Contents
Strategic Report
01
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
Chief Executive Officer’s Review
Board of Directors (in pictures)
Directors’ Report
Governance & Sustainability
02
10.
11.
12.
13.
14.
15.
16.
Financials
03
17.
18.
19.
20.
21.
Statement of Corporate Responsibility
Corporate Governance Report
Statement of Directors’ Responsibilities in Relation to the Financial Statements
Report of the Audit Committee
Independent Auditor’s Report
Sustainability Report
Report to the Directors on the Outcome of the Board Evaluation
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
04
22.
23.
24.
25.
Value Added Statement
Five Year Financial Summary
Share Capital History
Forms
2
4
5
6
9
21
24
30
34
42
52
53
69
70
71
76
82
84
85
86
89
92
248
250
254
255
Strategic Report
01 Zenith Bank Plc Annual Report December 31, 2020
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
Dame (Dr.) Adaora Umeoji
Mr. Ahmed Umar Shuaib
Dr. Temitope Fasoranti
Mr. Dennis Olisa
Mr. Henry Oroh
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
COMPANY SECRETARY
Michael Osilama Otu
REGISTERED OFFICE
AUDITOR
REGISTRAR AND TRANSFER OFFICE
4
Zenith Bank Plc
Zenith Heights
Plot 87, Ajose Adeogun Street,
Victoria Island, Lagos
PricewaterhouseCoopers (PwC) Professional Services
Landmark Towers, 5B Water Corporation Road
Victoria Island
Lagos
Veritas Registrars Limited (formerly Zenith Registrars Limited)
Plot 89 A, Ajose Adeogun Street,
Victoria Island, Lagos
Lagos
Results at a Glance/ Key Performance Indices
Financial Highlights
In millions of Naira
31-Dec-20
31-Dec-19
% 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
420,813
299,682
511,893
(256,032)
255,861
230,565
7.34
2,919,342
5,339,911
8,481,272
1,117,473
22.4%
3.1%
7.9%
2.1%
1.5%
50.0%
66.2%
54.7%
23%
4.29%
415,563
267,031
475,119
(231,825)
243,295
208,844
6.65
2,462,359
4,262,289
6,346,879
941,886
23.8%
3.4%
8.2%
3.0%
1.1%
48.8%
57.3%
57.8%
22%
4.30%
1%
12%
8%
10%
5%
10%
10%
19%
25%
34%
19%
-6%
-9%
-4%
-31%
34%
2%
16%
-5%
5%
0%
Strategic Report
5
Zenith Bank Plc Annual Report December 31, 2020
Group Financial Highlights
ZENITH BANK PLC – 2020 GROUP FINANCIAL HIGHLIGHTS FYE 2020
Total deposits grew by 25% (N1,078bn) reflecting
public confidence in the Zenith brand. The funding
mix was also rebalanced towards cheaper retail
deposits.
Total deposits - Group (N'bn)
5,340
4,262
3,438
3,690
2,984
6,000
5,000
4,000
3,000
2,000
1,000
0
Total assets grew by 34% (N2,134bn) to close at
N8.5trn enhancing our balance sheet.
Total assets - Group (N'bn)
8,481
5,595
5,956
6,347
4,739
2016
2017
2018
2019
2020
9,000
8,000
7,000
6,000
5,000
4,000
3,000
2,000
1,000
0
2016
2017
2018
2019
2020
5% growth in PBT is attributable to the growth in both
interest and non-interest income as well as reduction in
funding costs.
Profit after tax increased by 10% (N21.7bn) driven by
improved profit before tax as well as an efficient tax
management strategy.
Profit before tax - Group (N'bn)
Profit after tax - Group (N'bn)
243
232
256
199
151
231
209
193
174
124
250
200
150
100
50
0
2016
2017
2018
2019
2020
2016
2017
2018
2019
2020
300
250
200
150
100
50
0
6
Confidential to Zenith Bank Plc| 1
ZENITH BANK PLC – 2020 GROUP FINANCIAL HIGHLIGHTS FYE 2020
(cid:27)hareholders(cid:55) funds grew year-on-year by
18.(cid:14)% to N1,117bn providing ade(cid:46)uate buffer
for business expansion.
Total s(cid:24)are(cid:24)olders' fund - Group
(N'bn)
1,117
942
812
816
(cid:25)99
1200
1000
800
600
400
200
0
(cid:21)onsistent and growing dividend payout in the last 7 years.
The payout increased by 7% year-on-year. (cid:29)ith this
proposed dividend we are recording a dividend yield of 12%
(201(cid:17)(cid:18) 15%).
(cid:9)i(cid:35)idend (N)
2(cid:4)70
2(cid:4)80
2(cid:4)80
3(cid:4)00
1(cid:4)75
1(cid:4)80
2(cid:4)02
2014 2015 2016 2017 2018 2019 2020
3(cid:4)00
2(cid:4)00
1(cid:4)00
0(cid:4)00
2016
2017
2018
2019
2020
(cid:26)eturn on (cid:19)verage (cid:22)(cid:46)uity ((cid:26)o(cid:19)(cid:22)) and (cid:26)eturn on (cid:19)verage (cid:19)sset ((cid:26)o(cid:19)(cid:19)) dropped year-on-year on the
bac(cid:40) of increased shareholders(cid:55) funds and total assets respectively.
ROAE/ROAA
23(cid:4)30(cid:2)
22(cid:4)90(cid:2)
23(cid:4)80(cid:2)
23(cid:4)80(cid:2)
22(cid:4)40(cid:2)
3(cid:4)00(cid:2)
3(cid:4)40(cid:2)
3(cid:4)30(cid:2)
3(cid:4)40(cid:2)
3(cid:4)10(cid:2)
30.00%
20.00%
10.00%
0.00%
2016
2017
2018
2019
2020
(cid:18)(cid:17)(cid:15)(cid:16)
(cid:18)(cid:17)(cid:15)(cid:15)
(cid:22)ffective funding cost management giving rise to reduction in interest expense by 18% despite significant
growth in the (cid:23)roup(cid:55)s deposit base by 25%.
2020
2019
Interest expense 2020
Borrowed
funds and
leases
33%
Time
deposits
24%
Current
accounts
25%
Borrowed
funds and
leases
46%
Savings
18%
Current
accounts
8%
Savings
14%
Time
deposits
32%
Strategic Report
7
Confidential to Zenith Bank Plc| (cid:4)
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g
i
l
h
g
H
i
l
i
i
a
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a
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F
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8
Zenith Bank Plc Annual Report December 31, 2020
Corporate Profile & Strategy
INTRODUCTION
Zenith Bank Group is the largest bank in Nigeria by total assets size and Tier 1 Capital and is the tenth largest bank in Africa as
measured by Tier 1 Capital (The Banker, July 2020).
Zenith Bank is an international bank with operations in the United Kingdom, United Africa Emirates and three other West African
countries apart from Nigeria, namely, Ghana, Sierra Leone and Gambia. In Nigeria we have a strong franchise and reputation and are
either the top or one of the leaders in key financial variables such as customer deposits, total assets, earnings and profitability.
Within thirty years of its existence, Zenith Bank 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. The combined intellectual capital and dedication of the staff, Management and Board have shaped Zenith Bank
into the world-class institution that it is today.
Over the years the Zenith Bank 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 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 Bank is easily associated with the following attributes in the Nigerian banking industry:
Innovation
•
• Good financial performance
• Stable and dedicated management team
• Highly Skilled Personel
• Leadership in the use of Information and Commu-
nication Technology
• Strategic distribution channels
• Good asset quality
Strategic Report
9
Zenith Bank Plc Annual Report December 31, 2020
Corporate Profile & Strategy
OUR VISION
OUR MISSION
OUR VALUE
. Integrity
. Professionalism
. Excellence
. Ethics
. Commitment
· Transparency
· Service
“.....to build the
Zenith brand into a
reputable
international
financial institution
recognized
for innovation,
superior customer
service and
performance while
creating premium
value for
all stakeholders”.
“....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”
10
Business Focus
Zenith Bank Group is a customer centric, innovation and technology enabled financial services organisation that is geared towards
surpassing its customers’ expectations. It focuses and channels its resources only on its core business segments, international subsidiary
businesses, its pension/custodian services and nominees business only.
Core Business Segments
a)
The Bank’s core business segments provide a broad range of banking products and services to both corporate and retail customers.
These business activities are conducted through the following business units:
•
•
•
•
•
Institutional and Investment Banking
Corporate Banking
Commercial/SMEs
Retail Banking
Public Sector Banking
Institutional and Investment Banking
The Institutional and Investment Banking Unit (the “IIBU”) manages the Group’s business relationship with other banks, financial
institutions, multilateral agencies, securities houses, insurance companies, asset management companies and other non-bank finance
companies, private equity and venture funds. The IIBU also assists individuals, corporations and governments in raising capital by
underwriting and/or acting as the client’s agent in the issuance of securities as well as assisting companies in mergers and acquisitions
processes.
The unit through its Treasury sub unit provides ancillary services such as market-marking, derivatives trading, fixed income instruments,
foreign exchange, commodities and equity securities and manages the group’s correspondent banking relationships. The Treasury
sub-group works closely with 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.
Strategic Report
11
Zenith Bank Plc Annual Report December 31, 2020
Corporate Profile & Strategy
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, medium and micro enterprises (MSMEs), and other commercial businesses which also
includes all unincorporated entities (such as societies, clubs, churches, mosques etc).
It offers loans and advances 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
The Group’s strategic objective is to become the market leader in the retail market. To this end, the Group provides retail banking
products and services through its extensive branch network and ever widening array of digital channels driven by cutting edge
technology. The Group’s retail strategy includes categorizing the retail market into two major broad segments namely; PRESTIGE (rich
and affluent) and WAVE (retail affluent and mass). These two broad segments drive the Group’s design of retail deposits products and
services which range from standard to specialized savings, current, domiciliary and investment accounts.
Specialized products include the Zenith Children Accounts (ZECA), Individual Current and Savings Accounts, Easysave Classic and
Premium Accounts (financial inclusion customers), Aspire Savings Accounts (tertiary institution students), Timeless Accounts (senior
citizens) and Platinum and Gold Current Accounts (high net worth individuals) etc.
12
Also, the Group offers a wide range of digital products and services such as internet banking, mobile banking services (mobile app),
*966 EazyBanking, Zenith Scan to Pay, EazyMoney etc. Furthermore, the Group offers other channels such as ATMs, cards and POS
terminals which have been designed to meet the ever changing needs of the retail segment of the banking industry.
In addition, the Group offers credit products including personal loans, advances, mortgages, asset finance, and credit cards through our
traditional channels. These credit products can also be accessed through some of the Group’s digital channels such as *966 EazyBanking
and there are plans to on-board these as well on the internet banking and mobile banking application.
The Group recognizes that attracting, winning and retaining this segment of customers is through the development of customer value
propositions (CVPs) unique to each customer sub-segment. To ensure effective delivery of these CVPs through branches as well as
through digital channels, the Group employs advanced analytics to identify micro segments and customer spending patterns. Also, in
order to maximize customer acquisition, customer growth, and customer retention, the Group constantly carries out environmental
scanning and closely monitors key trends in the retail industry.
Recently, the Group, in addition to the on boarding of super agents, deployed agency banking services across the 36 states of the
federation to ensure the bank has a touch point at every location in the country. The Bank has on-boarded about 40,000 agents as
at 31st December 2020. This is to service mostly 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.
Also, the Group collaborates with selected Fintechs and Micro Finance Banks to make the Group’s innovative products and services
available to their customers and vice versa.
The Group regularly reviews its retail strategies to ensure efficient execution as well as to ensure that the Group is on course to become
the market leader in retail in an ever changing banking landscape.
The Group will continue to leverage on cutting edge technology to deliver best in class retail products and services that will be
adapted to the digital demands of retail customers. The Group will also continue to enable market leading capabilities, developing
bestin-class digital products and solutions as well as increasing speed to market supported by agility of innovation.
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:
Strategic Report
13
Zenith Bank Plc Annual Report December 31, 2020
Corporate Profile & Strategy
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
in fixed
effective treasury management, Zenith UK trades
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.
14
Pension and Custodial Services
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 2020, total funds under
its custody amounted to approximately N5.643 trillion. Zenith Pensions has 112 funds under its custody. 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-today basis.
Zenith Nominees Limited
Zenith Nominees Limited provides nominees, trustees, administrators and executorship services for non-pension assets. It started
operations in 2018. As at 31 December 2020, total funds under its custody amounted to approximately N603 billion.
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
Continue to seek, employ and retain the best personnel available
Continuous investment in training and retraining 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 strong risk management and corporate governance practices
•
•
•
•
•
•
•
•
•
•
•
•
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.
Strategic Report
15
Zenith Bank Plc Annual Report December 31, 2020
Corporate Profile & Strategy
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.
14.
15.
Continue to deliver superior and tailormade service experience to all our customers at all times
Continue to develop deeper and broader relationship with all clients and strive to understand their individual and industry
peculiarities with a view to developing specific solutions for each segment of our customer base
Continue to expand our operations by adding new distribution channels especially in the digital space
Consolidate our leadership as a banking service provider in Nigeria by continuing to build on long standing relationships,
capabilities and the strength of our brand and reputation to drive our international business network expansion
Continually enhance our processing and systems platforms to deliver new capabilities and improve operational efficiencies
and achieve economies of scale.
Maintain strong risk management and corporate 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 subregion to encourage them to use our foreign subsidiaries for
businesses they are currently transacting with other banks
Our foreign subsidiaries will target companies that currently have trade partners in Nigeria and other locations where we have
presence across the globe and process their trade transactions through the Zenith Bank network. This approach is aimed at
encouraging cross border marketing and the routing of a portion of their international trade transactions through the Group.
The idea is to demonstrate to the local companies that their relationship with Zenith Bank in their country and dealing with
Zenith Bank in another country will be mutually beneficial.
“Our Strategic Plan is part of a process of our development, and attempts to engender a commitment to continuous
improvement, by focusing and harnessing the energies of everyone in the group. We believe that the concepts of strategic
readiness, life-long learning and community engagement encourage and support quality in all aspects of the Bank’s
performance.”
The lending businesses in all our subsidiaries will focus primarily on international and export trade transactions. It will involve
discounting international trade bills for companies and also providing short-term credits to financial institutions that use the
bank as their correspondent bank.
MARKET AND BUSINESS STRATEGY
The strategic objectives of the Group in the next five years include:
•
to be amongst and remain one of the top tier banks in Africa in terms of profitability, balance sheet size, risk assets quality,
financial stability and operational efficiency;
Re-channelling its efforts in deploying more electronic banking products, following the divestment from non-core banking
operations.
The Group will look to strengthen its retail banking business by consolidating on its retail banking 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 banking industry in Nigeria.
•
•
16
•
Improving its capacity to meet its customers’ changing and increasing banking needs as well as sustain high quality growth
despite the volatile business environment.
Enhancing the Group’s internal operating systems to reduce costs
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 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 2020, the geographical spread of the Group’s business locations is as follows:
Geographical Locations
Branches
Cash Centres
Non-Banking Operations
Federal Republic of Nigeria
Republic of Ghana
United Kingdom
Sierra Leone
The Gambia
China Representative Office
Total
392
28
2
7
6
1
436
155
10
-
12
-
-
177
3
-
-
-
-
-
3
As shown above, the Group also has 177 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.
Strategic Report
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Zenith Bank Plc Annual Report December 31, 2020
ATM network
The Group has a total of 2,042 ATM machines
with 1,960 in Nigeria, 62 in Ghana, 14 in Sierra
Leone and 6 in The Gambia. The ATM machines
are mounted
in branches and strategic
locations such as airports, university campuses,
large shopping malls and premises of large
manufacturing firms employing large numbers
of workers. Due to collaboration and shared
services arrangements which the Bank has
with other banks, ATM cards issued by the Bank
are accepted by the ATM machines of other
institutions.
The Bank also collaborates with other card
issuing agencies
internationally
recognised cards, such as MasterCard, Visa and
Verve, in different currencies to their customers.
to offer
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 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;
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*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 selfservice. These include
retrieve card PIN, Block Cards, manage card less withdrawal, select preferred
USSD account to debit, perform transaction above N100,000.00 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 involved in the generation of monthly payroll while also remitting funds electronically to staff accounts. The
platform provides, database backup, payroll reports, customization option, secure payment authorization and salary payments;
Xpath (Customised Branch Collections) allows customers to collect or receive remittance from their key distributors and
customers through any branch of the Group. The platform also enables customers to capture specific information relating to
their account. Other features of the product include the provision of electronic receipts, PIN Vending and direct integration;
Internet Banking - a real-time solution that provides customers with access to their account 24 hours a day, 7 days a week via
the internet;
EaZymoney, Zenith Bank’s mobile money platform is a wallet payment solution that allows customers make withdrawals(cash-
out), make deposits(cash-in), transfer funds, pay bills (DSTV, Electricity etc. ) make purchases and top up airtime using their
mobile phones.
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.
Strategic Report
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Zenith Bank Plc Annual Report December 31, 2020
The Zenith Bank Virtual Card - The Zenith Bank Virtual Card is specifically designed for web transactions and can be used to
shop online (accepted locally and internationally), pay bills and subscriptions etc. The Zenith Bank virtual card can be used over
Internet Banking and the USSD platform (*966#).
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.
•
•
COVID 19 Pandemic Response
As we transit to the new normal amid this pandemic, the health and safety of our employees, customers and other stakeholders are
of utmost importance to us while we remain focused on preserving value for our shareholders.
We have set a clear direction and communicated this effectively to all staff and other stakeholders in accordance with our
Business Continuity Plan (BCP).
Remote working and electronic selfservices for our traditional banking services have been established.
Our BCPs are constantly being reviewed and strengthened to reflect the current and potential impacts of Covid-19 pandemic.
We have also developed a strategic crisis-action plan to guide our response across all Covid-19 scenarios - short, medium and
long term, while leveraging on emerging opportunities.
Executive Management has encouraged virtual meetings and discussions of the bank activities across various teams. x
Several stress tests to assess the possible impacts of Covid-19 on our liquidity, capital adequacy and earning capacity had been
conducted. We remain resilient to short and medium term shocks from the adverse impacts of coronavirus pandemic.
We review our loan books continuously and closely monitor all assets and liabilities classes to ensure sufficient liquidity to meet
our financial obligations.
We are engaging our customers in key sectors of the economy to better understand their current challenges and provide
effective and bespoke actions to alleviate their hardships while preserving shareholders’ funds.
We have increased our investment in IT and Cyber Security infrastructure to enable us meet the increasing digital needs of our
customers while protecting our organization and customers from all cyber security threats.
•
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Notice of Annual General Meeting
NOTICE IS HEREBY GIVEN that the Thirtieth Annual General Meeting of Zenith Bank Plc will hold at the Civic Centre, Ozumba Mbadiwe
Street, Victoria Island, Lagos State at 9.00 a.m. on Tuesday the 16 day of March, 2021 to transact the following business:
ORDINARY BUSINESS
1.
To present and consider the Bank’s Audited Accounts for the financial year ended 31 December, 2020, the Reports of the Directors,
Auditors and Audit Committee thereon.
2.
To declare a final dividend.
3.
To elect the following Directors retiring by rotation:
(i) Mr. Gabriel Ukpeh
(ii) Mr. Jeffrey Efeyini
(iii) Mr. Henry Oroh
4.
To ratify the appointment of Messrs PWC as External Auditors of the bank.
5.
To authorize the Directors to fix the remuneration of the Auditors.
6. Disclosure of the remuneration of Managers of the bank.
7.
To elect members of the Audit Committee.
SPECIAL BUSINESS
8.
To consider and if thought fit, to pass the following as ordinary resolution:
“That the remuneration of the Directors of the Bank for the year ending December 31, 2021 be and is hereby fixed at N25 million
only”.
Dated this 22nd day of February, 2021
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 24 hours before the time of holding the meeting. A
proxy need not be a member of the company.
Shareholders should note that the Corporate Affairs Commission has in view of the Covid19 pandemic and following the
Government’s restriction on public gathering approved that attendance to the Meeting shall only be by proxy to ensure public
health and safety. Shareholders are therefore requested to submit their completed proxy forms appointing any of the listed
proxies in line with the Corporate Affairs Commission’ Guidelines to the office of the Company’s Registrars, Veritas Registrars
Limited, 89A, Ajose Adeogun Street, Victoria Island, Lagos State and/or enquiry@veritasregistrars.com and th veritasregistrars@
veritasregistrars.com not later than 15 March, 2021 to enable the Bank stamp the proxy forms and lodge same with the Registrars
not later than 24 hours prior to the time of the meeting. The Proceedings will also be streamed live on the Bank’s website and
social media platforms.
Strategic Report
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Zenith Bank Plc Annual Report December 31, 2020
2. CLOSURE OF REGISTER OF MEMBERS
The Register of Members and Transfer Books of the Company will be closed 9th March 2021, to enable the Registrar prepare for
the payment of dividend.
3. DIVIDEND WARRANTS
If approved, dividend warrants for the sum of N2.70K for every share of 50K (bringing the total dividend for the financial year ended
December 31, 2020 to N3.00K) will be paid via emandate on the 16th March, 2021, to shareholders whose names are registered
in the register of members at the close of business on the 8th day of March, 2021. Shareholders are advised to forward particulars
of 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.
4. AUDIT COMMITTEE
In accordance with Section 404(6) of the Companies and Allied Matters Act, 2020, any shareholder may nominate another
shareholder for appointment to the Audit Committee. Such nomination should be in writing and should reach the Company
Secretary at least 21 days before the Annual General Meeting.
5
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 th submitted to the Company on or before the 15 day of March, 2021.
6. UNCLAIMED DIVIDEND WARRANTS AND SHARE CERTIFICATES
Shareholders are hereby informed that a number of share certificates and dividend warrants have been returned to the Registrars
as “unclaimed”. A list of all unclaimed dividend will be circulated with the Annual Report and Financial Statements. Any member
affected by this notice is advised to write to or call at the office of the Bank’s Registrars, Veritas Registrars Limited, Plot 89A, Ajose
Adeogun Street, Victoria Island, Lagos during normal working hours.
7. E-DIVIDEND
Notice is hereby given to all shareholders to open bank accounts for the purpose of dividend payment in line with the Securities
and Exchange Commission (SEC) directives. Detachable application forms for edividend and ebonus are attached to the Annual
Report to enable all shareholders furnish the particulars of their bank accounts/CCS details to the Registrars as soon as possible.
8. PROFILE OF DIRECTORS
The profile of all Directors are available for viewing on the bank’s website, www.zenithbank.com
By Order of the Board
MICHAEL OSILAMA OTU, ESQ.
Company Secretary/General Counsel
Plot 87, Ajose Adeogun Street
Victoria Island, Lagos
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JIM OVIA, CON
The year 2020 was
characterised by a very
challenging macroeconomic
environment brought
about by the Coronavirus
(COVID-19) pandemic, which
had a significant impact
on businesses globally. The
resilience of our Bank, however,
enabled us to weather the
economic headwinds.
My Fellow Shareholders, Distinguished
Guests, Ladies and Gentlemen,
I am delighted to welcome you to the 2020 Annual
General Meeting of our Bank and to present to you
the Annual Report and Financial Statements for the
financial year ended December 31, 2020.
I would like to sincerely thank you all for your
unwavering commitment and loyalty, which have
contributed immensely to the continued success of
our Bank.
CHAIRMAN’S STATEMENT
The year 2020 was characterised by a very challenging
macroeconomic environment brought about by the Coronavirus
(COVID-19) pandemic, which had a significant impact on
businesses globally. The resilience of our Bank, however, enabled
us to weather the economic headwinds.
Against this backdrop, it is therefore pertinent to review the
economic environment within which our Bank operated during
the year under review.
MACROECONOMIC REVIEW
In the outgone year, the Nigerian economy witnessed one
of its deepest recessions since the early 1990s following
the deleterious health and economic crisis caused by the
Coronavirus pandemic. The spread of the virus and its rapid
spin into a global pandemic in early 2020 triggered severe
the economy. MPR was eased by 100 basis points in May 2020,
from 13.5 per cent to 12.5 per cent, and another 100 basis
points in September 2020, from 12.5 per cent to 11.5 per cent.
This is the lowest MPR since 2016. Similarly, the Cash Reserve
Requirement (CRR) was adjusted by 500 basis points in January
from 22.5 to 27.5 per cent. The asymmetric corridor was changed
from +200/-500 basis points to +100/-700 basis points around
the MPR during the MPC meeting held in September. The apex
bank also leveraged its development finance tools to boost the
flow of credit to the real sector to stimulate output growth. The
Federal Government, through the Federal Ministry of Finance,
unveiled a fiscal stimulus package of NGN2.3 trillion to ease
contractionary concerns. These measures, combined with a
relative improvement in local and global economic activities,
supported the economy’s rebound in the last quarter of the year.
global macroeconomic shock, with a far-reaching impact on
In 2020, headline inflation, measured by the Consumer Price
the domestic economy. According to the National Bureau of
Index (CPI), witnessed a steady rise. According to the NBS,
Statistics (NBS), Gross Domestic Product (GDP) grew by 1.87
per cent in Q1 2020 but contracted by 6.10 per cent and 3.62
per cent in Q2 and Q3, 2020, respectively, before returning to
the growth path in Q4, 2020 at 0.11 per cent. Overall, in 2020,
the annual growth of real GDP was estimated at –1.92 per cent,
a decline of 4.20 percentage points compared to the 2.27 per
cent recorded in 2019. The weak performance of the economy
in 2020 was largely attributed to the steep fall in global oil prices,
the inflation rate stood at 12.13 per cent in January. It rose
consistently to 15.75 per cent in December, the highest rate
recorded in three years, bringing the average inflation rate
to 13.25 per cent in 2020. The persistent inflationary pressure
witnessed in the year was driven by rising food prices and supply
chain disruptions linked to Covid-19-related lockdown and
containment measures and exchange rate volatility. Throughout
the year, headline inflation remained outside the target range of
weaker domestic demand, and lower level of economic activities
6.0-9.0 per cent set by the CBN.
due to measures, such as nationwide lockdown, put in place to
contain the spread of the virus.
To insulate the economy from the effects of the global
pandemic, as well as to quicken the pace of economic recovery,
a raft of commendable monetary and fiscal stimulus packages
were rolled out by the monetary and fiscal authorities. Notably,
the Monetary Policy Committee (MPC) of the Central Bank of
Nigeria (CBN) cut the Monetary Policy Rate (MPR) twice in 2020
The global oil market opened the year 2020 on a relatively high
note, with U.S. West Texas Intermediate (WTI) trading nearly $60
and Brent averaging $64 per barrel in January. However, prices
plummeted as the economic effects of the COVID-19 pandemic
began to kick-in. The plunge was so massive that for the first time
in the long history of oil futures trading, a contract went negative
in April 2020 as global oil demand collapsed due to a low level
of business activity caused by lockdowns and movement and
to increase the flow of credit to the key productive sectors of
travel restrictions implemented in many economies.
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Towards the end of 2020, crude oil prices rebounded as the
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Organization of Petroleum Exporting Countries (OPEC) and
closing the year at about $35.37billion. The sharp fall in external
reserves within the first few months of the year was mainly due
participating non-OPEC countries cut output to match weaker
to the crash in crude oil prices, increased foreign exchange
demand. Nonetheless, oil prices lost more than a fifth of their
intervention at the forex market and lower foreign portfolio
value in 2020 – Brent fell 21.5 per cent for the year, while the
investment inflows. However, the foreign exchange reserve was
OPEC Reference Basket (ORB) dropped 25 per cent, to average
subsequently supported by improved oil receipts.
$41.47/b in 2020. World oil demand is estimated to have declined
by 9.8 million barrels per day (mb/d) year-on-year to an average
The Federation Account Allocation Committee (FAAC) disbursed
of 90mb/d in 2020.
a total of NGN7.68 trillion among the three tiers of Government
as allocations in 2020, a significant decline of more than half a
In 2020, the CBN adjusted the official exchange rate of the Naira
trillion when compared with the NGN8.2 trillion in the preceding
twice, from NGN307/$1 to NGN360/$1 in March, and then to
year. The decrease is attributable to shrinking government
NGN381.0/$ in July. Consequently, the average Naira exchange
revenue receipt due to the socioeconomic crisis caused by
rate depreciated across all segments of the market, averaging
the COVID-19 pandemic. The Federal Government and many
NGN381.00/$1 at the interbank, NGN471.62/$1 at the Bureau De
states of the federation revised their 2020 expenditure plans
Change (BDC) segment and NGN392.27/$1 at the Investors’ and
downwards due to shortfalls in revenue.
Exporters’ (I&E) Window in 2020. The exchange rate remained
pressured as the COVID-19 pandemic triggered a short supply of
In 2020, the Nigerian Stock Exchange (NSE) witnessed a bullish
foreign exchange due to a significant drop in crude oil prices in
trend. The All-Share Index (ASI) opened at 26,842.07 index points
the global commodities market.
but closed the year at 40,270.72, representing an appreciation of
50.02 per cent. While market capitalisation was at N12.958trillion
Nigeria witnessed a significant depletion in the stock of foreign
at the start of the year, it recorded a 62.49 per cent growth
exchange reserves in 2020. At the beginning of the year, Nigeria’s
to N21.056trillion at the close of the year. The outstanding
external reserves stood at $38.01billion but continued to decline
performance of the market was supported by the relatively low
to its lowest levels within the year at about $33.52billion in April.
yield in the fixed income market, which resulted in increased
This was followed by a rise to about $36.60billion in May, before
participation of domestic investors in the equities market.
The persistent inflationary pressure witnessed in the year was driven by
rising food prices and supply chain disruptions linked to Covid-19-related
lockdown and containment measures and exchange rate volatility.
26
CHAIRMAN’S STATEMENT
FINANCIAL RESULTS
As mentioned earlier, the year 2020 was characterised by
significant global and domestic economic developments with
far-reaching implications for the Nigerian financial services
sector. As a resilient brand, however, we were able to leverage
THE BOARD OF DIRECTORS
There were no changes to the composition of the Board of the
Bank during the period under review. However, on January 3,
2021, one of the Bank’s Non-Executive Directors, Prof. Oyewusi
Ibidapo-Obe, passed on. We pray that God will grant him eternal
the innate opportunities within the environment and record a
rest.
performance that further attests to the Group’s sound financial
health.
INVESTMENT IN TECHNOLOGY
Zenith Bank is committed to setting the pace in the adoption
The Group’s gross earnings grew by 5 per cent
from
of financial technology. Consequently, we have
N662.25billion in 2019 to N696.45billion in 2020. Profit-Before-
Tax (PBT) rose by 5 per cent, from N243.29billion in 2019 to
N255.86billion in 2020, while Profit-After-Tax (PAT) rose by 10
immensely in new technologies and digital solutions in the
year under review. This is in line with our pledge to create value
for our highly esteemed customers through our wide range of
per cent, from N208.84billion in 2019 to N230.57billion in 2020.
innovative products and services.
Total deposits was N5.34trillion for the year ended December
31, 2020, representing a 25 per cent increase over the previous
year’s figure of N4.26trillion. During the same period, total
assets of the Group grew by 34 per cent from N6.35trillion to
CORPORATE SOCIAL RESPONSIBILITY
Zenith Bank is committed to building a more sustainable and
inclusive economy. As such, we have continued to integrate
N8.48trillion, while shareholders’ funds rose by 19 per cent, from
sustainability principles
N941.89billion to N1.12trillion.
in our business operations and
DIVIDEND
Zenith Bank remains committed to consistently delivering
superior returns to our highly esteemed shareholders by
ensuring that a significant portion of our profit is set aside for
you. In a clear demonstration of this commitment, and despite
the macroeconomic headwinds brought about by COVID-19, we
had declared and paid an interim dividend of 30kobo per share
in the course of the 2020 financial year. We hereby propose a
final dividend of N2.70kobo per share. If approved, this will bring
the total dividend for the year ended December 31, 2020, to N3
per share.
As a resilient brand, however,
we were able to leverage the
innate opportunities within
the environment and record
a performance that further
attests to the Group’s sound
financial health.
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investment decisions in line with global best practices. During
B
the last year, we made considerable progress in this regard,
sports in Nigeria through its sponsorship of the Nigeria Football
Federation (NFF), the Zenith Women Basketball League, and the
bearing in mind our role in accelerating the achievement of the
Zenith Bank Delta Principals’ Cup, to name a few.
United Nations Sustainable Development Goals (SDGs).
Our sustainability and Corporate Social Responsibility (CSR)
billion as part of the Coalition Against COVID-19 (CACOVID), a
initiatives are hinged on the belief that today’s business
private sector-led initiative to support the Nigerian Government
In response to the Covid-19 pandemic, the Bank donated NGN1
performance is not all about the financial numbers – we believe
to combat the Covid-19 crisis.
that an institution’s social investments, contributions to inclusive
economic growth and development as well as improvements
Apart from our healthcare sector interventions, we expanded
in the condition of the physical environment, all constitute a
our support for women-owned businesses in the year under
balanced scorecard.
review. As a testament to our achievements in these areas,
Zenith Bank won the awards for “Best Company in Promotion of
Through our CSR initiatives, we have embodied the overarching
Good Health and Wellbeing” and “Best Company in Promotion
objective of the 17 SDGs, which provide a framework for
of Gender Equality and Women Empowerment” in Africa at the
addressing the major challenges confronting our society. Our
2020 Sustainability, Enterprise and Responsibility Awards (SERAs).
social investments are targeted at health, education, women
and youth empowerment, sports development and public
infrastructure enhancement.
MACROECONOMIC OUTLOOK
Although the outlook for the domestic economy, and indeed
the global economy, remains largely uncertain as the pandemic
To demonstrate our commitment to creating and expanding
continues to impact economies, most economic prognoses
opportunities, the Bank regularly makes donations towards the
suggest a modest recovery in 2021. On the domestic front,
setting up of ultramodern ICT centres in several educational
the recovery witnessed in the last quarter of 2020 is expected
institutions across the country.
It also supports various
to continue, supported by easing OPEC production cuts and
developmental projects and healthcare delivery causes in
higher oil prices. Thus, the IMF forecast the Nigerian economy
Nigeria. The Bank equally contributes to the development of
to expand by 1.5 per cent in 2021, while the World Bank expects
Zenith Bank is committed to building a more sustainable and inclusive
economy. As such, we have continued to integrate sustainability principles
in our business operations and investment decisions in line with global
best practices. During the last year, we made considerable progress in this
regard, bearing in mind our role in accelerating the achievement of the
United Nations Sustainable Development Goals (SDGs).
28
CHAIRMAN’S STATEMENT
domestic output to grow by 1.1 per cent in 2021. In addition
second wave of the COVID-19 pandemic and its impact on crude
to the stimulus packages to reflate the economy, growth is
oil demand, oil prices and capital flows. Overall, the economic
expected to be driven by an uptick in private consumption and
prospect in 2021 remains that of cautious optimism.
investment and government spending as enunciated in the
2021 budget.
APPRECIATION
The year 2020 was no doubt a challenging but successful year
The Federal Government of Nigeria (FGN) 2021 budget has
for us as a Bank. Clearly, the superior performance recorded
an aggregate expenditure estimate [inclusive of General
in the year was made possible by the collective efforts of all
Operating Expenses
(GOEs) and project
tied
loans] of
our stakeholders. Therefore, I am grateful to our customers for
N13.59trillion, representing a 25.7 per cent increase compared
their unflinching loyalty, our Staff and Management for their
to the N10.81trillion (inclusive of GOEs and project tied loans)
dedication and commitment, and our Board for continually
revised budget for 2020 fiscal year. A breakdown of the budget
guiding the Bank along the path of sustained growth.
estimates show that N4.13trillion (30.36 per cent) was budgeted
for capital expenditure; N5.64trillion (41.52 per cent) for recurrent
Ladies and gentlemen, I welcome you to the 2021 financial year
(non-debt) expenditure; N3.32trillion (24.47 per cent) for debt
with the firm assurance of continued excellent performance by
servicing; and N496.53billion (3.65 per cent) for statutory
our Bank.
transfers. Aggregate budget revenue for 2021 is projected
at N7.99trillion, 36.35 per cent higher than the N5.86trillion
Thank you.
estimated for 2020. The 2021 Budget is predicated on crude oil
production of 1.86 million barrels per day, crude oil price of $40
per barrel, and an average exchange rate of N379/dollar.
On the monetary policy side, CBN policy actions such as
Jim Ovia, CON
development finance initiatives, measures to boost credit flow
Chairman
to the private sector through the Loan-to-Deposit Ratio (LDR),
etc., are expected to provide momentum for growth. The apex
bank expects that the various stimulus initiatives will support
further economic recovery in Q1 2021 and beyond. However,
the downside to this prospect remains persistent inflationary
pressures and rising debt burden, which could weigh on
Nigeria’s growth prospects.
On the global front, ongoing vaccination is expected to support
recovery by driving a moderate rebound in economic activities
across most economies. However, there are concerns about
the economic impact of lockdown measures in the face of the
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EBENEZER ONYEAGWU
In 2020, the global
economy witnessed one
of its deepest recessions,
following the devastating
health and economic crisis
caused by the Coronavirus
(COVID-19) pandemic.
It gives me great honour and pleasure to welcome
you, our highly esteemed shareholders, to the
2020 Annual General Meeting. In 2020, the
global economy witnessed one of its deepest
recessions,
following the devastating health
and economic crisis caused by the Coronavirus
(COVID-19) pandemic. The pandemic triggered
leading to
a severe macroeconomic shock
sharp decline in aggregate demand and supply;
disruptions in global supply chain and trade;
rising sovereign and corporate debts; heightened
financial market vulnerabilities; low prices of crude
oil and other commodities; etc. Consequently, the
global economy contracted by an estimated 4.3
per cent in 2020.
The Nigerian economy slipped into recession in
Q3 2020 but recovered in the fourth quarter.
According to the National Bureau of Statistics
(NBS), aggregate output, measured by Gross
Domestic Product (GDP), grew by 1.87 per cent in
the first quarter of 2020 but contracted by 6.10 per
cent and 3.62 per cent in Q2 and Q3, respectively,
before growing by 0.11 per cent in Q4 2020.
The decline recorded during the second and third quarters of
the year was attributable primarily to the steep fall in global oil
prices and weaker domestic demand caused by the COVID-19
pandemic. Also, measures put in place to contain the spread of
the virus, such as nationwide lockdown, resulted in significantly
lower levels of both domestic and international economic
activity. In addition, EndSARS protests in October 2020 escalated
security concerns and crippled economic activity in some major
cities in the country. Overall, annual economic performance was
subdued as the country recorded negative GDP growth of -1.92
per cent in 2020.
In a bid to stimulate growth in the Nigerian economy amidst
the pandemic, the Central Bank of Nigeria (CBN) rolled out a
raft of initiatives. These measures include an extension of a
one-year moratorium on principal repayments across all the
CBN intervention facilities; reduction of interest rate on all CBN
intervention facilities from 9 per cent to 5 per cent per annum;
establishment of a NGN50 billion Targeted Credit Facility through
the Nigeria Incentive-based Risk Sharing System for Agricultural
Lending (NIRSAL) Microfinance Bank; and creation of a NGN100
billion credit support for the healthcare industry to meet the
increasing demand for healthcare services and products. Others
include regulatory forbearance for deposit money banks (DMBs)
to consider temporary restructuring of repayment terms and
extension of tenor of term loans for businesses and households
most affected by the COVID-19 pandemic. These include
creation of a NGN1 trillion manufacturing and agricultural
support fund for the agriculture and manufacturing sectors;
and establishment of a $39.4 billion infrastructure development
company in collaboration with the African Finance Corporation
(AFC) and the Nigeria Sovereign Investment Authority (NSIA) to
leverage on local and international funds to undertake significant
capital infrastructure projects in Nigeria.
In the course of the year, like all institutions, we were impacted
by pandemic-related lockdowns and restrictions. We responded
by activating our robust business continuity plan, which meant
that critical systems remained operational with our personnel
working remotely from home. The pandemic prompted an
adjustment in our strategy to ensure that we continue to create
value for customers, employees and investors. In particular, the
need to understand the impact of pandemic related disruptions
on various customer segments prompted an adjustment in our
strategy. Consequently, we ramped up support for our clients,
GMD/CEO’S REVIEW
especially SMEs, to improve credit access and create more
opportunities for their growth.
Supporting all our clients is critical in the journey towards recovery
from the revenue losses that many businesses have suffered due
to the pandemic. COVID-19 has accelerated the efforts towards
digital transformation in our operations and service delivery. As
private and public institutions implemented measures to reduce
exposure to the virus, we have witnessed a preference for digital
channels compared to traditional in-person channels, boosting
digital finance and e-commerce. A significant surge in volume of
online and contactless transactions processed via Unstructured
Supplementary Service Data (USSD), Quick Response (QR) code,
mobile and web platforms was recorded, especially during
citywide lockdowns. Given this trend, we have focused on
expanding our robust digital infrastructure, continually assessing
how we can make our digital finance suite more resilient.
