3)
doubt on the Group and Bank's ability to continue as a going concern. If we(cid:3)
conclude that a material uncertainty exists, we are required to draw attention(cid:3)
in our auditor's report to the related disclosures in the consolidated and(cid:3)
separate financial statements or, if such disclosures are inadequate, to modify(cid:3)
our opinion. Our conclusions are based on the audit evidence obtained up to(cid:3)
the date of our auditor's report. However, future events or conditions may(cid:3)
cause the Group and Bank to cease to continue as a going concern.
• Evaluate the overall presentation, structure and content of the consolidated(cid:3)
and separate financial statements, including the disclosures, and whether the(cid:3)
consolidated and separate financial statements represent the underlying(cid:3)
transactions and events in a manner that achieves fair presentation.
• Obtain sufficient appropriate audit evidence regarding the financial
information(cid:3)of the entities or business activities within the Group to express an
opinion on(cid:3)the consolidated financial statements. We are responsible for the
direction,(cid:3)supervision and performance of the group audit. We remain solely
responsible(cid:3)for our audit opinion.
We communicate with Audit Committee regarding, among other matters, the
planned scope and timing of the audit and significant audit findings, including any
significant deficiencies in internal control that we identify during our audit.
We also provide Audit Committee with a statement that we have complied with
relevant ethical requirements regarding independence, and to communicate with
them all relationships and other matters that may reasonably be thought to bear
on our independence, and where applicable, related safeguards.
From the matters communicated with Audit Committee, we determine those
matters that were of most significance in the audit of the consolidated and
separate financial statements of the current period and are therefore the key audit
matt ers. We describe these matters in our auditor's report unless law or
regulation precludes public disclosure about the matter or when, in extremely rare
circumstances, we determine that a matter should not be communicated in our
report because the adverse consequences of doing so would reasonably be
expected to outweigh the public interest benefits of such communication.
76
Report on Other Legal and Regulatory Requirements
Compliance with the requirements of Schedule 6 of the Companies and Allied
Matters Act, Cap C.20, Laws of the Federation of Nigeria, 2004
In our opinion, proper books of account have been kept by the Bank, so far as
appears from our examination of those books and the Bank's statement of
financial position and statement of profit or loss and other comprehensive income
are in agreement with the books of account.
Compliance with Section 27 (2) of the Banks and the other Financial Institutions
Act Cap 83, Laws of the Federation of Nigeria, 2004 and Central Bank of Nigeria
circular 850/1/2004
(cid:76)(cid:17) The Bank and Group paid penalties in respect of contravention of the Banks and(cid:3)
Other Financial Institutions Act, Cap B3, Laws of the Federation of Nigeria,(cid:3)
2004 during the year ended 31 December 2019. Details of penalties paid are .(cid:3)
disclosed in note 41 to the financial statements.
(cid:76)(cid:76)(cid:17) Related party transactions and balances are disclosed in note 37 to the financial(cid:3)
statements in compliance with the Central Bank of Nigeria circular BSD/1/2004.
Oluwafemi (cid:50). Awotoye, FCA
FRC/2013/ICAN/00000001182
For : KPMG Professional Services
Chartered Accountants
10 February 2020
Lagos, Nigeria
(cid:14)
77
Zenith Bank Plc Annual Report December 31, 2019
Consolidated and Separate Statements of Profit or Loss and other
Comprehensive Income for the Year Ended December 31, 2019
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-19 31-Dec-18
31-Dec-19
31-Dec-18
6
7
8
9
11
10
25
26
36
12
13a
13a
662,251
630,344
415,563
440,052
564,687
339,310
538,004
367,816
(148,532)
(144,458)
(126,237)
(124,156)
267,031
295,594
213,073
243,660
(24,032)
(18,372)
(23,393)
(15,313)
242,999
277,222
189,680
228,347
100,106
117,798
14,216
81,814
80,202
17,947
83,641
117,772
10,838
64,124
80,202
17,479
(21,436)
(16,648)
(18,887)
(14,625)
(3,078)
(2,399)
(2,795)
(2,187)
(77,858)
(68,556)
(62,038)
(56,657)
(129,453)
(137,897)
(118,191)
(124,576)
243,294
231,685
200,020
192,107
-
(4,052)
-
(4,052)
(34,451)
(34,209)
(22,017)
(22,575)
208,843
193,424
178,003
165,480
Fair value movements on equity instruments at FVOCI
21(b)
13,870
1,459
13,870
1,459
Items that are or may be reclassified to profit or loss:
Foreign currency translation differences for foreign operations
Fair value movements on debt securities at FVOCI
21(b)
Other comprehensive income/(loss) for the year
(8,498)
452
5,824
4,828
-
-
-
-
-
6,287
13,870
1,459
Total comprehensive income for the year
214,667
199,711
191,873
166,939
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)
208,693
193,147
178,003
165,480
150
277
-
-
214,577
199,437
191,873
166,939
90
274
-
-
14
6.65
6.15
5.67
5.27
The accompanying notes are an integral part of these consolidated and separate financial statements.
78
Consolidated and Separate Statements of
Financial Position as at December 31, 2019
In millions of Naira
Note(s)
31-Dec-19
31-Dec-18
31-Dec-19
31-Dec-18
Group
Bank
Assets
Cash and balances with central banks
Treasury bills
Assets pledged as collateral
Due from other banks
Derivative assets
Loans and advances
Investment securities
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
936,278
991,393
431,728
707,103
92,722
954,416
1,000,560
592,935
674,274
88,826
2,305,565
1,823,111
591,097
565,312
-
11,885
77,395
185,216
16,497
-
9,513
80,948
149,137
16,678
879,449
822,449
431,728
482,070
92,722
2,239,472
189,358
34,625
11,223
71,412
165,456
15,109
902,073
817,043
592,935
393,466
88,826
1,736,066
156,673
34,003
9,197
75,910
133,854
15,399
6,346,879
5,955,710
5,435,073
4,955,445
4,262,289
3,690,295
3,486,887
2,821,066
14,762
9,711
25
363,764
392,871
322,479
39,092
16,995
9,154
67
231,716
393,295
437,260
361,177
14,762
6,627
-
386,061
392,871
329,778
39,092
16,995
5,954
-
223,463
393,295
458,463
361,177
5,404,993
5,139,959
4,656,078
4,280,413
15,698
255,047
412,948
257,439
941,132
15,698
255,047
322,237
221,231
814,213
15,698
255,047
302,028
206,222
778,995
15,698
255,047
238,635
165,652
675,032
754
1,538
-
-
941,886
815,751
778,995
675,032
6,346,879
5,955,710
5,435,073
4,955,445
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 28 January, 2020 and signed on its
behalf by:
Jim Ovia, CON (Chairman)
FRC/2013/CIBN/00000002406
Ebenezer Onyeagwu (Group Managing Director &
Chief Executive Officer)
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, 2019
Consolidated and Separate Statements of
Changes in Equity as at December 31, 2019
Group
Attributable to equity holders of the Parent
In millions of Naira
Share
capital
Share
premium
Foreign currency
translation
reserve
Fair value
reserve
Statutory
reserve
SMIEIS
reserve
Credit risk
reservee
Retained
earnings
Total
Non-
Total equity
controlling
interest
Restated 1 January, 2018
15,698
255,047
33,683
Impact of adopting IFRS 9 at 1 January 2018
-
-
-
-
Restated 1 January, 2018
15,698
255,047
33,683
Profit for the year
Foreign currency translation differences
Fair value movements on equity instruments
Total comprehensive income for the Year
Transfer between reserves
Transactions with owners of the Parent
Dividends
Cost of transfer from income to stated capital
At December 31, 2018
At 1 January, 2019
Profit for the year
Foreign currency translation differences
Fair value movements on equity instruments
Fair value movements on debt securities
Total comprehensive income for the year
Transfer between reserves
Transactions with owners of the Parent
Dividends
Acquisition of NCI without change in control*
-
-
-
-
-
-
-
-
-
-
-
-
-
15,698
255,047
15,698
255,047
-
-
-
-
-
-
-
-
-
-
-
-
-
-
4,831
-
4,831
-
-
-
38,514
38,514
-
(8,438)
-
-
(8,438)
-
-
-
8,399
-
8,399
-
-
1,459
1,459
-
-
-
9,858
9,858
-
-
13,870
452
14,322
-
-
-
At December 31, 2019
15,698
255,047
30,076
24,180
197,395
3,729
2,059
412,948
941,132
* See note 22(i)
80
135,064
3,729
2,342
135,064
3,729
2,342
32,456
(732)
199,437
274
199,711
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
356,837
(108,116)
248,721
193,147
193,147
(31,724)
(86,340)
(1,567)
322,237
208,693
-
-
-
-
-
208,693
(30,324)
810,799
(108,116)
702,683
193,147
4,831
1,459
(86,340)
(1,567)
814,213
208,693
(8,438)
13,870
452
-
-
(87,910)
(87,910)
252
252
-
-
-
-
-
-
-
-
-
-
-
-
-
-
1,317
(53)
1,264
277
(3)
1,538
1,538
150
(60)
-
-
-
-
-
-
-
-
(874)
754
812,116
(108,169)
703,947
193,424
4,828
1,459
(86,340)
(1,567)
815,751
815,751
208,843
(8,498))
13,870
452
-
-
(87,910)
(622)
941,886
29,875
449
214,577
90
214,667
167,520
3,729
167,520
3,729
1,610
1,610
322,237
814,213
Group
Attributable to equity holders of the Parent
In millions of Naira
Profit for the year
Foreign currency translation differences
Fair value movements on equity instruments
Total comprehensive income for the Year
Transfer between reserves
Transactions with owners of the Parent
Dividends
Cost of transfer from income to stated capital
At December 31, 2018
At 1 January, 2019
Profit for the year
Foreign currency translation differences
Fair value movements on equity instruments
Fair value movements on debt securities
Total comprehensive income for the year
Transfer between reserves
Transactions with owners of the Parent
Dividends
Acquisition of NCI without change in control*
* See note 22(i)
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
4,831
4,831
38,514
38,514
(8,438)
(8,438)
-
-
-
-
-
-
-
-
-
-
-
-
1,459
1,459
9,858
9,858
13,870
452
14,322
-
-
-
-
-
-
-
-
-
-
-
15,698
255,047
15,698
255,047
Share
capital
premium
Share
Foreign currency
Fair value
reserve
translation
reserve
Statutory
reserve
SMIEIS
reserve
Credit risk
reservee
Retained
earnings
Total
Non-
controlling
interest
Total equity
Restated 1 January, 2018
15,698
255,047
33,683
8,399
135,064
3,729
2,342
Impact of adopting IFRS 9 at 1 January 2018
-
-
-
Restated 1 January, 2018
15,698
255,047
33,683
8,399
135,064
3,729
2,342
-
-
-
-
32,456
-
-
-
-
-
-
-
-
-
167,520
3,729
167,520
3,729
-
-
-
-
-
29,875
-
-
-
-
-
-
-
-
-
-
-
-
-
(732)
-
-
1,610
1,610
-
-
-
-
-
449
-
-
356,837
(108,116)
248,721
193,147
-
-
193,147
(31,724)
(86,340)
(1,567)
810,799
(108,116)
702,683
193,147
4,831
1,459
199,437
-
(86,340)
(1,567)
322,237
814,213
322,237
208,693
-
-
-
208,693
(30,324)
814,213
208,693
(8,438)
13,870
452
214,577
-
(87,910)
(87,910)
252
252
At December 31, 2019
15,698
255,047
30,076
24,180
197,395
3,729
2,059
412,948
941,132
1,317
(53)
1,264
277
(3)
-
274
-
-
-
1,538
1,538
150
(60)
-
-
90
-
-
(874)
754
812,116
(108,169)
703,947
193,424
4,828
1,459
199,711
-
(86,340)
(1,567)
815,751
815,751
208,843
(8,498))
13,870
452
214,667
-
(87,910)
(622)
941,886
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Zenith Bank Plc Annual Report December 31, 2019
Consolidated and Separate Statements of
Changes in Equity as at December 31, 2019
Bank
In millions of Naira
Share
capital
Share
premium
Fair
value
reserve
Statutory
reserve
SMIEIS
reserve
Credit
risk
reserve
Retained
earnings
Total
equity
Restated 1 January 2018 Adjustments
,
255,047
8,399
127,243
3,729
Impact of adopting IFRS 9 at 1 January 2018
-
-
-
-
-
Restated 1 January, 2018
15,698
255,047
8,399
127,243
3,729
Profit for the year
Fair value movements on equity instruments
Total comprehensive income for the year
Transfer between reserves
Dividends
At 31 December, 2018
At 01 January 2019
Profit for the year
Fair value movements on equity instruments
Total comprehensive income for the year
Transfer between reserves
Dividends
-
-
-
-
-
-
-
-
-
-
15,698
255,047
15,698
255,047
-
-
-
-
-
-
-
-
-
-
-
1,459
1,459
-
-
9,858
9,858
-
13,870
13,870
-
-
-
24,822
-
152,065
152,065
-
-
-
-
-
26,700
-
-
-
-
-
-
3,729
3,729
-
-
-
-
-
Balance at December 31, 2019
15,698
255,047
23,728
178,765
3,729
The accompanying notes are an integral part of these consolidated and separate financial statements.
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
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
238,635
675,032
178,003
-
178,003
13,870
178,003
191,873
(26,700)
-
(87,910)
(87,910)
302,028
778,995
82
Consolidated and Separate Statement of
Cash Flows for the Year Ended December 31, 2019
In millions of Naira
Cash flows from operating activities
Profit after tax for the year
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 (increase)/decrease in loans and advances
Net (increase)/decrease in other assets
Net decrease/(increase) in treasury bills with maturities greater than three
months
Group
Bank
Note(s)
2019
2018
2019
2018
208,843
193,424
178,003
165,480
8
8
8
8
27,754
(908)
(2,473)
(341)
43(i)
(10,905)
21,436
3,078
(1,932)
5,949
25
26
10
31
6
7
10
13
13,303
(807)
5,337
539
1,990
16,648
2,399
(1,795)
27,778
27,148
(928)
(2,473)
(354)
(10,905)
18,887
2,795
(5,532)
5,949
9,396
(1,051)
6,441
527
1,990
14,625
2,187
(5,395)
27,778
(415,563)
(440,052)
(339,310)
(367,816)
148,532
144,458
126,237
124,156
(147)
34,451
17,774
(259)
38,261
1,224
(152)
22,017
21,382
43(iv)
(492,717)
161,690
(513,382)
43(x)
43(ii)
3,863
3,050
194,352
(187,329)
(4,853)
183,300
Net (increase)/decrease in treasury bills (FVTPL)
43(iii)
(197,798)
37,343
(197,801)
37,343
Net decrease/(increase) in assets pledged as collateral
43(xi)
161,321
(124,925)
161,321
(124,925)
Net decrease/(increase) in investment securities
43(i)
1,513
(203,264)
(7,833)
(5,755)
Net increase in restricted balances (cash reserves)
43(xiii)
(55,479)
(58,357)
(55,479)
(58,386)
Net increase in due from banks with maturity greater than three months
18
(223,413)
-
(223,413)
Net increase in customer deposits
Net increase/(decrease) in other liabilities
Net increase in derivative assets
Net decrease in derivative liabilities
Interest received
Dividend received
Interest paid
Tax paid
VAT paid
43(v)
43(vi)
43(xii)
43(xiv)
564,135
252,380
134,974
(16,298)
(3,896)
(2,233)
(31,607)
(3,810)
664,555
165,524
(3,896)
(2,233)
102,396
(169,903)
187,192
(42,970)
43 (viii)
407,104
434,846
335,518
365,125
10
1,932
1,795
5,532
5,395
43 (ix)
(135,575)
(134,201)
(114,398)
(116,234)
13(c)
43(vi)
(36,308)
(37,925)
(23,370)
(26,742)
(381)
(260)
(381)
(260)
Net cash flows (used in)/generated from operations
339,168
94,352
390,093
184,314
(241)
26,627
4,704
135,770
(28,366)
(33,619)
-
76,541
(10,860)
(31,607)
(3,810)
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Zenith Bank Plc Annual Report December 31, 2019
Consolidated and Separate Statement of Cash Flows
for the Year Ended December 31, 2019
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
Group
Bank
Note(s)
2019
2018
2019
2018
25
(62,333)
(35,712)
(50,901)
(30,501)
43(vii)
26
2,976
(2,118)
3,490
(3,928)
530
(1,539)
406
(3,260)
Purchase of equity securities
21
(50)
(34,200)
(50)
(34,200)
Net cash used in investing activities
(61,525)
(70,350)
(51,960)
(67,555)
Cash flows from financing activities
Repayment & repurchase of debt securities issued
31
(340,358)
-
(340,358)
-
Borrowed funds
Proceeds from long term borrowing
Repayment of long term borrowing
Proceeds from onlending facility
Repayment of onlending facility
Lease liability principal payment
Acquisition of additional interest in Zenith Bank Ghana
Dividends paid to shareholders
30
30
29(b)
29(b)
44(vi)
22(i)
39
198,358
370,606
252,364
391,810
(313,139)
(289,842)
(381,049)
(352,326)
135,681
(136,105)
(2,196)
(622)
57,194
(46,933)
(2,760)
-
135,681
57,194
(136,105)
(46,933)
(2,196)
(622)
(2,760)
-
(87,910)
(86,340)
(87,910)
(86,340)
Net cash generated from / (used in) financing activities
(546,291)
1,925
(560,195)
(39,355)
Net (decrease)/increase in cash and cash equivalents
(268,648)
25,927
(222,062)
77,404
Analysis of changes in cash and cash equivalents :
Cash and cash equivalent at the beginning of the year
947,038
916,342
610,915
533,511
(decrease)/increase in cash and cash equivalents
(268,648)
25,927
(222,062)
77,404
Effect of exchange rate movement on cash balances
(7,675)
4,769
-
-
Cash and cash equivalents at the end of the year
40
670,715
947,038
388,853
610,915
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, 2019
Notes to the Consolidated and Separate Financial
Statements for the Year Ended December 31, 2019
1.
General information
Zenith Bank Plc (the “Bank”) was incorporated in Nigeria under
the Companies and Allied Matters Act as a private limited liability
company on May 30, 1990. It was granted a banking licence in
June 1990, to carry on the business of commercial banking and
commenced business on June 16, 1990. The Bank was converted
into a Public Limited Liability Company on May 20, 2004. The
Bank’s shares were listed on October 21, 2004 on the Nigerian
Stock Exchange. In August 2015, the Bank was admitted into the
Premium Board of the Nigerian Stock Exchange.
The principal activity of the Bank is the provision of banking and
other financial services to corporate and individual customers.
Such services include granting of loans and advances, corporate
finance and money market activities.
The Bank has six subsidiary companies namely, Zenith Bank
(Ghana) Limited, Zenith Pensions Custodian Limited, Zenith Bank
(UK) Limited, Zenith Bank (Sierra Leone) Limited, Zenith Bank
(The Gambia) Limited and Zenith Nominees Limited. The Bank
also has a representative office in China in addition to operating
a branch of Zenith Bank (UK) Limited in the United Arab Emirates.
ii.)
The consolidated financial statements for the year ended
December 31, 2019 comprise the Bank and its subsidiaries
(together referred to as “the Group” and individually as “Group
entities”) and the separate financial statements comprise the
Bank. The consolidated and separate financial statements for the
year ended December 31, 2019 were approved for issue by the
Board of Directors on January 28, 2020.
The Group does not have any unconsolidated structured entity.
2.0
(a) Changes in accounting policies
assets. Also, additional interest expense as a
result of the unwinding of the lease liability.
Disclosures on IFRS 16.
3)
i.)
IFRS 16 Leases
The Group has adopted IFRS 16, “Leases” as issued by the
IASB in July 2014 with a date of transition of 1 January
2019, which resulted in changes in accounting policies.
As permitted by the transitional provision of the standard,
the Group has chosen the modified retrospective
approach to the application of IFRS 16. This approach
allows the Group not to restate comparative financial
information. The major impact of the adoption of this
standard is that the Group will be required to capitalize
all leases (i.e. recognize a right-of-use asset and a lease
liability) with the exemption of certain short-term leases
and leases of low-value assets.
IFRIC 23 Uncertainty over income tax treatment
The amendment clarifies how to determine the
accounting tax position when there is uncertainty over
income tax treatments.
The Interpretation requires an entity to:
•
determine whether uncertain tax positions are
assessed separately or as a group; and
assess whether it is probable that a tax authority
will accept an uncertain tax treatment used, or
proposed to be used, by an entity in its income
tax filings:
If yes, the entity should determine its accounting
tax position consistently with the tax treatment
used or planned to be used in its income tax
filings.
If no, the entity should reflect the effect of
uncertainty in determining its accounting tax
position.
•
•
•
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
consequential
amendments to other standards with initial date of
application of January 1, 2019.
The effect of initially applying these standards is mainly
attributed to the following,
including any
1)
2)
Recognition of right-of-use assets and lease
liability for operating leases.
Additional depreciation on the right-of-use
The Group has adopted IFRIC 23 effective 1 January 2019.
(b)
2.1
(a).
Significant accounting policies
Except as noted in Note 2.0(a), the Group has consistently
applied the following accounting policies to all periods
presented in these consolidated and separate financial
statements, unless otherwise stated.
Basis of preparation
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
86
(b).
(c)
2.2
(a)
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.
This is the first set of consolidated and separated
financial statements in which IFRS 16 has been applied.
Changes arising from the initial application of IFRS 16 or
accounting policies are disclosed in Note 2.14
Basis of measurement
The financial statements have been prepared under
the historical cost convention with the exception of the
following:
•
liabilities measured at
Financial assets and
amortised cost;
Derivative financial
measured at fair value; and
Non-derivative financial
instruments, carried
at fair value through profit or loss, or fair value
through OCI are measured at fair value.
instruments which are
•
•
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.
Basis of Consolidation
Subsidiaries
Subsidiaries are entities controlled by the Group. The
Group controls an entity if it is exposed to, or has the
rights to variable returns from its involvement with
the entity and has the ability to affect those returns
through its power over the entity. The Group reassesses
whether it has control if there are changes to one or
more elements of control. This includes circumstances
in which protective rights held become substantive and
lead to the Group having control over an investee.
The financial statements of subsidiaries are consolidated
from the date the Group acquires control, up to the date
that such effective control ceases.
Changes in the Group’s interest in a subsidiary that
do not result in a loss of control are accounted for as
equity transactions (transactions with owners). When
the proportion of the equity held by Non Controlling
Interests (NCIs) changes, the carrying amounts of
the controlling and NCIs are adjusted to reflect the
changes in their relative interests in the Subsidiary.
Any difference between the amount by which the non-
controlling interest is adjusted and the fair value of the
consideration paid or received is recognised directly in
equity and attributed to the Group.
Inter-company transactions, balances and unrealised
gains on transactions between companies within the
Group are eliminated on consolidation. Unrealised losses
are also eliminated in the same manner as unrealised
gains, but only to the extent that there is no evidence
of impairment. Accounting policies of subsidiaries have
been changed where necessary to ensure consistency
with the policies adopted by the Group.
In the separate financial statements, investments in
subsidiaries are measured at cost.
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.
Associates
Associates are all entities over which the Group
has significant influence but not control, generally
accompanying a shareholding of between 20% and
50% of the voting rights. Investments in associates are
accounted for using the equity method of accounting
and are
initially recognised at cost. The Group’s
investment in associates includes goodwill identified on
acquisition, net of any accumulated impairment loss.
The Group’s share of its associates’ post-acquisition
profits or losses is recognised in profit or loss, and its
share of post- acquisition movements in reserves are
recognised in reserves. The cumulative post-acquisition
movements are adjusted against the carrying amount of
the investment. When the Group’s share of losses in an
associate equals or exceeds its interest in the associate,
including any other unsecured receivables, the Group
does not recognise further losses, unless it has incurred
obligations or made payments on behalf of the associate.
(b)
(c)
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Zenith Bank Plc Annual Report December 31, 2019
Notes to the Consolidated and Separate Financial
Statements for the Year Ended December 31, 2019
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.
(d)
interests are measured at
Non-controlling interests
Non-controlling
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.
2.3
Translation of foreign currencies
(c)
Foreign currency transactions and balances
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 separate and consolidated
financial statements. Except as otherwise indicated,
financial information presented in Naira has been
rounded to the nearest million.
(a)
(b)
Group companies
The results and financial position of all the Group entities
(none of which has the currency of a hyper-inflationary
economy) that have a functional currency different
from the presentation currency are translated into the
presentation currency as follows:
(i)
assets and liabilities for statement of financial
position presented are translated at the closing
rate at the reporting date;
income and expenses for each statement of
profit or loss and other comprehensive income
are translated at average exchange rates (unless
this average is not a reasonable approximation
of the cumulative effect of the rates prevailing
on the transaction dates, in which case income
and expenses are translated at the rate on the
dates of the transactions); and
all resulting exchange differences are recognised
in other comprehensive income and presented
within equity as foreign currency translation
reserves.
(ii)
(iii)
88
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.
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. When a gain or loss on non-monetary
item is recognised in other comprehensive income,
any exchange component of that gain or loss shall be
recognised in other comprehensive income. Conversely,
when a gain or loss on a non-monetary item is
recognised in profit or loss, any exchange of that gain or
loss shall be recognised in profit or loss.
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
2.4
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.
Cash and cash equivalents
For the purposes of the statement of cash flow, cash
and cash equivalents comprise balances with original
maturities of three (3) months or less than three months
from the date of acquisition that are subject to an
insignificant risk of changes in their fair value, and are
used by the Group in the management of its short-term
commitments. They include cash and non- restricted
balances with central banks, treasury bills and other
eligible bills, amounts due from other banks and short-
term government securities.
2.5
(a)
Financial instruments
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).
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.
All other financial assets including 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.
Subsequent measurement
financial
Subsequent
instruments are measured either at amortised cost or
fair value depending on their classification category.
initial measurement,
to
•
•
(b)
(c)
(i)
Classification
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)
•
Financial liabilities
(ii)
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
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Zenith Bank Plc Annual Report December 31, 2019
Notes to the Consolidated and Separate Financial
Statements for the Year Ended December 31, 2019
required to be measured at FVTPL, or
The Group elects to measure the financial liability at
FVTPL (using the fair value option).
the present value of any expected payment when a
payment under the contingent liability has become
probable and the unamortised fee.
and
loan
contracts
guarantees
Financial
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 at the higher of
the loss allowance determined in accordance with IFRS
9 (see note 3.2.18) and the amount initially recognised
less, when appropriate, the cumulative amount of
income recognised in accordance with the principles of
IFRS 15.
The Group has issued no loan commitments that are
measured at FVTPL.
Liabilities arising from financial guarantees and loan
commitments are included within provisions.
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
Business model assessment
The Group assesses the objective of a business model in which
an asset is held at a portfolio level because this best reflects the
way the business is managed, and information is provided to
management. The information considered includes:
•
the stated policies and objectives for the portfolio and
the operation of those policies in practice. In particular,
whether management’s strategy focuses on earning
contractual interest revenue, maintaining a particular
interest rate profile, matching the duration of the
financial assets to the duration of the liabilities that are
funding those assets or realising cash flows through the
sale of the assets;
how the performance of the portfolio is evaluated and
reported to the Group’s management;
the risks that affect the performance of the business
model (and the financial assets held within that business
model) and its strategy for how those risks are managed;
how managers of the business are compensated (e.g.
whether compensation is based on the fair value of the
assets managed or the contractual cash flows collected);
and
the frequency, volume and timing of sales in prior
periods, the reasons for such sales and its expectations
about future sales activity. However, information about
sales activity is not considered in isolation, but as part
of an overall assessment of how the Group’s stated
objective for managing the financial assets is achieved
and how cash flows are realised.
•
•
•
•
Financial instruments
2.5
Financial assets that are held for trading or managed and whose
performance is evaluated on a fair value basis are measured at
FVTPL because they are neither held to collect contractual cash
flows nor held both to collect contractual cash flows and to sell
financial assets.
Assessment of whether contractual cash flows are solely
payments of principal and interest
For the purposes of this assessment, ‘principal’ is defined as the
fair value of the financial asset on initial recognition. ‘Interest’ is
defined as consideration for the time value of money and for
the credit risk associated with the principal amount outstanding
during a particular period of time and for other basic lending
risks and costs (e.g. liquidity risk and administrative costs), as
well as profit margin.
In assessing whether the contractual cash flows are SPPI, the
Group considers the contractual terms of the instrument.
•
(iii)
90
This includes assessing whether the financial asset contains
a contractual term that could change the timing or amount
of contractual cash flows such that it would not meet this
condition. In making the assessment, the Group considers:
•
contingent events that would change the amount and
timing of cash flows;
leverage features;
prepayment and extension terms;
terms that limit the Group’s claim to cash flows from
specified assets (e.g. non-recourse loans); and features
that modify consideration of the time value of money
(e.g. periodical reset of Interest rate).
•
•
•
The Group holds a portfolio of long-term fixed-rate loans for
which the Group has the option to propose to revise the interest
rate at periodic reset dates. These reset rights are limited to
the market rate at the time of revision. The borrowers have an
option to either accept the revised rate or redeem the loan at par
without penalty. The Group has determined that the contractual
cash flows of these loans are SPPI because the option varies the
interest rate in a way that is consideration for the time value of
money, credit risk, other basic lending risks and costs associated
with the principal amount outstanding.
Reclassifications
Financial assets are not reclassified subsequent to their initial
recognition, except in the period after the Group changes its
business model for managing financial assets.
(d)
(i)
Derecognition
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
(ii)
(e)
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-and- repurchase transactions.
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.
Financial liabilities
The Group derecognises a financial liability when its
contractual obligations are discharged or cancelled, or
expire.
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
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Notes to the Consolidated and Separate Financial
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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 (2.9)), 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 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.
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.
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.
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
(f )
(g)
(h)
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other observable current market transactions in the
same instrument (without modification or repackaging)
or based on a valuation technique whose variables
include only data from observable markets, then the
difference is recognised in profit or loss on initial
recognition of the instrument. In other cases, the fair
value at initial recognition is considered to be the
transaction price and the difference is not recognised in
profit or loss immediately but is recognised over the life
of the instrument on an appropriate basis or when the
instrument is redeemed, transferred or sold, or the fair
value becomes observable.
If an asset or a liability measured at fair value has a
bid price and an ask price, then the Group measures
assets and long positions at a bid price and liabilities
and short positions at an ask price. Where the Bank has
positions with offsetting risks, mid market prices are
used to measure the offsetting risk positions and a bid
or ask price adjustment is applied only to the net open
position as appropriate.