Amidst the pandemic, our commitment to the Sustainable
Development Goals has not waned. We further entrenched
sustainable banking principles into our operations, carrying out
significant corporate social responsibility initiatives with a special
focus on the health, public infrastructure, and security sectors.
We believe that businesses should strive to deliver positive social,
environmental and economic impact in the pursuit of profit.
Since sustainability is integrated into our business strategy, we are
well-positioned to create value for all stakeholders irrespective of
the challenges prevalent in the operating environment.
As a testament to our market leadership, robust and best in class
service, and steadfast commitment to global best practices, we
received several awards and recognitions in 2020, including
“Most Valuable Banking Brand in Nigeria 2020” (The Banker),
“Biggest Bank in Nigeria by Tier-1 capital 2020” (The Banker), “Best
Bank in Nigeria 2020” (Global Finance Magazine), “Best Corporate
Governance (Financial Services) Africa 2020” (Ethical Boardroom),
“Retail Bank of the Year 2020” (BusinessDay Newspapers), and
“Bank of the Year 2020” (The Banker Magazine, Financial Times
Group). The Bank also received recognition as the “Best Company
in Promotion of Good Health and Well-Being” for interventions
in the health sector during the pandemic and “Best Company
in Promotion of Gender Equality and Women Empowerment”
at the 2020 Sustainability, Enterprise and Responsibility Awards
(SERAS).
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GMD/CEO’S REVIEW
Nigeria’s economic growth outlook for 2021 is brighter but
remains fragile. The CBN expects its initiatives to increase credit
flows to key productive sectors to stimulate output growth and
strengthen the economic recovery, which started in Q4 2020
as the country exited recession. The World Bank projects that
the Nigerian economy will grow by 1.1 per cent in 2021, driven
by an uptick in private consumption, as well as investments in
growth sectors – Agriculture and Information & Communication
Technology (ICT), and government consumption. There are
reasons for cautious optimism that the worst of the pandemic
is likely behind, even though COVID-19 infections could spike
occasionally. The scientific community now has a better
understanding of the virus and how to safeguard segments of
the population that are most susceptible to a negative outcome.
The development of COVID-19 therapeutics and the roll-out
of vaccines is a massive positive sentiment that will be driving
optimism in the days ahead. Other positive developments for
the domestic economy include improving asset yields, rising
crude prices, and the commencement of the African Continental
Free Trade Area (AfCFTA). In addition, payment system expansion
and widespread adoption of innovations like open banking and
Quick Response (QR) code will open up more opportunities in
the retail segment of the financial services market. Within this
environment, we will continue to strive to explore new growth
frontiers in order to continue to enhance value creation for all
our stakeholders.
Thank you.
EBENEZER ONYEAGWU
Group Managing Director / CEO
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The pandemic prompted an
adjustment in our strategy to
ensure that we continue to
create value for customers,
employees and investors.
In particular, the need to
understand the impact of
pandemic-related disruptions
on various customer segments
prompted an adjustment in
our strategy.
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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.
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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
of accounting from Auchi Polytechnic, widely recognized as an
institution that has produced some of Nigeria’s most renowned
Chartered Accountants. 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, immediately after graduation. He
subsequently became a Fellow (FCA) of the Institute of Chartered
Accountants of Nigeria (ICAN) in 2003. He is also a Fellow of Nigerian
Institute of Management (NIM), The Chartered Institute of Bankers
of Nigeria (CIBN), Institute of Credit Administrators (ICA) and Senior
Associate Member, Risk Management Institute of Nigeria (RIMAN).
Furthermore, Mr. Onyeagwu is an alumnus of the prestigious
University of Oxford, England,
from where he obtained a
Postgraduate Diploma in Financial Strategy, and a certificate in
Macroeconomics. He also has a Masters Degree in Accounting
and Financial Services from Salford Business School, University of
Salford, Manchester, United Kingdom. He 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. He has over 29 years of experience in the banking
industry in Nigeria, out of which he has recorded 19 years 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 professionalism,
competence, integrity and commitment to the objectives of the
bank saw him rise swiftly between 2003 and 2005, first, as Assistant
General Manager, then Deputy General 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, multinationals and public institutional relationships,
among others.
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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 Financial Control & Strategic
Planning, Treasury & Correspondent Groups, Human Resources
Group, Oil & Gas Group, and Credit Risk Management Group.
Mr. Onyeagwu was named Deputy Managing Director of the bank
in 2016. In that capacity, he deputized for the Group Managing
Director and Chief Executive Officer of the bank and also had direct
oversight of the bank’s Financial Control and Strategic Planning, Risk
Management, Retail Banking, Institutional and Corporate banking
business portfolios, IT Group, Credit Administration and Treasury &
Foreign Exchange Trading.
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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 decision-making.
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Mr. Onyeagwu is the Chairman of Zenith Pensions Custodian
Limited and Zenith Nominees Limited. He is also on the Board
of Zenith Bank (UK) Limited, FMDQ Holdings Plc, Shared Agent
Network Expansion Facilities (SANEF) Limited and Lagos State
Security Trust Fund (LSSTF). He is a member of The African Trade
Gateway Advisory Council of Afreximbank, The Wall Street Journal
CEO Council and The International Monetary Conference (IMC) –
which comprises CEOs of largest financial Institutions drawn from
28 countries in the world. He also served on the board of Zenith
Bank Ghana Limited, Zenith General Insurance, Zenith Securities
Limited, Zenith Assets Management Company, Zenith Madicare
Limited and Africa Finance Corporation (AFC).
He is very well noted for his tenacity, entrepreneurial spirit, high
sense of innovation and creativity and very inspirational leadership
skills. Within the market, he is highly respected for his consistent
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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ADAORA UMEOJI
With over 20 years cognate banking and broad executive
management experience, Dame (Dr.) Adaora Umeoji rose
through the ranks to her current position.
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
leadership and people management.
in high-level Bankers’ meetings with impactful contributions
towards the advancement of the banking industry and national
economic growth and development. She has delivered several
motivational speeches at strategic sessions aimed at mentoring
youths and managers, especially banking professionals.
Beyond banking, Dame (Dr.) Adaora Umeoji supports research
and learning on inspirational leadership, mentorship, talent
development, collaboration, change and adaptability, strategic
thinking, innovation and creativity, amongst others.
the strategic
thinking and management
She attended
programme at Wharton Business School, Pennsylvania, USA and
also holds a Certificate in Management from Harvard Business
School, Boston, USA.
Dame (Dr.) Adaora Umeoji promotes the Pink Breath Cancer Care
Foundation which supports several healthcare programs within
the six geopolitical zones of Nigeria.
She is a member of notable professional bodies including the
Chartered Institute of Bankers of Nigeria, Institute of Credit
Administration, Nigerian Institute of Management, Institute of
Certified Public Accountants of Nigeria and Institute of Chartered
Mediators and Conciliators.
Dame (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.
Dame (Dr.) Adaora Umeoji has at different times participated
Dame (Dr.) Adaora Umeoji has won numerous awards for
excellence and creativity in management. Her contribution
towards improving 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-governmental organizations both within and outside
the country.
As a result of her passion in promoting professionalism in the
banking industry and improving the well-being of the less
privileged, Dr Adaora Umeoji founded the Catholic Bankers
Association of Nigeria (CBAN), a platform she uses to promote
ethical banking and service to humanity.
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Deputy Managing Director
PROF. CHUKUKA
ENWEMEKA
JEFFREY
EFEYINI
He is a Professor at the 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 America. 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, Univer-
sity of Kansas (Medical Center), Kansas City, United States of America
as well as Associate Professor of Orthopaedics and Rehabilitation, Uni-
versity 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.
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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.
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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.
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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Non-Executive DirectorNon-Executive Director
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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PROF. OYEWUSI
IBIDAPO-OBE
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Non-Executive DirectorNon-Executive Director
ENGR. MUSTAFA
BELLO
DR. AL-MUJTABA
ABUBAKAR
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.
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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.
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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Non-Executive DirectorNon-Executive Director
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 29 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 and zones in Lagos which includes Ikeja Zone, Apapa Zone, Ilupeju
Zone, South West Region and was Group Head of Oil & Gas, Conglom-
erate 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 Zenith Pensions Custodian Limited and 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.
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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.
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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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Zenith Bank Plc Annual Report December 31, 2020
Directors’ Report for the Year Ended December 31, 2020
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, 2020.
Legal form
1.
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. The Bank is also listed on the London Stock Exchange.
There have been no material changes to the nature of the Group’s business from the previous year.
Principal activities and business review
2.
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 six new branches and no branch was closed.
As at December 31, 2020 the Group had 436 branches, 177 cash centers; 2,042 ATM terminals; 83,766 POS terminals and 9,905,449 cards
issued to its customers. (December 31, 2019: 430 branches, 178 cash centers, 2,093 ATM terminals, 50,427 POS terminals and 7,745,176
cards issued).
3. Operating results
Gross earnings of the Group increased by 5.2% and profit before tax increased by 5.2% . Highlights of the Group’s operating results for
the year under review are as follows:
Gross earnings
Profit before tax
Income tax expense
Profit after tax
Non- controlling interest
Profit attributable to the equity holders of the parent
Appropriations
Transfer to statutory reserve
Transfer to retained earnings and other reserves
Basic and diluted earnings per share (Naira)
42
31-Dec-20
31-Dec-19
N' Million N' Million
696,450
662,251
255,861
(25,296)
230,565
(191)
243,294
(34,451)
208,843
(150)
230,374
208,693
33,912
29,875
196,462
178,818
230,374
208,693
7.34
6.65
4. Dividends
The Board of Directors, pursuant to the powers vested in it by the provisions of section 426 of the Companies and Allied Matters Act
(CAMA 2020) of Nigeria, proposed a final dividend of N2.70 per share which in addition to the N0.30 per share as interim dividend
amounts to N3.00 per share (2019: Interim dividend of N0.30 per share and a final dividend of N2.50 per share) from the retained
earnings account as at December 31, 2020. This will be presented for ratification by the shareholders at the 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 301 and 302 of the Companies and Allied Matters Act
(CAMA 2020) and the listing requirements of the Nigerian Stock Exchange is as follows:
Interests in shares
Director
Jim Ovia, CON.
Designation
Direct
Indirect
Direct
Indirect
Chairman / Non-Executive Director
3,546,199,395
1,525,904,916
3,546,199,395 1,513,137,010
Number of Shareholding
December 31, 2020
December 31, 2019
Prof. Chukuka Enwemeka
Non-Executive Director
Mr. Jeffrey Efeyini
Non Executive Director
Prof.Oyewusi Ibidapo-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
Mr. Ebenezer Onyeagwu
Group Managing Director
Dame (Dr.) Adaora Umeoji
Deputy Managing Director
Mr. Ahmed Umar Shuaib
Executive Director
Dr. Temitope Fasoranti
Executive Director
Mr. Dennis Olisa
Mr. Henry Oroh
Executive Director
Executive Director
127,137
541,690
1,000,000
32,660
-
-
46,500,000
68,873,169
9,577,343
8,075,000
10,122,316
7,827,027
-
-
-
-
-
-
-
127,137
541,690
421,426
32,660
-
-
45,500,000
-
-
-
-
-
-
-
1,710,123
68,873,169
1,710,123
-
-
-
-
7,577,343
5,075,000
7,122,316
7,827,027
-
-
-
-
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, Quantum Zenith Securities Ltd)
Adaora Umeoji: (Palaise Vendome Limited)
Directors’ Remuneration
6.
The Bank ensures that remuneration paid to its Directors complies with the provisions of the Code of Corporate Governance issued by
its regulators.
Strategic Report
43
Zenith Bank Plc Annual Report December 31, 2020
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 arears.
- 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
Changes on the Board
7.
There were no changes made on the Board for the year ended December 31, 2020
Directors’ interests in contracts
8.
For the purpose of section 303(1) and (3) of Companies and Allied Matters Act of Nigeria, (CAMA 2020), all contracts with related parties
during the year were conducted at arm’s length. Information relating to related parties transactions are contained in Note 38 to the
financial statements.
Acquisition of own shares
9.
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 26 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.
11. Shareholding analysis
The shareholding pattern of the Bank as at 31 December, 2020 is as stated below:
No. of Shareholders
Percentage of Shareholders Number of holdings
Percentage Holdings (%)
540,089
79,951
22,378
1,232
191
202
64
2
83.8506 %
12.4127 %
3.4743 %
0.1913 %
0.0297 %
0.0314 %
0.0099 %
0.0003 %
1,600,471,228
1,649,026,287
3,742,557,959
2,594,952,811
1,327,572,762
4,418,860,987
11,234,533,343
4,828,518,410
644,109
100 %
31,396,493,787
5.10 %
5.25 %
11.92 %
8.27 %
4.23 %
14.07 %
35.78 %
15.38 %
100 %
Share range
1-10,000
10,001 - 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
44
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
84.0302 %
12.4250 %
3.3271 %
0.1579 %
0.0257 %
0.0248 %
0.0084 %
0.0009 %
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
640,835
100 %
31,396,493,787
5.10 %
5.22 %
11.04 %
6.95 %
3.70 %
11.01 %
28.92 %
28.06 %
100 %
12. Substantial interest in shares
According to the register of members as at 31 December, 2020, 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, 2019, the following shareholders held more than 5% of the issued share capital
of the Bank.
Jim Ovia, CON
3,546,199,395
11.29 %
13. Donations and charitable gifts
The Bank made contributions to charitable and non-political organisations amounting to N3,285 million during the year ended
December 31, 2020 (December 31, 2019: N2,729 million).
The beneficiaries are as follows:
Various State Government infrastructure/Security Trust Funds
Contribution to Coalition Against COVID (CACOVID)
Other medical donations
Other COVID-19 relief materials
Private Health Care Alliance
Lagos state (Abule-Ado explosion) emergency relief fund
Donations for new radiology and orthopaedic facilities
Sponsorship of Nigeria Football Federation
ICT equipments for Educational Institutions
St. Saviour's school sponsorship
Donation to ICAN - Capacity building
Other donations individually below N10 million
31-Dec-20
N’ Million
1,408
1,000
176
119
100
100
100
87
53
22
10
110
3,285
Strategic Report
45
Zenith Bank Plc Annual Report December 31, 2020
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.
Impact of Brexit
15.
Following UK’s exit from the European Union (EU) in January 2020, the Group has reviewed its initial assessments of the impact.
Overall, the Group does not anticipate any negative impact on its ability to continue to do business profitably. This assessment covers
business model, capital, liquidity and operations and is premised on the fact that it does not have any significant exposure to EU
markets. Furthermore, the Group believes that none of its significant sources of revenue is at risk due to Brexit.
Further, the Group does not anticipate any impact on Eurobond trading as bonds are usually traded globally and settled via Euroclear.
It is expected that this will be unchanged, and that UK’s exit will have minimal impact on pricing. Eurobond client base is mostly in
Nigeria and UK. European Fund Managers mainly have UK offices and it is believed that they would not be restricted from dealing with
the Zenith UK. Similarly, minimal impact is anticipated on the Bank’s Non-Deliverable Forwards (NDF) trading as all counterparties are
based in London or Africa.
Most of the Group liquid assets are denominated in Nigerian Naira.
Additionally, the possible risks that the Group envisages are the possibility of rates in the UK remaining static due to the heightened
level of fragility and uncertainty; the anticipation that regulation for banks conducting business across the European Union (“EU”) will
increase, in view of expected changes to EU regulation; and the risk to financial stability.
The Group believes that the above factors are unlikely to have a significant effect on the Group as it has very little direct interaction with
Europe since its main operations are in Africa, Middle East and the UK. The Group believes that it will be able to cope with the regulatory
demands and the current capital needs in the UK.
16. Disclosure of customer complaints in financial statements for the year ended December 31, 2020
Description
Number
Amount claimed
Amount refunded
31-Dec-20
31-Dec-19
31-Dec-20
N.
31-Dec-19
N.
31-Dec-20
N.
31-Dec-19
N.
Pending complaints brought forward
Received Complaints
Resolved Complaints
Unresolved Complaints escalated to CBN
for intervention / carried forward
549
175,702
92,352
83,899
188
769
408
180,765,030,644
17,033,494,506
12,982,196
27,009,119
27,938,837,259
167,782,649,956
8,823,953
222,775,473
145,716,214,240
4,051,113,818
3,722,876,538
421,465,468
549
62,987,653,663
180,765,030,644
-
Employment of disabled persons
17. Human resources
(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.
46
(ii) Health, safety and welfare at work
The Group enforces strict health and safety rules and practices at the work environment, which are reviewed and tested regularly.
The COVID-19 pandemic also presented an opportunity for the Group to enhance its health and safety protocols in all its operating
locations. The Group also provides medical insurance cover for staff and immediate family members.
Fire prevention and fire-fighting equipment are installed in strategic locations within the Group’s premises, while occassional fire drills
are conducted to create awareness amongst staff.
The Group operates both a Group Personal Accident and the Workmen’s Compensation Insurance covers for the benefit of its
employees. It also operates a contributory pension plan in line with the Pension Reform Act.
Employee training and development
(iii)
The Group ensures, through various fora, that employees are informed on matters concerning them. Formal and informal channels are
also employed in communication with employees with an appropriate two-way feedback mechanism.
In accordance with the Group’s policy of continuous development, training facilities are provided in well-equipped training centres.
These are complemented by on-the-job training.
(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
Gender Number
Gender Percentage
Male
Female
Total
Male
Female
12
37
49
1
22
23
13
59
72
92 %
63 %
68 %
8%
37 %
32 %
Gender Number
Gender Percentage
Male
Female
Total
23
16
9
5
7
4
-
1
5
1
-
-
1
-
39
14
6
7
4
1
1
49
23
72
Male
59 %
64 %
83 %
100 %
100 %
-%
100%
68 %
Female
41%
36%
17%
-%
-%
100%
-%
32 %
Strategic Report
47
Zenith Bank Plc Annual Report December 31, 2020
18. Auditors
During the year messers KPMG Professional Services resigned as auditors in line with the Central Bank of Nigeria’s directive, on ten years
maximum tenor for external auditors of banks. Acordingly Messers Pricewaterhouse Coopers (PWC) were appointed as Group auditors
and they have indicated their willingness to continue in office as auditors.
In accordance with section 401 of the Companies and Allied matters Act, in section 401 (CAMA 2020); resolution will be proposed at
the Annual General Meeting to authourize the directors to determine their remuneration.
By order of the Board
Michael Osilama Otu (Esq.)
Company Secretary
January 28, 2021
FRC/2013/MULTI/00000001084
48
Governance & Sustainability
02 Zenith Bank Plc Annual Report December 31, 2020
Statement of Corporate Responsibility for the Financial Statements
for the Year Ended December 31, 2020
In line with the provision of S. 405 of CAMA 2020, we have reviewed the audited financial statements of the bank for the
year ended December 31, 2020 and based on our knowledge confirm as follows:
(i)
(ii)
The audited financial statements do not contain any untrue statement of material fact or omit to state a material fact, which
would make the statements misleading.
The audited financial statements and all other financial information included in the statements fairly present, in all material
respects, the financial condition and results of operation of the bank as of and for the year ended December 31, 2020.
(iii) The bank’s internal controls has been designed to ensure that all material information relating to the bank and its subsidiaries is
received and provided to the Auditors in the course of the audit.
(iv) The bank’s internal controls were evaluated within 90 days of the financial reporting date and are effective as of 31 December
2020.
(v)
That we have disclosed to the bank’s Auditors and the Audit Committee the following information:
(a)
there are no significant deficiencies in the design or operation of the bank’s internal controls which could adversely
affect the bank’s ability to record, process, summarise and report financial data, and have discussed with the auditors any
weaknesses in internal controls observed in the cause of the Audit.
(b)
there is no fraud involving management or other employees which could have any significant role in the bank’s internal
control.
(vi) There are no significant changes in internal controls or in other factors that could significantly affect internal controls
subsequent to the date of this audit, including any corrective actions with regard to any observed deficiencies and material
weaknesses.
28 January 2021.
Mukhtar Adam, PhD
Chief Financial Officer
FRC/2013/MUL Tl/00000003196
Mr. Ebenezer Onyeagwu
Group Managing Director / CEO
FRC/2013/ICAN/00000003788
52
Corporate Governance Report for the Year Ended December 31, 202
1. Introduction
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 that it is consistent 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.
b.
c.
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.
In addition to the above Codes, the Bank complies with
jurisdictions
relevant disclosure requirements
where it operates.
in other
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.
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.
Directors are fully abreast of their responsibilities and knowledgeable in the business and are therefore able to exercise good judgment
on issues relating to the Bank’s business. They have on the basis of this acted in good faith with due diligence and skill and in the
overall best interest of the Bank and relevant stakeholders during the year of review.
The Board has a Charter which regulates its operations. The Charter has been forwarded to the Central Bank of Nigeria in line with the
CBN Code of Corporate Governance.
5. Board structure
The Board is made up of a Non-Executive Chairman, 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.
Governance & Sustainability
53
Zenith Bank Plc Annual Report December 31, 2020
Corporate Governance Report for the Year Ended 31 December, 2020
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;
b.
review and approving the Bank’s financial statements;
c.
reviewing and approving the Bank’s financial objectives, business plans and budgets, including capital allocations and
expenditures;
d. monitoring corporate performance against the strategic plans and business, operating and capital budgets;
e.
implementing the Bank’s succession planning;
f.
approving acquisitions and divestitures of business operations, strategic investments and alliances and major business
development initiatives;
g.
approving delegation of authority for any unbudgeted expenditure;
h.
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;
i.
assessing its own effectiveness in fulfilling its responsibilities, including monitoring the effectiveness of individual directors.
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
Mr. Ebenezer Onyeagwu
Group Managing Director/CEO
Dame (Dr.) Adaora Umeoji Deputy Managing Director
Mr. Umar Shuaib Ahmed
Dr. Temitope Fasoranti
Mr. Dennis Olisa
Mr. Henry Oroh
Executive Director
Executive Director
Executive Director
Executive Director
The Board meets at least once every quarter but may hold extra-ordinary sessions to address urgent matters requiring the
attention of the Board.
54
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 Group Managing Director/Chief
Executive Officer, who is supported by Executive Management. The Group 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 Governance, 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 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 a 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 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.
Governance & Sustainability
55
Zenith Bank Plc Annual Report December 31, 2020
Corporate Governance Report for the Year Ended 31 December, 2020
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.
The membership of the Committee during the year is as follows:
Mr. Gabriel Ukpeh - Chairman
Mr. Jeffrey Efeyini
Prof. Chukuka Enwemeka
Dr. Al-Mujtaba Abubakar
Mr. Ebenezer Onyeagwu
Dame (Dr.) Adaora Umeoji
Dr. Temitope Fasoranti
Terms of reference
•
To conduct a quarterly review of all collateral security for Board consideration and approval;
•
•
•
•
•
•
•
•
•
To recommend criteria by which the Board of Directors can evaluate the credit facilities presented from various customers;
To review the credit portfolio of the Bank;
To approve all credit facilities above Management approval limit;
To establish and periodically review the bank’s credit portfolio in order to align organizational strategies, goals and performance;
To evaluate on an annual basis the components of total credit facilities as well as market competitive data and other factors as
deemed appropriate, and to determine the credit level based upon this evaluation;
To make recommendations to the Board of Directors with respect to credit facilities based upon performance, market competitive
data, and other factors as deemed appropriate;
To recommend to the Board of Directors, as appropriate, new credit proposals, restructure plans, and amendments to existing
plans;
To recommend non-performing credits for write-off by the Board;
To perform such other duties and responsibilities as the Board of Directors may assign from time to time.
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.
56
The membership of the Committee during the year is as follows:
Prof. Oyewusi Ibidapo-Obe – Chairman
Mr. Jeffrey Efeyini
Mr Gabriel Ukpeh
Mr. Henry Oroh
Dame (Dr.) Adaora Umeoji
Mr. Ebenezer Onyeagwu
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. Ebenezer Onyeagwu
Governance & Sustainability
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Zenith Bank Plc Annual Report December 31, 2020
Corporate Governance Report for the Year Ended 31 December, 2020
Mr. Ahmed Umar Shuaib
Mr. Dennis Olisa
Terms of reference
•
The primary responsibility of the Committee is to ensure that sound policies, procedures and practices are in place for the risk-
wide management of the Bank’s material risks and to report the results of the Committee’s activities to the Board of Directors;
•
•
•
•
•
•
•
•
•
Design and implement risk management practices, specifically provide ongoing guidance and support for the refinement of the
overall risk management framework and ensuring that best practices are incorporated;
Ensure that management understands and accepts its responsibility for identifying, assessing and managing risk;
Ensure and monitor risk management practices, specifically determine which enterprise risks are most significant and approve
resource allocation for risk monitoring and improvement activities, assign risk owners and approve action plans;
Periodically review and monitor risk mitigation process and periodically review and report to the Board of Directors:
(a)
(b)
(c)
the magnitude of all material business risks;
the processes, procedures and controls in place to manage material risks; and
the overall effectiveness of the risk management process;
To ensure the implementation of the approved cybersecurity policies, standards and delineation of cybersecurity responsibilities.
To ensure that cybersecurity processes are conducted in line with the business requirements, applicable laws and regulation.
To engage the Chief Information Security Officer (CISO) whose duties includes amongst others – responsibility for the
implementation of approved cybersecurity policies and standards as well as to focus on the bank-wide cybersecurity activities
and the mitigation of cybersecurity risks in the bank.
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
Committee’s terms of reference
The Board Audit and Compliance Committee have the following responsibilities as delegated by the Board of Directors:
•
Ascertain whether the accounting and reporting policies of the Bank are in accordance with legal requirements and acceptable
ethical practices;
58
•
•
•
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;
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;
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Zenith Bank Plc Annual Report December 31, 2020
Corporate Governance Report for the Year Ended 31 December, 2020
•
•
•
•
•
•
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 Cßommittee:
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
Committee’s terms of reference
•
To determine a fair reasonable and competitive 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;
•
•
•
•
•
•
•
•
60
•
•
•
•
•
•
•
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 404(2) (CAMA 2020). 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
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 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;
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Zenith Bank Plc Annual Report December 31, 2020
Corporate Governance Report for the Year Ended 31 December, 2020
•
•
•
•
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)
(b)
(c)
(d)
(e)
(f )
Management Committee (MANCO);
Assets and Liabilities Committee (ALCO);
Management Global Credit Committee (MGCC);
Risk Management Committee (RMC)
Information Technology (IT) Steering Committee
Sustainability Steering Committe
(a) Management Committee (MANCO)
The Management Committee comprises the senior 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 Group 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.
62
(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.
(d) Risk Management Committee (RMC)
This Committee is responsible for regular analysis and consideration of risks other than credit risk in the Bank. It meets [at least once in a
month or as the need arises] to review environmental and other risk issues and policies affecting the Bank and recommend steps to be
taken. The Committee’s approach is entirely risk based. The Committee makes contributions to the Board Risk Management Committee
and also ensures that the Committee’s decisions and policies are implemented. The members of the Committee include the Group
Managing Director, two Executive Directors, the Chief Risk Officer and all divisional and group heads.
(e) Information Technology (IT) Steering Committee
The Information Technology (IT) Steering Committee is responsible for amongst others, development of corporate information
technology (IT) strategies and plans that ensure cost effective application and management of resources throughout the organization.
Membership of the committee is as follows:
The Group Managing Director/Chief Executive Officer;
Two (2) Executive Directors;
Chief Financial Officer;
Chief Inspector;
Chief Risk Officer;
Chief Compliance Officer
Chief Information Security Officer/Head of Infotech;
Head of Infotech - Software;
Head of Infotech - Enginering;
1.
2.
3.
4.
5.
6.
7.
8.
9.
10. Head of Card Services;
11. Group Head of IT Audit;
12. 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.
Governance & Sustainability
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Zenith Bank Plc Annual Report December 31, 2020
Corporate Governance Report for the Year Ended 31 December, 2020
The Committee present quarterly reports to the Board Risk Management 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
The 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.
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:
•
•
Fixed remuneration, taking into account the level of responsibility, and ensuring this remuneration is competitive with
remuneration paid for equivalent posts in banks of equivalent status both within and outside Nigeria.
Variable annual remuneration linked to the Zenith Bank financial results. The amount of this remuneration is subject to achieving
specific quantifiable targets, aligned directly with shareholders’ interest.
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.
64
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 link on its 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.
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.
14. Monitoring Compliance With Corporate Governance
The Bank as at December 31, 2020 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 exercises 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 Board of Directors of the subsidiaries 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.
Governance & Sustainability
65
Zenith Bank Plc Annual Report December 31, 2020
Corporate Governance Report for the Year Ended 31 December, 2020
•
•
•
•
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 reports are
analyzed and presented to Executive Management and the Group Board of Directors for decision making and fulfilment of its oversight
function.
Group Performance & Strategy Review/Budget Session
The Managing Directors and senior management team of the respective Subsidiaries of the Bank attend the annual Group’s Performance
& Strategy Review/Budget Session during which their performances are analyzed and recommendations made towards achieving
continuous improvement in financial, social and environmental performance. The annual 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.
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
66
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
15. 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.
16. 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
Board 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 Ibidapo-Obe
Mr.Gabriel Ukpeh
Engr.Mustafa Bello
Dr. Al-Mujtaba Abubakar
Dame (Dr.) Adaora Umeoji
Mr. Ebenezer Onyeagwu
Mr. Ahmed Umar Shuaib
Dr. Temitope Fasoranti
Mr. Dennis Olisa
Mr. Henry Oroh
5
5
4
5
5
5
5
5
5
5
5
5
5
5
4
N/A
4
4
N/A
4
N/A
4
4
N/A
4
N/A
N/A
Note:
N/A - Not Applicable (Not a Committee member)
4
N/A
4
N/A
4
4
N/A
N/A
4
4
N/A
N/A
N/A
4
4
N/A
N/A
4
4
4
4
N/A
N/A
N/A
N/A
N/A
N/A
N/A
4
N/A
4
4
N/A
N/A
4
4
N/A
4
4
N/A
4
N/A
4
N/A
4
N/A
4
4
4
4
N/A
N/A
N/A
N/A
N/A
N/A
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Zenith Bank Plc Annual Report December 31, 2020
Corporate Governance Report for the Year Ended 31 December, 2020
Dates for Board and Board Committee meetings held within the year to December 31, 2020
Board
meetings
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
28-Jan-20
27-Jan-20
29-Apr-20
28-Apr-20
23-Jul-20
22-Jul-20
22-Oct-20
21-Oct-20
27-Jan-20
28-Apr-20
21-Jul-20
20-Oct-20
27-Jan-20
28-Apr-20
21-Jul-20
20-Oct-20
27-Jan-20
28-Apr-20
21-Jul-20
20-Oct-20
27-Jan-20
28-Apr-20
21-Jul-20
20-Oct-20
27-Jan-20
28-Apr-20
21-Jul-20
20-Oct-20
17. Audit Committee
The table below shows the frequency of meetings of the audit committee and members’ attendance at these meetings during the
year under review.
Number of Meetings attended
4
4
4
4
4
4
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
68
Statement of Directors’ Responsibilities in Relation to the Financial
Statements for the Year Ended December 31, 2020
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, 2020, Financial Reporting Council of Nigeria
Act, 2011, the Banks and Other Financial Institutions Act, Cap B3, Laws of the Federation of Nigeria, 2020 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, 2020 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, 2021
_________________________
Mr. Ebenezer Onyeagwu
Group Managing Director / CEO
FRC/2013/ICAN/00000003788
January 28, 2021
69
Zenith Bank Plc Annual Report December 31, 2020
Report of the Audit Committee for the
Year Ended December 31, 2020
In compliance with Section 404(7) of the Companies and Allied Matters Act of Nigeria CAMA 2020, we have reviewed the
consolidated and separate financial statements of Zenith Bank Pic for the period ended 31st December, 2020 and hereby
state as follows:
1.
2.
3.
4.
5.
The scope and planning of the audit were adequate in our opinion;
The accounting and reporting policies of the Group and Bank conformed with the statutory requirements and
agreed ethical practices;
The Internal Control and Internal Audit functions were operating effectively; and
The External Auditor’s findings as stated in the management letter are being dealt with satisfactorliy by the
management.
Related party transactions and balances have been disclosed in note 37 to the Financial Statements in accordance
with requirements of the International Financial Reporting Standards (IFRS) and the Central Bank of Nigeria (CBN)
directives 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 26, 2021
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
70
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Governance & Sustainability
71
Zenith Bank Plc Annual Report December 31, 2020
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Governance & Sustainability
73
Zenith Bank Plc Annual Report December 31, 2020
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(cid:100)(cid:62)(cid:85)(cid:62)(cid:120)(cid:52)(cid:93)(cid:109)(cid:128)(cid:58)(cid:76)(cid:100)(cid:58)(cid:118)(cid:85)(cid:52)(cid:100)(cid:107)(cid:128)(cid:76)(cid:107)(cid:107)(cid:118)(cid:62)(cid:59)(cid:128)(cid:56)(cid:125)(cid:128)(cid:109)(cid:74)(cid:62)(cid:128)(cid:34)(cid:62)(cid:93)(cid:109)(cid:100)(cid:52)(cid:86)(cid:128)(cid:33)(cid:51)(cid:93)(cid:82)(cid:128)(cid:94)(cid:64)(cid:128)(cid:44)(cid:76)(cid:73)(cid:62)(cid:100)(cid:76)(cid:51)(cid:128)(cid:59)(cid:118)(cid:100)(cid:76)(cid:93)(cid:73)(cid:128)(cid:109)(cid:74)(cid:62)(cid:128)(cid:125)(cid:62)(cid:52)(cid:100)(cid:128)(cid:62)(cid:93)(cid:59)(cid:62)(cid:59)(cid:128)(cid:20)(cid:16)(cid:128)(cid:35)(cid:62)(cid:58)(cid:62)(cid:91)(cid:56)(cid:62)(cid:100)(cid:128)(cid:19)(cid:14)(cid:19)(cid:14)(cid:12)(cid:128)
(cid:34)(cid:74)(cid:52)(cid:100)(cid:113)(cid:62)(cid:100)(cid:62)(cid:59)(cid:128)(cid:32)(cid:58)(cid:58)(cid:94)(cid:118)(cid:93)(cid:109)(cid:52)(cid:93)(cid:109)(cid:107)(cid:128)
(cid:42)(cid:73)(cid:94)(cid:107)(cid:9)(cid:128)(cid:44)(cid:76)(cid:73)(cid:62)(cid:101)(cid:76)(cid:51)(cid:128)
(cid:36)(cid:93)(cid:73)(cid:51)(cid:73)(cid:62)(cid:91)(cid:62)(cid:93)(cid:109)(cid:128)(cid:46)(cid:52)(cid:100)(cid:109)(cid:93)(cid:62)(cid:100)(cid:27)(cid:128)(cid:48)(cid:51)(cid:91)(cid:118)(cid:62)(cid:85)(cid:128)(cid:32)(cid:56)(cid:118)
(cid:37)(cid:47)(cid:34)(cid:13)(cid:128)(cid:19)(cid:14)(cid:15)(cid:20)(cid:13)(cid:40)(cid:34)(cid:32)(cid:44)(cid:128)(cid:13)(cid:128)(cid:14)(cid:14)(cid:14)(cid:14)(cid:14)(cid:14)(cid:14)(cid:18)(cid:21)(cid:25)(cid:23)(cid:128)
(cid:19)(cid:19)(cid:128)(cid:37)(cid:62)(cid:56)(cid:100)(cid:118)(cid:52)(cid:103)(cid:125)(cid:128)(cid:19)(cid:14)(cid:19)(cid:17)(cid:128)
Governance & Sustainability
75
O ver the years, Zenith Bank has consistently created superior value for its esteemed stakeholders. As a reputable
and responsible brand, the Bank has entrenched sustainable banking principles and standards into its
business operations and investment decisions, in line with global best practices. We have fully integrated
environmental and social (E&S) risks considerations into our credit approval process. Zenith Bank remains
committed to promoting sustainable banking practices, improving the quality of life 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, wealth creation, and
employment generation. This consciousness influences our business investments and lending activities and continually propels us to
seek innovative ways to support wealth creation.
Our strategy is to support the government’s efforts at diversifying 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 identifies and channels
funds to sectors and industries with considerable potential to spur economic growth and the overall wellbeing of the people.
76
The Bank also prioritises green investments, supporting and
funding projects that promote the wellbeing of the larger society
while preserving the physical environment. We are conscious of
our environmental footprint and remain focused on investing
responsibly in the best interest of our stakeholders.
The focus areas of our CSR endeavours during the year mirror the
Sustainable Development Goals (SDGs) of the United Nations and
include security, healthcare, education and skills development,
sports development, youth & women empowerment, and
public infrastructure development.
Social Investments and Community Development
Despite the relatively slow economic growth and challenging
business environment brought about by the global COVID-19
pandemic, Zenith Bank has remained committed to enhancing
the welfare and prosperity of communities through our social
investments. In the year under review, Zenith Bank’s total social
investments stood at NGN3.285 billion, representing 1.66 per
cent of our Profit After Tax (PAT).
Government Infrastructure and Security: Zenith Bank
enhanced its engagement with the government and other
relevant stakeholders tasked with peace and security. The
assessment emanating from the engagement formed the basis
for our contribution to various States’ Governments Security
Trust Fund and infrastructure. Thus, in 2020, we invested the
sum of NGN1.408 billion in security trust funds and various
government infrastructure projects. By boosting the operations
and effectiveness of relevant security agencies, the safety of
communities is enhanced.
77
Health: Our health initiatives in the outgone year focused
mainly on supporting government efforts to curb the effects of
the COVID-19 pandemic. Zenith Bank donated NGN1 billion to
the Coalition Against COVID-19 (CACOVID). Also, NGN119 million
was invested in other COVID-19 relief initiatives. We also donated
NGN100 million to the Abule Ado Emergency Relief Fund for
the care of victims of the gas explosion. In 2020, we invested
in medical interventions for low-income individuals faced with
various
life-threatening medical conditions and supported
various health programmes, complementing the government’s
efforts at improving life expectancy in the country. We supported
the Private Sector Health Alliance of Nigeria with a donation of
NGN100 million, and we made a donation of NGN 100 million
towards the construction of the Radiology and Orthopaedic
Center at General Hospital Marina. Other donations towards
medical interventions amounted to about NGN176 million. Our
total investment in the health sector in the year under review
was NGN1.595 billion.
Our health sector investments earned Zenith Bank an award as
the “Best Company in Promotion of Good Health and Well-Being”
at the 2020 Sustainability Enterprise Responsibility Awards
(SERAs).
Sports: In 2020, the COVID-19 pandemic greatly hampered
sporting events. Our major sports initiatives include the title
sponsorship of the Delta State Principals’ Cup, the Nigerian
Football Federation (NFF), and the Zenith National Women’s
Basketball League in partnership with the Nigerian Basketball
Federation (NBBF). 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 within the year
under review was about NGN87 million since most of the events
could not hold due to the pandemic.
Education: In line with our firm commitment to developing the
Nigerian education sector, we committed over NGN95 million
to educational initiatives in the outgone financial year. Some
of our educational initiatives in the year under review include
donations towards the educational endowment fund of St.
Saviour’s School, Ikoyi, the Nigerian Academy of Science, training
of 100 teachers and flag-off of Microsoft Office Specialist World
Championship, a donation to ICAN’s Capacity building activities,
and the Zenith Academic Excellence Award for Best Graduating
Students in selected Federal Universities.
Environmental Sustainability and Carbon Footprint
Management
Zenith Bank considers environmental and social (E&S) risk
management critical to the bank’s sustainability strategy. Our
Environmental and Social Management System (ESMS) provides
a clear framework for the management of E&S risks associated
with the Bank’s investments. We take measures to mitigate and
minimise the risks identified during the E&S risk due diligence
process. Zenith Bank’s ESMS aligns with the Equator Principles,
Presented to
ZENITH BANK PLC
Plot 84, Ajose Adeogun Street, Victoria Island
Lagos – Nigeria
For its Greenhouse Gas Auditing and Reporting for the calendar year 2019, using V4 Advisors’ tool that is in compliance
with the Greenhouse Gas Corporate Standard and ISO 14064-1, 2006.
V4 Advisors’ calculation and reporting tool has been reviewed by WRI for conformance with the GHG Protocol Corporate Standard.
Contacting V4 Advisors: www.V4advisorsdmcc.com – mobile: +971 (0) 50 668 1073 – V4 Advisors DMCC Registered in Dubai
78
International Finance Corporation
the
Standards, among other global sustainability principles.