The fair value of a demand deposit is not less than the
amount payable on demand, discounted from the first
date on which the amount could be required to be paid.
The Group recognises transfers between levels of the
fair value hierarchy as of the end of the reporting period
during which the change has occurred.
Subsequent to initial recognition, the fair value of a
financial instrument is based on quoted market prices
or dealer price quotation for financial instruments. If a
market for a financial instrument is not active, then the
Group establishes fair value using a valuation technique.
Valuation techniques include using recent arm’s length
transactions between knowledgeable, willing parties
(if available), reference to the current fair value of other
instruments that are substantially the same, discounted
cash flow analyses and option pricing models. The
chosen valuation technique makes maximum use of
market inputs, relies as little as possible on estimates
specific to the Group, incorporates all factors that market
participants would consider in setting a price, and is
consistent with accepted economic methodologies
for pricing financial instruments. Inputs into valuation
techniques reasonably represent market expectations
and measures of the risk-return factors inherent in the
financial instrument.
See note 3.5 on fair valuation methods and assumptions.
(i)
(j)
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.
Assets under repurchase agreement
Assets under repurchase agreement are transactions
in which the Group sells a security and simultaneously
agrees to repurchase it (or an asset that is substantially
the same as the one sold) at a fixed price on a future
date. The Group continues to recognise the securities
in their entirety in the statement of financial position
because it retains substantially all of the risks and
rewards of ownership. The cash consideration received
is recognised as a financial asset and a financial liability
is recognised for the obligation to pay the repurchase
price. Because the Group sells the contractual rights
to the cash flows of the securities, it does not have the
ability to use the transferred assets during the term of
the arrangement.
2.6
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. Non-
hedging derivative assets and liabilities are not reclassified
subsequent to their initial recognition.
Impairment
2.7
The Group recognises loss allowances for ECL on the following
financial instruments that are not measured at FVTPL:
•
Financial assets that are debt instruments;
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•
•
•
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
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.
•
•
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.
Reversal of Impairment and Backward Transfer Criteria
When the Group has measured the loss allowance for a financial
instrument at an amount equal to lifetime ECL in the previous
reporting period but determines at the current reporting date
that criteria for recognizing the lifetime ECL is no longer met
i.e. cured, the Group measures the loss allowance at an amount
equal to 12-month ECL at the current reporting date.
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. Financial instrument for which
a 12-month ECL is recognised are referred to as ‘stage 1 financial
instruments’.
However, the Group observes the following backward transfer
criteria (probationary period) to monitor if the criteria for
recognizing the lifetime ECL has decreased significantly before
the backward transfer can be effected on the credit rating of the
customer;
Life-time ECL are the ECL that result from all possible default
events over the expected life of the financial instrument.
Financial instruments for which a lifetime ECL is recognised
but which are not credit-impaired are referred to as ‘Stage 2
financial instruments’.
Financial instruments for which lifetime ECL is recognised
which are credit impaired are referred to as ‘Stage 3 financial
instruments”.
Loss allowances for other assets and lease receivables are always
measured at an amount equal to lifetime ECL.
The Group considers debt investment securities to have low
credit risk when its credit risk rating is equivalent to the globally
understood definition of ‘investment grade’ or its is a sovereign
debt instruments issued in the local currency.
90 days probationary period to move a financial instrument from
Lifetime ECL not credit-impaired (Stage 2 financial instruments)
to 12 months ECL (Stage 1 financial instruments);
90 days probationary period to move a financial instrument from
Lifetime ECL credit-impaired (Stage 3 financial instruments) to
Lifetime ECL not impaired (Stage 2 financial instruments);
180 days probationary period to move a loan from Lifetime ECL
credit-impaired (Stage 3 financial instruments) to 12 months ECL
(Stage 1 financial instruments).
The Group also considers other qualitative criteria where
necessary.
Impairment gains arising from backward transfers will be
recognized as part of impairment losses on financial instruments.’
2.7.1 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 flows that are
•
•
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2.7.2 Credit-impaired financial assets
At each reporting date, the Group assesses whether financial
assets carried at amortised cost are credit-impaired referred to as
‘Stage 3 financial instruments. 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.
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.
2.7.3 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.
•
•
•
•
•
•
•
2.7.4 Write-off policy
The Group writes off a loan balance when the Group’s credit
department determines that the loan is uncollectable and had
been declared delinquent and subsequently classified as lost.
This determination is made after considering information such
as the continuous deterioration in the customer’s financial po-
sition, 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 recov-
ery 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 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.
Reclassification of financial instruments
2.8
Financial assets are required to be reclassified in certain rare
circumstances among the amortised cost, FVOCI and FVTPL
categories. When the Group changes its business model for
managing financial assets, the Group reclassifies all affected
financial assets in accordance with the new model. The
reclassification is applied prospectively from the reclassification
date. Accordingly, any previously recognised gains, losses or
interest are not reinstated. Changes in the business model for
managing financial assets are expected to be very infrequent.
Restructuring of financial instruments
2.9
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 and ECL are
measured as follows;
•
If the expected
in
derecognition of the existing asset, then the expected
cash flows arising from the modified financial asset
restructuring will not
result
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•
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.
2.10 Collateral
The Group obtains collateral where appropriate, from customers
to manage their credit risk exposure to the customers. The
collateral normally takes the form of a lien over the customer’s
assets and gives the Group a claim on these assets for customers
in the event that the customer defaults.
The Group may also use other credit instruments, such as
derivative contracts in order to reduce their credit risk.
Collateral received in the form of securities and other non-cash
assets 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)
In certain cirumstances, property may be repossessed following
the foreclosure on loans that are in default. Repossessed
properties are measured at the lower of carrying amount and
fair value less cost to sell and reported within ‘Other asset’.
Property and equipment
2.11
Property and equipment are stated at historical cost less
accumulated depreciation and accumulated impairment losses.
Historical cost includes expenditure that is directly attributable
to the acquisition of the items. Where significant parts of an item
of property and equipment have different useful lives, they are
accounted for as separate items (major components) of property
and equipment.
Subsequent costs are included in the asset’s carrying amount or
recognised as a separate asset, as appropriate, only when it is
probable that future economic benefits associated with the item
will flow to the Group and the cost of the item can be measured
reliably. All other repairs and maintenance are charged to profit
or loss during the financial year in which they are incurred.
Property and equipment are depreciated on the straight line
basis to their residual values over the estimated useful lives of
the assets. Land is not depreciated.
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
Land
(Not depreciated)
Motor vehicles
Office equipment
Furniture and fittings
Computer equipment
Buildings
4 years
5 years
5 years
3 years
50 years
Leasehold improvement Over the remaining lease period
Right of use assets
Lower of lease term or the useful life for
the specified class of item
Depreciation is included in profit or loss.
Work in progress consists of items of property and equipment
that are not yet available for use. Work in progress is carried at cost
less any required impairment. Depreciation starts when assets are
available for use. An impairment loss is recognised if the asset’s
recoverable amount is less than cost. The asset is reviewed for
impairment when events or changes in circumstances indicate
that the carrying amount may not be recoverable. Once the
items are available for use, they are transferred to relevant classes
of property and equipment as appropriate.
Property and equipment are derecognized on disposal, or when
no future economic benefits are expected from their use or
disposal.
Gains and losses on disposal are determined by comparing
proceeds with carrying amount. These are included in profit or
loss.
Depreciation methods, useful lives and residual values are
reassessed at each reporting date and adjusted if appropriate.
Borrowing 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.
2.12
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.
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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)
it is technically feasible to complete the software
product so that it will be available for use;
management intends to complete the software product
and use or sell it;
there is an ability to use or sell the software product;
it can be demonstrated how the software product will
generate probable future economic benefits
adequate technical, financial and other resources to
complete the development and to use/sell the software
product are available
the expenditure attributable to the software product
during its development can be reliably measured.
(ii)
(iii)
(iv)
(v)
(vi)
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.
residual values
Amortisation methods, useful
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.
Impairment of non-financial assets
2.13
The carrying amounts of the Group’s non-financial assets, other
than deferred tax assets, are reviewed at each reporting date to
determine whether there is any indication of impairment. If any
such indication exists, then the asset’s recoverable amount is
estimated. For intangible assets that have indefinite useful lives
or that are not yet available for use, the recoverable amount is
estimated each period at the same time.
An impairment loss is recognised if the carrying amount of an
asset or its Cash Generating Unit (CGU) exceeds its estimated
recoverable amount. The recoverable amount is the higher of an
asset’s fair value less costs to sell and value in use. In assessing
value in use, the estimated future cash flows are discounted to
their present value using a pre-tax discount rate that reflects
current market assessments of the time value of money and
the risks specific to the asset or CGU. For the purposes of
assessing impairment, assets that cannot be tested individually
are grouped together into the smallest group of assets that
generates cash inflows from continuing use that are largely
independent of the cash flows of other assets or CGU.
The Group’s corporate assets do not generate separate cash
inflows and are utilised by more than one CGU. Corporate assets
are allocated to CGUs on a reasonable and consistent basis and
tested for impairment as part of the testing of the CGU to which
the corporate asset is allocated.
Impairment losses are recognised in profit or loss. Impairment
losses in respect of CGUs are allocated first to reduce the carrying
amount of any goodwill allocated to the CGU (group of CGUs)
and then to reduce the carrying amount of the other assets in
the CGU (group of CGUs) on a pro rata basis.
Impairment losses recognised in prior periods are assessed
at each reporting date for any indications that the loss has
decreased or no longer exists. An impairment loss is reversed if
there has been a change in the estimates used to determine
the recoverable amount. An impairment loss is reversed only
to the extent that the asset’s carrying amount does not exceed
the carrying amount that would have been determined, net of
depreciation or amortisation, if no impairment loss had been
recognised. An impairment loss in respect of goodwill is not
reversed.
Leases
2.14
Policy applicable before 1 January 2019
(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 straightline 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
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(b)
as an expense in the period in which termination takes
place.
A Group company is the lessor
Lease and
instalment sale contracts are primarily
financing transactions in banking activities, with rentals
and
less unearned finance
charges, being included in Loans and advances to
customers in the statement of financial position.
instalments receivable,
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 classifed
as operating leases. Receipts of operating leases are
accounted for as income on the straightline basis over
the period of the lease.
Policy applicable from 1 January 2019.
The Group has initially adopted IFRS 16 Leases from 1 January
2019.
IFRS 16 introduced a single, on-balance sheet accounting model
for leases. As a result, the Group, as a lessee has recognized the
right-of-use assets representing its right to use the underlying
assets and lease liabilities representing its obligation to make
lease payments. Lessors accounting remains similar to previous
accounting policies.
B.
The major lease transaction wherein the Group/Bank is a lessee
relates to the lease of Bank’s branches.
As permitted by the standard, the Group has applied IFRS 16
using the modified retrospective approach. Accordingly, the
comparative information presented for 2018 is not restated – i.e
it is presented, as previously reported, under IAS 17 and related
interpretations and the effect of applying IFRS 16 is recognised
in the opening retained earnings at 1 January 2019. The details of
the changes in accounting policies are disclosed below.
A.
Definition of a lease
The Group has elected to apply the practical expedient
available on transition to IFRS 16 not to reassess
whether a contract is or contains a lease. Accordingly,
the definition of a lease in accordance with IAS 17 and
IFRIC 4 will continue to apply to those leases entered or
modified before 1 January 2019.
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Under IFRS 16, a contract is, or contains a lease if the
contract conveys a right to control the use of an identified
asset for a period of time in exchange for consideration.
The change in definition of a lease mainly relates to the
concept of control. IFRS 16 distinguishes between leases
and service contracts on the basis of whether the use of
an identified asset is controlled by the customer. Control
is considered to exist if the customer has:
•
•
The right to obtain substantially all of the
economic benefits from the use of an identified
asset; and
The right to direct the use of that asset.
The Group will apply the definition of a lease and related
guidance set out in IFRS 16 to all lease contracts entered
into or modified on or after 1 January 2019 (where the
Group is a lessee in the lease contract).
At inception or on reassessment of a contract that
contains a lease component, the Group allocates the
consideration in the contract to each lease and non-
lease component on the basis of their relative stand-
alone prices. However, for leases of properties in which
it is a lessee, the Group has elected not to separate non-
lease components and will instead account for the lease
and non-lease component as a single component.
Group / Bank as a lessee
Leases, under which the Bank possess a contract that
conveys the right to control the use of an identified
asset for a period of time in exchange for consideration
is disclosed in the Bank’s statement of financial position
and recognized as a leased asset.
To assess whether a contract conveys the right to control
the use of an identified asset for a period of time, the
Bank assesses whether, throughout the period of use, it
has both of the following:
(a)
the right to obtain substantially all of the
economic benefits from use of the identified
asset, and
the right to direct the use of the identified asset.
(b)
The Group has elected not to recognize right-of-use
assets and lease liabilities for some leases of low value
assets. The Group recognizes expenses associated with
these leases as an expense on straight line basis over the
lease term.
The Group presents right-of-use assets as a separate
class under ‘property and equipment’. The Group
presents lease liability in other liabilities in the statement
of financial position.
i.
Significant accounting policies
The Group recognizes a right-of-use asset and a lease
liability at the lease commencement date. The right-of-
use asset is initially measured at cost, and subsequently at
cost less any accumulated depreciation and impairment
losses, and adjusted for certain remeasurements of the
lease liability.
The lease liability is initially measured at the present
value of the lease payments that are not paid at the
commencement date, discounted using the interest
rate implicit in the lease or, if that rate cannot be readily
determined, the Group’s incremental borrowing rate.
Generally, the Group uses its incremental borrowing rate
as the discount rate.
The lease liability is subsequently increased by the
interest cost on the lease liability and decreased by
lease payment made. It is remeasured when there is a
change in future lease payments arising from a change
in an index or rate, a change in the estimate of the
amount expected to be payable under a residual value
guarantee, or as appropriate, changes in the assessment
of whether a purchase or extension option is reasonably
certain to be exercised or a termination option is
reasonably certain not to be exercised.
The Group has applied judgement to determine the
lease term for some lease contracts in which it is a
lessee that include renewal options. The assessment
of whether the Group is reasonably certain to exercise
such options impacts the lease term, which significantly
affects the amount of lease liabilities and right-of-use
assets recognized.
C.
ii.
Transition
leases as
Previously, the Group classified property
operating leases under IAS 17. These properties are the
Bank’s branch offices.
•
lease
IAS 17,
At transition, for leases classified as operating
liabilities were
leases under
measured at the present value of the remaining
lease payments, discounted at the Group’s
incremental borrowing rate as at 1 January
2019. Right-of-use assets are measured at an
amount equal to the lease liability, adjusted by
the amount of any prepaid or accrued lease
payments - the Group applied this approach to
all other leases.
The Group leases an aircraft. The Group classified
this lease as a finance lease under IAS 17. At the
date of initial application, the Group measured
the right of use asset and lease liability at the
amount of the finance lease asset and liability
immediately before the date of initial application
of IFRS 16.
The Group used
following practical
the
expedients when applying IFRS 16 to leases
previously classified as operating leases under
IAS 17.
Applied the exemption not to recognize right-
of-use assets and liabilities for leases with less
than 12 months of lease term.
Excluded initial direct costs from measuring
the right-of-use asset at the date of initial
application.•
Used hindsight when determining the lease
term if the contract contains options to extend
or terminate the lease.
•
•
instalments receivable,
Group / Bank as a lessor
Lease and
instalment sale contracts are primarily
financing transactions in banking activities, with rentals
less unearned finance
and
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 capitalized to the value of the lease amount
receivable and accounted for over the lease term as an
adjustment to the effective interest rate method.
The accounting policies applicable to the Group as a
lessor are not different from those under IAS 17. The
Group is not required to make any adjustments on
transition to IFRS 16 for lease in which it acts as a lessor.
The Group recognizes assets held under a finance
lease in its statement of financial position and present
them as a receivable at an amount equal to the net
investment in the lease. Initially, the Group will recognize
a finance lease receivable at the amount equal to the
net investment in the lease. Subsequently, finance
income will be recognized at a constant rate on the
net investment. During any ‘payment free’ period, this
will result in the accrued finance income increasing the
finance lease receivable.
For finance leases, the lease payments included in
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Zenith Bank Plc Annual Report December 31, 2019
Notes to the Consolidated and Separate Financial
Statements for the Year Ended December 31, 2019
the measurement of the net investment in a lease at
commencement date includes variable lease payments
that depend on an index or a rate; other variable
payments (e.g. those linked to future performance
or use of an underlying asset) are excluded from the
measurement of the net investment and are instead
recognized as income when they arise. The treatment
adopted for variable lease payments under operating
leases are consistent with these requirements.
D.
Impacts on the financial statements
On transition to IFRS 16, the Group recognized additional
right-of-use assets and additional lease liabilities as
summarized below:
In millions of Naira
1 January 2019
Additional Right-of-use assets presented as part of
property and equipment
Lease liability presented in other liabilities
17,618
10,692
When measuring the lease liabilities for leases that were classified
as operating leases, the Group discounted lease payments
using its incremental borrowing rates as at 1 January 2019. The
weighted- average rate applied is 16.4%.
In millions of Naira
1 January 2019
Operating
prepayments as at 31 December 2018.
lease presented as part of
Additional right-of-use asset as a result of
extension option which are reasonably certain
to be exercised.
Recognition exemption for leases of low-value
Recognition exemption for short term leases
Right-of-use asset recognized as at 1 January
2019 in property and equipment
10,149
7,559
(2)
(88)
17,618
As a result of initially applying IFRS 16, in relation to the leases
that were previously classified as operating leases, the Group
recognized N16.69 billion of right-of-use assets and N11.21
billion of lease liabilities as at 31 December 2019.
Also, in relation to those leases under IFRS 16, the Group has
recognized depreciation and interest cost, instead of operating
lease expense. During the year ended 31 December 2019, the
Group recognized N1.45 million of depreciation charges and
N3.49 million of interest cost from the lease liabilities.
Provisions
2.15
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.
2.16
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
100
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 8% and 10%
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.
(c)
(d)
(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 personnel
expenses in the profit or loss.
(e)
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.
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.
Share capital and reserves
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.
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)
2.17
(a)
(b)
(f )
(g)
(h)
(i)
Share premium
Premiums from the issue of shares are reported in share
premium.
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
(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.
Institutions Act of 1991
SMIEIS reserve
The SMIEIS reserve is maintained to comply with the
Central Bank of Nigeria (CBN) requirement that all
licensed banks set aside a portion of the profit after tax
in a fund to be used to finance equity investments in
qualifying small and medium scale enterprises. Under
the terms of the guideline (amended by CBN letter dated
11 July 2006), the contributions will be 10% of profit after
tax and shall continue after the first 5 years but banks’
contributions shall thereafter reduce to 5% of profit
after tax. The small and medium scale industries equity
investment scheme reserves are non-distributable.
Transfer to this reserve is no longer mandatory.
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.
Retained earnings
Retained earnings comprise the undistributed profits
from previous periods which have not been reclassified
to any specified reserves.
Fair value reserve
Comprises fair value movements on equity instruments
carried at FVOCI.
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.
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Zenith Bank Plc Annual Report December 31, 2019
Notes to the Consolidated and Separate Financial
Statements for the Year Ended December 31, 2019
2.18
Recognition of interest income and expense
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.
•
interest rate for financial
When calculating the effective
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.
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 credit- impaired, then
the calculation of interest income reverts to the gross basis.
For financial assets that were credit-impaired on
initial
recognition, interest income is calculated by applying the credit-
adjusted 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 2.7.2.
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 2.20).
Fees, commission and other income
2.19
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 2.18).
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
102
equity securities. Dividends are presented in net trading gains,
or other income based on the underlying classification of the
equity investment.
a)
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.
2.20 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.
2.21 Operating expense
Expenses are decreases
in economic benefits during the
accounting period in the form of outflows, depletion of assets
or incurrence of liabilities that result in decrease in equity, other
than those relating to distributions to equity participants.
•
•
•
•
Current tax
Current tax comprises the expected tax payable or
receivable on the taxable income or loss for the year, and
any adjustment to tax payable or receivable in respect of
previous years.
The amount of current tax payable or receivable is the
best estimate of the tax amount expected to be paid
or received that reflects uncertainty related to income
taxes, if any. It is measured using tax rates enacted or
substantively enacted at the reporting date and is
assessed as follows:
Company income tax is computed on taxable profits.
Tertiary education tax is computed on assessable profits.
National Information Technology Development Agency
levy is computed on profit before tax.
Nigeria Police Trust Fund levy is computed on net profit
(i.e. profit after deducting all expenses and taxes from
revenue earned by the company during the year).
Expenses are recognized on an accrual basis regardless of the
time of spending cash. Expenses are recognized in the income
statement when a decrease in future economic benefit related to
a decrease in an assets or an increase of a liability has arisen that
can be measured reliably. Expenses are measured at historical
cost.
Only the portion of cost of a previous period that is related to
the income earned during the reporting period is recognized as
an expense. Expenses that are not related to the income earned
during the reporting period, but expected to generate future
economic benefits, are recorded in the financial statement
as assets. The portion of assets which is intended for earning
income in the future periods shall be recognized as an expense
when the associated income is earned.
Expenses are recognized in the same reporting period when
they are incurred in cases when it is not probable to directly
relate them to particular income earned during the current
reporting period and when they are not expected to generate
any income during the coming years.
2.22 Current and deferred income tax
Income tax expense comprises current tax (company income
tax, tertiary education tax National Information Technology
Development Agency levy and Nigeria Police Trust Fund levy)
and deferred tax. It is recognised in profit or loss except to
the extent that it relates to a business combination, or items
recognised directly in equity or in other comprehensive income.
The Bank had determined that interest and penalties relating to
income taxes, including uncertain tax treatments, do not meet
the definition of income taxes, and therefore are accounted for
under IAS 37 Provisions, Contingent Liabilities and Contingent
Assets.
Total amount of tax payable under CITA is determined based on
the higher of two components namely Company Income Tax
(based on taxable income (or loss) for the year); and minimum
tax. Taxes based on profit for the period are treated as income
tax in line with IAS 12.
Minimum tax
Minimum tax which is based on a gross amount is outside
the scope of IAS 12 and therefore, are not presented as part of
income tax expense in the profit or loss.
Minimum tax is determined based on the sum of:
•
the highest of; 0.25% of revenue of N500,000, 0.5% of
gross profit, 0.25% of paid up share capital and 0.5% of
net assets; and
0.125% of revenue in excess of N500,000.
•
Where the minimum tax charge is higher than the Company
Income Tax (CIT), a hybrid tax situation exists. In this situation,
the CIT is recognised in the income tax expense line in the profit
or loss and the excess amount is presented above the income
tax line as minimum tax.
The Bank offsets the tax assets arising from withholding tax
(WHT) credits and current tax liabilities if, and only if, it has a
legally enforceable right to set off the recognised amounts, and
intends either to settle on a net basis, or to realise the asset and
settle the liability simultaneously. The tax asset is reviewed at
each reporting date and written down to the extent that it is no
longer probable that future economic benefit would be realised.
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Zenith Bank Plc Annual Report December 31, 2019
Notes to the Consolidated and Separate Financial
Statements for the Year Ended December 31, 2019
(b)
investments
Deferred tax
Deferred tax is recognised in respect of temporary
differences between the carrying amounts of assets
and liabilities for financial reporting purposes and the
amounts used for taxation purposes. Deferred tax is not
recognised for: – temporary differences on the initial
recognition of assets or liabilities in a transaction that
is not a business combination and that affects neither
accounting nor taxable profit or loss; – temporary
differences related to
in subsidiaries,
associates and joint arrangements to the extent that
the Bank is able to control the timing of the reversal of
the temporary differences and it is probable that they
will not reverse in the foreseeable future; and – taxable
temporary differences arising on the initial recognition
of goodwill.
Deferred tax assets are recognised for unused tax
losses, unused tax credits and deductible temporary
differences to the extent that it is probable that future
taxable profits will be available against which they can
be used. Future taxable profits are determined based on
the reversal of relevant taxable temporary differences.
If the amount of taxable temporary differences is
insufficient to recognise a deferred tax asset in full, then
future taxable profits, adjusted for reversals of existing
temporary differences, are considered, based on the
business plans of the Company. 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; such reductions are reversed
when the probability of future taxable profits improves.
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.
Deferred tax is measured at the tax rates that are
expected to be applied to temporary differences when
they reverse, using tax rates enacted or substantively
enacted at the reporting date, and reflects uncertainty
related to income taxes, if any.
The measurement of deferred tax reflects the tax
consequences that would follow from the manner in
which the Company expects, at the reporting date, to
recover or settle the carrying amount of its assets and
liabilities.
Deferred tax assets and liabilities are offset only if certain
criteria are met.
Earnings per share
2.23
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.
Segment reporting
2.24
An operating segment is a component of the Group engaged
in business activities from which it can earn revenues, whose
operating results are regularly reviewed by the Group’s Executive
[Management/Board]
in order to make decisions about
resources to be allocated to segments and assessing segment
performance. The Group’s identification of segments and the
measurement of segment results are based on the Group’s
internal reporting to management.
Fiduciary activities
2.25
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.
2.26 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.
3.
Risk management
Enterprise Risk Management
3.1
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.
104
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.
b.
c.
d.
e.
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.
3.1.2 Risk Appetite
The Group’s risk appetite is reviewed by the Board of Directors
annually, at a level that minimizes erosion of earnings or
capital due to avoidable losses or from frauds and operational
inefficiencies.
The Group’s risk appetite describes the quantum of risk that
the Group would assume in pursuit of its business objectives at
any point in time. The Group uses this risk appetite definition in
aligning its overall corporate strategy, its capital allocation and
risks.
The Group sets tolerance limits for identified key risk indicators
(“KRIs”), which served as proxies for the risk appetite for each
risk area and business/support unit. Tolerance levels for KRIs are
jointly define, agreed upon by the business/support units and
subject to annual reviews.
3.1.3 Risk Management Approach
The Group addresses the challenge of risks comprehensively
through an enterprise-wide risk management framework and
a risk governance policy by applying leading practices that
are supported by a robust governance structure consisting of
Board-level and executive management committees. The Board
drives the risk governance and compliance process through
its committees. The audit committee provides oversight
on the systems of internal control, financial reporting and
compliance. The Board credit committee reviews the credit
policies and approves all loans above the defined limits for
Executive Management. The Board Risk Committee sets the risk
philosophy, policies and strategies as well as provides guidance
on the various risk elements and their management. The Board
Risk Control Functions are supported by various management
committees and sub committees (Global Credit committee
and Management Risk committee) that help it develop and
implement various risk strategies. The Global Credit committee
manages the credit approval and documentation activities. It
ensures that the credit policies and procedures are aligned with
the Group’s business objectives and strategies. The Management
Risk committee drives the management of the financial risks
(Market, Liquidity and Credit Risk), operational risks as well as
strategic and reputational risks.
In addition, Zenith Group manages its risks in a structured,
systematic and transparent manner through a global risk policy
which embeds comprehensive risk management processes into
the organisational structure, risk measurement and monitoring
activities. This structure ensures that the Group’s overall risk
exposures are within the thresholds set by the Board.
The key features of the Group’s risk management policy are:
a.
The Board of Directors provides overall risk management
direction and oversight;
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.
b.
c.
d.
e.
f.
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.
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Zenith Bank Plc Annual Report December 31, 2019
Notes to the Consolidated and Separate Financial
Statements for the Year Ended December 31, 2019
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,
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.
b.
c.
d.
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.
lines of authority and responsibility
identification, measurement, monitoring and
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
for
managing individual risk elements in line with the
Board’s overall direction;
Risk
control procedures;
Establish effective internal controls that cover each risk
management process;
Ensure that the Group’s risk management processes are
properly documented;
Create adequate awareness to make risk management a
part of the corporate culture of the Group;
Ensure
established by the Board; and
Ensure that business lines comply with risk parameters
and prudent limits established by the Board;
the boundaries
remains within
that
risk
b.
c.
d.
e.
f.
g.
h.
106
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.
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
Available information points to a mild pick-up of activity in the
second half of 2019,, following a subdued performance in the
first half of 2019 which was weighed by yet another contraction
of the vital oil industry. Although the manufacturing Purchasing
Managers’ Index (PMI) fell from April’s five-month high in May,
the two-month average lies above that of the first quarter,
signaling that business dynamics remain upbeat. Encouragingly,
new orders from abroad quickened to a year-to- date high in
May. Furthermore, bank lending to the private sector accelerated
notably in April, which, coupled with slightly higher business
confidence in May, bodes well for overall activity in the quarter.
The economy is seen gaining some traction this year. In
particular, increased credit provision and the implementation
of the minimum wage hike should lend support to consumer
demand and the non-oil segment of the economy. However, the
slow progress on structural reforms and oil price volatility pose
key risks to the outlook.
The Bank regularly assesses it’s resilience to changes in micro
and macro environments with specific actions to address any
observed or anticipated challenges.
The Bank strongly believe it is well positioned to deal with
liquidity risk and funding challenges that may arise from
any adverse situations and our capital and earnings capacity
(profitability) can withstand the shocks that may arise.
Zenith Bank Plc will continue to support its customers as much
as possible in terms of foreign exchange funding challenges;
credit performance obligations (restructuring repayments to
match cash-flows, where necessary);
Some of the key risk management strategies in the period would
include the following:
(a)
sales and
Continue to monitor impact of global economy in
commodity pricing, Foreign Direct Investment (FDI)
inflows and general behavior of local economy to the
changes in the global market.
Source for cheaper and stable funds
Drive other income sources - Increase marginal value of
current assets utilization and their derivable income as
much as possible. Seek new sources and champions.
Pursue other government activities especially trapping
utilization of government funds for projects and other
activities
Further develop SME/Retail product
penetrations
Develop market hub initiative to host market players
and drive retail participation
Ensure that the Net Interest Margin (NIM) is maintained
for all changes in interest rates.
Create additional foreign exchange funding sources
from the receipt of foreign exchange deposits from
customers especially export proceeds.
Pursue and support export strategies to assure expanded
foreign exchange inflow.
Increased collections of payments (Deploy more friendly
collection tools)
Improve customer service delivery through trainings,
systems, communication, and compensation medium.
Stabilize the Bank’s technology/platforms - This is to
increase and aid customers’ confidence, loyalty and
Bank’s reputation.
Cautiously grow risk assets while maintaining adequate
level of capital.
(b)
(c)
(d)
(e)
(f )
(g)
(h)
(i)
(j)
(k)
(l)
(m)
Credit Risk
3.2
Credit risk is the risk of a financial loss if an obligor does not fully
honour its contractual commitments to the Group. Obligors
may be borrowers, issuers, counterparties or guarantors. Credit
risk is the most significant risk facing the Bank in the normal
course of business. The Bank is exposed to credit risk not only
through its direct lending activities and transactions but also
through commitments to extend credit, letters of guarantee,
letters of credit, securities purchased under reverse repurchase
agreements, deposits with financial
institutions, brokerage
activities, and transactions carrying a settlement risk for the Bank
such as irrevocable fund transfers to third parties via electronic
payment systems.
The Group has robust credit standards, policies and procedures
to control and monitor intrinsic and concentration risks through
all credit levels of selection, underwriting, administration and
control. Some of the policies are:
a.
Credit is only extended to suitable and well identified
customers and never where there is any doubt as to the
ethical standards and record of the intending borrower;
industry or customer will be
Exposures to any
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
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
b.
c.
d.
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Zenith Bank Plc Annual Report December 31, 2019
Notes to the Consolidated and Separate Financial
Statements for the Year Ended December 31, 2019
e.
Estimated Rate of Recovery, which is a measure of the
portion of the debt that can be recovered through
realisation of assets and collateral should default occur.
(i)
(ii)
Internal and external research and market
intelligence reports; and
Regulatory agencies reports
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
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)
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.
industry, and
Credit assessment of the borrower’s
macro-economic factors;
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.
b.
c.
d.
e.
f.
g.
Unrated
Individually insignificant (unrated)
The credit rating system seeks to achieve the foundation level
of the internal rating-based approach under Basel II, through
continuous validation exercises over the years.
(b)
Other debt instruments
With respect to other debt instruments, the Group takes
the following into consideration in the management of
the associated credit risk:
3.2.4 Group Credit Risk Management
Zenith’s approach in managing credit risk is a key element in
achieving its strategic objective of maintaining and further
enhancing its asset quality and credit portfolio risk profile. The
credit standards, policies and procedures, risk methodologies
and framework, solid structure and infrastructure, risk monitoring
and control activities enable the Group to deal with the
emerging risks and challenges with a high level of confidence
and determination.
108
The framework for credit risk assessment at Zenith is well-defined
and institutionally predicated on:
a.
in
and
line with key
assessment of
Clear tolerance limits and risk appetite set at the Board
level, well communicated to the business units and
periodically reviewed and monitored to adjust as
appropriate;
Well-defined target market and risk asset acceptance
criteria;
Rigorous financial, credit and overall risk analysis for each
customer/transaction;
Regular portfolio examination
performance indicators and periodic stress testing;
Continuous
concentrations
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.
b.
c.
d.
e.
f.
g.
h.
i.
j.
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
Management Global
Credit Committee
N1 billion and above (Not exceeding
20% of total shareholders’ fund) 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.
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Zenith Bank Plc Annual Report December 31, 2019
Notes to the Consolidated and Separate Financial
Statements for the Year Ended December 31, 2019
3.2.7
(a) Credit Risk Mitigation, Collateral and other Credit
Enhancements
The Group’s approach to controlling various risks begins with
optimizing the diversification of its exposures. Zenith uses a
variety of techniques to manage the credit risk arising from its
lending activities. These techniques are set out in the Group’s
internal policies and procedures. They are mainly reflected in the
application of various exposure limits: credit concentration limits
by counterparty and credit concentration limits by industry,
country, region and type of financial instrument.
Enforceable legal documentation establishes Zenith’s direct,
irrevocable and unconditional recourse to any collateral, security
or other credit enhancements.
(i)
Collateral Security
A key mitigation step employed by the Group in its credit
risk management process includes the use of collateral
securities to secure its loans and advances as alternative
sources of repayment during adverse conditions. All
major credit facilities to our customers are to be secured
and the security instruments and documentations must
be perfected and all conditions precedent must be met
before drawdown or disbursement is allowed. Collateral
analysis includes a good description of the collateral,
its value, how the value was arrived at, and when the
valuation was made. It is usually necessary to review
the potential adverse changes in the value of collateral
security for the foreseeable future.
Collateral securities that are pledged must be in negotiable form
and usually fall under the following categories:
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,
b.
trademarks,
machinery equipment, patents,
farm
products, general intangibles, etc. These require a
security agreement (usually a floating debenture) which
has to be registered and, must be enforceable under
Nigerian law;
Stocks and shares of publicly quoted companies;
Domiciliation of contracts proceeds;
Documents of title to goods such as shipping
documents consigned to the order of Zenith Bank or any
of its subsidiaries;
Letter of lien; and
Cash collateral.
c.
d.
e.
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 addressed
immediately. 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) and other sovereigns.
Details of collateral pledged by customers against the carrying
amount of loans and advances as at December 31, 2019 are as
follows:
In millions of Naira
Secured against real estate
Secured by shares of quoted companies
Cash Collateral, lien over fixed and floating assets
Unsecured
Total Gross amount
ECL Allowance
Net carrying amount
Group
Bank
Total exposure
Value of collateral
Total exposure Value of collateral
214,040
27,759
1,301,733
918,827
2,462,359
(156,794)
2,305,565
222,648
4,118
1,070,602
-
1,297,368
-
1,297,368
187,659
5,813
1,285,343
911,837
2,390,651
(151,179)
2,239,472
105,637
4,118
1,060,953
-
1,170,708
-
1,170,708
110
Group
December 31, 2019
Disclosure by Collateral
Property/Real estate
Equities
Cash Collateral, lien over fixed and floating assets
Grand total: Fair value of collateral
Grand total: Gross loans
Grand total: ECL Allowance
Grand total: Net amount
Term loan Overdrafts
On lending
Finance lease
Total
173,073
150
732,119
905,342
35,815
3,968
41,677
81,460
1,760,501
212,548
119,912
34,328
1,640,589
178,220
12,574
-
296,640
309,214
483,024
2,435
480,589
1,186
-
165
1,351
6,286
119
222,648
4,118
1,070,601
1,297,367
2,462,359
156,794
6,167
2,305,565
Grand total: Amount of undercollaterization/
(overcollaterization)
(735,247)
(96,760)
(171,375)
(4,816)
(1,008,198)
December 31, 2019
Term loan Overdrafts
On lending
Finance lease
Total
Against 12 months ECL loans and advances
Property/Real estate
Equities
Cash Collateral, lien over fixed and floating assets
Fair value of collateral
Gross loans
ECL Allowance
Net amount
119,237
150
673,805
793,192
20,257
1,503
37,039
58,799
1,499,536
132,221
25,961
2,762
1,473,575
129,459
12,541
-
296,640
309,181
475,591
1,603
473,988
1,186
153,221
-
1,653
165
1,007,649
1,351
1,162,523
6,240
2,113,588
103
30,429
6,137
2,083,159
Amount of undercollaterization/(overcollaterization)
(680,383)
(70,660)
(164,807)
(4,786)
(920,636)
December 31, 2019
Term loan Overdrafts On lending
Finance lease
Total
Against lifetime ECL not credit-impaired loans and advances
Property/Real estate
Equities
Cash Collateral, lien over fixed and floating assets
Fair value of collateral
Gross loans
ECL Allowance
Net amount
52,028
-
50,181
102,209
143,288
12,986
130,302
2,710
834
2,158
5,702
30,172
2,082
28,090
-
-
-
-
7,263
734
6,529
-
-
-
-
31
3
28
54,738
834
52,339
107,911
180,754
15,805
164,949
Amount of undercollaterization/(overcollaterization)
(28,093)
(22,388)
(6,529)
(28)
(57,038)
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Zenith Bank Plc Annual Report December 31, 2019
Notes to the Consolidated and Separate Financial
Statements for the Year Ended December 31, 2019
December 31, 2019
Term loan Overdrafts On lending
Finance lease
Total
Against lifetime ECL credit-impaired loans and advances
Property/Real estate
Equities
Cash Collateral, lien over fixed and floating assets
Fair value of collateral
Gross loans
ECL Allowance
Net amount
Amount of undercollaterization/(overcollaterization)
Bank
December 31, 2019
Disclosure by Collateral
Property/Real estate
Equities
Cash Collateral, lien over fixed and floating assets
Grand total: Fair value of collateral
Grand total: Gross loans
Grand total: ECL Allowance
Grand total: Net amount
Grand total: Amount of undercollaterization/
(overcollaterization)
1,808
12,848
-
8,134
9,942
117,677
80,965
36,712
(26,770)
1,631
2,480
16,959
50,155
29,484
20,671
(3,712)
33
-
-
33
171
97
74
(41)
-
-
-
-
15
13
1
(1)
14,688
1,631
10,614
26,934
168,017
110,559
57,458
(30,524)
Term loan Overdrafts
On lending
Finance lease
Total
70,344
150
728,469
798,963
21,533
3,968
37,179
62,679
1,707,326
194,020
115,551
33,074
1,591,775
160,946
792,812
98,267
12,574
-
296,640
309,214
483,024
2,435
480,589
171,375
1,186
105,637
-
4,118
165
1,062,453
1,351
1,172,208
6,281
2,390,651
119
151,179
6,162
2,239,472
4,811
1,067,264
December 31, 2019
Term loan Overdrafts
On lending Finance lease
Total
Against 12 months ECL loans and advances
Property/Real estate
Equities
Cash Collateral, lien over fixed and floating assets
Fair value of collateral
Gross loans
ECL Allowance
Net amount
18,388
150
670,176
688,714
13,319
1,503
31,227
46,049
1,451,551
119,541
23,064
2,372
1,428,487
117,169
Amount of undercollaterization/(overcollaterization)
739,773
71,120
12,541
-
296,640
309,181
475,591
1,603
473,988
164,807
1,186
-
45,435
1,653
165
998,208
1,351
1,045,295
6,235
2,052,918
103
27,143
6,132
2,025,776
4,781
980,481
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December 31, 2019
Term loan Overdrafts On lending
Finance lease
Total
Against lifetime ECL not credit-impaired loans and advances
Property/Real estate
Equities
Cash Collateral, lien over fixed and floating assets
Fair value of collateral
Gross loans
ECL Allowance
Net amount
Amount of undercollaterization/(overcollaterization)
51,480
-
50,181
101,661
138,680
11,534
127,146
25,485
2,579
834
2,009
5,422
30,080
2,005
28,075
22,653
-
-
-
-
7,263
734
6,529
6,529
-
-
-
-
31
3
28
28
54,059
834
52,190
107,083
176,054
14,276
161,778
54,695
December 31, 2019
Term loan Overdrafts On lending
Finance lease
Total
Against lifetime ECL credit-impaired loans and advances
Property/Real estate
Equities
Cash Collateral, lien over fixed and floating assets
Grand total: Fair value of collateral
Grand total: Gross loans
Grand total: ECL Allowance
Grand total: Net amount
Grand total: Amount of undercollateriza-tion/
(overcollaterization)
476
-
8,113
8,589
117,095
80,953
36,142
27,553
5,634
1,631
2,443
9,708
44,399
28,697
15,702
5,994
33
-
-
33
171
97
74
41
-
-
-
-
14
13
1
1
6,143
1,631
10,556
18,330
161,679
109,760
51,919
33,589
No loss allowance was computed for loans and advances amounting to N3.52 billion for which the collateral value exceeded the
amount of loan exposure.
Details of collateral pledged by customers against carrying amount of loans and advances as at December 31, 2018 are as follows:
In millions of Naira
December 31, 2018
Secured against real estate
Secured by shares of quoted companies
Cash collateral, lien over fixed and floating assets
Unsecured
Total Gross amount
ECL Allowance
Net carrying amount
Group
Bank
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, 2019
Notes to the Consolidated and Separate Financial
Statements for the Year Ended December 31, 2019
Group
December 31, 2018
Disclosure by Collateral
Property/Real estate
Equities
Cash Collateral, lien over fixed and floating assets
Grand total: Fair value of collateral
Grand total: Gross loans
Grand total: ECL Allowance
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
1,419,276
208,021
156,366
31,999
1,262,910
176,022
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
Grand total: Amount of undercollaterization/(overcollaterization)
633,980
101,272
December 31, 2018
Term loan Overdrafts On lending
Finance lease
Total
Against 12 months ECL loans and advances
Property/Real estate
Equities
Cash Collateral, lien over fixed and floating assets
Fair value of collateral
Gross loans
ECL Allowance
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
December 31, 2018
Term loan Overdrafts On lending
Finance lease
Total
Against lifetime ECL not credit-impaired loans and advances
Property/Real estate
Equities
Cash Collateral, lien over fixed and floating assets
Fair value of collateral
Gross loans
ECL Allowance
Net amount
Amount of undercollaterization/(overcollaterization)
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
114
December 31, 2018
Term loan Overdrafts
On lending Finance lease
Total
Against lifetime ECL credit-impaired loans and advances
Property/Real estate
Equities
Cash Collateral, lien over fixed and floating assets
Fair value of collateral
Gross loans
ECL Allowance
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/(overcollaterization)
(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
December 31, 2018
Disclosure by Collateral
Property/Real estate
Equities
Cash Collateral, lien over fixed and floating assets
Grand total: Fair value of collateral
Grand total: Gross loans
Grand total: ECL Allowance
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
1,353,101
178,740
154,678
25,276
1,198,423
153,464
569,493
78,714
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
1,921,064
141
184,998
3,160
1,736,066
3,083
764,801
December 31, 2018
Term loan Overdrafts
On lending Finance lease
Total
Against 12 months ECL loans and advances
Property/Real estate
Equities
Cash Collateral, lien over fixed and floating assets
Fair value of collateral
Gross loans
ECL Allowance
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, 2019
Notes to the Consolidated and Separate Financial
Statements for the Year Ended December 31, 2019
December 31, 2018
Term loan Overdrafts On lending
Finance lease
Total
Against lifetime ECL not credit-impaired loans and advances
Property/Real estate
Equities
Cash Collateral, lien over fixed and floating assets
Fair value of collateral
Gross loans
ECL Allowance
Net amount
Amount of undercollaterization/(overcollaterization)
2,294
343
212,397
215,034
321,662
30,739
290,923
75,889
3,750
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
December 31, 2018
Term loan Overdrafts On lending
Finance lease
Total
Against lifetime ECL credit-impaired loans and advances
Property/Real estate
Equities
Cash Collateral, lien over fixed and floating assets
Fair value of collateral
Gross loans
ECL Allowance
Net amount
Amount of undercollaterization/(overcollaterization)
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)
(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.
(b) Maximum Exposure to Credit Risk Before Collateral Held or Credit Enhancements
3.2.7
The Group’s maximum exposure to credit risk at December 31, 2019 and December 31, 2018 respectively, are represented by the
net carrying amounts of the financial assets, with the exception of financial and other guarantees issued by the Group for which
the maximum exposure to credit risk are represented by the maximum amount the Group would have to pay if the guarantees are
called on (refer to note 38 Contingent liabilities and commitments).
3.2.8 Concentration of Risks of Financial Assets with Credit Risk Exposure
The Group monitors concentrations of credit risk by geographical location and by industry sector. An analysis of concentrations of
credit risk at December 31, 2019 and December 31, 2018 respectively for loans and advances to customers and amounts due from
banks, is set out below:
116
(a) Geographical sectors
The following table breaks down the Group’s main credit exposure at their carrying amounts, as categorised by geographical
region at December 31, 2019 and December 31, 2018 respectively. For this table, the Group has allocated exposures to regions
based on the regions the counterparties are domiciled. Financial assets included in the table below represents other assets
excluding prepayment.
In millions of Naira
December 31, 2019
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
In millions of Naira
December 31, 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
Group
Bank
Nigeria
Rest of Africa Outside Africa
Nigeria
Rest of Africa
Outside Africa
879,996
824,119
431,728
8,134
203,857
92,722
62,496
56,263
167,274
-
78,025
101,996
-
960
19
-
-
620,944
285,244
-
308
879,449
822,449
431,728
-
189,358
92,722
61,253
2,503,052
404,518
906,515
2,476,959
79,318
413,656
261,495
754,469
-
39,640
22,980
62,620
-
91,878
79,447
79,318
413,656
261,495
171,325
754,469
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
482,070
-
-
-
482,070
-
-
-
-
Group
Bank
Nigeria
Rest of Africa Outside Africa
Nigeria
Rest of Africa
Outside Africa
902,107
818,314
592,935
13,214
164,349
88,826
59,754
52,299
182,246
-
-
67,754
-
1,343
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, 2019
Notes to the Consolidated and Separate Financial
Statements for the Year Ended December 31, 2019
Gross loans and advances to customers and the Non-performing loan portion per geographical region as at December 31, 2019
*Carrying amounts presented in the table below is determined as gross loans less impairment allowances (Impairment is measured
in line with IFRS9).
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
201,543
1,629
3,488
198,055
201,543
1,629
1,828,217
94,779
140,839
1,687,379
1,828,086
94,779
Impairment
Allowance
3,488
140,839
138,681
95,005
26,271
101,065
47,299
24,278
1,338
1,423
112
176
6,339
-
3,556
2,837
177
282
2,153
3,462
135,125
138,681
92,168
26,094
95,005
26,271
100,783
101,065
45,146
20,816
-
-
1,338
1,423
112
176
-
-
3,556
2,837
177
282
-
-
Carrying
amount
198,055
1,687,248
135,125
92,168
26,094
100,783
-
-
2,462,359
105,796
156,794
2,305,565
2,390,651
99,457
151,179
2,239,472
Gross loans and advances and non-performing portion per geographical region as at 31 December 2018
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
113,319
1,071
3,330
109,989
113,319
1,071
1,553,639
87,650
177,322
1,376,317
1,553,037
87,650
Impairment
Allowance
3,330
177,294
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
-
-
Carrying
amount
109,989
1,375,743
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
118
(b)
Industry sectors
Gross loans and advances to customers and the non-performing loan portion per industry sector as at 31 December, 2019
*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
Agriculture
Oil and gas
Consumer Credit
Manufacturing
Real estate and construction
Finance and insurance
Government
Power
Transportation
Communication
Education
General Commerce
162,123
619,414
153,892
489,526
80,922
34,542
362,836
81,785
65,385
383
32,537
12,683
5,353
11,943
513
121
4
143
111,344
31,179
8,854
291,736
1,193
9,744
454
53,837
19,562
8,917
11,732
3,672
403
32,873
312
14,726
1,021
9,285
161,669
565,577
134,330
480,609
69,190
30,870
48,912
65,073
96,618
7,833
161,636
383
617,978
32,537
153,416
12,683
474,411
76,195
14,798
81,630
63,533
8,802
5,064
9,795
513
121
-
80
1,193
5,912
107,153
31,176
362,433
361,667
282,451
269,434
454
53,713
19,515
8,199
11,520
944
292
32,872
119
14,722
1,020
7,809
161,182
564,265
133,901
466,212
64,675
13,853
361,375
48,757
63,414
92,431
7,782
261,625
2,462,359
105,796
156,794
2,305,565
2,390,651
99,457
151,179
2,239,472
Gross loans and advances to customers and the non-performing loan portion per industry sector as at December 31, 2018
In millions of Naira
Group
Bank
Loans and advances to customers
Loans and advances to customers
Gross
loans
NPL
Impairment
Allowance
Carrying
amount
Agriculture
Oil and gas
Consumer Credit
Manufacturing
Real estate and
construction
Gross
loans
115,303
559,284
78,450
450,020
39,504
NPL
1,180
35,939
8,571
2,164
7,841
Finance and insurance
6,307
2,642
Government
Power
Transportation
Communication
Education
General Commerce
310,265
85,417
51,982
83,987
36,779
199,222
170
51
330
24,083
7,608
9,924
Impairment
Allowance
1,889
65,043
7,236
26,132
6,122
2,875
1,956
14,247
2,550
47,779
5,482
12,098
Carrying
amount
113,414
494,241
71,214
115,303
1,180
551,105
35,939
77,814
423,888
442,778
33,382
39,506
3,432
6,307
2,641
308,309
309,721
71,170
49,432
36,208
31,297
81,610
19,402
5,021
187,124
198,412
74,085
23,996
8,571
2,114
7,841
158
8
185
171
9,826
1,889
64,505
7,209
25,487
6,124
2,875
1,945
14,201
1,360
47,138
208
12,057
113,414
486,600
70,605
417,291
33,382
3,432
307,776
67,409
18,042
26,947
4,813
186,355
2,016,520
100,503
193,409
1,823,111
1,921,064
92,630
184,998
1,736,066
Impairment was not recognised on N509 million of the Bank’s total loan exposure as a result of the collateral value applied being
higher than the loan exposure.
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Zenith Bank Plc Annual Report December 31, 2019
Notes to the Consolidated and Separate Financial
Statements for the Year Ended December 31, 2019
3.2.9 Credit quality analysis
All other financial assets are neither past due nor impaired. Loans and advances to customers of N452 billion which are neither past
due nor impaired have been renegotiated (December 31, 2018: N295 billion).
Group
December 31, 2019
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
AAA
936,278
991,956
431,797
707,245
BBB to BB
-
-
-
-
527,968
63,680
92,722
-
Gross amount
936,278
991,956
431,797
707,245
591,648
92,722
ECL - impairment
Carrying amount
-
(563)
(69)
(142)
(551)
-
936,278
991,393
431,728
707,103
591,097
92,722
In millions of Naira
Loans and Advances
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
** This includes on-lending facilities.
Term loans **
Overdraft
1,975,127
150,551
117,847
2,243,525
27,564
13,720
81,062
122,346
2,121,179
132,221
30,172
50,155
212,548
2,761
2,084
29,484
34,329
178,219
Others
6,240
31
15
6,286
2,462,359
103
3
13
119
30,428
15,807
110,559
156,794
6,167
2,305,565
Other
financial
assets
64,541
-
64,541
(777)
63,764
Total
2,113,588
180,754
168,017
In millions of Naira
Loans and Advances
12 months ECL
Lifetime ECL not credit impaired
Lifetime ECL credit impaired
Total
A
AA
AAA
B
BB
BBB
C
CC
CCC
D
UNRATED
Gross amount
ECL-Impairment
Carrying amount
120
510,098
716,791
385,478
19,735
284,193
96,455
-
-
-
47
100,791
2,113,588
(30,429)
2,083,159
20,454
5,178
-
4,544
136,540
12,971
-
1
-
-
1,066
180,754
(15,806)
164,948
6,095
-
14
8
93,478
2,206
52
190
1,281
49,282
15,411
536,647
721,969
385,492
24,287
514,211
111,632
52
191
1,281
49,329
117,268
168,017
2,462,359
(110,559)
(156,794)
57,458
2,305,565
In millions of Naira
Term loan
12 months ECL
Lifetime ECL not credit impaired
Lifetime ECL credit impaired
Total
A
AA
AAA
B
BB
BBB
CC
CCC
D
UNRATED
Gross amount
ECL-Impairment
Carrying amount
438,779
698,710
376,835
19,735
284,193
74,389
-
-
-
82,935
1,975,576
(27,564)
1,948,012
7,157
4,857
-
3,001
120,642
12,545
1
-
-
807
149,010
(13,376)
135,634
2,270
-
-
-
71,938
1,395
2
843
35,833
5,566
448,206
703,567
376,835
22,736
476,773
88,329
3
843
35,833
89,308
117,847
2,242,433
(81,062)
(122,002)
36,785
2,120,431
In millions of Naira
Overdraft
12 months ECL
Lifetime ECL not credit impaired
Lifetime ECL credit impaired
A
AA
AAA
B
BB
BBB
C
CC
CCC
D
UNRATED
Gross amount
ECL-Impairment
Carrying amount
67,448
16,089
8,643
-
-
21,717
-
-
-
48
17,832
131,777
(2,761)
129,016
13,267
322
-
1,543
15,900
426
-
-
-
-
257
31,715
(2,427)
29,288
3,815
-
14
8
21,540
811
52
188
438
13,450
9,840
50,156
(29,484)
20,672
Total
84,530
16,411
8,657
1,551
37,440
22,954
52
188
438
13,498
27,929
213,648
(34,672)
178,976
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Zenith Bank Plc Annual Report December 31, 2019
Notes to the Consolidated and Separate Financial
Statements for the Year Ended December 31, 2019
In millions of Naira
Others
12 months ECL
Lifetime ECL not credit impaired
Lifetime ECL credit impaired
A
AA
BBB
UNRATED
Gross amount
ECL-Impairment
Carrying amount
Bank
December 31, 2019
3,870
1,991
349
31
6,241
(103)
6,138
29
-
-
2
31
(3)
28
10
-
-
4
14
(13)
1
Total
3,909
1,991
349
37
6,286
(119)
6,167
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
879,449
822,466
431,797
482,212
BBB to BB
-
-
-
-
126,216
63,680
Gross amount
879,449
822,466
431,797
482,212
189,896
-
(17)
(69)
(142)
(538)
879,449
822,449
431,728
482,070
189,358
92,722
92,722
-
92,722
-
61,973
-
61,973
(720)
61,253
Total
2,052,918
176,054
161,679
Others
6,235
31
15
Term loans**
Overdraft
Loans and Advances
1,927,142
145,943
117,265
2,190,350
24,668
12,269
81,050
117,987
2,072,363
119,541
30,080
44,399
194,020
2,372
2,005
28,697
33,074
160,946
6,281
2,390,651
100
3
15
118
27,140
14,277
109,762
151,179
6,163
2,239,472
ECL - impairment
Carrying amount
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
** This includes on-lending facilities.
122
In millions of Naira
Loans and Advances
12 months ECL
Lifetime ECL not credit impaired
Lifetime ECL credit impaired
A
AA
AAA
B
BB
BBB
C
CC
CCC
D
UNRATED
Gross amount
ECL-Impairment
Carrying amount
510,097
716,704
385,478
-
284,193
93,144
-
-
-
48
63,254
2,052,918
(27,143)
2,025,775
20,454
5,178
-
-
136,542
12,971
-
-
-
-
909
176,054
(14,276)
161,778
6,095
-
14
8
93,479
2,206
52
188
1,281
49,284
9,072
Total
536,646
721,882
385,492
8
514,214
108,321
52
188
1,281
49,332
73,235
161,679
2,390,651
(109,760)
(151,179)
51,919
2,239,472
In millions of Naira
Term loan
12 months ECL
Lifetime ECL not credit impaired
Lifetime ECL credit impaired
Total
A
AA
AAA
BB
BBB
CCC
D
UNRATED
Gross amount
ECL-Impairment
Carrying amount
438,779
698,623
376,835
284,193
72,119
-
-
56,593
1,927,142
(24,668)
1,902,474
7,157
4,857
-
120,642
12,545
-
-
742
145,943
(12,269)
133,674
2,270
-
-
71,938
1,396
843
35,834
4,984
448,206
703,480
376,835
476,773
86,060
843
35,834
62,319
117,265
2,190,350
(81,050)
(117,987)
36,215
2,072,363
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Zenith Bank Plc Annual Report December 31, 2019
Notes to the Consolidated and Separate Financial
Statements for the Year Ended December 31, 2019
In millions of Naira
Overdraft
12 months ECL
Lifetime ECL not credit impaired
Lifetime ECL credit impaired
A
AA
AAA
B
BB
BBB
C
CC
CCC
D
UNRATED
Gross amount
ECL-Impairment
Carrying amount
In millions of Naira
A
AA
BBB
UNRATED
Gross amount
ECL-Impairment
Carrying amount
Group
December 31, 2018
67,448
16,089
8,643
-
-
20,676
-
-
-
48
6,636
119,540
(2,372)
117,168
3,815
-
14
8
21,540
811
52
188
438
13,450
4,084
44,400
(28,697)
15,703
13,267
322
-
-
15,900
426
-
-
-
-
165
30,080
(2,005)
28,075
Others
12 months ECL
Lifetime ECL not credit impaired
Lifetime ECL credit impaired
3,871
1,991
349
24
6,235
(103)
6,132
29
-
-
2
31
(3)
28
11
-
-
4
15
(13)
2
Total
84,530
16,411
8,657
8
37,440
21,913
52
188
438
13,498
10,885
194,020
(33,074)
160,946
Total
3,911
1,991
349
30
6,281
(119)
6,162
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
954,416
1,000,632
593,061
676,243
BBB to BB
-
-
-
-
518,124
49,760
Gross amount
954,416
1,000,632
593,061
676,243
567,884
-
(72)
(126)
(1,969)
(2,572)
954,416
1,000,560
592,935
674,274
565,312
88,826
88,826
-
88,826
-
62,080
-
62,080
(710)
61,370
ECL - impairment
Carrying amount
124
In millions of Naira
Loans and Advances
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
Bank
December 31, 2018
Term loans
Overdraft
916,359
350,833
152,084
1,419,276
11,123
32,383
112,859
156,365
1,262,911
158,264
21,214
28,543
208,021
2,623
1,857
27,519
31,999
176,022
Others
376,827
11,253
1,143
Total
1,451,450
383,300
181,770
389,223
2,016,520
2,220
1,800
1,025
5,045
15,966
36,040
141,403
193,409
384,178
1,823,111
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
130,993
321,662
152,084
19,204
28,543
376,826
11,254
1,143
1,387,174
352,120
181,770
1,353,101
178,740
389,223
1,921,064
11,080
30,739
112,859
154,678
793
1,694
22,789
25,276
2,220
1,800
1,024
5,044
14,093
34,233
136,672
184,998
1,198,423
153,464
384,179
1,736,066
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125
Zenith Bank Plc Annual Report December 31, 2019
Notes to the Consolidated and Separate Financial
Statements for the Year Ended December 31, 2019
At December 31, 2019
Loans and advances to customers
Loans and advances to customers
Group
Bank
AAA
AA to A
BBB to BB
Below B
Unrated
385,492
1,258,613
650,133
50,853
117,268
2,462,359
Group
385,492
1,258,528
622,543
50,853
73,235
2,390,651
Bank
At December 31, 2018
Loans and advances to customers
Loans and advances to customers
AAA
AA to A
BBB to BB
Below B
Unrated
B-
787,799
340,500
620,051
172,714
63,728
31,728
2,016,520
787,799
340,500
620,051
172,714
-
-
1,921,064
3.2.10 Amounts Arising from ECL
For inputs, assumptions and techniques used for estimating impairment see accounting policy in note 2.7
3.2.11 Amounts Arising from ECL
Corporate exposures
Retail exposures
All exposures
– Information obtained during periodic review of customer files – e.g.
– Internally collected data
– Payment record – this includes
audited financial statements, management accounts, budgets and
on customer behaviour –
overdue status as well as a range of
projections.
e.g. utilisation of credit card
variables about payment ratios
Examples of areas of particular focus are: gross profit margins, financial
facilities
leverage ratios, debt service coverage, compliance with covenants, quality
– Affordability metrics
– Utilisation of the granted limit
– Requests for and granting of
of management, senior management changes
– External data from credit
forbearance
– Data from credit reference agencies, press articles, changes in external
reference agencies, including
credit ratings
industry-standard credit scores
– 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
– 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.