(IFC) Performance
The automation of our E&S Risk Exposure Assessment process
was a major milestone in our resolve to ensure sustainable
financing of every project we invest in. Our target remains to
broaden our E&S risk coverage to all projects, irrespective of
the sector 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 NGN3.1 trillion were screened and assessed for
E&S risk. While working on expanding coverage, we hope to
significantly improve E&S monitoring of existing credit customers
and projects.
In line with Zenith Bank’s carbon emission reduction strategy,
we are working towards powering all our operations from
alternative (renewable) sources such as solar energy. As of the
end of the year 2020, we increased the number of buildings
powered by solar energy to over 400, while 1,092 Automated
Teller Machines (ATMs) are currently powered by solar energy.
We have also automated several banking processes to reduce
the consumption of paper in our daily operations. We engaged
V4 Advisors to measure our carbon emissions within the period
under review, with the aim of managing and reducing our
footprint in line with regulatory and global expectations.
Workplace
The Bank remains committed to building a conducive work
environment. We understand that a safe, healthy and secure
workplace contributes to increased productivity and employee
satisfaction. Strict implementation of our Health, Safety and
Environment (HSE) Management Plan also supports the safety
of vendors, contractors and other stakeholders. To boost the
safety culture in the Bank, we trained 280 employees in Basic
Emergency Response in 2020.
prohibit discrimination, bullying and harassment of any form. We
strive to build an inclusive work environment where people are
valued and respected and given equal opportunities to fulfil their
potential. Our employees, contractors, agents, consultants and
business partners are encouraged to treat others with dignity
and respect, in conformity with the United Nations Universal
Declaration of Human Rights (UDHR).
In response to the pandemic, we implemented remote work
and other social distancing initiatives in compliance with
COVID-19 protocols stipulated by the government. We also
made considerable effort to ensure the safety of our offices
by providing face masks and sanitisers while promoting good
hygiene practices. Employees and their
immediate family
members were able to access the services of top-class medical
hospitals retained by the Bank.
The Bank has developed human rights assessment courses,
namely “Introduction to Human Rights Framework and the Rights
of the Child”, “Understanding the Implications of Human Rights
Non-compliance”, and “Human Rights in Business Transactions ”
to train staff across all levels on the basics of human rights. These
courses have been deployed on our Learning Management
Portal and made mandatory for staff, from entry-level to
executive management level.
Human Rights
Zenith Bank is committed to respecting human rights and
works to safeguard the rights of people. The Bank has a robust
Human Rights Policy, which lays down guidelines on how
our employees are expected to relate among themselves and
with all other stakeholders within our business operations. We
Women Empowerment
Zenith Bank remains committed to gender equality and women
empowerment. We operate a gender-inclusive workplace
culture and also offer products and services designed specifically
for women. In 2020, women represented 49 per cent of our total
workforce. The male/female ratio for senior management level
79
staff for 2020 was 68:32. In the year under review,
we invested over NGN196 million in capacity
building for our female employees, and 2,832
employees participated in two trainings: ‘Choosing
to Lead as a Woman’ and ‘Women in Leadership:
Moving Beyond Gender Roles as a Leader’.
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, including many other benefits
which will help women grow their businesses
and increase sales. Facilities and loans to female
entrepreneurs under the initiative stood at roughly
NGN4 billion during the period. In recognition
of these women-focused efforts, the bank was
recognised as “Best Company in Gender Equality”
at the 2020 Sustainability Enterprise Responsibility
Awards (SERAs).
Sustainable Supply Chain Management
As part of efforts to comply with the principles
of responsible consumption and production,
we have integrated environmental and social
conditions into our Code of Conduct for Suppliers,
Vendors and Contractors. The aim is to promote
sustainable business practices, and to ensure high-
quality products and services, value for money and
responsible sourcing of raw materials in our supply
chain. Consequently, in 2020, we administered our
“Code of Conduct” on all major vendors, suppliers
and contractors of the bank and periodically
screened all third-party business partners to
ensure their compliance with E&S guidelines.
Because Information Communication Technology
(ICT)
facilities and equipment constitute a
substantial part of our procurement, we strive to
empower local communities and businesses by
ensuring that our procurement policy deliberately
promotes the patronage of local ICT vendors. Our
engagement with IT vendors is guided by laid
down service level agreements and compliance
with our Code of Conduct, while our Tender
Committee oversees the process of selection of
vendors. Zenith Bank’s procurement practices
have positively impacted the economy, creating
jobs, income and economic empowerment for
households.
80
As part of efforts
to comply with
the principles
of responsible
consumption and
production, we
have integrated
environmental and
social conditions into
our Code of Conduct
for Suppliers, Vendors
and Contractors.
Financial Inclusion
Zenith Bank has continued to support financial
inclusion and literacy in the country. The bank
has developed initiatives for nurturing financial
inclusion in the country. Our financial literacy
initiatives are geared towards empowering
the financially excluded groups by providing
them with essential information and adequate
knowledge of the various types of financial
products and services that are accessible to
them. Physical activities were curtailed in 2020 as
a result of the pandemic.
Our financial inclusion drive is supported by our
numerous retail products such as the Zenith
Children’s Account (ZECA), Zenith Integrated
Student Account (ZISA), Aspire Account, Easy
Save Accounts (Classic & Premium), EazyMoney,
Agent Banking, Zenith Mobile Banking, and
Unstructured Supplementary Service Data
service (*966#).
Training and Capacity Building
Capacity building remains one of the key people development
strategies of the Bank. In 2020, we continued to carry out
E&S risk management training for all our employees using
online platforms. As part of our sustainability acculturation
strategy, we made significant progress with the integration of
Environmental and Social Risk Management sessions into the
quarterly Anti-Money Laundering and Operational Risks training
bank-wide, the quarterly Business Summit of the Bank, and the
orientation programme for boarding of new employees. We
also publish “Sustainability Titbits”, Sustainability Lifestyle Tips”
“Safety Nuggets” and “Sustainability Headlines” weekly to create
awareness on E&S issues.
Reporting
Zenith Bank is a member of the United Nations Global Compact,
the United Nations Environment Programme Finance Initiative
(UNEP-FI), and a signatory to the CBN Nigerian Sustainable
Banking Principles (NSBP). Consequently, we remain fully
committed to sustainability reporting.
In October 2020, the bank published its fifth standalone 2019
Sustainability Report titled ‘Creating Value and Opportunities’ to
demonstrate our economic, environmental and social progress
in the financial year 2019. The report aligns with several
sustainability guidelines, including the Nigerian Stock Exchange
(GRI) Sustainability
(NSE) and Global Reporting
Reporting Guidelines. Additionally, Zenith Bank sends biannual
progress reports to the CBN as well as annual reports to the IFC,
UNGC, PROPARCO, and AfDB, among others.
Initiative
Conclusion
Zenith Bank remains committed to sustainable banking and
has put in place a robust governance structure that supports
lending, wealth creation and community
its sustainable
empowerment initiatives. We understand that our brand thrives
on the sustainable value we create for our stakeholders. As such,
we will seek continuous improvement in our processes to build
on our successes and work towards achieving our sustainable
banking ambitions.
81
Zenith Bank Plc Annual Report December 31, 2020
Report of the Independent Consultant to the Board of Directors of Zenith Bank PLC. on
their Appraisal for the Year Ended 31 December 2020.
In compliance with the guidelines of Section 2.8.3 of the Central Bank of Nigeria (CBN) Revised
Code of Corporate Governance for Banks in Nigeria Post Consolidation (“the CBN Code”), the
Securities and Exchange Commission (SEC) Code of Corporate Governance (“the SEC Code”)
and Section 14.1 of the Nigerian Code of Corporate Governance 2018 (“NCCG”), Zenith Bank
Plc. (“Zenith bank” or “the Bank”) engaged KPMG Advisory Services to carry out an appraisal
of the Board of Directors (“the Board”) for the year ended 31 December 2020. The Codes
recommend an annual appraisal of the Board with specific focus on the Board’s structure
and
composition,
responsibilities, processes and
relationships,
individual director
competencies and respective roles in the performance of the Board.
We have performed the procedures agreed with Zenith Bank in respect of the appraisal of the
Board in accordance with the provisions of the CBN Code, SEC Code and the NCCG. These
procedures, which are limited in scope but sufficient for the Board’s objectives in line with the
Codes, are different in scope from an external audit. Consequently, no opinion is expressed by
us on the activities reported upon.
Our approach to the appraisal of the Board involved a review of the Bank’s Board papers and
minutes, key corporate governance structures, policies and practices. This included the review
of the corporate governance framework and representations obtained from questionnaires and
interviews with members of the Board and Senior Management.
On the basis of our review, the Bank’s corporate governance practices are largely in compliance
with the key provisions of the Codes. Specific recommendations for further improving the Bank’s
governance practices have been articulated and included in our detailed report to the Board.
These include recommendations on the continuous oversight on the Independent Non-
Executive Director process, gender diversity and the (cid:90)(cid:75)(cid:76)s(cid:87)(cid:79)e(cid:3)(cid:69)(cid:79)o(cid:90)(cid:76)n(cid:74) mechanism(cid:17)
Olumide Olayinka
Partner, KPMG Advisory Services
FRC/2013/ICAN/00000000427
(cid:21)(cid:27) (cid:45)(cid:68)n(cid:88)(cid:68)r(cid:92) 2020
82
Financials
Financials
83
03 Zenith Bank Plc Annual Report December 31, 2020
Consolidated and Separate Statements of Profit or Loss and other
Comprehensive Income for the Year Ended December 31, 2020
In millions of Naira
Note(s) 31-Dec-20 31-Dec-19
31-Dec-20
31-Dec-19
Group
Bank
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
Income tax expense
Profit for the year after tax
Other comprehensive income:
6
7
8
9
11
10
26
27
37
12
420,813
415,563
342,492
339,310
(121,131)
(148,532)
(102,111)
(126,237)
299,682
267,031
240,381
213,073
(39,534)
(24,032)
(37,237)
(23,393)
260,148
242,999
203,144
189,680
79,332
100,106
61,417
83,641
121,678
117,798
118,601
117,772
50,735
14,216
50,450
10,838
(25,125)
(21,436)
(22,686)
(18,887)
(3,537)
(3,078)
(2,776)
(2,795)
(79,258)
(77,858)
(61,515)
(62,038)
(148,112)
(129,453)
(136,628)
(118,191)
255,861
243,294
210,007
200,020
13a
(25,296)
(34,451)
(12,155)
(22,017)
230,565
208,843
197,852
178,003
Items that will never be reclassified to profit or loss:
Fair value movements on equity instruments at FVOCI
16,295
13,870
16,295
13,870
Items that are or may be reclassified to profit or loss:
Foreign currency translation differences for foreign operations
15,011
(8,498)
Fair value movements on debt securities at FVOCI
Income tax relating to fair value movement on debt securities at
FVOCI
1,981
(355)
518
(66)
-
-
-
-
-
-
Other comprehensive income for the year
32,932
5,824
16,295
13,870
Total comprehensive income for the year
263,497
214,667
214,147
191,873
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)
230,374
208,693
197,852
178,003
191
150
-
-
263,277
214,577
214,147
191,873
220
90
-
-
14
7.34
6.65
6.30
5.67
The accompanying notes are an integral part of these consolidated and separate financial statements.
84
Consolidated and Separate Statements of
Financial Position as at December 31, 2020
In millions of Naira
Note(s)
31-Dec-20
31-Dec-19
31-Dec-20
31-Dec-19
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
24
25
26
27
28
33
13
24
29
30
31
32
34
35
35
35
35
1,591,768
1,577,875
298,530
810,494
44,496
936,278
991,393
431,728
707,103
92,722
2,779,027
2,305,565
996,916
591,097
-
5,786
169,967
190,170
16,243
-
11,885
77,395
185,216
16,497
1,503,245
1,393,421
298,530
532,377
41,729
2,639,797
333,126
34,625
4,733
159,625
169,080
14,699
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
8,481,272
6,346,879
7,124,987
5,435,073
5,339,911
4,262,289
4,298,258
3,486,887
11,076
11,690
-
703,292
384,573
870,080
43,177
14,762
9,711
25
363,764
392,871
322,479
39,092
11,076
9,117
-
599,464
384,573
874,090
43,177
14,762
6,627
-
386,061
392,871
329,778
39,092
7,363,799
5,404,993
6,219,755
4,656,078
15,698
255,047
521,293
324,461
1,116,499
15,698
255,047
412,948
257,439
941,132
15,698
255,047
382,292
252,195
905,232
15,698
255,047
302,028
206,222
778,995
974
754
-
-
1,117,473
941,886
905,232
778,995
8,481,272
6,346,879
7,124,987
5,435,073
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, 2021 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
Financials
85
Zenith Bank Plc Annual Report December 31, 2020
Consolidated and Separate Statements of
Changes in Equity as at December 31, 2020
Group
Attributable to equity holders of the Parent
In millions of Naira
Notes
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
15,698
255,047
38,514
9,858
167,520
3,729
1,610
814,213
1,538
815,751
-
-
-
-
-
-
-
-
-
-
-
-
-
-
15,698
255,047
15,698
255,047
-
-
-
-
-
-
-
-
-
-
-
-
-
(8,438)
-
-
-
-
13,870
452
(8,438)
14,322
214,577
90
214,667
-
-
-
30,076
30,076
-
14,982
-
-
14,982
-
-
-
-
-
24,180
24,180
-
-
16,295
1,626
17,921
-
-
29,875
449
(87,910)
(87,910)
252
252
197,395
3,729
412,948
941,132
197,395
3,729
2,059
2,059
322,237
208,693
-
-
-
-
-
-
208,693
(30,324)
412,948
230,374
230,374
(34,119)
208,693
(8,438)
13,870
452
-
-
941,132
230,374
14,982
16,295
1,626
-
-
-
-
-
-
-
-
-
-
-
-
-
208,843
(8,498)
13,870
452
(87,910)
(622)
941,886
941,886
230,565
15,011
16,295
1,626
-
-
150
(60)
(874)
754
754
191
29
-
-
-
-
-
-
-
-
33,912
207
263,277
220
263,497
(87,910)
(87,910)
(87,910)
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
15,698
255,047
45,058
42,101
231,307
3,729
2,266
521,293
1,116,499
974
1,117,473
At 1 January, 2019
Profit for the year
Foreign currency translation differences
-
Fair value movements on equity instruments
Fair value movements on debt securities
(net of tax)
Total comprehensive income for the Year
Transfer between reserves
Transactions with owners of the Parent
Dividends
40
Acquisition of NCI without change in control
At December 31, 2019
At 1 January, 2020
Profit for the year
Foreign currency translation differences
Fair value movements on equity instruments
Fair value movements on debt securities (net of tax)
Total comprehensive income for the year
Transfer between reserves
Transactions with owners of the Parent
Dividends
At December 31, 2020
40
86
Notes
Share
capital
premium
Share
Foreign currency
Fair value
reserve
Statutory
reserve
SMIEIS
reserve
Credit risk
reservee
Retained
earnings
translation
reserve
Foreign currency translation differences
-
(8,438)
Total comprehensive income for the Year
(8,438)
14,322
Group
Attributable to equity holders of the Parent
In millions of Naira
At 1 January, 2019
Profit for the year
Fair value movements on equity instruments
Fair value movements on debt securities
(net of tax)
Transfer between reserves
Transactions with owners of the Parent
Dividends
40
Acquisition of NCI without change in control
At December 31, 2019
At 1 January, 2020
Profit for the year
Foreign currency translation differences
Fair value movements on equity instruments
Fair value movements on debt securities (net of tax)
Total comprehensive income for the year
Transfer between reserves
Transactions with owners of the Parent
Dividends
At December 31, 2020
40
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
30,076
30,076
14,982
14,982
13,870
452
24,180
24,180
16,295
1,626
17,921
-
-
-
-
-
-
-
-
-
15,698
255,047
15,698
255,047
15,698
255,047
38,514
9,858
167,520
3,729
1,610
-
-
-
-
-
29,875
-
-
-
-
-
-
-
-
-
-
197,395
3,729
197,395
3,729
-
-
-
-
-
33,912
-
-
-
-
-
-
-
15,698
255,047
45,058
42,101
231,307
3,729
-
-
-
-
-
449
-
-
2,059
2,059
-
-
-
-
-
207
-
2,266
322,237
208,693
-
-
-
208,693
(30,324)
412,948
230,374
-
-
-
230,374
(34,119)
(87,910)
(87,910)
252
252
412,948
941,132
-
-
941,132
230,374
14,982
16,295
1,626
Total
Non-
controlling
interest
Total equity
814,213
1,538
815,751
208,693
(8,438)
13,870
452
150
(60)
-
-
208,843
(8,498)
13,870
452
214,577
90
214,667
-
-
(874)
754
754
191
29
-
-
-
(87,910)
(622)
941,886
941,886
230,565
15,011
16,295
1,626
-
-
-
(87,910)
263,277
220
263,497
(87,910)
(87,910)
521,293
1,116,499
974
1,117,473
Financials
87
Zenith Bank Plc Annual Report December 31, 2020
Consolidated and Separate Statements of
Changes in Equity as at December 31, 2020
Bank
In millions of Naira
Notes
Share
capital
Share
premium
Fair
value
reserve
Statutory
reserve
SMIEIS
reserve
Credit
risk
reserve
Retained
earnings
Total
equity
At 1 January, 2019
Profit for the year
Fair value movements on equity
instruments
Total comprehensive income for the
year
Transfer between reserves
Dividends
At December 31, 2019
At 01 January 2020
Profit for the period
Fair value movements on equity
instruments
Total comprehensive income for the
year
Transfer between reserves
Dividends
40
40
,
255,047
9,858
152,065
3,729
-
-
-
-
-
-
-
-
-
-
-
13,870
13,870
-
-
-
-
-
26,700
-
-
-
-
-
-
15,698
255,047
23,728
178,765
3,729
15,698
255,047
23,728
178,765
3,729
-
-
-
-
-
-
-
-
-
-
-
16,295
16,295
-
-
-
-
-
29,678
-
-
-
-
-
-
Balance at December 31, 2020
15,698
255,047
40,023
208,443
3,729
The accompanying notes are an integral part of these consolidated and separate financial statements.
-
-
-
-
-
-
-
-
-
-
-
-
-
-
238,635
178,003
675,032
178,003
-
13,870
178,003
191,873
(26,700)
-
(87,910)
(87,910)
302,028
778,995
302,028
778,995
197,852
197,852
-
16,295
197,852
214,147
(29,678)
-
(87,910)
(87,910)
382,292
905,232
88
Consolidated and Separate Statement of
Cash Flows for the Year Ended December 31, 2019
For the year ended 31 December
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
Group
Bank
Note(s)
2020
2019
2020
2019
230,565
208,843
197,852
178,003
8
8
8
8
37,439
27,754
35,495
27,148
1,392
(706)
1,409
(908)
(2,473)
(341)
1,079
(706)
1,369
(928)
(2,473)
(354)
Unrealised fair value change in trading bond, bills and derivatives
43(i)
(83,476)
(10,905)
(81,630)
(10,905)
Depreciation of property and equipment
Amortisation of intangible assets
Dividend income
Foreign exchange revaluation (Gain)/Loss
Interest income
Interest expense
Profit on sale of property and equipment
Profit on sale of investment in associate
Tax expense
Changes in operating assets and liabilities:
Net (increase)/decrease in loans and advances
Net (increase)/decrease in other assets
26
27
10
32
6
7
10
25,125
21,436
22,686
18,887
3,537
3,078
2,776
2,795
(1,707)
(1,932)
(5,307)
(5,532)
(43,441)
5,949
(39,668)
5,949
(420,813)
(415,563)
(342,492)
(339,310)
121,131
148,532
102,111
126,237
(347)
(901)
13
25,296
(105,497)
(147)
-
34,451
17,774
(348)
(901)
12,155
(95,529)
(152)
-
22,017
21,382
43(iv)
(385,651)
(492,717)
(352,819)
(513,382)
43(x)
(88,605)
3,863
(90,079)
(4,853)
Net decrease/(increase) in treasury bills with maturities greater than three months
43(ii)
(164,637)
194,352
(149,109)
183,300
Net (increase)/decrease in treasury bills (FVTPL) including bills pledged
Net decrease/(increase) in assets pledged as collateral
43(iii)
43(xi)
81,210
(197,798)
79,661
(197,801)
-
161,321
-
161,321
Net decrease/(increase) in investment securities including bonds pledged
43(i)
(244,193)
1,513
(51,521)
(7,833)
Net increase in restricted balances (cash reserves)
43(xiii)
(650,472)
(55,479)
(609,669)
(55,479)
Net increase in due from banks with maturity greater than three months
18
67,918
(223,413)
66,725
(223,413)
Net increase in customer deposits
Net increase/(decrease) in other liabilities
Net increase in derivative assets
Interest received
Dividend received
Interest paid
Tax paid
VAT paid
43(v)
960,138
564,135
761,784
664,555
43(vi)
337,972
134,974
212,884
165,524
43(xii)
75,193
(6,129)
77,960
(6,129)
(116,624)
102,396
(149,712)
187,192
43 (viii)
340,642
407,104
303,244
335,518
10
-
-
-
-
43 (ix)
(101,461)
(135,575)
(84,934)
(114,398)
13(c)
(16,746)
(36,308)
(2,678)
(23,370)
43(vi)
-
(381)
-
(381)
Net cash flows (used in)/generated from operations
105,811
337,236
65,920
384,561
Financials
89
Zenith Bank Plc Annual Report December 31, 2020
Consolidated and Separate Statement of Cash Flows
for the Year Ended December 31, 2020
In millions of Naira
Cash flows from investing activities
Purchase of property and equipment
Proceeds from sale of property and equipment
Purchase of intangible assets
Proceeds from sale of equity securities
Purchase of equity securities
21
Dividend received
Net cash used in investing activities
Cash flows from financing activities
Repayment & repurchase of debt securities issued
Borrowed funds
Additions to long term borrowings
Repayment of long term borrowing
Additions to onlending facility
Repayment of onlending facility
Lease payments
Acquisition of additional interest in Zenith Bank Ghana
Dividends paid to shareholders
Net cash used in financing activities
10
32
31
31
30(b)
30(b)
44(vi)
22(i)
40
Group
Bank
Note(s)
2020
2019
2020
2019
26
(27,194)
(62,333)
(24,923)
(50,901)
43(vii)
27
43(viii)
1,113
(2,473)
901
-
1,707
2,976
(2,118)
-
(50)
1,932
593
(2,366)
901
-
5,307
530
(1,539)
-
(50)
5,532
(25,946)
(59,593)
(20,488)
(46,428)
-
(340,358)
-
(340,358)
872,332
(114,781)
872,332
(128,685)
(353,338)
32,263
(39,758)
(742)
-
-
(424)
-
(2,196)
(622)
(357,341)
32,263
(39,758)
(684)
-
-
(424)
-
(2,196)
(622)
(87,910)
(87,910)
(87,910)
(87,910)
422,847
(546,291)
418,902
(560,195)
Net (decrease)/increase in cash and cash equivalents
502,712
(268,648)
464,334
(222,062)
Analysis of changes in cash and cash equivalents :
Cash and cash equivalent at the beginning of the year
670,715
947,038
388,853
610,915
(decrease)/increase in cash and cash equivalents
Effect of exchange rate movement on cash balances
502,712
(268,648)
464,334
(222,062)
35,093
(7,675)
29,496
-
Cash and cash equivalents at the end of the year
41
1,208,520
670,715
882,683
388,853
The accompanying notes are an integral part of these consolidated and separate financial statements.
90
Notes
Financials
91
Zenith Bank Plc Annual Report December 31, 2020
Notes to the Consolidated and Separate Financial
Statements for the Year Ended December 31, 2020
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 is domiciled in Nigeria and 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.
The consolidated financial statements for the period ended December 31, 2020 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 period ended December 31, 2020 were approved for issue by the Board of Directors on January
28, 2021.
The Group does not have any unconsolidated structured entity.
2.0
(a) Changes in accounting policies
Except as noted below, the Group has consistently applied the accounting policies as set out in Note 2(b) to all periods presented in
these consolidated and separate financial statements.
The Group has adopted the following amendments including any consequential amendments to other standards with initial date of
application of January 1, 2020.
i.)
Amendment to IFRS 3 (Business Combinations)
IFRS 3 (Business Combinations) outlines the accounting when an acquirer obtains control of a business (e.g. an acquisition
or merger). Such business combinations are accounted for using the ‘acquisition method’, which generally requires assets
acquired and liabilities assumed to be measured at their fair values at the acquisition date.
The amendments are effective for business combinations for which the acquisition date is on or after the beginning of the first
annual reporting period beginning on or after January 1, 2020 and to asset acquisitions that occur on or after the beginning of
that period. Earlier application is permitted.
The amendment relates to the definition of a “business” and they:
•
Clarify that to be considered a business, an acquired set of activities and assets must include, at a minimum, an input
and a substantive process that together significantly contribute to the ability to create outputs.
Narrow the definitions of a business and of outputs by focusing on goods and services provided to customers and by
removing the reference to an ability to reduce costs.
Add guidance and illustrative examples to help entities assess whether a substantive process has been acquired.
Remove the assessment of whether market participants are capable of replacing any missing inputs or processes and
continuing to produce outputs.
•
•
•
92
Add an optional concentration test that permits a simplified assessment of whether an acquired
•
set of activities and assets is not a business.
There has been no change in the Group structure within the period as such this amendment does not have an impact
on the Group’s financial statements.
ii.) Amendment to IAS 1 (Presentation of Financial Statements) and IAS 8 (Accounting Policies, Changes in
AccountingEstimates and Errors)
IAS 1 (Presentation of Financial Statements) and IAS 8 (Accounting Policies, Changes in Accounting Estimates and Errors) have
Both been amended by the International accounting standard board (IASB), on October 2018. The amendments are effective
for annual reporting periods beginning on or after 1 January 2020, although earlier application was permitted. The purpose for
the amendment is to expand on the definition of materiality and bring more clarity to its characteristics.
The revised definition of “Material” is quoted below:
“Information is material if omitting, misstating or obscuring it could reasonably be expected to influence decisions that the
primary users of general purpose financial statements make on the basis of those financial statements, which provide financial
information about a specific reporting entity.”
The amendment emphasises five ways material information can be obscured:
•
•
If the language regarding a material item, transaction or other event is vague or unclear.
If information regarding a material item, transaction or other event is scattered in different places in the financial
statements.•
If dissimilar items, transactions or other events are inappropriately aggregated.
If similar items, transactions or other events are inappropriately disaggregated.•
If material information is hidden by immaterial information to the extent that it becomes unclear what information is
material.
•
•
•
The amendment expands the definition to include:
Obscuring
Obscuring material information with information that can be omitted can have a similar effect. Although the term obscuring
is new in the definition, it was already part of IAS 1.
Could reasonably be expected to influence
The existing definition referred to ‘could influence’ which the IASB felt might be understood as requiring too much information
as almost anything ‘could’ influence the decisions of some users even if the possibility is remote.
Primary users
The existing definition referred only to ‘users’ which again the IASB feared might be understood too broadly as requiring to
consider all possible users of financial statements when deciding what information to disclose.
The group has incorporated this definition and guides in preparation of its financial statements.
(b)
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.
Financials
93
Zenith Bank Plc Annual Report December 31, 2020
Notes to the Consolidated and Separate Financial
Statements for the Year Ended December 31, 2020
iii)
Interest Rate Benchmark Reform – Amendments to IFRS 7, IFRS 9 and IAS 39
The amendments made to IFRS 7 Financial Instruments: Disclosures, IFRS 9 Financial Instruments and IAS 39 Financial
Instruments: Recognition and Measurement provide certain reliefs in relation to interest rate benchmark reforms.
The reliefs relate to hedge accounting and have the effect that the reforms should not generally cause hedge accounting to
terminate. However, any hedge ineffectiveness should continue to be recorded in the income statement.
The adoption of phase 1 of the IBOR reform did not lead to a change in the Bank’s accounting policies and do not have any
interest hedge accounting. The Bank is currently assessing the impact of the phase 2 amendments.
(iv)
Revised Conceptual Framework for Financial Reporting
The IASB has issued a revised Conceptual Framework which will be used in standard-setting decisions with immediate effect.
Key changes include:
•
•
•
•
•
•
•
increasing the prominence of stewardship in the objective of financial reporting.
reinstating prudence as a component of neutrality.
defining a reporting entity, which may be a legal entity, or a portion of an entity.
revising the definitions of an asset and a liability.
removing the probability threshold for recognition and adding guidance on derecognition.
adding guidance on different measurement basis, and.
stating that profit or loss is the primary performance indicator and that, in principle, income and expenses in other
comprehensive income should be recycled where this enhances the relevance or faithful representation of the financial
statements.
No changes will be made to any of the current accounting standards. However, entities that rely on the Framework in
determining their accounting policies for transactions, events or conditions that are not otherwise dealt with under the
accounting standards will need to apply the revised Framework from 1 January 2020. The Group is not impacted as it did not
rely on the framework in determining the accounting policies for transactions.
Covid-19-related Rent concessions - Amendments to IFRS 16
(v)
As a result of the COVID-19 pandemic, rent concessions have been granted to lessees. Such concessions might take a variety
of forms, including payment holidays and deferral of lease payments. In May 2020, the IASB made an amendment to IFRS 16
Leases which provides lessees with an option to treat qualifying rent concessions in the same way as they would if they were
not lease modifications. In many cases, this will result in accounting for the concessions as variable lease payments in the
period in which they are granted.
Effective date is 1 June 2020.
The Group had no such Covid -19 related rent concessions as such there is no impact on the Group financial statements.
Standards issued but not yet effective
(c)
The following standards and interpretations had been issued but were not mandatory for annual reporting periods ending on
31 December 2020.
Classification of Liabilities as current or non-current - Amendments to IAS 1
The narrow-scope amendments to IAS 1 Presentation of Financial Statements clarify that liabilities are classified as either
current or noncurrent, depending on the rights that exist at the end of the reporting period. Classification is unaffected by
the expectations of the entity or events after the reporting date (eg the receipt of a waver or a breach of covenant). The
(i)
94
amendments also clarify what IAS 1 means when it refers to the ‘settlement’ of a liability.
The amendments could affect the classification of liabilities, particularly for entities that previously considered management’s
intentions to determine classification and for some liabilities that can be converted into equity.
They must be applied retrospectively in accordance with the normal requirements in IAS 8 Accounting Policies, Changes in
Accounting Estimates and Errors.
In May 2020, the IASB issued an Exposure Draft proposing to defer the effective date of the amendments to 1 January 2023.
The effective date is 1 January 2022 (possibly deferred to 1 January 2023).
The impact of this amendment on the Groups financial statements is currently under assessment.
Reference to the Conceptual Framework - Amendments to IFRS 3
(ii)
Minor amendments were made to IFRS 3 Business Combinations to update the references to the Conceptual Framework for
Financial Reporting and add an exception for the recognition of liabilities and contingent liabilities within the scope of IAS
37 Provisions, Contingent Liabilities and Contingent Assets and Interpretation 21 Levies. The amendments also confirm that
contingent assets should not be recognised at the acquisition date.
The effective date is 1 January 2022.
The amendment has no effect on the Group financial statements for the year, as there has been no business combinations for
the reporting period.
(iii)
Onerous Contracts - Cost of Fulfilling a Contract Amendments to IAS 37
The amendment to IAS 37 clarifies that the direct costs of fulfilling a contract include both the incremental costs of fulfilling the
contract and an allocation of other costs directly related to fulfilling contracts. Before recognising a separate provision for an
onerous contract, the entity recognises any impairment loss that has occurred on assets used in fulfilling the contract.
The effective date is 1 January 2022.
The Group has no contracts as at the reporting dates to which the amendments apply.
(iv)
2.1
(a).
Annual Improvements to IFRS Standards 2018-2020
The following improvements were finalised in May 2020:
•
IFRS 9 Financial Instruments - clarifies which fees should be included in the 10% test for derecognition of financial
liabilities.
IFRS 16 Leases - To remove the illustration of payments from the lessor relating to leasehold improvements, to remove
any confusion about the treatment of lease incentives.
•
The effective date is 1 January 2022.
Basis of preparation
Statement of compliance
The financial statements are prepared in accordance with International Financial Reporting Standards (IFRS) and comply with
IFRS as issued by the International Accounting Standard Board (IASB) and in the manner required by the Companies and Allied
Matters Act of Nigeria, the Financial Reporting Council of Nigeria Act, the Banks and other Financial Institutions Act of Nigeria,
and relevant Central Bank of Nigeria circulars.
(b).
Basis of measurement
The financial statements have been prepared under the historical cost convention with the exception of the following:
•
Financial assets and liabilities measured at amortised cost;
Financials
95
Zenith Bank Plc Annual Report December 31, 2020
Notes to the Consolidated and Separate Financial
Statements for the Year Ended December 31, 2020
•
•
Derivative financial instruments which are 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.
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.
(c)
2.2
(a)
(b)
(c)
96
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)
Non-controlling interests
Non-controlling interests are measured at their proportionate share of the acquiree’s identifiable net assets at the acquisition
date. Changes in the Group’s interest in a subsidiary that do not result in a loss of control are accounted for as equity transactions.
2.3
Translation of foreign currencies
Foreign currency transactions and balances
(a)
Functional and presentation currency
Items included in the financial statements of each of the Group’s entities are measured using the currency of the primary
economic environment in which the entity operates (functional currency). The parent entity’s functional currency (Nigerian
Naira) is adopted as the presentation currency for the separate and consolidated financial statements. Except as otherwise
indicated, financial information presented in Naira has been rounded to the nearest million.
(b)
Group companies
The results and financial position of all the Group entities (none of which has the currency of a hyper-inflationary economy) that
have a functional currency different from the presentation currency are translated into the presentation currency as follows:
(i)
(ii)
(iii)
assets and liabilities for statement of financial position presented are translated at the closing rate at the reporting date;
income and expenses for each statement of profit or loss and other comprehensive income are translated at average
exchange rates (unless this average is not a reasonable approximation of the cumulative effect of the rates prevailing
on the transaction dates, in which case income and expenses are translated at the rate on the dates of the transactions);
and
all resulting exchange differences are recognised in other comprehensive income and presented within equity as
foreign currency translation reserves.
On the disposal of a foreign operation, the Group recognises in profit or loss the cumulative amount of exchange
differences relating to that foreign operation. When a subsidiary that includes a foreign operation is partially disposed
of or sold, the Group re-attributes the proportionate share of the cumulative amount of the exchange differences
recognised in other comprehensive income to the non-controlling interests in that foreign operation. In the case of
any other partial disposal of a foreign operation, the Group reclassifies to profit or loss only the proportionate share of
the cumulative amount of exchange differences recognised in other comprehensive income.
Goodwill and fair value adjustments arising on the acquisition of a foreign entity are treated as assets and liabilities of
the foreign entity and translated at the closing rate at the reporting date.
(c)
Transactions and balances
Foreign currency transactions are translated into the functional currency using the exchange rates prevailing at the dates of
the transactions or valuation where items are re-measured. Foreign exchange gains and losses resulting from the settlement
of such transactions and from the translation at period-end exchange rates of monetary assets and liabilities denominated in
foreign currencies are recognised in profit or loss.
Non-monetary assets and liabilities denominated in foreign currencies that are measured at historical cost are translated to
the functional currency using the exchange rate at the transaction date, and those measured at fair value are translated to the
Financials
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Zenith Bank Plc Annual Report December 31, 2020
Notes to the Consolidated and Separate Financial
Statements for the Year Ended December 31, 2020
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 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.
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 settles the purchase or sale of the instruments
(settlement date accounting).
Subsequent measurement
Subsequent to initial measurement, financial instruments are measured either at amortised cost or fair value depending on
their classification category.
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)
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.
•
•
2.4
2.5
(a)
(b)
(c)
(i)
98
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.
•
•
•
•
(ii)
(iii)
Financial liabilities
Financial liabilities are either classified by the Group as:
Financial liabilities at amortised cost; or
•
Financial liabilities as at fair value through profit or loss (FVTPL).
•
Financial liabilities are measured at amortised cost by the Group unless either:
The financial liability is held for trading and is therefore required to be measured at FVTPL, or
The Group elects to measure the financial liability at FVTPL (using the fair value option).
•
•
Financial guarantees contracts and loan commitments
A financial guarantee contract is a contract that requires the Group (issuer) to make specified payments to reimburse the holder
for a loss it incurs because a specified debtor fails to make payment when due in accordance with the original or modified
terms of a debt instrument.
Loan commitments’ are firm commitments to provide credit under pre-specified terms and conditions. Financial guarantees
issued or commitments to provide a loan at a below-market interest rate are initially measured at fair value. Subsequently,
they are measured 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.
Financials
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Zenith Bank Plc Annual Report December 31, 2020
Notes to the Consolidated and Separate Financial
Statements for the Year Ended December 31, 2020
Contingent liabilities and commitments are initially recognized at fair value which is also generally equal to the fees received
and amortized over the life of the commitment. The carrying amount of contingent liabilities are subsequently measured at the
higher of the present value of any expected payment when a payment under the contingent liability has become probable
and the unamortised fee.
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 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.
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
100
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 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.
(ii)
Financial liabilities
The Group derecognises a financial liability when its contractual obligations are discharged or cancelled, or expire.
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Zenith Bank Plc Annual Report December 31, 2020
Notes to the Consolidated and Separate Financial
Statements for the Year Ended December 31, 2020
(e)
Modifications of financial assets and financial liabilities
Financial assets
If the terms of a financial asset are modified, then the Group evaluates whether the cash flows of the modified asset are
substantially different.
If the cash flows are substantially different, then the contractual rights to cash flows from the original financial asset are deemed
to have expired. In this case, the original financial asset is derecognized (see (d)) and a new financial asset is recognised at fair
value plus any eligible transaction costs. Any fees received as part of the modification are accounted for as follows: - fees that
are considered in determining the fair value of the new asset and fees that represent reimbursement of eligible transaction
costs are included in the initial measurement of the asset; and - other fees are included in profit or loss as part of the gain or
loss on derecognition.
If cash flows are modified when the borrower is in financial difficulties, then the objective of the modification is usually to
maximize recovery of the original contractual terms rather than to originate a new asset with substantially different terms. If the
Group plans to modify a financial asset in a way that would result in forgiveness of cash flows, then it first considers whether
a portion of the asset should be written off before the modification takes place (see below for write off policy). This approach
impacts the result of the quantitative evaluation and means that the derecognition criteria are not usually met in such cases.
If the modification of a financial asset measured at amortised cost or FVOCI does not result in derecognition of the financial
asset, then the Group first recalculates the gross carrying amount of the financial asset using the original effective interest rate
of the asset and recognises the resulting adjustment as a modification gain or loss in profit or loss. For floating-rate financial
assets, the original effective interest rate used to calculate the modification gain or loss is adjusted to reflect current market
terms at the time of the modification. Any costs or fees incurred and fees received as part of the modification adjust the gross
carrying amount of the modified financial asset and are amortised over the remaining term of the modified financial asset.
If such a modification is carried out because of financial difficulties of the borrower (see (2.9)), then the gain or loss is presented
together with impairment losses for stage 1 facilities, for stage 2 and 3 the modification gain or loss is disclosed separately. 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.
102
(f )
Offsetting
Financial assets and financial liabilities are offset and the net amount presented in the statement of financial position when,
and only when, the Group currently has a legally enforceable right to set off the amounts and it intends either to settle them
on a net basis or to realise the asset and settle the liability simultaneously.
Income and expenses are presented on a net basis only when permitted under IFRS, or for gains and losses arising from a group
of similar transactions such as in the Group’s trading activity.
(g)
Amortised cost measurement
The amortised cost of a financial asset or liability is the amount at which the financial asset or liability is measured at initial
recognition, minus principal repayments, plus or minus the cumulative amortisation using the effective interest rate method
of any difference between the initial amount recognised and the maturity amount, minus any reduction for impairment.
(h)
Fair value measurement
‘
Fair value’ is the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between
market participants at the measurement date in the principal or, in its absence, the most advantageous market to which the
Group has access at that date. The fair value of a liability reflects its non-performance risk.
The best evidence of the fair value of a financial instrument at initial recognition is the transaction price – i.e. the fair value of
the consideration given or received. However, in some cases the initial estimate of fair value of a financial instrument on initial
recognition may be different from its transaction price. If this estimated fair value is evidenced by comparison with other
observable current market transactions in the same instrument (without modification or repackaging) or based on a valuation
technique whose variables include only data from observable markets, then the difference is recognised in profit or loss
on initial recognition of the instrument. In other cases, the fair value at initial recognition is considered to be the transaction
price and the difference is not recognised in profit or loss immediately but is recognised over the life of the instrument on an
appropriate basis or when the instrument is redeemed, transferred or sold, or the fair value becomes observable.
If an asset or a liability measured at fair value has a bid price and an ask price, then the Group measures assets and long
positions at a bid price and liabilities and short positions at an ask price. Where the Bank has positions with offsetting risks, mid
market prices are used to measure the offsetting risk positions and a bid or ask price adjustment is applied only to the net open
position as appropriate.
The fair value of a demand deposit is not less than the amount payable on demand, discounted from the first date on which
the amount could be required to be paid.
The Group recognises transfers between levels of the fair value hierarchy as of the end of the reporting period during which
the change has occurred.
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,
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Zenith Bank Plc Annual Report December 31, 2020
Notes to the Consolidated and Separate Financial
Statements for the Year Ended December 31, 2020
and is consistent with accepted economic methodologies for pricing financial instruments. Inputs into valuation techniques
reasonably represent market expectations and measures of the risk-return factors inherent in the financial instrument.
See note 3.5 on fair valuation methods and assumptions.
(i)
Assets pledged as collateral
Financial assets transferred to external parties and which do not qualify for de-recognition are reclassified in the statement of
financial position from treasury bills and investment securities to assets pledged as collateral, if the transferee has received the
right to sell or re-pledge them in the event of default from agreed terms. Assets pledged as collateral are initially recognised
at fair value, and are subsequently measured at amortised cost or fair value as appropriate. These transactions are performed in
accordance with the usual terms of securities lending and borrowing.
(j)
Assets under repurchase agreement
Assets under repurchase agreement are transactions in which the Group sells a security and simultaneously agrees to
repurchase it (or an asset that is substantially the same as the one sold) at a fixed price on a future date. The Group continues to
recognise the securities in their entirety in the statement of financial position because it retains substantially all of the risks and
rewards of ownership. The cash consideration received is recognised as 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.
Non-hedging derivative assets and liabilities are initially recognized and subsequently measured at fair value in the statement
of financial position. All changes in fair value are recognized as part of net trading income in profit or loss. Non- hedging
derivative assets and liabilities are not reclassified subsequent to their initial recognition.
2.7
Impairment
The Group recognises loss allowances for ECL on the following financial instruments that are not measured at FVTPL:
•
•
•
•
Financial assets that are debt instruments;
Lease receivables;
Financial guarantee contracts issued; and
Loan commitments issued.
No impairment loss is recognised on equity investments.
104
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.
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’.
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.
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 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.
There has been no change in estimation techniques from prior period. Also, significant assumptions made during the
period can be seen in note 4.4
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.
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;
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Zenith Bank Plc Annual Report December 31, 2020
Notes to the Consolidated and Separate Financial
Statements for the Year Ended December 31, 2020
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.’
2.7.2 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 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.
106
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 position, such that the customer can no longer pay the obligation,
or that proceeds from the collateral will not be sufficient to pay back the entire exposure. Board approval is required for such
write-off. For insider-related loan (loans by the Bank to its own officers and directors), CBN approval is required. The loan
recovery department continues with its recovery efforts and any loan subsequently recovered is treated as other income.
Loans and debt securities are written off (either partially or in full) when there is no realistic prospect of recovery. This is generally
the case when the Group determines that the borrower does not have assets or sources of income that 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.
The outstanding contractual amounts of assets written off during the year ended 31 December 2020 was N53.8 billion (31
December, 2019: N60.9 billion). The Group still seeks to recover amounts it is legally owed in full, but which have been written
off due to no reasonable expectation of full recovery.
2.8
2.9
Reclassification of financial instruments
Financial assets are required to be reclassified in certain rare circumstances among the amortised cost, FVOCI and FVTPL
categories. When the Group changes its business model for managing financial assets, the Group reclassifies all affected
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
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.
Financials
107
Zenith Bank Plc Annual Report December 31, 2020
Notes to the Consolidated and Separate Financial
Statements for the Year Ended December 31, 2020
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 of the related loan and fair value less cost to sell and reported within
‘Other asset’.
2.11
Property and equipment
Property and equipment are stated at historical cost less accumulated depreciation and accumulated impairment losses.
Historical cost includes expenditure that is directly attributable to the acquisition of the items. Where significant parts of an
item of property and equipment have different useful lives, they are accounted for as separate items (major components) of
property and equipment.
Subsequent costs are included in the asset’s carrying amount or recognised as a separate asset, as appropriate, only when
it is probable that future economic benefits associated with the item will flow to the Group and the cost of the item can be
measured reliably. All other repairs and maintenance are charged to profit or loss during the financial year in which they are
incurred.
Property and equipment are depreciated on the straight line basis to their residual values over the estimated useful lives of the
assets. 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
Motor vehicles
Office equipment
Furniture and fittings
Computer equipment
Buildings
Leasehold improvement
Right of use assets
Depreciation is included in profit or loss.
108
(Not depreciated)
4 years
5 years
5 years
3 years
50 years
Over the remaining lease period
Lower of lease term or the useful life for the specified class of item
Work in progress consists of items of property and equipment that are not yet available for use. Work in progress is carried at
cost less any required impairment. Depreciation starts when assets are available for use. An impairment loss is recognised if the
asset’s recoverable amount is less than cost. The asset is reviewed for impairment when events or changes in circumstances
indicate that the carrying amount may not be recoverable. Once the items are available for use, they are transferred to relevant
classes of property and equipment as appropriate.
Property and equipment are derecognized on disposal, or when no future economic benefits are expected from their use or
disposal.
Gains and losses on disposal are determined by comparing proceeds with carrying amount. These are included in profit or loss.
Depreciation methods, useful lives and residual values are reassessed at each reporting date and adjusted if appropriate.
Borrowing Cost
Borrowing 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.
Costs associated with maintaining computer software programmes are recognised expenses as they are incurred. Development
costs that are directly attributable to the design and testing of identifiable and unique software products controlled by the
Group, are recognised as intangible assets when the following criteria are met:
(i)
(ii)
(iii)
(iv)
(v)
(vi)
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.
Subsequent expenditure on computer software is capitalised only when it increases the future economic benefits embodied
in the specific asset to which it relates.
Amortisation is recognised in profit or loss on a straight-line basis over the estimated useful life of the software, from the date
that the asset is available for use since this most closely reflects the expected pattern of consumption of the future economic
benefits embodied in the asset. The estimated useful life for computer software is 5 years.
Amortisation methods, useful lives and residual values are reviewed at each financial period-end and adjusted if appropriate.
Intangible assets are derecognized on disposal or when no future economic benefits are expected from their use or disposal.
Financials
109
Zenith Bank Plc Annual Report December 31, 2020
Notes to the Consolidated and Separate Financial
Statements for the Year Ended December 31, 2020
2.13
Impairment of non-financial assets
The carrying amounts of the Group’s non-financial assets, other than deferred tax assets, are reviewed at each reporting date
to determine whether there is any indication of impairment. If any such indication exists, then the asset’s recoverable amount
is estimated. For intangible assets that have indefinite useful lives or that are not yet available for use, the recoverable amount
is estimated each period at the same time.
An impairment loss is recognised if the carrying amount of an asset or its Cash Generating Unit (CGU) exceeds its estimated
recoverable amount. The recoverable amount is the higher of an asset’s fair value less costs to sell and value in use. In assessing
value in use, the estimated future cash flows are discounted to their present value using a pre-tax discount rate that reflects
current market assessments of the time value of money and the risks specific to the asset or CGU. For the purposes of assessing
impairment, assets that cannot be tested individually are grouped together into the smallest group of assets that generates
cash inflows from continuing use that are largely independent of the cash flows of other assets or CGU.
The Group’s corporate assets do not generate separate cash inflows and are utilised by more than one CGU. Corporate assets
are allocated to CGUs on a reasonable and consistent basis and tested for impairment as part of the testing of the CGU to which
the corporate asset is allocated.
Impairment losses are recognised in profit or loss. Impairment losses in respect of CGUs are allocated first to reduce the carrying
amount of any goodwill allocated to the CGU (group of CGUs) and then to reduce the carrying amount of the other assets in
the CGU (group of CGUs) on a pro rata basis.
Impairment losses recognised in prior periods are assessed at each reporting date for any indications that the loss has
decreased or no longer exists. An impairment loss is reversed if there has been a change in the estimates used to determine
the recoverable amount. An impairment loss is reversed only to the extent that the asset’s carrying amount does not exceed
the carrying amount that would have been determined, net of depreciation or amortisation, if no impairment loss had been
recognised. An impairment loss in respect of goodwill is not reversed.
2.14
Leases
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.
The major lease transaction wherein the Group/Bank is a lessee relates to the lease of Bank’s branches.
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.
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.
110
The Group applies 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.
B.
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)
(b)
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.
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.
Financials
111
Zenith Bank Plc Annual Report December 31, 2020
Notes to the Consolidated and Separate Financial
Statements for the Year Ended December 31, 2020
C.
Group / Bank as a lessor
Lease and instalment sale contracts are primarily financing transactions in banking activities, with rentals and instalments
receivable, less unearned finance charges, being included in Loans and advances to customers in the statement of financial
position. Finance charges earned are computed using the effective interest method which reflects a constant periodic return
on the investment in the finance lease. Initial direct costs paid are 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 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.
2.15
Provisions
Provisions are recognised when the Group has a present legal or constructive obligation as a result of past events and it is
probable that an outflow of resources embodying economic benefits will be required to settle the obligation and a reliable
estimate of the amount of the obligation can be made. Provisions are determined by discounting the expected future cash
flows using a pre-tax discount rate that reflects current market assessments of the time value of money and, where appropriate,
the risks specific to the liability.
A provision for restructuring is recognised when the Group has approved a detailed formal plan, and the restructuring either
has commenced or has been announced publicly. Future operating costs or losses are not provided for. A provision for onerous
contracts is recognised when the expected benefits to be derived by the Group from a contract are lower than the unavoidable
cost of meeting its obligations under the contract. The provision is measured at the present value of the lower of the expected
cost of terminating the contract and the expected net cost of continuing with the contract. Before a provision is established,
the Group recognises any impairment loss on the assets associated with that contract.
Contingent liabilities are possible obligations that arise from past events whose existence will be confirmed only by the
occurrence, or non-occurrence, of one or more uncertain future events not wholly within the Group’s control. Contingent
liabilities are not recognised in the financial statements but are disclosed in the notes to the financial statements.
The Group recognises liability for a levy not earlier than when the activity that triggers payment occurs. Also, the Group accrues
liability on levy progressively only if the activity that triggers payment occurs over a period of time. However, for a levy that is
triggered upon reaching a minimum threshold, no liability is recognised before the specified minimum threshold is reached.
112
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 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.
(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.
A liability is recognised for the amount expected to be paid under short-term cash benefits such as accumulated leave and
leave allowances if the Group has a present legal or constructive obligation to pay this amount as a result of past services
provided by the employee and the obligation can be measured reliably.
(c)
Termination benefits
The Group recognises termination benefits as an expense when the Group is demonstrably committed, without realistic
possibility of withdrawal, to a formal detailed plan to either terminate employment before the normal retirement date, or to
provide termination benefits as a result of an offer made to encourage voluntary redundancy. The Group settles termination
benefits within twelve months and are accounted for as short-term benefits.
2.17
Share capital and reserves
(a)
(b)
(c)
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.
Share premium
Premiums from the issue of shares are reported in share premium.
Financials
113
Zenith Bank Plc Annual Report December 31, 2020
Notes to the Consolidated and Separate Financial
Statements for the Year Ended December 31, 2020
(d)
(e)
(f )
(g)
(h)
(i)
Statutory reserve
Nigerian banking regulations require the Bank to make an annual appropriation to a statutory reserve. As stipulated by Section
16(1) of the Banks and Other Financial Institutions Act of 1991 (amended), an appropriation of 30% of profit after tax is made if
the statutory reserve is less than the paid-up share capital and 15% of profit after tax if the statutory reserve is greater than the
paid-up share capital.
SMIEIS reserve
The SMIEIS reserve is maintained to comply with the Central Bank of Nigeria (CBN) requirement that all licensed banks set
aside a portion of the profit after tax in a fund to be used to finance equity investments in qualifying small and medium scale
enterprises. Under the terms of the guideline (amended by CBN letter dated 11 July 2006), the contributions will be 10% of
profit after tax and shall continue after the first 5 years but banks’ contributions shall thereafter reduce to 5% of profit after tax.
The small and medium scale industries equity investment scheme reserves are nondistributable. Transfer to this reserve is no
longer mandatory.
Statutory reserve for credit risk
The Nigerian banking regulator requires the Bank to create a reserve for the difference between impairment provision
determined in line with the principles of IFRS and impairment provision 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.
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.
When calculating the effective interest rate for financial instruments other than purchased or originated credit-impaired assets,
the Group estimates future cash flows considering all contractual terms of the financial instrument, but not ECL. For purchased
or originated credit impaired financial assets, a creditadjusted effective interest rate is calculated using estimated future cash
flows including ECL.
114
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.
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 consolidated and separate statement of profit
or loss includes only interest on financial assets and financial liabilities measured at amortised cost and FVTOCI.
Interest expense presented in the consolidated and separate statement of profit or loss and other comprehensive income
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).
2.19
Fees, commission and other income
Fee and commission income and expense that are integral to the effective interest rate on a financial asset or financial liability
are included in the effective interest rate (see Note 2.18).
Financials
115
Zenith Bank Plc Annual Report December 31, 2020
Notes to the Consolidated and Separate Financial
Statements for the Year Ended December 31, 2020
Other fee and commission income – including account servicing fees, fees on electronic products, sales commission, placement
fees and syndication fees – is recognised as the related services are performed. If a loan commitment is not expected to result
in the draw-down of a loan, then the related loan commitment fee is recognised on a straight-line basis over the commitment
period.
A contract with a customer that results in a recognised financial instrument in the Group’s financial statements may be partially
in the scope of IFRS 9 and partially in the scope of IFRS 15. If this is the case, then the Group first applies IFRS 9 to separate and
measure the part of the contract that is in the scope of IFRS 9 and then applies IFRS 15 to the residual.
Other fee and commission expenses relate mainly to transaction and service fees, which are expensed as the services are
received.
Dividend income is recognised when the right to receive income is established. Usually, this is the exdividend date for quoted
equity securities. Dividends are presented in net trading gains, or other income based on the underlying classification of the
equity investment.
Dividends on equity instruments designated as at FVOCI that clearly represent a recovery of part of the cost of the investment
are presented in OCI.
Income on cash handling relates to services provided to customers in processing cash withdrawal and deposits above the
regulated limit, provided by the Central Bank of Nigeria. Income is recognised as the service is provided.
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 Net income from other financial instruments at fair value through profit or loss
Net income from other financial instruments at fair value through profit or loss relates to derivatives held for risk management
purposes that do not form part of qualifying hedge relationships.
Fair value changes on other derivatives held for risk management purposes, and other financial assets and liabilities carried
at fair value through profit or loss, are presented in Other Income – Mark to market gain/(loss) on trading investmentsin the
Income statement.
2.22 Operating expense
Expenses are decreases in economic benefits during the accounting period in the form of outflows, depletion of assets or
incurrence of liabilities that result in decrease in equity, other than those relating to distributions to equity participants.
Expenses are recognized on an accrual basis regardless of the time of spending cash. Expenses are recognized in the income
statement when a decrease in future economic benefit related to a decrease in an assets or an increase of a liability has arisen
that can be measured reliably. Expenses are measured at historical cost.
Only the portion of cost of a previous period that is related to the income earned during the reporting period is recognized as
an expense. Expenses that are not related to the income earned during the reporting period, but expected to generate future
economic benefits, are recorded in the financial statement as assets. The portion of assets which is intended for earning income
in the future periods shall be recognized as an expense when the associated income is earned.
116
Expenses are recognized in the same reporting period when they are incurred in cases when it is not probable to directly
relate them to particular income earned during the current reporting period and when they are not expected to generate any
income during the coming years.
2.23 Current and deferred income tax
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.
(a)
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).
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 0.25% of gross earnings.:
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, 2020
Notes to the Consolidated and Separate Financial
Statements for the Year Ended December 31, 2020
(b)
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 investments 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
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
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
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.
2.24
2.25
2.26
118
2.27 Deposit for Investment in AGSMEIS
The Agri-Business/Small and Medium Enterprises Investment Scheme is an initiative of Banker’s committee of Nigeria. The
contributed funds is meant for supporting the Federal Government’s effort at promoting agricultural businesses as well as
Small and Medium Enterprises. In line with this initiative, the Bank will contribute 5% of Profit After Tax yearly to the fund.
3.
Risk management
3.1
Enterprise Risk Management
The Zenith Bank Group adopts an integrated approach to risk management by bringing all risks together under a limited
number of oversight functions. The Group addresses the challenge of risks comprehensively through the Enterprise Risk
Management (ERM) Framework by applying practices that are supported by a governance structure consisting of Board- level
and executive management committees.
As part of its risk management policy, the Group segregates duties between market-facing business units and risk management
functions while management is governed by well-defined policies, which are clearly communicated across the Group.
Risk related issues are taken into consideration in all business decisions and the Group continually strives to maintain a
conservative balance between risk and revenue consideration. Continuous education and awareness of risk management has
strengthened the risk management culture across the Group.
3.1.1 Risk Management Philosophy/Strategy
The Group considers sound risk management practice to be the foundation of a long lasting financial institution.
a.
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-
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Statements for the Year Ended December 31, 2020
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.
b.
c.
d.
e.
f.
The Board of Directors provides overall risk management direction and oversight;
The Group’s risk appetite is approved by the Board of Directors;
Risk management is embedded in the Group as an intrinsic process and is a core competence of all its employees;
The Group manages its credit, market, operational and liquidity risks in a coordinated manner within the organisation;
The Group’s risk management function is independent of the business divisions; and
The Group’s internal audit function reports to the Board Audit Committee and provides independent validation of
the business units’ compliance with risk policies and procedures, and the adequacy and effectiveness of the risk
management framework on an enterprise-wide basis.
The Group continuously modifies and enhances its risk management policies and systems to reflect changes in markets,
products and international best practices. Training, individual responsibility and accountability, together with a disciplined and
cautious culture of control, are an integral part of the Group’s management of risk.
The Board of Directors ensures strict compliance with relevant laws, rules and standards issued by the industry regulators and
other law enforcement agencies, market conventions, codes of practices promoted by industry associations and internal
policies.
The compliance function, under the leadership of the Chief Compliance Officer of the Bank, has put in place a robust compliance
framework, which includes:
a.
b.
c.
d.
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.
120
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.
b.
c.
d.
e.
f.
g.
h.
Develop and implement procedures and practices that translate the Board’s goals, objectives, and risk tolerances into
operating standards that are well understood by staff;
Establish lines of authority and responsibility for managing individual risk elements in line with the Board’s overall
direction;
Risk identification, measurement, monitoring and control procedures;
Establish effective internal controls that cover each risk management process;
Ensure that the Group’s risk management processes are properly documented;
Create adequate awareness to make risk management a part of the corporate culture of the Group;
Ensure that risk remains within the boundaries established by the Board; and
Ensure that business lines comply with risk parameters and prudent limits established by the Board;
The CBN Risk Management Guidelines prescribes quantitative and qualitative criteria for the identification of significant
activities and sets a threshold of contributions for determining significant activities in the Bank and its subsidiaries. This practice
is essentially to drive the risk control focus of financial institutions.
Zenith Bank applies a mix of qualitative and quantitative techniques in the determination of its significant activities under
prescribed broad headings. The criteria used in estimating the materiality of each activity is essentially based on the following:
a.
b.
c.
d.
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.
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
Amid the impact of the Covid-19 pandemic, the Nigerian economy slipped into another recession in five years, contracting by
6.1 and 3.62 per cent, year-on-year, in real terms, in the second and third quarters of 2020 financial year, respectively, according
to the National Bureau of Statistics (NBS).This technical recession was triggered mainly by the sluggish performance of the oil
and gas sector, which recorded negative growth of 13.89 per cent in Q3 2020 relative to a decline of 6.63 per cent recorded in
Q2 2020.
The adverse performance of the oil and gas sector was occasioned by a sharp slump in crude oil prices (from about $100 in
December 2019 to around $49.9 per barrel). Covid-19 pandemic along with global lockdowns and restrictions have resulted in
a considerable drop in the aggregate demand for crude oil in the international commodity markets. The development has led
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Zenith Bank Plc Annual Report December 31, 2020
Notes to the Consolidated and Separate Financial
Statements for the Year Ended December 31, 2020
to significant dollar scarcity, a high headline inflation rate, and devaluation of the naira against a basket of major currencies in
all segments of Nigeria’s foreign exchange market.
Indeed, the development and rollouts of Covid-19 Vaccines have, however, brought light at the end of the tunnel as Nigeria’s
economy is expected to leverage the momentum to record positive growth of 1.5% in 2021, according to the International
Monetary Funds (IMF), provided there are no fresh lockdowns. Already, the International Monetary Funds had forecast a
contraction of about -4.1 for the Nigerian economy in 2020.
In 2021, we expect a gradual improvement in oil price fundamentals, with positive impacts on Nigeria’s SRA inflows and foreign
exchange reserves. We foresee reopening of the border to enhance the exports of locally manufactured goods. However, a
resurgence in cases of the COVID-19 pandemic could slow economic recovery.
Despite the prevailing macroeconomic headwinds in the period under review, Zenith Bank remained resilient and delivered yet
another superior financial performance, characterized by high-quality assets, robust earnings, and Capital Adequacy Ratio.
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 year would include the following:
(a)
(b)
(c)
(d)
(e)
(f )
(g)
(h)
(i)
(j)
(k)
(l)
The bank’s business continuity activities are constantly being reviewed and strengthened to reflect the current and
potential impacts of Covid-19 pandemic.
The bank has also developed a strategic crisis-action plan to guide the organization’s response across all Covid-19
scenarios - short, medium and long term.
Several stress tests to assess the possible impacts of Covid-19 on our liquidity, capital adequacy and earning capacity
had been conducted. The bank remains resilient to short and medium term shocks from the adverse impacts of
coronavirus pandemic.
Continual review of loan book and close monitoring of all assets and liabilities class to ensure sufficient liquidity to
meet the bank’s financial obligations.
In line with regulatory requirements, we recognize the Impact of Covid-19 on our risk assets, loan-provisioning and net
interest margin.
We are engaging our discerning customers in key sectors of the economy to better understand their current challenges
and provide effective and bespoke actions to alleviate their hardships while preserving shareholders’ funds.
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.
Further develop SME/Retail product sales and penetrations
Develop market hub initiative to host market players and drive retail participation
Ensure that the Net Interest Margin (NIM) is maintained for all changes in interest rates.
Create additional foreign exchange funding sources from the receipt of foreign exchange deposits from customers
especially export proceeds.
122
(m)
(n)
(o)
(p)
(q)
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.
3.2
Credit Risk
Credit risk is the risk of a financial loss if an obligor does not fully honour its contractual commitments to the Group. Obligors
may be borrowers, issuers, counterparties or guarantors. Credit risk is the most significant risk facing the Bank in the normal
course of business. The Bank is exposed to credit risk not only through its direct lending activities and transactions but also
through commitments to extend credit, letters of guarantee, letters of credit, securities purchased under reverse repurchase
agreements, deposits with financial institutions, brokerage activities, and transactions carrying a settlement risk for the Bank
such as irrevocable fund transfers to third parties via electronic payment systems.
The Group has robust credit standards, policies and procedures to control and monitor intrinsic and concentration risks through
all credit levels of selection, underwriting, administration and control. Some of the policies are:
a.
b.
c.
d.
e.
f.
g.
h.
Credit is only extended to suitable and well identified customers and never where there is any doubt as to the ethical
standards and record of the intending borrower;
Exposures to any industry or customer will be determined by the regulatory guidelines, clearly defined internal policies,
debt service capability and balance sheet management guidelines;
Credit is not extended to customers where the source of repayment is unknown or speculative, and also where the
destination of funds is unknown. There must be clear and verifiable purpose for the use of the funds;
Credit is not given to a customer where the ability of the customer to meet obligations is based on the most optimistic
forecast of events. Risk considerations will always have priority over business and profit considerations
The primary source of repayment for all credits must be from an identifiable cash flow from the counterparty’s normal
business operations or other financial arrangements. The realization of security remains a fall back option;
A pricing model that reflects variations in the risk profile of various credits to ensure that higher risks are compensated
by higher returns is adopted;
All insiders’ related credits are limited to regulatory and strict internal limits and are disclosed as required; and
The consequences for non-compliance with the credit policy and credit indiscipline are communicated to all staff and
are implemented.
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.
b.
c.
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;
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Zenith Bank Plc Annual Report December 31, 2020
Notes to the Consolidated and Separate Financial
Statements for the Year Ended December 31, 2020
d.
e.
The size of the facility in case default occurs; and
Estimated Rate of Recovery, which is a measure of the portion of the debt that can be recovered through realisation of
assets and collateral should default occur.
3.2.2 Credit Rating Tools
The principal objective of the credit risk rating system is to produce a reliable assessment of the credit risk to which the Group is
exposed. As such, all loans and indirect credits such as guarantees and bonds as well as treasury investments undergo a formal
credit analysis process that would ensure the proper appraisal of the facility.
(a)
Loans and advances and amounts due from banks
Each individual borrower is rated based on an internally developed rating model that evaluates risk based on financial,
qualitative and industry-specific inputs. The associated loss estimate norms for each grade have been developed based on the
experience of the Bank and its various subsidiaries.
In order to allow for a meaningful distribution of exposures across grades with no excessive concentrations on the Group’s
borrower-rating and its facility-rating scale, the Group maintains the under listed rating grade, which is applicable to both new
and existing customers.
Zenith Group Rating
Description of the grade
AAA
AA
A
BBB
BB
B
CCC
CC
C
D
Unrated
Investment Risk (Extremely Low Risk)
Investment Risk (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)
Individually insignificant (unrated)
(b)
Other debt instruments
With respect to other debt instruments, the Group takes the following into consideration in the management of the associated
credit risk:
(i)
(ii)
Internal and external research and market intelligence reports; and
Regulatory agencies reports
In addition to the above, we have put in place limits structure which is monitored from time to time in order to limit our risk
exposures on these securities.
124
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.
b.
c.
d.
e.
f.
g.
Credit assessment of the borrower’s industry, and 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.
3.2.4 Group Credit Risk Management
Zenith’s approach in managing credit risk is a key element in achieving its strategic objective of maintaining and further
enhancing its asset quality and credit portfolio risk profile. The credit standards, policies and procedures, risk methodologies
and framework, solid structure and infrastructure, risk monitoring and control activities enable the Group to deal with the
emerging risks and challenges with a high level of confidence and determination.
The framework for credit risk assessment at Zenith is well-defined and institutionally predicated on:
a.
b.
c.
d.
e.
f.
g.
h.
i.
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 in line with key performance indicators and periodic stress testing;
Continuous assessment of concentrations and mitigation strategies;
Continuous validation and modification of early warning system to ensure proper functioning for risk identification;
Systematic and objective credit risk rating methodologies that are based on quantitative, qualitative and expert
judgment;
Systematic credit limits management which enables the Bank to monitor its credit exposure on daily basis at country,
borrower, industry, credit risk rating and credit facility type levels;
Solid documentation and collateral management process with proper coverage and top-up triggers and follow-ups;
and
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Notes to the Consolidated and Separate Financial
Statements for the Year Ended December 31, 2020
j.
Annual and interim individual credit reviews to ensure detection of weakness signs or warning signals and considering
proper remedies.
The credit processes are supplemented by sectoral portfolio reviews, which focus on countries, regions or specific
industries as well as multiple stress testing scenarios. These are intended to identify any inherent risks in the portfolios
resulting from changes in market conditions and are supplemented by independent reviews from our Group Internal
Audit.
3.2.5 Group Credit Risk Limits
The Group applies credit risk limits, among other techniques in managing credit risk. This is the practice of stipulating a
maximum amount that the individual or counterparty can obtain as loan. Internal and regulatory limits are strictly adhered to.
Through this, the Group not only protects itself, but also in a sense, protects the counterparties from borrowing more than they
are capable of repaying.
The Group focuses on its concentration and intrinsic risks and further manages them to a more comfortable level. This is very
important due to the serious risk implications that intrinsic and concentration risk pose to the Group. A thorough analysis of
economic factors, market forecasting and prediction based on historical evidence is used to mitigate these risks.
The Group has in place various portfolio concentration limits (which are subject to periodic review). These limits are closely
monitored and reported on from time to time.
The Group’s internal credit approval limits for the various authorities levels are as indicated below.
Zenith Group Rating
Board Credit Committee
Management Global Credit Committee
Approval limit (% of Shareholders’ Fund)
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.
126
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.
b.
c.
d.
e.
f.
g.
Real estate, plant and equipment collateral (usually all asset or mortgage debenture or charge), which have to be
registered and enforceable under Nigerian law;
Collateral consisting of inventory, accounts receivable, machinery equipment, patents, trademarks, farm products,
general intangibles, etc. These require a security agreement (usually a floating debenture) which has to be registered
and, must be enforceable under Nigerian law;
Stocks and shares of publicly quoted companies;
Domiciliation of contracts proceeds;
Documents of title to goods such as shipping documents consigned to the order of Zenith Bank or any of its subsidiaries;
Letter of lien; and
Cash collateral.
Collateral securities are usually valued and inspected prior to disbursement and on a regular basis thereafter until full repayment
of the exposure. We conduct a regular review of all collateral documentation in respect of all credits in the Bank and specific
gaps in the collateral documentation 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.
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Zenith Bank Plc Annual Report December 31, 2020
Notes to the Consolidated and Separate Financial
Statements for the Year Ended December 31, 2020
Details of collateral pledged by customers against the carrying amount of loans and advances as at December 31, 2020 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
December 31, 2020
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
Group
Bank
Total exposure
Value of collateral
Total exposure Value of collateral
293,904
4,587
1,296,252
1,324,599
2,919,342
(140,315)
2,779,027
242,928
3,241
1,291,922
-
1,538,091
-
1,538,091
231,672
4,587
1,224,165
1,312,239
2,772,663
(132,866)
2,639,797
171,661
3,241
1,193,685
-
1,368,587
-
1,368,587
Term loan Overdrafts
On lending
Total
185,659
1,301
881,735
1,068,695
2,142,728
109,575
35,781
1,940
78,869
116,590
248,003
26,283
21,488
-
331,318
352,806
528,611
4,457
242,928
3,241
1,291,922
1,538,091
2,919,342
140,315
2,033,153
221,720
524,154
2,779,027
Grand total: Amount of (undercollaterization)/overcollaterization
(964,458)
(105,130)
(171,348)
(1,240,936)
December 31, 2020
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
Term loan Overdrafts
On lending
Total
88,121
1,301
457,498
546,920
14,310
110
70,011
84,431
18,462
-
330,419
348,881
120,893
1,411
857,928
980,232
1,475,417
154,570
523,592
2,153,579
16,421
2,571
4,408
23,400
1,458,996
151,999
519,184
2,130,179
Grand total: Amount of (undercollaterization)/overcollaterization
(912,076)
(67,568)
(170,303)
(1,149,947)
128
December 31, 2020
Term loan Overdrafts On lending
Total
Against lifetime ECL not credit-impaired loans and advances
Property/Real estate
Cash Collateral, lien over fixed and floating assets
Fair value of collateral
Gross loans
ECL Allowance
Net amount
95,577
397,381
492,958
539,960
7,217
532,743
10,848
1,342
12,190
34,377
1,448
32,929
Grand total: Amount of (undercollaterization)/overcollaterization
(39,785)
(20,739)
2,999
-
2,999
4,200
38
4,162
(1,163)
109,424
398,723
508,147
578,537
8,703
569,834
(61,687)
December 31, 2020
Term loan Overdrafts On lending
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
1,962
-
26,856
28,818
127,351
85,937
41,414
10,623
1,830
7,516
19,969
59,056
22,264
36,792
Grand total: Amount of (undercollaterization)/overcollaterization
(12,596)
(16,823)
26
-
899
925
819
11
808
117
12,611
1,830
35,271
49,712
187,226
108,212
79,014
(29,302)
Bank
December 31, 2020
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
Total
121,271
1,301
792,203
914,775
2,013,764
103,512
28,902
1,940
70,164
101,006
230,288
24,897
21,488
171,661
-
3,241
331,318
1,193,685
352,806
1,368,587
528,611
2,772,663
4,457
132,866
1,910,252
205,391
524,154
2,639,797
Grand total: Amount of (undercollaterization)/overcollaterization
(995,477)
(104,385)
(171,348)
1,271,210
Financials
129
Zenith Bank Plc Annual Report December 31, 2020
Notes to the Consolidated and Separate Financial
Statements for the Year Ended December 31, 2020
December 31, 2020
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
Grand total: Amount of (undercollaterization)/overcollaterization
Term loan
Overdrafts
On lending
Total
25,241
1,301
367,966
394,508
1,347,431
10,393
1,337,038
(942,530)
11,149
110
62,197
73,456
140,977
2,130
138,847
(65,391)
18,462
-
330,419
348,881
54,852
1,411
760,582
816,845
523,592
2,012,000
4,408
16,931
519,184
1,995,069
(170,303)
(1,178,224)
December 31, 2020
Term loan
Overdrafts
On lending
Total
Against lifetime ECL not credit-impaired loans and advances
Property/Real estate
Cash Collateral, lien over fixed and floating assets
Fair value of collateral
Gross loans
ECL Allowance
Net amount
Grand total: Amount of (undercollaterization)/overcollaterization
95,577
397,381
492,958
539,977
7,217
532,760
(39,802)
10,832
1,342
12,174
34,304
1,447
32,857
(20,683)
2,999
109,408
-
2,999
4,200
38
4,162
(1,163)
398,723
508,131
578,481
8,702
569,779
(61,648)
December 31, 2020
Term loan
Overdrafts
On lending
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
454
-
26,856
27,310
126,356
85,902
40,454
6,921
1,830
6,625
15,376
55,007
21,320
33,687
Grand total: Amount of (undercollaterization)/overcollaterization
(13,144)
(18,311)
26
-
899
925
819
11
808
117
7,401
1,830
34,380
43,611
182,182
107,233
74,949
(31,338)
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.
130
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, 2019
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
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
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
Term loan
Overdrafts On lending
Finance lease
Total
173,073
150
732,119
905,342
1,760,501
119,912
1,640,589
(735,247)
35,815
3,968
41,677
81,460
212,548
34,328
178,220
12,574
-
296,640
309,214
483,024
2,435
480,589
1,186
-
165
1,351
6,286
119
6,167
222,648
4,118
1,070,601
1,297,367
2,462,359
156,794
2,305,565
(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
Grand total: Net amount
Amount of (undercollaterization)
119,237
150
673,805
793,192
1,499,536
25,961
1,473,575
(680,383)
20,257
1,503
37,039
58,799
132,221
2,762
12,541
-
296,640
309,181
475,591
1,603
129,459
473,988
1,186
-
165
1,351
6,240
103
6,137
153,221
1,653
1,007,649
1,162,523
2,113,588
30,429
2,083,159
(70,660)
(164,807)
(4,786)
(920,636)
Financials
131
Zenith Bank Plc Annual Report December 31, 2020
Notes to the Consolidated and Separate Financial
Statements for the Year Ended December 31, 2020
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
Amount of (undercollaterization)
(28,093)
(22,388)
(6,529)
-
-
-
-
31
3
28
(28)
54,738
834
52,339
107,911
180,754
15,805
164,949
(57,038)
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)
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
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
168,018
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
12,574
-
296,640
309,214
483,024
2,435
480,589
1,186
105,637
-
4,118
165
1,062,453
1,351
6,281
119
1,172,208
2,390,651
151,179
6,162
2,239,472
Grand total: Amount of (undercollaterization
(792,812)
(98,267)
(171,375)
(4,811)
(1,067,264)
132
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
12,541
-
296,640
309,181
475,591
1,603
473,988
1,186
-
165
1,351
6,235
103
45,435
1,653
998,208
1,045,295
2,052,918
27,143
6,132
2,025,776
Amount of (undercollaterization)
(739,773)
(71,120)
(164,807)
(4,781)
(980,481)
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
51,480
-
50,181
101,661
138,680
11,534
127,146
2,579
834
2,009
5,422
30,080
2,005
28,075
-
-
-
-
7,263
734
6,529
-
-
-
-
31
3
28
54,059
834
52,190
107,083
176,054
14,276
161,778
Amount of (undercollaterization)
(25,485)
(22,653)
(6,529)
(28)
(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
Fair value of collateral
Gross loans
ECL Allowance
Net amount
Amount of (undercollaterization)
476
-
8,113
8,589
117,095
80,953
36,142
(27,553)
5,634
1,631
2,443
9,709
44,399
28,697
15,702
(5,993)
33
-
-
33
171
97
74
(41)
-
-
-
-
14
13
1
(1)
6,143
1,631
10,556
18,331
161,679
109,760
51,919
(33,589)
Financials
133
Zenith Bank Plc Annual Report December 31, 2020
Notes to the Consolidated and Separate Financial
Statements for the Year Ended December 31, 2020
(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.
In accordance with the Group’s credit policies, banks and creditworthy companies and individuals with high net worth
are accepted as guarantors, subject to credit risk assessment. Furthermore, Zenith Bank Plc. only recognises unconditional
irrevocable guarantees or standby letters of credit provided they are not related to the underlying obligor.
3.2.7
(b) Maximum Exposure to Credit Risk Before Collateral Held or Credit Enhancements
The Group’s maximum exposure to credit risk at December 31, 2020 and December 31, 2019 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 39 Contingent liabilities and commitments).
Maximum exposure to credit risk - Financial instruments not subject to impairment
The following table contains an analysis of the maximum credit risk exposure from financial assets not subject to impairment
as at December 31, 2020.
December 31, 2020
Group
Bank
In millions of Naira
Maximum exposure to credit risk
Maximum exposure to credit risk
Trading assets
- Treasury bills
- Investment in securities
- Derivatives
- Assets pledged as collateral
698,493
49,277
44,496
71,602
698,199
44,933
41,729
71,602
Maximum exposure to credit risk - Financial instruments subject to impairment
The following table contains an analysis of the maximum credit risk exposure from financial assets subject to impairment as
at December 31, 2020
Financial assets measured at amortised cost
- Balances with central bank
- Treasury bills
- Investment in securities
- Assets pledged as collateral
- Loans and advances to customers
- Due from banks
- Other financial assets
Financial assets measured through other comprehensive income
- Investment in securities
Off balance sheet exposures
134
1,487,224
879,382
475,514
226,928
2,779,027
810,494
149,568
392,150
599,927
1,436,411
695,222
208,218
226,928
2,639,797
532,377
143,301
-
459,001
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, 2020 and December 31, 2019 respectively is set out below:
(a)
Geographical sectors
The following table breaks down the Group’s main credit exposure at their carrying amounts, as categorised by geographical
region at December 31, 2020 and December 31, 2019 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, 2020
Group
Bank
Nigeria
Rest of Africa Outside Africa
Nigeria
Rest of Africa
Outside Africa
Cash and balances with central bank
1,487,224
-
Treasury bills
1,409,564
168,311
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
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
298,530
3,000
492,967
41,220
142,251
-
55,224
45,517
2,917
7,154
-
-
-
752,270
378,457
359
163
1,436,411
1,393,421
298,530
3,000
253,151
41,220
143,301
3,874,756
279,123
1,131,249
3,569,034
49,569
84,183
325,249
459,001
881,023
824,119
431,728
8,134
203,857
92,722
62,496
-
39,301
33,677
72,978
-
167,274
-
78,025
101,996
-
960
1,201
49,421
17,326
67,948
-
-
-
620,944
285,244
-
308
49,569
84,183
325,249
459,001
840,032
822,449
431,728
-
189,358
92,722
61,253
2,504,079
348,255
906,496
2,437,542
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
-
-
-
-
-
150
-
150
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
529,377
-
359
-
529,736
-
-
-
-
-
-
-
482,070
-
-
-
482,070
-
-
-
-
Financials
135
Zenith Bank Plc Annual Report December 31, 2020
Notes to the Consolidated and Separate Financial
Statements for the Year Ended December 31, 2020
Gross loans and advances to customers and the impairment allowance per geographical region as at December 31, 2020
*Carrying amounts presented in the table below is determined as gross loans less impairment allowances.