126
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.
3.2.13 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.
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. The credit risk grades are
reviewed bi-annually.
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.
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.
its expert credit
Using
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 Life-
time 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.
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Zenith Bank Plc Annual Report December 31, 2019
Notes to the Consolidated and Separate Financial
Statements for the Year Ended December 31, 2019
The Group monitors the effectiveness of the criteria used to
identify significant increases in credit risk by regular reviews
(annually) to confirm that:
•
the criteria are capable of
identifying significant
increases in credit risk before an exposure is in default;
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).
•
•
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.
3.2.14 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
the modification does not result
in derecognition, the
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
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.
128
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
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 while 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.
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.
The Group has identified and documented key drivers of credit
risk and credit losses for its financial assets and, using an analysis
of historical data, has estimated relationships between macro-
economic variables and its non-performing loans.
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.
Some of the macroeconomic variables considered include
Crude Oil price, Foreign Exchange rate, GDP growth rate,
Inflation rate. However from the statistical analysis of the various
macroeconomic variables, the result infers that the key drivers
for its portfolios are inflation rate and foreign exchange rate.
The economic scenarios used as at December 31, 2019 included
the following key indicators for Nigeria for the years ending 31
December 2019 to 2020.
2020
2021
Foreign
exchange rate
Base Base 362.26
Upside 366.03
Downside 398.49
Base 362.26
Upside 326.03
Downside 398.49
Inflation rate
forecast
Base 11.73
Upside 10.56
Downside 12.91
Base 11.73
Upside 10.23
Downside 12.50
Predicted relationships between the key indicators and default
and loss rates on the Bank’s portfolio has been developed by
analysing historical data over the past 5 years.
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.
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
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Zenith Bank Plc Annual Report December 31, 2019
Notes to the Consolidated and Separate Financial
Statements for the Year Ended December 31, 2019
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,
longer period. The maximum
the Group considers a
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
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 for 2019 represent allowance account for credit losses and reflect measurement basis under
IFRS 9.
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
December 31, 2019
12-month
ECL
Lifetime
ECL not
credit
impaired
Lifetime
ECL credit
impaired
Total
12-month
ECL
December 31, 2018
Lifetime
ECL not
credit-
impaired
Lifetime
ECL credit-
impaired
-
-
-
-
72
(35)
-
526
563
-
-
-
-
72
(35)
-
526
563
1,305
(1,243)
10
72
283,845
283,845
490,319
-
-
-
-
-
-
Total
1,305
(1,243)
10
72
490,319
130
In millions of Naira
12-month
ECL
Off balance sheet
exposure
Balance at 1 January
Net remeasurement of loss
allowances (see note 8)
Write-offs
Closing balance
Gross amount
8,011
(2,473)
-
5,538
988,414
December 31, 2019
Lifetime
ECL not
credit
impaired
Lifetime ECL
credit
impaired
Total
12-month
ECL
December 31, 2018
Lifetime ECL
not credit-
impaired
Lifetime
ECL credit-
impaired
Total
-
-
-
-
-
-
-
-
8,011
(2,473)
5,538
2,526
5,337
148
8,011
988,414
831,251
-
-
-
-
2,526
5,337
148
8,011
831,251
In millions of Naira
12-month
ECL
Lifetime ECL
not credit
impaired
Lifetime ECL
credit
impaired
Total
12-month
ECL
December 31, 2019
December 31, 2018
Lifetime ECL
not credit-
impaired
Lifetime
ECL credit-
impaired
Total
Assets pledged as collateral
at ammortised cost
Balance at 1 January
Net remeasurement of loss
allowances (see note 8)
Closing balance
Gross amount
126
(57)
69
316,276
-
-
-
-
-
-
126
(57)
1,202
(1,076)
-
-
69
126
316,276
593,061
In millions of Naira
Loans and advances to
customers at amortised cost
Balance at 1 January
- Transfer to 12-month
ECL
- Transfer to lifetime ECL
not credit-impaired
- Transfer to lifetime ECL
credit-impaired
Net remeasurement of
loss allowances (see note8)
New financial assets originated
or purchased
Write-offs and recoveries
Foreign exchange and
other movements
Closing balance
Gross amount
December 31, 2019
12-month
ECL
Lifetime
ECL not
credit
impaired
Lifetime
ECL credit
impaired
Total
12-month
ECL
December 31, 2018
Lifetime
ECL not
credit-
impaired
Lifetime
ECL credit-
impaired
141,403
193,408
152,967
253,174
15,965
5,235
36,040
(4,855)
(7,486)
7,564
(380)
(78)
64,620
382
35,586
(248)
(22,215)
22,913
(134)
(698)
(2,078)
(36,022)
38,100
(42,298)
(46,836)
89,134
-
-
-
5,380
12,658
(4,455)
13,583
14,074
22,890
(27,128)
9,836
12,605
698
868
14,171
1,550
1,540
377
3,467
-
807
-
(60,971)
(60,971)
(277)
(3,928)
(3,398)
-
(148)
-
195
(73,962)
(73,962)
847
894
30,428
15,806
110,559
156,794
15,965
36,040
141,403
193,409
2,113,588
180,754
168,017
2,462,359
1,451,450
383,300
181,770
2,016,520
-
-
1,202
(1,076)
126
593,061
Total
-
-
-
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Zenith Bank Plc Annual Report December 31, 2019
Notes to the Consolidated and Separate Financial
Statements for the Year Ended December 31, 2019
In millions of Naira
12-month
ECL
Lifetime ECL
not credit
impaired
Lifetime
ECL credit
impaired
Total
12-month
ECL
December 31, 2019
December 31, 2018
LifetimeECL
not credit-
impaired
Lifetime
ECL credit-
impaired
Investment securities at
amortised cost
Balance at 1 January
Net remeasurement of loss
allowances (see note 8)
Write-offs
Foreign exchange and
other movements
Closing balance
Gross amount
2,572
(27)
-
(1,994)
551
234,857
In millions of Naira
Other financial assets
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
-
-
-
-
-
-
2,572
(27)
(1,994)
1,773
(430)
1,229
551
2,572
234,857
513,154
-
-
-
December 31, 2019
Lifetime ECL
December 31, 2018
Lifetime ECL
710
36
-
31
777
64,541
4,831
395
(4,516)
-
710
62,080
In millions of Naira
12-month
ECL
Lifetime ECL
not credit
impaired
Lifetime
ECL credit
impaired
Total
12-month
ECL
December 31, 2019
December 31, 2018
LifetimeECL
not credit-
impaired
Lifetime
ECL credit-
impaired
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
1,969
(789)
-
(1,038)
142
707,245
-
-
-
-
-
-
-
-
-
-
-
-
1,969
(789)
-
1,938
-
(1,038)
-
31
142
1,969
707,245
676,243
-
-
-
-
-
-
132
Total
1,773
(430)
1,229
-
-
-
2,572
513,154
Total
-
1,938
-
31
1,969
-
-
-
-
-
- 676,243
Bank
In millions of Naira
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
December 31, 2019
12-month
ECL
Lifetime ECL
not credit
impaired
Lifetime
ECL credit
impaired
Total
12-month
ECL
December 31, 2018
LifetimeECL
not credit-
impaired
Lifetime
ECL credit-
impaired
72
(55)
-
-
17
-
-
-
-
-
(55)
-
-
-
-
72
-
17
1,186
(1,114)
72
-
-
-
-
-
-
114,352
114,352
306,802
In millions of Naira
12-month
ECL
Lifetime ECL
not credit
impaired
Lifetime
ECL credit
impaired
Total
12-month
ECL
December 31, 2019
December 31, 2018
Lifetime ECL
not credit-
impaired
Lifetime
ECL credit-
impaired
Off balance sheet
exposure
Balance at 1 January
Net remeasurement of loss
allowances (see note 8)
Closing balance
Gross amount
8,011
(2,473)
-
5,538
754,469
-
-
-
-
-
-
-
-
8,011
(2,473)
-
5,538
1,571
6,441
8,011
754,469
775,355
-
-
-
-
-
-
Total
1,186
(1,114)
72
306,802
Total
1,571
6,441
8,011
775,355
In millions of Naira
12-month
ECL
Lifetime ECL
not credit
impaired
Lifetime
ECL credit
impaired
Total
12-month
ECL
December 31, 2019
December 31, 2018
Lifetime ECL
not credit-
impaired
Lifetime
ECL credit-
impaired
Total
Assets pledged as collateral
at ammortised cost
Balance at 1 January
Net remeasurement of loss
allowances (see note 8)
Closing balance
Gross amount
126
(57)
69
316,276
-
-
-
-
-
-
126
(57)
69
1,202
(1,076)
126
316,276
593,061
-
-
-
-
-
-
1,202
(1,076)
126
593,061
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Zenith Bank Plc Annual Report December 31, 2019
Notes to the Consolidated and Separate Financial
Statements for the Year Ended December 31, 2019
In millions of Naira
12-month
ECL
Lifetime ECL
not credit
impaired
Lifetime
ECL credit
impaired
Total
12-month
ECL
December 31, 2019
December 31, 2018
Lifetime
ECL not
credit-
impaired
Lifetime
ECL credit-
impaired
Total
Loans and advances to
customers at amortised cost
Balance at 1 January
- Transfer to 12-month ECL
- Transfer to lifetime ECL
not credit-impaired
- Transfer to lifetime ECL
credit-impaired
Net remeasurement of
loss allowances (see note8)
New financial assets originated
or purchased
Write-offs
Foreign exchange and
other movements
Closing balance
Gross amount
14,092
5,236
(7,486)
34,233
(4,856)
7,564
(380)
(78)
60,761
382
(22,215)
33,245
(248)
22,913
(134)
(698)
136,673
184,998
141,832
235,838
(2,078)
(36,021)
38,100
(42,298)
(46,836)
89,134
-
-
-
-
-
-
4,774
12,658
(4,455)
12,977
15,912
23,619
(33,602)
5,929
12,605
698
868
14,171
1,550
1,540
377
3,467
-
-
-
-
(60,967)
(60,967)
-
-
(60,236)
(60,236)
-
-
27,143
14,276
109,760
151,179
14,092
34,233
136,673
184,998
2,052,919
176,053
161,679
2,390,651
1,387,174
352,119
181,770 1,921,064
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
December 31, 2019
Lifetime ECL
December 31, 2018
Lifetime ECL
698
22
-
-
720
61,973
4,832
383
(4,517)
698
59,104
In millions of Naira
12-month
ECL
Lifetime ECL
not credit
impaired
Lifetime
ECL credit
impaired
Total
12-month
ECL
December 31, 2019
December 31, 2018
Lifetime
ECL not
credit-
impaired
Lifetime
ECL credit-
impaired
Due from other Banks
Balance at 1 January
Net remeasurement of loss
allowances (see note 8)
Closing balance
Gross amount
931
(789)
142
482,212
-
-
-
-
-
-
-
-
931
(789)
142
-
931
931
482,212
394,397
-
-
-
-
134
Total
-
931
931
-
-
-
- 394,397
In millions of Naira
12-month
ECL
Lifetime ECL
not credit
impaired
Lifetime
ECL credit
impaired
Total
12-month
ECL
December 31, 2019
December 31, 2018
Lifetime
ECL not
credit-
impaired
Lifetime
ECL credit-
impaired
-
-
-
-
-
-
-
-
-
-
565
(27)
-
538
358
207
-
565
113,959
102,508
-
-
-
-
-
-
-
-
-
Total
358
207
-
565
102,508
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
565
(27)
-
538
113,959
(a) Expected Credit Loss Migration Matrix
In millions of Naira
Stage as at December 31, 2019
12-month
ECL
Lifetime ECL not
credit-impaired
Lifetime ECL
credit-impaired
Stage as at 1 January 2019
Lifetime ECL not credit-impaired
12- months ECL
Lifetime ECL credit-impaired
Gross
9,302
4,855
380
14,537
7,486
6,014
78
13,578
(b) Summary of migrations December 31, 2019
12 month ECL (migration from lifetime ECL not credit impaired and lifetime ECL credit-impaired)
Lifetime ECL not credit-impaired (migration from 12 months ECL and lifeteime ECL credit-impaired)
Lifetime ECL credit impaired (migration from 12 months ECL and lifetime ECL not credit-impaired)
2,078
36,021
70,792
108,891
5,235
7,564
38,099
In millions of Naira
Stage as at December 31, 2018
12-month
ECL
Lifetime ECL not
credit-impaired
Lifetime ECL
credit-impaired
12- months ECL
Lifetime ECL not credit-impaired
Stage as at 1 January 2018
Lifetime ECL credit-impaired
Gross
12,160
248
134
12,542
22,215
9,780
698
32,693
(b) Summary of migrations December 31, 2018
12 month ECL (migration from lifetime ECL not credit impaired and lifetime ECL credit-impaired)
Lifetime ECL not credit-impaired (migration from 12 months ECL and lifeteime ECL credit-impaired)
Lifetime ECL credit impaired (migration from 12 months ECL and lifetime ECL not credit-impaired)
42,299
46,836
47,162
136,297
382
22,913
89,135
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135
Zenith Bank Plc Annual Report December 31, 2019
Notes to the Consolidated and Separate Financial
Statements for the Year Ended December 31, 2019
Summary of loss allowance by class of financial instruments also showing ECL coverage ratio as at December 31, 2019.
Group
Financial Statement Items
In millions of Naira
On-balance sheet items
Assets pledged as collateral
Treasury bills
Loans and advances to
customers at amortised cost
Debt investment securities at
amortised cost
Other financial assets
measured at amortised cost
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
%
%
%
%
0.02
0.20
1.44
0.23
0.02
3.09
-
-
-
-
8.74
65.80
-
-
-
-
-
-
8.74
65.80
0.02
0.20
6.37
0.23
1.20
0.02
4.89
-
-
-
-
-
-
-
0.65
0.85
. -
0.25
-
-
0.42
0.51
8.74
65.80
3.69
316,276
283,845
-
-
-
-
316,276
283,845
69
563
-
-
-
-
69
563
2,113,588
180,754
168,017
2,462,359
30,429
15,806
110,559
156,794
234,857
64,541
-
-
-
-
234,857
551
64,541
707,245
777
142
-
-
-
-
-
-
551
142
777
1.20
Due from other Banks
707,245
Subtotal
3,013,107
180,754
168,017
3,361,878
32,389
15,806
110,559
158,754
Off-balance sheet items
Loans and other credit related commitments
545,174
79,318
363,922
96,911
1,085,325
-
-
-
-
-
-
-
-
-
-
545,174
79,318
3,528
677
363,922
923
96,911
1,085,325
410
5,538
-
-
-
-
-
-
-
-
-
-
4,098,432 180,754
168,017 4,447,203
37,927
15,806 110,559
164,292
3,528
677
0.65
0.85
923
0.25
410
5,538
0.42
2.17
0.93
Letters of credit
Usance Financial guarantee
and similar contracts
Performance bonds and
guarantees
Undrawn overdraft balance
Subtotal
Total
136
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
%
%
%
%
Bank
Financial Statement Items
In millions of Naira
On-balance sheet items
Assets pledged as collateral
Treasury bills
Loans and advances to
customers at amortised cost
Debt investment securities at
amortised cost
Other financial assets measured
at amortised cost
316,276
114,352
-
-
-
-
316,276
114,352
69
17
-
-
-
-
69
17
2,052,919
176,054
161,679
2,390,652
27,143
14,276
109,760
151,179
113,959
61,973
-
-
-
-
-
-
113,959
61,973
482,212
538
720
142
-
-
-
-
-
-
538
720
142
Due from other Banks
482,212
Subtotal
2,659,479
176,054
161,679
2,997,212
28,487
14,276
109,760
152,523
0.02
0.01
1.32
0.47
1.18
0.03
3.00
-
-
-
-
8.11
67.89
-
-
-
-
-
-
8.11
67.89
Off-balance sheet items
Loans and other credit
related commitments
Letters of credit
Usance Financial guarantee and
similar contracts
Performance bonds and
guarantees
Undrawn overdraft balance
Subtotal
Total
413,656
79,318
261,495
96,911
851,380
-
-
-
-
-
-
-
-
-
-
413,656
79,318
3,528
677
261,495
923
96,911
851,380
410
5,538
-
-
-
-
-
-
-
-
-
-
3,528
677
0.85
0.42
923
0.35
410
5,538
0.42
2.04
0.97
-
-
-
-
-
-
-
. -
-
-
8.11
67.89
3,510,859 176,054
161,679 3,848,592
34,025
14,276 109,760 158,061
0.02
0.01
6.32
0.47
1.18
0.03
5.09
0.85
0.85
0.35
0.42
0.65
4.11
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137
Zenith Bank Plc Annual Report December 31, 2019
Notes to the Consolidated and Separate Financial
Statements for the Year Ended December 31, 2019
Summary of loss allowance by class of financial instruments also showing ECL coverage ratio as at December 31, 2018.
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
collateral
Treasury bills
490,319
-
-
-
-
593,061
126
490,319
72
-
-
-
-
Loans and advances to
1,451,450
383,300
181,770
2,016,520
15,965
36,040
141,403
193,408
customers at amortised
cost
Debt investment
513,154
securities at amortised
cost
Debt investment
49,760
securities at FVOCI
Other financial assets
62,080
measured at amortised
cost
-
-
-
-
-
-
513,154
2,572
49,760
-
62,080
710
Due from other Banks
676,243
676,243
Subtotal
3,836,067
383,300
181,770
4,401,137
1,969
21,414
-
-
-
-
-
-
-
-
126
0.02
72
0.01
1.10
2,572
0.50
-
-
710
1.14
36,040
141,403
198,857
1,969
0.29
0.56
Off-balance sheet items
Loans and other credit
related commitments
Letters of credit
Usance
356,939
147,189
Financial guarantee and
similar contracts
Performance bonds and
327,123
831,251
-
-
-
-
-
-
-
-
356,939
147,189
5,312
1,940
327,123
759
831,251
8,011
-
-
-
-
-
-
-
-
5,312
1,940
1.49
1.32
759
0.23
8,011
0.96
0.63
4,667,318 383,300
181,770
5,232,388
29,425
36,040 141,403 206,868
guarantees
Subtotal
Total
138
-
-
-
-
9.40
77.79
-
-
-
-
-
-
-
-
9.40
77.79
-
-
-
-
-
-
. -
-
9.40
77.79
0.02
0.01
9.59
0.50
-
1.14
0.29
4.52
1.49
1.32
0.23
0.96
3.95
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
collateral
Treasury bills
306,802
-
-
-
-
593,061
126
306,802
72
-
-
-
-
Loans and advances to
1,387,174
352,119
181,770
1,921,064
14,092
34,233
136,673
184,998
customers at amortised
cost
Debt investment
102,508
securities at amortised
cost
Debt investment
49,760
securities at FVOCI
Other financial assets
59,104
measured at amortised
cost
Other non-financial assets
18,064
Due from other Banks
394,397
-
-
-
-
-
-
-
-
-
-
102,508
565
49,760
-
59,104
698
18,064
560
394,397
931
-
-
-
-
-
-
-
-
-
-
Subtotal
2,910,870
352,119
181,770
3,444,760
17,044
34,233
136,673
187,950
Off-balance sheet items
Loans and other credit
related commitments
Letters of credit
Usance
321,754
147,189
Performance bonds and
306,412
guarantees
Subtotal
Total
775,355
-
-
-
-
-
-
-
-
321,754
147,189
306,412
5,311
1,941
759
775,355
8,011
-
-
-
-
-
-
-
-
5,311
1,941
759
8,011
3,686,225 352,119
181,770
4,220,115
25,055
34,233 136,673 195,961
126
0.02
72
0.02
1.02
565
0.55
-
-
698
1.18
560
3.10
931
0.24
6.13
1.65
1.32
0.24
1.03
0.68
-
-
-
-
9.72
75.19
-
-
-
-
-
-
-
-
-
-
9.72
75.19
-
-
-
-
-
-
. -
-
9.72
75.19
0.02
0.02
9.63
0.55
-
1.18
3.10
0.24
5.46
1.65
1.32
0.25
1.03
4.64
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139
Zenith Bank Plc Annual Report December 31, 2019
Notes to the Consolidated and Separate Financial
Statements for the Year Ended December 31, 2019
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.
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 credit committee may, from time to time, grant
approval for restructuring of certain facilities due to the
following reasons:
Where the execution of the loan purpose and the
repayment are no longer realistic in light of new
cash flows;
To avoid unintended default arising from adverse
business conditions;
To align loan repayment with new pattern of
achievable cash flows;
Where there are proven cost over runs that may
significantly impair the project repayment capacity;
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.
c.
d.
The Group’s risk exposure is within established limits;
Risk taking decisions are in line with business
strategy and objectives set by the Board of Directors;
The expected payoffs compensate for the risks
taken; and
e.
Sufficient capital, as a buffer, is available to take risk.
is
Where
customer’s business environment;
there
temporary downturn
in
the
The Group proactively manages its market risk exposures
in both the trading and non-trading books within the
acceptable levels.
a.
b.
c.
d.
e.
f.
g.
Where the customer’s going concern status is NOT
in doubt or threatened; and
The revised terms of restructured facilities usually
include extended maturity, changing timing of
interest payments and amendments to the terms of
the loan agreement.
Market risk
3.3
Market risk is the risk of potential losses in both on- and off-
balance sheet positions arising from movements in market
prices. Market risks can arise from adverse changes in interest
rates, foreign exchange rates, equity prices, commodity
prices and other relevant factors such as market volatilities.
The Group undertakes activities which give rise to some
level of market risks exposures. The objective of market
risk management activities is to continuously identify,
manage and control market risk exposure within acceptable
parameters, while optimizing the return on risks taken.
3.3.1 Management of market risk
The Group has an independent Market Risk Management
unit which assesses, monitors, manages and reports on
140
The Group’s market risks exposures are broadly categorised
into:
(i)
Trading Market Risks - These are risks that arise
primarily through trading activities and market
making activities. These activities include position-
income
in foreign exchange and fixed
taking
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.
Group
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
Investment securities
Other financial assets
Liabilities
Customer deposits
Derivative liabilities
Other financial liabilities
On-lending facilities
Borrowings
Debt securities issued
Bank
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
Investment securities
Other financial assets
Liabilities
Customer deposits
Derivative liabilities
Other financial liabilities
On-lending facilities
Borrowings
Debt securities issued
At December 31, 2019
At December 31, 2018
Note
Carrying
Amount
Trading
Non-
trading
Carrying
Amount
Trading
Non-
trading
15
16
17
18
19
20
21
24
27
32
28
29
30
31
936,278
-
936,278
954,416
-
954,416
991,393
708,114
283,279
1,000,560
510,313
490,247
431,728
115,520
316,208
592,935
184,812
408,123
707,103
-
707,103
674,274
-
674,274
92,722
92,722
-
88,826
88,826
-
2,305,565
-
2,305,565
1,823,111
-
1,823,111
591,097
12,257
578,840
565,312
4,970
560,342
63,764
4,262,289
-
-
63,764
61,370
4,262,289
3,690,295
-
-
61,370
3,690,295
14,762
14,762
-
16,995
16,995
-
330,552
392,871
322,479
39,092
-
-
-
-
363,764
190,408
392,871
393,295
322,479
437,260
39,092
361,177
-
-
-
-
190,408
393,295
437,260
361,177
At December 31, 2019
At December 31, 2018
Note
Carrying
Amount
Trading
Non-
trading
Carrying
Amount
Trading
Non-
trading
15
16
17
18
19
20
21
24
27
32
28
29
30
31
879,449
-
879,449
902,073
-
902,073
822,449
708,114
114,335
817,043
510,313
306,730
431,728
115,520
316,208
592,935
184,812
408,123
482,070
-
482,070
393,466
-
393,466
92,722
92,722
-
88,826
88,826
-
2,239,472
-
2,239,472
1,736,066
-
1,736,066
189,358
12,257
177,101
156,673
4,970
151,703
61,253
3,486,887
-
-
61,253
58,406
3,486,887
2,821,066
-
-
58,406
2,821,066
14,762
14,762
-
16,995
16,995
-
380,798
392,871
329,778
39,092
-
-
-
-
386,061
212,006
392,871
393,295
329,778
458,463
39,092
361,177
-
-
-
-
212,006
393,295
458,463
361,177
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Zenith Bank Plc Annual Report December 31, 2019
Notes to the Consolidated and Separate Financial
Statements for the Year Ended December 31, 2019
(Value-at-risk) approach
3.3.2 Measurement of Market Risk
The Group adopts Non-VAR
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.
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.
142
Group
The table below summarizes the Group’s exposure to foreign currency exchange rate risk at 31 December, 2019 and 31
December, 2018. Included in the table are the Group’s financial instruments at carrying amounts, categorised by currency.
In millions of Naira
At December 31, 2019
Assets
Cash and balances with central bank
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
In millions of Naira
At December 31, 2018
Assets
Investment securities
Other financial assets
Liabilities
Customer deposits
Derivative liabilities
Other financial liabilities
On-lending facilities
Borrowings
Debt securities issued
Naira
Dollar
GBP
Euro
Others
Total
35,289
8,310
3,875
845,021
872,564
431,728
32,376
74,855
-
-
595,047
-
1,275,254
966,764
323,972
222,712
21,090
189
-
-
3,298
17,868
8,678
33,192
43,261
43,784
118,829
-
-
-
39,344
37,038
936,278
991,393
431,728
707,103
92,723
-
14,626
11,223
-
40,244
2,305,565
-
-
591,099
64,541
3,876,861
1,820,001
114,607
69,068
239,894
6,120,430
3,095,031
816,091
98,892
27,912
224,363
4,262,289
14,762
317,679
392,871
-
-
-
-
1,812
-
-
209
-
-
25
-
14,762
319,725
392,871
-
-
297,556
39,092
7,104
16,439
1,380
322,479
-
-
-
39,092
3,820,343
1,152,739
107,807
44,560
225,768
5,351,218
56,518
667,262
6,800
24,508
14,126
769,212
Naira
Dollar
GBP
Euro
Others
Total
-
-
-
2,100,306
1,203,619
63,148
43,868
279,354
3,690,295
16,995
-
59,284
121,994
393,295
-
-
-
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
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
930,701
592,935
54,201
88,826
1,957
-
-
-
-
-
67,902
1,000,560
497,803
34,100
52,825
35,346
-
-
Loans and advances to customers (gross)
926,163
830,868
1,006
592,935
674,274
88,826
48,857
1,823,111
66,360
17,854
565,312
61,370
-
16,217
1,283
-
75,163
274,055
5,760,804
176,771
320,897
7,006
10,892
3,212,788
2,132,025
-
25,618
66,773
Net Exposure
642,908
7,975
3,625
27,905
(11,039)
671,374
143
Zenith Bank Plc Annual Report December 31, 2019
Notes to the Consolidated and Separate Financial
Statements for the Year Ended December 31, 2019
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 6% and 9% (December 31, 2018: 15% and 30%,
with all other variables held constant.
US Dollar effect of 6% (31 December 2018: 15%) up or (down) movement on profit before tax and statement of
financial position size (in millions of Naira)
US Dollar effect of 9% (31 December 2018: 30%) up or (down) movement on profit before tax and statement of
financial position size (in millions of Naira)
31-Dec-19
31-Dec-18
2,651
5,303
5,891
11,782
Bank
The table below summarizes the Bank’s exposure to foreign currency exchange rate risk at December 31, 2019 and December
31, 2018. Included in the table are the Bank’s financial instruments at carrying amounts, categorised by currency.
In millions of Naira
At December 31, 2019
Assets
Cash and balances with central bank
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
Net Exposure
144
Naira
Dollar
GBP
Euro
Others
Total
-
82
-
-
840,032
822,449
431,728
28,644
92,722
30,886
7,102
1,429
-
-
-
-
-
-
422,556
3,560
26,379
-
-
-
-
-
932
-
879,449
822,449
431,728
482,070
92,722
1,274,050
950,570
184,565
61,253
4,794
-
14,486
283
2,239,472
-
-
-
-
189,359
61,253
3,735,443
1,408,806
10,744
42,294
1,215
5,198,502
2,401,854
1,056,876
10,045
17,564
548
3,486,887
14,762
369,971
392,871
-
-
-
-
-
329,778
39,092
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
14,762
369,971
392,871
329,778
39,092
3,179,458
1,425,746
10,045
555,985
(16,940)
699
17,564
24,730
548
4,633,361
667
565,141
In millions of Naira
At December 31, 2018
Assets
Naira
Dollar
GBP
Euro
Others
Total
Cash and balances with central bank
435,137
459,300
5,389
2,247
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
815,086
592,935
29,211
88,826
-
932,004
788,477
154,806
54,047
1,867
3,940
1,957
-
-
-
-
-
339,070
4,760
16,818
3,607
-
147
-
418
-
15,416
-
-
-
22
-
-
-
-
-
902,073
817,043
592,935
393,466
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
393,295
-
91,400
-
849
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 Exposure
500,938
(19,125)
80
573
19
482,486
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 December 31, 2019 was 364.70 and 361.84 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 6% and 9% (December 31, 2018: 15% and 30%), with all other variables held
constant.
In millions of Naira
US Dollar effect of 6% (31 December 2019: 15%) up or (down) movement on profit before tax and balance sheet size
US Dollar effect of 9% (31 December 2019: 30%) up or (down) movement on profit before tax and statement of
financial position size (in millions of Naira)
31-Dec-19
31-Dec-18
2,541
5,082
9,881
19,762
Interest Rate Risk
3.3.4
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.