In millions of Naira
Group
Bank
Loans and advances to customers
Loans and advances to customers
Gross loans
Impairment
Allowance
Carrying
amount
Gross loans
Impairment
Allowance
Carrying
amount
South South Nigeria
South West Nigeria
South East Nigeria
North Central Nigeria
North West Nigeria
North East Nigeria
Rest of Africa
Outside Africa
268,738
2,166,507
104,223
103,101
54,352
114,769
78,056
29,596
7,657
121,783
261,081
266,283
2,044,724
2,129,935
918
2,737
283
300
5,399
1,238
103,305
100,364
54,069
114,469
72,657
28,358
104,223
103,101
54,352
114,769
-
-
2,772,663
7,571
121,056
918
2,737
283
301
-
-
132,866
258,712
2,008,879
103,305
100,364
54,069
114,468
-
-
2,639,797
2,919,342
140,315
2,779,027
Gross loans and advances to customers per industry sector as at December 31, 2019
In millions of Naira
Group
Bank
Loans and advances to customers
Loans and advances to customers
Gross loans
Impairment
Allowance
Carrying
amount
Gross loans
Impairment
Allowance
Carrying
amount
South South Nigeria
South West Nigeria
South East Nigeria
North Central Nigeria
North West Nigeria
North East Nigeria
Rest of Africa
Outside Africa
201,543
1,828,217
138,681
95,005
26,271
101,065
47,299
24,278
3,488
140,839
198,055
201,543
1,687,379
1,828,086
3,556
2,837
177
282
2,153
3,462
135,125
92,168
26,094
100,783
45,146
20,816
138,681
95,005
26,271
101,065
-
-
2,390,651
3,488
140,839
3,556
2,837
177
282
-
-
151,179
198,055
1,687,248
135,125
92,168
26,094
100,783
-
-
2,239,472
2,462,359
156,794
2,305,565
136
(b)
Industry sectors
Gross loans and advances to customers and the impairment allowance per geographical region as at December 31, 2020
*Carrying amounts presented in the table below is determined as gross loans less impairment allowances.
In millions of Naira
Group
Bank
Loans and advances to customers
Loans and advances to customers
Gross loans
Impairment
Allowance
Carrying
amount
Gross loans
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
182,127
731,517
123,593
620,311
126,580
10,708
432,765
72,633
169,301
120,095
11,252
318,460
3,193
50,834
11,930
3,947
4,837
1,766
2,932
28,271
5,600
19,322
926
6,757
178,934
680,683
111,663
616,364
121,743
8,942
429,833
44,362
163,701
100,773
10,326
311,703
182,103
720,496
121,022
593,266
113,408
4,887
416,648
72,633
168,340
112,619
11,253
255,988
3,194
50,445
11,842
3,008
4,783
204
72
28,271
5,566
19,301
926
5,254
178,909
670,051
109,180
590,258
108,625
4,683
416,576
44,362
162,774
93,318
10,327
250,734
2,919,342
140,315
2,779,027
2,772,663
132,866
2,639,797
Gross loans and advances to customers per industry sector as at December 31, 2019
In millions of Naira
Group
Bank
Loans and advances to customers
Loans and advances to customers
Gross loans
Impairment
Allowance
Carrying
amount
Gross loans
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
111,344
8,854
291,736
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
362,433
48,912
65,073
96,618
7,833
282,451
161,636
617,978
153,416
474,411
76,195
14,798
361,667
81,630
63,533
107,153
8,802
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
466,211
64,675
13,853
361,375
48,757
63,414
92,431
7,782
261,625
2,462,359
156,794
2,305,565
2,390,651
151,179
2,239,472
Financials
137
Zenith Bank Plc Annual Report December 31, 2020
Notes to the Consolidated and Separate Financial
Statements for the Year Ended December 31, 2020
Group
Financial assets excluding loans and advances per industry sector as at December 31, 2020
December 31, 2020
In millions of naira
Balances with
central bank
Treasury
bills
Assets
pledged as
collateral
Due from
other banks
Investment
securities
Derivative
instruments
Government
Manufacturing
Finance and Insurance
1,487,224
1,579,450
298,885
-
-
-
-
-
-
-
-
810,552
987,929
9,760
-
39,875
1,079
3,542
Other
financial
assets
-
-
151,709
Gross amount
1,487,224
1,579,450
298,885
810,552
997,689
44,496
151,709
Impairment allowance
-
(1,575)
(355)
(58)
(773)
-
(2,141)
Carrying amount
1,487,224
1,577,875
298,530
810,494
996,916
44,496
149,568
Financial assets excluding loans and advances per industry sector as at December 31, 2019
December 31, 2020
In millions of naira
Balances with
central bank
Treasury
bills
Assets
pledged as
collateral
Due from
other banks
Investment
securities
Derivative
instruments
Government
881,023
991,956
431,797
-
591,648
Finance and Insurance
-
-
-
Gross amount
881,023
991,956
431,797
Impairment allowance
-
(563)
(69)
707,245
707,245
(142)
-
591,648
(551)
92,722
-
92,722
-
Carrying amount
881,023
991,393
431,728
707,103
591,097
92,722
Financial assets excluding loans and advances per industry sector as at December 31, 2020
December 31, 2020
In millions of naira
Balances with
central bank
Treasury
bills
Assets
pledged as
collateral
Due from
other banks
Investment
securities
Derivative
instruments
Government
Manufacturing
Finance and Insurance
1,436,411
1,394,097
298,885
-
-
-
-
-
-
-
-
532,435
333,881
-
-
39,875
1,079
775
Other
financial
assets
-
64,541
64,541
(777)
63,764
Other
financial
assets
-
-
145,347
Gross amount
1,436,411
1,394,097
298,885
532,435
333,881
41,729
145,347
Impairment allowance
-
(676)
(355)
(58)
(755)
-
(2,046)
Carrying amount
1,436,411
1,393,421
298,530
532,377
333,126
41,729
143,301
Financial assets excluding loans and advances per industry sector as at December 31, 2019
138
December 31, 2019
In millions of naira
Balances with
central bank
Treasury
bills
Assets
pledged as
collateral
Due from
other banks
Investment
securities
Derivative
instruments
Government
840,032
822,466
431,797
-
189,896
Finance and Insurance
-
-
-
Gross amount
840,032
822,466
431,797
Impairment allowance
-
(17)
(69)
482,212
482,212
(142)
-
189,896
(538)
92,722
-
92,722
-
Carrying amount
840,032
822,449
431,728
482,070
189,358
92,722
3.2.9 Credit quality analysis
All other financial assets are subject to 12 months ECL.
Group
December 31, 2020
In millions of naira
Balances with
central bank
Treasury
bills
Assets
pledged as
collateral
Due from
other banks
Investment
securities
Derivative
instruments
Credit rating - 12 month ECL: All financial assets excluding loans and advances
AAA to A
BBB to BB
Unrated
Gross amount
ECL - impairment
1,487,224
1,579,450
298,885
810,552
-
-
-
-
-
-
-
-
888,934
28,780
-
44,496
-
-
1,487,224
1,579,450
298,885
810,552
917,714
44,496
-
(1,575)
(355)
(58)
(773)
-
Carrying amount
1,487,224
1,577,875
298,530
810,494
916,941
44,496
Other
financial
assets
-
61,973
61,973
(720)
61,253
Other
financial
assets
-
-
151,709
151,709
(2,141)
149,568
December 31, 2019
12 months ECL
Lifetime ECL not credit impaired
Lifetime ECL credit impaired
Gross loans and advances
Less allowance 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
Term loan
Overdrafts
On lending
Total
1,475,417
154,570
523,592
2,153,579
539,960
127,351
34,377
59,056
4,200
819
578,537
187,226
2,142,728
248,003
528,611
2,919,342
16,421
7,217
85,937
109,575
2,033,153
2,571
1,448
22,264
26,283
221,720
4,408
38
11
4,457
23,400
8,703
108,212
140,315
524,154
2,779,027
Financials
139
Zenith Bank Plc Annual Report December 31, 2020
Notes to the Consolidated and Separate Financial
Statements for the Year Ended December 31, 2020
December 31, 2019
Term loan
Overdrafts
On lending
Loans and Advances
A
AA
BB
BBB
UNRATED
Gross amount
ECL-Impairment
Carrying amount
Bank
December 31, 2019
553,775
257,072
73
536,511
127,986
1,475,417
(16,421)
1,458,996
64,103
31,287
12
45,593
13,575
154,570
(2,571)
151,999
97,980
63,897
-
361,715
-
523,592
(4,408)
519,184
Credit rating - 12 month ECL: All financial assets excluding loans and advances
In millions of
naira
Balances with
central bank
Treasury
bills
Assets
pledged as
collateral
Due from
other banks
Investment
securities
Derivative
instruments
AAA to A
BBB to BB
Unrated
Gross amount
ECL - impairment
Carrying amount
1,436,411
1,394,097
298,885
532,435
-
-
-
-
-
-
-
-
242,091
11,815
-
41,729
-
-
1,436,411
1,394,097
298,885
532,435
253,906
41,729
(145,347)
-
(676)
(355)
(58)
(755)
-
(2,046)
1,436,411
1,393,421
298,530
532,377
253,151
41,729
(147,393)
December 31, 2019
12 months ECL
Lifetime ECL not credit impaired
Lifetime ECL credit impaired
Gross loans and advances
Less allowance for impairment
12 - months ECL
Lifetime ECL not credit impaired
Lifetime ECL credit impaired
Total allowances for impairment
Net loans and advances
140
Loans and Advances
Term loan
1,347,431
539,977
126,356
2,013,764
10,393
7,217
85,902
103,512
1,910,252
140,977
34,304
55,007
230,288
2,130
1,447
21,320
24,897
205,391
Overdrafts
On lending
523,592
4,200
819
Total
2,012,000
578,481
182,182
528,611
2,772,663
4,408
38
11
4,457
524,154
16,931
8,702
107,233
132,866
2,639,797
Total
715,858
352,256
85
943,819
-
2,153,579
(23,400)
2,130,179
Other
financial
assets
-
-
(145,347)
December 31, 2019
Term loan
Overdrafts
On lending
Loans and Advances
A
AA
BB
BBB
Gross amount
ECL-Impairment
Carrying amount
Group
December 31, 2019
553,775
257,072
73
536,511
1,347,431
(10,393)
1,337,038
64,085
31,287
12
45,593
140,977
(2,130)
138,847
97,980
63,897
-
361,715
523,592
(4,408)
519,184
Credit rating - 12 month ECL: All financial assets excluding loans and advances
In millions of
naira
Balances with
central bank
Treasury
bills
Assets pledged
as collateral
Due from
other banks
Investment
securities
Derivative
instruments
AAA to A
BBB to BB
Unrated
Gross amount
ECL - impairment
Carrying amount
881,023
991,956
431,797
707,245
-
-
-
-
-
-
-
-
527,968
63,680
-
92,722
-
-
881,023
991,956
431,797
707,245
591,648
92,722
-
(563)
(69)
(142)
(551)
-
881,023
991,393
431,728
707,103
591,097
92,722
Overdrafts
On lending
December 31, 2019
12 months ECL
Lifetime ECL not credit impaired
Lifetime ECL credit impaired
Gross loans and advances
Less allowance 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
Term loan
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
Total
715,840
352,256
85
943,819
2,012,000
(16,931)
1,995,069
Other
financial
assets
-
-
61,973
61,973
(720)
61,253
Total
2,113,588
180,754
168,017
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
Financials
141
Zenith Bank Plc Annual Report December 31, 2020
Notes to the Consolidated and Separate Financial
Statements for the Year Ended December 31, 2020
December 31, 2019
Term loan
Overdrafts
On lending
Loans and Advances
A
AA
AAA
B
BB
BBB
D
UNRATED
Gross amount
ECL-Impairment
Carrying amount
December 31, 2019
438,779
698,710
376,835
19,735
284,193
74,389
-
82,935
1,975,576
(27,564)
1,948,012
67,448
16,089
8,643
-
-
21,717
42
17,832
131,771
(2,761)
129,010
3,870
1,991
-
-
-
349
-
31
6,241
(104)
6,137
Total
510,097
716,790
385,478
19,735
284,193
96,455
42
100,798
2,113,588
(30,429)
2,083,159
Bank
Credit rating - 12 month ECL: All financial assets excluding loans and advances
In millions of
naira
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
Gross amount
ECL - impairment
840,032
822,466
431,797
482,212
-
-
-
-
126,216
63,680
92,722
-
840,032
822,466
431,797
482,212
189,896
92,722
-
(17)
(69)
(142)
(538)
-
Carrying amount
840,032
822,449
431,728
482,070
189,358
92,722
Loans and Advances
Overdrafts
On lending
December 31, 2019
12 months ECL
Lifetime ECL not credit impaired
Lifetime ECL credit impaired
Gross loans and advances
Less allowance for impairment
12 - months ECL
Lifetime ECL not credit impaired
Lifetime ECL credit impaired
Total allowances for impairment
Net loans and advances
142
Term loan
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
61,973
-
61,973
(720)
61,253
Total
2,052,918
176,054
161,679
6,235
31
15
6,281
2,390,651
100
3
15
118
27,140
14,277
109,762
151,179
6,163
2,239,472
December 31, 2019
Term loan
Overdrafts
On lending
Loans and Advances
A
AA
AAA
B
BB
BBB
D
UNRATED
Gross amount
ECL-Impairment
Carrying amount
438,779
698,623
376,835
284,193
72,119
-
56,593
82,935
1,927,142
(24,668)
1,902,474
67,448
16,089
8,644
-
20,676
48
6,636
17,832
119,541
(2,372)
117,169
3,871
1,991
349
-
-
-
24
31
6,235
(103)
6,132
Total
510,098
716,703
385,828
284,193
92,795
48
63,253
100,798
2,052,918
(27,143)
2,025,775
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. audited
– Internally collected
– Payment record – this includes
financial statements, management accounts, budgets and projections.
data on customer
Examples of areas of particular focus are: gross profit margins, financial leverage
behaviour – e.g.
ratios, debt service coverage, compliance with covenants, quality of
utilisation of credit card
management, senior management changes
facilities
–
–
–
Data from credit reference agencies, press articles, changes in external
– Affordability metrics
credit ratings
– External data from
Quoted bond and credit default swap (CDS) prices for the borrower
credit reference agencies,
where available
including industry-
Actual and expected significant changes in the political, regulatory and
standard credit scores
overdue status as well as a range
of variables about payment ratios
– Utilisation of the granted limit
– Requests for and granting of
forbearance
– Existing and forecast changes in
business, financial and economic
conditions
technological environment of the borrower or in its business activities
The Group allocates each exposure to a credit risk grade based on a variety of data that is determined to be predictive of the risk of
default and applying experienced credit judgement. Credit risk grades are defined using qualitative and quantitative factors that are
indicative of risk of default. These factors vary depending on the nature of the exposure and the type of borrower.
Credit risk grades are defined and calibrated such that the risk of default occurring increases exponentially as the credit risk
deteriorates so, for example, the difference in risk of default between credit risk grades 1 and 2 is smaller than the difference
between credit risk grades 2 and 3.
Each exposure is allocated to a credit risk grade at initial recognition based on available information about the borrower. Exposures
Financials
143
Zenith Bank Plc Annual Report December 31, 2020
Notes to the Consolidated and Separate Financial
Statements for the Year Ended December 31, 2020
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 quarterly.
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, where
the receivables are grouped based on the nature of the transactions, aging of the balances and different historical loss patterns, to
determine the lifetime ECLs. Receivables relate to amounts due for the povision of services to the Banks’ customers. The provision
matrix estimates ECLs on the basis of historical default rates, adjusted for current and future economic conditions (expected changes
in default rates) without undue cost and effort.
3.2.13 Significant increase in credit risk
At each reporting date, the Group assesses whether there has been a significant increase in credit risk for exposures since initial
recognition by comparing the risk of default occurring over the remaining expected life from the reporting date and the date of
initial recognition. The criteria for determining whether credit risk has increased significantly depends on quantitative, qualitative as
well as backstop indicators. 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 credit rating is determined to have deteriorated since initial recognition by
more than a predetermined range. This inturn increases the probability of default of these facilities as a lifetime ECL is now used in
estimating ECL. Using its expert credit judgement and, where possible, relevant historical experience, the Group may determine
that an exposure has experienced 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.
144
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.
The Group monitors the effectiveness of the criteria used to identify significant increases in credit risk by regular reviews (quarterly)
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).
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.
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
Financials
145
Zenith Bank Plc Annual Report December 31, 2020
Notes to the Consolidated and Separate Financial
Statements for the Year Ended December 31, 2020
behaviour over a period of time before the exposure is no longer considered to be credit-impaired/in default or the PD is considered
to have decreased such that the loss allowance reverts to being measured at an amount equal to 12- month ECL.
3.2.15 Definition of default
The Group considers a financial asset to be in default when;
•
•
•
•
•
the borrower is unlikely to pay its credit obligations to the Group in full, without recourse by the Group to actions such as
realising security (if any is held); or
the borrower is past due more than 90 days on any material credit obligation to the Group.Overdrafts are considered as
being past due once the customer has breached an advised limit or been advised of a limit smaller than the current amount
outstanding. In assessing whether a borrower is in default, the Group considers indicators that are:
qualitative - e.g. breaches of covenant;
quantitative - e.g. overdue status and non-payment on another obligation of the same issuer to the Group; and
based on data developed internally and obtained from external sources.
Inputs into the assessment of whether a financial instrument is in default and their significance may vary over time to reflect changes
in circumstances.
The definition of default largely aligns with that applied by the Group for regulatory purposes (see note 3.2.8), except where there is
regulatory waiver on specifically identified loans and advances.
3.2.16 Incorporation of forward-looking information
The Group incorporates forward-looking information into both its assessment of whether the credit risk of an instrument 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.
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 sectorial historical loan performance. Some of
the macroeconomic variables considered include Crude Oil price, Foreign Exchange rate, GDP growth rate, Inflation rate, Monetary
policy rate and Crude production. However from the statistical analysis of the various macroeconomic variables, the result infers
that the key drivers vary across the different sectors. The macro economic variables used across the different sectors are as follows:
Oil and gas portfolio- Inflation rate, Crude Oil price and Monetary Policy Rate
Public sector Portfolio - Crude Oil price and Government expenditure
Manufacturing sector Portfolio - Inflation and Crude Oil price
Consumer Credit sector portfolio - GDP growth rate and Inflation
•
•
•
•
146
•
•
Agriculture sector portfolio- GDP growth rate and Prime lending rate
Others - Unemployment rate, GDP growth rate and Inflation.
The economic scenarios used as at December 31, 2020 included the following key indicators for Nigeria for the years ending 31
December 2021 to 2025.
2021
GDP growth rate
Base 1.7%
Inflation rate
Base 12.69%
2022
Base 2.52%
Base 11.15%
2023
Base 2.51%
Base 11%
2024
Base 2.52%
Base 10.85%
2025
Base 2.51%
Base 10.64%
forecast
Oil prices
Base 51 USD
Base 53 USD
Base 55 USD
Base 58 USD
Base 58 USD
Predicted relationships between the historical loan performance of the Bank’s portfolio and the macroeconomic variables has been
developed by analysing historical data over the past 5 years. The result of this analysis in addition to a 5 year forecast was used to
determine the scalars used in adjusting ECL.
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.
These parameters are generally derived from internally developed statistical models and other historical data and they are adjusted
to reflect forward-looking information as described above.
PD is an estimate of the likelihood of default over a given time horizon, which are calculated based on statistical rating models,
and assessed using rating tools tailored to the various categories of counterparties and exposures. These statistical models are
based on internally compiled data comprising both quantitative and qualitative factors. Where it is available, market data may
also be used to derive the PD for large corporate counterparties. If a counterparty or exposure migrates between rating classes,
then this will lead to a change in the estimate of the associated PD. 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 the
Financials
147
Zenith Bank Plc Annual Report December 31, 2020
Notes to the Consolidated and Separate Financial
Statements for the Year Ended December 31, 2020
financial guarantee becomes payable. For some financial assets, EAD is determined by modelling the range of possible exposure
outcomes at various points in time using scenario and statistical techniques.
As described above, and subject to using a maximum of a 12-month PD for financial assets for which credit risk has not significantly
increased, the Group measures ECL considering the risk of default over the maximum contractual period (including any borrower’s
extension options) over which it is exposed to credit risk, even if, for risk management purposes, the Group considers a longer
period. The maximum contractual period extends to the date at which the Group has the right to require repayment of an
advance or terminate a loan commitment or guarantee.
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
Impairment Charge/(writeback) (see
note 8)
Foreign exchange and other
movements
Closing balance
Gross amount
148
December 31, 2020
December 31, 2019316,276 316,276
12-month
ECL
563
972
40
1,575
880,957
12-month
ECL
72
(35)
526
563
283,845
In millions of Naira
Off balance sheet
exposure
Balance at 1 January
Impairment/(writeback)
(see note 8)
Closing balance
Gross amount
In millions of Naira
Assets pledged as collateral
at ammortised cost
Balance at 1 January
Impairment Charge/(writeback)
(see note 8)
Closing balance
Gross amount
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
Impairment Charge (see
note 8)
Write-off
Foreign exchange and
other movements
Closing balance
Gross amount
December 31, 2020
12-month
ECL
Lifetime ECL not
credit
impaired
Lifetime ECL credit
impaired
December 31,
2019
Total
12-month
ECL
5,538
(3,947)
1,591
150,452
-
20
20
432,478
-
3,221
3,221
16,997
5,538
(706)
4,832
599,927
December 31, 2020
December 31, 2019
12-month
ECL
69
286
355
227,283
December 31, 2020
12-month
ECL
Lifetime
ECL not
credit
impaired
Lifetime
ECL credit
impaired
Total
12-month
ECL
December 31, 2019
Lifetime
ECL not
credit-
impaired
Lifetime
ECL credit-
impaired
8,011
(2,473)
5,538
988,414
12-month
ECL
126
(57)
69
316,276
Total
111,089
156,794
141,403
193,408
29,621
1,091
16,083
(250)
(8,503)
8,949
(841)
(446)
15,965
5,235
36,040
(4,855)
(7,486)
7,564
(380)
(78)
152
3,847
(3,999)
(2,078)
(36,022)
38,100
-
-
-
-
-
-
1,039
(19,926)
56,326
37,439
17,985
13,356
(3,587)
27,754
-
-
-
-
(53,808)
(53,808)
(110)
(110)
-
-
-
-
(60,971)
(60,971)
(3,398)
(3,398)
23,400
8,703
108,211
140,315
29,621
16,083
111,089
156,794
2,153,579
578,537
187,226
2,919,342
2,113,588
180,754
168,017
2,462,359
Financials
149
Zenith Bank Plc Annual Report December 31, 2020
Notes to the Consolidated and Separate Financial
Statements for the Year Ended December 31, 2020
December 31, 2020
December 31, 2019
12-month
ECL
551
217
5
773
Total
551
217
5
773
476,287
476,287
12-month
ECL
2,572
(27)
(1,994)
551
234,857
December 31, 2020
December 31, 2019
Lifetime
ECL
142
(83)
(1)
58
810,552
Lifetime
ECL
1,969
(789)
(1,038)
142
707,245
December 31, 2020
December 31, 2019
12-month
ECL
17
659
676
695,898
12-month
ECL1
72
(55)
17
114,352
December 31, 2020
December 31, 2019
12-month
ECL
Lifetime ECL not credit
impaired
Lifetime ECL credit
impaired
12-month
ECL
5,538
(3,947)
-
1,591
459,001
-
20
-
20
432,478
-
3,221
-
3,221
16,997
8,011
(2,473)
5,538
754,469
In millions of Naira
Investment securities at amortised cost
Balance at 1 January
Impairment Charge/(writeback) (see note 8)
Foreign exchange and
other movements
Closing balance
Gross amount
In millions of Naira
Due from other banks
Balance at 1 January
Impairment/(writeback) (see note 8)
Foreign exchange and other movements
Closing balance
Gross amount
Bank
In millions of Naira
Treasury bills at ammortised cost
Balance at 1 January
Impairment Charge/(writeback) (see note 8)
Closing balance
Gross amount
In millions of Naira
Off balance sheet exposure
Balance at 1 January
Impairment/(writeback) (see note 8)
Closing balance
Gross amount
150
In millions of Naira
Assets pledged as collateral at ammortised cost
Balance at 1 January
Impairment Charge/(writeback) (see note 8)
December 31, 2020
December 31, 2019
12-month
ECL
69
286
355
227,283
12-month
ECL
126
(57)
69
316,276
Closing balance
Gross amount
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
note 8)
Impairment Charge (see
note 8)
Write-offs
Foreign exchange and
other movements
Closing balance
Gross amount
In millions of Naira
Due from other Banks
Balance at 1 January
Impairment/(writeback) (see
note 8)
Closing balance
Gross amount
December 31, 2020
12-month
ECL
Lifetime ECL
not credit
impaired
Lifetime
ECL credit
impaired
Total
12-month
ECL
December 31, 2019
Lifetime
ECL not
credit-
impaired
Lifetime
ECL credit-
impaired
Total
14,276
109,760
151,179
136,673
184,998
27,143
1,091
(8,503)
(250)
8,949
(841)
(446)
14,092
5,236
(7,486)
34,233
(4,856)
7,564
(380
(78)
152
3,847
(3,999)
(2,078)
(36,021)
38,100
-
-
-
-
-
-
(2,952)
(18,120)
56,566
35,494
4,774
12,658
(4,455)
12,977
-
-
-
-
-
-
-
-
12,605
698
868
14,171
(53,807)
(53,807)
-
-
(60,967)
(60,967)
-
-
16,931
8,702
107,233
132,866
27,143
14,276
109,760
151,179
2,012,000
578,481
182,182
2,772,663
2,052,919
176,053
161,679
2,390,651
December 31, 2020
12-month
ECL
December 31, 2019
12-month
ECL
142
(83)
59
532,435
931
789
142
482,212
Financials
151
Zenith Bank Plc Annual Report December 31, 2020
Notes to the Consolidated and Separate Financial
Statements for the Year Ended December 31, 2020
December 31, 2020
December 31, 2019
In millions of Naira
Investment securities at amortised cost
Balance at 1 January
Impairment Charge/(writeback)(see note 8)
Closing balance
Gross amount
12-month
ECL
538
217
755
208,973
12-month
ECL
565
(27)
538
113,959
Significant changes in the gross carrying amount of financial assets that contributed to changes in the loss allowance were
as follows:
Group
In millions of Naira
Treasury bills at amortised cost
Gross carrying amount at 1 January Transfers:
Financial assets derecognised during the period
other than write-offs
New financial assets originated or purchased
Foreign exchange and other movements
Closing gross carrying amount
December 31, 2020
December 31, 2019
Stage 1
12-month
ECL
283,845
-
597,112
-
880,957
Stage 2
12-month
ECL
490,319
(205,855)
-
381
284,845
Summary of loss allowance by class of financial instruments also showing ECL coverage ratio as at December 31, 2019.
December 31, 2020
December 31, 2019
In millions of Naira
Off balance sheet exposure
Gross carrying amount at 1 January Transfer:
Financial assets derecognised during the period
other than write-offs
New financial assets originated or purchased
Foreign exchange and other movements
Closing gross carrying amount
Stage 1
12-month
ECL
754,469
(482,096)
327,554
-
599,927
Stage 2
12-month
ECL
775,355
(21,104)
-
218
754,469
152
In millions of Naira
Assets pledged as collateral at amortised cost
Gross carrying amount at 1 January Transfers:
Financial assets derecognised during the period other than write-offs
Closing gross carrying amount
December 31, 2020
December 31, 2019
Stage 1
12-month
ECL
316,276
(88,993)
227,283
Stage 2
12-month
ECL
393,164
(76,888)
316,276
December 31, 2020
December 31, 2019
Stage 1
Stage 2
Stage 3
Stage 1
Stage 2
Stage 3
In millions of Naira
12-month
ECL
Lifetime ECL
not credit
impaired
Lifetime ECL
credit
impaired
Total
12-month
ECL
Lifetime
ECL not
credit-
impaired
Lifetime
ECL
credit-
impaired
Total
Loans and advances to
customers at amortised cost
Gross carrying amount at
1 January
Transfers:
2,113,588
180,754
168,017
2,462,359
1,451,450
383,300
181,770
2,016,520
Transfer from stage 1 to stage 2
(359,012)
359,012
Transfer from stage 1 to stage 3
(7, 026)
Transfer from stage 2 to stage 3
Transfer from stage 2 to stage 1
Transfer from stage 3 to stage 1
Transfer from stage 3 to stage 2
-
5,927
1,454
-
-
(28,108)
(5,927)
-
710
-
7,026
28,108
-
(1,454)
(710)
-
-
-
-
-
-
-
(44,483)
-
-
-
(5,987)
196,559
(196,559)
-
-
New financial assets
originated or purchased
Write-offs
Foreign exchange and
other movements
Closing gross carrying
amount
406,060
64,305
(55,024)
415,341
510,062
-
-
-
-
(53,807)
(53,807)
95,449
95,449
-
-
2,160,991
570,746
187,605 2,919,342 2,113,588
180,754
168,017
2,462,359
-
44,483
5,987
-
-
-
-
-
-
-
-
-
-
510,062
(60,971)
(60,971)
(3,252)
(3,252)
-
-
-
-
-
In millions of Naira
Investment securities at amortised cost
Gross carrying amount at 1 January Transfers:
Financial assets derecognised during the period other than write-offs
New financial assets originated or purchased
Foreign exchange and other movements
Closing gross carrying amount
December 31, 2020
December 31, 201976
Stage 1
12-month
ECL
234,857
-
212,941
28,489
476,287
Stage 2
12-month
ECL
307,401
(72,670)
-
126
234,857
Financials
153
Zenith Bank Plc Annual Report December 31, 2020
Notes to the Consolidated and Separate Financial
Statements for the Year Ended December 31, 2020
December 31, 2020
December 31, 2019
Stage 1
12-month
ECL
64,541
81,295
5,873
151,709
Stage 2
12-month
ECL
62,080
2,378
83
64,541
December 31, 2020
December 31, 2019
Stage 1
12-month
ECL
707,245
49,776
53,531
810,552
Stage 2
12-month
ECL
676,243
30,916
86
707,245
December 31, 2020
December 31, 2019
Stage 1
12-month
ECL
114,352
-
581,546
695,898
Stage 2
12-month
ECL
306,802
(192,450)
-
114,352
December 31, 2020
December 31, 2019
Stage 1
12-month
ECL
754,469
(482,096)
186,628
459,001
Stage 2
12-month
ECL
775,355
(20,886)
-
754,469
In millions of Naira
Other financial assets
Gross carrying amount at 1 January Transfers:
New financial assets originated or purchased
Foreign exchange and other movements
Closing gross carrying amount
In millions of Naira
Due from other banks
Gross carrying amount at 1 January Transfers:
Financial assets derecognised during the periodother than write-offs
New financial assets originated or purchased
Closing gross carrying amount
Bank
In millions of Naira
Treasury bills at amortised cost
Gross carrying amount at 1 January Transfers:
Financial assets derecognised during the periodother than write-offs
New financial assets originated or purchased
Closing gross carrying amount
In millions of Naira
Off balance sheet exposure
Gross carrying amount at 1 January Transfers:
Financial assets derecognised during the periodother than write-offs
New financial assets originated or purchased
Closing gross carrying amount
154
In millions of Naira
Assets pledged as collateral at amortised cost
Gross carrying amount at 1 January Transfers:
Financial assets derecognised during the periodother than write-offs
Closing gross carrying amount
December 31, 2020
December 31, 2019
Stage 1
12-month
ECL
316,276
(88,993)
227,283
Stage 2
12-month
ECL
393,164
(76,888)
316,276
December 31, 2020
December 31, 2019
Stage 1
Stage 2
Stage 3
Stage 1
Stage 2
Stage 3
In millions of Naira
12-month
ECL
Lifetime ECL
not credit
impaired
Lifetime ECL
credit
impaired
Total
12-month
ECL
Lifetime
ECL not
credit-
impaired
Lifetime
ECL credit-
impaired
Total
Loans and advances to customers at amortised cost
Gross carrying amount at
1 January
Transfers:
2,052,919
176,053
161,679
2,390,651
1,387,174
352,119
181,770
1,921,063
Transfer from stage 1 to stage 2
(359,012)
359,012
Transfer from stage 1 to stage 3
(7,026)
Transfer from stage 2 to stage 3
Transfer from stage 3 to stage 2
Transfer from stage 2 to stage 1
Transfer from stage 3 to stage 1
-
-
5,927
1,454
-
(28,108)
710
(5,927)
-
-
7,026
28,108
(710)
-
(1,454)
41,340
-
-
-
-
-
-
-
(40,876)
-
-
-
-
-
-
176,066
(176,066)
-
-
40,876
-
-
-
-
-
-
-
-
-
-
-
530,555
(60,967)
(60,967)
-
-
-
-
-
-
New financial assets
originated or purchased
Write-offs
Foreign exchange and
other movements
Closing gross carrying
amount
317,738
23,541
382,619
530,555
-
-
-
(53,807)
(53,807)
53,200
-
53,200
-
-
2,012,000
578,481
182,182 2,772,663 2,052,919
176,053
161,679
2,390,651
December 31, 2020
December 31, 2019
In millions of Naira
Investment securities at amortised cost
Gross carrying amount at 1 January Transfers:
New financial assets originated or purchased
Foreign exchange and other movements
Closing gross carrying amount
Stage 1
12-month
ECL
113,959
94,546
468
208,973
Stage 2
12-month
ECL
102,508
11,451
-
113,959
Financials
155
Zenith Bank Plc Annual Report December 31, 2020
Notes to the Consolidated and Separate Financial
Statements for the Year Ended December 31, 2020
In millions of Naira
Other financial assets
Gross carrying amount at 1 January Transfers:
New financial assets originated or purchased
Closing gross carrying amount
Due from other banks
Gross carrying amount at 1 January Transfers:
New financial assets originated or purchased
Foreign exchange and other movements
Closing gross carrying amount
December 31, 2020
December 31, 2019
Stage 1
12-month
ECL
61,973
83,374
145,347
482,212
3,198
47,025
532,435
Stage 2
12-month
ECL
59,104
2,869
61,973
394,397
87,815
-
482,212
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 collateral
Treasury bills
227,283
880,957
-
-
-
-
227,283
880,957
355
1,575
-
-
-
-
355
1,575
Loans and advances to
customers at amortised cost
Debt investment securities at
amortised cost
Other financial assets
measured at amortised cost
Due from other Banks
2,153,579
578,537
187,226
2,919,342
23,400
8,703
108,211
140,314
476,287
151,709
810,552
-
-
-
-
-
-
476,287
773
151,709
2,141
810,552
58
-
-
-
-
-
-
773
2,141
58
Subtotal
4,700,367
578,537
187,226
5,466,130
28,302
8,703
108,211
145,216
Off-balance sheet items
Loans and other credit related commitments
Letters of credit
Usance Financial guarantee
and similar contracts
Performance bonds and
guarantees
167,960
47,859
2,738
1,612
2,207
1,299
172,905
50,770
357,584
12,647
6,021
376,252
412
241
10
Undrawn overdraft balance
145,202
1,326
2,077
718,605
18,323
11,604
148,605
748,532
928
1,591
12
8
-
-
1,985
1,169
21
46
20
3,221
2,409
1,418
31
974
4,832
5,418,972 596,860
198,830 6,214,662
29,893
8,723 111,432
150,048
Subtotal
Total
156
0.16
0.18
1.09
0.16
1.41
0.01
0.60
0.25
0.50
-
0.64
0.22
0.55
-
-
-
-
1.50
57.80
-
-
-
-
-
-
1.50
57.80
0.16
0.18
4.81
0.16
1.41
0.01
2.66
-
0.50
-
-
0.11
1.46
-
-
1.39
2.79
. -
0.01
-
27.76
0.66
0.65
56.04
2.41
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
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
%
%
%
%
227,283
695,898
-
-
-
-
227,283
695,898
355
676
-
-
-
-
355
676
2,012,000
578,481
182,182
2,772,663
16,931
8,702
107,233
132,866
0.16
0.10
0.84
-
-
-
-
1.50
58.86
208,973
145,347
-
-
-
-
-
-
208,973
755
145,347
2,046
532,435
58
-
-
-
-
-
-
755
0.36
2,046
1.41
58
0.01
0.54
-
-
-
-
-
-
1.50
58.86
Due from other Banks
532,435
Subtotal
3,821,936
578,481
182,182
4,582,599
20,821
8,702
107,233
136,756
Off-balance sheet items
Loans and other credit
related commitments
Letters of credit
Usance Financial guarantee and
similar contracts
Performance bonds and
guarantees
79,238
46,658
2,738
1,612
2,207
1,299
84,183
49,569
306,581
12,647
6,021
325,249
Undrawn overdraft balance
145,202
1,326
2,077
148,605
607,606
Subtotal
Total
577,679
18,323
11,604
20
3,221
4,399,615 596,804
193,786 5,190,205
22,412
8,722 110,454 141,588
12
8
-
-
412
241
10
928
1,591
1,985
1,169
2,409
1,418
0.52
0.52
-
0.50
21
46
31
-
974
4,832
0.64
0.28
0.51
-
-
0.11
1.46
27.76
57.00
-
-
-
-
0.16
0.10
4.79
0.36
1.41
0.01
2.98
2.86
2.86
0.01
0.66
0.80
2.73
Financials
157
Zenith Bank Plc Annual Report December 31, 2020
Notes to the Consolidated and Separate Financial
Statements for the Year Ended December 31, 2020
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
%
%
%
%
0.02
0.20
1.44
0.23
1.20
0.02
0.87
0.65
0.85
0.25
0.42
0.51
0.79
-
-
-
-
8.90
66.12
-
-
-
-
-
-
8.90
66.12
-
-
-
-
-
-
-
-
DIV/0
DIV/0
0.02
0.20
6.40
0.23
1.20
0.02
3.92
0.65
0.85
0.25
0.42
0.51
8.90
66.12
3.21
Assets pledged as collateral
Treasury bills
316,276
283,845
-
-
-
-
316,276
283,845
69
563
-
-
-
-
69
563
2,113,588
180,754
168,017
2,462,359
30,429
16,083
11,089
157,601
Loans and advances to
customers at amortised cost
Debt investment securities at
amortised cost
Other financial assets
measured at amortised cost
234,857
64,541
Due from other Banks
707,245
-
-
-
-
-
-
234,857
64,541
707,245
551
777
142
-
-
-
-
-
-
551
777
142
Subtotal
3,720,352
180,754
168,017
4,069,123
32,531
16,083
111,089
159,703
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
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
-
-
-
-
-
-
-
-
-
-
3,528
677
923
410
5,538
4,805,677 180,754
168,017 5,154,448
38,069
16,083 111,089
165,241
158
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
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
%
%
%
%
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
3,141,691
176,054
161,679
3,479,424
28,629
14,276
109,760
152,665
0.02
0.01
1.32
0.47
1.16
0.03
0.91
-
-
-
-
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
16,997
96,315
3,528
677
-
-
261,495
923
96,911
16,997
868,377
410
5,538
-
-
-
-
-
-
-
-
-
-
3,528
677
0.85
0.85
923
0.35
410
5,538
0.42
0.65
0.86
-
-
-
-
-
-
-
-
-
-
8.11
61.43
3,993,071 176,054
178,676 4,347,801
34,167
14,276 109,760 158,203
0.02
0.01
6.32
0.47
1.16
0.03
4.39
0.85
0.70
0.35
0.42
0.64
3.64
3.2.19 Restructuring Policy
Loans with renegotiated terms are loans that have been restructured because the Group has made concessions by agreeing to
terms and conditions that are more favorable for the customer than these provided by the Group initially. The Group implements
restructuring policy in order to maximize collections opportunities and minimize the risk of default.
The Group’s credit committee may, from time to time, grant approval for restructuring of certain facilities due to the following
reasons:
a.
b.
c.
d.
e.
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;
Where there is temporary downturn in the customer’s business environment;
Financials
159
Zenith Bank Plc Annual Report December 31, 2020
Notes to the Consolidated and Separate Financial
Statements for the Year Ended December 31, 2020
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 market risk
taking activities across the Group. The Group enhances its Market Risk Management Framework on a continuous basis. The
operations of the unit is guided by the mission of “inculcating enduring market risk management values and culture, with a view
to reducing the risk of losses associated with market risk-taking activities, and optimizing risk-reward trade-off.”
The Group’s market risk objectives, policies and processes are aimed at instituting a model that objectively identifies, measures
and manages market risks in the Group and ensure that:
a.
b.
c.
d.
e.
The individuals who take or manage risk clearly understand it;
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
Sufficient capital, as a buffer, is available to take risk.
The Group proactively manages its market risk exposures in both the trading and non-trading books within the acceptable levels.
The Group’s market risks exposures are broadly categorised into:
(i)
Trading Market Risks - These are risks that arise primarily through trading activities and market making activities. These
activities include position-taking in foreign exchange and fixed income securities (Bonds and Treasury Bills).
(ii)
Non Trading Market Risks -These are risks that arise from assets and liabilities that are usually on the books for a longer
period of time, but where the intrinsic value is a function of the movement of financial market parameter.
The 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.
160
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, 2020
At December 31, 2019
Note
Carrying
Amount
Trading
Non-
trading
Carrying
Amount
Trading
Non-
trading
15
16
17
18
19
20
21
25
28
33
29
30
31
32
1,591,768
-
1,591,768
936,278
-
936,278
1,577,875
698,493
879,382
991,393
708,114
283,279
298,530
71,602
226,928
431,728
115,520
316,208
810,494
-
810,494
707,103
-
707,103
44,496
44,496
-
92,722
92,722
-
2,779,027
-
2,779,027
2,305,565
-
2,305,565
996,916
49,277
947,639
591,097
12,257
578,840
149,568
5,339,911
-
-
149,568
63,764
5,339,911
4,262,289
-
-
63,764
4,262,289
11,076
11,076
-
14,762
14,762
-
542,866
384,573
870,080
43,177
-
-
-
-
542,866
330,552
384,573
392,871
870,080
322,479
43,177
39,092
-
-
-
-
330,552
392,871
322,479
39,092
At December 31, 2020
At December 31, 2019
Note
Carrying
Amount
Trading
Non-
trading
Carrying
Amount
Trading
Non-
trading
15
16
17
18
19
20
21
25
28
33
29
30
31
32
1,503,245
-
1,503,245
879,449
-
879,449
1,393,421
698,199
695,222
822,449
708,114
114,335
298,530
71,602
226,928
431,728
115,520
316,208
532,377
-
532,377
482,070
-
482,070
41,729
41,729
-
92,722
92,722
-
2,639,797
-
2,639,797
2,239,472
-
2,239,472
333,126
44,933
288,193
189,358
12,257
177,101
143,301
4,298,258
-
-
143,301
61,253
4,298,258
3,486,887
-
-
61,253
3,486,887
11,076
11,076
-
14,762
14,762
-
515,916
384,573
874,090
43,177
-
-
-
-
515,916
380,798
384,573
392,871
874,090
329,778
43,177
39,092
-
-
-
-
380,798
392,871
329,778
39,092
161
Zenith Bank Plc Annual Report December 31, 2020
Notes to the Consolidated and Separate Financial
Statements for the Year Ended December 31, 2020
3.3.2 Measurement of Market Risk
The Group adopts Non-VAR (Value-at-risk) approach for quantitative measurement and control of market risks in both trading and
non-trading books. The Non -VAR (Value at risk) measurements includes: Duration; Factor Sensitivities (Pv01), Stress Testing, Aggregate
Open Position etc. The measured risks are therefore monitored against the pre-set limits on a daily basis. All exceptions are investigated
and reported in line with internal policies and guidelines.
Limits are sets to reflect the risk appetite that is approved by the Board of Directors. These limits are reviewed, at least, annually or at
a more frequent interval. Some of the limits include; Net Open Position (NOP- for foreign exchange); Aggregate Control Limits (for
Securities); Management Action Trigger (MAT); Duration; Factor Sensitivities (Pv01); Permitted Instrument and Tenor Limits; Holding
Period and Off Market Rate Tolerance limit.
Stress testing is an important risk management tool that is used by the Group as part of its enterprise-wide risk management. It is the
evaluation of the Group’s financial position under severe but plausible scenarios to assist in decision- making. Stress testing provides
the Group with the opportunity to spot emerging risks, uncover weak spots and take preventive action. It also alerts management
to adverse unexpected outcomes related to a variety of risks and provides an indication of how much capital might be needed to
absorb losses should large shocks occur. The Group adopts both single factor and multifactor stress testing approaches (sensitivity
and scenario based) in conducting stress testing within the risk areas of liquidity, foreign exchange, interest rate, market and credit
risks. Stress testing is conducted both on a regular and ad-hoc basis in response to changing financial, regulatory and economic
environment/circumstances.
3.3.3 Foreign exchange risk
Fluctuations in the prevailing foreign currency exchange rates can affect the Group’s financial position and cash flows - ‘on’ and
‘off’ balance sheet. The Group manages part of the foreign exchange risks through basic derivative products and hedges (such as
forwards and swaps). The risk is also managed by ensuring that all risks taken by the Group are within approved limits. In addition
to adherence to regulatory limits, Zenith Group established various internal limits (such as non- VAR models, overall Overnight and
Intra-day positions), dealer limits, as well as individual currency limits among others limits which are monitored by the Market Risk
Department on a regular basis. These limits are set with the aim of minimizing the Group’s risk exposures to exchange rates volatilities
to an acceptable level. The Group’s transactions are carried out majorly in four (4) foreign currencies with a significant percentage of
transactions involving US Dollars. The Group uses the average interbank exchange rate for each foreign currency to value assets and
liabilities denominated in foreign currencies.
Group
The table below summarizes the Group’s exposure to foreign currency exchange rate risk at December 31, 2020 and
December 31, 2019. Included in the table are the Group’s financial instruments at carrying amounts, categorised by currency.
In millions of Naira
At December 31, 2020
Assets
Naira
Dollar
GBP
Euro
Others
Total
Cash and balances with central bank
1,477,436
72,065
5,762
7,023
29,482
1,591,768
Treasury bills
Assets pledged as collateral
Due from other banks
Derivative assets
Loans and advances to customers
Investment securities
Other financial assets
Swap contracts**
162
-
-
-
-
60,268
60,792
60,990
1,507,915
298,530
-
-
3,000
9,862
625,444
33,774
1,477,562
1,185,037
480,093
482,626
21,270
126,353
17,014
(440,363)
440,363
-
-
261
6,686
531
35,070
12,927
-
-
69,960
1,577,875
-
68
298,530
810,494
44,496
74,672
2,779,027
-
6,201
-
996,916
149,568
-
4,940,388
2,856,323
94,247
116,343
241,373
8,248,674
At December 31, 2020
Naira
Dollar
GBP
Euro
Others
Total
Liabilities
Customer deposits
Derivative liabilities
Other financial liabilities
On-lending facilities
Borrowings
Debt securities issued
4,940,388
440,363
94,247
3,483,784
1,174,302
352,353
46,468
283,004
5,339,911
9,514
430,266
384,573
-
-
1,497
33,779
-
870,080
43,177
-
197
-
-
-
5
60
11,076
13,126
65,498
-
-
-
-
-
-
542,866
384,573
870,080
43,177
4,308,137
2,122,835
352,550
59,599
348,562
7,191,683
Net-exposure
632,251
733,488
(258,303)
56,744
(107,189)
1,056,991
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 (gross)
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
-
-
-
14,626
11,223
-
43,784
118,829
-
-
936,279
991,393
431,728
707,103
92,723
40,244
2,305,565
-
-
591,099
64,541
39,344
37,038
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
Net Exposure
56,518
667,292
6,800
24,508
14,126
769,212
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 9% (December 31, 2019: 6% and 9%, with all other
variables held constant.
Financials
163
Zenith Bank Plc Annual Report December 31, 2020
Notes to the Consolidated and Separate Financial
Statements for the Year Ended December 31, 2020
US Dollar effect of 9% (31 December 2019: 6%) 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 2019: 9%) 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 2019: 6%) up or (down) movement on OCI and statement of financial position
size (in millions of Naira)
US Dollar effect of 9% (31 December 2019: 9%) up or (down) movement on OCI and statement of financial position
size (in millions of Naira)
31-Dec-20
31-Dec-19
57,148
57,148
2,651
5,303
31-Dec-20
31-Dec-19
1,193
1,193
26
39
Bank
The table below summarizes the Bank’s exposure to foreign currency exchange rate risk at December 31, 2020 and December
31, 2019. Included in the table are the Bank’s financial instruments at carrying amounts, categorised by currency.
In millions of Naira
At December 31, 2020
Assets
Naira
Dollar
GBP
Euro
Others
Total
Cash and balances with central bank
1,477,072
25,038
858
277
1,393,421
298,530
-
-
3,000
9,862
479,636
31,007
1,477,448
1,141,271
251,790
126,450
81,336
16,851
(440,363)
440,363
-
-
-
-
7,396
40,528
261
56
-
-
-
531
21,021
-
-
-
-
-
-
1,817
68
-
-
-
-
1,503,245
1,393,421
298,530
532,377
41,729
2,639,796
333,126
143,301
-
4,597,210
2,215,502
8,571
62,357
1,885
6,885,525
3,483,784
769,957
13,863
29,502
1,152
4,298,258
9,514
430,266
384,573
-
-
1,497
69,418
-
874,090
43,177
-
345
-
-
-
5
60
11,076
13,126
2,760
-
-
-
-
-
-
515,916
384,573
874,090
43,177
4,308,137
1,758,139
14,208
289,073
457,363
(5,637)
42,633
19,724
3,972
6,127,090
(2,087)
758,435
Treasury bills
Assets pledged as collateral
Due from other banks
Derivative assets
Loans and advances to customers
Investment securities
Other financial assets
Swap contracts**
Liabilities
Customer deposits
Derivative liabilities
Other financial liabilities
On-lending facilities
Borrowings
Debt securities issued
Net Exposure
164
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 (gross)
Investment securities
Other financial assets
Liabilities
Customer deposits
Derivative liabilities
Other financial liabilities
On-lending facilities
Borrowings
Debt securities issued
Net Exposure
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
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, 2020 was 400.33 and 384.64 respectively.
**The Bank entered into currency swap (USD/NGN) transactions with various counterparties. The nominal cash exchange of
these transactions are not captured in the derivative assets recognised on the balance sheet. Amounts captured on balance
sheet represent the fair value of these contracts.
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 9% (December 31, 2019: 6% and 9%), with all other variables
held constant.
In millions of Naira
US Dollar effect of 9% (31 December 2019: 6%) up or (down) movement on profit before tax and balance sheet size
US Dollar effect of 9% (31 December 2019: 9%) 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 2019: 6%) up or (down) movement on OCI and statement of financial position
size (in millions of Naira)
US Dollar effect of 9% (31 December 2019: 9%) up or (down) movement on OCI and statement of financial position
size (in millions of Naira)
31-Dec-20
31-Dec-19
34,208
34,208
2,541
5,082
31-Dec-20
31-Dec-19
1,193
1,193
20
30
Financials
165
Zenith Bank Plc Annual Report December 31, 2020
Notes to the Consolidated and Separate Financial
Statements for the Year Ended December 31, 2020
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.
Group
The table below summarizes the Group’s interest rate gap position:
In millions of Naira
At December 31, 2020
Assets
Cash and balances with central banks
Treasury and other eligible bills (Amortized cost)
Assets pledged as collateral
Due from other banks
Derivative assets
Loans and advances to customers (Gross)
Investment securities (Amortized cost and Fair value through OCI)
Other financial assets
Liabilities
Customer deposits
Derivative liabilities
Other financial liabilities
On-lending facilities
Borrowings
Debt securities issued
Note
Carrying Amount
Rate sensitive
Non rate sensitive
15
16
17
18
19
21
25
28
33
29
30
31
32
1,591,768
879,382
226,928
810,494
44,496
-
-
-
167,855
-
2,779,027
2,771,883
947,639
149,568
-
-
1,591,768
879,382
226,928
642,639
44,496
7,144
947,639
149,568
7,429,302
2,939,738
4,489,564
5,339,911
11,076
542,866
384,573
870,080
43,177
4,507,005
11,076
-
-
290,964
-
832,906
-
542,866
384,573
579,116
43,177
7,191,683
4,809,045
2,382,638
Total interest repricing gap
237,619
(1,869,307)
The table shows the maturity profile of financial instruments that are rate sensitive.
At December 31, 2020
In millions of Naira
Assets
Due from other banks
Loans and advances to customers
Liabilities
Customer deposits
Derivative liabilities
Borrowings
Up to 1
month
1 - 3
months
3 - 6
months
6 - 12
months
Over 1
year
Total rate
sensitive
-
337,128
337,128
1,401,728
2,931
-
167,855
154,416
322,271
79,696
5,709
-
127,457
127,457
-
-
452,958
1,699,924
452,958
1,699,924
167,855
2,771,883
2,939,738
448,060
82,036
2,495,485
4,507,005
716
-
229,350
1,720
61,614
-
-
11,076
290,964
Total interest repricing gap
(1,067,531)
236,866
(550,669)
307,588
(795,561)
(1,869,307)
1,404,659
85,405
678,126
145,370 2,495,485
4,809,044
166
At December 31, 2019
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 liabilties
Financial liabilities
On-lending facilities
Borrowings
Debt securities issued
Total interest repricing gap
In millions of Naira
At December 31, 2019
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
25
28
33
29
30
31
32
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
5,362,045
78,507
3,674,292
14,762
-
392,871
322,479
39,092
4,443,496
(64,667)
587,997
-
330,552
-
-
-
918,549
-
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
4,443,495
Total interest repricing gap
(536,633)
266,388
276,770
192,190 (263,380)
(64,665)
Financials
167
Zenith Bank Plc Annual Report December 31, 2020
Notes to the Consolidated and Separate Financial
Statements for the Year Ended December 31, 2020
Interest rate sensitivity showing fair value interest rate risk
In millions of Naira
Financial assets at FVPL
Treasury bills
Government bonds
Total
Impact on income statement:
Favourable change at 2% reduction in interest rate
Unfavourable change at 2% increase in interest rate
FVOCI investment securities
Government bonds
Impact on other comprehensive income statement: Favourable change at 2% reduction in
interest rate
Unfavourable change at 2% increase in interest rate
31-Dec-20
31-Dec-19
698,493
49,277
747,770
14,955
(14,955)
392,150
7,843
(7,843)
708,111
12,257
720,368
14,407
(14,407)
280,854
5,617
(5,617)
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 200 basis points, with all other variables held constant.
In millions of Naira
Effect of 200 basis points (December 2019: 300basis points) movement on profit before tax
31-Dec-20
31-Dec-19
5,117
4,101
* Holding all other variables constant
168
Bank
The table below summarizes the Bank’s interest rate gap position:
At December 31, 2020
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
Investment securities (Amortized cost and Fair value through OCI)
Other financial assets
Liabilities
Customer deposits
Derivative liabilities
Other financial liabilities
On-lending facilities
Borrowings
Debt securities issued
Note
Carrying Amount Rate sensitive Non rate sensitive
15
16
17
18
19
21
19
28
33
29
30
31
32
1,503,245
695,222
226,928
532,377
41,729
-
-
-
167,855
-
2,639,797
2,632,652
288,193
143,301
-
-
1,503,245
695,222
226,928
364,522
41,729
7,144
288,193
143,301
6,070,792
2,800,507
3,270,284
4,298,258
11,076
515,916
384,573
874,090
43,177
3,465,351
11,076
-
-
290,964
-
832,907
-
515,916
384,573
583,126
43,177
6,127,090
3,767,391
2,359,699
Total interest repricing gap
(56,298)
(966,884)
910,585
The table shows the maturity profile of financial instruments that are rate sensitive.
At December 31, 2020
In millions of Naira
Assets
Due from other banks
Up to 1
month
1 - 3
months
3 - 6
months
6 - 12
months
Over 1
year
Total rate
sensitive
-
167,855
-
-
-
167,855
Loans and advances to customers
293,913
146,030
124,629
449,447
1,618,633
2,632,652
Investment securities (Amortized cost and Fair value through OCI)
-
40,462
-
39,886
127,870
208,218
293,913
354,347
124,629
489,333
1,746,503
3,008,725
Liabilities
Customer deposits
Derivative liabilities
Borrowings
1,034,313
2,931
-
34,864
5,709
54
716
-
229,350
528
2,395,592
3,465,351
1,720
61,614
-
-
11,076
290,964
1,037,244
40,573
230,120
63,862 2,395,592
3,767,391
Total interest repricing gap
(743,331)
313,774 (105,491)
425,471 (649,089)
(758,666)
Financials
169
Zenith Bank Plc Annual Report December 31, 2020
Notes to the Consolidated and Separate Financial
Statements for the Year Ended December 31, 2020
At December 31, 2019
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
Derivative liabilities
Financial liabilities
On-lending facilities
Borrowings
Debt securities issued
Total interest repricing gap
15
16
17
18
19
21
25
28
29
13
33
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
-
4,513,787
3,511,405
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)
877,449
-
-
-
-
-
63,680
61,253
1,002,382
587,997
-
380,798
-
-
-
968,795
33,587
The table shows the maturity profile of financial instruments that are rate sensitive.
At December 31, 2019
In millions of Naira
Assets
Cash and balances with central bank
Treasury bills
Assets pledged as collateral
Derivative assets
Loans and advances to customers
Investment securities (Amortized cost and fair value through OCI)
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
411,816
-
-
34,058
79,758
47,686
22,800
88,653
4,668
-
23,201
3,406
122,386
-
55,833
15,715
32,770
16,742
43,766
-
-
205,690
-
-
2,000
114,334
316,208
482,071
92,722
105,346
179,293
1,605,543
2,390,651
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
170
Interest rate sensitivity showing fair value interest rate risk
In millions of Naira
Financial assets at FVPL
Treasury bills
Government bonds
Total
Impact on income statement:
Favourable change at 2% reduction in interest rate
Unfavourable change at 2% increase in interest rate
FVOCI investment securities
Government bonds
Impact on other comprehensive income statement: Favourable change at 2% reduction in
interest rate
Unfavourable change at 2% increase in interest rate
31-Dec-20
31-Dec-19
698,199
44,933
743,132
14,863
(14,863)
392,150
7,843
(7,843)
708,114
12,257
720,371
14,407
(14,407)
280,854
5,617
(5,617)
The management of interest risk against interest rate gap limits is supplemented by the monitoring of the sensitivity of the
Group’s financial assets and liabilities to various scenarios. Interest rate movement affects reported income by causing an increase
or decrease in net interest income and fair value changes.
The table below shows the impact on the Bank’s profit before tax if interest rates on financial instruments held at amortized cost
or at fair value had increased or decreased by 500 basis points, with all other variables held constant.
In millions of Naira
Effect of 500 basis points (December 2019: 300 basis points) movement on profit
before tax
31-Dec-20
31-Dec-19
12,793
2,166
The effect of 500 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.
* Holding all other variables constant
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)
8.64% equity holding in African Finance Corporation (AFC) valued at N76.06 billion and cost N40 billion.
(ii)
3.6% equity holding in Nigerian Interbank Settlement Scheme (NIBBS) valued at N2.11 billion and cost N50 million.
(iii)
2.31% equity holding in FMDQ holdings plc valued at N1.65 billion.
(iv)
0.88% equity holding in Unified Payment Services (UPS) valued at N96.66 million.
The AFC is a private sector-led investment bank and development finance institution which has the Central Bank of Nigeria (CBN) as
the single major shareholder (42.39%) 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).
Financials
171
Zenith Bank Plc Annual Report December 31, 2020
Notes to the Consolidated and Separate Financial
Statements for the Year Ended December 31, 2020
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.
3.4.1 Liquidity risk management process
The Group has a comprehensive liquidity risk management framework that ensures that adequate liquidity, including a cushion
of unencumbered and high quality liquid assets is maintained at all times, to enable the Group withstand a range of stress events,
including those that might involve loss or impairment of funding sources.
The Group’s liquidity risk exposure is monitored and managed by the Asset and Liability Management Committee (ALCO) on a regular
basis. This process includes:
a.
Projecting cash flows and considering the level of liquid assets necessary in relation thereto;
b.
c.
d.
e.
f.
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 ensure a satisfactory
overall funding mix;
Maintaining up-to-date liquidity and funding contingency plans. These plans identify early indicators of stress conditions
and describe actions to be taken in the event of difficulties arising from systemic or other crises while minimizing any adverse
long-term implications for the business;
g.
Regular conduct of stress testing, coupled with testing of contingency funding plans from time to time.
The Maximum Cumulative Outflow has remained positive all through the short tenor maturity buckets. Assessments are carried out
on contractual basis. These reveal very sound and robust liquidity position of the Group.
The Group maintains liquid assets and marketable securities adequate, within regulatory limits, to manage liquidity stress situation.
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:
(i)
(ii)
(iii)
Cash flows;
Liquidity position; and
Profitability.
(a).
(b).
172
The Board and the Asset and Liability Committee (ALCO) regularly review the stresses and scenarios tested to ensure that their nature
and severity remain appropriate and relevant to the Bank. These reviews take into the account the following;
a.
Changes in market condition;
b.
c.
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.
The Group considers the potential impact of idiosyncratic Institution-Specific, market-wide and combined alternative scenarios while
carrying out the test to ensure that all areas are appropriately covered. In addition, the Group also considers the impact of severe
stress scenarios.
Contingency Funding Plan
The Group maintains a contingency funding plan which sets out strategies for addressing liquidity. The Plan:
a.
outlines strategies, policies and plans to manage a range of stresses;
b.
c.
d.
e.
f.
g.
h.
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 robust to withstand simultaneous disruptions in a range of payment and settlement;
outlines how the Group will manage both internal communications and those with its external stakeholders; and
As part of the contingency funding plan process, the Group maintains committed credit lines that can be drawn in case of liquidity
crises. These lines are renewed as at when due.
3.4.3 Funding approach
Our sources of liquidity are regularly reviewed by both the ALCO and the Treasury Group in order to avoid undue reliance on large
individual depositors and to ensure that a satisfactory overall funding mix is maintained at all times. The funding strategy is geared
toward ensuring effective diversification in the sources and tenor of funding. The Group however places greater emphasis on demand
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.
Financials
173
Zenith Bank Plc Annual Report December 31, 2020
Notes to the Consolidated and Separate Financial
Statements for the Year Ended December 31, 2020
At year end
Average for the period/year
Maximum for the period/year
Minimum for the period/year
31-Dec-20
31-Dec-19
31-Dec-20
31-Dec-19
66.23%
59.69%
71.80%
48.42%
57.25%
68.90%
85.47%
37.52%
62.45%
48.49%
62.45%
35.99%
57.18%
68.05%
80.41%
36.00%
Liquidity reserve
(b)
The table sets out the component of the Group’s liquidity reserve. These are liquid instruments the Group uses to settle short
term or current obligations.
Group
In millions of Naira
Cash and balances with central banks
Treasury bills
Balances with other banks
Investment securities
Assets pledged as collaterals
Total
Bank
In millions of Naira
Cash and balances with central banks
Treasury bills
Balances with other banks
Investment securities
Assets pledged as collaterals
Total
31-Dec-20
31-Dec-19
Carrying value
Carrying value
1,591,768
1,577,575
810,494
916,941
298,530
5,195,308
936,278
991,393
707,103
527,417
431,728
3,593,919
31-Dec-20
31-Dec-19
Carrying value
Carrying value
1,503,245
1,393,421
532,377
253,151
298,530
3,980,724
879,449
822,449
482,070
125,678
431,728
2,741,374
Total
936,278
991,956
431,728
707,245
175,328
991,956
-
707,245
2,462,359
2,462,359
591,650
591,650
64,541
64,541
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-20
31-Dec-19
Note
Encum-
bered
Unenc-
umbered
Total
Encum-
bered
Unenc-
umbered
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
25
1,370,619
221,149
1,591,768
760,950
-
1,577,875
1,577,875
-
298,530
-
298,530
431,728
-
-
-
-
810,494
810,494
2,779,027
2,779,027
996,916
996,916
149,568
149,568
-
-
-
-
174
Bank
In millions of Naira
31-Dec-20
31-Dec-19
Note
Encum-
bered
Unenc-
umbered
Total
Encum-
bered
Unenc-
umbered
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
25
1,370,619
132,626
1,503,245
760,950
-
1,393,421
1,393,421
-
298,530
-
298,530
431,728
-
-
-
-
532,377
532,377
2,639,797
2,639,797
333,126
333,126
143,301
143,301
-
-
-
-
Total
879,449
822,466
431,728
482,212
118,499
822,466
-
482,212
2,390,651
2,390,651
189,358
189,358
61,253
61,253
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, 2020 and December 31, 2019 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.
Financials
175
Zenith Bank Plc Annual Report December 31, 2020
Notes to the Consolidated and Separate Financial
Statements for the Year Ended December 31, 2020
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
25
19
28
29
30
31
32
33
221,149
109,117
47,845
642,639
396,242
29,865
118,461
-
473,951
33,409
171,795
154,998
101,658
-
332
-
129,824
110,864
111
-
1,370,619
97,616
1,014,333
-
-
71,316
461,220
-
-
1,591,768
1,591,768
1,695,017
1,577,675
614,122
814,434
298,530
810,494
490,704
1,716,087
2,887,855
2,779,027
175,504
-
707,261
30,996
1,125,152
149,568
996,916
149,568
1,565,318
935,811
338,747
3,122,476
2,915,564
8,877,916
8,203,978
-
98,191
2,377
-
21,463
5,145
-
-
16,589
363,850
591
1,749
100,568
26,608
17,180
365,599
-
-
-
-
-
500,093
9,862
-
34,634
9,862
509,955
44,496
2,605,785
104,554
525,323
1,777
1,616
330
92,135
1,350
-
2,542
244
49,250
374,899
160,259
197,615
-
-
1,594
1,621
82,035
2,495,502
5,380,011
5,339,911
38,029
491,853
102,773
44,591
568,860
494,204
884,796
47,806
542,866
384,573
870,080
43,177
3,182,135
481,399
255,338
284,057
3,172,748
7,375,677
7,180,607
3,182,135
-
13,579
2,331
-
21,469
5,051
-
16,526
820
-
-
1,312
15,910
26,520
17,346
1,312
-
-
-
-
-
14,762
51,574
9,514
1,562
9,514
61,088
11,076
Group
At December 31, 2020
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:
Gross settled
Net settled
Liabilities
Non-derivative liabilities
Customer deposits
Financial liabilities
On-lending facilities
Borrowings
Debt securities issued
Derivative assets
Trading:
Gross settled
Net settled
176
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
Liabilities
Non-derivative liabilities
Customer's deposits
Financial liabilities
On-lending facilities
Borrowings
Debt securities issued
Derivative liabilities
Trading:
Inflow
15
16
17
18
20
21
25
19
27
28
29
30
32
254,132
-
-
-
682,106
130,190
337,192
203,413
519,163
102,545
32,781
-
588,738
-
19,717
122,438
104,368
98,530
47,702
88,633
16,222
29,124
504,182
406,030
51,753
38,109
173,291
1,533,243
2,305,565
2,305,565
2,686
11,394
742,106
824,161
591,097
-
-
3,067
22,588
63,764
63,764
936,238
1,189,958
838,654
707,103
936,278
991,393
431,728
707,103
1,413,519
588,279
452,622
842,241 3,568,781
6,865,442
6,026,928
-
9,414
9,414
-
-
22,800
16,742
22,800
16,742
-
43,766
43,766
-
-
-
-
92,722
92,722
92,722
92,722
92,722
4,241,370
15,851
4,302
31
4,262,289
4,262,289
125,315
6,717
2,574
-
735
-
862
-
-
-
205,237
2,691
382,600
44,669
-
30,671
1,460
237,869
1,477
24,606
43,552
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
3,242
-
5,249
5,249
-
3,953
3,953
-
2,318
2,318
-
-
-
-
14,762
14,762
14,762
14,762
29,524
Financials
177
Zenith Bank Plc Annual Report December 31, 2020
Notes to the Consolidated and Separate Financial
Statements for the Year Ended December 31, 2020
Bank
At December 31, 2020
Note
Up to 1
month
1 - 3
months
3 - 6
months
6 - 12
months
Over 1
year
Gross nominal
inflow/ (outflow)
Carrying
amount
132,626
100,588
47,845
364,522
353,027
4,608
111,474
-
450,496
33,409
171,795
146,612
46,568
-
-
1,370,619
51,227
332
-
771,723
71,316
-
-
-
461,220
-
1,503,245
1,374,034
614,122
536,317
1,503,245
1,393,421
298,530
532,377
126,997
487,193
1,662,148
2,775,977
2,639,797
4,168
111
45,414
370,944
-
31,716
471,702
143,301
333,126
143,301
1,114,690
848,880
182,835
2,746,265
2,526,028
7,418,698
6,843,797
-
-
16,589
363,850
591
1,749
17,180
365,599
-
-
-
-
-
500,093
9,862
509,955
-
34,634
9,862
44,496
54
1,350
-
1,439
244
374,899
164,506
197,615
-
1,594
1,621
536
2,395,593
4,298,287
4,298,258
27,246
491,853
102,773
44,591
536,416
494,204
889,043
47,806
515,916
384,573
874,090
43,177
2,423,476
411,265
167,504
201,455
3,062,056
6,265,756
6,116,014
2,423,476
-
13,579
2,331
-
16,526
820
21,469
5,051
15,910
26,520
17,346
-
-
1,313
1,313
-
-
-
-
-
51,574
9,515
-
1,562
9,514
61,089
11,076
-
21,463
5,145
26,608
34,878
1,158
330
-
98,191
2,377
100,568
1,867,226
505,223
1,777
49,250
-
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:
Gross settled
Net settled
Liabilities
Non-derivative liabilities
Customer deposits
Financial liabilities
On-lending facilities
Borrowings
Debt securities issued
Derivative liabilities
Trading:
Gross settled
Net settled
15
16
17
18
20
21
25
19
28
29
30
31
32
33
178
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
Liabilities
Non-derivative liabilities
Customer deposits
Financial liabilities
On-lending facilities
Borrowings
Debt securities issued
Derivative assets
Trading:
Outflow
15
16
17
18
20
21
25
19
28
29
30
31
32
33
-
-
-
682,106
402,759
102,545
32,781
-
588,738
-
231,496
150,096
19,717
122,438
104,368
98,530
47,702
88,633
6,675
173,291
1,485,678
2,239,472
2,239,472
2,686
11,394
297,147
320,687
189,358
879,449
881,092
838,654
482,222
879,449
822,449
431,728
482,070
197,343
96,741
29,124
279,301
387,502
2,785
38,109
-
-
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
9,414
-
22,800
22,800
-
16,742
16,742
-
43,766
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
-
2,711
237,869
1,477
23
255,483
382,774
24,606
43,552
3,486,887
3,486,887
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
2,850,662
-
3,242
3,242
5,249
5,249
-
3,953
3,953
-
2,318
2,318
-
-
-
-
14,762
14,762
14,762
-
14,762
The amounts in the table above have been compiled as follows.
Type of financial instrument
Basis on which amounts compiled
Non-derivative financial liabilities and financial assets
Undiscounted cash flows, which include estimated interest payments.
Issued financial guarantee contracts
Derivative financial liabilities and financial assets
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.
Financials
179
Zenith Bank Plc Annual Report December 31, 2020
Notes to the Consolidated and Separate Financial
Statements for the Year Ended December 31, 2020
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.
Carrying
amount
Less than 3
months
3 -6
months
6 - 12
months
1 to 5 Years More than 5
years
Group
At December 31, 2020
In millions of Naira
Financial guarantees
Usance
Letters of Credit
Performance bonds and Guarantees
Total
599,927
209,832
74,971
149,996
103,682
50,770
172,905
376,252
41,657
93,389
74,786
114
10,986
63,871
8,999
56,710
84,287
-
11,819
91,863
-
-
91,863
91,863
At December 31, 2019
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
79,318
545,174
363,922
988,414
62,972
16,346
394,651
135,665
77,040
19,528
-
12,747
44,128
534,663
171,539
56,875
-
2,111
108,959
111,070
-
-
114,267
114,267
180
At December 31, 2020
In millions of Naira
Financial guarantees
Usance
Letters of Credit
Performance bonds and Guarantees
Total
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
299,445
55,357
49,569
84,183
325,249
459,001
Carrying
amount
299,445
55,357
79,318
413,656
261,495
754,469
102,937
9,672
1,602
-
14,032
31,708
78,292
82,106
40,456
68,705
74,291
114
194
63,562
8,999
15,284
39,004
183,452
63,870
63,287
-
-
86,948
86,948
-
-
61,444
61,444
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
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.
Financials
181
Zenith Bank Plc Annual Report December 31, 2020
Notes to the Consolidated and Separate Financial
Statements for the Year Ended December 31, 2020
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, 2020
At December 31, 2019
Carrying
Value
Fair value Fair value
hierarchy
Carrying
Value
Fair
value
Fair value
hierarchy
698,493
698,493
1&2
708,114
708,114
1&2
49,277
49,277
44,496
71,602
44,496
71,602
1
2
12,257
12,257
92,722
92,722
1
2
1&2
115,520
115,520
1&2
79,975
392,150
79,975
392,150
1,591,768
1,591,768
879,382
893,721
226,928
304,946
810,494
810,494
2,779,027
2,191,000
2&3
63,680
63,680
2
-
1&2
1&2
-
-
280,854
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
-
-
475,514
511,798
1&2
234,305
301,370
1,2&3
149,568
149,568
11,076
11,076
5,339,911
5,339,911
542,866
542,866
384,573
384,573
870,080
870,080
43,177
49,410
-
2
-
-
-
-
-
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
-
-
-
-
-
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
25
33
28
29
30
31
32
182
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, 2020
At December 31, 2019
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
25
698,199
698,199
1&2
708,114
708,114
1&2
44,933
41,729
71,602
44,933
41,729
71,602
1
2
12,257
92,722
12,257
92,722
1
2
1 & 2
115,520
115,520
1 & 2
79,975
79,975
2&3
63,680
63,680
1,503,245
1,503,245
695,222
709,561
226,928
304,946
532,377
532,377
2,639,797
2,051,770
208,218
247,178
143,301
143,301
-
1&2
1&2
-
-
-
-
879,449
114,335
879,449
114,995
316,207
355,950
482,070
482,070
2,239,472
2,239,472
113,421
125,141
1,2&3
61,253
61,253
323
11,076
11,076
2
14,762
14,762
28
29
30
31
32
4,298,258
4,298,258
515,916
515,916
384,573
384,573
874,090
874,090
43,177
49,410
-
-
-
-
-
3,486,887
3,486,887
380,798
380,798
392,871
392,871
329,778
329,778
39,092
39,092
3
-
1&2
1&2
-
-
-
2
-
-
3
3
3
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.
Financials
183
Zenith Bank Plc Annual Report December 31, 2020
Notes to the Consolidated and Separate Financial
Statements for the Year Ended December 31, 2020
Financial instruments measured at fair value
Group and Bank
Reconciliation of Level 3 items
In millions of Naira
At 1 January 2019
Addition
Gain recognised through other comprehensive income
At December 31, 2019
Reconciliation of Level 3 items
At 1 January 2020
Addition
Gain recognised through other comprehensive income of equity investments
Transfer to level 2 due to availability of observable data
At December 31, 2020
49,760
50
13,870
63,680
63,680
-
16,295
(76,063)
3,912
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, 2020
Valuation
technique
Significant
unobservable
input
Range of estimates
(average) for
unobservable inputs
Fair value measurement
sensitivity to unobservable
inputs
N3.91 billion
Unquoted
equity
investment
Equity DCF
model.
adjusted with
recent similar
transactions.
-Discount rate.
-Estimate cash
flow.
Risk premium of 13.32%
above risk- free interest rate
(0.82%) (31 Dec.
2019:10.63% above risk
free rate (1.92%)) 5-year
Compound Annual Growth
Rate (CAGR) of cash flow of
1.0%-14.6%
(December 2019:
6.5%))
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, 2020
At December 31, 2019
Decrease of
20 basis
point in risk
premium
Increase of 20
basis point in
risk premium
Decrease
of 20 basis
point in risk
premium
Increase of 20
basis point in
risk premium
Unquoted investment securities
55
(53)
1,770
(1,662)
184
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, 2020
included a risk premium of 13.32% and an above the risk-free interest rate of 0.82% (December 31, 2019: 10.63% respectively
above risk free rate of 1.92%).
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)
(i)
(ii)
(iii)
(iv)
(v)
(vi)
Fair valuation methods and assumptions
Cash and balances with central banks
Cash and balances with Central banks represent cash held (including mandatory cash reserve requirements of
December 31, 2020: N1,411 billion, December 31, 2019: N761 billion) with Central banks of the various jurisdictions in
which the Group operates. The fair value of these balances is their carrying amounts.
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.
Treasury bills and investment securities
Treasury bills represent short term instruments issued by the Central banks of the jurisdiction where the Group has
operations. The fair value of treasury bills and bonds are determined with reference to quoted prices (unadjusted) in
active markets for identical assets.
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 is determined on the basis of the discounted cashflow
methodology which takes into account the discounted stream of estimated future income and free cashflows of the
investment. Subsequently, the percentage holding of the Bank is then applied on the derived company value. Where
available the fair value of unquoted equity is determined using recent market observable data.
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
Other financial assets/financial liabilities represent monetary assets, which usually have a short recycle period and as
such, whose fair values approximate their carrying amount.
Customer deposits and borrowings
The estimated fair value of deposits with no stated maturity, which includes non-interest-bearing deposits, is the amount
repayable on demand. The estimated fair values of fixed interest-bearing deposits and borrowings are determined
using a discounted cash flow model based on a current yield curve appropriate for the remaining term to maturity.
(vii) Derivatives
The Group uses widely recognised valuation models for determining the fair value of common and simple financial
instruments, such as interest rate and currency swaps that use only observable market data and require little
management judgement and estimation. Observable prices or model inputs are usually available in the market for
listed debt and equity securities, exchange-traded derivatives and simple OTC derivatives such as interest rate swaps.
Availability of observable market prices and model inputs reduces the need for management judgement and estimation
Financials
185
Zenith Bank Plc Annual Report December 31, 2020
Notes to the Consolidated and Separate Financial
Statements for the Year Ended December 31, 2020
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 practices.
The Group adopts and implements the decisions necessary to maintain the capital at a level that ensures the realisation of the
business plan with a certain safety margin.
The Group undertakes a regular monitoring of capital adequacy and the application of regulatory capital by deploying internal
systems based on the guidelines provided by the Central Bank of Nigeria (CBN) and the regulatory authorities of the subsidiaries
for supervisory purposes.
The Group has consistently met and surpassed the minimum capital adequacy requirements applicable in all areas of operations.
Most of the Group’s capital is Tier 1 (Core Capital) which consists of essentially share capital and reserves created by appropriations
of retained earnings.
Banking subsidiaries in the Group, which are not incorporated in Nigeria, are directly regulated and supervised by their local
banking regulators and are required to meet the capital requirement directive of the local regulatory jurisdiction. Parental
support and guidance are given at the Group level at which the risk level in relation to capital level and adequacy is closely
monitored. The Group meet all capital requests from these regulatory jurisdictions and determines the adequacy based on its
expansion strategies and internal capital assessments.
The Group’s capital plan is linked to its business expansion strategy, which anticipates the need for growth and expansion in its
branch network and IT infrastructure. The capital plan sufficiently meets regulatory requirements as well as providing adequate
cover for the Group’s risk profile. The Group’s capital adequacy remains strong and the capacity to generate and retain reserves
continues to grow.
The Group will only seek additional capital where it finds compelling business need for it and with the expectation that the
returns would adequately match the efforts and risks undertaken.
The following sources of funds are available to the Group to meet its capital growth requirements:
a.
Profit from Operations: The Group has consistently reported good profit, which can easily be retained to support the
capital base.
b.
Issue of Shares: The Group has successfully assessed the capital market to raise equity and with such experiences, the
Group is confident that it can access the capital market when the need arises.
186
c.
Bank Loans (long term/short term): In 2014 financial year, Zenith Bank commenced capital computations in accordance
with Basel II standard under the guidelines issued by the Central Bank of Nigeria. The guidelines require capital adequacy
computations based on the Standardized Measurement Approach for Credit Risk and Market Risk while Basic Indicator
Measurement Approach was advised for Operational Risk. The capital requirement for the Bank has been set at 15% and
an addition of 1% as a Systemically Important Bank (SIB) in accordance with the guidelines.
The table below shows the computation of the Group’s capital adequacy ratio for the period ended December 31, 2020 as well
as the December 31, 2019 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.
In millions of Naira
31-Dec-20
Group
31-Dec-
19
Adjusted
impact of
IFRS 9
transition
on
31-Dec-20
Tier 1 capital
Share capital
Share premium
Statutory reserves
SMEIES reserve
Retained earnings
IFRS 9 Transitional Adjustment
Basel II
15,698
255,047
231,307
3,729
521,293
-
Basel II
15,698
Basel II
15,698
255,047
255,047
231,307
170,695
3,729
521,293
21,634
3,729
439,510
-
Total qualifying Tier 1 capital
1,027,074
1,048,708
884,679
(5,786)
(5,786)
(11,885)
(16,243)
(16,243)
(16,497)
-
-
-
Adjusted
impact of
IFRS 9
transition
on
31-Dec-19
Basel II
15,698
255,047
170,695
3,729
439,510
43,268
927,947
(11,885)
(16,497)
-
31-Dec-20
Basel II
15,698
255,047
208,443
3,729
382,292
-
865,209
(4,733)
(14,699)
(17,313)
Bank
Adjusted
impact of
IFRS 9
transition
on
31-Dec-20
Basel II
15,698
255,047
208,443
3,729
382,292
20,710
885,919
(4,733)
(14,699)
(17,313)
31-Dec-19
Basel II
15,698
255,047
152,065
3,729
328,590
-
755,129
(11,223)
(15,109)
(10,896)
Adjusted
impact of
IFRS 9
transition
on
31-Dec-19
Base II
15,698
255,047
152,065
3,729
328,590
41,420
796,549
(11,223)
(15,109)
(10,896)
1,005,045
1,026,679
856,297
899,565
828,464
849,174
717,901
759,321
87,159
87,159
54,257
54,257
40,023
40,023
(23,729)
(23,729)
Total qualifying Tier 2 capital
87,159
87,159
54,257
54,257
-
-
-
-
40,023
(17,313)
40,023
(17,313)
22,710
871,884
(23,729)
(23,729)
-
-
-
-
717,901
759,321
Total regulatory capital
1,092,204
1,113,838
910,554
953,822
851,174
87,159
87,159
54,257
54,257
22,710
Risk-weighted assets
Credit risk
Market risk
Operational risk
3,734,222
3,734,222
3,134,029
3,134,029
3,250,187
3,250,187
2,806,711
2,806,711
175,625
921,168
175,625
170,392
921,168
891,735
170,392
891,735
89,635
813,499
89,635
813,499
52,423
810,268
52,423
810,268
Total risk-weighted assets
4,831,015
4,831,015
4,196,156
4,196,156
4,153,321
4,153,321
3,669,402
3,669,402
Risk-weighted Capital
Adequacy Ratio (CAR)
23 %
23 %
22 %
23 %
20 %
21 %
20 %
21 %
Financials
187
Deferred tax assets
Intangible assets
Investment in capital of financial
subsidiaries
Adjusted Total qualifying Tier
1 capital
Tier 2 capital
Other comprehensive income
(OCI)
Investment in capital and
financial subsidiaries
Net Tier 2 Capital
Zenith Bank Plc Annual Report December 31, 2020
Notes to the Consolidated and Separate Financial
Statements for the Year Ended December 31, 2020
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%
-%
Operational risk
3.7
Operational Risk is the risk of loss resulting from inadequate and /or failed internal processes, people and systems or from external
events, including legal risk and any other risks that is deemed fit on an ongoing basis but exclude reputation and strategic risks.