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Zenith Bank Plc Annual Report December 31, 2019
Notes to the Consolidated and Separate Financial
Statements for the Year Ended December 31, 2019
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
Total interest repricing gap
At December 31, 2019
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)
Investment securities (Amortized cost and fair value through OCI)
Liabilities
Customer deposits
Derivative liabilities
On-lending facilities
Borrowings
Debt securities issued
Note
Carrying Amount
Rate sensitive
Non rate sensitive
15
16
17
18
19
20
21
24
27
32
28
29
30
31
936,278
283,279
316,207
707,103
92,722
2,462,359
578,840
63,764
2,000
283,279
316,207
707,103
92,722
2,462,359
515,159
-
934,278
-
-
-
-
-
63,680
63,764
5,440,552
4,378,829
1,061,722
4,262,289
14,762
330,552
392,871
322,479
39,092
3,674,292
14,762
-
392,871
322,479
39,092
587,997
-
330,552
-
-
-
5,362,045
4,443,496
918,549
78,507
(64,667)
Up to 1
month
1 - 3
months
3 - 6
months
6 - 12
months
Over 1
year
Total rate
sensitive
2,000
15,340
11,638
504,261
9,414
430,344
51,753
-
60,969
79,758
47,686
22,800
88,653
16,220
-
55,059
3,406
122,386
16,742
-
151,911
15,715
32,770
43,766
-
-
205,690
-
-
2,000
283,279
316,207
707,103
92,722
105,346
179,293
1,658,723
2,462,359
2,196
7,311
437,680
515,160
1,024,750
316,086
305,135
430,766 2,302,093
4,378,830
1,545,702
3,242
12,439
15,852
5,250
-
735
3,952
1,597
4,286
2,318
1,716
-
-
28,596
22,081
230,256
-
-
-
2,107,717
3,674,292
-
377,119
41,545
39,092
14,762
392,871
322,478
39,092
1,561,383
49,698
28,365
238,576 2,565,473
4,443,494
Total interest repricing gap
(536,633)
266,388
276,770
192,190
(263,380)
(64,665)
146
At December 31, 2018
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)
Other financial assets
Liabilities
Customer deposits
Derivative liabilities
On-lending facilities
Borrowings
Current income tax
Financial liabilities
Total interest repricing gap
In millions of Naira
At December 31, 2018
Assets
Cash and balances with central banks
Treasury bills
Assets pledged as collateral
Due from other banks
Derivative assets
Loans and advances to customers (Gross)
Investment securities (Amortized cost and fair value through OCI)
Liabilities
Customer deposits
Derivative liabilities
On-lending facilities
Borrowings
Debt securities issued
Note
Carrying Amount Rate sensitive
Non rate sensitive
15
16
17
18
19
21
24
27
32
29
30
13
28
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
5,089,430
4,430,517
864,783
465,650
468,505
-
190,408
-
-
-
658,913
-
Up to 1
month
1 - 3
months
3 - 6
months
6 - 12
months
Over 1
year
Total rate
sensitive
7,500
-
-
-
211,269
243,457
194,041
351,793
-
-
7,500
1,000,560
3,000
123,929
27,475
187,419
251,112
660,078
4,944
137,132
-
241
27,920
80,020
659
-
14,097
87,026
75,012
9,641
41,865
4,314
-
592,935
674,274
88,826
314,277
1,398,064
2,016,520
105,389
334,492
515,552
1,023,923
476,226
397,651 1,010,384 1,987,982
4,896,167
1,062,367
116,163
6,907
44,655
-
-
6,682
3,277
-
-
7,130
3,268
47,712
-
180,588
886
139
9,516
6,343
1,251
2,035,244
3,221,790
-
287,776
431,277
179,338
16,996
392,935
437,620
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
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Zenith Bank Plc Annual Report December 31, 2019
Notes to the Consolidated and Separate Financial
Statements for the Year Ended December 31, 2019
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-19
31-Dec-18
4,101
44,891
Bank
The table below summarizes the Bank’s interest rate gap position:
At December 31, 2019
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
Note
Carrying Amount Rate sensitive Non rate sensitive
15
16
17
18
19
20
21
19
27
32
28
29
30
31
879,449
114,335
316,207
482,070
92,722
2,390,651
177,100
61,253
2,000
114,335
316,207
482,070
92,722
2,390,651
113,420
-
877,449
-
-
-
-
-
63,680
61,253
4,513,787
3,511,405
1,002,382
3,486,887
14,762
380,798
392,871
329,778
39,092
2,898,889
14,762
--
392,871
329,778
39,092
4,644,188
3,675,392
(130,401)
(163,987)
587,997
-
380,798
-
-
-
968,795
33,587
148
At December 31, 2019
In millions of Naira
Assets
Cash and balances with central banks
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
2,000
1,242
11,639
279,229
9,414
-
34,058
79,758
47,686
22,800
-
23,201
3,406
122,386
16,742
-
55,833
15,715
32,770
43,766
-
-
205,690
-
-
2,000
114,334
316,208
482,071
92,722
Loans and advances to customers (Gross)
411,816
88,653
105,346
179,293
1,605,543
2,390,651
Investment securities (Amortized cost and fair value through OCI)
-
4,668
235
3,689
104,828
113,420
715,340
277,623
271,316
331,066 1,916,061
3,511,406
Liabilities
Customer deposits
Derivative liabilities
On-lending facilities
Borrowings
Debt securities issued
4,251
1,600,013
2,898,890
1,281,780
3,242
12,439
12,262
5,250
-
584
3,953
1,597
2,318
1,716
-
-
28,600
22,081
230,254
-
-
-
-
377,119
48,843
39,092
14,763
392,871
329,778
39,092
Total interest repricing gap
(582,121)
231,511
243,101
92,527 (149,006)
(163,988)
1,297,461
46,112
28,215
238,539 2,065,067
3,675,394
At December 31, 2018
Note
Carrying Amount Rate sensitive Non rate sensitive
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
Total interest repricing gap
15
16
17
18
19
20
21
24
27
13
28
32
29
30
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
-
4,930,486
3,927,747
2,821,066
16,995
212,006
393,295
458,463
361,177
2,352,561
16,995
-
393,295
458,463
361,177
4,263,002
3,582,491
667,484
345,256
894,573
-
-
-
-
-
49,760
58,406
1,002,739
468,505
-
212,006
-
-
-
680,511
322,228
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Zenith Bank Plc Annual Report December 31, 2019
Notes to the Consolidated and Separate Financial
Statements for the Year Ended December 31, 2019
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)
Investment securities (Amortized cost and fair value through OCI)
Liabilities
Customer deposits
Derivative liabilities
On-lending facilities
Borrowings
Other
Up to 1
month
1 - 3
months
3 - 6
months
6 - 12
months
Over 1
year
Total rate
sensitive
7,500
817,043
592,935
393,466
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
659
-
915
4,713
14,097
83,120
11,032
41,865
-
88,826
296,620
1,333,926
1,921,064
48,150
47,072
106,913
712,968
427,556
291,400
858,999 1,636,824
3,927,747
831,197
74,685
1,444,109
2,352,561
2,354
3,268
216
140
-
47,712
10,368
287,283
6,682
3,277
-
-
-
180,588
5,490
1,251
452,973
179,338
16,997
393,295
458,463
361,177
6,907
44,655
-
-
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
The management of interest risk against interest rate gap limits
is supplemented by monitoring the sensitivity of the Group’s
financial assets and liabilities to various scenarios. Interest rate
movement affects reported income by causing an increase or
decrease in net interest income and fair value changes.
The table below shows the impact on the Bank’s profit before tax
if interest rates on financial instruments held at amortized cost or
at fair value had increased or decreased by 300 basis points, with
all other variables held constant.
In millions of Naira
31-Dec-19
31-Dec-18
Effect of 300 basis points
movement on profit before tax
2,166
48,184
The effect of 300 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 securities
held by the group is composed mainly of the following:
(i)
8.883% equity holding in African Finance Corporation
(AFC) valued at N62.8 billion and cost N40 billion.
(ii)
3.6% equity holding in Nigerian Interbank Settlement
Scheme (NIBBS) valued at N820 million and cost N50
million.
is a private sector-led
The AFC
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.
NIBSS was incorporated in 1993 and is owned by all licensed
banks including the Central Bank of Nigeria (CBN). The Company
is responsible for handling inter-bank payments, funds transfer
and settlement, and it also operates the Nigerian Automated
Clearing System (NACS).
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).
Liquidity risk
3.4
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.
150
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.
(a).
(b).
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;
Monitoring balance sheet liquidity ratios against internal
and regulatory requirements;
Maintaining a diverse range of funding sources with
adequate back-up facilities;
Managing the concentration and profile of debt
maturities;
Monitoring deposit concentration in order to avoid
undue reliance on large individual depositors and
satisfactory overall funding mix;
ensure a
Maintaining up-to-date
funding
and
contingency plans. These plans identify early indicators
of stress conditions and describe actions to be taken
in the event of difficulties arising from systemic or
other crises while minimizing any adverse long-term
implications for the business;
Regular conduct of stress testing, coupled with testing
of contingency funding plans from time to time.
liquidity
b.
c.
d.
e.
f.
g.
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:
Conducts on a regular basis appropriate stress tests so
as to;
(i)
(ii)
Identify sources of potential liquidity strain; and
Ensure that current liquidity exposures continue
to conform to the
liquidity risk tolerance
established by the board.
Analyses the separate and combined impact of possible
future liquidity stresses on:
Cash flows;
(i)
Liquidity position; and
(ii)
Profitability.
(iii)
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.
b.
Changes in market condition;
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;
establishes a clear allocation of roles and clear lines of
management responsibility;
is formally documented;
includes clear invocation and escalation procedures;
is regularly tested and the result shared with the ALCO
and Board;
outlines that Group’s operational arrangements for
managing a huge funding run;
is sufficiently
disruptions in a range of payment and settlement;
outlines how the Group will manage both internal
communications and
its external
stakeholders; and
to withstand simultaneous
those with
robust
b.
c.
d.
e.
f.
g.
h.
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.
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Zenith Bank Plc Annual Report December 31, 2019
Notes to the Consolidated and Separate Financial
Statements for the Year Ended December 31, 2019
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
and savings 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.
Exposure to liquidity risk
(a)
The key measure used by the Group for managing liquidity risk is the ratio of net liquid assets to deposits from customers. For this
purpose, ‘net liquid assets’ includes cash and cash equivalents and investment-grade debt securities for which there is an active and
liquid market less any balances with foreign banks and regulatory restricted cash. Customers’ deposit excludes deposit denominated
in foreign currencies. Details of the reported Group ratio of net liquid assets to deposits from customers at the reporting date and
during the reporting period were as follows.
At year end
Average for the period
Maximum for the period
Minimum for the period
Liquidity reserve
(b)
The table sets out the component of the Group’s liquidity reserve.
GROUP
BANK
31-Dec-19
31-Dec-18
31-Dec-19
31-Dec-18
57.25%
68.90%
85.47%
37.52%
80.91%
82.59%
88.87%
74.63%
57.18%
68.05%
80.41%
36.00%
75.35%
74.33%
82.10%
67.04%
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
152
31-Dec-19
31-Dec-18
Carrying value
Fair value Carrying value
Fair value
936,278
991,393
707,103
591,097
431,728
936,278
993,396
707,103
658,162
471,470
954,416
954,416
1,000,560
1,000,729
675,309
565,312
592,935
675,312
555,379
377,444
3,657,599
3,766,409
3,788,532
3,563,280
31-Dec-19
31-Dec-18
Carrying value
Fair value Carrying value
Fair value
879,449
822,449
482,070
189,358
431,728
879,449
823,109
482,212
201,079
471,470
902,073
817,043
393,466
156,673
592,935
902,073
817,181
393,466
153,920
377,444
2,805,054
2,857,319
2,862,190
2,644,084
Financial assets available to support funding
(c)
The table below sets out the availability of the Group’s financial assets to support future funding
Group
In millions of Naira
31-Dec-19
31-Dec-18
Note
Encum-
bered
Unenc-
umbered
Total
Encum-
bered
Unenc-
umbered
Total
-
-
-
-
-
-
-
-
Cash and balances with central banks
Treasury bills
Assets pledged as collateral
Due from other banks
Loans and advances
Investment securities
Financial assets
Bank
In millions of Naira
15
16
17
18
-
21
24
760,950
175,328
936,278
705,471
248,945
954,416
-
991,956
991,956
-
1,000,560
1,000,560
431,728
-
431,728
592,935
707,245
707,245
2,462,359
2,462,359
591,650
591,650
-
-
-
-
67,274
592,935
67,274
2,016,520
2,016,520
565,312
565,312
64,541
64,541
13,822
44,584
58,406
Cash and balances with central banks
Treasury bills
Assets pledged as collateral
Due from other banks
Loans and advances
Investment securities
Financial assets
15
16
17
18
-
21
24
31-Dec-19
31-Dec-18
Note
Encum-
bered
Unenc-
umbered
Total
Encum-
bered
Unenc-
umbered
760,950
118,499
879,449
705,471
-
822,466
822,466
-
431,728
-
431,728
592,935
Total
902,073
817,043
592,935
393,466
196,602
817,043
-
393,466
482,212
482,212
2,390,651
2,390,651
189,358
189,358
-
-
-
1,921,064
1,921,064
156,673
156,673
61,253
61,253
13,822
44,584
58,406
Financial assets pledged as collateral
(d)
The total financial assets recognized in the statement of financial position that have been pledged as collateral for liabilities as at
December 31, 2019 and December 31, 2018 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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Zenith Bank Plc Annual Report December 31, 2019
Notes to the Consolidated and Separate Financial
Statements for the Year Ended December 31, 2019
Note
Up to 1
month
1 - 3
months
3 - 6
months
6 - 12
months
Over 1
year
Gross nominal
inflow/ (outflow)
Carrying
amount
15
16
17
18
20
21
24
19
27
28
29
30
31
32
254,132
-
-
-
682,106
936,238
936,278
130,190
337,192
203,413
29,124
504,182
406,030
51,753
38,109
98,530
47,702
88,633
16,222
-
19,717
122,438
104,368
2,686
-
519,163
102,545
32,781
-
588,738
-
1,189,958
838,654
707,103
991,393
431,728
707,103
173,291
1,533,243
2,305,565
2,305,565
11,394
3,067
742,106
22,588
824,161
591,097
63,764
63,764
1,413,519
588,279
452,622
842,241
3,568,781
6,865,442
6,026,928
-
-
-
-
9,414
22,800
16,742
43,766
-
-
-
-
9,414
22,800
16,742
43,766
-
-
-
-
-
92,722
-
92,722
92,722
-
92,722
185,444
4,241,370
15,851
125,315
6,717
2,574
-
735
-
862
-
-
44,669
-
30,671
1,460
4,302
-
2,691
237,869
1,477
31
205,237
382,600
24,606
43,552
4,262,289
4,262,289
330,552
392,871
340,389
46,489
330,552
392,871
322,479
39,092
4,375,976
60,520
33,728
246,339
656,026
5,372,590
5,347,283
-
-
-
3,242
5,249
3,953
-
-
-
3,242
5,249
3,953
-
2,318
-
2,318
-
-
-
-
-
14,762
-
14,762
14,762
-
14,762
29,524
Group
At December 31, 2019
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
154
At December 31, 2018
Note
Up to 1
month
1 - 3
months
3 - 6
months
6 - 12
months
Over 1
year
Gross nominal
inflow/ (outflow)
Carrying
amount
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's deposits
Financial liabilities
Borrowings
Debt securities issued
Financial guarantees contracts
Derivative liabilities
Trading:
Inflow
Outflow
15
16
17
18
20
21
24
19
27
28
30
31
38
248,945
-
-
211,269
243,457
194,041
3,000
123,929
27,475
660,078
344,904
-
-
241
80,020
659
27,920
-
87,026
75,012
705,471
351,793
187,419
9,641
-
-
251,112
4,314
954,416
954,416
1,000,560
1,000,560
592,935
674,274
592,935
674,274
314,277
1,190,292
2,016,520
2,016,520
100,420
389,221
565,312
565,312
-
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
-
-
-
-
-
-
-
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
3,566,115
116,163
886
6,682
3,277
77,907
43,648
44,655
46,391
-
7,130
3,268
47,712
37,394
23,559
113,251
9,516
287,416
216,662
72,376
-
191,616
6,615
212,471
3,700,809
204,029
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, 2019
Notes to the Consolidated and Separate Financial
Statements for the Year Ended December 31, 2019
Bank
At December 31, 2019
Note
Up to 1
month
1 - 3
months
3 - 6
months
6 - 12
months
Over 1
year
Gross nominal
inflow/ (outflow)
Carrying
amount
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 liabilities
Trading:
Inflow
Outflow
15
16
17
18
20
21
24
19
27
28
29
30
31
32
197,343
96,741
29,124
279,301
387,502
2,785
38,109
-
231,496
98,530
47,702
88,633
6,675
-
150,096
19,717
122,438
104,368
2,686
-
682,106
402,759
102,545
32,781
-
588,738
-
173,291
1,485,678
11,394
297,147
879,449
881,092
838,654
482,222
879,449
822,449
431,728
482,070
2,239,472
2,239,472
320,687
189,358
-
-
556
22,588
61,253
61,253
1,030,905
473,036
399,305
723,326
3,076,257
5,702,829
5,105,779
-
-
-
-
9,414
22,800
16,742
43,766
-
-
-
-
9,414
22,800
16,742
43,766
-
-
-
-
-
92,722
92,722
-
-
-
92,722
92,722
3,469,752
12,262
125,315
6,767
2,574
-
-
-
44,669
-
584
-
869
30,671
1,460
4,266
23
3,486,887
3,486,887
-
255,483
2,711
382,774
237,869
1,477
24,606
43,552
380,798
393,121
340,389
46,489
380,798
392,871
329,778
39,092
3,604,408
56,931
33,584
246,323
706,438
4,647,684
4,629,426
-
3,242
-
3,242
-
5,249
-
5,249
-
3,953
-
3,953
-
2,318
-
2,318
-
-
-
-
-
14,762
14,762
-
-
-
14,762
14,762
156
At December 31, 2018
Note
Up to 1
month
1 - 3
months
3 - 6
months
6 - 12
months
Over 1
year
Gross nominal
inflow/ (outflow)
Carrying
amount
15
16
17
18
20
21
24
19
27
28
29
30
31
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:
Outflow
Inflow
196,602
182,137
3,000
387,596
312,789
-
6,283
-
195,199
123,929
241
79,607
659
-
-
705,471
155,676
284,031
-
-
27,475
187,419
251,112
-
916
4,713
902,073
817,043
592,935
393,466
902,073
817,043
592,935
393,466
83,120
11,032
296,620
1,148,928
1,921,064
1,921,064
48,150
96,832
156,673
156,673
-
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
2,821,066
2,821,066
212,006
393,295
463,138
410,702
212,006
393,295
393,295
361,177
2,743,812
74,685
216
15,804
44,655
46,391
-
6,682
3,277
88,443
2,354
3,268
47,712
37,394
101,254
84,998
10,368
287,283
216,662
74,248
-
191,616
6,615
212,471
2,850,662
173,087
282,344
335,115
659,000
4,300,207 4,180,839
2,850,662
-
-
6,907
6,682
3,268
-
-
-
-
-
-
-
-
-
-
-
-
-
139
-
-
-
-
6,907
6,682
3,268
139
-
-
-
-
-
-
-
-
16,995
16,996
35,156
-
-
-
-
-
-
-
-
52,152
16,995
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157
Zenith Bank Plc Annual Report December 31, 2019
Notes to the Consolidated and Separate Financial
Statements for the Year Ended December 31, 2019
The amounts in the table above have been compiled as follows.
Type of financial instrument
Basis on which amounts compiled
Non-derivative financial
financial assets
Issued financial guarantee contracts
liabilities and
Derivative financial liabilities and financial
assets held for risk management purposes
Trading derivative
liabilities and assets
forming part of the Group’s proprietary
trading operations that are expected to be
closed out before contractual maturity
Trading derivative
liabilities and assets
that are entered into by the Group with its
customers
Undiscounted cash flows, which include estimated interest payments.
Earliest possible contractual maturity. For issued financial guarantee contracts, the
maximum amount of the guarantee is allocated to the earliest period in which the
guarantee could be called.
Contractual undiscounted cash flows. The amounts shown are the gross nominal
inflows and outflows for derivatives that have simultaneous gross settlement (e.g.
forward exchange contracts and currency swaps) and the net amounts for derivatives
that are net settled.
Fair values at the date of the statement of financial position. This is because contractual
maturities 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, 2019
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
79,318
545,174
363,922
62,972
16,346
394,651
135,665
77,040
19,528
-
12,747
44,128
988,414
534,663
171,539
56,875
-
2,111
108,959
111,070
-
-
114,267
114,267
158
At December 31, 2018
Carrying
amount
Less than 3
months
3 -6
months
6 - 12
months
1 to 5 Years More than 5
years
In millions of Naira
Financial guarantees
Usance
Letters of Credit
Performance bonds and Guarantees
Total
Bank
At December 31, 2019
In millions of Naira
Financial guarantees
Usance
Letters of Credit
Performance bonds and Guarantees
Total
At December 31, 2018
In millions of Naira
Financial guarantees
Usance
Letters of Credit
Performance bonds and Guarantees
Total
147,189
356,939
327,123
831,251
Carrying
amount
299,445
55,357
79,318
413,656
261,495
754,469
Carrying
amount
299,445
55,357
147,189
321,754
306,412
775,355
100,638
203,327
71,251
44,422
142,873
45,981
2,129
10,714
48,998
375,216
233,276
61,841
-
25
100,028
100,053
-
-
60,865
60,865
Less than 3
months
3 -6
months
6 - 12
months
1 to 5 Years More than 5
years
102,937
9,672
1,602
-
31,708
78,292
82,106
14,032
62,972
16,346
299,445
102,937
55,357
14,032
-
9,672
31,708
417,774
133,315
41,380
-
1,602
78,292
79,894
-
-
82,106
82,106
Less than 3
months
3 -6
months
6 - 12
months
1 to 5 Years More than 5
years
102,937
9,672
1,602
-
31,708
78,292
82,106
14,032
100,638
180,202
68,040
44,422
133,813
2,129
7,731
40,855
42,763
348,880
219,090
52,623
-
8
100,028
100,036
-
-
54,726
54,726
Fair value of financial assets and liabilities
3.5
IFRS 7 specifies a hierarchy of valuation techniques based on whether the inputs to those valuation techniques are observable
or unobservable. Observable inputs reflect market data obtained from independent sources; unobservable inputs reflect the
Group’s market assumptions. These two types of inputs have created the following fair value hierarchy.
a.
b.
c.
Level 1: Quoted prices (unadjusted) in active markets for identical assets or liabilities.
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).
This hierarchy requires the use of observable market data when available. The Group considers relevant and observable market
prices in its valuations where possible.
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159
Zenith Bank Plc Annual Report December 31, 2019
Notes to the Consolidated and Separate Financial
Statements for the Year Ended December 31, 2019
Classification of financial assets and liabilities and fair value hierarchy
Group
The table below sets out the Group’s classification of each class of its financial assets and liabilities and fair value heirachy
In millions of Naira
Note
At December 31, 2019
At December 31, 2018
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 :
Equity securities (unquoted)
Debt securities
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 Amortised cost
Customer deposits
Other financial liabilities
On-lending facilities
Borrowings
Debt securities issued
16
21
19
21
21
15
16
17
18
20
21
24
32
27
28
29
30
31
708,114
708,114
1&2
510,313
510,313
1&2
12,257
92,722
12,257
92,722
1
2
4,970
4,970
88,826
88,826
115,520
115,520
1&2
208,382
208,382
63,680
280,854
63,680
280,854
936,278
936,278
283,282
285,282
316,207
355,950
707,103
707,103
2,305,565
2,305,565
3
2
-
1&2
1&2
-
3
49,760
49,760
205,753
205,753
954,416
954,416
490,247
490,424
592,935
585,826
674,274
675,312
1,823,111
1,728,567
234,305
301,370
1,2&3
510,582
496,543
63,764
63,764
14,762
14,762
4,262,289
4,262,289
330,552
330,552
392,871
392,871
322,479
322,479
39,092
39,092
-
2
-
-
3
3
3
61,370
61,370
16,995
16,995
3,690,295
3,690,295
177,810
190,408
393,295
393,295
437,260
437,260
361,177
361,177
1
2
-
3
1
-
1
1
2
3
1
-
2
-
-
3
3
2
160
Bank
The table below sets out the Bank’s classification of each class of its financial assets and liabilities.
In millions of Naira
Note
Carrying
Value
Fair value Fair value
hierarchy
Carrying
Value
Fair
value
Fair value
hierarchy
At December 31, 2019
At December 31, 2018
Assets
Carried at FVTPL:
Treasury bills
Investment securities (FGN bonds)
Derivative assets
Asset pledged as collateral
Carried at FVOCI :
Equity 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 amortized cost:
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
708,114
708,114
1&2
510,313
510,313
1&2
12,257
92,722
12,257
92,722
1
2
4,970
4,970
88,826
88,826
115,520
115,520
1 & 2
208,382
208,382
63,680
63,680
879,449
879,449
114,335
114,995
316,207
355,950
482,070
482,070
2,239,472
2,239,472
3
-
1&2
1&2
-
3
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
113,421
125,141
1,2&3
102,508
99,190
58,406
58,406
61,253
61,253
14,762
14,762
3,486,887
3,486,887
380,798
380,798
392,871
392,871
329,778
329,778
39,092
39,092
-
2
-
-
3
3
3
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
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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161
Zenith Bank Plc Annual Report December 31, 2019
Notes to the Consolidated and Separate Financial
Statements for the Year Ended December 31, 2019
Financial instruments measured at fair value
At December 31, 2019
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 December 31, 2019
At December 31, 2018
In millions of Naira
Financial assets
Notes
Level1
Level2
Level3
16
16
21
21
19
32
21
361,380
90,815
12,257
15,665
-
-
-
346,734
9,041
-
-
92,722
14,762
-
-
-
-
-
-
-
63,680
480,117
463,259
63,680
49,760
50
13,870
63,680
Notes
Level1
Level2
Level3
Treasury bills (FVTPL) (unpledged)
16
362,639
147,674
Treasury bills pledged under repurchase agreement (FVTPL)
FGN bonds FVTPL (unpledged)
FGN bonds pledged under repurchase agreement (FVTPL)
Derivative assets
Derivative liabilities
Investment securities
Reconciliation of Level 3 items
At 1 January
Addition
Gain recognised through other comprehensive income
At December 31, 2018
16
21
21
19
32
21
162
-
-
-
-
-
-
179,259
553
4,970
23,570
-
-
-
-
-
88,826
16,995
-
49,760
570,438
254,048
49,760
14,101
34,200
1,459
49,760
Unobservable inputs used in measuring fair value
Level 3 fair value measurements
(a)
The table below sets out information about significant unobservable inputs used at December 31, 2019 and December 31, 2018 in
measuring financial instruments categorized as level 3 in the fair value hierarchy
Type of
financial
instrument
Fair values
at December
31, 2019
Valuation
technique
Significant
unobservable
input
Range of estimates
(average) for
unobservable inputs
Fair value measurement
sensitivity to unobservable
inputs
N63.68 billion
Unquoted
equity
investment
Equity DCF
model.
adjusted with
recent similar
transactions.
-Discount rate.
-Estimate cash
flow.
Risk premium of 10.63%
above risk- free interest rate
(1.92%) (31 Dec.
2018:11.50 - 12.50%
above risk free rate (3.01%))
5-year
Compound Annual Growth
Rate (CAGR) of cash flow of
6.5% (December 2018: 8-
9% (15.20%))
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.
The effect of unobservable inputs on fair value measurements
(b)
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 December 31, 2019
At December 31, 2018
Favourable
changes
Unfavourable
changes
Favourable
changes
Unfavourable
changes
Unquoted investment securities
1,770.00
(1,662.00)
2,140.00
(870.00)
The favourable and unfavourable effects of using reasonably possible alternative assumptions for valuation of unquoted equity
securities have been calculated by recalibrating the model values using unobservable inputs based on upper and lower quartile
respectively of the Group’s range of possible estimates. Key inputs and assumptions used in the model at December 31, 2019
included a risk premium 10.63% above the risk-free interest rate of 1.92% (December 31, 2018: 12.44% - 13.44%) respectively
above risk free rate of 3.01%).
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The fair value of the unquoted equity holding in African Finance Corporation (AFC) is determined using equity discounted cash
flow model. Inputs into the model include estimated future cash flows to equity, valuation horizon and Capital Asset Pricing
Model (CAPM) discount rate (Risk free rate plus risk premium).
(c)
Fair valuation methods and assumptions
(i)
Cash and balances with central banks
Cash and balances with Central banks represent cash held (including mandatory cash reserve requirements of
December 31, 2019: N761 billion, December 31, 2018: N705 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.
163
Zenith Bank Plc Annual Report December 31, 2019
Notes to the Consolidated and Separate Financial
Statements for the Year Ended December 31, 2019
(iii)
(iv)
(v)
(vi)
short
Treasury bills and investment securities
Treasury bills
term
represent
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 discounted cashflow
the basis of
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.
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.
Other financial assets/financial liabilities
liabilities
Other financial assets/financial
represent monetary assets, which usually
have a short recycle period and as such,
whose fair values approximate their carrying
amount.
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
maturity.
(vii) Derivatives
for the remaining term to
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.
Capital management
3.6
The strategy for assessing and managing the impact of
our business plans on present and future regulatory
capital forms an integral part of the Group’s strategic plan.
Specifically, the Group considers how the present and future
capital requirements will be managed and met against
projected capital requirements. This is based on the Group’s
assessment and against the supervisory/regulatory capital
requirements taking account of the Group business strategy
and value creation to all its stakeholders.
The Group prides itself in maintaining very healthy capital
adequacy ratio in all its areas of operations. Capital levels
are determined either based on internal assessments or
regulatory requirements. The Group maintained capital
levels above the regulatory minimum prescribed in all its
operating jurisdictions. The 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 3 December 2020.
The Group’s Capital Adequacy is reviewed regularly to meet
regulatory requirements and standard of international best
164
practices. The Group adopts and implements the decisions
necessary to maintain the capital at a level that ensures the
realisation of the business plan with a certain safety margin.
The Group undertakes a regular monitoring of capital
adequacy and the application of regulatory capital by
deploying internal systems based on the guidelines provided
by the Central Bank of Nigeria (CBN) and the regulatory
authorities of the subsidiaries for supervisory purposes.
The Group has consistently met and surpassed the minimum
capital adequacy requirements applicable in all areas of
operations.
Most of the Group’s capital is Tier 1 (Core Capital) which
consists of essentially share capital and reserves created by
appropriations of retained earnings.
Banking subsidiaries in the Group, which are not incorporated
in Nigeria, are directly regulated and supervised by their
local banking regulators and are required to meet the capital
requirement directive of the local regulatory jurisdiction.
Parental support and guidance are given at the Group
level at which the risk level in relation to capital level and
adequacy is closely monitored. The Group meet all capital
requests from these regulatory jurisdictions and determines
the adequacy based on its expansion strategies and internal
capital assessments.
The Group’s capital plan is linked to its business expansion
strategy, which anticipates the need for growth and
expansion in its branch network and IT infrastructure. The
capital plan sufficiently meets regulatory requirements as
well as providing adequate cover for the Group’s risk profile.
The Group’s capital adequacy remains strong and the
capacity to generate and retain reserves continues to grow.
b.
c.
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
in accordance with the
guidelines.
(SIB)
The table below shows the computation of the Group’s
capital adequacy ratio for the year ended December 31,
2019 as well as the December 31, 2018 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, 2019
Notes to the Consolidated and Separate Financial
Statements for the Year Ended December 31, 2019
In millions of Naira
31-Dec-19
Adjusted
impact of
IFRS 9
transition on
31-Dec-19
Group
31-Dec-18
31-Dec-19
Adjusted
impact of
IFRS 9
transition on
31-Dec-18
Bank
Adjusted
impact of
IFRS 9
transition on
31-Dec-19
31-Dec-18
Adjusted
impact of
IFRS 9
transition on
31-Dec-18
Tier 1 capital
Share capital
Share premium
Statutory reserves
SMEIES reserve
Retained earnings
IFRS 9 Transitional Adjustment
Total qualifying Tier 1 capital
Deferred tax assets
Intangible assets
Investment in capital of financial
subsidiaries
Adjusted Total qualifying Tier 1
capital
Tier 2 capital
Basel II
15,698
255,047
170,695
3,729
439,510
-
884,679
(11,885)
Basel II
15,698
Basel II
15,698
255,047
255,047
170,695
143,320
3,729
439,510
43,268
927,947
(11,885)
3,729
346,215
-
764,009
(9,513)
(16,497)
(16,497)
(16,678)
-
-
-
Basel II
15,698
255,047
143,320
3,729
346,215
64,901
828,910
(9,513)
(16,678)
-
Basel II
15,698
255,047
152,065
3,729
328,590
-
755,129
(11,223)
(15,109)
(10,896)
Basel II
15,698
255,047
152,065
3,729
328,590
41,420
796,549
(11,223)
(15,109)
(10,896)
Basel II
15,698
255,047
127,865
3,729
263,781
-
666,120
(9,197)
(15,399)
(25,604)
Base II
15,698
255,047
127,865
3,729
263,781
62,192
728,249
(9,197)
(15,399)
(24,145)
856,297
899,565
737,818
802,719
717,901
759,321
641,524
703,653
Other comprehensive income (OCI)
Total qualifying Tier 2 capital
54,257
54,257
54,257
54,257
48,354
48,354
48,354
48,354
(23,729)
(23,729)
(23,729)
(23,729)
(9,858))
(9,858)
(8,399)
(9,858)
Net Tier 2 Capital
Total regulatory capital
Risk-weighted assets
Credit risk
Market risk
Operational risk
54,257
910,554
54,257
48,354
953,822
77786,172
48,354
851,073
-
-
-
-
717,901
759,321
641,524
703,653
3,134,029
3,134,029
2,050,298
2,050,298
2,806,711
2,806,711
1,755,076
1,755,076
170,392
891,735
170,392
88,914
891,735
945,361
88,914
945,361
52,423
810,268
52,423
810,268
53,562
881,691
53,562
881,691
Total risk-weighted assets
4,196,156
4,196,156
3,084,573
3,084,573
3,669,402
3,669,402
2,690,329
2,690,329
Risk-weighted Capital Adequacy
Ratio (CAR)
22 %
23 %
25 %
28 %
20 %
21 %
24 %
26 %
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
Year 2
Year 3
Year 4
60%
40%
20%
-%
166
4.
Critical accounting estimate and judgements
The Group makes estimates and assumptions that affect the
reported amounts of assets and liabilities within the next
financial year. Estimates and judgements are continually
evaluated and are based on historical experience and other
factors, including expectations of future events that are
believed to be reasonable under the circumstances.
Impairment losses on loans and advances
4.1
Measurement of the expected credit loss 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
significantly;
Incorporation of forward-looking information;
Establishing groups of similar financial assets for the
purposes of measuring ECL.
increased
•
•
•
•
•
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.
ii)
iii)
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.
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.
Level 3 : Valuation techniques using significant
includes all
inputs. This category
unobservable
instruments where the valuation technique includes
inputs not based on observable data and the
unobservable inputs have a significant effect on
the instrument’s valuation. This category includes
instrument that are valued based on quoted prices for
similar instruments where significant unobservable
adjustments or assumptions are requried to reflect
differences between the instruments.
Income taxes
is subject to
income taxes
4.3
The Group
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.
Deferred Tax Assets and Liabilities
The deferred tax assets and liabilities recognized by the
Group is dependent on the availability of taxable profit in
the foreseeable future to utilize the deferred tax. The Group
reviews the carrying amount of the deferred tax at the end of
each reporting period and recognizes an amount such that
it is probable that sufficient taxable profit will be available
which the Group can use the benefit therefrom.
In determining the deferred tax assets recognized in the
financial statements, the Group has applied judgement in
estimating the deferred tax recoverable in the foreseeable
future. This involves the estimation of future income and
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Zenith Bank Plc Annual Report December 31, 2019
Notes to the Consolidated and Separate Financial
Statements for the Year Ended December 31, 2019
(a)
Expenses for loan losses recognised in the profit and
loss account should be determined based on the
relevant IFRS.
However, the allowance for loan losses determined
under the IFRS should be compared with the loan
loss provisions
determined under the Prudential Guidelines. The
differences between both provisions should be
treated as follows:
(i)
(ii)
Where Prudential Provisions is greater than
IFRS provisions, the resulting difference
should be transferred from the
general
distributable regulatory credit risk reserve.
reserve account
to a non-
Where Prudential Provisions is less than IFRS
provisions, the IFRS determined provision is
charged to the statement
of comprehensive income. The cumulative
balance in the regulatory risk reserve is
thereafter transferred to the general
reserve account.
(b)
The non-distributable reserve is classified under
Tier 1 as part of the core capital for the purpose of
determining capital
adequacy.
In the guidelines to IFRS implementation, the Central Bank
of Nigeria (CBN) directed banks to maintain a regulatory
credit risk reserve in the event that the impairment on loans
determine using the CBN prudential guideline is higher than
the impairment determined using IFRS principles. As a result
of this directive, the Bank holds no credit risk reserves as at
December 31, 2019.
expenses, and the consideration of non-taxable income and
disallowable expenses in order to arrive at the future taxable
profit / loss.
Effective January 2022, the tax exemption granted on
short term Federal Government of Nigeria securities [such
as Treasury bills, promissory notes etc.] and non-Federal
Government of Nigeria Bonds, and the interest earned by the
holder of these instruments, under the Companies Income
Tax (Exemption of Bonds and Short Term Government
Securities) Order, 2011, elapses. In determining the extent
to which it is probable that future taxable profit will be
available against which the unused tax losses of the Group
can be utilized, the Group has applied judgment that the
Federal Government of Nigeria (FGN) will likely extend the
Companies Income Tax (Exemption of Bonds and Short Term
Government Securities) Order, 2011, beyond 2021, in order
to stimulate continuous participation in the treasury bills
market and to meet government funding needs. See note
23 for details on deferred tax.
Prudential Adjustments
4.4
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.
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:
168
Provision for loan losses per prudential guidelines
In millions of Naira
Loans and advances
-Lost
- Doubtful
- Substandard
- Watchlist
- Performing
Other financial assets
(a)
Impairment assessment under IFRS
Loans and advances
12-months ECL credit
Life-time ECL Not impaired
Life- time ECL credit impaired
(b)
Due from Banks- 12 months ECL (c)
Treasury bills- 12 months ECL (d)
Asset pledged as collateral- 12 months ECL (e)
Investment securities- 12 months ECL (f )
Other financial assets- ECL allowance (g)
Other non-financial assets (h)
Off Balance Sheet Exposures- 12 months ECL (i)
(m)=(b)+(c)+(d)+(e)+(f )+(g)+(h)+(i)
(n)=(a)-(m)
Reversal from)/transfer to retained earnings at year end
Bank
31-Dec 19
31-Dec 18
57,477
17,831
986
10,605
40,620
1,514
129,033
27,143
14,276
109,760
151,179
-
142
17
69
538
720
183
5,538
158,386
(29,353)
-
66,900
10,970
1,575
11,156
31,485
833
122,920
14,092
34,233
136,673
184,998
-
-
-
-
763
1,628
560
8,011
195,960
(73,040)
-
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Zenith Bank Plc Annual Report December 31, 2019
Notes to the Consolidated and Separate Financial
Statements for the Year Ended December 31, 2019
5.
Segment analysis
The Group’s strategic divisions offer different products and
services, and are managed seperately based on the Group’s
management and internal reporting structure. The Group’s
Executive Management (Chief Operating Decision Maker)
reviews internal management reports from each of the
strategic divisions on a monthly basis.
The Group’s operations are primarily organised on the basis
of its products and service offerings in Nigeria, while the
banking operations outside Nigeria are reported seperately
for Africa and Europe. The following summary describes each
of the Group’s reportable segments:
(a)
Corporate, Public, Retail Banking, Pension Custodial
services and Nominee - Nigeria
This segment provides a broad range of banking
and pension custodial services to a diverse group of
corporations, financial institutions, investment funds,
governments and individuals.
(b)
Outside Nigeria Banking - Africa and Europe
These segments provide a broad range of banking
services to a diverse group of corporations, financial
institutions,
investment funds, governments and
individuals outside Nigeria. The reportable segments
covers banking operations in other parts of Africa
(Ghana, Sierra Leone and The Gambia) and in Europe
(the United Kingdom) respectively.
Segment profit before tax, as included in internal
management reports reviewed by the Group’s
Executive Management,
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.
is used
No single external customer 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.
170
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In millions of Naira
31-Dec-19
31-Dec-18
31-Dec-19
31-Dec-18
Group
Bank
6. Interest and similar income
Loans and advances to customers
Placement with banks and discount houses
Treasury bills
Promissory note
Commercial papers
Government and other bonds
232,946
26,897
81,108
5,748
367
68,497
273,179
13,886
100,537
-
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52,450
220,210
18,911
52,127
5,748
367
41,947
415,563
440,052
339,310
258,440
6,608
64,002
-
-
38,766
367,816
Included in interest income on loans and advances is interest income on advances under finance lease of N724 million (31 December,
2018: N671 million).
7. Interest and similar expense
Current
Savings accounts
Time deposits
Borrowed funds and lease
11,624
21,625
47,334
67,949
10,952
18,698
42,299
72,509
10,387
21,394
35,041
59,415
10,258
18,532
30,172
65,194
148,532
144,458
126,237
124,156
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.
Included in the interest expense on borrowed funds and lease is N3,494 million and N3,079 million for Group and Bank respectively,
which represents interest expense on lease liability.
8. Impairment loss/(write back) on financial and non-financial instruments
ECL on financial instruments:
Loans and advances( see note 3.2.18)
Investment securities (see note 3.2.18)
Treasury Bills (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 ECL on financial instruments
Impairment (credit)/charge on non-financial
instruments:
Off balance sheet (see note 3.2.18)
Other non financial assets (see note 24)
27,754
(27)
(35)
36
(789)
(57)
26,882
(2,473)
(377)
24,032
13,303
(430)
(1,237)
395
1,938
(1,078)
12,891
5,337
144
18,372
27,148
(27)
(55)
23
(789)
(57)
26,243
(2,473)
(377)
23,393
9,396
207
(1,111)
383
931
(1,078)
8,728
6,441
144
15,313
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173
Zenith Bank Plc Annual Report December 31, 2019
Notes to the Consolidated and Separate Financial
Statements for the Year Ended December 31, 2019
In millions of Naira
31-Dec-19
31-Dec-18
31-Dec-19
31-Dec-18
Group
Bank
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)
21,879
2,051
19,623
3,202
42,511
3,725
7,849
2,381
536
6,021
4,896
114,674
(14,568)
100,106
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
20,046
-
19,623
2,921
41,162
1,233
-
2,381
278
6,021
3,102
96,767
(13,126)
83,641
15,231
-
18,008
7,596
19,307
1,161
-
3,239
449
4,518
2,998
72,507
(8,383)
64,124
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 43(vii))
Income on cash handling
Foreign currency revaluation gain (See note b below)
1,932
147
597
11,540
14,216
1,795
259
601
15,292
17,947
5,532
152
400
4,754
10,838
5,395
241
428
11,415
17,479
(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
174
(7,427)
114,320
10,905
117,798
(16,783)
94,478
2,507
80,202
(7,427)
114,294
10,905
117,772
(16,783)
94,478
2,507
80,202
In millions of Naira
Group
Bank
31-Dec-19
31-Dec-18
31-Dec-19
31-Dec-18
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
2,448
892
12,898
4,377
2,439
9,846
1,313
7,908
11,762
4,563
14,429
1,977
3,449
2,751
2,402
3,824
268
21
2,751
28,654
3,609
5,847
1,025
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
1,512
590
12,898
3,427
2,136
9,071
859
7,433
11,762
3,968
11,822
1,836
2,883
2,340
1,642
3,419
268
21
2,729
28,654
3,195
5,687
39
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
An amount of N1,313 million and N859 million for Group and Bank respectively have been represented as operating
lease expense, which represent the amount of straight line amortisation on short term lease in which the Group/
Bank has applied the recognition exception.
129,453
137,897
118,191
124,576
13. Taxation
(a) Major components of the tax expense
Minimum tax expense (see note i below)
-
4,052
Income tax expense
Corporate tax
Information technology tax
Dividend tax (see note (i) below)
Prior year (over)/under provision
Tertiary Education tax
Police trust fund levy
Current income tax
Deferred tax expense:
12,770
1,980
22,105
-
-
10
11,031
2,056
20,673
275
77
-
-
-
1,980
22,053
-
-
10
4,052
-
1,902
20,673
-
-
-
36,865
34,112
24,043
22,575
(Reversal)/origination of temporary differences
Income tax expense
Total tax expense
(2,414)
34,451
34,451
97
34,209
38,261
(2,026)
22,017
22,017
-
22,575
26,627
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Zenith Bank Plc Annual Report December 31, 2019
Notes to the Consolidated and Separate Financial
Statements for the Year Ended December 31, 2019
The Bank was assessed based on the dividend tax on 2018 financial year profit (minimum tax rule).
In millions of Naira
31-Dec-19 31-Dec-18
31-Dec-19
31-Dec-18
(b) Reconciliation of effective tax rate
Group
Bank
Profit before income tax
243,294
231,685
200,020
192,107
Tax calculated at the weighted average Group rate of 30% (2018: 30%)
72,988
69,506
60,006
57,632
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
Unrecognised deferred tax asset
Dividend tax paid
Tertiary education tax
Changes in estimate relating to prior year
Police trust fund levy
Total tax expense
-
1,834
(1,377)
9,158
(78,806)
(84,852)
-
2,409
13,963
22,053
-
-
10
4,052
2,056
17,644
20,673
1,126
275
-
-
1,828
(77,823)
-
1,980
13,963
22,053
-
-
10
-
8,212
(83,488)
4,052
1,902
17,644
20,673
-
-
-
34,451
38,261
22,017
26,627
In millions of Naira
31-Dec-19
31-Dec-18
31-Dec-19
31-Dec-18
(c) The movement in the current income tax payable balance is as follows:
At start of the year
Tax paid
Minimum tax
Current income tax charge (see note 13a)
At end of the year
9,154
8,915
(36,308)
(37,925)
-
36,865
9,711
4,052
34,112
9,154
5,954
(23,370)
-
24,043
6,627
6,069
(26,742)
4,052
22,575
5,954
176
In millions of Naira
31-Dec-19 31-Dec-18
31-Dec-19 31-Dec-18
Group
Bank
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)
208,693
193,147
178,003
165,480
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
6.65
31,396
31,396
6.15
31,396
31,396
5.67
31,396
31,396
5.27
Basic and diluted earnings per share are the same, as the Bank has no potentially dilutive ordinary shares
15. Cash and balances with central banks
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
55,255
120,073
680,261
80,689
936,278
254,171
682,107
148,266
100,679
624,782
80,689
954,416
954,416
-
39,417
79,082
680,261
80,689
133,466
63,136
624,782
80,689
879,449
902,073
197,342
682,107
902,073
-
936,278
954,416
879,449
902,073
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.
Included in the Mandatory reserve is the sum of N78.8 billion which arose as a result of the Bank’s shortfall in the
regulatory loan to depost ratio (LDR)
Mandatory reserve deposit is reported net of N98.1 billion (December 31, 2018: N4.3 billion) which relates to
Differentiated Cash Reserve Requirement (DCRR) Scheme. Under the DCRR scheme, Deposit Money Banks (DMBs)
interested in providing credit financing to Greenfield (New) and Brownfield (expansion) projects in the Real Sector
(Agriculture and Manufacturing) may request for the release of funds from their CRR to finance the projects.
(b)
Special Cash Reserve Requirement represents a 5% special intervention reserve held with the Central Bank of Nigeria
as a regulatory requirement.
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Zenith Bank Plc Annual Report December 31, 2019
Notes to the Consolidated and Separate Financial
Statements for the Year Ended December 31, 2019
In millions of Naira
16. Treasury bills
Treasury bills (FVTPL)
Treasury bills (Amortized cost)
ECL Allowance on treasury bills (Amortized cost) (see note 3.2.18)
Classified as:
Current
Group
Bank
31-Dec-19 31-Dec-18
31-Dec-19 31-Dec-18
708,111
283,845
(563)
510,313
490,319
(72)
708,114
114,352
(17)
510,313
306,802
(72)
991,393
1,000,560
822,449
817,043
991,393
1,000,560
822,449
817,043
991,393
1,000,560
822,449
817,043
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).
In millions of Naira
17. Assets pledged as collateral
Treasury bills pledged as collateral
Bonds pledged as collateral
Treasury bills under repurchase agreement
Bonds under repurchase agreement
ECL Allowance on assets pledged and under repo
11,697
11,697
23,819
23,819
11,697
11,697
20,847
20,847
Group
Bank
31-Dec-19
31-Dec-18
31-Dec-19
31-Dec-18
-
105,135
198,611
128,051
(69)
5,100
94,046
373,336
120,579
(126)
-
105,135
198,611
128,051
(69)
5,100
94,046
373,336
120,579
(126)
431,728
592,935
431,728
592,935
Included in assets pledged as collateral for Group/Bank are treasury bills and bonds at amortised cost of N98,755 million and
N217,521 million (December 31, 2018: N202,110 million and N191,054 million) respectively. All other assets pledged as collateral
for Group/Bank are treasury bills and bonds at fair value
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) N27.84 billion (December 31, 2018: N28.18 billion), Federal Inland Revenue Services N8.08 billion
(December 31, 2018: N8.04 billion), V-Pay N44.87 million (December 31, 2018: N44.70 million), Interswitch Limited N2.15 billion
(December 31, 2018: N2.15 billion), the Bank of Industry (Nigeria) N39.53 billion (December 31, 2018: N44.03 billion), E- Tranzact
N44.87 million (December 31, 2018: N44.00 million), CBN Real Sector Support Fund (RSSF) N24.77 billion (December 31, 2018:
N13.95 billion) and System Specs/RMITA N2.68 billion (December 31, 2018: N2.69 billion).
178
Assets exchanged under repurchase agreement as at December 31, 2019 are with the following counterparties (note 30):
In millions of Naira
Counterparties
JP Morgan (see note 30)
ABSA (see note 30)
Standard Bank South Africa (see note 30)
Mashreq Bank (see note 30)
Societe Generale Bank (see note 30)
Goldman Sachs (see note 30)
Group
Bank
Carrying value of asset Carrying value of liability
Carrying value of asset Carrying value of liability
49,617
103,271
22,385
24,813
75,768
50,808
326,662
36,534
82,352
27,635
18,320
55,433
36,950
49,617
103,271
22,385
24,813
75,768
50,808
36,534
82,352
27,635
18,320
55,433
36,950
257,224
326,662
257,224
Assets exchanged under repurchase agreement as at December 31, 2018 are with the following counterparties (note 30):
In millions of Naira
Counterparties
JP Morgan
ABSA
Standard Bank
First Abu Dhabi
Societe Generale Bank
Standard Bank London
Classified as:
Current
Non-current
Group
Bank
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
493,915
210,373
221,355
431,728
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
365,966
493,915
365,966
436,491
156,444
592,935
210,373
221,355
431,728
436,491
156,444
592,935
In millions of Naira
31-Dec-19
31-Dec-18
31-Dec-19
31-Dec-18
Group
Bank
18. Due from other banks
Current balances with banks within Nigeria
Current balances with banks outside Nigeria
Placements with banks and discount houses
ECL Allowance
Classified as:
Current
Non-current
8,155
171,410
527,680
(142)
707,103
529,771
177,332
707,103
13,214
204,724
458,305
(1,969)
674,274
674,274
-
674,274
-
154,654
327,558
(142)
482,070
304,738
177,332
482,070
-
196,384
198,013
(931)
393,466
393,466
-
393,466
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Zenith Bank Plc Annual Report December 31, 2019
Notes to the Consolidated and Separate Financial
Statements for the Year Ended December 31, 2019
Included in balances with banks outside Nigeria is the amount of N22.32 billion and N46.35 billion for the Group and Bank
respectively (December 31, 2018: N41.18 billion and N41.05 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).
In millions of Naira
31-Dec-19
31-Dec-18
31-Dec-19
31-Dec-18
Due from banks with maturity greater than 3 months:
223,413
-
223,413
-
Group
Bank
19. Derivative assets
Instrument types (fair value):
Forward and Swap Contracts
Futures contracts
Total
Instrument types (Notional amount) :
Forward and Swap Contracts
Futures contract
Total
91,204
1,518
92,722
729,726
319,968
87,467
1,359
88,826
730,715
320,797
91,204
1,518
92,722
729,726
319,968
87,467
1,359
88,826
730,715
320,797
1,049,694
1,051,512
1,049,694
1,051,512
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 N7.4 billion (31 December, 2018 net loss
of N16.8 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
Gross loans and advances to customers
Less: ECL Allowance (see note 3.2.18)
Gross Loans classified as:
Current
Non-current
212,548
1,760,501
483,024
6,286
2,462,359
(156,794)
208,021
1,419,276
385,922
3,301
2,016,520
(193,409)
194,020
1,707,326
483,024
6,281
2,390,651
(151,179)
178,740
1,353,101
385,922
3,301
1,921,064
(184,998)
2,305,565
1,823,111
2,239,472
1,736,066
803,636
1,658,723
608,556
1,407,964
785,108
1,605,543
566,279
1,354,785
2,462,359
2,016,520
2,390,651
1,921,064
Movement in ECL Allowance as at December 31, 2019 is presented in Note 3.2.18.
180
Included in Loans and advances are loans to other banks of N139.39 billion and N7.66 billion for Group and Bank respectively
(December 31, 2018: N51.8 billion and Nil respectively).
In millions of Naira
31-Dec-19
31-Dec-18
31-Dec-19
31-Dec-18
Group
Bank
21. Investment securities
Debt securities
At amortised cost (see note iii)
At FVTOCI
ECL Allowance (see note 3.2.18)
Net debt securities measured at amortised cost
Debt securities (measured at fair value through profit or loss) (see note ii)
Net debt securities
Equity securities
234,857
280,854
(551)
515,160
12,257
527,417
307,401
205,753
(2,572)
510,582
4,970
515,552
113,959
102,508
-
(538)
113,421
12,257
125,678
-
(565)
101,943
4,970
106,913
At fair value through other comprehensive income (see note (i) below)
63,680
49,760
63,680
49,760
591,097
565,312
189,358
156,673
Movement in impairment allowance on investment securities is presented in Note 3.2.18
Classified as:
Current
Non-current
8,592
582,505
591,097
132,124
433,188
565,312
8,592
180,766
189,358
28,342
128,331
156,673
(i) 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.
(ii) The Group’s debt securities measured at FVTPL comprise FGN bonds (December 31, 2019: N12.26 billion; December 31,
2018; N2.99 billion) and Eurobonds (December 31, 2019; Nil, December 31, 2018; N1.98 billion).
(iii) The Group’s debt securities measured at amortised cost can be analysed as follows:
Sovereign (Federal)
Sub-sovereign (State)
Corporate bonds
487,870
19,768
8,073
484,899
24,663
3,592
86,118
19,768
8,073
74,253
24,663
3,592
515,711
513,154
113,959
102,508
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183
Zenith Bank Plc Annual Report December 31, 2019
Notes to the Consolidated and Separate Financial
Statements for the Year Ended December 31, 2019
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 (see (i) below)
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
(i) Acquisition of NCI
31-Dec-19
31-Dec-19
31-Dec-18
Ownership interest%
Carrying amount
99.4200
100.0000
99.9900
99.9600
99.0000
99.0000
7,066
21,482
2,059
1,038
1,980
1,000
6,444
21,482
2,059
1,038
1,980
1,000
34,625
34,003
In March 2019, the Group acquired an additional 1.35% interest in Zenith Bank Ghana, increasing its ownership from 98.07%
to 99.42%. The carrying amount of Zenith Bank Ghana’s net assets in the Group’s consolidated financial statements on the date
of acquisition was N 64,828 million.
The following table summarises the effect of changes in the Bank’s ownership interest in Zenith Bank Ghana
In millions of Naira
Carrying amount of NCI acquired (N64,828*1.35%)
Consideration paid to NCI in cash
An increase in equity attributable to owners of the Bank
874
(622)
252
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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 Nominees Limited provides nominees, trustees, administrators
and executorship services for non-pension assets.
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
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.
In millions of Naira
Gross investment
Share of profit b/f
Diminution in investment
Balance at end of the year
Group
Bank
31-Dec-19
31-Dec-18
31-Dec-19
31-Dec-18
103
440
(543)
-
103
440
(543)
-
103
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(103)
-
103
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(103)
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F
i
189
Zenith Bank Plc Annual Report December 31, 2019
Notes to the Consolidated and Separate Financial
Statements for the Year Ended December 31, 2019
23. Deferred tax asset
In millions of Naira
Group
December 31, 2019
Movements in temporary differences during the year
01-Jan-19
Recognised in profit or loss
31-Dec-19
Asset
Property and equipment
Other assets
Unutilized capital allowances
ECL Allowance on not-credit impaired financial instruments
Tax loss carry forward
Foreign exchange differences
(12,033)
(2)
14,682
4,832
1,926
108
9,513
8,727
593
(8,872)
(2,097)
4,137
(116)
2,372
(3,306)
591
5,810
2,735
6,063
(8)
11,885
Movements in temporary differences during the period
01-Jan-19
Recognised in profit or loss
31-Dec-19
Liabilities
Property and equipment
Impairment allowance on not-credit impaired financial instruments
51
16
67
(42)
-
(42)
9
16
25
December 31, 2018
Movements in temporary differences during the year
01-Jan-18
Recognised in profit or loss
31-Dec-18
Asset
Property and equipment
Other assets
ECL Allowance on not-credit impaired financial instruments
Unutilized capital allowances
Tax loss carry forward
Foreign exchange differences
(11,987)
(2)
4,832
14,682
1,926
110
9,561
(46)
(12,033)
-
-
-
-
(2)
(48)
(2)
4,832
14,682
1,926
108
9,513
Movements in temporary differences during the year
01-Jan-18
Recognised in profit or loss
31-Dec-18
Liabilities
Property and equipment
Impairment allowance on not-credit impaired financial instruments
2
16
18
49
-
49
51
16
67
190
Bank
In millions of Naira
December 31, 2019
Movements in temporary differences during the year
01-Jan-19
Recognised in profit or loss
31-Dec-19
Asset
Property and equipment
ECL Allowance on not-credit impaired financial instruments
Unutilized capital allowances
Tax loss carried forward
December 31, 2018
(12,324)
4,912
14,683
1,926
9,197
8,956
(2,194)
(8,873)
4,137
2,026
(3,368)
2,718
5,810
6,063
11,223
Movements in temporary differences during the year
01-Jan-18
Recognised in profit or loss
31-Dec-18
Asset
Property and equipment
ECL Allowance on not-credit impaired financial instruments
Unutilized capital allowances
Tax loss carried forward
(12,324)
4,912
14,683
1,926
9,197
-
-
-
-
-
(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 ECL allowance
on not credit-impaired financial instruments is N60.2 billion as at December 31, 2019. (December 31, 2018: N44.2 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 December
31, 2019 to N11.2 billion. Thus the Bank has not recognised deferred tax asset of N49 billion in these financial statements.
The amount of deductible temporary differences for which no deferred tax asset is recognised is detailed below:
In millions of Naira
Property and equipment
ECL Allowance on financial instruments not-credit impaired
Unutilised capital allowance
Unrelieved losses
Balance at end of the year
31-Dec-19
31-Dec-18
Gross Amount
Tax Impact
Gross Amount
Tax Impact
(49,025)
39,566
84,567
88,257
163,365
(14,708)
11,870
25,370
26,477
49,009
(6,887)
22,670
58,817
42,217
116,817
(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
l
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n
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F
i
191
Zenith Bank Plc Annual Report December 31, 2019
Notes to the Consolidated and Separate Financial
Statements for the Year Ended December 31, 2019
In millions of Naira
31-Dec-19 31-Dec-18
31-Dec-19
31-Dec-18
Group
Bank
24. Other assets
Non financial assets
Prepayments
Other non-financial assets
Gross other non-financial assets
less impairment (see note (i) below)
Net other non-financial assets
Other financial assets
Electronic card related receivables
Intercompany receivables
Deposit for investment in AGSMEIS
Receivables
Deposits for shares
Gross other financial assets
Less: ECL Allowance(see note 3.2.18)
Net other financial assets
Total other assets (Net)
13,457
357
13,814
(183)
13,631
19,398
740
20,138
(560)
19,578
42,019
47,256
-
22,096
426
-
64,541
(777)
63,764
77,395
-
13,822
1,002
-
62,080
(710)
61,370
80,948
9,983
359
10,342
(183)
10,159
38,555
210
22,096
392
720
61,973
(720)
61,253
71,412
17,322
742
18,064
(560)
17,504
43,395
637
13,822
530
720
59,104
(698)
58,406
75,910
Deposit for investment in AGSMEIS represents funds deposited with the CBN for future equity investments in agricultural, small and medium
enterprises in line with the CBN directives (See note 34(e)).
Classified as:
Current
Non-current
53,071
24,324
80,948
-
77,395
80,948
46,368
25,044
71,412
75,910
-
75,910
See note 3.2.18 for movement in impairment allowance for other financial assets as at December 31, 2019.
(i) 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
560
(377)
183
416
144
560
560
(377)
183
416
144
560
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In millions of Naira
31-Dec-19
31-Dec-18
31-Dec-19
31-Dec-18
Group
Bank
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
28,905
22,099
24,876
19,377
867
-
582
2,118
32,472
12,227
670
-
-
3,078
15,975
16,497
639
81
2,158
3,928
28,905
9,110
717
1
-
2,399
12,227
16,678
-
-
966
1,539
27,381
-
81
2,158
3,260
24,876
9,477
7,289
-
-
-
2,795
12,272
15,109
-
1
-
2,187
9,477
15,399
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..
In 2018, N81 million was reclassified from property and equipment to intangible assets.