Operational risk exists in all products and business activities.
The Group has a broad Operational Risk management framework which defines the set of activities designed to proactively identify,
assess and manage all operational risk components by aligning the people, technology and processes with best risk management
practices towards enhancing stake holders’ value and sustaining industry leadership.
Operational risk objectives include the following:
a.
b.
c.
To provide clear and consistent direction in all operations of the group;
To provide a standardised framework and appropriate guidelines for creating and managing all operational risk exposures;
and
To enable the group identify and analyse events (both internal and external) that impact on its business.
The Operational Risk unit constantly conducts reviews to identify and assess the operational risk inherent in all material products,
activities, processes and systems. It also ensures that all business units within the Bank monitor their operational risks using set standards
and indicators. Significant issues and exceptions are reported to Risk Management and are also identified by the independent risk
function for discussion at the risk management committee.
Disaster recovery procedures, business continuity planning, self-compliance assurance and internal audit also form an integral part of
our operational risk management process.
The Bank uses the following tools and methodologies in the implementation of its Operational risk Management.
Risk and Control Self-Assessment (RCSA) - This is the process whereby risks that are inherent in Business Units strategies, objectives
and activities are identified and the effectiveness of the controls over those risks evaluated and monitored bank wide. The Risk and
Control Self-Assessment process address risks and controls comprehensively. It incorporates the process for evaluating and managing
all aspects of risk that is inherent in how and where the business is done.
Key Risk Indicators (KRI) - Key Risk Indicator is measures which indicate the risk profile of the bank and any change thereof. KRIs act
as early warning indicators and are used to monitor and predict potential operational loss events. KRIs are used in conjunction with
system of thresholds. When the threshold or tolerance level for any KRI is breached, it triggers review, escalation or management
action. Risk indicators help keep the operational risk management dynamic and risk profile current.
Loss Incident Reporting – Loss incidents are reported by all business units using the Loss incident reporting template. The discipline
of collecting loss data is not only needed to understand the dimensions of risk the Bank faces but also used to motivate staff to
consider and more actively control key elements of risk. The Bank-wide data collection promotes a dialogue within the Bank about
determining the major operational risk exposures and reinforces more qualitative efforts to manage operational risk within each of
the business lines.
188
Operational Risk Capital Computation – The bank, based on Central Bank of Nigeria guideline, adopted basic indicator approach (BIA)
in the calculation of its Operational Risk Capital adequacy. The estimated operational Risk Capital Charge is reported to the Board and
management for capital planning and decision making.
Business Continuity Management (BCM)
In line with ISO 22301 Standards, the bank has a robust documented Business Continuity Plan. The primary objective of this plan is
to protect the bank in the event of an undesired event in the form of fire outbreak, flood, theft or robbery, thunderstorm, unexpected
breakdown of systems, networks, equipment, etc or any other form of disaster. This plan ensures that the bank recover from disasters
resulting in the partial or total loss of IT infrastructure and applications to normal business operations, in a timely, effective and
efficient manner. The business continuity test is conducted at least once in a year. The process is driven at a committee level but ably
championed by the Risk Management Group.
Operational Risk Reporting
Periodic Operational Risk report highlighting key Operational risk identified are rendered to the Board, Management and other
relevant stakeholders for awareness and prompt implementation of mitigation plans.
Strategic risk
3.8
Strategic risk is a possible source of loss that might arise from the pursuit of an unsuccessful business plan. Strategic risk examines
the impact of design and implementation of business models and decisions on earnings and capital as well as the organisation’s
responsiveness to industry changes. Processes and procedures have been established to ensure that the right models are employed
and appropriately communicated to all decision makers in the Group on issues relating to strategic risk management. This has
essentially driven the Group’s sound banking culture and performance record to date.
Legal risk
3.9
Legal risk is defined as the risk of loss due to defective contractual arrangements, legal liability (both criminal and civil) incurred during
operations by the inability of the organisation to enforce its rights, or by failure to address identified concerns to the appropriate
authorities where changes in the law are proposed.
The Group manages this risk by monitoring new legislation, creating awareness of legislation among employees, identifying significant
legal risks as well as assessing the potential impact of these.
Legal risks management in the Group is also being enhanced by appropriate product risk review and management of contractual
obligations via well documented Service Level Agreements and other contractual documents.
3.10 Reputational risk
Reputational risk is defined as the risk of indirect losses arising from a decline in the bank’s reputation among one or multiple
bank stakeholders. The risk can expose the Group to litigation, financial loss or damage to its reputation. The Group’s reputation risk
management philosophy involves anticipating, acknowledging and responding to changing values and behaviours on the part of a
range of stakeholders. Accordingly, the following are the roles and responsibilities:
a.
b.
c.
Board and senior management oversee the proper set-up and effective functioning of the reputational risk management
framework;
Enterprise Risk Management Policy/Strategy (ERSP) is responsible for supporting the Board and senior management in
overseeing the implementation of reputational risk management framework; and
Corporate Communications is responsible for managing both the internal and external communications that may impact
the reputation of the Bank.
Financials
189
Zenith Bank Plc Annual Report December 31, 2020
Notes to the Consolidated and Separate Financial
Statements for the Year Ended December 31, 2020
The process of reputation risk management within the Bank encompasses the following steps:
a.
b.
c.
d.
e.
f.
Identification: Recognizing potential reputational risk as a primary and consequential risk;
Assessment: Conducting qualitative assessment of reputational risk based on the potential events that have been identified
as reputational risk;
Monitoring: Undertaking frequent monitoring of the reputational risk drivers;
Mitigation and Control: Establishing preventive measures and controls for management of reputational risk and tracking
mitigation actions;
Independent review: Subjecting the reputational risk measures and mitigation techniques to regular independent review
by internal auditors and/or external auditors; and
Reporting: Generating regular, action-oriented reports for management review.
3.11 Taxation risk
Taxation risk refers to the risk that new taxation laws will adversely affect the Group and/or the loss as a result of non- compliance
with tax laws.
The taxation risk is managed by monitoring applicable tax laws, maintaining operational policies that enable the Group to comply
with taxation laws and, where required, seeking the advice of tax specialists.
3.12 Regulatory risk
The Group manages the regulatory risk to which it is potentially exposed by monitoring new regulatory rules and applicable laws, and
identifying significant regulatory risks. The Group strives to maintain appropriate procedures, processes and policies that enable it to
comply with applicable regulation.
The Group maintains zero tolerance posture for any regulatory breach in all its area of operations.
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:
Input assumptions applied in estimating probability of default, loss given default and exposure at default;
•
Determining whether credit risk has increased significantly;
•
Incorporation of forward-looking information;
•
190
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.
ECL inputs sensitivity analysis
In millions of Naira
Upturn
Baseline
Downturn
126,133
130,805
139,465
Probability
weighted
132,866
Determining fair values
4.2
The determination of fair value for financial assets and liabilities for which there is no observable market prices requires the
use of valuation techniques as described in note 3.3.5(a). For financial instruments that trade infrequently and have little price
transparency, fair value is less objective, and requires varying degrees of judgment depending on liquidity, concentration,
uncertainty of market factors, pricing assumptions and other risks affecting the specific instrument.
The Group measures fair values using the following fair value hierarchy that reflects the significance of the inputs used in
making the measurements.
i)
ii)
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 unobservable inputs. This category includes all instruments where the
valuation technique includes inputs not based on observable data and the unobservable inputs have a significant
effect on the instrument’s valuation. This category includes instrument that are valued based on quoted prices for
similar instruments where significant unobservable adjustments or assumptions are requried to reflect differences
between the instruments.
iii)
Deferred Tax Assets and Liabilities
4.3
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 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 24
for details on deferred tax.
Financials
191
Zenith Bank Plc Annual Report December 31, 2020
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 provisions required
under the two methodologies.
Paragraph 12.4 of the revised Prudential Guidelines for Deposit Money Banks in Nigeria stipulates that Banks would be required
to make provisions for loans as prescribed in the relevant IFRS when IFRS is adopted. However, Banks would be required to
comply with the following:
(a)
(i)
(ii)
(b)
Expenses for loan losses recognised in the profit and loss account should be determined based on the relevant
IFRS. However, the provisions 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:
Where Prudential Provisions is greater than IFRS provisions, the resulting difference should be transferred from the
general reserve account to a non-distributable regulatory credit risk reserve.
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.
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, 2020.
192
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 20
31-Dec 19
71,560
1,685
4,567
11,952
41,089
-
130,853
16,931
8,702
107,233
132,866
-
58
676
355
755
2,046
226
4,832
141,814
(10,961)
-
57,477
17,831
986
10,605
40,620
1,514
122,920
14,092
34,233
136,673
184,998
-
-
-
-
763
1,628
560
8,011
195,960
(73,040)
-
Financials
193
Zenith Bank Plc Annual Report December 31, 2020
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, is used to measure performance because management believes that this information is the most
relevant in evaluating the results of the respective segments relative to other entities that operate within the same
industries.Inter-segment pricing is determined on arm’s length basis.
No single external cutomer accounts for 10% or more of the Group’s revenue. The measurement policies the Group
uses for segment reporting are the same as those used in its financial statements. There have been no changes from
prior periods in the measurement methods used to determine reported segment profit or loss.
194
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In millions of Naira
December 31, 2019
Revenue:
Derived from external customers
568,999
68,125
25,127
662,251
Derived from other business
6,079
107
-
6,186
-
(6,186)
662,251
-
segments
Total revenue*
575,078
68,232
25,127
668,437
(6,186)
662,251
Interest expense
(126,237)
(20,739)
(4,142)
(151,118)
2,586
(148,532)
Impairment loss on financial assets
Depreciation charge
Amortisation charge
Admin and operating expenses
Profit before tax
Tax expense
Profit after tax
In millions of Naira
December 31, 2019
(23,406)
(19,066)
(2,929)
(739)
(1,691)
(149)
113
(679)
-
(24,032)
(21,436)
(3,078)
(195,291)
(19,421)
(6,767)
(221,479)
208,149
(24,459)
183,690
25,493
(7,753)
17,740
13,652
(2,239)
11,413
247,294
(34,451)
212,843
-
-
-
(400)
(4,000)
-
(4,000)
(24,032)
(21,436)
(3,078)
(221,879)
243,294
(34,451)
208,843
Nigeria
Outside Nigeria
Corporate
retail and
pensions
custodian
services
Africa
Europe
Total
reportable
segments
Eliminations
Consolidated
Expenditure on non-current assets
52,440
3,337
1,334
57,111
-
57,111
In millions of Naira
December 31, 2019
Total assets
Other measures of assets:
Current assets
Loans and advances to customers
Treasury bills
Investment securities
Total liabilities
Other measures of liabilities
Customer deposits
Borrowings
5,461,929
471,819
616,825
6,550,573
(203,694)
6,346,879
2,467,692
2,239,603
824,119
203,857
333,226
45,147
167,274
101,996
4,659,475
375,101
142,811
20,816
-
285,244
523,610
2,943,729
2,305,566
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-
-
(1)
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2,943,729
2,305,565
991,393
591,097
5,558,186
(153,193)
5,404,993
3,486,887
329,778
353,149
422,253
-
-
4,262,289
329,778
-
4,262,289
(7,299)
322,479
Financials
197
Zenith Bank Plc Annual Report December 31, 2020
Notes to the Consolidated and Separate Financial
Statements for the Year Ended December 31, 2020
In millions of Naira
31-Dec-20
31-Dec-19
31-Dec-20
31-Dec-19
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
250,812
232,946
236,064
26,398
53,797
7,742
553
81,511
26,897
81,108
5,748
367
68,497
25,205
31,147
7,742
553
41,781
220,210
18,911
52,127
5,748
367
41,947
420,813
415,563
342,492
339,310
Interest income accrued on impaired financial assets amount to N6,016 million and N3,644 million for Group and Bank respectively.
Included in interest income is modification loss of N1.3 billion for Group and Bank. It represents the changes in gross carrying amounts
of the financial assets from immediately before, to immediately after modification. The modifications were not as a result of credit
detorioration.
7. Interest and similar expense
Current
Savings accounts
Time deposits
Borrowed funds and lease
29,657
22,130
29,274
40,070
11,624
21,625
47,334
67,949
26,997
21,888
10,806
42,420
10,387
21,394
35,041
59,415
121,131
148,532
102,111
126,237
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 N3,412 million and N2,804 million for Group and Bank (December 31,
2019: N3,494 million and N3,079 million) 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)
198
37,439
217
972
1,366
(83)
286
40,197
(706)
43
39,534
27,754
35,495
(27)
(35)
36
(789)
(57)
217
659
1,326
(83)
286
26,882
37,900
(2,473)
(377)
24,032
706)
43
37,237
27,148
(27)
(55)
23
(789)
(57)
26,243
(2,473)
(377)
23,393
In millions of Naira
31-Dec-20
31-Dec-19
31-Dec-20
31-Dec-19
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
13,913
2,491
21,988
6,802
27,078
2,135
7,612
524
148
8,061
12,472
103,224
(23,892)
79,332
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
9,110
-
21,988
6,300
25,559
1,685
-
524
92
8,061
11,059
84,378
(22,961)
61,417
20,046
-
19,623
2,921
41,162
1,233
-
2,381
278
6,021
3,102
96,767
(13,126)
83,641
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.
Total fee and commission income recognised at a point in time amount to N70,556 million and N52,446 million for Group and
Bank (December 31, 2019: N80,204 million and N64,374 million) respecvtively while an amount of N32,669 million and N31,932
million (December 31, 2019: N34,470 million and N32,393 million) was recognised over the period.
10. Other operating income
In millions of Naira
31-Dec-20
31-Dec-19
31-Dec-20
31-Dec-19
Group
Bank
Dividend income from equity investments (see note a below)
Gain on disposal of property and equipment (see note 43(vii))
Income on cash handling
Recoveries
Gain on disposal of equity investment
Foreign currency revaluation gain (See note b below)
1,707
347
306
4,043
891
43,441
50,735
1,932
147
597
-
-
11,540
14,216
5,307
348
193
4,043
891
39,668
50,450
5,532
152
400
-
-
4,754
10,838
(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.
Financials
199
Zenith Bank Plc Annual Report December 31, 2020
Notes to the Consolidated and Separate Financial
Statements for the Year Ended December 31, 2020
11. Trading gains
Loss on trading books
Treasury bills trading income
Bonds trading income
Interest income on trading bonds
(18,735)
123,097
14,448
2,868
(7,427)
114,320
6,558
4,347
(18,735)
123,029
11,439
2,868
(7,427)
114,294
6,558
4,347
121,678
117,798
118,601
117,772
Included in the loss on trading books is derivatives gain of N30.65 billion for Group and Bank (December 31, 2019: N19.15 billion).
In millions of Naira
Group
Bank
31-Dec-20
31-Dec-19
31-Dec-20
31-Dec-19
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
1,674
786
14,405
4,338
1,191
20,440
664
7,656
11,500
6,635
17,778
1,865
6,496
1,883
2,580
3,980
360
11
3,414
30,948
3,866
4,179
1,463
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
1,213
380
14,405
3,747
1,057
19,572
13
7,411
11,500
6,259
14,555
1,702
5,815
1,102
1,872
3,545
360
11
3,285
30,948
3,435
4,077
364
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
An amount of N664 million and N13 million for Group and Bank (December 31, 2019: N1,313 million and N859
million) respectively represent the amount of straight line amortisation on short term lease in which the Group/Bank
has applied the recognition exception.
148,112
129,453
136,628
118,191
200
The external auditors of Zenith Bank Plc, PWC Nigeria rendered the following services during the year:
Services
Transfer pricing compliance for 2018 financial year
Due diligence engagement for 2019 financial year
Sustainability assurance for 2019 financial year
Financial risk and regulatory services for 2019 financial year
Analytics project
Training
Board evaluation for 2019 financial year
13. Taxation
(a) Major components of the tax expense
In millions of Naira
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:
(Reversal)/origination of temporary differences
Income tax expense
Total tax expense
Amount Paid in
N’m
3
35
4
45
15
2
22
128
Group
Bank
31-Dec-20 31-Dec-19
31-Dec-20
31-Dec-19
13,557
1,479
2,103
-
2,072
11
19,222
6,074
25,296
25,296
12,770
-
1,980
22,105
-
10
36,865
(2,414)
34,451
34,451
-
1,479
2,103
-
2,072
11
5,665
6,490
12,155
12,155
-
-
1,980
22,053
-
10
24,043
(2,026)
14,290
22,017
Financials
201
Zenith Bank Plc Annual Report December 31, 2020
Notes to the Consolidated and Separate Financial
Statements for the Year Ended December 31, 2020
(b) Reconciliation of effective tax rate
In millions of Naira
Profit before income tax
Group
Bank
31-Dec-20 31-Dec-19
31-Dec-20
31-Dec-19
255,861
243,294
210,007
200,020
Tax calculated at the weighted average Group rate of 30% (2019: 30%)
76,758
72,988
63,002
60,006
Tax effect of adjustments on taxable income
Non-deductable expenses
Tax exempt income
Balancing charge
Tax loss
Minimum tax
Information technology levy
Unrecognised deferred tax asset
Dividend tax paid
Capital allowance utilised
Tertiary education tax
Derecognition of previously recognised deductible
temporary differences
Police trust fund levy
Total tax expense
In millions of Naira
52,286
(85,396)
143
(9,506)
1,479
2,103
-
-
(20,728)
2,072
6,074
1,834
(78,806)
-
-
-
2,409
13,963
22,053
-
-
-
50,402
(83,313)
143
(9,506)
1,479
2,103
-
-
(20,728)
2,072
6,490
1,828
(77,823)
-
-
-
1,980
13,963
22,053
-
-
-
11
10
11
10
25,296
34,451
12,155
22,017
31-Dec-20
31-Dec-19
31-Dec-20
31-Dec-19
(c) The movement in the current income tax payable balance is as follows:
At start of the year
Tax paid
Current income tax charge (see note 13a)
At end of the year
9,711
9,154
(17,243)
(36,308)
19,222
11,690
36,865
9,711
6,627
(3,175)
5,665
9,117
5,954
(23,370)
24,043
6,627
202
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.
In millions of Naira
31-Dec-20 31-Dec-19
31-Dec-20 31-Dec-19
Profit attributable to shareholders of the Bank (N'million)
230,374
208,693
197,852
178,003
Number of shares in issue at end of the year (millions)
Weighted average number of ordinary shares in issue (millions)
Basic and diluted earnings per share (Koba)
31,396
31,396
7.34
31,396
31,396
6.65
31,396
31,396
6.30
31,396
31,396
5.67
Group
Bank
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)
Special Cash Reserve Requirement
Current
Non current
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
104,544
75,802
1,330,733
80,689
55,255
120,073
680,261
80,689
66,834
65,792
1,289,930
80,689
39,417
79,082
680,261
80,689
1,591,768
936,278
1,503,245
879,449
221,149
1,370,619
254,171
682,107
132,626
1,370,619
197,342
682,107
1,591,768
936,278
1,503,245
879,449
698,493
880,957
(1,575)
708,111
283,845
(563)
698,199
695,898
(676)
708,114
114,352
(17)
1,577,875
991,393
1,393,421
822,449
1,577,875
1,577,875
991,393
991,393
1,393,421
1,393,421
822,449
822,449
Financials
203
Zenith Bank Plc Annual Report December 31, 2020
Notes to the Consolidated and Separate Financial
Statements for the Year Ended December 31, 2020
Treasury bills measured at fair value through profit and loss are mandatorily designated as such.
In millions of Naira
31-Dec-20 31-Dec-19
31-Dec-20 31-Dec-19
Group
Bank
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).
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
396,924
396,924
11,697
11,697
396,924
396,924
11,697
11,697
1,962
117,290
122,870
56,763
(355)
-
1,962
-
105,135
117,290
198,611 122,870
128,051
(69)
56,763
(355)
105,135
198,611
128,051
(69)
298,530
431,728
298,530
431,728
Included in assets pledged as collateral for Group/Bank are treasury bills and bonds at amortised cost of N53,231 million and
N174,052 million (December 31, 2019: N98,755 million and N217,521 million) respectively. All other assets pledged as collateral
for Group/Bank are treasury bills 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) N3.62 billion (December 31, 2019: N27.84 billion), Federal Inland Revenue Services N8.14
billion (December 31, 2019: N8.08 billion), V-Pay N45.24 million (December 31, 2019: N44.87 million), Interswitch Limited
N2.17 billion (December 31, 2019: N2.15 billion), the Bank of Industry (Nigeria) N35.20 billion (December 31, 2019: N39.53
billion), E- Tranzact N45.22 million (December 31, 2019: N44.87 million), CBN Real Sector Support Fund (RSSF) N39.74 billion
(December 31, 2019: N24.77 billion), System Specs/REMITA N2.68 billion (December 31, 2019: N2.68 billion) and Financial
Market dealers Quotation (FMDQ) N27.61 billion (December 31, 2019: Nil).
Assets exchanged under repurchase agreement as at December 31, 2020 are with the following counterparties (note 31):
Counterparties
MASHREQ (see note 31)
ABSA (see note 31)
Standard Bank London (see note 31)
Carrying value Carrying value Carrying value Carrying value
of asset
of liability
of asset
of liability
37,051
110,497
32,085
179,633
28,113
100,457
20,159
148,729
37,051
110,497
32,085
179,633
28,113
100,457
20,159
148,729
204
Assets exchanged under repurchase agreement as at December 31, 2019 are with the following counterparties (note 31):
Counterparties
JP Morgan
ABSA
Standard Bank
Mashreq Bank
Societe Generale Bank
Goldman Sachs
Classified as:
Current
Non-current
Carrying value Carrying value Carrying value Carrying value
of asset
of liability
of asset
of liability
49,617
103,271
22,385
24,813
75,768
50,808
326,662
129,299
169,231
298,530
36,534
82,352
27,635
18,320
55,433
36,950
257,224
210,373
221,355
431,728
49,617
103,271
22,385
24,813
75,768
50,808
326,662
129,299
169,231
298,530
36,534
82,352
27,635
18,320
55,433
36,950
257,224
210,373
221,355
431,728
In millions of Naira
31-Dec-20 31-Dec-19
31-Dec-20 31-Dec-19
Group
Bank
18. Due from other banks
Current balances with banks within Nigeria
Current balances with banks outside Nigeria
Placements with banks
ECL Allowance
Classified as:
Current
Non-current
-
8,155
-
-
333,466
477,086
171,410
527,680
305,872
226,563
154,654
327,558
(58)
(142)
(58)
(142)
810,494
707,103
532,377
482,070
810,494
-
529,771
177,332
532,377
-
304,738
177,332
810,494
707,103
532,377
482,070
Included in balances with banks outside Nigeria is the amount of N50.28 billion and N86.27 billion for the Group and Bank
respectively (December 31, 2019: N22.32 billion and N46.35 billion for the Group and Bank respectively) which represents the
Naira value of foreign currency balances held on behalf of customers in respect of letters of credit. The corresponding liabilities are
included in other liabilities (See Note 29).
Financials
205
Zenith Bank Plc Annual Report December 31, 2020
Notes to the Consolidated and Separate Financial
Statements for the Year Ended December 31, 2020
In millions of Naira
31-Dec-20
31-Dec-19
31-Dec-20
31-Dec-19
Due from banks with maturity greater than 3 months:
179,244
223,413
179,244
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
34,634
9,862
44,496
481,886
222,730
91,204
1,518
92,722
729,726
319,968
704,616
1,049,694
31,867
9,862
41,729
481,886
222,730
704,616
91,204
1,518
92,722
729,726
319,968
1,049,694
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 gain of N18.7 billion December 31, 2019 net
gain of N7.4 billion, which were recognized in the statement of profit or loss and other comprehensive income.
All derivative assets are current.
In millions of Naira
20. Loans and advances
Overdrafts
Term loans
On-lending facilities
Gross loans and advances to customers
Less: ECL Allowance (see note 3.2.18)
Group
Bank
31-Dec-20
31-Dec-19
31-Dec-20
31-Dec-19
248,003
2,142,727
528,612
2,919,342
(140,315)
212,548
1,766,787
483,024
2,462,359
(156,794)
230,288
2,013,763
528,612
2,772,663
(132,866)
194,020
1,713,607
483,024
2,390,651
(151,179)
2,779,027
2,305,565
2,639,797
2,239,472
Management adjustments to impairment models are applied in order to factor in certain conditions that are not fully incorporated
into the impairment model, or to reflect additional facts and circumstances at period end. Management adjustments are reversed and
incorporated into the future model developments, where applicable.
As at 31 December 2020, management adjustment to impairment allowance was N4.63 billion and the proportion of total impairment
allowance was 3.49%.
206
In millions of Naira
Net Loans classified as:
Current
Non-current
Group
Bank
31-Dec-20
31-Dec-19
31-Dec-20
31-Dec-19
1,066,675
1,712,352
751,614
1,553,951
1,013,234
1,626,563
734,547
1,504,925
2,779,027
2,305,565
2,639,797
2,239,472
Movement in ECL Allowance as at December 31, 2020 is presented in Note 3.2.18.
In millions of Naira
31-Dec-20
31-Dec-19
31-Dec-20
31-Dec-19
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
476,287
392,150
(773)
867,664
49,277
916,941
234,857
280,854
(551)
515,160
12,257
527,417
208,973
113,959
-
(755)
208,218
44,933
253,151
-
(538)
113,421
12,257
125,678
At fair value through other comprehensive income (see note (i) below)
79,975
63,680
79,975
63,680
996,916
591,097
333,126
189,358
Movement in impairment allowance on investment securities is presented in Note 3.2.18
Classified as:
Current
Non-current
718,818
278,098
996,916
8,592
582,505
591,097
80,444
252,682
333,126
8,592
180,766
189,358
(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 and Bank debt securities measured at FVTPL comprise FGN bonds (December 31, 2020: N49.3 billion and N44.9
billion respectively; December 31, 2019; N12.26 billion).
Financials
207
Zenith Bank Plc Annual Report December 31, 2020
Notes to the Consolidated and Separate Financial
Statements for the Year Ended December 31, 2020
(iii) The Group’s debt securities measured at amortised cost can be analysed as follows:
In millions of Naira
Sovereign (Federal)
Sub-sovereign (State)
Corporate bonds
Promissory note
Commercial papers
Group
Bank
31-Dec-20
31-Dec-19
31-Dec-20
31-Dec-19
378,026
177,364
110,712
22,154
13,371
52,976
9,760
19,768
8,073
29,652
22,154
13,371
52,976
9,760
56,466
19,768
8,073
29,652
-
476,287
234,857
208,973
113,959
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
Ownership interest%
Ownership interest%
Carrying amount
31-Dec-20
31-Dec-19
31-Dec-20
31-Dec-19
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
99.42%
100.00%
99.99%
99.96%
99.00%
99.00%
All investments in subsidiaries are non-current
99.42%
100.00%
99.99%
99.96%
99.00%
99.00%
7,066
21,482
2,059
1,038
1,980
1,000
7,066
21,482
2,059
1,038
1,980
1,000
34,625
34,625
208
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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.
Zenith Bank (Ghana) Limited provides Corporate and Retail Banking services. It was incorporated on April 15, 2005 and commenced operations on
September 16, 2005.
Zenith Pensions Custodian Limited provides pension funds custodial services to Licensed Pension Fund Administrators (PFAs) and Closed Pension Funds
Administrators under the Pension (Reform) Act, 2004. It was incorporated on March 1, 2005. The name was changed from "Zenith Pensions Limited" to
"Zenith Pensions Custodian Limited" on September 20, 2005. It was licensed by the National Pension Commission as a custodian of pension funds and
assets on December 7, 2005 and commenced operations in December 2005.
Zenith Bank (UK) Limited provides wholesale and investment banking services in the United Kingdom. It was incorporated on February 17, 2006 and
commenced operations on March 30, 2007.
Zenith Bank (Sierra Leone) Limited provides corporate and retail banking services. It was incorporated in Sierra Leone on September 17, 2007 and
granted an operating license by the Bank of Sierra Leone on September 10, 2008. It commenced banking operations on September 15, 2008.
Zenith Bank (Gambia) Limited provides corporate and retail banking services. It was incorporated in The Gambia on October 24, 2008 and granted an
operating licence by the Central Bank of Gambia on December 30, 2009. It commenced banking operations on January 18, 2010.
Zenith Nominees Limited which is incorporated in Nigeria provides nominees, trustees, administrators and executorship services for non-pension assets.
It was incorporated in Nigeria on April 6, 2006.
There are no significant restrictions on the ability of subsidiaries to transfer funds to the Group in the form of cash dividends or repayment of loans and
advances.
23. Investment in associates
The Group’s investments under the Small and Medium Enterprises Equity Investment Scheme (“SMEEIS”) is in compliance with the Policy Guidelines for
2001 Fiscal Year (Monetary Policy Circular No. 35). The Group generally holds 20 percent or more of the voting power of the investee and is therefore
presumed to have significant influence over the investee. In instances where the Group holds less than 20 percent of the voting power of the investee,
the Group concluded that it has significant influence due to the Group’s representation on the Board of the relevant investee, with such Board generally
limited to a small number of Board members.
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
Diminution in investment
Balance at end of the year
Group
Bank
31-Dec-20
31-Dec-19
31-Dec-20
31-Dec-19
92
(92)
-
103
(103)
-
92
(92)
-
103
(103)
-
Financials
213
Zenith Bank Plc Annual Report December 31, 2020
Notes to the Consolidated and Separate Financial
Statements for the Year Ended December 31, 2020
24. Deferred tax balances
(i) Deferred tax asset
In millions of Naira
Unutilised capital allowances
ECL allowance on not-credit impaired financial
Instruments
Tax loss carry forward
Other assets
Fair value reserves
Foreign exchange differences
Total deferred tax asset
Group
Bank
31-Dec-20
31-Dec-19
31-Dec-20
31-Dec-19
11,756
4,301
4,692
91
410
-
21,250
5,810
2,735
6,063
591
-
(8)
15,191
(3,331)
11,756
3,066
5,810
2,718
4,692
6,063
-
-
-
-
-
-
19,514
(14,781)
14,591
(3,368)
Set-off of deferred tax liabilities pursuant to set-off
(15,464)
provisions (see (ii) below)
Net deferred tax asset
Group
December 31, 2020
5,786
11,860
4,733
11,223
Movements in temporary differences during the year
01-Jan-20
Recognised in profit or loss
31-Dec-20
Asset
Other assets
Fair value reserves
Unutilized capital allowances
ECL Allowance on not-credit impaired financial instruments
Tax loss carry forward
Foreign exchange differences
536
55
5,810
2,735
6,063
(8)
15,191
(445)
355
5,946
1,566
(1,371)
8
91
410
11,756
4,301
4,692
-
6,059
21,250
December 31, 2019
Movements in temporary differences during the year
01-Jan-19
Recognised in profit or loss
31-Dec-19
Asset
Other assets
Fair value reserves
ECL Allowance on not-credit impaired financial instruments
Unutilized capital allowances
Tax loss carry forward
Foreign exchange differences
(9)
7
14,682
4,832
1,926
108
21,546
545
48
(8,872)
(2,097)
4,137
(116)
536
55
5,810
2,735
6,063
(8)
(6,355)
15,191
214
Bank
December 31, 2020
Movements in temporary differences during the year
01-Jan-20
Recognised in profit or loss
31-Dec-20
Asset
ECL Allowance on not-credit impaired financial instruments
Unutilized capital allowances
Tax loss carried forward
December 31, 2019
2,718
5,810
6,063
14,591
348
5,946
(1,371)
4,923
3,066
11,756
4,692
19,514
Movements in temporary differences during the year
01-Jan-19
Recognised in profit or loss
31-Dec-19
Asset
ECL Allowance on not-credit impaired financial instruments
Unutilized capital allowances
Tax loss carried forward
(ii) Deferred tax liability
In millions of Naira
Property and equipment
ECL Allowance on financial instruments not-credit impaired
instruments
Right of use asset
Foreign exchange differences
Balance at end of the year
Group
December 31, 2020
4,912
14,683
1,926
21,521
(2,194)
(8,873)
4,137
(6,930)
2,718
5,810
6,063
14,591
Group
Bank
31-Dec-20
31-Dec-19
31-Dec-20
31-Dec-19
603
-
2,087
12,694
15,384
3,315
16
-
-
3,331
-
-
2,087
12,694
14,781
3,368
-
-
-
3,368
Movements in temporary differences during the year
01-Jan-20
Recognised in profit or loss
31-Dec-20
Liabilities
Property and equipment
Other assets
Right of use asset
Foreign exchange differences
3,368
16
-
-
3,384
(2,685)
(16)
2,087
12,694
12,080
683
-
2,087
12,694
15,464
Financials
215
Zenith Bank Plc Annual Report December 31, 2020
Notes to the Consolidated and Separate Financial
Statements for the Year Ended December 31, 2020
December 31, 2019
Movements in temporary differences during the year
01-Jan-19
Recognised in profit or loss
31-Dec-19
Liabilities
Property and equipment
Impairment allowance on not-credit
instruments
impaired financial
12,084
16
12,100
(8.769)
-
3,315
16
(8,769)
3,331
Bank
December 31, 2020
Movements in temporary differences during the year
01-Jan-20
Recognised in profit or loss
31-Dec-20
Liabilities
Property and equipment
Right of use asset
Foreign exchange differences
December 31, 2019
3,368
-
-
3,368
(3,368)
2,087
12,694
11,413
-
2,087
12,694
14,781
Movements in temporary differences during the year
01-Jan-19
Recognised in profit or loss
31-Dec-19
Liabilities
Property and equipment
12,324
(8,956)
3,368
The Group and Bank deferred tax assets and deferred tax liabilities have been offset in the consolidated and separate financial
statements.
The Bank’s deferred tax asset which principally arise from allowable loss, un-utilized capital allowance, foreign exchange
differences and ECL allowance on not credit-impaired financial instruments is N12.2 billion as at December 31, 2020.
(December 31, 2019: N60.2 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 not recognised all of its deferred tax
asset as at December 31, 2020. The amount of unrecognised deferred tax is N7.4 billion. (December 31, 2019: N49 billion).
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
Capital allowance
Unrelieved losses
Balance at end of the year
31-Dec-20
31-Dec-19
Gross Amount
Tax Impact
Gross Amount
Tax Impact
-
22,890
-
2,086
24,976
-
6,867
-
626
7,493
(49,025)
39,566
84,567
88,257
163,365
(14,708)
11,870
25,370
26,477
49,009
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.
216
25. Other assets
In millions of Naira
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)
Group
Bank
31-Dec-20
31-Dec-19
31-Dec-20
31-Dec-19
20,289
336
20,625
(226)
20,399
115,161
-
30,996
5,552
-
151,709
(2,141)
149,568
13,457
357
13,814
(183)
13,631
42,019
-
22,096
426
-
64,541
(777)
63,764
16,214
336
16,550
(226)
16,324
107,848
329
30,996
5,454
720
145,347
(2,046)
143,301
9,983
359
10,342
(183)
10,159
38,555
210
22,096
392
720
61,973
(720)
61,253
169,967
77,395
159,625
71,412
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 35(e)).
Other Non-financial assets comprises of balances on settlement accounts such as: Witholding tax, revenue collection,, sundry
receivables. These assets are short tenured and are quickly settled.
Classified as:
Current
Non-current
138,971
30,996
169,967
53,071
24,324
77,395
128,629
30,996
159,625
46,368
25,044
71,412
See note 3.2.18 for movement in impairment allowance for other financial assets as at December 31, 2020.
(i) Movement in impairment allowance for non financial assets
Financials
217
Zenith Bank Plc Annual Report December 31, 2020
Notes to the Consolidated and Separate Financial
Statements for the Year Ended December 31, 2020
In millions of Naira
At start of the year
Charge for the year (see note 8)
At end of the year
Group
Bank
31-Dec-20
31-Dec-19
31-Dec-20
31-Dec-19
183
43
226
560
(377)
183
183
43
226
560
(377)
183
(ii) Provision matrix
Loss allowance for the Bank as at December 31, 2020 and December 31, 2019 was determined as follows for other financial
assets.
December 31, 2020
Receivables
Expected loss rate
ECL
December 31, 2019
Receivables
Expected loss rate
ECL
0-30 days
31-60 days
61-90 days
91-180 days
113,189
1.70 %
1,924
-
-
113
10.95 %
24.35 %
100.00 %
-
-
113
0-30 days
31-60 days
61-90 days
91-180 days
48,000
1.50 %
720
-
-
113
10.95 %
24.35 %
100.00 %
-
-
-
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113,302
-
2,037
Total
48,000
-
720
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(b)
Right of use amounts recognised in the statement of financial postion
In millions of Naira
31-Dec-20
31-Dec-19
31-Dec-20
31-Dec-19
Right-of-use assets
Aircraft (see note 26)
Buildings (see note 26)
8,610
20,824
29,434
9,870
16,689
26,559
8,610
13,755
22,365
9,870
10,462
20,332
In millions of Naira
31-Dec-20
31-Dec-19
31-Dec-20
31-Dec-19
Lease liabilities
Current (see note 29)
Non-current (see note 29)
(c)
Amounts recognised in the income statement
6,275
18,181
24,456
6,534
15,660
22,194
4,158
13,363
17,521
4,539
11,758
16,297
In millions of Naira
31-Dec-20
31-Dec-19
31-Dec-20
31-Dec-19
Depreciation charge of right-of-use asset
Aircraft (see note 26)
Buildings (see note 26)
Interest expense (included in finance cost)
1,260
1,836
3,096
3,230
1,260
1,449
2,709
3,494
1,260
1,409
2,669
2,804
1,260
1,188
2,448
3,079
The total cash outflow of leases for Group and bank as at December 31, 2020 was N3,427 million and N3,212 million respectively (December 31, 2019:
N2,196 million and N2,196 million respectively)
Financials
223
Zenith Bank Plc Annual Report December 31, 2020
Notes to the Consolidated and Separate Financial
Statements for the Year Ended December 31, 2020
In millions of Naira
27. Intangible assets
Computer software
Cost
At start of the year
Exchange difference
Additions
At end of the year
Accumulated amortization
At start of the year
Exchange difference
Charge for the year
At end of the year
Carrying amount at end of the year
Group
Bank
31-Dec-20
31-Dec-19
31-Dec-20
31-Dec-19
32,472
664
2,473
35,609
15,975
(146)
3,537
19,366
16,243
28,905
867
2,700
32,472
12,227
670
3,078
15,975
16,497
27,381
-
2,366
29,747
12,272
-
2,776
15,048
14,699
24,876
-
2,505
27,381
9,477
-
2,795
12,272
15,109
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.