27. Customers' deposits
Demand
Savings
Term
Domiciliary
Classified as:
Current
1,985,020
1,934,766
1,422,508
1,286,187
614,297
495,714
1,167,258
492,206
462,433
800,890
588,454
379,627
1,096,298
435,291
368,816
730,772
4,262,289
3,690,295
3,486,887
2,821,066
4,262,289
3,690,295
3,486,887
2,821,066
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Zenith Bank Plc Annual Report December 31, 2019
Notes to the Consolidated and Separate Financial
Statements for the Year Ended December 31, 2019
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
Lease liability (see note (c) below
AMCON payable
Electronic card related payables
Customers’ foreign transactions payables
Off Balance Sheet ECL allowance (see note (a) below)
Group
Bank
31-Dec-19
31-Dec-18
31-Dec-19
31-Dec-18
22,315
99,225
13,777
20,259
4,626
80,243
25,588
22,194
7,634
13,065
16,088
5,538
41,179
31,511
13,195
22,164
509
36,345
5,832
11,568
9,542
4,266
6,286
8,011
46,354
99,269
13,095
63,309
4,513
80,243
25,588
16,297
7,634
12,951
6,007
5,538
41,046
31,346
12,317
50,563
508
36,345
5,832
11,568
9,542
3,903
1,025
8,011
Total other financial liabilities
330,552
190,408
380,798
212,006
Non financial liabilities
Tax collections
Other payables
Total other non financial liabilities
2,018
31,194
33,212
1,8244
39,484
41,308
1,832
3,431
5,263
Total other liabilities
363,764
231,716
386,061
1,578
9,879
11,457
223,463
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
340,557
23,207
363,764
213,429
18,287
231,716
363,990
22,071
205,176
18,287
386,061
223,463
923
410
4,205
5,538
759
1,941
5,311
8,011
923
410
4,205
5,538
759
1,941
5,311
8,011
See note 3.2.18 for movement in ECL allowance for off balance sheet exposure.
(b)
The amounts above for financial guarantee contracts represents the deferred income initially recognised less cumulative
amortisation
196
In millions of Naira
31-Dec-19
31-Dec-18
31-Dec-19
31-Dec-18
Group
Bank
(c) Lease liability
This relates to an Aircraft and lease rental for properties used by the Group. The net carrying amount of leased assets, included within
property and equipment is N26.59 billion (Bank: N20.33 billion) as at December 31, 2019. (December 31, 2018: N11.13 billion, for both
Group and Bank).
The future minimum lease payments on the lease liabilities 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 lease liabilities is as follows at end of the years:
Not more than one year
Between one and five years
More than five years
At end of the year
7,394
20,592
16,126
(21,918)
22,194
6,534
10,232
5,428
22,194
2,760
11,043
10,123
(12,358)
11,568
915
3,656
6,997
11,568
5,072
15,807
11,996
(16,578)
16,297
4,539
7,703
4,055
16,297
2,760
11,043
10,123
(12,358)
11,568
915
3,656
6,997
11,568
The Group does not face any significant risk with regards to the lease liability. Also the Bank's exposure to liquidity risk as a result of
leases are monitored by the Bank's enterprise risk management unit.
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Zenith Bank Plc Annual Report December 31, 2019
Notes to the Consolidated and Separate Financial
Statements for the Year Ended December 31, 2019
In millions of Naira
31-Dec-19
31-Dec-18
31-Dec-19
31-Dec-18
Group
Bank
29. On-lending facilities
(a) This comprises:
Central Bank of Nigeria (CBN) Commercial Agri-
culture 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)
Paddy Aggregation Scheme (Phase 2) Funds (ix)
Creative Industry Financing Initiative (x)
Maize Aggregation Scheme (xi)
Accelerated Agricultural Development Scheme
(xii)
Classified as:
Current
Non-current
(b) Movement in on-lending facilities
At beginning of the year
Addition during the year
Repayment during the year
At end of the year
40,666
39,827
14,590
1,353
135,869
83,302
43,689
21,139
2,500
74
4,006
5,856
51,735
44,678
16,416
4,223
139,835
88,226
34,276
13,906
-
-
-
-
40,666
39,827
14,590
1,353
135,869
83,302
43,689
21,139
2,500
74
4,006
5,856
51,735
44,678
16,416
4,223
139,835
88,226
34,276
13,906
-
-
-
-
392,871
393,295
392,871
393,295
15,752
377,119
392,871
-
393,295
393,295
15,752
377,119
392,871
-
393,295
393,295
393,295
135,681
(136,105)
392,871
383,034
57,194
(46,933)
393,295
393,295
135,681
(136,105)
392,871
383,034
57,194
(46,933)
393,295
198
(i)
(ii)
(iii)
(iv)
(v)
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 3% 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.
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.
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 4% per annum payable quarterly in
arrears and the Bank is under obligation to on-lend to
customers at an all-in interest rate of 9% per annum. This
facility is not secured.
The Micro Small & Medium Scale Enterprises
Development Fund (MSMEDF) is an intervention fund
established to support the channeling of low interest
funds to the MSME sub-sector of the Nigerian economy.
The facility attracts an interest rate of 3% 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.
The Salary Bailout Scheme was approved by the
Federal Government to assist State Governments in the
settlement of outstanding salaries owed their workers.
Funds are disbursed to Banks nominated by beneficiary
States at 2% for on- lending to the beneficiary states at
9%. The loans have a tenor of 20 years. Repayments are
deducted at source, by the Accountant General of the
Federation, as a first line charge against each beneficiary
state’s monthly statutory allocation. This facility is not
secured.
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.
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 billion. The
activities targeted by the Facility are manufacturing,
agricultural value chain and selected service subsectors.
The funds are received from the CBN at 3%, and disbursed
at 9% to the beneficiary.
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 3% which are then disbursed to
qualifying customers at the rate of 9% per annum.
Paddy Aggregation Scheme (PAS) was established
by the Central Bank of Nigeria to provide funding to
millers for the purchase of home grown rice paddy.
Loans are disbursed to the Bank at 3% for on lending to
beneficiaries at 9% per annum for up to 24 months.
Creative Industry Financing Initiative (CIFI) is a scheme
established by the Central Bank of Nigeria to provide
long term and low interest funding to players in the
creative industry. Areas of interest include Information
Technology, Fashion, Movie Production/Distribution and
Music. Loans are disbursed to beneficiaries for up to 10
years at 9% per annum.The fund is disbursed to the bank
at 5% interest rate.
Maize Aggregation Scheme (MAS) was established
by the Central Bank of Nigeria to provide funding to
(vi)
(vii)
(viii)
(ix)
(x)
(xi)
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199
Zenith Bank Plc Annual Report December 31, 2019
Notes to the Consolidated and Separate Financial
Statements for the Year Ended December 31, 2019
processors for the purchase of home grown maize. Loans of up to N2billion are disbursed to the Bank at 3% for on lending to
beneficiaries at 9% per annum for 12 months.
(xii)
Accelerated Agricultural Development Scheme (AADS) was established by the Central Bank of Nigeria to help states develop at
least 2 crops/agricultural commodities in which they have comparative advantage. The fund is disbursed to the Bank at 2% per
annum. Each state is allowed a facility of N1.5billion at 9% per annum and repayments are made via ISPO deductions.
In Millions of Naira
31-Dec-19
31-Dec-18
31-Dec-19
31-Dec-18
Group
Bank
30. Borrowings
Long term borrowing comprise:
Due to ADB (i)
Due to KEXIM (ii)
Due to EIB
Due to PROPARCO (iii)
Societe Generale Bank (iv)
Due to ABSA Bank (v)
Due to J P Morgan Chase Bank (vi)
Due to Standard Bank London
Due to Standard Bank South Africa (vii)
Due to IFC (viii)
Due to First Abu Dhabi Bank
Due to Zenith Bank (UK)
Due to Goldman Sachs (ix)
Due to Mashreq Bank (x)
Due to Zenith Bank Ghana (xi)
17,681
22,877
-
5,884
55,433
82,352
36,534
-
27,635
18,813
-
-
36,950
18,320
-
29,005
4,726
2,528
10,758
27,209
63,175
108,417
36,926
49,023
24,276
81,217
-
-
-
-
17,681
22,877
-
5,884
55,433
82,352
36,534
-
27,635
18,813
-
-
36,950
18,320
7,299
322,479
437,260
329,778
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
458,463
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 (December 31, 2018: nil). The assets exchanged under repurchase agreements with counter parties are
disclosed in note 17.
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
200
280,934
41,545
322,479
437,260
198,358
(313,139)
322,479
345,921
91,339
437,260
356,496
370,606
(289,842)
437,260
280,934
48,844
329,778
458,463
252,364
(381,049)
329,778
356,357
102,106
458,463
418,979
391,810
(352,326)
458,463
(i)
(ii)
Due to ADB
The amount due to African Development Bank (ADB)
the
(US $48.5million)
of N17.68billion
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 N17.68billion
(US $48.5million) will mature in February 2021.
represents
Due to KEXIM
The amount of N22.88 billion (US $62.73 million)
represents the outstanding balance from ten(10) short
term loan facilities of US $12million, US $13.2million, US
$9million, US $9.6million, US $12.29million, US $5million,
US $12million, US $8.4million, US $11.4million, and US
$9.61million granted by The Export-Import Bank of Korea
(KEXIM) in March 2019, April 2019, May 2019, June 2019,
July 2019, August 2019, September 2019, October 2019,
November 2019, and December 2019 respectively.
Interest is payable monthly at 3 month LIBOR+1.6% for
all running obligations.
Final repayments on these facilities are due in March
2020, April 2020, May 2020, June 2020, July 2020, August
2020, September 2020, October 2020, November 2020,
and December 2020 respectively.
(iii) Due to Proparco
The amount due to Proparco of N5.88billion (US
$16.14million) 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
in February and December 2013
(PROPARCO)
respectively. The facilities are priced at 6 months
Libor+3.76% and 6 months Libor+3.76% 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 N850million (US $2.33million) and
N5.03 billion (US $13.8 million) respectively.
(iv)
Societe Generale Bank
The amount of N55.43billion
(US $152 million)
represents the outstanding balance on two short-term
dollar facilities of US $40 million and US $160 million
granted to the Bank in September 2019 by Societe
Generale Bank. Interest is payable upon maturity at the
rate of 4.07% and 4.17% per annum and the facility will
mature in September 2020.
(v)
Due to ABSA
The amount of N82.35 billion (US $225.81 million)
represents the amount payable by the Bank on dollar
repurchase facilities of US$100 million,US$75 million,
and US$50 million granted by ABSA in September 2019,
November 2019, and December 2019 respectively.
Interest is payable on maturity at a fixed rate of 4.91,
4.40% and 4.79% per annum respectively. The facilities
will mature in September 2020, November 2020, and
December 2020 respectively.
(vi) Due to JP Morgan
The amount of N36.53billion (US $100.16 million)
represents the outstanding balance on two short-
term dollar facilities of US $40 million and US $160
million granted to the Bank in September 2019 and
October 2019 respectively by JP Morgan. Interest is
payable upon maturity at the rate of 4.05% and 3.98%
per annum and the facility will mature in September
2020 and October 2020 respectively.
(vii) Due to Standard Bank South Africa
The amount of N27.64 billion
($75.77 million)
represents the outstanding balance on a dollar short-
term facilities of US $75 million granted by Standard
Bank of South Africa in July 2018. The facility is priced at
3 months LIBOR plus 2.78%. The facility has a maturity
date in October 2020.
(viii) Due to IFC
The amount of N18.81billion (US $51.58 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.
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(ix) Due to Goldman Sachs
($101.32 million)
The amount of N36.95billion
represents the outstanding balance on dollar short-
term facility of US $100 million granted by Goldman
Sachs in September 2019. The facility is priced at 4.19%
payable at maturity and would mature in September
2020.
(x)
Due to Mashreq Bank
The amount of N18.32billion ($50.23 million) represents
the outstanding balance on dollar short-term facility of
US $50 million granted by Mashreq Bank in November
2019. The facility is priced at 4.19% payable at maturity
and would mature in November 2020.
201
Zenith Bank Plc Annual Report December 31, 2019
Notes to the Consolidated and Separate Financial
Statements for the Year Ended December 31, 2019
(xi) Due to Zenith Bank Ghana
The amount of N7.30billion ($20.0 million) represents the outstanding balance on a dollar short-term facility of US $30
million granted to Zenith Bank Ghana in 2018. The facility is priced at 7.5% per annum and is due to mature in December
2021. The facility has been eliminated on consolidation.
31. Debt securities issued
in Millions of Naira
Due to Euro bond holders
Group
Bank
31-Dec-19
31-Dec-18
31-Dec-19
31-Dec-18
39,092
39,092
361,177
361,177
39,092
39,092
361,177
361,177
The amount of N39.09 billion ($107 million) represents the outstanding balance due on the second tranche of US $500 million Eurobond
notes issued by Zenith Bank Plc in May 2017 with a maturity date of May 2022. Interest is priced at 7.375%, payable semiannually with
a bullet repayment of the principal sum at maturity. The total amount is non-current. The First Tranche of Eurobond was issued in April
2014, and priced at 6.25%, it was fully repaid on 17th April 2019.
In September 2019, the Bank repurchased US 392 million out of the outstanding US $500 million Eurobond notes for cash, pursuant to
its tender offer.
The Group has not had any defaults of principal, interest or other breaches with respect to the debt securities during the year (December
31, 2018: Nil).
Movement in debt securities issued
At start of the period/year
Revaluation loss for the year
Repurchase during the year
Contractual repayment
Accrued interest during the year
At end of the year
Classified as:
Current
Non-current
32. Derivative liabilities
Instrument types (Fair value):
Forward and Swap Contracts
Futures contracts
202
361,177
5,949
(142,151)
(198,207)
12,324
39,092
-
39,092
39,092
13,622
1,140
14,762
332,931
27,778
-
(24,443)
24,911
361,177
180,720
180,457
361,177
16,236
759
16,995
361,177
5,949
(142,151)
(198,207)
12,324
39,092
-
39,092
39,092
13,622
1,140
14,762
332,931
27,778
-
(24,443)
24,911
361,177
180,720
180,457
361,177
16,236
759
16,995
in Millions of Naira
31-Dec-19
31-Dec-18
31-Dec-19
31-Dec-18
Group
Bank
Instrument types (Notional Amount):
Forward and Swap Contracts
Futures contracts
Classified as:
Current
Non-current
208,263
277,716
231,382
302,882
208,263
277,716
231,382
302,882
485,979
534,264
485,979
534,264
14,762
16,995
14,762
16,995
-
-
-
-
14,762
16,995
14,762
16,995
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 N7.43 billion (31 December, 2018 net
loss of N16.78 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 N92.72 and N14.76 billion
respectively (December 31, 2018 N88.83 and N17.00 billion respectively).
33. Share capital
Authorised
40,000,000,000 ordinary shares of 50k each (31 Dec 2018: 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 2018: 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
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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203
Zenith Bank Plc Annual Report December 31, 2019
Notes to the Consolidated and Separate Financial
Statements for the Year Ended December 31, 2019
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-19
31-Dec-18
31-Dec-19
31-Dec-18
255,047
255,047
255,047
255,047
The nature and purpose of the reserves in equity are as follows:
(b)
(c)
(d)
Share premium: Premiums from the issue of shares are
reported in share premium.
Retained earnings:
Retained earnings represent undistributed profits, net
of statutory appropriations attributable to the ordinary
shareholders.
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. Sec-
tion 16(1) of the Bank and Other Financial Institutions
Act of 1991 (amended), stipulates that an appropria-
tion 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 N27.05 billion (December 31, 2018: N24.82 billion)
representing 15% of Zenith Bank's profit after tax was
appropriated.
(e)
SMIEIS/AGSMIES reserves:
This reserve represents the aggregate amount of ap-
propriations from profit after tax to finance equity in-
vestments 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 re-
spectively.
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 con-
tributions were 10% of profit after tax and were expect-
ed 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 guide-
lines 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 achiev-
ing sustainable economic development and employ-
ment generation.
The small and medium scale industries equity invest-
ment scheme reserves are non-distributable.
Fair value reserve:
Comprises fair value movements on equity instru-
ments that are carried at fair value through other com-
prehensive income.
Foreign currency translation reserve: Comprises ex-
change differences resulting from the translation to
Naira of the results and financial position of Group
companies that have a functional currency other than
Naira.
Regulatory reserve for credit risk: This reserve represents
the cummulative difference between the loan loss pro-
vision determined per the Prudential Guidelines and
the allowance/reserve for loan losses as determined in
line with the principles of IFRS 9.
Non-controlling interest: This is the component of
shareholders equity as reported on the consolidated
statement of financial position which represents the
ownership interest of shareholders other than the par-
ent of the subsidiary. See note 22(i) for the changes in
non-controlling interest during the year.
(f )
(g)
(h)
(i)
204
In millions of Naira
Movement in Non-controlling interest
At start of the year
Profit for the year
Foreign currency translation differences
Acquisition of NCI without change in control*
At financial year end
35. Pension contribution
31-Dec-19
31-Dec-18
1,538
150
(60)
(874)
754
1,264
277
(3)
-
1,538
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 8% and 10% respectively of the employees' basic salary, housing and transport allowances. Entities operating outside Nigeria
contribute in line with the relevant pension laws in their jurisdictions. The contribution by the Group and the Bank during the
year were N3.92 billion and N2.94 billion respectively (31 December 2018: N4.05 billion and N3.15 billion).
In millions of Naira
31-Dec-19
31-Dec-18
31-Dec-19
31-Dec-18
Group
Bank
36. Personnel expenses
Compensation for the staff are as follows:
Salaries and wages
Other staff costs
Pension contribution
65,831
8,103
3,924
77,858
57,957
6,547
4,052
68,556
51,966
7,128
2,944
62,038
47,971
5,536
3,150
56,657
(a) The average number of persons employed during the year by category:
Executive directors
Management
Non-management
Number
Number
Number
Number
12
433
6,960
7,405
14
443
7,137
7,594
6
358
5,618
5,982
6
387
5,860
6,253
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Zenith Bank Plc Annual Report December 31, 2019
Notes to the Consolidated and Separate Financial
Statements for the Year Ended December 31, 2019
The table below shows the number of employees, whose earnings during the year, fell within the ranges shown below:
Number
Number
Number
1,467
75
475
1,083
1,382
31
2,892
7,405
1,566
107
706
1,015
1,421
841
1,938
7,594
1,069
-
414
929
1,189
24
2,357
5,982
Number
1,114
-
626
849
1,225
833
1,606
6,253
Group
Bank
31-Dec-19
30-Jun-18
31-Dec-19
30-Jun-18
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
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
2,043
405
2,448
1,048
370
1,418
1,428
84
1,512
26
125
550
185
735
28
125
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
38
39
13
13
Number
Number
Number
Number
206
37. Group subsidiaries and related party transactions
Parent:
Zenith Bank Plc (incorporated in Nigeria) is the ultimate parent company of the Group
Subsidiaries:
Transactions between Zenith Bank Plc and its subsidiaries which are eliminated on consolidation are not separately disclosed
in the consolidated financial statements. The Group's effective interests and investments in subsidiaries as at December 31,
2019 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
December 31, 2019
Effective holding % Nominal share capital held
99.42 %
100.00 %
99.99 %
99.96 %
99.00 %
99.00 %
7,066
21,482
2,059
1,038
1,980
1,000
Transactions and balances with subsidiaries
In millions of Naira
Receivable from
Payable to
Income received
from
Expense paid to
Zenith Bank (UK) Limited
Zenith Bank (Ghana) Limited
Zenith Bank (Sierra leone) Limited
Zenith Bank (Gambia) Limited
Zenith Pensions Custodian Limited
December 31, 2018
83,570
-
159
53
-
67,194
7,301
-
-
-
540
-
-
-
3,600
-
-
-
-
-
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
38,836
14,169
2,876
97
200
74,828
491
88
59
2
-
2
52
1
3,600
134
-
-
-
2,288
The Group does not have significant restrictions on its ability to access or use its assets and settle its liabilities other than those
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207
Zenith Bank Plc Annual Report December 31, 2019
Notes to the Consolidated and Separate Financial
Statements for the Year Ended December 31, 2019
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 N1,116 million and N917,981 million respectively (December 31,
2018: N1,138 million and N986 million 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 and non-executive directors, 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-19
31-Dec-18
31-Dec-19
31-Dec-18
Group
Bank
Key management compensation
Short term benefits
Post employment benefits
Fees and sitting allowances
Loans and advances
At start of the year
Granted during the year
Repayment during the year
At end of of the year
Interest earned
1,226
919
405
2,550
1,180
1,010
(426)
1,764
60
1,222
20
370
1,612
199
1,016
(35)
1,180
41
724
906
84
1,714
1,022
1,010
(390)
1,642
60
724
7
185
916
225
824
(27)
1,022
41
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. Loans granted to key management are performing. Mortgage loans amounting to N1,642
million (December 31, 2018: N1,180 million) are secured by the underlying assets.
208
Relationship/Name
Loans Deposits
Interest
received
Interest
paid
December 31, 2019
Name of company
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
Oviation limited
Sirius Lumina Ltd
-
Former Director
Director / Prof. Sam Enwemeka
December 31, 2018
Name of company
Cyberspace Network
Relationship/
Name
Loans Deposits
Interest
received
Interest
paid
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
-
-
-
796
-
-
2
85
1,146
1,598
1,578
1
796
4,410
-
-
-
48
-
-
48
-
-
-
35
-
-
35
-
-
-
-
3
3
226
32
968
1,660
-
2,886
-
-
-
-
-
-
-
-
8
6
-
14
lease transaction was conducted at arm’s length and the
lease liability as at year end December 31, 2019 (Note 28c)
was N10.99 billion ( December 31, 2018 – N11.57 billion)
The Bank paid N5.71 billion (31 December 2018 N12.2 billion)
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 222 (December
31, 2018: 195) litigation suits in the ordinary course
of business. The total amount claimed in the
cases against the Group is estimated at N27 billion
(December 31, 2018: N28 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.
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. Loans granted to
related parties are performing. No impairment has been
recognised in respect of loans granted to related parties
(December 31, 2018: Nil).
During the year, Zenith Bank Plc paid N1.78 billion as
insurance premium to Zenith General Insurance Limited
(31 December 2018: N1.86 billion). These expenses were
reported as operating expenses.
The amount of N4,198 billion (December 31, 2018:
N4,357 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.
The Bank entered into a 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
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209
Zenith Bank Plc Annual Report December 31, 2019
Notes to the Consolidated and Separate Financial
Statements for the Year Ended December 31, 2019
Capital commitments
(b)
At the reporting date, the Group had capital commitments amounting to N5.5 billion (December 31, 2018: N6.24 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-19
31-Dec-18
31-Dec-19
31-Dec-18
Performance bonds and guarantees (see note i below)
363,922
Usance (see note ii below)
Letters of credit (see note ii below)
Assets under custody (See Note iii below)
79,318
545,174
988,414
5,174,795
327,123
147,189
356,939
831,251
4,356,973
261,495
79,318
413,656
754,469
5,174,795
306,412
147,189
321,754
775,355
4,356,973
(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 December 31, 2019, performance bonds and
guarantees worth N84 billion (December 31, 2018: N59.4 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.
The amount includes N4,198 billion (December 31, 2018: N4,357 billion) which represents the full amount of the Group's
guarantee for the assets held by its subsidiary, Zenith Pensions Custodian Limited's custodial business as required by the
National Pensions Commission of Nigeria. The residual amount of N977 billion (December 31,2018: N932 billion) is held
under the custodial business of Zenith Nominees Limited.
(iii)
39. Dividend per share
Group
Bank
31-Dec-19
31-Dec-18
31-Dec-19
31-Dec-18
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
78,491
9,419
87,910
87,910
31,396
2.80
0.30
2.50
76,921
9,419
86,340
87,910
31,396
2.80
0.30
2.50
78,491
9,419
87,910
87,910
31,396
2.80
0.30
2.50
76,921
9,419
86,340
The Board of Directors, pursuant to the powers vested in it by the provisions of Section 379 of the Companies and Allied Matters
210
Act of Nigeria, Cap C20 LFN 2004, proposed an interim dividend of N0.30 per share and a final dividend of N2.50 per share
(December 31, 2018: interim; N0.30, final; N2.50) from the retained earnings account as at December 31, 2019. This is subject to
approval by shareholders at the next Annual General Meeting.
The number of shares in issue and ranking for dividend represents the outstanding number of shares as at December 31, 2019
and December 31, 2018 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-19
31-Dec-18
31-Dec-19
31-Dec-18
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
175,328
248,945
118,499
196,602
11,697
23,819
11,697
20,847
483,690
670,715
674,274
947,038
258,657
388,853
393,466
610,915
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
4
Penalty for incomplete documentation of newly opened accounts
Fines for non-compliance with ATM installation procedures.
Fines for non-compliance with Anti-money laundering procedures.
Penalty for improper classification of corporate accounts.
42. Events after the reporting period
2,000,000
2,000,000
2,000,000
15,000,000
21,000,000
No significant event that requires disclosure occured between the reporting date and the date when the financial statements
were issued.
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Zenith Bank Plc Annual Report December 31, 2019
Notes to the Consolidated and Separate Financial
Statements for the Year Ended December 31, 2019
In millions of Naira
43.
Statement of cash flow workings
(i) Debt securities (see note 21)
Group
Bank
31-Dec-19
31-Dec-18
31-Dec-19
31-Dec-18
December 31, 2019
At 1 January 2019
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
December 31, 2018
At 1 January 2018
Gains from changes in fair value recognised in
profit or loss (see note 11)
Additions
Disposals (sale, transfers and redemption)
Interest accrued
Movement for cash flow statement
Recognised in cash flow statement
Debt securities at
fair value through
profit or loss
Debt securities at a
mortised cost and
FVTOCI
Debt securities at fair
value through profit
or loss
Debt securities
at a mortised
cost
4,970
10,905
11,592
(15,210)
-
-
12,257
(3,618)
-
513,154
-
132,685
(138,370)
7,790
-
515,259
2,105
1,513
4,970
10,905
11,592
(15,210)
-
-
12,257
(3,618)
-
102,508
-
57,059
(49,551)
3,943
-
113,959
11,451
(7,833)
Debt securities at fair
value through profit
or loss
Debt securities at
amortised cost and
FVTOCI
Debt securities at
fair value through
profit or loss
Debt securities
at a mortised
cost
32,266
(1,990)
1,978
(27,408)
124
4,970
(25,306)
-
284,584
-
230,573
(10,086)
8,063
513,154
228,570
(203,264)
32,266
(1,990)
1,978
(27,408)
124
4,970
(25,306)
-
71,447
-
27,475
(1,252)
4,838
102,508
31,061
(5,755)
(ii) Treasury bills (Amortised cost) (see note 16)
December 31, 2019
31-Dec-19
31-Dec-18
31-Dec-19
31-Dec-18
Treasury bills (Amortised cost)
Treasury bills (with 3 months maturity)
Changes
Recognised in cashflow statement
283,845
(11,697)
272,148
194,352
490,319
(23,819)
466,500
114,352
(11,697)
102,655
183,300
306,802
(20,847)
285,955
212
December 31, 2018
31-Dec-18
31-Dec-17
31-Dec-18
31-Dec-17
Treasury bills (Amortised cost)
Treasury bills (with 3 months maturity)
Changes
Recognised in cashflow statement
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
(iii) Treasury bills (FVTPL) (see note 16)
December 31, 2019
Treasury bills (FVTPL)
31-Dec-19
31-Dec-18
31-Dec-19
31-Dec-18
708,111
510,313
708,114
510,313
Recognised in cashflow
(197,798)
(197,801)
December 31, 2018
Treasury bills (FVTPL)
Recognised in cashflow
31-Dec-18
31-Dec-17
31-Dec-18
31-Dec-17
510,313
37,343
547,656
510,313
37,343
547,656
(iv) Loans and advances (see note 20)
December 31, 2019
Gross loans and advances
Changes
Write off
Interest receivables
31-Dec-19
31-Dec-18
31-Dec-19
31-Dec-18
2,462,359
(445,839)
(65,253)
18,375
2,016,520
235,652
(73,962)
-
2,390,651
(469,587)
(60,967)
17,172
1,921,064
196,005
(60,235)
-
(492,717)
161,690
(513,382)
135,770
December 31, 2018
Gross loans and advances
31-Dec-18
31-Dec-17
31-Dec-18
31-Dec-17
2,016,520
2,252,172
1,921,064
2,117,069
Changes
Write-back
Write off
235,652
-
(73,962)
161,690
108,637
(6,535)
(7,196)
94,906
196,005
-
(60,235)
135,770
76,155
(6,535)
(7,196)
62,424
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Zenith Bank Plc Annual Report December 31, 2019
Notes to the Consolidated and Separate Financial
Statements for the Year Ended December 31, 2019
(v) Customer deposits
December 31, 2019
As per financial statement
Changes
Interest payables
December 31, 2018
As per financial statement
Changes
Group
Bank
31-Dec-19
31-Dec-18
31-Dec-19
31-Dec-18
4,262,289
3,690,295
3,486,887
2,821,066
571,994
(7,859)
564,135
252,380
-
-
665,821
(1,266)
664,555
76,541
-
-
31-Dec-18
31-Dec-17
31-Dec-18
31-Dec-17
3,690,295
3,437,915
2,821,066
2,744,525
252,380
252,380
454,294
-
76,541
76,541
191,562
-
(vi) Other liabilities (see note 29)
December 31, 2019
31-Dec-19
31-Dec-18
31-Dec-19
31-Dec-18
As per statement of financial position
Changes
Finance lease principal repayments
Finance lease interest repayments
off balance sheet ECL allowance
VAT paid
Net cash movement
363,764
(137,299)
(2,196)
(564)
5,466
(381)
231,716
11,307
(2,760)
-
8,011
(260)
386,061
(167,849)
(2,196)
(564)
5,466
(381)
223,463
5,869
(2,760)
-
8,011
(260)
134,974
(16,298)
165,524
(10,860)
December 31, 2018
31-Dec-18
31-Dec-17
31-Dec-18
31-Dec-17
As per statement of financial position
Changes
Finance lease repayments
ECL allowance
VAT paid
Net cash movement
231,716
11,307
(2,760)
8,011
(260)
(16,298)
243,023
(24,801)
-
-
2,235
(27,036)
223,463
5,869
(2,760)
8,011
(260)
(10,860)
229,332
23,946
-
-
(1,814)
22,132
214
(vii) Profit on disposal of property and
equipment
Cost (see note 25)
Accummulated depreciation (see note 25)
Net book value
Sales proceed
Recognised in cash flow statement
(viii) Interest received
Group
Bank
31-Dec-19
31-Dec-18
31-Dec-19
31-Dec-18
5,163
(2,334)
2,829
(2,976
147
4,157
(926)
3,231
3,490
259
1,960
(1,582)
378
(530)
152
2,262
(2,097)
165
406
241
31-Dec-19
31-Dec-18
31-Dec-19
31-Dec-18
Interest income as per financial statement
Interest receivables
Recognised in cash flow statement
415,563
(8,459)
407,104
440,052
(5,206)
434,846
339,310
(3,792)
335,518
367,816
(2,691)
365,125
(ix) Interest paid
31-Dec-19
31-Dec-18
31-Dec-19
31-Dec-18
Interest expense as per financial statement
Interest payables
Recognised in cash flow statement
148,532
(12,957)
135,575
144,458
(10,257)
134,201
126,237
(11,839)
114,398
124,156
(7,922)
116,234
(x) Other assets
Other assets (see note 24)
Changes
Write off of asset
Recognised in cash flow statement
Other assets
Changes
Write off of asset
Recognised in cash flow statement
31-Dec-19
31-Dec-18
31-Dec-19
31-Dec-18
77,395
3,863
-
3,863
79,678
7,568
(4,518)
3,050
71,412
(4,853)
-
74,652
(23,848)
(4,518)
(4,853)
(28,366)
31-Dec-19
31-Dec-18
31-Dec-19
31-Dec-18
79,678
7,568
(4,518)
3,050
87,246
-
-
-
74,652
(23,848)
(4,518)
(28,366)
50,804
-
-
-
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Zenith Bank Plc Annual Report December 31, 2019
Notes to the Consolidated and Separate Financial
Statements for the Year Ended December 31, 2019
(xi) Asset pledged as collateral
Asset pledged as collateral
Impairment
Recognised in cash flow
(xii) Derivative Asset
Forward contract
Future contract
Group
Bank
31-Dec-19
31-Dec-18
31-Dec-19
31-Dec-18
431,671
69
431,740
161,321
592,935
126
593,061
(124,925)
431,671
69
431,740
161,321
592,935
126
593,061
(124,925)
31-Dec-19
31-Dec-18
31-Dec-19
31-Dec-18
91,204
1,518
92,722
87,467
1,359
88,826
91,204
1,518
92,722
(3,896)
87,467
1,359
88,826
(31,607)
Recognised in cash flow
(3,896)
(31,607)
(xiii) Restricted balances (Cash Reserve)
Mandatory reserve deposit with central bank
Special Cash Reserve
31-Dec-19
31-Dec-18
31-Dec-19
31-Dec-18
680,261
80,689
760,950
624,782
80,689
705,471
680,261
80,689
760,950
624,782
80,689
705,471
Recognised in cashflow
(55,479)
(58,357)
(55,479)
(58,386)
(xiiv) Derivative liabilities
Forward contract
Futures contract
Recognised in cashflow
31-Dec-19
31-Dec-18
31-Dec-19
31-Dec-18
13,622
1,140
14,762
(2,233)
16,236
759
16,995
(3,810)
13,622
1,140
14,762
(2,233)
16,236
759
16,995
(3,810)
216
(cid:37)(cid:80)(cid:1)(cid:90)(cid:80)(cid:86)(cid:1)(cid:80)(cid:88)(cid:79)(cid:1)(cid:66)(cid:1)(cid:84)(cid:85)(cid:80)(cid:83)(cid:70)(cid:13)(cid:1)(cid:83)(cid:70)(cid:84)(cid:85)(cid:66)(cid:86)(cid:83)(cid:66)(cid:79)(cid:85)(cid:13)(cid:1)(cid:84)(cid:86)(cid:81)(cid:70)(cid:83)(cid:78)(cid:66)(cid:83)(cid:76)(cid:70)(cid:85)(cid:1)
(cid:80)(cid:83)(cid:1)(cid:66)(cid:79)(cid:90)(cid:1)(cid:80)(cid:85)(cid:73)(cid:70)(cid:83)(cid:1)(cid:85)(cid:90)(cid:81)(cid:70)(cid:1)(cid:80)(cid:71)(cid:1)(cid:67)(cid:86)(cid:84)(cid:74)(cid:79)(cid:70)(cid:84)(cid:84)(cid:32)(cid:1)(cid:1)
(cid:42)(cid:71)(cid:1)(cid:90)(cid:70)(cid:84)(cid:13)(cid:1)(cid:90)(cid:80)(cid:86)(cid:1)(cid:68)(cid:66)(cid:79)
EARN MONEY
(cid:88)(cid:74)(cid:85)(cid:73)(cid:1)(cid:59)(cid:70)(cid:79)(cid:74)(cid:85)(cid:73)(cid:1)(cid:35)(cid:66)(cid:79)(cid:76)
(cid:52)(cid:74)(cid:78)(cid:81)(cid:77)(cid:90)(cid:1)(cid:87)(cid:74)(cid:84)(cid:74)(cid:85)(cid:1)(cid:66)(cid:79)(cid:90)(cid:1)(cid:80)(cid:71)(cid:1)(cid:80)(cid:86)(cid:83)(cid:1)(cid:67)(cid:83)(cid:66)(cid:79)(cid:68)(cid:73)(cid:70)(cid:84)(cid:1)(cid:85)(cid:80)(cid:69)(cid:66)(cid:90)(cid:1)
(cid:66)(cid:79)(cid:69)(cid:1)(cid:84)(cid:74)(cid:72)(cid:79)(cid:1)(cid:86)(cid:81)(cid:1)(cid:71)(cid:80)(cid:83)(cid:1)(cid:85)(cid:73)(cid:70)(cid:1)(cid:66)(cid:72)(cid:70)(cid:79)(cid:85)(cid:1)(cid:67)(cid:66)(cid:79)(cid:76)(cid:74)(cid:79)(cid:72)(cid:1)(cid:81)(cid:83)(cid:80)(cid:72)(cid:83)(cid:66)(cid:78)(cid:15)
MONEY
Other National Disclosures
04 Zenith Bank Plc Annual Report December 31, 2019
Value Added
Statement
In millions of Naira
31-Dec-19 31-Dec-19
31-Dec-18 31-Dec-18
%
%
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
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
662,251
(123,651)
(24,881)
513,719
(24,032)
489,687
(76,072)
(67,949)
630,344
(49,224)
(95,234)
485,886
(18,903)
466,983
(65,388)
(72,509)
345,666
100
329,086
100
77,858
34,451
24,514
9,420
199,423
23
10
7
3
35
68,556
38,261
19,047
84,771
118,451
21
12
6
26
36
345,666
100
329,086
100
Value added represents the additional wealth which the Group has been able to create by its own and employees efforts.
220
In millions of Naira
31-Dec-19 31-Dec-19
31-Dec-18 31-Dec-18
%
%
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
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
564,687
(58,288)
(67,949)
438,450
(23,393)
415,057
(128,230)
(3,087)
538,004
(51,647)
{72,509)
413,848
(15,313)
398,535
(121,999)
(2,577)
283,740
100
273,959
100
62,038
22,017
21,682
9,420
168,583
22
8
8
33
59
56,657
26,627
16,812
84,771
80,709
21
10
5
69
(15)
283,740
100
265,576
100
Value added represents the additional wealth which the Bank has been able to create by its own and employees efforts.
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Zenith Bank Plc Annual Report December 31, 2019
Five Year Financial
Summary
In millions of Naira
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
222
31-Dec-19 31-Dec-18
31-Dec-17 31-Dec-16 31-Dec-15
936,278
991,393
431,728
707,103
92,722
954,416
1,000,560
957,663
936,817
669,058
557,359
761,561
377,928
592,935
468,010
328,343
265,051
674,274
88,826
495,803
57,219
459,457
82,860
272,194
8,481
2,305,565
1,823,111
2,100,362
2,289,365
1,989,313
591,097
565,312
330,951
199,478
213,141
-
11,885
77,395
185,216
16,497
-
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
6,346,879
5,955,710
5,595,253
4,739,825
4,006,842
4,262,289
3,690,295
3,437,915
2,983,621
2,557,884
14,762
9,711
25
363,764
392,871
322,479
39,092
5,404,993
941,886
15,698
255,047
412,948
257,439
941,132
754
16,995
9,154
67
231,716
393,295
437,260
361,177
5,139,959
815,751
15,698
255,047
322,237
221,231
814,213
1,538
20,805
8,915
18
243,023
383,034
66,834
8,953
45
214,080
350,657
384
3,579
19
205,062
286,881
356,496
332,931
4,783,137
812,116
263,106
153,464
4,040,760
699,065
258,862
99,818
3,412,489
594,353
15,698
255,047
356,837
183,217
810,799
1,317
15,698
15,698
255,047
261,608
165,729
698,082
983
255,047
200,115
122,900
593,760
593
941,886
815,751
812,116
699,065
594,353
In millions of Naira
31-Dec-19 31-Dec-18 31-Dec-17 31-Dec-16
31-Dec-15
Statement Of Profit Or Loss And Other Comprehensive
Income
Gross earnings
Share of profit / (loss) of associates
Interest expense
662,251
-
(148,532)
630,344
-
(144,458)
745,189
-
(216,637)
507,997
-
(144,378)
432,535
228
(123,597)
Operating and direct expenses
(246,393)
(235,829)
(231,006)
(179,921)
(167,877)
Impairment charge for financial and non-financial assets
Profit before taxation
Income tax
Profit after tax
Foreign currency translation differences
Fair value movements on equity instruments
Related tax
Effective portion of changes in fair value of cash flow
hedges
Related tax
Total comprehensive income
Earning per share:
Basic and diluted
(24,032)
243,294
(34,451)
208,843
(8,498)
13,870
-
452
-
5,824
214,667
214,667
665 K
(18,372)
231,685
(38,261)
193,424
4,828
1,459
-
-
-
6,287
199,711
199,711
615 K
(98,227)
199,319
(25,528)
173,791
5,233
(2,551)
-
-
-
2,682
176,473
(32,350)
151,348
(27,096)
124,252
30,338
6,636
-
-
-
36,974
161,226
(15,673)
125,616
(19,953)
105,663
637
(1,752)
-
-
-
(1,115)
104,548
553 K
395 K
336 K
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Zenith Bank Plc Annual Report December 31, 2019
Five Year Financial
Summary
In millions of Naira
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
31-Dec-19
31-Dec-18
31-Dec-17 31-Dec-16 31-Dec-15
879,449
822,449
431,728
482,070
92,722
902,073
817,043
592,935
393,466
88,826
907,265
799,992
627,385
463,787
735,946
330,900
468,010
325,575
264,320
273,331
57,219
354,405
82,860
266,894
8,481
2,239,472
1,736,066
1,980,464
2,138,132
1,849,225
189,358
34,625
-
11,223
71,412
-
165,456
15,109
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
33,003
-
6,041
35,410
-
94,613
3,903
150,724
33,003
90
5,131
21,673
-
81,187
2,753
5,435,073
4,955,445
4,833,658
4,283,736
3,750,327
3,486,887
2,821,066
2,744,525
2,552,963
2,333,017
14,762
6,627
-
386,061
392,871
329,778
39,092
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
4,656,078
778,995
4,280,413
675,032
4,135,675
697,983
3,672,783
610,953
3,203,381
546,946
15,698
15,698
15,698
15,698
15,698
255,047
302,028
206,222
778,995
255,047
238,635
165,652
675,032
255,047
287,867
139,371
697,983
255,047
213,107
127,101
610,953
255,047
160,408
115,793
546,946
Total shareholders' equity
778,995
675,032
697,983
610,953
546,946
224
In millions of Naira
31-Dec-19
31-Dec-18
31-Dec-17 31-Dec-16 31-Dec-15
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
564,687
(126,237)
(215,037)
(23,393)
200,020
(19,688)
180,332
13,870
-
13,870
194,202
(2,551)
574 K
538,004
(124,156)
(206,428)
(15,313)
192,107
(26,627)
165,480
-
1,459
-
1,459
166,939
113,885
527 K
673,636
(200,672)
(208,299)
(95,244)
169,421
(16,418)
155,003
-
(2,551)
-
(2,551)
150,452
454,808
(131,910)
(162,076)
(26,295)
134,527
(20,642)
113,885
-
6,636
-
6,636
120,521
396,653
(114,936)
(155,406)
(11,091)
115,220
(16,436)
98,784
-
(1,752)
-
(1,752)
97,032
487 K
362 K
315 K
s
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D
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225
Zenith Bank Plc Annual Report December 31, 2019
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
3 1 - D e c - 1 9
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
0 .5
226
Zenith Youth Parade 2019
The 14th Edition
The Zenith Youth Parade (ZYP) is a Corporate Social Responsibility (CSR) initiative of Zenith
Bank Plc aimed at supporting, nurturing and empowering Nigerian youths.
The Zenith Youth Parade (ZYP) is a Corporate Social Responsibility (CSR) initiative of Zenith
Bank Plc aimed at supporting, nurturing and empowering Nigerian youths.
With participants drawn from select public schools, alternative care homes and family-like
care centers across Lagos, the parade has over the years evolved into a mega festival and a
With participants drawn from select public schools, alternative care homes and family-like
channel for ushering in the Yuletide and New Year seasons, showcasing the best of Nigeria’s
care centers across Lagos, the parade has over the years evolved into a mega festival and a
entertainment and creative industry while providing a healthy platform for children from
channel for ushering in the Yuletide and New Year seasons, showcasing the best of Nigeria’s
diverse cultural, religious, ethnic and social backgrounds to interact and have great fun.
entertainment and creative industry while providing a healthy platform for children from
diverse cultural, religious, ethnic and social backgrounds to interact and have great fun.
With the theme “HEROES OF OUR TIMES: PAST, PRESENT AND FUTURE”, this year’s
parade was all about giving honour to the deserving Nigerians of diverse disciplines, ages
With the theme “HEROES OF OUR TIMES: PAST, PRESENT AND FUTURE”, this year’s
and backgrounds, who have made their marks in our world. This hopefully will inspire the
parade was all about giving honour to the deserving Nigerians of diverse disciplines, ages
children to pursue their dreams with greater vigor and passion, seeing that consistent effort
and backgrounds, who have made their marks in our world. This hopefully will inspire the
and commitment will always be rewarded.
children to pursue their dreams with greater vigor and passion, seeing that consistent effort
and commitment will always be rewarded.
227
Style by Zenith
The 2nd Edition
(cid:186)(cid:45)(cid:204)(cid:222)(cid:143)(cid:105)(cid:3)(cid:76)(cid:222)(cid:3)(cid:60)(cid:105)(cid:152)(cid:136)(cid:204)(cid:133)(cid:3)(cid:211)(cid:176)(cid:228)(cid:187)(cid:93)(cid:3)(cid:204)(cid:133)(cid:105)(cid:3)(cid:195)(cid:105)(cid:86)(cid:156)(cid:152)(cid:96)(cid:3)(cid:105)(cid:96)(cid:136)(cid:204)(cid:136)(cid:156)(cid:152)(cid:3)(cid:156)(cid:118)(cid:3)(cid:156)(cid:213)(cid:192)(cid:3)(cid:121)(cid:62)(cid:125)(cid:195)(cid:133)(cid:136)(cid:171)(cid:3)(cid:143)(cid:136)(cid:118)(cid:105)(cid:195)(cid:204)(cid:222)(cid:143)(cid:105)(cid:3)(cid:118)(cid:62)(cid:136)(cid:192)(cid:93)(cid:3)(cid:220)(cid:62)(cid:195)(cid:3)(cid:133)(cid:105)(cid:143)(cid:96)(cid:3)(cid:62)(cid:204)(cid:3)(cid:204)(cid:133)(cid:105)(cid:3)
(cid:186)(cid:45)(cid:204)(cid:222)(cid:143)(cid:105)(cid:3)(cid:76)(cid:222)(cid:3)(cid:60)(cid:105)(cid:152)(cid:136)(cid:204)(cid:133)(cid:3)(cid:211)(cid:176)(cid:228)(cid:187)(cid:93)(cid:3)(cid:204)(cid:133)(cid:105)(cid:3)(cid:195)(cid:105)(cid:86)(cid:156)(cid:152)(cid:96)(cid:3)(cid:105)(cid:96)(cid:136)(cid:204)(cid:136)(cid:156)(cid:152)(cid:3)(cid:156)(cid:118)(cid:3)(cid:156)(cid:213)(cid:192)(cid:3)(cid:121)(cid:62)(cid:125)(cid:195)(cid:133)(cid:136)(cid:171)(cid:3)(cid:143)(cid:136)(cid:118)(cid:105)(cid:195)(cid:204)(cid:222)(cid:143)(cid:105)(cid:3)(cid:118)(cid:62)(cid:136)(cid:192)(cid:93)(cid:3)(cid:220)(cid:62)(cid:195)(cid:3)(cid:133)(cid:105)(cid:143)(cid:96)(cid:3)(cid:62)(cid:204)(cid:3)(cid:204)(cid:133)(cid:105)(cid:3)
Eko Energy City, Victoria Island, Lagos from Friday, November 29 to Sunday, December
Eko Energy City, Victoria Island, Lagos from Friday, November 29 to Sunday, December
1, 2019.
1, 2019.
The fair is an initiative of Zenith Bank to engage the various aspects of our customers’
The fair is an initiative of Zenith Bank to engage the various aspects of our customers’
lifestyle strategically. The three-day fair provided a classy meeting point for purveyors
lifestyle strategically. The three-day fair provided a classy meeting point for purveyors
of lifestyle products and the public to interact. It included a series of activities like
of lifestyle products and the public to interact. It included a series of activities like
fashion shows and masterclasses, food fairs, music concerts, and play area for children,
fashion shows and masterclasses, food fairs, music concerts, and play area for children,
amongst others.
amongst others.
Apart from serving as a veritable touch-point for creating value for our teeming
Apart from serving as a veritable touch-point for creating value for our teeming
customers, the fair also provided an opportunity for budding entrepreneurs and retail
customers, the fair also provided an opportunity for budding entrepreneurs and retail
businesses to nurture and expand their businesses in line with our retail focus, thus
businesses to nurture and expand their businesses in line with our retail focus, thus
promoting the Federal Government’s agenda of growing SME businesses in Nigeria.
promoting the Federal Government’s agenda of growing SME businesses in Nigeria.
2.0
Style the Life you Desire
228
The Aba SME Fair
2.0
Style the Life you Desire
ENYIMBA BUSINESS FAIR
(cid:186)(cid:45)(cid:204)(cid:222)(cid:143)(cid:105)(cid:3)(cid:76)(cid:222)(cid:3)(cid:60)(cid:105)(cid:152)(cid:136)(cid:204)(cid:133)(cid:3)(cid:211)(cid:176)(cid:228)(cid:187)(cid:93)(cid:3)(cid:204)(cid:133)(cid:105)(cid:3)(cid:195)(cid:105)(cid:86)(cid:156)(cid:152)(cid:96)(cid:3)(cid:105)(cid:96)(cid:136)(cid:204)(cid:136)(cid:156)(cid:152)(cid:3)(cid:156)(cid:118)(cid:3)(cid:156)(cid:213)(cid:192)(cid:3)(cid:121)(cid:62)(cid:125)(cid:195)(cid:133)(cid:136)(cid:171)(cid:3)(cid:143)(cid:136)(cid:118)(cid:105)(cid:195)(cid:204)(cid:222)(cid:143)(cid:105)(cid:3)(cid:118)(cid:62)(cid:136)(cid:192)(cid:93)(cid:3)(cid:220)(cid:62)(cid:195)(cid:3)(cid:133)(cid:105)(cid:143)(cid:96)(cid:3)(cid:62)(cid:204)(cid:3)(cid:204)(cid:133)(cid:105)(cid:3)
(cid:186)(cid:45)(cid:204)(cid:222)(cid:143)(cid:105)(cid:3)(cid:76)(cid:222)(cid:3)(cid:60)(cid:105)(cid:152)(cid:136)(cid:204)(cid:133)(cid:3)(cid:211)(cid:176)(cid:228)(cid:187)(cid:93)(cid:3)(cid:204)(cid:133)(cid:105)(cid:3)(cid:195)(cid:105)(cid:86)(cid:156)(cid:152)(cid:96)(cid:3)(cid:105)(cid:96)(cid:136)(cid:204)(cid:136)(cid:156)(cid:152)(cid:3)(cid:156)(cid:118)(cid:3)(cid:156)(cid:213)(cid:192)(cid:3)(cid:121)(cid:62)(cid:125)(cid:195)(cid:133)(cid:136)(cid:171)(cid:3)(cid:143)(cid:136)(cid:118)(cid:105)(cid:195)(cid:204)(cid:222)(cid:143)(cid:105)(cid:3)(cid:118)(cid:62)(cid:136)(cid:192)(cid:93)(cid:3)(cid:220)(cid:62)(cid:195)(cid:3)(cid:133)(cid:105)(cid:143)(cid:96)(cid:3)(cid:62)(cid:204)(cid:3)(cid:204)(cid:133)(cid:105)(cid:3)
Eko Energy City, Victoria Island, Lagos from Friday, November 29 to Sunday, December
Eko Energy City, Victoria Island, Lagos from Friday, November 29 to Sunday, December
1, 2019.
1, 2019.
The fair is an initiative of Zenith Bank to engage the various aspects of our customers’
The fair is an initiative of Zenith Bank to engage the various aspects of our customers’
lifestyle strategically. The three-day fair provided a classy meeting point for purveyors
lifestyle strategically. The three-day fair provided a classy meeting point for purveyors
of lifestyle products and the public to interact. It included a series of activities like
of lifestyle products and the public to interact. It included a series of activities like
fashion shows and masterclasses, food fairs, music concerts, and play area for children,
fashion shows and masterclasses, food fairs, music concerts, and play area for children,
amongst others.
amongst others.
Apart from serving as a veritable touch-point for creating value for our teeming
Apart from serving as a veritable touch-point for creating value for our teeming
customers, the fair also provided an opportunity for budding entrepreneurs and retail
customers, the fair also provided an opportunity for budding entrepreneurs and retail
businesses to nurture and expand their businesses in line with our retail focus, thus
businesses to nurture and expand their businesses in line with our retail focus, thus
promoting the Federal Government’s agenda of growing SME businesses in Nigeria.
promoting the Federal Government’s agenda of growing SME businesses in Nigeria.
The Aba SME Fair, a three-day fair held from Thursday, October 17 to Saturday, October
19, 2019, in the city of Aba, Abia State. The event provided a unique opportunity to
showcase the ingenuity of the people and put the state on the global fashion map.
The event, which was put together by Zenith Bank Plc in partnership with the Abia State
Government, was geared towards contributing to the growth and development of SMEs in
the state by providing funding, and facilitating access and exposure to both national and
international markets for “Made in Aba” products.
Some of the major highlights of the fair are the offer of free registration with the Corporate
(cid:386)(cid:118)(cid:118)(cid:62)(cid:136)(cid:192)(cid:195)(cid:3)(cid:10)(cid:156)(cid:147)(cid:147)(cid:136)(cid:195)(cid:195)(cid:136)(cid:156)(cid:152)(cid:3)(cid:173)(cid:10)(cid:386)(cid:10)(cid:174)(cid:3)(cid:118)(cid:156)(cid:192)(cid:3)(cid:204)(cid:133)(cid:105)(cid:3)(cid:119)(cid:192)(cid:195)(cid:204)(cid:3)(cid:211)(cid:228)(cid:228)(cid:3)(cid:45)(cid:31)(cid:13)(cid:195)(cid:3)(cid:62)(cid:152)(cid:96)(cid:3)(cid:118)(cid:192)(cid:105)(cid:105)(cid:3)(cid:76)(cid:156)(cid:156)(cid:204)(cid:133)(cid:3)(cid:118)(cid:156)(cid:192)(cid:3)(cid:204)(cid:133)(cid:105)(cid:3)(cid:119)(cid:192)(cid:195)(cid:204)(cid:3)(cid:163)(cid:120)(cid:228)(cid:3)(cid:45)(cid:31)(cid:13)(cid:195)(cid:3)(cid:204)(cid:156)(cid:3)
register for the fair as well as an opportunity for the best fashion/creative exhibitors at the
fair to participate at the “Style by Zenith 2.0” fair in Lagos.
229
Zenith Tech Fair
Maiden Edition
FUTURE FORWARD
The maiden edition of the Zenith Tech Fair held on Wednesday, November 27, 2019, at
the Landmark Events Centre, Victoria Island, Lagos.
Themed “Future Forward”, the event covered conversations and exhibitions in
(cid:105)(cid:147)(cid:105)(cid:192)(cid:125)(cid:136)(cid:152)(cid:125)(cid:3)(cid:204)(cid:105)(cid:86)(cid:133)(cid:152)(cid:156)(cid:143)(cid:156)(cid:125)(cid:136)(cid:105)(cid:195)(cid:93)(cid:3)(cid:62)(cid:195)(cid:3)(cid:220)(cid:105)(cid:143)(cid:143)(cid:3)(cid:62)(cid:195)(cid:3)(cid:62)(cid:3)(cid:21)(cid:62)(cid:86)(cid:142)(cid:62)(cid:204)(cid:133)(cid:156)(cid:152)(cid:3)(cid:204)(cid:156)(cid:3)(cid:136)(cid:96)(cid:105)(cid:152)(cid:204)(cid:136)(cid:118)(cid:222)(cid:3)(cid:62)(cid:152)(cid:96)(cid:3)(cid:119)(cid:152)(cid:62)(cid:152)(cid:86)(cid:105)(cid:3)(cid:136)(cid:152)(cid:152)(cid:156)(cid:219)(cid:62)(cid:204)(cid:136)(cid:219)(cid:105)(cid:3)
startups.
The fair showcased leading technology innovations that cut across different aspects
(cid:156)(cid:118)(cid:3)(cid:143)(cid:136)(cid:118)(cid:105)(cid:3)(cid:195)(cid:213)(cid:86)(cid:133)(cid:3)(cid:62)(cid:195)(cid:3)(cid:386)(cid:192)(cid:204)(cid:136)(cid:119)(cid:86)(cid:136)(cid:62)(cid:143)(cid:3)(cid:22)(cid:152)(cid:204)(cid:105)(cid:143)(cid:143)(cid:136)(cid:125)(cid:105)(cid:152)(cid:86)(cid:105)(cid:93)(cid:3)(cid:43)(cid:213)(cid:62)(cid:152)(cid:204)(cid:213)(cid:147)(cid:3)(cid:10)(cid:156)(cid:147)(cid:171)(cid:213)(cid:204)(cid:136)(cid:152)(cid:125)(cid:93)(cid:3)(cid:31)(cid:62)(cid:86)(cid:133)(cid:136)(cid:152)(cid:105)(cid:3)(cid:29)(cid:105)(cid:62)(cid:192)(cid:152)(cid:136)(cid:152)(cid:125)(cid:93)(cid:3)
(cid:9)(cid:143)(cid:156)(cid:86)(cid:142)(cid:86)(cid:133)(cid:62)(cid:136)(cid:152)(cid:93)(cid:3)(cid:44)(cid:156)(cid:76)(cid:156)(cid:204)(cid:136)(cid:86)(cid:195)(cid:93)(cid:3)(cid:9)(cid:136)(cid:125)(cid:3)(cid:12)(cid:62)(cid:204)(cid:62)(cid:93)(cid:3)(cid:19)(cid:136)(cid:152)(cid:47)(cid:105)(cid:86)(cid:133)(cid:93)(cid:3)(cid:386)(cid:213)(cid:125)(cid:147)(cid:105)(cid:152)(cid:204)(cid:105)(cid:96)(cid:3)(cid:44)(cid:105)(cid:62)(cid:143)(cid:136)(cid:204)(cid:222)(cid:93)(cid:3)(cid:12)(cid:62)(cid:204)(cid:62)(cid:3)(cid:386)(cid:152)(cid:62)(cid:143)(cid:222)(cid:204)(cid:136)(cid:86)(cid:195)(cid:93)(cid:3)(cid:120)(cid:20)(cid:3)(cid:62)(cid:152)(cid:96)(cid:3)
Communication Technologies, among others.
The lineup of exhibitors included Google, Oracle, IBM, Microsoft, Visa, HP, and
(cid:386)(cid:171)(cid:171)(cid:143)(cid:105)(cid:93)(cid:3)(cid:220)(cid:136)(cid:204)(cid:133)(cid:3)(cid:152)(cid:156)(cid:3)(cid:118)(cid:105)(cid:220)(cid:105)(cid:192)(cid:3)(cid:204)(cid:133)(cid:62)(cid:152)(cid:3)(cid:211)(cid:93)(cid:3)(cid:228)(cid:228)(cid:228)(cid:3)(cid:171)(cid:62)(cid:192)(cid:204)(cid:136)(cid:86)(cid:136)(cid:171)(cid:62)(cid:152)(cid:204)(cid:195)(cid:93)(cid:3)(cid:120)(cid:228)(cid:3)(cid:105)(cid:221)(cid:133)(cid:136)(cid:76)(cid:136)(cid:204)(cid:156)(cid:192)(cid:195)(cid:93)(cid:3)(cid:62)(cid:152)(cid:96)(cid:3)(cid:123)(cid:228)(cid:228)(cid:3)(cid:96)(cid:105)(cid:219)(cid:105)(cid:143)(cid:156)(cid:171)(cid:105)(cid:192)(cid:195)(cid:3)(cid:136)(cid:152)(cid:3)
attendance.
230
The maiden edition of the Zenith Tech Fair held on Wednesday, November 27, 2019, at
the Landmark Events Centre, Victoria Island, Lagos.
Themed “Future Forward”, the event covered conversations and exhibitions in
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startups.
The fair showcased leading technology innovations that cut across different aspects
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Communication Technologies, among others.
The lineup of exhibitors included Google, Oracle, IBM, Microsoft, Visa, HP, and
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attendance.
FUTURE FORWARD
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:
(cid:44)(cid:3)(cid:75)(cid:72)(cid:85)(cid:72)(cid:69)(cid:92)(cid:3)(cid:68)(cid:73)(cid:191)(cid:85)(cid:80)(cid:3)(cid:87)(cid:75)(cid:68)(cid:87)(cid:3)(cid:87)(cid:75)(cid:72)(cid:3)(cid:76)(cid:81)(cid:73)ormation 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
(cid:50)(cid:73)(cid:191)(cid:70)(cid:72)(cid:85)’s Name & Sign:
Not Credited
Pending
(cid:36)(cid:2814)(cid:91)
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
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(cid:47)(cid:36)(cid:42)(cid:50)(cid:54)(cid:17)
VERITASREGISTRARS
YOU CAN
MONITOR
YOUR SHARES
ALL BY YOURSELF
(cid:910)
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VERITASREGISTRARSONLINE PORTAL
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