28. Customers’ deposits
Demand
Savingss
Term
Domiciliary
Classified as:
2,986,724
1,155,026
323,149
875,012
1,985,020
614,297
495,714
1,167,258
2,181,524
1,112,914
188,480
815,340
1,422,508
588,454
379,627
1,096,298
5,339,911
4,262,289
4,298,258
3,486,887
Carrying amount at end of the year
5,339,911
4,262,289
4,298,258
3,486,887
224
In millions of Naira
29. Other liabilities
Other financial liabilities
Customer deposits for letters of credit
Settlement payables
Managers' cheques
Due to banks for clean letters of credit
Deferred income on financial guarantee contracts (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-20
31-Dec-19
31-Dec-20
31-Dec-19
50,276
55,981
19,318
-
1,234
22,315
99,225
13,777
20,259
4,626
86,266
56,060
18,728
-
1,234
46,354
99,269
13,095
63,309
4,513
269,709
80,243
269,711
80,243
28,035
24,457
5,725
16,015
67,284
4,832
25,588
22,194
7,634
13,065
16,088
5,538
28,035
17,522
5,725
15,789
12,014
4,832
25,588
16,297
7,634
12,951
6,007
5,538
Total other financial liabilities
542,866
330,552
515,916
380,798
Non financial liabilities
Tax collections
Other payables
Total other non financial liabilities
Total other liabilities
See note 44
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
2,317
158,109
160,426
703,292
685,111
18,181
703,292
3,424
886
522
4,832
2,018
31,194
33,212
2,136
81,412
83,548
1,832
3,431
5,263
363,764
599,464
386,061
340,557
23,207
363,764
586,101
13,363
363,990
22,071
599,464
386,061
923
410
4,205
5,538
3,424
886
522
4,832
923
410
4,205
5,538
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
Financials
225
Zenith Bank Plc Annual Report December 31, 2020
Notes to the Consolidated and Separate Financial
Statements for the Year Ended December 31, 2020
In millions of Naira
31-Dec-20
31-Dec-19
31-Dec-20
31-Dec-19
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, 2020. (December 31, 2019: 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
At end of the year
5,803
27,867
10,162
43,832
7,394
20,592
16,126
44,112
4,158
21,112
6,113
31,383
The table below shows the movement in lease liability during the year.
As at 1 January
Additions
Principal repayment
Interest expense
Interest paid
At end of the year
22,194
2,582
(742)
3,107
(2,685)
24,456
11,568
10,561
(645)
3,494
(2,784)
22,194
16,297
1,632
(684)
2,804
(2,528)
17,521
5,072
15,807
11,996
32,875
11,568
4,901
(598)
3,079
(2,653)
16,297
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.
226
In millions of Naira
31-Dec-20
31-Dec-19
31-Dec-20
31-Dec-19
Group
Bank
30. 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
49,469
35,171
7,070
965
134,115
81,933
41,902
23,325
-
256
-
10,367
40,666
39,827
14,590
1,353
135,869
83,302
43,689
21,139
2,500
74
4,006
5,856
49,469
35,171
7,070
965
134,115
81,933
41,902
23,325
-
256
-
10,367
40,666
39,827
14,590
1,353
135,869
83,302
43,689
21,139
2,500
74
4,006
5,856
384,573
392,871
384,573
392,871
8,312
376,261
384,573
15,752
377,119
392,871
8,312
376,261
384,573
15,752
377,119
392,871
In millions of Naira
31-Dec-20
31-Dec-19
31-Dec-20
31-Dec-19
At beginning of the period/year
Principal addition during the period/year
Principal repayment during the period/year
Interest expense during the period
Interst paid during the period
At end of the period/year
392,871
32,264
(39,758)
5,528
(2,638)
393,295
130,153
(132,840)
5,528
(3,265)
392,871
32,264
(39,758)
1,834
(2,638)
393,295
130,153
(132,840)
5,528
(3,265)
384,573
392,871
384,573
392,871
(i)
The fund received under the Central Bank of Nigeria (CBN) Commercial Agriculture Credit Scheme represents a credit line
granted to the Bank for the purpose of providing concessionary funding to the agricultural sector. The facility has a tenor of 16 years
with effect from 2009 and will expire in September 2025. The facility attracts an interest rate of 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.
Financials
227
Zenith Bank Plc Annual Report December 31, 2020
Notes to the Consolidated and Separate Financial
Statements for the Year Ended December 31, 2020
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 fund is disbursed to the
bank at 2% interest rate.
The Real Sector Support Facility (RSSF): The Central Bank of Nigeria, as part of the efforts to unlock the potential of the real sector
to engender output growth, productivity and job creation has established a N300 billion Real Sector Support Facility (RSSF). The
facility is disbursed to large enterprises and startups with financing needs of N500 million up to a maximum of N10.0 billion.
The activities targeted by the Facility are manufacturing, agricultural value chain and selected service subsectors. The funds are
received from the CBN at 2%, 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 2% which are then disbursed to qualifying
customers at the rate of 9% per annum.
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.
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.
(ii)
(iii)
(iv)
(v)
(vi)
(vii)
(viii)
(ix)
(x)
228
Due to the COVID 19 pandemic, all intervention funds disbursed to the bank are now priced at 1% per annum effective March 01, 2020
until February 28, 2021. The Bank on-lends to customers at 5% p.a.
Included in On-lending is a modification gain of N2.3 billion for the bank. It represents changes in gross carrying amount of the financial
liabilities from immediately before, to immediately after modification.
In Millions of Naira
31-Dec-20
31-Dec-19
31-Dec-20
31-Dec-19
Group
Bank
31. Borrowings
Long term borrowing comprise:
Due to ADB (i)
Due to KEXIM (ii)
Due to Afrexim (iii)
Due to PROPARCO (iv)
Societe Generale Bank
Due to ABSA Bank (v)
Due to J P Morgan Chase Bank
Due to Standard Bank London (vi)
Due to Standard Bank South Africa
Due to Mashreq Bank (vii)
Due to Goldman Sachs
Due to IFC (viii)
Due to Zenith Bank Ghana (ix)
Due to banks for clean letters of credit (x)
5,841
670
80,293
1,830
-
100,457
-
20,159
-
28,113
-
53,630
-
579,087
870,080
17,681
22,877
-
5,884
55,433
82,352
36,534
-
27,635
18,320
36,950
18,813
-
-
322,479
5,841
670
80,293
1,830
-
100,457
-
20,159
-
28,113
-
53,630
4,010
579,087
874,090
17,681
22,877
-
5,884
55,433
82,352
36,534
-
27,635
18,813
-
-
36,950
18,320
329,778
The Group has not defaulted in the payment of principal or interest neither has the Group been in breach of any covenant relating to
the liabilities during the period (December 31, 2019: nil). The assets exchanged under repurchase agreements with counterparties are
disclosed in note 17.
Classified as:
Current
Non-current
Movement in borrowings
At beginning of the year
Addition during the year
Interest expense
Interest paid
Repayments (principal)
Foreign exchange difference
At end of the year
783,520
86,560
870,080
322,479
872,332
30,706
(29,843)
(353,338)
27,744
870,080
280,934
41,545
322,479
437,260
223,779
46,505
(16,005)
(369,060)
-
322,479
787,530
86,560
874,090
329,778
872,332
33,510
(34,104)
(357,341)
29,915
874,090
280,934
48,844
329,778
458,463
223,779
28,585
(19,288)
(361,761)
-
329,778
Financials
229
Zenith Bank Plc Annual Report December 31, 2020
Notes to the Consolidated and Separate Financial
Statements for the Year Ended December 31, 2020
(i)
(ii)
Due to ADB
This balance relates to term loan facility to the tune of US $125 million granted by ADB on September 2014. The facility is
repayable over 6.5 years. Interest is payable half-yearly at the rate of 6 months LIBOR + 3.6% per annum. The outstanding
balance of N6.3 billion (US $15.6 million) will mature in February 2021.
Due to KEXIM
The amount relates to facility of US $2.51million granted by The Export-Import Bank of Korea (KEXIM) in August 2020. Interest is
payable monthly at 3 month LIBOR+1.6% for all running obligations.
Final repayments on these facilities are due in August 2021.
(iii) Due to Afrexim
The amount due to Afrexim of N80 billion (US $200 million) represents the amount payable by the Bank from 3year term
loan, with a one year moratorium. The facilities are priced at 3 months Libor+3.34% per annum for $150m and Libor+4.34%
per annum for the balance $50m ,and will mature in August 2023. Interest on the facility is payable quarterly
(iv) Due to Proparco
The amount due to Proparco of N1.83 billion (US $4.5 million) represents the outstanding from a dollar term loan facility to
the tune of $50m granted by Promotion et Participation pour la Coopération économique (PROPARCO) in December 2013.
The facilities are priced at 6 months Libor+3.71% per annum and will mature in April 2021. Interest on the facility is payable
semi-annually. The outstanding balance for this facility is N1.82 billion (US $4.5 million).
(v)
Due to ABSA
The amount of N100.048 billion (US $250 million) represents the amount payable by the Bank on dollar repurchase facilities
of US$100 million and US$150 million, granted by ABSA in June 2020 and September 2020 respectively. Interest is payable
quarterly and are priced at 3 months Libor+3.1 & 3.2% per annum each. The facilities will mature in June 2021 and Sept
2021 respectively.
(vi) Due to ICBC (STANDARD BANK LONDON)
The amount of N20.16 billion (US $50 million) represents the amount payable by the Bank on dollar repurchase facility of
US$50 million granted by ICBC in October. Interest is payable quarterly and are priced at 6 months Libor+3.% per annum.
The facilities will mature in April 2021.
(vii) Due to Mashreq Bank
The amount of N28.1 billion (US $70 million) represents the amount payable by the Bank on dollar repurchase facilities of
US$50 million and US$20 million, granted by MASHREQ in July 2020 and November 2020 respectively. Interest is payable at
maturity and are priced at 6 months Libor+3.1% per annum each. The facilities will mature in January 2021 and June 2021
respectively.
(viii) Due to IFC
The amount of N53.63 billion (US $133.33 million) represents the amount payable by the Bank from a term loan facility of
US$100million, with a 1.5 year moratorium, and another USD 100m loan granted by International Finance Corporation (IFC)
in June 2015 and July 2020 respectively. Interest is payable semi annually at 6 months LIBOR plus 4.5% and 3% per annum
and the facility will mature in September 2022 and July 2020 respectively.
(ix)
Due to Zenith Bank Ghana
The amount of N4.01 billion ($10 million) represents the outstanding balance on a dollar short-term facility of US $30million
granted to Zenith Bank Ghana in 2018. The facility is priced at 6.75% per annum and is due to mature in December 2021.
The facility has been eliminated on consolidation..
(x)
The amount represents clean line obtained from various international banks for letters of credit and trade loans from
international banks
230
32. Debt securities issued
in Millions of Naira
Due to Euro bond holders
Group
Bank
31-Dec-20
31-Dec-19
31-Dec-20
31-Dec-19
43,177
43,177
39,092
39,092
43,177
43,177
39,092
39,092
The amount of N43.2 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.
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 year
Revaluation loss for the year
Interest expense
Interest paid
Repurchase during the year
Contractual repayment
Accrued interest during the year
At end of the year
Classified as:
Current
Non-current
33. Derivative liabilities
Instrument types (Fair value):
Forward and Swap Contracts
Futures contracts
39,092
2,928
4,271
(3,114)
-
-
-
43,177
3,289
39,888
43,177
1,562
9,514
11,076
361,177
5,949
-
-
(142,151)
(198,207)
12,324
39,092
-
39,092
39,092
13,622
1,140
14,762
39,092
2,928
4,271
(3,114)
-
-
-
43,177
3,289
39,888
43,177
1,562
9,514
11,076
361,177
5,949
-
-
(142,151)
(198,207)
12,324
39,092
-
39,092
39,092
13,622
1,140
14,762
Instrument types (Notional Amount):
Forward and Swap Contracts
Futures contracts
51,574
222,730
274,304
208,263
277,716
485,979
51,574
222,730
274,304
208,263
277,716
485,979
Financials
231
Zenith Bank Plc Annual Report December 31, 2020
Notes to the Consolidated and Separate Financial
Statements for the Year Ended December 31, 2020
in Millions of Naira
Classified as:
Current
Non-current
Group
Bank
31-Dec-20
31-Dec-19
31-Dec-20
31-Dec-19
11,076
14,762
11,076
14,762
-
-
-
-
11,076
14,762
11,076
14,762
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 gain of N(18.74) billion (December 31, 2019
net gain of N(7.43) 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 N41.73 and N11.08
billion respectively (December 31, 2019 N92.72 and N14.76 billion respectively).
34. Share capital
Authorised
40,000,000,000 ordinary shares of 50k each (31 Dec 2019: 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 2019: 31,396,493,786)
15,698
15,698
15,698
15,698
Issued
Ordinary
15,698
15,698
15,698
15,698
There was no movement in the share capital account during the year. The holders of ordinary shares are entitled to receive dividends,
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.
35. 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
31-Dec-20
31-Dec-19
31-Dec-20
31-Dec-19
Share premium
The nature and purpose of the reserves in equity are as follows:
255,047
255,047
255,047
255,047
Group
Bank
(b)
Share premium: Premiums from the issue of shares are reported in share premium.
(c)
Retained earnings:
Retained earnings represent undistributed profits, net of statutory appropriations attributable to the ordinary shareholders.
232
(d)
Statutory reserve:
This reserve represents the cumulative appropriation from general reserves/earnings in line with Nigerian banking
regulations that require the Bank to make an annual appropriation in reference to specific rules. Section 16(1) of the Bank
and Other Financial Institutions Act of 1991 (amended), stipulates that an appropriation of 30% of profit after tax be made
if the statutory reserve is less than the paid-up share capital and 15% of profit after tax if the statutory reserve is greater
than the paid-up share capital. In the current year, a total of N29.68 billion (December 31, 2019: N27.05 billion) representing
15% of Zenith Bank’s profit after tax was appropriated.
(e)
SMIEIS/AGSMIES reserves:
This reserve represents the aggregate amount of appropriations from profit after tax to finance equity investments in
compliance with the directives issued by the Central Bank of Nigeria (CBN) through its circulars dated July 11, 2006
(amended) and April 7, 2017 respectively.
The SMIEIS reserve was maintained in compliance with the Central Bank of Nigeria’s requirement that all licensed banks
set aside a portion of the profit after tax in a fund to be used to finance equity investments in qualifying small and medium
scale enterprises. Under the terms of the guideline issued in July 2006, the contributions were 10% of profit after tax and
were expected to continue after the first 5 years after which banks’ contributions were to reduce to 5% of profit after tax.
The small and medium scale industries equity investment scheme reserves are non-distributable.
(f )
(g)
(h)
(i)
Fair value reserve:
Comprises fair value movements on equity instruments that are carried at fair value through other comprehensive income.
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.
Regulatory reserve for credit risk: This reserve represents the cummulative difference between the loan loss provision
determined per the Prudential Guidelines and the allowance/reserve for loan losses as determined in line with the
principles of IFRS 9.
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 parent of the subsidiary. See
note 22(i) for the changes in non-controlling interest during the period.
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 end of year
36. Pension contribution
31-Dec-20
31-Dec-19
754
191
29
-
974
1,538
150
(60)
(874)
754
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).
Financials
233
Zenith Bank Plc Annual Report December 31, 2020
In millions of Naira
37. Personnel expenses
Compensation for the staff are as follows:
Salaries and wages
Other staff costs
Pension contribution
Group
2020
2019
Bank
2020
2019
67,558
7,922
3,778
79,258
65,831
8,103
3,924
77,858
52,485
6,354
2,676
61,515
51,966
7,128
2,944
62,038
(a) The average number of persons employed during the year by category:
Executive directors
Management
Non-management
Number
Number
Number
Number
15
410
7,119
7,544
12
433
6,960
7,405
6
349
5,982
6,337
6
358
5,618
5,982
The table below shows the number of employees, whose earnings during the year, fell within the ranges shown below:
N300,001 - N2,000,000
N2,000,001 - N2,800,000
N2,800,001 - N4,000,000
N4,000,001 - N6,000,000
N6,000,001 - - N8,000,000
N8,000,001 - N9,000,000
N9,000,001 - and above
(b) Directors’ emoluments
Number
1,747
124
426
927
1,302
18
3,000
7,544
Number
1,467
75
475
1,083
1,382
31
2,892
7,405
Number
1,593
15
323
728
1,132
18
2,528
6,337
Number
1,069
-
414
929
1,189
24
2,357
5,982
The remuneration paid to directors are as follows:
Number
Number
Number
Number
Executive compensation
Fees and sitting allowances
Retirement Benefit costs
1,252
409
13
1,674
1,140
405
903
2,448
Fees and other emoluments disclosed above include amounts paid to:
The Chairman
The highest paid director
992
210
11
1,213
28
230
525
84
903
1,512
13
221
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
234
Number
46
Number
38
Number
13
Number
13
38. Group subsidiaries and related party transactions
Parent:
Zenith Bank Plc (incorporated in Nigeria) is the ultimate parent company of the Group
Subsidiaries:
The amount of N5,643 billion (December 31, 2019: N5,175 billion) represents the total assets under custody held by the Bank’s
subsidiary, Zenith Pensions Custodian Limited under the latter’s custodial business. Included in the amount above is N105.7
billion which represents the amount of the Group’s guarantee for the assets held by the subsidiary 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.
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, 2020
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, 2020
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
114,939
2
256
791
-
35,900
4,010
-
-
-
130
-
-
-
3,600
-
2,805
-
-
-
Transactions and balances with subsidiaries
In millions of Naira
Receivable from
Payable to
Income received
from
Expense paid to
31 December 2019
31 December 2019
Zenith Bank (UK) Limited
Zenith Bank (Ghana) Limited
Zenith Bank (Sierra leone) Limited
Zenith Bank (Gambia) Limited
Zenith Pensions Custodian Limited
83,570
-
159
53
-
67,194
7,301
-
-
-
540
-
-
-
3,600
-
-
-
-
-
Financials
235
Zenith Bank Plc Annual Report December 31, 2020
Notes to the Consolidated and Separate Financial
Statements for the Year Ended December 31, 2020
Significant restrictions
The Group does not have significant restrictions on its ability to access or use its assets and settle its liabilities other than those
resulting from the supervisory frameworks within which banking subsidiaries operate. The supervisory frameworks require
banking subsidiaries to keep certain levels of regulatory capital and liquid assets, limit their exposure to other parts of the Group
and comply with other ratios. See notes 3.4, 3.6 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 N1,526 billion and N1,305
billion respectively (December 31, 2019: N1,089 billion and N914 billion respectively).
Non controlling interest in subsidiaries
The Group does not have any subsidiary that has material non controlling interest.
Key management personnel
Key management personnel is defined as the Group’s executive, non-executive directors and chief officers,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-20
31-Dec-19
31-Dec-20
31-Dec-19
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
1,576
23
409
2,008
1,764
366
(333)
1,797
69
1,226
919
405
2,550
1,180
1,010
(426)
1,764
60
1,194
11
210
1,415
1,642
-
(166)
1,476
63
724
906
84
1,714
1,022
1,010
(390)
1,642
60
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.
Directors’ related party transactions:
December 31, 2020
Name of company
Cyberspace Network
Quantum Fund Management
Relationship/Name
Loans
Deposits
1,634
1,634
1,709
1,709
Interest
received
Interest paid
61
61
38
38
236
Relationship/Name
Loans Deposits
Interest
received
Interest
paid
Insider related transactions:
December 31, 2020
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
Zenith Trustees Ltd
Oviation limited
Sirius Lumina Ltd
Common directorship /Jim Ovia
Former Director
Director / Prof. Sam Enwemeka
-
-
-
-
-
-
-
61
189
1,544
1
844
1
2,640
-
-
-
-
-
-
-
-
-
-
-
-
-
-
31 December 2019
31 December 2019
Name of company
Relationship/Name
Loans
Deposits
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
-
Director / Prof. Sam Enwemeka
-
-
-
796
-
796
2
85
1,146
1,598
1,578
1
4,410
Interest
received
Inter-
est
paid
-
-
-
48
-
48
-
-
-
35
-
35
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 life time impairment has been recognised in respect of loans granted to related
parties (31 December, 2019: Nil).
During the year, Zenith Bank Plc paid N1.90 billion as insurance premium to Zenith General Insurance Limited (December
31, 2019: N1.78 billion). These expenses were reported as operating expenses.
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 Bank paid N2.58 billion (31 December, 2019 N5.71 billion) to Cyberspace Network for various Information technology
services rendered during the year.
39. Contingent liabilities and commitments
Legal proceedings
(a)
The Group is presently involved in several litigation suits in the ordinary course of business. The total amount claimed in the
cases against the Group is estimated at N78.8 billion (December 31, 2019: N27 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.
Financials
237
Zenith Bank Plc Annual Report December 31, 2020
Notes to the Consolidated and Separate Financial
Statements for the Year Ended December 31, 2020
Capital commitments
(b)
At the reporting date, the Group had capital commitments amounting to N4.9 billion (December 31, 2019: N5.5 billion) in respect
of authorized and contracted capital projects.
Break down of capital commitments
Motor vehicles, Furniture and equipments
Information tecnology
Property
Group
31-Dec-20
31-Dec-19
50
3,756
1,135
4,941
285
4,080
1,128
5,493
Confirmed credits and other obligations on behalf of customers
(c)
In the normal course of business the Group is a party to financial instruments with off-balance sheet risk. These instruments
are issued to meet the credit and other financial requirements of customers. The contractual amounts of the off-balance sheet
financial instruments are:
Performance bonds and guarantees
(see note i below)
Usance (see note ii below)
Letters of credit (see note ii below)
Group
Bank
31-Dec-20
31-Dec-19
31-Dec-20
31-Dec-19
376,252
363,922
325,249
261,495
50,770
172,905
599,927
79,318
545,174
988,414
49,569
84,183
459,001
79,318
413,656
754,469
Pension Funds (See Note iii below)
5,642,718
5,174,795
5,642,718
5,174,795
(i)
(ii)
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, 2020, performance bonds
and guarantees worth N73 billion (December 31, 2019: N84 billion) are secured by cash while others are otherwise
secured.
Usance and letters of credit are agreements to lend to a customer in the future, subject to certain conditions. Such
commitments are either made for a fixed period, or have no specific maturity dates, but are cancellable by the Group
(as lender) subject to notice requirements. These Letters of credit are provided at market-related interest rates. Usance
and letters of credit are secured by different types of collaterals similar to those accepted for actual credit facilities.
The amount of N5,643 billion (December 31, 2019: N5,175 billion) represents the total assets under custody held by
(iii)
the Bank’s subsidiary, Zenith Pensions Custodian Limited under the latter’s custodial business. Included in the amount above
is N105.7 billion which represents the amount of the Group’s guarantee for the assets held by the subsidiary 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.
238
40. Dividend per share
In millions of Naira
Dividend proposed
Number of shares in issue and ranking for dividend
Proposed dividend per share (Naira)
Interim dividend per share paid (Naira)
Final dividend per share proposed
Final dividend paid during the year
Interim dividend paid during the year
Total dividend paid during the year
Group
Bank
31-Dec-20
31-Dec-19
31-Dec-20
31-Dec-19
94,188
31,396
3.00
0.30
2.70
78,491
9,419
87,910
87,910
31,396
2.80
0.30
2.50
78,491
9,419
87,910
94,188
31,396
3.00
0.30
2.70
78,491
9,419
87,910
87,910
31,396
2.8
0.30
2.50
78,491
9,419
87,910
The Board of Directors, pursuant to the powers vested in it by the provisions of Section 426 of the Companies and Allied Matters
Act of Nigeria, CAMA 2020, paid an interim dividend of N0.30 per share and propose a final dividend of N2.70 per share (December
31, 2019: interim; N0.30, final; N2.50) from the retained earnings account as at December 31, 2020. 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, 2020
and December 31, 2019 respectively.
Dividends are paid to shareholders net of withholding tax at the rate of 10% in compliance with extant tax laws.
41. Cash and cash equivalents
For the purposes of the statement of cash flow, cash and cash equivalents include cash and non-restricted balances with central
banks, treasury bills maturing within three months, operating account balances with other banks, amounts due from other banks.
Cash and cash balances with central bank (less
mandatory reserve deposits)
Treasury bills (maturing within 3 months) (see
note 16)
Due from other banks
Group
Bank
31-Dec-20
31-Dec-19
31-Dec-20
31-Dec-19
180,346
175,328
132,626
118,499
396,924
11,697
396,924
11,697
631,250
1,208,520
483,690
670,715
353,133
882,683
258,657
388,853
42. Compliance with banking regulations
During the year, the Bank paid a penalty to CBN of N11.4 million relating to customer domiciliary account operations.
Financials
239
Zenith Bank Plc Annual Report December 31, 2020
Notes to the Consolidated and Separate Financial
Statements for the Year Ended December 31, 2020
In millions of Naira
43.
Statement of cash flow workings
(i) Debt securities (see note 21)
Group
Bank
31-Dec-20
31-Dec-19
31-Dec-20
31-Dec-19
December 31, 2020
At 1 January 2019
Gains from changes in fair value recognised in
profit or loss (see note 21)
Gains from changes in fair value recognised in OCI
Impairment Charge
Interest income
Interest received
Interest accrued
Foreign exchange difference
Balance as at 31 December 2020
Movement for cash flow statement
Recognised in cash flow statement
December 31, 2019
At 1 January 2019
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
(including pledged
instruments) at fair
value through profit
or loss
Debt securities
(including
pledged
instruments) at
amortised cost
and FVTOCI
Debt securities
(including pledged
instruments) at fair
value through profit
or loss
Debt securities
(including
pledged
instruments) at
amortised cost
and FVTOCI
27,922
9,486
-
-
-
-
-
-
49,277
11,869
-
796,306
-
17,921
(503)
89,806
(42,990)
-
28,489
1,121,353
232,324
(244,193)
27,922
9,486
-
-
-
-
-
-
44,935
7,527
-
394,567
-
16,295
(503)
50,076
(42,990)
-
468
461,907
43,994
(51,521)
Debt securities at fair
value through profit
or loss
Debt securities at
fair value through
profit or loss
Debt securities at
fair value through
profit or loss
Debt securities at
fair value through
profit or loss
4,970
10,905
11,592
(15,210)
-
(12,257)
(3,618)
-
513,154
-
132,685
(138,370)
7,790
516,772
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)
240
In millions of Naira
31-Dec-20
31-Dec-19
31-Dec-20
31-Dec-19
Group
Bank
(ii) Treasury bills (Amortised cost) (see note 16)
December 31, 2020
31-Dec-20
31-Dec-19
31-Dec-20
31-Dec-19
Treasury bills (including pledged instruments)
at amortised cost as at 1 January
Change in ECL allowance
Interest income
Interest received
Balance as at 31 December 2020
370,326
(972)
53,797
(52,115)
535,673
Recognised in cashflow statement
(164,637)
692,429
201,379
332,497
35
81,108
(208,894)
370,326
194,352
(659)
31,147
(29,465)
351,511
(149,109)
55
52,127
-
201,379
183,300
(iii) Treasury bills (FVTPL) (see note 16)
December 31, 2020
31-Dec-20
31-Dec-19
31-Dec-20
31-Dec-19
Treasury bills fair value through profit or loss as
at 1 January
708,111
510,313
708,114
510,313
Treasury bills pledged FVTPL
Unrealised fair value gain
Balance as at 31 December 2020
Recognised in cashflow
99,856
43,337
770,094
81,210
-
-
708,111
(197,798)
99,856
41,491
769,800
79,661
-
-
708,114
(197,801)
(iv) Loans and advances (see note 20)
December 31, 2020
31-Dec-20
31-Dec-19
31-Dec-20
31-Dec-19
Loans and advances at 1 January
2,305,565
1,823,111
2,239,472
1,736,066
Changes in ECL allowance
Interest income
Interest received
Foreign exchange difference
Balance as at 31 December 2020
(37,439)
250,812
(221,011)
95,449
2,779,027
(385,651)
(27,754)
232,946
(215,455)
-
2,305,565
(492,717)
(35,495)
236,064
(206,263)
53,200
2,639,797
(352,819)
(27,148)
220,210
(203,038)
-
2,239,472
(513,382)
Financials
241
Zenith Bank Plc Annual Report December 31, 2020
Notes to the Consolidated and Separate Financial
Statements for the Year Ended December 31, 2020
Group
Bank
31-Dec-20
31-Dec-19
31-Dec-20
31-Dec-19
4,262,289
3,690,295
3,486,887
2,821,066
81,060
(63,028)
99,452
5,339,911
960,138
80,583
(72,724)
-
4,262,289
564,135
59,691
(42,550)
32,446
4,298,258
761,784
66,822
(65,556)
-
3,486,887
664,555
31-Dec-20
31-Dec-19
31-Dec-20
31-Dec-19
363,764
231,716
386,061
223,463
(706)
-
2,582
3,260
(2,838)
(742)
703,292
337,972
2,473
2,307
-
-
(5,510)
(2,196)
363,764
134,974
(706)
-
1,632
2,805
(2,528)
(684)
599,464
212,884
2,473
2,307
-
-
(5,510)
(2,196)
386,061
165,524
31-Dec-20
31-Dec-19
31-Dec-20
31-Dec-19
7,561
(6,795)
766
(1,113)
347
5,163
(2,334)
2,829
(2,976)
147
2,436
(2,191)
245
(593)
348
1,960
(1,582)
378
(530)
152
In millions of Naira
(v) Customer deposits
December 31, 2020
As at 1 January
Interest expense
Interest paid
Foreign exchange differences
Balance as at year end
(vi) Other liabilities (see note 29)
December 31, 2020
As at 1 January
Changes in ECL allowance
Additional VAT payable
Lease liability additions
Interest expense on lease liability
Interest paid
Principal repayment on lease liability
Balance as at 31 December 2020
Net cash movement
December 31, 2020
Cost (see note 25)
Accummulated depreciation (see note 25)
Net book value
Sales proceed
Profit on Disposal (see note 10)
242
In millions of Naira
Group
Bank
(vii) Due from Banks (greater than 90 days)
December 31, 2020
As at 1 January
Changes in ECL allowance
Interest Income
Interest received
Foreign exchange difference
Balance as at 31 December 2020
Recognised in cash flow statement
(viii) Other assets
December 31, 2020
As at 1 January
Changes in ECL allowance
Withholding tax receivable utilised
Foreign exchange difference
Balance as at 31 December 2020
Recognised in cash flow statement
(ix) Derivative Asset
December 31, 2020
At 1 January
Balance as at 31 December 2020
Recognised in cashflow (as unrealised fair
value gain/loss)
31-Dec-20
31-Dec-19
31-Dec-20
31-Dec-19
223,413
83
26,398
(24,526)
21,794
179,244
67,918
-
-
-
-
-
223,413
(223,413)
223,413
83
25,205
(24,526)
21,794
179,244
66,725
-
-
-
-
-
223,413
(223,413)
31-Dec-20
31-Dec-19
31-Dec-20
31-Dec-19
77,395
(1,409)
(497)
5,873
169,967
(88,605)
80,948
341
-
(31)
77,395
3,863
71,412
(1,369)
(497)
-
159,625
(90,079)
75,910
354
-
-
71,412
(4,853)
31-Dec-20
31-Dec-19
31-Dec-20
31-Dec-19
92,722
44,496
48,226
88,826
92,722
(3,896)
92,722
41,729
50,993
88,826
92,722
(3,896)
Financials
243
Zenith Bank Plc Annual Report December 31, 2020
Notes to the Consolidated and Separate Financial
Statements for the Year Ended December 31, 2020
In millions of Naira
Group
Bank
(x)
Restricted balances (Cash Reserve)
December 31, 2020
31-Dec-20
31-Dec-19
31-Dec-20
31-Dec-19
Mandatory reserve deposit with central bank
Special Cash Reserve
Recognised in cashflow
1,330,733
80,689
1,411,422
(650,472)
680,261
80,689
760,950
-
1,289,930
80,689
1,370,619
(609,669)
680,261
80,689
760,950
-
December 31, 2019
31-Dec-20
31-Dec-19
31-Dec-20
31-Dec-19
Mandatory reserve deposit with central bank
Special Cash Reserve
Recognised in cashflow
(xi) Derivative liabilities
680,261
80,689
760,950
(55,479)
624,782
80,689
705,471
-
680,261
80,689
760,950
(55,479)
624,782
80,689
705,471
-
December 31, 2020
31-Dec-20
31-Dec-19
31-Dec-20
31-Dec-19
As at 1 January
Balance as at 31 December 2020
14,762
11,076
16,995
14,762
14,762
11,076
16,995
14,762
Recognised in cashflow as fair unrealised
fair value gain/loss
(3,686)
(2,233)
(3,686)
(2,233)
244
Other National Disclosures
04 Zenith Bank Plc Annual Report December 31, 2020
Value Added
Statement
In millions of Naira
Group
Gross income
Interest expense
- Local
- Foreign
Impairment loss on financial and non-financial instruments
Bought-in materials and services
- Local
- Foreign
Value added
Distribution
Employees
Salaries and benefits
Government
Income tax
Retained in the Group
Replacement of property and equipment/ intangible assets
To pay proposed dividend
Profit for the year (including statutory reserves, small scale industry, and non-
controling interest)
31-Dec-20 31-Dec-20
%
31-Dec-19 31-Dec-19
%
696,450
(98,512)
(22,619)
575,319
(39,534)
535,785
(131, 934)
(40,070)
363,781
662,251
(123,651)
(24,881)
513,719
(24,032)
489,687
(76,072)
(67,949)
100
345,666
100
79,258
22
77,858
23
25,296
7
34,451
10
28,662
84,769
145,796
8
23
35
24,514
9,420
199,423
7
3
58
Total Value Added
363,781
100
345,666
100
Value added represents the additional wealth which the Group has been able to create by its own and employees efforts.
248
In millions of Naira
Bank
Gross income
Interest expense
- Local
- Foreign
Impairment loss on financial and non-financial instruments
Bought-in materials and services
- Local
- Foreign
Value added
Distribution
Employees
Salaries and benefits
Government
Income tax
Retained in the Bank
31-Dec-20 31-Dec-20
%
31-Dec-19 31-Dec-19
%
595,921
(62,041)
(40,070)
493,810
(37,237)
456,573
(156,502)
(3,087)
564,687
(58,288)
(67,949)
438,450
(23,393)
415,057
(128,230)
(3,087)
296,984
100
283,740
100
61,515
21
62,038
22
22,017
4
22,017
8
Replacement of property and equipment/ intangible assets
To pay proposed dividend
Profit for the year (including statutory reserves, and small scale industry)
25,462
84,769
113,083
9
33
38
21,682
9,420
168,583
5
69
(15)
Total Value Added
296,984
100
283,740
100
Value added represents the additional wealth which the Bank has been able to create by its own and employees efforts.
Other National Disclosures
249
Zenith Bank Plc Annual Report December 31, 2020
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
250
31-Dec-20 31-Dec-19 31-Dec-18
31-Dec-17 31-Dec-16
1,591,768
1,577,875
298,530
810,494
44,496
936,278
991,393
954,416
1,000,560
957,663
936,817
669,058
557,359
431,728
592,935
468,010
328,343
707,103
92,722
674,274
88,826
495,803
57,219
459,457
82,860
2,779,027
2,305,565
1,823,111
2,100,362
2,289,365
996,916
591,097
565,312
330,951
199,478
-
5,786
169,967
190,170
16,243
-
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
8,481,272
6,346,879
5,955,710
5,595,253
4,739,825
5,339,911
4,262,289
3,690,295
3,437,915
2,983,621
11,076
11,690
-
703,292
384,573
870,080
43,177
7,363,799
1,117,473
15,698
255,047
521,293
324,461
1,116,499
974
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
20,805
8,915
18
243,023
383,034
66,834
8,953
45
214,080
350,657
437,260
361,177
5,139,959
815,751
356,496
332,931
4,783,137
812,116
263,106
153,464
4,040,760
699,065
15,698
255,047
322,237
221,231
814,213
1,538
15,698
15,698
255,047
356,837
183,217
810,799
1,317
255,047
261,608
165,729
698,082
983
1,117,473
941,886
815,751
812,116
699,065
In millions of Naira
31-Dec-20 31-Dec-19 31-Dec-18
31-Dec-17 31-Dec-16
Statement Of Profit Or Loss And Other Comprehensive
Income
Gross earnings
Share of profit / (loss) of associates
Interest expense
Operating and direct expenses
Impairment charge for financial and non-financial assets
Profit before taxation
Income tax
Profit after tax
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
696,450
-
(121,131)
662,251
-
(148,532)
630,344
-
(144,458)
745,189
507,997
-
(216,637)
-
(144,378)
(279,924)
(246,393)
(235,829)
(231,006)
(179,921)
(39,534)
255,861
(25,296)
230,565
16,295
-
1,981
(355)
17,921
248,486
(24,032)
243,294
(34,451)
208,843
13,870
-
518
(66)
14,322
223,165
(18,372)
231,685
(38,261)
193,424
(98,227)
(32,350)
199,319
151,348
(25,528)
(27,096)
173,791
124,252
1,459
(2,551)
6,636
-
-
-
6,287
199,711
-
-
-
-
-
2,682
176,473
-
36,974
161,226
214,667
199,711
734 K
665 K
615 K
553 K
395 K
Other National Disclosures
251
Zenith Bank Plc Annual Report December 31, 2020
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
Total shareholders' equity
252
31-Dec-20
31-Dec-19
31-Dec-18
31-Dec-17 31-Dec-16
1,503,245
1,393,421
298,530
532,377
41,729
879,449
822,449
431,728
482,070
92,722
902,073
817,043
907,265
799,992
627,385
463,787
592,935
468,010
325,575
393,466
88,826
273,331
57,219
354,405
82,860
2,639,797
2,239,472
1,736,066
1,980,464
2,138,132
333,126
34,625
-
4,733
159,625
-
169,080
14,699
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
7,124,987
5,435,073
4,955,445
4,833,658
4,283,736
4,298,258
3,486,887
2,821,066
2,744,525
2,552,963
11,076
9,117
-
599,464
384,573
874,090
43,177
14,762
6,627
-
386,061
392,871
329,778
39,092
16,995
5,954
-
223,463
393,295
458,463
361,177
20,805
6,069
-
229,332
383,034
418,979
332,931
66,834
6,927
-
249,136
350,657
292,802
153,464
6,219,755
905,232
4,656,078
778,995
4,280,413
675,032
4,135,675
697,983
3,672,783
610,953
15,698
15,698
15,698
15,698
15,698
255,047
382,292
252,195
905,232
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
905,232
778,995
675,032
697,983
610,953
In millions of Naira
31-Dec-20
31-Dec-19
31-Dec-18
31-Dec-17 31-Dec-16
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
595,921
(102,111)
(246,566)
(37,237)
210,007
(12,155)
197,852
16,295
-
16,295
564,687
(126,237)
(215,037)
(23,393)
200,020
(19,688)
180,332
-
13,870
-
13,870
538,004
(124,156)
(206,428)
(15,313)
192,107
(26,627)
673,636
(200,672)
(208,299)
(95,244)
169,421
(16,418)
165,480
155,003
-
1,459
-
1,459
-
(2,551)
-
(2,551)
454,808
(131,910)
(162,076)
(26,295)
134,527
(20,642)
113,885
-
6,636)
-
6,636
Total comprehensive income
214,147
194,202
166,939
150,452
120,521
Earning per share:
Basic and diluted
630 K
574 K
527 K
487 K
362 K
Other National Disclosures
253
Zenith Bank Plc Annual Report December 31, 2020
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
3 0 - J u n - 9 5
3 0 - J u n - 9 6
3 0 - J u n - 9 7
3 0 - J u n - 9 8
3 0 - J u n - 9 9
3 0 - J u n - 0 0
3 0 - J u n - 0 1
3 0 - J u n - 0 2
3 0 - J u n - 0 3
3 0 - J u n - 0 4
3 0 - J u n - 0 5
3 0 - J u n - 0 6
3 0 - J u n - 0 7
2 4 , 8 3 9 , 0 0 0 . 0 0
5 4 , 4 0 7 , 0 0 0 . 0 0
5 7 , 8 9 7 , 3 5 2 . 0 0
9 0 , 0 6 2 , 0 0 0 . 0 0
24,839,000.00
54,407,000.00
57,897,352.00
90,062,000.00
1 7 8 , 7 4 4 , 0 0 0 . 0 0
178,744,000.00
2 4 2 , 8 3 0 , 0 0 0 . 0 0
242,830,000.00
2 4 4 , 0 5 4 , 0 0 0 . 0 0
244,054,000.00
5 1 2 , 5 1 3 , 0 0 0 . 0 0
512,513,000.00
5 1 2 , 5 1 3 , 0 0 0 . 0 0
512,513,000.00
5 1 3 , 3 2 9 , 0 0 0 . 0 0
513,329,000.00
1 , 0 2 6 , 6 5 8 , 0 0 0 . 0 0
1,026,658,000.00
1 , 0 2 6 , 6 5 8 , 0 0 0 . 0 0
1,026,658,000.00
1 , 5 4 8 , 5 5 5 , 0 0 0 . 0 0
1,548,555,000.00
1 , 5 4 8 , 5 5 5 , 0 0 0 . 0 0
3,097,110,000.00
3 , 0 0 0 , 0 0 0 , 0 0 0 . 0 0
6,000,000,000.00
4 , 5 8 6 , 7 4 4 , 4 5 0 . 0 0
9,173,488,900.00
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
3 1 - D e c - 2 0
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
0 . 5
254
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